-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LwynQluHPHCrDD6vmghB5vDxRfNlrrFMA3DJVnKNjBEBVAdjYnze+o7IPq57HZak B5bRGUua1P0ZeqL92TyUxQ== 0000950168-97-003067.txt : 19971027 0000950168-97-003067.hdr.sgml : 19971027 ACCESSION NUMBER: 0000950168-97-003067 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19971024 SROS: NONE GROUP MEMBERS: GENESIS ELDERCARE ACQUISITION CORP GROUP MEMBERS: GENESIS ELDERCARE CORP. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MULTICARE COMPANIES INC CENTRAL INDEX KEY: 0000890925 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 223152527 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-43945 FILM NUMBER: 97700742 BUSINESS ADDRESS: STREET 1: 411 HACKENSACK AVE CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2014888818 MAIL ADDRESS: STREET 1: 411 HACKENSACK AVENUE CITY: HACKENSACK STATE: NJ ZIP: 07601 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MULTICARE COMPANIES INC CENTRAL INDEX KEY: 0000890925 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 223152527 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-43945 FILM NUMBER: 97700743 BUSINESS ADDRESS: STREET 1: 411 HACKENSACK AVE CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2014888818 MAIL ADDRESS: STREET 1: 411 HACKENSACK AVENUE CITY: HACKENSACK STATE: NJ ZIP: 07601 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GENESIS ELDERCARE ACQUISITION CORP CENTRAL INDEX KEY: 0001041356 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 148 WEST STATE ST CITY: KENNETT SQUARE STATE: PA ZIP: 19348 BUSINESS PHONE: 6104446350 MAIL ADDRESS: STREET 1: 148 WEST STATE ST CITY: KENNETT SQUARE STATE: PA ZIP: 19348 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GENESIS ELDERCARE ACQUISITION CORP CENTRAL INDEX KEY: 0001041356 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 148 WEST STATE ST CITY: KENNETT SQUARE STATE: PA ZIP: 19348 BUSINESS PHONE: 6104446350 MAIL ADDRESS: STREET 1: 148 WEST STATE ST CITY: KENNETT SQUARE STATE: PA ZIP: 19348 SC 14D1/A 1 SCHEDULE 14D1/A ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FINAL AMENDMENT TO SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 and Statement on SCHEDULE 13D Under the Securities Exchange Act of 1934 ----------------------- THE MULTICARE COMPANIES, INC. (Name of Subject Company) GENESIS ELDERCARE ACQUISITION CORP. AND GENESIS ELDERCARE CORP. (Bidder) ----------------------- Common Stock, par value $.01 per share (Title of Class of Securities) 62543 V1 0 (CUSIP Number of Class of Securities) Michael R. Walker Genesis ElderCare Corp. 148 West State Street Kennett Square, PA 19348 Telephone: (610) 444-6350 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) ----------------------- Copies to: William E. Curbow, Esq. Richard J. McMahon, Esq. Paul J. Shim, Esq. Simpson Thacher & Bartlett Blank Rome Comisky & McCauley Cleary, Gottlieb, Steen & Hamilton 425 Lexington Avenue 1200 Four Penn Center Plaza One Liberty Plaza New York, New York 10017 Philadelphia, Pennsylvania 19103 New York, New York 10006 Telephone: (212) 455-2000 Telephone: (215) 569-5500 Telephone: (212) 225-2000
================================================================================ CUSIP NO. 62543 VI 0 NAMES OF REPORTING PERSONS: S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS: GENESIS ELDERCARE CORP. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) { } (b) {X} 3 SEC USE ONLY 4 SOURCE OF FUNDS AF and BK 5 CHECK BOX IF THE DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) 5 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware 6 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 32,904,492 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES { } 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 100.0% (based on 32,904,492 shares outstanding) (10) TYPE OF REPORTING PERSON HC 2 CUSIP NO. 62543 VI 0 NAMES OF REPORTING PERSONS: S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS: GENESIS ELDERCARE ACQUISITION CORP. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) { } (b) {X} 3 SEC USE ONLY 4 SOURCE OF FUNDS AF and BK 5 CHECK BOX IF THE DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) 5 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware 6 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 32,904,492 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES { } 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 100.0% (based on 32,904,492 shares outstanding) (10) TYPE OF REPORTING PERSON CO 3 This Final Amendment amends and supplements the Tender Offer Statement on Schedule 14D-1 and Statement on Schedule 13D filed on June 20, 1997 and amended and supplemented on July 17, 1997, August 14, 1997, September 11, 1997, September 29, 1997, October 8, 1997 and October 10, 1997 (as amended and supplemented, the "Schedule 14D-1/13D") relating to the offer by Genesis ElderCare Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Genesis ElderCare Corp., a Delaware corporation (the "Parent"), to purchase all of the outstanding shares of Common Stock, par value $.0l per share (the "Shares"), of The Multicare Companies, Inc., a Delaware corporation ("Multicare"), at a purchase price of S28.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 20, 1997 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). Item 6. Interest in Securities of the Subject Company Item 6(a) of the Schedule 14D-1/13D is hereby amended and supplemented as follows: On October 10, 1997, Multicare was merged with and into the Purchaser. As a result, Multicare has become a wholly owned subsidiary of the Parent. Attached hereto as Exhibit (a) (18) is a press release issued by the Parent on October 10, 1997 describing the merger. Item 11. Material to be Filed as Exhibits (a) (18) Press release issued by the Parent on October 10, 1997. (b) (4) Indenture, dated as of August 11, 1997, among Genesis ElderCare Acquisition Corp., as Issuer, PNC Bank, National Association, as Trustee and Banque Internationale a Luxembourg S.A., as Paying Agent, relating to the 9% Senior Subordinated Notes of the Issuer. (b) (5) Credit Agreement, dated as of October 9, 1997, by and among The Multicare Companies, Inc. and its direct and indirect subsidiaries, as borrowers, the financial institutions identified therein, as lenders, Mellon Bank, N.A., as issuer of letters of credit, Mellon Bank, N.A., as administrative agent, Citicorp USA, Inc., as syndication agent, Nationsbank, N.A., as syndication agent, and First Union National Bank, as documentation agent. (b) (6) Credit Agreement, dated as of October 9, 1997, by and among, Genesis ElderCare Acquisition Corp., as borrower, the financial institutions identified therein, as lenders, Mellon Bank, N.A., as administrative agent and the other agents identified therein. (b) (7) Third Amended and Restated Credit Agreement, dated as of October 9, 1997, by and among Genesis Health Ventures, Inc. and certain of its subsidiaries, as borrowers, the financial institutions identified therein, as lenders, Mellon Bank, N.A., as issuer of letters of credit, Mellon Bank, N.A., as administrative agent, Citicorp USA, Inc., as syndication agent, First Union National Bank, as documentation agent, Nationsbank, N.A., as syndication agent and the other agents identified therein. (b) (8) Credit Agreement dated as of October 9, 1997, by and among The Multicare Companies, Inc. and certain of its subsidiaries, as borrowers, the financial institutions identified therein, as lenders, Mellon Bank, N.A., as issuer of letters of credit, Mellon Bank, N.A., as administrative agent, Citicorp USA, Inc., as syndication agent, First Union National Bank, as documentation agent Nationsbank, N.A., as syndication agent, and the other agents identified therein. (c) (8) Put/Call Agreement among The Cypress Group L.L.C., TPG Partners II, L.P., Nazem, Inc. and Genesis Health Ventures, Inc. dated October 9, 1997. (c) (9) Stockholders Agreement, dated as of October 9, 1997, by and among Genesis ElderCare Corp., The Cypress Group L.L.C., TPG Partners II, L.P., Genesis Health Ventures, Inc. and Nazem, Inc. 2 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. GENESIS ELDERCARE CORP. By: /s/ James L. Singleton ----------------------------- Name: James L. Singleton ----------------------------- Title: Vice President ----------------------------- GENESIS ELDERCARE ACQUISITION CORP. By: /s/ James L. Singleton ----------------------------- Name: James L. Singleton ----------------------------- Title: Vice President ----------------------------- Date: October 24, 1997 3 EX-99 2 EX-(A)(18) For Immediate Release - National Circuit Contact: George V. Hager, Jr. Senior Vice President & Chief Financial Officer (610) 444-6350 GENESIS ELDERCARE CORP. AND THE MULTICARE COMPANIES, INC. COMPLETE MERGER Kennett Square, PA -- October 10, 1997 - Genesis ElderCare Corp. announced today that as of October 10, 1997, The Multicare Companies, Inc., had been merged with a wholly-owned subsidiary of Genesis ElderCare Corp. As a result, each share of common stock of Multicare not previously purchased in Genesis ElderCare Corp.'s tender offer which expired at 7:00 p.m., New York City time, on Wednesday, October 8, 1997 had been converted into the right to receive $28.00 in cash. Genesis E1derCare Corp. was formed by Genesis Health Ventures, Inc. (NYSE:GHV), The Cypress Group L.L.C. and TPG Partners II, L.P. to acquire Multicare. #### EX-99 3 EX (B)(4) INDENTURE ================================================================================ GENESIS ELDERCARE ACQUISITION CORP., Issuer and PNC BANK, NATIONAL ASSOCIATION, Trustee and BANQUE INTERNATIONALE A LUXEMBOURG S.A., Paying Agent ----------------------- Indenture Dated as of August 11, 1997 ----------------------- 9% Senior Subordinated Notes due 2007 ================================================================================ CROSS-REFERENCE TABLE TIA Sections Indenture Sections - ------------ ------------------ ss. 310(a)(1)..................................... 7.10 (a)(2)..................................... 7.10 (b)........................................ 7.08 ss. 313(c)........................................ 7.06; 11.02 ss. 314(a)........................................ 4.17; 11.02 (a)(4)..................................... 4.16; 11.02 (c)(1)..................................... 11.03 (c)(2)..................................... 11.03 (e)........................................ 11.04 ss. 315(b)........................................ 7.05; 11.02 ss. 316(a)(1)(A).................................. 6.05 (a)(1)(B).................................. 6.04 (b)........................................ 6.07 ss. 317(a)(1)..................................... 6.08 (a)(2)..................................... 6.09 ss. 318(a)........................................ 11.01 (c)........................................ 11.01 Note: The Cross-Reference Table shall not for any purpose be deemed to be a part of the Indenture. TABLE OF CONTENTS Page ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions.............................................. 1 SECTION 1.02. Incorporation by Reference of Trust Indenture Act........ 24 SECTION 1.03. Rules of Construction.................................... 25 ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating.......................................... 25 SECTION 2.02. Restrictive Legends...................................... 27 SECTION 2.03. Execution, Authentication and Denominations.............. 29 SECTION 2.04. Registrar and Paying Agent............................... 29 SECTION 2.05. Paying Agent to Hold Money in Trust...................... 30 SECTION 2.06. Transfer and Exchange.................................... 31 SECTION 2.07. Book-Entry Provisions for Global Notes................... 31 SECTION 2.08. Special Transfer Provisions.............................. 33 SECTION 2.09. Replacement Notes........................................ 37 SECTION 2.10. Outstanding Notes........................................ 37 SECTION 2.11. Temporary Notes.......................................... 37 SECTION 2.12. Cancellation............................................. 38 SECTION 2.13. CUSIP Numbers............................................ 38 SECTION 2.14. Defaulted Interest....................................... 38 SECTION 2.15. Issuance of Additional Notes............................. 39 ARTICLE THREE REDEMPTION SECTION 3.01. Right of Redemption; Mandatory Redemption................ 39 SECTION 3.02. Notices to Trustee....................................... 40 SECTION 3.03. Selection of Notes to Be Redeemed........................ 40 SECTION 3.04. Notice of Redemption..................................... 40 SECTION 3.05. Effect of Notice of Redemption........................... 41 SECTION 3.06. Deposit of Redemption Price.............................. 41 SECTION 3.07. Payment of Notes Called for Redemption................... 42 SECTION 3.08. Notes Redeemed in Part................................... 42 - -------- Note: The Table of Contents shall not for any purposes be deemed to be a part of the Indenture. ii ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes......................................... 42 SECTION 4.02. Maintenance of Office or Agency.......................... 42 SECTION 4.03. Limitation on Indebtedness............................... 43 SECTION 4.04. Limitation on Restricted Payments........................ 43 SECTION 4.05. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries........................ 45 SECTION 4.06. Limitations on Preferred Stock of Restricted Subsidiaries 46 SECTION 4.07. Limitation on Issuances of Guarantees by Restricted Subsidiaries ............................................ 46 SECTION 4.08. Limitation on Transactions with Stockholders and Affiliates .............................................. 47 SECTION 4.09. Limitation on Liens...................................... 48 SECTION 4.10. Limitation on Asset Sales................................ 49 SECTION 4.11. Repurchase of Notes upon a Change in Control............. 49 SECTION 4.12. Limitation on Senior Subordinated Indebtedness........... 50 SECTION 4.13. Limitation on Management Fees............................ 50 SECTION 4.14. Existence................................................ 50 SECTION 4.15. Payment of Taxes and Other Claims........................ 51 SECTION 4.16. Maintenance of Properties and Insurance.................. 51 SECTION 4.17. Notice of Defaults....................................... 51 SECTION 4.18. Compliance Certificates.................................. 52 SECTION 4.19. Commission Reports and Reports to Holders................ 52 SECTION 4.20. Waiver of Stay, Extension or Usury Laws.................. 53 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. When Issuer May Merge, Etc............................... 53 SECTION 5.02. Successor Substituted.................................... 54 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default........................................ 55 SECTION 6.02. Acceleration............................................. 56 SECTION 6.03. Other Remedies........................................... 57 SECTION 6.04. Waiver of Past Defaults.................................. 57 SECTION 6.05. Control by Majority...................................... 57 SECTION 6.06. Limitation on Suits...................................... 57 SECTION 6.07. Rights of Holders to Receive Payment..................... 58 SECTION 6.08. Collection Suit by Trustee............................... 58 iii SECTION 6.09. Trustee May File Proofs of Claim......................... 59 SECTION 6.10. Priorities............................................... 59 SECTION 6.11. Undertaking for Costs.................................... 59 SECTION 6.12. Restoration of Rights and Remedies....................... 60 SECTION 6.13. Rights and Remedies Cumulative........................... 60 SECTION 6.14. Delay or Omission Not Waiver............................. 60 ARTICLE SEVEN TRUSTEE SECTION 7.01. General.................................................. 60 SECTION 7.02. Certain Rights of Trustee................................ 61 SECTION 7.03. Individual Rights of Trustee............................. 62 SECTION 7.04. Trustee's Disclaimer..................................... 62 SECTION 7.05. Notice of Default........................................ 62 SECTION 7.06. Reports by Trustee to Holders............................ 62 SECTION 7.07. Compensation and Indemnity............................... 62 SECTION 7.08. Replacement of Trustee................................... 63 SECTION 7.09. Successor Trustee by Merger, Etc......................... 64 SECTION 7.10. Eligibility.............................................. 64 SECTION 7.11. Money Held in Trust...................................... 64 SECTION 7.12. Withholding Taxes........................................ 65 ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Issuer's Obligations...................... 65 SECTION 8.02. Defeasance and Discharge of Indenture.................... 66 SECTION 8.03. Defeasance of Certain Obligations........................ 68 SECTION 8.04. Application of Trust Money............................... 70 SECTION 8.05. Repayment to Issuer...................................... 70 SECTION 8.06. Reinstatement............................................ 70 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders............................... 71 SECTION 9.02. With Consent of Holders.................................. 71 SECTION 9.03. Revocation and Effect of Consent......................... 72 SECTION 9.04. Notation on or Exchange of Notes......................... 73 SECTION 9.05. Trustee to Sign Amendments, Etc.......................... 73 SECTION 9.06. Conformity with Trust Indenture Act...................... 74 iv ARTICLE TEN SECURITY SECTION 10.01. Security................................................ 74 ARTICLE ELEVEN SUBORDINATION SECTION 11.01. Agreement to Subordinate................................ 75 SECTION 11.02. Distribution on Dissolution, Liquidation, Bankruptcy or Reorganization.......................................... 76 SECTION 11.03. Suspension of Payment When Senior Indebtedness in Default................................................. 77 SECTION 11.04. Payment Permitted if No Default......................... 79 SECTION 11.05. Subrogation to Rights of Holders of Senior Indebtedness. 79 SECTION 11.06. Provisions Solely to Define Relative Rights............. 79 SECTION 11.07. Trustee to Effectuate Subordination..................... 80 SECTION 11.08. No Waiver of Subordination Provisions................... 80 SECTION 11.09. Notice to Trustee....................................... 81 SECTION 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent ...................................... 82 SECTION 11.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights........................ 82 SECTION 11.12. Trust Moneys and Escrowed Funds Not Subordinated........ 82 SECTION 11.13. No Suspension of Remedies............................... 82 SECTION 11.14. Trustee's Relation to Senior Indebtedness............... 82 SECTION 11.15. Other Rights of Holders of Senior Indebtedness.......... 83 ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act of 1939............................. 83 SECTION 12.02. Notices................................................. 83 SECTION 12.03. Certificate and Opinion as to Conditions Precedent...... 85 SECTION 12.04. Statements Required in Certificate or Opinion........... 85 SECTION 12.05. Rules by Trustee, Paying Agent or Registrar............. 86 SECTION 12.06. Payment Date Other Than a Business Day.................. 86 SECTION 12.07. Governing Law........................................... 86 SECTION 12.08. No Adverse Interpretation of Other Agreements........... 86 SECTION 12.09. No Recourse Against Others.............................. 86 SECTION 12.10. Successors.............................................. 87 SECTION 12.11. Duplicate Originals..................................... 87 SECTION 12.12. Separability............................................ 87 SECTION 12.13. Table of Contents, Headings, Etc........................ 87 v EXHIBIT A Form of Note...................................................A-1 EXHIBIT B Form of Certificate............................................B-1 EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Non-QIB Accredited Investors..........C-1 EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S..........................D-1 EXHIBIT E Form of Supplemental Indenture.................................E-1 INDENTURE, dated as of August 11, 1997, between GENESIS ELDERCARE ACQUISITION CORP., a Delaware corporation (the "Issuer"), PNC Bank, National Association, a national banking association duly organized under the laws of the United States of America (the "Trustee"), and Banque Internationale a Luxembourg S.A. (a "Paying Agent"). RECITALS The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance initially of up to $250,000,000 aggregate principal amount of the Issuer's 9% Senior Subordinated Notes due 2007 (the "Notes") issuable as provided in this Indenture. The Notes will be secured pursuant to the terms of an Escrow Agreement (as defined herein) as provided by Article Ten of this Indenture. All things necessary to make this Indenture a valid agreement of the Issuer, in accordance with its terms, have been done, and the Issuer has done all things necessary to make the Notes, when executed by the Issuer and authenticated and delivered by the Trustee hereunder and duly issued by the Issuer, the valid obligations of the Issuer as hereinafter provided. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939 that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939. AND THIS INDENTURE FURTHER WITNESSETH For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, the Issuer and the Trustee, as follows. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time such Person becomes a Restricted Subsidiary or (ii) existing at the time and assumed in connection with the acquisition of assets by a Restricted Subsidiary from such Person, in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition; provided that Indebtedness of a Person which is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such asset acquisition shall not be Acquired Indebtedness. Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary. 2 "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, (ii) any other Person that owns, directly or indirectly, 5% or more of such specified Person's Capital Stock, (iii) any officer or director of (A) any such specified Person, (B) any Subsidiary of such specified Person or (C) any Person described in clause (i) or (ii) above or (iv) any other Person having a relationship with any natural Person described in clause (i), (ii) or (iii) above by blood, marriage or adoption not more remote than first cousin or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with such other Person described in this clause (iv). For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Co-Registrar, Paying Agent or authenticating agent. "Agent Members" has the meaning provided in Section 2.07(a). "Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction) (collectively, a "transfer"), directly or indirectly, in one or a series of related transactions, of (i) any Capital Stock of any Restricted Subsidiary; (ii) all or substantially all of the properties and assets of any division or line of business of the Issuer or its Restricted Subsidiaries; or (iii) any other properties or assets of the Issuer or any Restricted Subsidiary, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include (a) any transfer of properties and assets that is governed by Article Five, (b) any transfer of properties or assets of the Issuer to a Restricted Subsidiary, or of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary, (c) any transfer of inventory, receivables and other current assets, (d) any transfer of assets for consideration at least equal to the Fair Market Value of the assets transferred, to the extent that the consideration received would satisfy clause (B) of Section 4.10, (e) the Therapy Sale, (f) the Pharmacy Sale, or (g) any transfer of property or assets with a Fair Market Value not in excess of $1 million in any transaction or series of related transactions. "Attributable Debt" in respect of a sale-leaseback transaction or an operating lease in respect of a healthcare facility means, at the time of determination, the present value (discounted at the interest rate implicit in the lease, compounded semiannually) of the obligation of the lessee of the property subject to such sale-leaseback transaction or operating lease in respect of a healthcare facility for rental payments during the remaining term of the lease included in such transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended or until the earliest date on which the lessee may terminate such lease without penalty or upon payment of penalty (in which case the rental payments shall include such 3 penalty), after excluding all amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water, utilities and similar charges. "Average Life" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (A) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (B) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bankruptcy Law" means Title 11, United States Code, as amended, or any similar United States Federal or State law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Board of Directors" means the Board of Directors of the Issuer or any committee of such Board of Directors duly authorized to act under this Indenture. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Issuer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, or in the city of the Corporate Trust Office of the Trustee, are authorized by law to close. "Capital Lease Obligation" means the discounted present value of the rental obligations under any lease of real or personal property which, in accordance with GAAP, is required to be recorded on the balance sheet of such Person as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's capital stock or equity interests. "Cash Collateral Account" means the account established with the Trustee pursuant to the terms of the Escrow Agreement for the deposit of the net proceeds from the sale of the Notes and such other purposes as specified therein. "Cash Equivalent" means (i) any security, maturing not more than six months after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America, (ii) any certificate of deposit, time deposit, money market account or bankers' acceptance, maturing not more than six months after the date of acquisition, issued by any 4 commercial banking institution that is a member of the Federal Reserve System and that has combined capital and surplus and undivided profits of not less than $500,000,000, whose debt has a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or any successor rating agency, or "A-1" (or higher) according to Standard & Poor's Ratings Services or any successor rating agency and (iii) commercial paper, maturing not more than three months after the date of acquisition, issued by any corporation (other than an Affiliate or Subsidiary of the Issuer) organized and existing under the laws of the United States of America with a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or any successor rating agency, or "A-1" (or higher) according to Standard & Poor's Ratings Services or any successor rating agency. "Change in Control" means any time that (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than an Existing Stockholder or Genesis ElderCare Corp., in a single transaction or through a series of related transactions, is or becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Issuer on a fully diluted basis and such ownership is greater than the amount of voting power of the Voting Stock of the Issuer, on a fully diluted basis, held by Genesis and its Affiliates on such date; (ii) the Issuer consolidates or merges with or into another corporation or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates or merges with or into the Issuer, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Issuer is changed into or exchanged for cash, securities or other property, other than any such transaction where (A) the outstanding Voting Stock of the Issuer is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock or (y) cash, securities or other property in an amount which could be paid by the Issuer as a Restricted Payment under Section 4.04 (and such amount shall be treated as a Restricted Payment), and (B) the holders of the Voting Stock of the Issuer immediately prior to such transaction own, directly or indirectly, not less than 50% of the Voting Stock of the surviving corporation immediately after such transaction; (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Issuer (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Issuer was (a) approved by a vote of at least 66% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or (b) approved by Genesis in connection with its acquisition of the Common Stock of Genesis ElderCare Corp. held by Cypress or TPG) cease for any reason to constitute a majority of the Board of Directors of the Issuer then in office; or (iv) the Issuer is liquidated or dissolved or adopts a plan of liquidation. "Closing Date" means the date on which the Notes are originally issued under this Indenture. 5 "Collateral" means the Collateral as defined in the Escrow Agreement. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the date of the Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's equity, other than Preferred Stock of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such common stock. "Consolidated EBITDA" of any Person means, with respect to any period, the Consolidated Net Income of such Person for such period, plus, to the extent such amount was deducted in calculating such Consolidated Net Income (i) Consolidated Income Tax Expense, (ii) depreciation expense, (iii) amortization expense, (iv) Consolidated Interest Expense, (v) all other non-cash items reducing Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Consolidated Net Income and (vi) all management fees, and minus all management fees paid during such period (whether or not such fees were deducted in calculating Consolidated Net Income for such period), all as determined on a consolidated basis in accordance with GAAP; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA of the Issuer shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Issuer or any of its Restricted Subsidiaries. "Consolidated Income Tax Expense" means for any period, as applied to any Person, the provision for federal, state, local and foreign income taxes of such Person and its Consolidated Subsidiaries for such period (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets) as determined in accordance with GAAP. "Consolidated Interest Expense" means, without duplication, for any period, as applied to any Person, the sum of (i) the interest expense of such Person and its Consolidated Subsidiaries for such period, including, without limitation, (A) amortization of debt discount, (B) the net cost under interest rate contracts (including amortization of discounts), (C) the interest portion of any deferred payment obligation calculated in accordance with the effective interest method of accounting and (D) accrued interest, plus (ii) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid, or accrued by such Person 6 during such period, in each case as determined in accordance with GAAP, plus (iii) Preferred Stock dividends in respect of Preferred Stock of the Issuer or any Restricted Subsidiary held by Persons other than the Issuer or a Wholly Owned Restricted Subsidiary. For purposes of clause (c) of the preceding sentence, dividends shall be deemed to be an amount equal to the actual dividends paid divided by one minus the applicable actual combined federal, state, local and foreign income tax rate of the Issuer and its Consolidated Subsidiaries (expressed as a decimal). "Consolidated Net Income" of any Person means, for any period, as applied to any Person, the net income (or loss) of such Person and its Consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (loss), by excluding (without duplication) (i) all extraordinary gains or losses (less all fees and expenses relating thereto), (ii) the portion of net income of such Person and its Consolidated Subsidiaries allocable to investments in Persons other than Consolidated Subsidiaries to the extent that cash dividends or distributions have not actually been received by such Person or one of its Consolidated Subsidiaries, (iii) net income (or loss) of any Person combined with such Person or any of its Consolidated Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan, (v) any gains or losses (less all fees and expenses relating thereto) in respect of dispositions of assets other than in the ordinary course of business, or (vi) the net income of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Consolidated Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to that Consolidated Subsidiary. "Consolidated Net Worth" of any Person means the Consolidated stockholders' equity (excluding Redeemable Capital Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable for the sale of Capital Stock) of such Person and its Consolidated Subsidiaries, as set forth on the most recent consolidated balance sheet of such Person and its Consolidated Subsidiaries (which shall be as of a date not more than 90 days prior to the date of such computation determined in accordance with GAAP). "Consolidated Rental Payments" of any Person means, for any period, the aggregate rental obligations of such Person and its Consolidated Subsidiaries (not including taxes, insurance, maintenance and similar expenses that the lessee is obligated to pay under the terms of the relevant leases), determined on a consolidated basis in conformity with GAAP, payable in respect of such period under Attributable Debt or leases of real or personal property not constituting Attributable Debt (net of income from subleases thereof, not including taxes, insurance, maintenance and similar expenses that the sublessee is obligated to pay under the terms of such sublease), whether or not such obligations are reflected as liabilities or commitments on a consolidated balance sheet of such Person and its Subsidiaries or in the notes 7 thereto, excluding, however, in any event, (i) that portion of Consolidated Interest Expense of such Person representing payments by such Person or any of its Consolidated Subsidiaries in respect of Capital Lease Obligations (net of payments to such Person or any of its Consolidated Subsidiaries under subleases qualifying as capitalized lease subleases to the extent that such payments would be deducted in determining Consolidated Interest Expense) and (ii) the aggregate amount of amortization of obligations of such Person and its Consolidated Subsidiaries in respect of such Capital Lease Obligations for such period (net of payments to such Person or any of its Consolidated Subsidiaries and subleases qualifying as capitalized lease subleases to the extent that such payments would be deducted in determining such amortization amount). "Consolidation" means, (i) with respect to the Issuer, the consolidation of the accounts of the Issuer and each of its Restricted Subsidiaries and (ii) with respect to any other Person, the consolidation of the accounts of such Person and each of its Subsidiaries, in each case if and to the extent the accounts of such Person and such Subsidiaries would normally be consolidated with those of such Person, all in accordance with GAAP. The term "Consolidated" shall have a similar meaning. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at 1600 Market Street, Philadelphia, PA 19103, Attention: Sheila Wallbridge. "Credit Facility" means (i) any and all credit agreements (whether of the Issuer or any Subsidiary of the Issuer) contemplated by the Amended and Restated Commitment Letter dated as of June 14, 1997 between the Issuer and Mellon Bank, N.A., Citicorp Securities, Inc., Citibank, N.A., First Union Capital Markets Corp., First Union National Bank and NationsBank, N.A. as the same may be amended, restated, renewed, extended, restructured, supplemented or otherwise modified from time to time; (ii) any agreements, instruments and documents executed or delivered pursuant to or in connection with such credit agreement; and (iii) any credit agreement, loan agreement, note purchase agreement, indenture or other agreement, document or instrument refinancing, refunding or otherwise replacing the credit agreement or any other agreement deemed a Credit Facility under clause (i), (ii) or (iii) hereof, whether or not with the same agent, trustee, representative, lenders or holders, regardless of whether the Credit Facility or any portion thereof was outstanding or in effect at the time of such restatement, renewal, extension, restructuring, supplement or modification. Without limiting the generality of the foregoing, the term "Credit Facility" shall include any amendment, restatement, renewal, extension, restructuring, supplement or modification to any Credit Facility and all refundings, refinancings and replacements of any Credit Facility, including any agreement (a) extending the maturity of any Indebtedness Incurred thereunder or contemplated thereby, (b) adding or deleting borrowers or guarantors thereunder, provided that the addition of such borrower or guarantor would not be prohibited by Sections 4.03, 4.07 and 4.09, (c) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed 8 thereunder, provided such increase is permitted to be Incurred under Section 4.03, or (d) otherwise altering the terms and conditions thereof in a manner not prohibited by Sections 4.03, 4.05, 4.07 and 4.09. Notwithstanding the foregoing, with respect to any agreement providing for the refinancing, refunding or replacement of Indebtedness under the Credit Facility, such agreement shall be the Credit Facility under the Indenture only if a notice to that effect is delivered by the Issuer to the Trustee and there shall be at any time only one instrument that is (together with the related agreements, instruments and documents) the Credit Facility under the Indenture. No amendment or modification to the Credit Facility shall be considered a refinancing, refunding or replacement of Indebtedness under the Credit Facility for the purpose of requiring notice pursuant to the preceding sentence. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Cypress" means The Cypress Group L.L.C., together with its Affiliates or any of their respective successors. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Depositary" means The Depository Trust Issuer, its nominees, and their respective successors. "Designated Senior Indebtedness" means (i) all Senior Indebtedness under, or in respect of, the Credit Facility and any Interest Rate Contract or Currency Agreement related to Indebtedness under the Credit Facility and (ii) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding, together with any commitments to lend additional amounts, of at least $30,000,000 and is specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness." "Escrow Agreement" means the Escrow and Security Agreement made and entered into as of the Closing Date by and among the Issuer, Genesis and the Placement Agents in favor of the Trustee for the Holders. "Escrow Agreement Officers' Certificate" means the Officers' Certificate as defined in the Escrow Agreement. "Escrow Agreement Opinion of Counsel" means the Opinion of Counsel as defined in the Escrow Agreement. "Event of Default" has the meaning provided in Section 6.01. 9 "Excess Proceeds" has the meaning provided in Section 4.10. "Exchange Act" means the Securities Exchange Act of 1934. "Exchange Notes" means any securities of the Issuer containing terms identical to the Notes (except that such Exchange Notes shall be registered under the Securities Act and shall not contain terms concerning interest rate increases) that are issued and exchanged for the Notes pursuant to the Registration Rights Agreement and this Indenture. "Exchange Offer" means the exchange offer by the Issuer of Exchange Notes for the Notes pursuant to the terms of the Registration Rights Agreement. "Existing Stockholders" means Genesis, The Cypress Group L.L.C. and TPG Partners II, L.P. and their Affiliates. "Expiration Date" means October 31, 1997, subject to an extension of up to one month at the Issuer's option. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "Fixed Charge Coverage Ratio" of any Person means, for any period, the ratio of (i) the sum of Consolidated EBITDA plus one-third of Consolidated Rental Payments, in each case for such period, of the Issuer and its Consolidated Subsidiaries, as determined in accordance with GAAP to (ii) the sum of Consolidated Interest Expense and one-third of Consolidated Rental Payments, in each case, for such period of the Issuer and its Consolidated Subsidiaries; provided that in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, as in effect on the Closing Date. All ratios and computations contained or referred to in this Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that computations made for purposes of determining compliance with the terms of the covenants and with other provisions of this Indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the offering of the Notes, the Tender Offer or the Merger and 10 (ii) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and 17. "Genesis" means Genesis Health Ventures, Inc. "Global Notes" has the meaning provided in Section 2.01. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services without requiring that such property be received or such services be rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss; provided that the term "Guaranteed Debt" shall not include endorsements for collection or deposit, in either case in the ordinary course of business. "Guaranty Documents" means the Supplemental Indenture and the opinion of counsel substantially in the form of Exhibit B-2 to the Escrow Agreement. "Healthcare Related Business" means a business, the majority of whose revenues result from healthcare, long-term care, or managed care related businesses or facilities, including businesses which provide insurance relating to the costs of healthcare, long-term care or managed care services. 11 "Holder" means the registered holder of any Note. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all obligations for the payment of money of such Person for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities arising in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit or acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, (iii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iv) all obligations under Interest Rate Contracts and Currency Agreements of such Person, (v) all Capital Lease Obligations of such Person, (vi) all Indebtedness of other Persons the payment of which is secured by a Lien, upon any property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Guaranteed debt of such Person, (viii) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, and (ix) all Attributable Debt of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided (A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at the time of its issuance as determined in conformity with GAAP, (B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be "Indebtedness" and (C) that Indebtedness shall not include any liability for federal, state, local or other taxes. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is 12 based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair Market Value to be determined in good faith by the Board of Directors. "Indenture" means this Indenture as originally executed or as it may be amended or supplemented from time to time by one or more indentures supplemental to this Indenture entered into pursuant to the applicable provisions of this Indenture. "Initial Blockage Period" has the meaning provided in Section 11.03. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Payment Date" means each semiannual interest payment date on February 1 and August 1 of each year, commencing February 1, 1998. "Interest Rate Contracts" means interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance, and other similar agreements or arrangements. "Investment" means, with respect to any Person, directly or indirectly, any advance, loan or other extension of credit (including, without limitation, any guarantee or similar arrangement but excluding advances in the ordinary course of business that are, in conformity with generally accepted accounting principles, recorded as accounts receivable on the balance sheet of the Issuer or a Restricted Subsidiary) or capital contribution to (by means of any transfer of cash or other property (tangible or intangible) to others, or any payment for property or services for the account or use of others or otherwise), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities (including, without limitation, any interests in any partnership or joint venture) issued or owned by any other Person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the issuance or sale of Capital Stock of a Restricted Subsidiary if immediately after giving effect thereto such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and the Issuer or another Restricted Subsidiary would have an Investment in such Restricted Subsidiary after giving effect to such issuance or sale. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to the Issuer or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of liabilities (other than liabilities to the Issuer or any of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) "Investment" shall include the fair market value of the Capital Stock (or any other remaining Investment), held by the Issuer or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary; provided that 13 the fair market value of the Investment in an Unrestricted Subsidiary or any other Person that has ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made less the net reduction of such Investments. "Issuer" means Genesis ElderCare Acquisition Corp. and, following the Merger, Multicare until a successor replaces it pursuant to Article Five and thereafter means the successor. "Issuer Order" means a written request or order signed in the name of the Issuer (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "Merger" means the merger of Genesis ElderCare Acquisition Corp. with and into Multicare which shall be the surviving corporation in the merger. "Merger Closing Date" means the date the Merger is consummated. "Multicare" means The Multicare Companies, Inc. "Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Issuer or any Restricted Subsidiary) net of (i) brokerage commissions and other reasonable fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness either (A) is secured by the assets or properties sold or (B) is required to be paid as a result of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Issuer or any Subsidiary of the Issuer) owning a beneficial interest in the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other 14 post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee and (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent such obligations are financed or sold with recourse to the Issuer or any Restricted Subsidiary), net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Non-payment Default" means any default or event of default under or in respect of any Designated Senior Indebtedness, other than a Payment Default. "Non-U.S. Person" means a person who is not a "U.S. person" (as defined in Regulation S). "Notes" means any of the securities, as defined in the first paragraph of the recitals hereof, that are authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Notes" shall include the Notes initially issued on the Closing Date, any Exchange Notes to be issued and exchanged for any Notes pursuant to the Registration Rights Agreement and this Indenture and any other Notes issued after the Closing Date under this Indenture. For purposes of this Indenture, all Notes shall vote together as one series of Notes under this Indenture. "Offer to Purchase" means an offer to purchase Notes by the Issuer from the Holders commenced by mailing a notice to the Trustee and each Holder stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless the Issuer defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) 15 that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, the Issuer shall (i) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by the Issuer. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. The Issuer will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the paying agent for an Offer to Purchase. The Issuer will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Issuer is required to repurchase Notes pursuant to an Offer to Purchase. "Officer" means, with respect to the Issuer, (i) the Chairman of the Board, the Chief Executive Officer, the President, any Vice President or the Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary. "Officers' Certificate" means a certificate signed by one Officer listed in clause (i) of the definition thereof and one Officer listed in clause (ii) of the definition thereof or two officers listed in clause (i) of the definition thereof. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e). "Offshore Global Note" has the meaning provided in Section 2.01. "Offshore Notes Exchange Date" has the meaning provided in Section 2.01. "Offshore Physical Notes" has the meaning provided in Section 2.01. "Opinion of Counsel" means a written opinion signed by legal counsel, who may be an employee of or counsel to the Issuer, that meets the requirements of Section 12.04 hereof. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "Paying Agent" has the meaning provided in Section 2.04, except that, for the purposes of Article Eight, the Paying Agent shall not be the Issuer or a Subsidiary of the Issuer or an Affiliate of any of them. The term "Paying Agent" includes any additional Paying Agent. 16 "Payment Blockage Period" has the meaning provided in Section 11.03. "Payment Default" means any default in the payment when due (at maturity, upon acceleration of maturity, upon mandatory prepayment or otherwise) of any amount owing under or in respect of any Designated Senior Indebtedness. "Permanent Offshore Global Notes" has the meaning provided in Section 2.01. "Permitted Indebtedness" means: (a) Indebtedness outstanding at any time in an aggregate principal amount not to exceed $625 million, less any amount of such Indebtedness permanently repaid as provided under Section 4.10; (b) Indebtedness of Multicare in existence on the Merger Closing Date; provided that upon consummation of the Merger not more than $40 million of such Indebtedness shall remain outstanding; (c) Indebtedness of the Issuer pursuant to the Notes; (d) Indebtedness evidenced by letters of credit issued in the ordinary course of business consistent with past practice to support the Issuer's or any Subsidiary's insurance or self-insurance obligations (including to secure workers' compensation and other similar insurance coverages) to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following a demand for reimbursement; (e) Interest Rate Contracts and Currency Agreements to the extent that the notional principal amount of such obligations under Interest Rate Contracts does not exceed the amount of Indebtedness outstanding or committed to be incurred on the date such Interest Rate Contracts are entered into; (f) Indebtedness owed (A) to the Issuer evidenced by an unsubordinated promissory note or (B) to any Restricted Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or a Restricted Subsidiary) shall be deemed, in each case to be an Incurrence of such Indebtedness not permitted by this clause (f); (g) any guarantees of Indebtedness by a Restricted Subsidiary entered into in accordance with Section 4.07; 17 (h) Indebtedness incurred by the Issuer or any Restricted Subsidiary, and any renewals, extensions, substitutions, refundings, refinancings or replacements thereof, in an amount not to exceed $20 million at any one time outstanding to finance the acquisition or construction of any property or assets or any business, including Acquired Indebtedness and Indebtedness incurred within 90 days after such acquisition or construction, less any amount of such Indebtedness permanently repaid as provided under Section 4.10; (i) Capital Lease Obligations, and any renewals, extensions, substitutions, refundings, refinancings or replacements thereof, in an amount not to exceed $10 million at any time outstanding, less any amount of such Indebtedness permanently repaid as provided under Section 4.10; (j) Indebtedness in addition to that described in clauses (a) through (i) of this definition of "Permitted Indebtedness," in an aggregate principal amount outstanding at any time not to exceed $20 million, less any amount of such Indebtedness permanently repaid as provided under Section 4.10; and (k) any renewals, extensions, substitutions, refundings, refinancings or replacements of any Indebtedness (other than Indebtedness Incurred under clause (a), (d), (e), (f), (g), (h), (i) or (j) of this definition of "Permitted Indebtedness"), including any successive renewals, extensions, substitutions, refundings, refinancings or replacements, so long as (i) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced, plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness being refinanced or the amount of any premium reasonably determined by the Issuer as necessary to accomplish such refinancing through means of a tender offer or privately negotiated transactions and, in each case, actually paid, plus the amount of expenses of the Issuer incurred in connection with such refinancing; (ii) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes; (iii) in the case of any refinancing of Subordinated Indebtedness, such new Indebtedness is made subordinate in right of payment to the Notes at least to the same extent as the Indebtedness being refinanced; and (iv) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; provided that in no event may Indebtedness of the Issuer be refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant to this clause (k). 18 For purposes of determining any particular amount of Indebtedness under Section 4.03, (1) Indebtedness Incurred under the Credit Facility on or prior to the Merger Closing Date shall be treated as Incurred pursuant to clause (a) of this "Permitted Indebtedness" definition, (2) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (3) any Liens granted pursuant to the equal and ratable provisions referred to in Section 4.09 shall not be treated as Indebtedness. For purposes of determining compliance with Section 4.03, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in this "Permitted Indebtedness" definition (other than Indebtedness referred to in clause (1) of the preceding sentence), the Issuer, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. (l) Notwithstanding the foregoing, for so long as the Credit Facility is outstanding, Indebtedness Incurred under clause (a) above shall consist of (i) $525 million of Indebtedness incurred under the Credit Facility (less any amount referred to in clause (iii)), (ii) $100 million of Indebtedness (whether or not incurred under the Credit Facility) and (iii) additional Indebtedness equal to the amount by which, after giving effect to any amendment, restatement, renewal, extension, restructuring, supplement or other modification of the Credit Facility, the principal amounts outstanding and the commitments under the Credit Facility have been permanently reduced (which may include subsequent increases in the Credit Facility) less, without duplication, in the case of Indebtedness described in clauses (i), (ii) or (iii), any amount of such Indebtedness permanently repaid as provided under ss.4.10. "Permitted Investment" means (i) Investments in the Issuer or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to the Issuer or a Restricted Subsidiary; provided that such Person's primary businesses are Healthcare Related Businesses; (ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; and (iv) Investments in existence on the Closing Date (including Investments held by Multicare and its Subsidiaries). "Permitted Junior Notes" has the meaning provided in Section 11.02. "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Pharmacy Sale" means the sale of Multicare's pharmacy business to Genesis or any of its Affiliates in connection with the Merger. 19 "Physical Notes" has the meaning provided in Section 2.01. "Preferred Stock," as applied to any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a debt security, including the Notes, means the principal amount due on the Stated Maturity as shown on such debt security. "Private Placement Legend" means the legend initially set forth on the Notes in the form set forth in Section 2.02. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Capital Stock" of any Person means any Capital Stock of such Person other than Redeemable Capital Stock. "Redeemable Capital Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Redeemable Capital Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change in control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change in control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 4.10 and 4.11 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Issuer's repurchase of such Notes as are required to be repurchased pursuant to Sections 4.10 and 4.11. "Redemption Date" means, when used with respect to any Note to be redeemed, the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price" means, when used with respect to any Note to be redeemed, the price at which such Note is to be redeemed pursuant to this Indenture. "Registrar" has the meaning provided in Section 2.04. 20 "Registration" has the meaning provided in Section 4.19. "Registration Rights Agreement" means the Registration Rights Agreement dated the Closing Date among the Issuer and the Placement Agents. "Registration Statement" means the Registration Statement as defined and described in the Registration Rights Agreement. "Regular Record Date" for the interest payable on any Interest Payment Date means the January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S under the Securities Act. "Responsible Officer," when used with respect to the Trustee, means the chairman or any vice chairman of the board of directors, the chairman or any vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee in its Corporate Trust Department customarily performing functions similar to those performed by any of the above-designated officers and in each case having direct responsibility for the administration of this Indenture or the Escrow Agreement and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Payments" has the meaning provided in Section 4.04. "Restricted Subsidiary" means any Subsidiary of the Issuer other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. "Securities Act" means the Securities Act of 1933. "Security Register" has the meaning provided in Section 2.04. "Senior Indebtedness" means the following obligations, whether outstanding on the Closing Date or thereafter Incurred: (a) all Indebtedness and other monetary obligations of the Issuer or any Subsidiary of the Issuer under or in respect of the Credit Facility (including obligations in respect of any lease financing facility of the Credit Facility) or any Interest Rate Contract or Currency Agreement related to Indebtedness under the Credit Facility, whether for 21 principal, interest (including interest accruing after the filing of a petition by or against the Issuer or any Subsidiary of the Issuer under any state or federal Bankruptcy Laws, whether or not such interest is allowed as a claim after such filing in any proceeding under such law), fees, expenses, indemnification or otherwise, and (b) the principal of, premium, if any, and interest on all other Indebtedness of the Issuer (other than the Notes) unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall be pari passu with or subordinated in right of payment to the Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness that is by its terms subordinate in right of payment to any Indebtedness of the Issuer, (ii) Indebtedness which when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Law is without recourse to the Issuer, (iii) any repurchase, redemption or other obligation in respect of Redeemable Capital Stock, (iv) Indebtedness for goods, materials or services purchased in the ordinary course of business or indebtedness consisting of trade payables or other current liabilities, (v) Indebtedness of or amounts owed by the Issuer to employees, officers, or directors, (vi) any liability for federal, state, local or other taxes owed or owing by the Issuer, (vii) Indebtedness of the Issuer to a Subsidiary of the Issuer or any other Affiliate of the Issuer or any of such Affiliate's subsidiaries, (viii) that portion of any Indebtedness which at the time of issuance is issued in violation of the Indenture and (ix) amounts owing under leases (other than Capital Lease Obligations). "Senior Representative" has the meaning provided in Section 11.01. "Shelf Registration Statement" means the Shelf Registration Statement as defined and described in the Registration Rights Agreement. "Significant Subsidiary" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal year of the Issuer, accounted for more than 10% of the consolidated revenues of the Issuer and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Issuer and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Issuer for such fiscal year. "Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon, means the dates specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means any Indebtedness of the Issuer subordinated in right of payment to the Notes. 22 "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. "Subsidiary Guarantee" has the meaning provided in Section 4.07. "Supplemental Indenture" means the indenture supplemental hereto substantially in the form of Exhibit E to this Indenture. "Temporary Cash Investments" means (i) any evidence of Indebtedness, maturing not more than one year after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America, (ii) any certificate of deposit and money market deposit, maturing not more than one year after the date of acquisition, issued by, or time deposit of, a commercial banking institution that is a member of the Federal Reserve System and that has combined capital and surplus and undivided profits of not less than $500,000,000, whose debt has a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or any successor rating agency, or "A-1" (or higher) according to Standard & Poor's Ratings Services or any successor rating agency or any money market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Issuer) organized and existing under the laws of the United States of America with a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or any successor rating agency, or "A-1" (or higher) according to Standard & Poor's Ratings Services or any successor rating agency and (iv) securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Services or Moody's Investors Service, Inc. "Temporary Offshore Global Notes" has the meaning provided in Section 2.01. "Tender Offer" means the offer to purchase all of the issued and outstanding shares of Common Stock of Multicare made by Genesis ElderCare Acquisition Corp. "Therapy Sale" means the sale of Multicare's contract therapy business to Genesis or any of its Affiliates in connection with the Merger. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. 23 "TPG" means TPG Partners II, L.P., together with its Affiliates, and any of their respective successors. "Transactions" means, collectively, the Tender Offer, the Merger, the offering of the Notes issued hereunder, the management agreement to be entered into by Genesis in connection with the Merger, the Therapy Sale and the Pharmacy Sale. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article Seven of this Indenture and thereafter means such successor. "Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of the Issuer) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Issuer or any Restricted Subsidiary; provided that (A) any guarantee by the Issuer or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Issuer or such Restricted Subsidiary (or both, if applicable) at the time of such designation; (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04 and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Sections 4.03 and 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of this Indenture. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Global Notes" has the meaning provided in Section 2.01. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the 24 Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "U.S. Government Securities" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America (x) the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or (y) that are rated at least "Aaa" (or the then equivalent grade) by Moody's Investors Service, Inc. or "AAA" (or the then equivalent grade) by Standard & Poor's Ratings Services. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "U.S. Physical Notes" has the meaning provided in Section 2.01. "Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the Capital Stock of which is owned by the Issuer or another Wholly Owned Restricted Subsidiary. SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security holder" means a Holder or a Noteholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and 25 "obligor" on the indenture securities means the Issuer or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the Commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (vii) all ratios and computations based on GAAP contained in this Indenture shall be computed in accordance with the definition of GAAP set forth in Section 1.01; and (viii) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated. ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate of authentication shall be substantially in the form annexed hereto as Exhibit A with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange agreements to which the Issuer is subject or usage. The Issuer shall approve the form of the Notes and any notation, legend or endorsement on the Notes. Each Note shall be dated the date of its authentication. 26 The terms and provisions contained in the form of the Notes annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "U.S. Global Notes"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, in accordance with the instructions given by the Holder thereof, as hereinafter provided. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of one or more temporary global Notes in registered form substantially in the form set forth in Exhibit A (the "Temporary Offshore Global Notes"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. At any time following September 22, 1997 (the "Offshore Notes Exchange Date"), upon receipt by the Trustee and the Issuer of a certificate substantially in the form of Exhibit B hereto, one or more permanent global Notes in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Notes"; and together with the Temporary Offshore Global Notes, the "Offshore Global Notes") duly executed by the Issuer and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Temporary Offshore Global Notes in an amount equal to the principal amount of the beneficial interest in the Temporary Offshore Global Notes transferred. Notes offered and sold in reliance on Regulation D under the Securities Act shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "U.S. Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for interests in the Offshore Global Notes shall be in the form of permanent certificated Notes in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Notes"). The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively herein referred to as the "Physical Notes." The U.S. Global Notes and the Offshore Global Notes are sometimes referred to herein as the "Global Notes." The definitive Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the 27 rules of any securities exchange on which the Notes may be listed, all as determined by the Officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.02. Restrictive Legends. Unless and until a Note is exchanged for an Exchange Note in connection with an effective Registration Statement pursuant to the Registration Rights Agreement, the U.S. Global Notes, Temporary Offshore Global Notes and each U.S. Physical Note shall bear the following legend on the face thereof: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, THE HOLDER 28 MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. Each Global Note, whether or not an Exchange Note, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE. 29 SECTION 2.03. Execution, Authentication and Denominations. Subject to Article Four, the aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Notes shall be executed by two Officers of the Issuer. The signature of these Officers on the Notes may be by facsimile or manual signature in the name and on behalf of the Issuer. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee or authenticating agent authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. At any time and from time to time after the execution of this Indenture, the Trustee or an authenticating agent shall upon receipt of a Issuer Order authenticate for original issue Notes in the aggregate principal amount specified in such Issuer Order; provided that the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Issuer in connection with such authentication of Notes. Such Issuer Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and in case of an issuance of Notes pursuant to Section 2.15, shall certify that such issuance is in compliance with Article Four. The Trustee may appoint an authenticating agent to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent. An authenticating agent has the same rights as an Agent to deal with the Issuer or an Affiliate of the Issuer. The Trustee shall not be liable for the misconduct or negligence of any authenticating agent appointed with due care. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 in principal amount and any integral multiple of $1,000 in excess thereof. SECTION 2.04. Registrar and Paying Agent. The Issuer shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where Notes may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served, which shall be in the Borough of Manhattan, The City of New York or at the principal Corporate Trust Office of the Trustee. The Issuer shall cause the Registrar to keep a register of the Notes and of their transfer and exchange (the "Security Register"). The Issuer may have one or more co-Registrars and one or more additional Paying Agents. 30 The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuer shall give prompt written notice to the Trustee of the name and address of any such Agent and any change in the address of such Agent. If the Issuer fails to maintain a Registrar, Paying Agent and/or agent for service of notices and demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for service of notices and demands. The Issuer may remove any Agent upon written notice to such Agent and the Trustee; provided that no such removal shall become effective until (i) the acceptance of an appointment by a successor Agent to such Agent as evidenced by an appropriate agency agreement entered into by the Issuer and such successor Agent and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as such Agent until the appointment of a successor Agent in accordance with clause (i) of this proviso. The Issuer, any Subsidiary of the Issuer, or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar, and/or agent for service of notice and demands. The Issuer initially appoints the Trustee as Registrar, Paying Agent, authenticating agent and agent for service of notice and demands and Banque Internationale a Luxembourg S.A., as Paying Agent. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee as of each Regular Record Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, including the aggregate principal amount of Notes held by each Holder. SECTION 2.05. Paying Agent to Hold Money in Trust. Not later than 11:00 a.m. (New York City time) on each due date of the principal, premium, if any, and interest on any Notes, the Issuer shall deposit with the Paying Agent money in immediately available funds sufficient to pay such principal, premium, if any, and interest so becoming due. The Issuer shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes (whether such money has been paid to it by the Issuer or any other obligor on the Notes), and such Paying Agent shall promptly notify the Trustee of any default by the Issuer (or any other obligor on the Notes) in making any such payment. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Issuer or any Subsidiary of the Issuer or any Affiliate of any of them acts as Paying Agent, it will, on or before each due date of any principal of, premium, if any, or interest on the Notes, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such principal, premium, if any, or interest so 31 becoming due until such sum of money shall be paid to such Holders or otherwise disposed of as provided in this Indenture, and will promptly notify the Trustee of its action or failure to act. SECTION 2.06. Transfer and Exchange. The Notes are issuable only in registered form. A Holder may transfer a Note only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Security Register. Prior to the registration of any transfer by a Holder as provided herein, the Issuer, the Trustee, and any agent of the Issuer shall treat the person in whose name the Note is registered as the owner thereof for all purposes whether or not the Note shall be overdue, and neither the Issuer, the Trustee, nor any such agent shall be affected by notice to the contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent) and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. When Notes are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations (including an exchange of Notes for Exchange Notes), the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met (including that such Notes are duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and Registrar duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder); provided that no exchanges of Notes for Exchange Notes shall occur until a Registration Statement shall have been declared effective by the Commission and that any Notes that are exchanged for Exchange Notes shall be cancelled by the Trustee. To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange or redemption of the Notes, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04). The Registrar shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Notes selected for redemption under Section 3.03 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. SECTION 2.07. Book-Entry Provisions for Global Notes. (a) The U.S. Global Notes and Offshore Global Notes initially shall (i) be registered in the name of the Depositary for such 32 Global Notes or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 2.02. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Note, and the Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. Neither the Issuer nor the Trustee shall be liable for any delay by the Depositary in identifying the beneficial owners of the Notes and the Issuer and the Trustee may conclusively rely on, and shall be protected in relying on, instructions from the Depositary for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of any Notes to be issued). (b) Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Notes or the Offshore Global Notes, respectively, if (i) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the U.S. Global Notes or the Offshore Global Notes, as the case may be, and a successor depositary is not appointed by the Issuer within 90 days of such notice, (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary or (iii) in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. (c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in the other Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (d) In connection with any transfer of a portion of the beneficial interests in the U.S. Global Notes to beneficial owners pursuant to paragraph (b) of this Section 2.07, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Notes in an amount equal to the principal amount of the beneficial interest in the 33 U.S. Global Notes to be transferred, and the Issuer shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes of like tenor and amount. (e) In connection with the transfer of the entire U.S. Global Note or Offshore Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.07, the U.S. Global Note or Offshore Global Note, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the U.S. Global Note or Offshore Global Note, as the case may be, an equal aggregate principal amount of U.S. Physical Notes or Offshore Physical Notes, as the case may be, of authorized denominations. (f) Any U.S. Physical Note delivered in exchange for an interest in the U.S. Global Note pursuant to paragraph (b) or (d) of this Section 2.07 shall, except as otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding transfer restrictions applicable to the U.S. Physical Note set forth in Section 2.02. (g) Any Offshore Physical Note delivered in exchange for an interest in the Offshore Global Note pursuant to paragraph (b) of this Section 2.07 shall, except as otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding transfer restrictions applicable to the Offshore Physical Note set forth in Section 2.02. (h) The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.08. Special Transfer Provisions. Unless and until a Note is exchanged for an Exchange Note in connection with an effective Registration Statement pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to any Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons): (i) The Registrar shall register the transfer of any Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the time period referred to in Rule 144(k) under the Securities Act or (y) the proposed transferee has delivered to the Registrar (A) a certificate substantially in the form of Exhibit C hereto and (B) if the aggregate principal amount of the Notes being transferred is less than $100,000, an opinion of counsel acceptable to the Issuer that such transfer is in compliance with the Securities Act. 34 (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Note, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Note in an amount equal to the principal amount of the beneficial interest in the U.S. Global Note to be transferred, and the Issuer shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a U.S. Physical Note or an interest in the U.S. Global Note to a QIB (excluding Non-U.S. Persons): (i) If the Note to be transferred consists of (x) U.S. Physical Notes, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A or (y) an interest in the U.S. Global Note, the transfer of such interest may be effected only through the book entry system maintained by the Depositary. (ii) If the proposed transferee is an Agent Member, and the Note to be transferred consists of U.S. Physical Notes, upon receipt by the Registrar of the documents referred to in clause (i) and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the U.S. Global Note in an amount equal to the principal amount of the U.S. Physical Notes to be transferred, and the Trustee shall cancel the U.S. Physical Note so transferred. (c) Transfers of Interests in the Temporary Offshore Global Note. The following provisions shall apply with respect to registration of any proposed transfer of interests in the Temporary Offshore Global Note: 35 (i) The Registrar shall register the transfer of any Note (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto or (y) if the proposed transferee is a QIB and the proposed transferor has checked the box provided for on the form of Note stating, or has otherwise advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) If the proposed transferee is an Agent Member, upon receipt by the Registrar of the documents referred to in clause (i)(y) above and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the U.S. Global Note in an amount equal to the principal amount of the Temporary Offshore Global Note to be transferred, and the Trustee shall decrease the amount of the Temporary Offshore Global Note. (d) Transfers of Interests in the Permanent Offshore Global Note or Offshore Physical Notes to U.S. Persons. The following provisions shall apply with respect to any transfer of interests in the Permanent Offshore Global Note or Offshore Physical Notes to U.S. Persons: The Registrar shall register the transfer of any such Note without requiring any additional certification. (e) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of a Note to a Non-U.S. Person: (i) Prior to September 22, 1997, the Registrar shall register any proposed transfer of a Note to a Non-U.S. Person upon receipt of a certificate substantially in the form of Exhibit D hereto from the proposed transferor. (ii) On and after September 22, 1997, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Note to be transferred is a U.S. Physical Note or an interest in the U.S. Global Note, upon receipt of a certificate substantially in the form of Exhibit D hereto from the proposed transferor. 36 (iii) (a) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Note, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Note in an amount equal to the principal amount of the beneficial interest in the U.S. Global Note to be transferred, and (b) if the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Note in an amount equal to the principal amount of the U.S. Physical Notes or the U.S. Global Note, as the case may be, to be transferred, and the Trustee shall cancel the Physical Note, if any, so transferred or decrease the amount of the U.S. Global Note. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless either (i) the circumstances contemplated by the fourth paragraph of Section 2.01 or paragraph (a)(i)(x) or (e)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (g) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall not register a transfer of any Note unless such transfer complies with the restrictions on transfer of such Note set forth in this Indenture. In connection with any transfer of Notes, each Holder agrees by its acceptance of the Notes to furnish the Registrar or the Issuer such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Issuer with respect to) the sufficiency of any such certifications, legal opinions or other information. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.07 or this Section 2.08. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. 37 SECTION 2.09. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding; provided that the requirements of the second paragraph of Section 2.10 are met. If required by the Trustee or the Issuer, an indemnity bond must be furnished that is sufficient in the judgment of both the Trustee and the Issuer to protect the Issuer, the Trustee or any Agent from any loss that any of them may suffer if a Note is replaced. The Issuer may charge such Holder for its expenses and the expenses of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Issuer in its discretion may pay such Note instead of issuing a new Note in replacement thereof. Every replacement Note is an additional obligation of the Issuer and shall be entitled to the benefits of this Indenture. SECTION 2.10. Outstanding Notes. Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.10 as not outstanding. If a Note is replaced pursuant to Section 2.09, it ceases to be outstanding unless and until the Trustee and the Issuer receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser. If the Paying Agent (other than the Issuer or an Affiliate of the Issuer) holds on the maturity date money sufficient to pay Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them shall cease to accrue. A Note does not cease to be outstanding because the Issuer or one of its Affiliates holds such Note, provided, however, that in determining whether the Holders of the requisite principal amount of the outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Issuer or any other obligor upon the Notes or any Affiliate of the Issuer or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer or any other obligor upon the Notes or any Affiliate of the Issuer or of such other obligor. SECTION 2.11. Temporary Notes. Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall 38 be substantially in the form of definitive Notes but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Notes, as evidenced by their execution of such temporary Notes. If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer designated for such purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.12. Cancellation. The Issuer at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder which the Issuer has not issued and sold. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for transfer, exchange, payment or cancellation and shall destroy them in accordance with its normal procedure. Except as expressly permitted by this Indenture, the Issuer may not issue new Notes to replace Notes it has paid in full or delivered to the Trustee for cancellation. SECTION 2.13. CUSIP Numbers. The Issuer in issuing the Notes may use "CUSIP," "CINS" or "ISIN" numbers (if then generally in use), and the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification numbers printed on the Notes. The Issuer will promptly notify the Trustee of any change in "CUSIP," "CINS" or "ISIN" numbers for the Notes. SECTION 2.14. Defaulted Interest. If the Issuer defaults in a payment of interest on the Notes, it shall pay, or shall deposit with the Paying Agent money in immediately available funds sufficient to pay, the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date. A special record date, as used in this Section 2.14 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Issuer for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Issuer shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. 39 SECTION 2.15. Issuance of Additional Notes. The Issuer may, subject to Article Four of this Indenture, issue additional Notes under this Indenture. The Notes issued on the Closing Date and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. ARTICLE THREE REDEMPTION SECTION 3.01. Right of Redemption; Mandatory Redemption. (a) The Notes will be redeemable, at the Issuer's option, in whole or in part, at any time or from time to time, on or after August 1, 2002 and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's last address, as it appears in the Security Register, at the following Redemption Prices (expressed in percentages of principal amount), plus accrued and unpaid interest to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date), if redeemed during the 12-month period commencing August 1 of the years set forth below: Redemption Year Price ---- ---------- 2002.................... 104.500% 2003.................... 102.250 2004 and thereafter..... 100.000 (b) In the event that the Tender Offer is not consummated and certain other conditions set forth in the Escrow Agreement are not satisfied by the Expiration Date, or if it appears, in the sole judgment of the Issuer, that the Tender Offer will not be consummated and such conditions will not be satisfied by the Expiration Date, the Issuer shall redeem the Notes in whole, on 10 days' prior notice mailed by first-class mail to each Holder's last address as it appears in the Security Register, at a Redemption Price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to the Redemption Date. On the earlier of (i) the Expiration Date, if the Trustee has not received the Escrow Agreement Officers' Certificate stating that the Tender Offer has been consummated (or will be consummated promptly upon the release of the escrowed proceeds of the offering of the Notes to the Issuer) and certain conditions have been satisfied and the Escrow Agreement Opinion of Counsel, and (ii) such date on which the Trustee receives an officer's certificate under the Escrow Agreement that the Tender Offer will not be consummated and such conditions will not be satisfied by the Expiration Date, the Trustee will mail by first-class mail to each Holder's last address as it appears in the Security Register a written notice that the Notes will be redeemed within 10 days of such notice. 40 SECTION 3.02. Notices to Trustee. If the Issuer elects to redeem Notes pursuant to Section 3.01(a) or (b), it shall notify the Trustee in writing of the Redemption Date and the principal amount of Notes to be redeemed. The Issuer shall give notice provided for in this Section 3.02, (i) pursuant to an election to redeem Notes under Section 3.01(a), in an Officers' Certificate at least 45 days before the Redemption Date and (ii) pursuant to an election to redeem Notes under Section 3.01(b), in an Officers' Certificate at least 15 days before the Redemption Date (in each case unless a shorter period shall be satisfactory to the Trustee). SECTION 3.03. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed in compliance with the requirements, as certified to it by the Issuer, of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, by lot or by such other method as the Trustee in its sole discretion shall deem fair and appropriate; provided that no Notes of $1,000 in principal amount or less shall be redeemed in part. The Trustee shall make the selection from the Notes outstanding and not previously called for redemption. Notes in denominations of $1,000 in principal amount may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 in principal amount or any integral multiple thereof) of Notes that have denominations larger than $1,000 in principal amount. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Issuer and the Registrar promptly in writing of the Notes or portions of Notes to be called for redemption. SECTION 3.04. Notice of Redemption. With respect to any redemption of Notes pursuant to Section 3.01(a), at least 30 days but not more than 60 days before a Redemption Date, the Issuer, and with respect to any redemption of Notes pursuant to Section 3.01(b), within 10 days before a Redemption Date, the Trustee, shall mail a notice of redemption by first-class mail to each Holder whose Notes are to be redeemed. The notice shall identify the Notes to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the name and address of the Paying Agent; (iv) that Notes called for redemption must be surrendered to the Paying Agent in order to collect the Redemption Price; 41 (v) that, unless the Issuer defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to the Paying Agent; (vi) that, if any Note is being redeemed in part, the portion of the principal amount (equal to $1,000 in principal amount or any integral multiple thereof) of such Note to be redeemed and that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be reissued; and (vii) that, if any Note contains a CUSIP, CINS or ISIN number as provided in Section 2.13, no representation is being made as to the correctness of the CUSIP, CINS or ISIN number either as printed on the Notes or as contained in the notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes. At the Issuer's request (which request may be revoked by the Issuer at any time prior to the time at which the Trustee shall have given such notice to the Holders), made in writing to the Trustee at least 45 days (or such shorter period as shall be satisfactory to the Trustee) before a Redemption Date, the Trustee shall give the notice of redemption pursuant to Section 3.01(a) in the name and at the expense of the Issuer. If, however, the Issuer gives such notice to the Holders, the Issuer shall concurrently deliver to the Trustee an Officers' Certificate stating that such notice has been given. The Trustee shall give the notice of redemption if and as required pursuant to Section 3.01(b). SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender of any Notes to the Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued interest, if any, to the Redemption Date. Notice of redemption shall be deemed to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of Notes held by Holders to whom such notice was properly given. SECTION 3.06. Deposit of Redemption Price. On or prior to any Redemption Date, the Issuer shall deposit with the Paying Agent (or, if the Issuer is acting as its own Paying Agent, shall segregate and hold in trust as provided in Section 2.05) money sufficient to pay the Redemption Price of and accrued interest on all Notes to be redeemed on that date other than 42 Notes or portions thereof called for redemption on that date that have been delivered by the Issuer to the Trustee for cancellation. SECTION 3.07. Payment of Notes Called for Redemption. If notice of redemption has been given in the manner provided above, the Notes or portion of Notes specified in such notice to be redeemed shall become due and payable on the Redemption Date at the Redemption Price stated therein, together with accrued interest to such Redemption Date, and on and after such date (unless the Issuer shall default in the payment of such Notes at the Redemption Price and accrued interest to the Redemption Date, in which case the principal, until paid, shall bear interest from the Redemption Date at the rate prescribed in the Notes), such Notes shall cease to accrue interest. Upon surrender of any Note for redemption in accordance with a notice of redemption, such Note shall be paid and redeemed by the Issuer at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders registered as such at the close of business on the relevant Regular Record Date. SECTION 3.08. Notes Redeemed in Part. Upon surrender of any Note that is redeemed in part, the Issuer shall execute and the Trustee shall authenticate and deliver to the Holder a new Note equal in principal amount to the unredeemed portion of such surrendered Note. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. The Issuer shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Issuer, a Subsidiary of the Issuer, or any Affiliate of any of them) holds on that date money designated for and sufficient to pay the installment. If the Issuer or any Subsidiary of the Issuer or any Affiliate of any of them acts as Paying Agent, an installment of principal, premium, if any, or interest shall be considered paid on the due date if the entity acting as Paying Agent complies with the last sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or reorganization procedure relative to the Issuer, the Trustee shall serve as the Paying Agent, if any, for the Notes. The Issuer shall pay interest on overdue principal, premium, if any, and interest on overdue installments of interest, to the extent lawful, at the rate per annum specified in the Notes. SECTION 4.02. Maintenance of Office or Agency. The Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where 43 notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02. The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Issuer hereby initially designates the Corporate Trust Office of the Trustee as such office of the Issuer in accordance with Section 2.04. SECTION 4.03. Limitation on Indebtedness. The Issuer will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (including any Acquired Indebtedness but excluding Permitted Indebtedness) unless at the time of such event and after giving effect thereto on a pro forma basis the Issuer's Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event taken as one period, calculated on the assumption that (i) such Indebtedness, and any Indebtedness Incurred or repaid after the first day of such four-quarter period and on or prior to the date of such event (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such four-quarter period unless any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of the Issuer, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof) had been Incurred or repaid on the first day of such four-quarter period and (ii) any acquisition or disposition by the Issuer and its Restricted Subsidiaries out of the ordinary course of business of any assets constituting a company, division, line of business or business facility, in each case after the first day of such four-quarter period, and on or prior to the date of such event, had been consummated on the first day of such four-quarter period (including giving pro forma effect to the application of the proceeds of any such disposition), would have been at least equal to 2:00:1.00. SECTION 4.04. Limitation on Restricted Payments. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly: 44 (i) declare or pay any dividend on, or make any distribution to holders of, its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Qualified Capital Stock or in options, warrants or other rights to acquire such Qualified Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders); (ii) purchase, redeem, defease or otherwise acquire or retire for value any Capital Stock (or any option, warrant or other right to acquire such Capital Stock) of (A) the Issuer or an Unrestricted Subsidiary held by any Person or (B) a Restricted Subsidiary held by an Affiliate of the Issuer (other than any Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of the Issuer; (iii) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case, prior to any scheduled repayment, or maturity, any Subordinated Indebtedness; or (iv) make any Investment in any Person (other than a Permitted Investment) (such payments described in (i) through (iv) collectively, "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution), (x) no Default or Event of Default shall have occurred and be continuing and such Restricted Payment shall not be an event which is, or after notice or lapse of time or both, would be, an "event of default" under the terms of any Indebtedness of the Issuer or any Restricted Subsidiary; (y) the Issuer could Incur $1.00 of additional Indebtedness under Section 4.03 (other than Permitted Indebtedness); and (z) the aggregate amount of all Restricted Payments, including any Restricted Payments made pursuant to clauses (i) and (iv) of the succeeding paragraph, declared or made after the Closing Date shall not exceed the sum of: (A) 50% of the Consolidated Net Income of the Issuer accrued on a cumulative basis during the period beginning on the first day of the fiscal quarter beginning immediately following the Closing Date and ending on the last day of the fiscal quarter ending prior to the date of such proposed Restricted Payment for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.19 (or, if such aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of the amount of such loss); (B) the aggregate Net Cash Proceeds received after the Closing Date by the Issuer as capital contributions to the Issuer; 45 (C) the aggregate Net Cash Proceeds received after the Closing Date by the Issuer from the issuance and sale (other than to any of its Subsidiaries) of shares of Qualified Capital Stock of the Issuer or any options or warrants to purchase such shares (other than issuances to the extent used to make a Restricted Payment under clause (ii) of the subsequent paragraph) of Qualified Capital Stock of the Issuer; (D) the aggregate Net Cash Proceeds received after the Closing Date by the Issuer for debt securities that have been converted into or exchanged for Qualified Capital Stock of the Issuer to the extent such debt securities were originally sold for cash plus the aggregate cash received by the Issuer at the time of such conversion or exchange; and (E) $10 million. None of the foregoing provisions shall be deemed to prohibit the following Restricted Payments so long as in the case of clauses (ii), (iii) and (iv) at the time of and after giving effect to the proposed Restricted Payment no Default or Event of Default shall have occurred and be continuing: (i) dividends paid within 60 days after the date of declaration if at the date of declaration, such payment would be permitted by the provisions of the preceding paragraph; (ii) the redemption, repurchase or other acquisition or retirement of Capital Stock of the Issuer or Subordinated Indebtedness in exchange for, or out of the net proceeds of, a substantially concurrent issue and sale (other than to a Subsidiary) of shares of Qualified Capital Stock of the Issuer; (iii) the redemption, repurchase, or other acquisition or retirement of Subordinated Indebtedness of the Issuer, including premium, if any, and accrued and unpaid interest, made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Issuer permitted to be Incurred under clause (k) of the definition of "Permitted Indebtedness"; and (iv) Investments in an aggregate amount not to exceed $25 million in any Person which owns, operates or services Healthcare Related Businesses. SECTION 4.05. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Issuer will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any restriction of any kind, on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distribution on its Capital Stock to the Issuer or any other Restricted Subsidiary, (ii) pay any Indebtedness owed 46 to the Issuer or any other Restricted Subsidiary, (iii) make any Investment in the Issuer or any other Restricted Subsidiary or (iv) transfer any of its property or assets to the Issuer or any other Restricted Subsidiary, except (a) any encumbrance or restriction existing under or by reason of applicable law; (b) any encumbrance or restriction existing under or by reason of customary non-assignment provisions of any lease governing a leasehold interest of the Issuer, or any Restricted Subsidiary; (c) any restriction pursuant to an agreement in effect at or entered into on the Closing Date; (d) any restriction, with respect to a Restricted Subsidiary that is not a Subsidiary on the Closing Date, in existence at the time such Person becomes a Restricted Subsidiary and not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary; (e) any restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the restrictions in the foregoing clauses (c) and (d), provided that the terms and conditions of any such restrictions are not materially less favorable to the Holders than those under or pursuant to the agreement so extended, renewed, refinanced or replaced (in the opinion of the Board of Directors of the Issuer whose determination shall be conclusive); (f) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Issuer or any Restricted Subsidiary in any manner material to the Issuer or any Restricted Subsidiary; (g) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; or (h) contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if (A) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement, (B) the encumbrance or restriction is not materially more disadvantageous to the Holders than is customary in comparable financings (as determined by the Issuer) and (C) the Issuer determines that any such encumbrance or restriction will not materially affect the Issuer's ability to make principal or interest payments on the Notes. SECTION 4.06. Limitations on Preferred Stock of Restricted Subsidiaries. The Issuer will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any Preferred Stock of a Restricted Subsidiary other than to the Issuer or a Wholly Owned Restricted Subsidiary, or permit any Person (other than the Issuer or a Wholly Owned Restricted Subsidiary) to own or hold any Preferred Stock of any Restricted Subsidiary, unless such Restricted Subsidiary would be entitled to Incur Indebtedness pursuant to Section 4.03 in an aggregate principal amount equal to the aggregate liquidation value of the Preferred Stock to be issued. SECTION 4.07. Limitation on Issuances of Guarantees by Restricted Subsidiaries. (a) The Issuer will not permit any Restricted Subsidiary, directly or indirectly, to assume, guarantee or in any other manner become liable with respect to any Indebtedness of the Issuer which is expressly by its terms pari passu with or subordinate in right of payment to the Notes ("Guaranteed Indebtedness") unless (i) such Restricted Subsidiary simultaneously executes and 47 delivers a supplemental indenture to the Indenture providing for a guarantee of payment of the Notes by such Restricted Subsidiary and (ii) such Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee. If the Guaranteed Indebtedness is (A) pari passu with the Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or subordinate in right of payment to, the Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated in right of payment to the Notes. (b) Each guarantee created pursuant to the provisions described in the foregoing paragraph is referred to as a "Subsidiary Guarantee," and the issuer of each such Guarantee is referred to as a "Subsidiary Guarantor." Notwithstanding the foregoing, any Subsidiary Guarantee may provide by its terms that it (together with any Liens arising from such Subsidiary Guarantee) shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Issuer, of all of the Issuer's Capital Stock in, or all or substantially all the assets of, such Subsidiary Guarantor, which is in compliance with this Indenture or (ii) the release or discharge of the assumption, guarantee or other liability which resulted in the creation of such Subsidiary Guarantee, except a release or discharge by or as a result of payment under such Subsidiary Guarantee. SECTION 4.08. Limitation on Transactions with Stockholders and Affiliates. The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into, renew or extend any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Issuer (other than a Wholly Owned Restricted Subsidiary) unless (i) such transaction or series of related transactions is on terms that are no less favorable to the Issuer or such Restricted Subsidiary, as the case may be, than would be available in a comparable transaction in arm's-length dealings with an unrelated third party and (ii) with respect to a transaction or series of related transactions involving payments in excess of $10 million in the aggregate, the Issuer delivers an Officers' Certificate to the Trustee certifying that (A) such transaction complies with clause (i) above and (B) such transaction or series of related transactions shall have been approved by a majority of the independent directors of the Board of Directors of the Issuer or for which the Issuer or a Restricted Subsidiary has received a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view (a copy of which opinion shall be attached to such Officers' Certificate); provided, however, that the foregoing restriction shall not apply to (a) the payment of reasonable and customary regular fees to directors of the Issuer or any of its Restricted Subsidiaries who are not employees of the Issuer or any Affiliate, (b) the payment of monthly fees in accordance with Section 4.13 and the reimbursement of expenses pursuant to the terms of management agreements with Genesis or 48 any of its affiliates, (c) any payments or other transactions pursuant to any tax-sharing agreement between the Issuer and any other Person with which the Issuer files a consolidated tax return or with which the Issuer is part of a consolidated group for tax purposes, (d) the Therapy Sale, provided the Issuer or its Restricted Subsidiaries receives at least $20 million from the Therapy Sale, (e) the Pharmacy Sale, provided the Issuer or its Restricted Subsidiaries receives at least $50 million from the Pharmacy Sale, (f) transactions in the ordinary course of business with Genesis or any of its Affiliates, related to the Issuer's healthcare businesses or facilities; provided that the aggregate amount of any such transactions in any twelve month period does not exceed $10 million, (g) any Restricted Payments not prohibited by Section 4.04 or (h) the payment of fees and expenses in connection with the Transactions to Genesis, Cypress and TPG. SECTION 4.09. Limitation on Liens. The Issuer will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Liens of any kind upon any of its respective properties now owned or acquired after the Closing Date or any income or profits therefrom securing (i) any Indebtedness of the Issuer which is expressly subordinate in right of payment to any other Indebtedness of the Issuer, unless the Notes are equally and ratably secured; provided that, if such Indebtedness is subordinate in right of payment to the Notes, the Lien securing such Indebtedness shall be subordinate to the Lien securing the Notes with the same relative priority as such subordinated Indebtedness shall have with respect to the Notes; provided further that this clause (i) shall not be applicable to any Liens securing any such Indebtedness which became Indebtedness of the Issuer pursuant to a transaction permitted under Article Five or Liens securing Acquired Indebtedness and, in each case, which Liens were in existence at the time of such transaction or Incurrence of such Acquired Indebtedness and not Incurred in connection with or in contemplation of such transaction or Incurrence, so long as such Liens do not extend to or cover any property or assets of the Issuer or any Restricted Subsidiary other than property or assets acquired in such transaction, or (ii) any assumption, guarantee or other liability of any Restricted Subsidiary in respect of any Indebtedness of the Issuer which is expressly subordinate in right of payment to any other Indebtedness of the Issuer, unless the substantially similar assumption, guarantee or other liability of such Restricted Subsidiary in respect of the Notes is equally and ratably secured; provided that, if such subordinated Indebtedness is subordinate in right of payment to the Notes, the Lien securing the assumption, guarantee or other liability of such Restricted Subsidiary in respect of such Indebtedness shall be subordinate to the Lien securing the assumption, guarantee or other liability of such Restricted Subsidiary with respect to the Notes with the same relative priority as such subordinated Indebtedness shall have with respect to the Notes; provided further that this clause (ii) shall not be applicable to Liens securing any such assumption, guarantee or other liability which existed at the time such Restricted Subsidiary became a Restricted Subsidiary and which Liens were in existence at the time of such transaction (unless such assumption, guarantee or other liability was Incurred in connection with or in contemplation of such Person becoming a Restricted Subsidiary), so long as such Liens do not extend to or cover any property or assets of the Issuer or any other Restricted Subsidiary. 49 SECTION 4.10. Limitation on Asset Sales. The Issuer will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the consideration received by the Issuer or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of and (ii) at least 75% of the consideration received consists of cash or Temporary Cash Investments. In the event and to the extent that the Net Cash Proceeds received by the Issuer or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed $10 million, then the Issuer shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received exceed $10 million (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay Senior Indebtedness of the Issuer or any Subsidiary Guarantor or Indebtedness of any other Restricted Subsidiary, in each case owing to a Person other than the Issuer or any of its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement; provided that if any such agreement is terminated, the Issuer may invest such Net Cash Proceeds prior to the end of the 12-month period referred to in clause (i) or six months after the termination of such agreement, whichever is later), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Issuer and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this Section 4.10. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.10 totals at least $10 million, the Issuer must commence, not later than the fifteenth Business Day of such month, and consummate an Offer to Purchase from the Holders on a pro rata basis an aggregate principal amount of Notes equal to the Excess Proceeds on such date, at a purchase price equal to 100% of the principal amount of the Notes, plus, in each case, accrued interest (if any) to the Payment Date. SECTION 4.11. Repurchase of Notes upon a Change in Control. The Issuer must commence, within 30 days of the occurrence of a Change in Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount thereof, plus accrued interest (if any) to the Payment Date. Within 30 days following a Change of Control, the Issuer shall mail a notice to each Holder and the Trustee stating the terms of the Change of Control. 50 SECTION 4.12. Limitation on Senior Subordinated Indebtedness. The Issuer will not Incur any Indebtedness, other than the Notes, that is subordinate in right of payment to any Senior Indebtedness, unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Notes pursuant to subordination provisions substantially similar to those contained in the Indenture; provided that the foregoing limitation shall not apply to distinctions between categories of Senior Indebtedness of the Issuer that exist by reason of any Liens or Guarantees arising or created in respect of some but not all of such Senior Indebtedness. SECTION 4.13. Limitation on Management Fees. The Issuer will not, and will not permit any of its Restricted Subsidiaries to, pay any management fees in any month to the extent such fees would exceed the greater of (i) $1,991,666 and (ii) 4% of the Issuer's consolidated net revenues for such month; provided that the Issuer may pay management fees in excess of such amount (including accrued fees) to the extent that (A) both before and after giving effect to the proposed payment (x) no Default or Event of Default shall have occurred and be continuing and (y) the Issuer's Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that (I) any Indebtedness Incurred or repaid after the first day of such four-quarter period and on or prior to the date of such payment (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such four quarter period unless any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of the Issuer, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), had been Incurred or repaid on the first day of such four-quarter period, (II) any acquisition or disposition by the Issuer and its Restricted Subsidiaries out of the ordinary course of business of any assets constituting a company, division, line of business or business facility, in each case after the first day of such four-quarter period, and on or prior to the date of such payment, had been consummated on the first day of such four-quarter period (including giving pro forma effect to the application of the proceeds of any such disposition) and (III) the proposed management fees were paid during such period, would have been at least equal to 2:00:1.00; and (B) the aggregate amount of management fees paid with respect to any month do not exceed 6% of the Issuer's consolidated net revenues for such month. To the extent the Issuer is prohibited from paying any management fees as a result of clause (y) of the proviso to the preceding sentence, the Issuer may accrue such fees until they may be paid in accordance with this Section 4.13 provided the payment of such accrued fees is subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all of the Issuer's obligations under the Notes and this Indenture. SECTION 4.14. Existence. Subject to Articles Four and Five of this Indenture, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of the Issuer and each such Subsidiary and the rights (whether pursuant to charter, partnership certificate, agreement, statute or otherwise), material 51 licenses and franchises of the Issuer and each such Subsidiary; provided that the Issuer shall not be required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary, if the maintenance or preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries taken as a whole. SECTION 4.15. Payment of Taxes and Other Claims. The Issuer will pay or discharge and shall cause each of its Subsidiaries to pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon (a) the Issuer or any such Subsidiary, (b) the income or profits of any such Subsidiary which is a corporation or (c) the property of the Issuer or any such Subsidiary and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of the Issuer or any such Subsidiary; provided that the Issuer shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established. SECTION 4.16. Maintenance of Properties and Insurance. The Issuer will cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Issuer may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section 4.16 shall prevent the Issuer or any such Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Issuer, desirable in the conduct of the business of the Issuer or such Subsidiary. The Issuer will provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, products liability insurance and public liability insurance, with reputable insurers or with the government of the United States of America, or an agency or instrumentality thereof, in such amounts, with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry in which the Issuer or any such Restricted Subsidiary, as the case may be, is then conducting business. SECTION 4.17. Notice of Defaults. In the event that the Issuer becomes aware of any Default or Event of Default, the Issuer, promptly after it becomes aware thereof, will give written notice thereof to the Trustee. 52 SECTION 4.18. Compliance Certificates. (a) The Issuer shall deliver to the Trustee, within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), an Officers' Certificate stating whether or not the signers know of any Default or Event of Default that occurred during such fiscal quarter. In the case of the Officers' Certificate delivered within 90 days after the end of the Issuer's fiscal year, such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer of the Issuer that a review has been conducted of the activities of the Issuer and its Restricted Subsidiaries and the Issuer's and its Restricted Subsidiaries' performance under this Indenture and that the Issuer has complied with all conditions and covenants under this Indenture. For purposes of this Section 4.18, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If the officers of the Issuer signing such certificate do know of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default and its status. The first certificate to be delivered pursuant to this Section 4.18(a) shall be for the first fiscal quarter beginning after the execution of this Indenture. (b) The Issuer shall deliver to the Trustee, within 90 days after the end of the Issuer's fiscal year, a certificate signed by the Issuer's independent certified public accountants stating (i) that their audit examination has included a review of the terms of this Indenture and the Notes as they relate to accounting matters, (ii) that they have read the most recent Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this Section 4.18 and (iii) whether, in connection with their audit examination, anything came to their attention that caused them to believe that the Issuer was not in compliance with any of the terms, covenants, provisions or conditions of Article Four and Section 5.01 of this Indenture as they pertain to accounting matters and, if any Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided that such independent certified public accountants shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards in effect at the date of such examination. SECTION 4.19. Commission Reports and Reports to Holders. At all times from and after the earlier of (i) the date of the commencement of an Exchange Offer or the effectiveness of the Shelf Registration Statement (the "Registration") and (ii) the date that is six months after the Closing Date, in either case, whether or not the Issuer is then required to file reports with the Commission, the Issuer shall file with the Commission the annual, quarterly and other reports and other information required by Section 13(a) or 15(d) of the Exchange Act, regardless of whether such sections of the Exchange Act are applicable to the Issuer (unless the Commission will not accept such a filing). The Issuer shall mail or cause to be mailed copies of such reports and information to Holders and the Trustee within 15 days after the date it files such reports and information with the Commission or after the date it would have been required to file such reports and information with the Commission had it been subject to such sections 53 of the Exchange Act; provided, however, that the copies of such reports and information mailed to Holders may omit exhibits, which the Issuer will supply to any Holder at such Holder's request. In addition, at all times prior to the earlier of the date of the Registration and the date that is six months after the Closing Date, the Issuer shall, at its cost, deliver to each Holder of the Notes quarterly and annual reports substantially equivalent to those which would be required by the Exchange Act. In addition, at all times prior to the Registration, upon the request of any Holder or any prospective purchaser of the Notes designated by a Holder, the Issuer shall supply to such Holder or such prospective purchaser the information required under Rule 144A under the Securities Act. SECTION 4.20. Waiver of Stay, Extension or Usury Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Issuer from paying all or any portion of the principal of, premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Issuer hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. When Issuer May Merge, Etc. The Issuer shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer or lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to any Person or group of affiliated Persons, or permit any of its Restricted Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a sale, assignment, transfer, lease or disposal of all or substantially all of the properties and assets of the Issuer and its Restricted Subsidiaries on a consolidated basis to any other Person or group of affiliated Persons, unless at the time and after giving effect thereto (i) either (A) the Issuer shall be the continuing corporation, or (B) the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or the Person which acquires by conveyance, transfer, lease or disposition the properties and assets of the Issuer, substantially as an entirety (the "Surviving Entity") shall be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and shall, in either case, expressly assume, by an indenture supplemental to this Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Issuer under the Notes and this Indenture, and this Indenture shall remain in full force and effect; (ii) immediately before 54 and immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of the Issuer or a Restricted Subsidiary which becomes the obligation of the Issuer or any of its Restricted Subsidiaries in connection with or as a result of such transaction as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth of the Issuer (or the Surviving Entity if the Issuer is not the continuing obligor under the Indenture) is at least equal to the Consolidated Net Worth of the Issuer immediately before such transaction; (iv) immediately before and immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of the Issuer or a Restricted Subsidiary which becomes the obligation of the Issuer or any of its Restricted Subsidiaries in connection with or as a result of such transaction as having been incurred at the time of such transaction), the Issuer (or the Surviving Entity if the Issuer is not the continuing obligor under this Indenture) could incur $1.00 of additional Indebtedness under Section 4.03 (other than Permitted Indebtedness); provided that this clause (iv) shall not apply to (x) a consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in connection with any such merger or consolidation, no consideration (other than Qualified Capital Stock in the Surviving Entity or the Issuer) shall be issued or distributed to the stockholders of the Issuer or (y) the merger of Genesis ElderCare Acquisition Corp. with and into Multicare; and (v) the Issuer or the Surviving Entity shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that such consolidation, merger, transfer, lease or disposition and such supplemental indenture comply with the terms of this Indenture. SECTION 5.02. Successor Substituted. Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Issuer in accordance with the immediately preceding paragraph, the successor Person formed by such consolidation or into which the Issuer is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such successor had been named as the Issuer herein. When a successor assumes all the obligations of its predecessor under this Indenture and the Notes, the predecessor shall be released from those obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal and interest on the Notes. 55 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. An "Event of Default" shall occur with respect to the Notes if: (a) the Issuer defaults in the payment of the principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, whether or not such payment is prohibited by Article Eleven; (b) the Issuer defaults in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days, whether or not such payment is prohibited by Article Eleven; (c) the Issuer defaults in the performance of, or breaches the provisions of, Article Five or Section 3.01(b) or fails to make or consummate an Offer to Purchase in accordance with Section 4.10 or 4.11; (d) the Issuer defaults in the performance of or breaches any covenant or agreement of the Issuer in this Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above), and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) there occurs with respect to any issue or issues of Indebtedness of the Issuer or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Issuer or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to 56 exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Issuer or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or any Significant Subsidiary or for all or substantially all of the property and assets of the Issuer or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Issuer or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) the Issuer or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or any Significant Subsidiary or for all or substantially all of the property and assets of the Issuer or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; or (i) the Guaranty Documents are not executed and delivered within three Business Days after the consummation of the Tender Offer (unless prior to or at the end of such three Business Days the Merger shall have been consummated). SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 that occurs with respect to the Issuer) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) of Section 6.01 has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Issuer or the relevant Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) of Section 6.01 occurs with respect to the Issuer, the principal of, premium, if any, and accrued interest on the Notes then outstanding 57 shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes, by written notice to the Issuer and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may, and at the direction of the Holders of at least a majority in principal amount of the outstanding Notes shall, pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of the outstanding Notes, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of, premium, if any, or interest on any Note as specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or provision of this Indenture which cannot be modified or amended without the consent of the Holder of each outstanding Note affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 6.05. Control by Majority. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. SECTION 6.06. Limitation on Suits. A Holder may not pursue any remedy with respect to this Indenture or the Notes unless: 58 (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer (and if requested provide) the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. For purposes of Section 6.05 of this Indenture and this Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any determination of whether the Holders of the required aggregate principal amount of outstanding Notes have concurred in any request or direction of the Trustee to pursue any remedy available to the Trustee or the Holders with respect to this Indenture or the Notes or otherwise under the law. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. The limitations set forth in this Section 6.06 shall not apply to the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in clause (a), (b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other obligor of the Notes for the whole amount of principal, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal, premium, if any, and, to the extent that payment of such interest is lawful, interest on overdue 59 installments of interest, in each case at the rate specified in the Notes, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07) and the Holders allowed in any judicial proceedings relative to the Issuer (or any other obligor of the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for all amounts due under Section 7.07; Second: to Holders for amounts then due and unpaid for principal of, premium, if any, and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, and interest, respectively; and Third: to the Issuer or any other obligors of the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior written notice to the Issuer, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted 60 by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in principal amount of the outstanding Notes. SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Issuer, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Issuer, Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. ARTICLE SEVEN TRUSTEE SECTION 7.01. General. The duties and responsibilities of the Trustee shall be as provided by the TIA and as set forth herein. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 61 Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article Seven. SECTION 7.02. Certain Rights of Trustee. Subject to TIA Sections 315(a) through (d): (i) the Trustee may rely, and shall be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in any such document; (ii) before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.04. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion; (iii) the Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care; (iv) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (v) the Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the written direction of the Holders of a majority in principal amount of the outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; (vi) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; and (vii) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, 62 notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer personally or by agent or attorney. SECTION 7.03. Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no representation as to the validity or adequacy of this Indenture or the Notes, (ii) shall not be accountable for the Issuer's use or application of the proceeds from the Notes and (iii) shall not be responsible for any statement in the Notes other than its certificate of authentication. SECTION 7.05. Notice of Default. If any Default or any Event of Default occurs and is continuing and if such Default or Event of Default is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder in the manner and to the extent provided in TIA Section 313(c) notice of the Default or Event of Default within 45 days after it occurs, unless such Default or Event of Default has been cured; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each August 1, beginning with August 1, 1998, the Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief report dated as of such August 1, if required by TIA Section 313(a). SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to the Trustee such compensation as shall be agreed upon in writing for its services. The compensation of the Trustee shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses and advances incurred or made by the Trustee. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Issuer shall indemnify the Trustee against any and all losses, liabilities, obligations, damages, penalties, judgments, actions, suits, proceedings, reasonable costs and expenses 63 (including reasonable fees and disbursements of counsel) of any kind whatsoever which may be incurred by the Trustee in connection with any investigative, administrative or judicial proceeding (whether or not such indemnified party is designated a party to such proceeding) arising out of or in connection with the acceptance or administration of its duties under this Indenture; provided, however, that the Issuer need not reimburse any expense or indemnify against any loss, obligation, damage, penalty, judgment, action, suit, proceeding, reasonable cost or expense (including reasonable fees and disbursements of counsel) of any kind whatsoever which may be incurred by the Trustee in connection with any investigative, administrative or judicial proceeding (whether or not such indemnified party is designated a party to such proceeding) in which it is determined that the Trustee acted with negligence, bad faith or willful misconduct. The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder, unless the Issuer is materially prejudiced thereby. The Issuer shall defend the claim and the Trustee shall cooperate in the defense. Unless otherwise set forth herein, the Trustee may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. To secure the Issuer's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held by the Trustee pursuant to the Escrow Agreement and money or property held in trust to pay principal of, premium, if any, and interest on particular Notes. If the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses and the compensation for the services will be intended to constitute expenses of administration under Title 11 of the Bankruptcy Law or any applicable federal or state law for the relief of debtors. SECTION 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign at any time by so notifying the Issuer in writing at least 30 days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the consent of the Issuer. The Issuer may remove the Trustee if: (i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting pursuant to the requirement of TIA Section 310(b). 64 If the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer. If the successor Trustee does not deliver its written acceptance required by the next succeeding paragraph of this Section 7.08 within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of a majority in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Immediately after the delivery of such written acceptance, subject to the lien provided in Section 7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, (ii) the resignation or removal of the retiring Trustee shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. If the Trustee is no longer eligible under Section 7.10, any Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. The Issuer shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer's obligation under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein. SECTION 7.10. Eligibility. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $25 million as set forth in its most recent published annual report of condition. SECTION 7.11. Money Held in Trust. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Issuer. Money held in trust 65 by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article Eight of this Indenture. SECTION 7.12. Withholding Taxes. The Trustee, as agent for the Issuer, shall exclude and withhold from each payment of principal and interest and other amounts due hereunder or under the Notes any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Notes, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Holders of the Notes, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each Holder of a Note appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Holders may reasonably request from time to time. ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Issuer's Obligations. Except as otherwise provided in this Section 8.01, the Issuer may terminate its obligations under the Notes and this Indenture if: (i) all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes that have been replaced or Notes that are paid pursuant to Section 4.01 or Notes for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Issuer, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Issuer has paid all sums payable by it hereunder; or (ii) (A) the Notes mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) the Issuer irrevocably deposits in trust with the Trustee during such one-year period, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds solely for the benefit of the Holders for that purpose, money or U.S. Government Obligations sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment of any interest thereon, to pay principal, premium, if, any, and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (C) no Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, (D) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound and 66 (E) the Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. With respect to the foregoing clause (i), the Issuer's obligations under Section 7.07 shall survive. With respect to the foregoing clause (ii), the Issuer's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05, 8.06 and Article Eleven (with respect to payments in respect of Indebtedness that is subordinated in right of payment to any Senior Indebtedness other than with respect to the assets held in trust as described in the foregoing clause (ii)) shall survive until the Notes are no longer outstanding. Thereafter, only the Issuer's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuer's obligations under the Notes and this Indenture except for those surviving obligations specified above. SECTION 8.02. Defeasance and Discharge of Indenture. The Issuer will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 123rd day after the date of the deposit referred to in clause (A) of this Section 8.02, and the provisions of this Indenture will no longer be in effect with respect to the Notes, and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging the same, except as to (i) rights of registration of transfer and exchange, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders to receive payments of principal thereof and interest thereon, (iv) the Issuer's obligations under Section 4.02, (v) the rights, obligations and immunities of the Trustee hereunder and (vi) the rights of the Holders as beneficiaries of this Indenture with respect to the property so deposited with the Trustee payable to all or any of them; provided that the following conditions shall have been satisfied: (A) with reference to this Section 8.02, the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 acting as the agent of the Trustee) and conveyed all right, title and interest for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (1) money in an amount, (2) U.S. Government Obligations that, through the payment of interest, premium, if any, and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (A), money in an amount or (3) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes 67 or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and accrued interest on the outstanding Notes at the Stated Maturity of such principal or interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (B) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound and is permitted by Article Eleven; (C) immediately after giving effect to such deposit on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of deposit; (D) the Issuer shall have delivered to the Trustee (1) either (x) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Issuer's exercise of its option under this Section 8.02 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised or (y) an Opinion of Counsel to the same effect as the ruling described in clause (x) above accompanied by a ruling to that effect published by the Internal Revenue Service, unless there has been a change in the applicable federal income tax law since the date of this Indenture such that a ruling from the Internal Revenue Service is no longer required and (2) an Opinion of Counsel to the effect that (x) the creation of the defeasance trust does not violate the Investment Issuer Act of 1940 and (y) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the Bankruptcy Law, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the Bankruptcy Law or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Issuer under either such statute, and either (I) the trust funds will no longer remain the property of the Issuer (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (II) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Issuer, (a) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the Bankruptcy Law on interest on the trust funds accruing after the commencement of a case under such statute and (b) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; 68 (E) if the Notes are then listed on a national securities exchange, the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that such deposit, defeasance and discharge will not cause the Notes to be delisted; and (F) the Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02 have been complied with. Notwithstanding the foregoing, prior to the end of the 123-day (or one year) period referred to in clause (D)(2)(y) of this Section 8.02, none of the Issuer's obligations under this Indenture shall be discharged. Subsequent to the end of such 123-day (or one year) period with respect to this Section 8.02, the Issuer's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05, 8.06 and Article Eleven (with respect to payments in respect of Indebtedness that is subordinated in right of payment to any Senior Indebtedness other than with respect to the assets held in trust as described in this Section 8.02) shall survive until the Notes are no longer outstanding. Thereafter, only the Issuer's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and when a ruling from the Internal Revenue Service or an Opinion of Counsel referred to in clause (D)(1) of this Section 8.02 is able to be provided specifically without regard to, and not in reliance upon, the continuance of the Issuer's obligations under Section 4.01, then the Issuer's obligations under such Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuer's obligations under the Notes and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 8.03. Defeasance of Certain Obligations. The Issuer may omit to comply with any term, provision or condition set forth in clauses (iii) and (iv) of Section 5.01 and Sections 4.03 through 4.19, clause (c) of Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01, clause (d) of Section 6.01 with respect to Sections 4.03 through 4.19, and clauses (e) and (f) of Section 6.01 shall be deemed not to be Events of Default, and Article Eleven shall not apply to the money and/or U.S. Government Obligations held by the trust referred to in clause (i) below, in each case with respect to the outstanding Notes if: (i) with reference to this Section 8.03, the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10) and conveyed all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, 69 premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (A) money in an amount, (B) U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), money in an amount or (C) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and interest on the outstanding Notes on the Stated Maturity of such principal or interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (ii) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound and is permitted by Article Eleven; (iii) immediately after giving effect to such deposit on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of deposit; (iv) the Issuer has delivered to the Trustee an Opinion of Counsel to the effect that (A) the creation of the defeasance trust does not violate the Investment Issuer Act of 1940, (B) the Trustee, for the benefit of the Holders, has a valid first-priority security interest in the trust funds, (C) the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred and (D) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the Bankruptcy Law, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the Bankruptcy Law or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Issuer under either such statute, and either (1) the trust funds will no longer remain the property of the Issuer (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (2) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Issuer, (x) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected 70 security interest in such trust funds that is not avoidable in bankruptcy or otherwise (except for the effect of Section 552(b) of the Bankruptcy Law on interest on the trust funds accruing after the commencement of a case under such statute) and (y) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; (v) if the Notes are then listed on a national securities exchange, the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that such deposit defeasance and discharge will not cause the Notes to be delisted; and (vi) the Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.03 have been complied with. SECTION 8.04. Application of Trust Money. Subject to Section 8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with the Notes and this Indenture to the payment of principal of, premium, if any, and interest on the Notes; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.05. Repayment to Issuer. Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the Issuer upon request set forth in an Officers' Certificate any excess money held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Issuer upon request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years. After payment to the Issuer, Holders entitled to such money must look to the Issuer for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the Issuer has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to 71 the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Issuer, when authorized by a resolution of its Board of Directors (as evidenced by a Board Resolution delivered to the Trustee), and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in this Indenture; provided that such amendments or supplements shall not, in the good faith opinion of the Board of Directors as evidenced by a Board Resolution, adversely affect the interests of the Holders in any material respect; (2) to comply with Article Five; (3) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; or (5) to make any change that, in the good faith opinion of the Board of Directors as evidenced by a Board Resolution, does not materially and adversely affect the rights of any Holder. SECTION 9.02. With Consent of Holders. Subject to Sections 6.04 and 6.07 and without prior notice to the Holders, the Issuer, when authorized by its Board of Directors (as evidenced by a Board Resolution delivered to the Trustee), and the Trustee may amend this Indenture, the Notes and the Escrow Agreement with the written consent of the Holders of a majority in principal amount of the Notes then outstanding, and the Holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may waive future compliance by the Issuer with any provision of this Indenture, the Notes and the Escrow Agreement. Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04, may not: 72 (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or adversely affect any right of repayment at the option of any Holder of any Note, or change any place of payment where, or the currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage in principal amount of outstanding Notes the consent of whose Holders is required for any such supplemental indenture, for any waiver of compliance with certain provisions of this Indenture or certain Defaults and their consequences provided for in this Indenture; (iii) waive a default in the payment of principal of, premium, if any, or interest on, any Note; (iv) modify Article Eleven or the Escrow Agreement in a manner that adversely affects the rights of any Holder in any material respect; or (v) modify any of the provisions of this Section 9.02, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby. Notwithstanding the foregoing and without affecting any restrictions on amendments to this Indenture under the Credit Facility, any amendment to the provisions of Article Eleven that is adverse to the holders of Senior Indebtedness shall require the consent of such holders. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Issuer will mail supplemental indentures to Holders upon request. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.03. Revocation and Effect of Consent. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the Note of 73 the consenting Holder, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion of its Note. Such revocation shall be effective only if the Trustee receives the notice of revocation before the time the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the last two sentences of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies) and only those persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type described in any of clauses (i) through (v) of the second paragraph of Section 9.02. In case of an amendment or waiver of the type described in clauses (i) through (v) of the second paragraph of Section 9.02, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder of a Note that evidences the same indebtedness as the Note of the consenting Holder. SECTION 9.04. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver it to the Trustee. At the Issuer's expense, the Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Note thereafter authenticated. Alternatively, if the Issuer or the Trustee so determines, the Issuer in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation, or issue a new Note, shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and that it will be valid and binding upon the Issuer. Subject to the preceding sentence, the Trustee shall sign such amendment, supplement or waiver if the same does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 74 SECTION 9.06. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the TIA as then in effect. ARTICLE TEN SECURITY SECTION 10.01. Security. (a) On the Closing Date, the Issuer shall (i) enter into the Escrow Agreement and comply with the terms and provisions thereof and (ii) cause the Collateral to be pledged to the Trustee for the benefit of the Holders in an amount equal to the net proceeds to be received by the Issuer from the sale of the Notes. The Collateral shall be pledged by the Issuer to the Trustee for the benefit of the Holders and shall be held by the Trustee in the Cash Collateral Account pending disposition pursuant to the terms of the Escrow Agreement. (b) Each Holder, by its acceptance of a Note, consents and agrees to the terms of the Escrow Agreement (including, without limitation, the provisions providing for foreclosure and release of the Collateral) as the same may be in effect or may be amended from time to time in accordance with its terms, and authorizes and directs the Trustee to enter into the Escrow Agreement and to perform its respective obligations and exercise its respective rights thereunder in accordance therewith. The Issuer will do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Escrow Agreement, to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby, by the Escrow Agreement or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein expressed. The Issuer shall take, or shall cause to be taken, any and all actions reasonably required (and any action requested by the Trustee) to cause the Escrow Agreement to create and maintain, as security for the obligations of the Issuer under this Indenture and the Notes, valid and enforceable first priority liens in and on all the Collateral, in favor of the Trustee, superior to and prior to the rights of third Persons and subject to no other Liens. (c) The release of any Collateral pursuant to the Escrow Agreement will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to this Indenture and the Escrow Agreement. To the extent applicable, the Issuer shall cause TIA Section 314(d) relating to the release of property or securities from the Lien and security interest of the Escrow Agreement (other than pursuant to Sections 7(c) and 7(d) thereof) and relating to the substitution therefor of any property or securities to be subjected to the Lien and security interest of the Escrow Agreement to be complied with. Any certificate or opinion required by TIA Section 314(d) may be made by an Officer of the Issuer, except in cases where TIA Section 314(d) requires that such 75 certificate or opinion be made by an independent Person, which Person shall be an independent engineer, appraiser or other expert selected by the Issuer. (d) The Issuer shall cause TIA Section 314(b), relating to opinions of counsel regarding the Lien under the Escrow Agreement, to be complied with. The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such instruments. (e) The Trustee, in its sole discretion and without the consent of the Holders, may, and at the request of the Holders of at least 25% in aggregate principal amount of Notes then outstanding shall, on behalf of the Holders, take all actions it deems necessary or appropriate in order to (i) enforce any of the terms of the Escrow Agreement and (ii) collect and receive any and all amounts payable in respect of the obligations of the Issuer thereunder. The Trustee shall have power to institute and to maintain such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or of the Trustee). ARTICLE ELEVEN SUBORDINATION SECTION 11.01. Agreement to Subordinate. The Issuer, for itself, its successors and assigns, covenants and agrees, and each Holder, by his or her acceptance thereof, likewise covenants and agrees, that the payment of the principal of and premium, if any, and interest on each and all of the Notes (including any payment in connection with the repurchase, redemption or other acquisition thereof) is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full, in cash or Cash Equivalents of all Senior Indebtedness. This Article Eleven constitutes a continuing offer to all persons or entities who become holders of, or continue to hold, Senior Indebtedness, each of whom is an obligee hereunder and is entitled to enforce such holder's rights hereunder, subject to the provisions hereof, without any act or notice of acceptance hereof or reliance hereon. All provisions of this Article Eleven shall be subject to Section 11.12. For the purposes of this Article Eleven, (a) no Senior Indebtedness shall be deemed to have been paid in full unless and until all commitments or other obligations of the holders of the Senior Indebtedness to make advances or otherwise extend credit shall have terminated and the holders thereof shall have indefeasibly received payment in full in cash or Cash Equivalents, and 76 (b) the term "Senior Representative" shall mean the indenture trustee or other trustee, agent or representative for any Senior Indebtedness. SECTION 11.02. Distribution on Dissolution, Liquidation, Bankruptcy or Reorganization. Upon any distribution of assets of the Issuer upon any total or partial dissolution, winding up, liquidation or reorganization of the Issuer, whether in bankruptcy, insolvency, reorganization or receivership proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer or otherwise, (a) The holders of Senior Indebtedness shall be entitled to receive payment in full in cash or Cash Equivalents or, as acceptable to each holder of Senior Indebtedness, in any other manner, of all amounts and obligations due on or in respect of all Senior Indebtedness before the Holders are entitled to receive any payment or distribution of any kind or character (excluding securities of the Issuer provided for in a plan of reorganization with respect to the Issuer approved by the bankruptcy court that are equity securities or are subordinated in right of payment to all Senior Indebtedness to the same extent as, or to a greater extent than, the Notes are so subordinated as provided in this Article; such securities are hereinafter collectively referred to as "Permitted Junior Notes") on account of principal of, premium, if any, or interest on the Notes (including any payment or other distribution which may be received from the holders of Subordinated Indebtedness as a result of any payment on such Subordinated Indebtedness); and (b) any payment or distribution of assets of the Issuer or any Subsidiary of the Issuer of any kind or character, whether in cash, property or securities (excluding Permitted Junior Notes), by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article (including any payment or other distribution which may be received from the holders of Subordinated Indebtedness as a result of any payment on such Subordinated Indebtedness) shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their Senior Representative or Representatives, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash, Cash Equivalents or in any other form acceptable to each, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or any Holder shall have received any payment or distribution of assets of the Issuer or any Subsidiary of the Issuer of any kind or character, whether in cash, property or securities (excluding Permitted Junior Notes), in respect of principal, 77 premium, if any, and interest on the Notes before all Senior Indebtedness is paid in full in cash, then and in such event, such payment or distribution (including any payment or other distribution which may be received from the holders of Subordinated Indebtedness as a result of any payment on such Subordinated Indebtedness) shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Issuer for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash, Cash Equivalents or, as acceptable to each holder of Senior Indebtedness, any other manner, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness or deposited with a court of competent jurisdiction. The consolidation of the Issuer with, or the merger of the Issuer into, another corporation or the liquidation or dissolution of the Issuer following the sale or conveyance of its property or assets as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article Five shall not be deemed a dissolution, winding up, liquidation or reorganization of the Issuer for the purposes of this Article Eleven if such other corporation shall, as a part of such consolidation, merger, sale or conveyance, comply with the conditions stated in Article Five. If the Trustee or any Holder does not file a proper claim or proof of debt in the form required in any proceeding referred to above prior to 30 days before the expiration of the time to file such claim in such proceeding, then the holder of any Senior Indebtedness (or its Senior Representative) is hereby authorized, and has the right, to file an appropriate claim or claims for or on behalf of such Holder. SECTION 11.03. Suspension of Payment When Senior Indebtedness in Default. (a) Unless Section 11.02 shall be applicable, upon the occurrence of a Payment Default, then no payment or distribution of any assets of the Issuer or any Subsidiary of the Issuer of any kind or character (excluding Permitted Junior Notes) shall be made by the Issuer or any Subsidiary of the Issuer or on behalf of or out of the property of the Issuer, or received by the Trustee or any Noteholder on account of principal of, premium, if any, or interest on, the Notes or on account of the purchase, redemption, defeasance (whether under Section 8.02 or 8.03) or other acquisition of or in respect of the Notes unless and until such Payment Default shall have been cured or waived in writing by the holders of the Designated Senior Indebtedness or shall have ceased to exist or the Designated Senior Indebtedness shall have been paid in full in cash, Cash Equivalents or in any other manner as acceptable to each holder of such Designated Senior Indebtedness, after which the Issuer shall resume making any and all required payments in respect of the Notes, including any missed payments. (b) Unless Section 11.02 shall be applicable, upon (i) the occurrence of a Non-payment Default pursuant to which the maturity of the applicable Designated Senior 78 Indebtedness may be accelerated, either immediately or upon the giving of notice, the passage of time or both, and (ii) receipt by the Trustee and the Issuer from a Senior Representative or the holder of any Designated Senior Indebtedness of written notice of such occurrence, no payment (other than any payments made pursuant to Section 8.02 or 8.03 or from the money or proceeds of U.S. Government Securities held under the Escrow Agreement as provided in Section 10.01) or distribution of any assets of the Issuer or any Subsidiary of the Issuer of any kind or character (excluding Permitted Junior Notes) shall be made by the Issuer or any Subsidiary of the Issuer or on behalf of or out of the property of the Issuer or any Subsidiary of the Issuer, or received by the Trustee or any Holder on account of any principal of, premium, if any, or interest on, the Notes (including payments under any guaranty thereof) or on account of the purchase, redemption or other acquisition of or in respect of Notes (including payments under any guaranty thereof) for a period ("Payment Blockage Period") commencing on the date of receipt by the Trustee of such notice until the earliest of (x) 179 days after receipt of such written notice by the Trustee (provided any Designated Senior Indebtedness as to which notice was given shall theretofore have not been accelerated), (y) the date such Non-payment Default and all other Non-payment Defaults as to which notice is also given after such period is initiated shall have been cured or waived in writing by the holders of the Designated Senior Indebtedness or shall have ceased to exist or the Senior Indebtedness related thereto shall have been paid in full in cash or Cash Equivalents or (z) the date such Payment Blockage Period and any Payment Blockage Periods initiated during such period shall have been terminated by written notice to the Issuer or the Trustee from the Senior Representative and the holders of the Designated Senior Indebtedness that have given notice of a Non-payment Default at or after the initiation of such Payment Blockage Period, after which in the case of clause (x), (y) or (z), the Issuer shall resume making any and all required payments in respect of the Notes including any missed payments. Notwithstanding any other provision of this Indenture, in no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt by the Issuer or the Trustee of the notice referred to in clause (ii) of this paragraph (b) (the "Initial Blockage Period"). Not more than one Payment Blockage Period may be commenced with respect to the Notes during any period of 360 consecutive days; provided that, subject to the limitations set forth in the next sentence, the commencement of a Payment Blockage Period by the representative of Designated Senior Indebtedness other than the Credit Facility shall not bar the commencement of another Payment Blockage Period by the representative for the Credit Facility within such period of 360 consecutive days. Notwithstanding anything in this Indenture to the contrary, there must be 180 days in any 360-day period in which no Payment Blockage Period is in effect. No event of default (other than an event of default pursuant to the financial maintenance covenants under the Credit Facility) that existed or was continuing (it being acknowledged that any subsequent action that would give rise to an event of default pursuant to any provision under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose) on the date of commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or shall be made, the basis for the commencement of a second Payment Blockage Period by the representative for, or the holders of, such Designated Senior 79 Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. (c) In the event that, notwithstanding the foregoing, the Issuer or any Subsidiary of the Issuer shall make, or the Trustee or any Holder shall receive, any payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to a Senior Representative of the holders of the Designated Senior Indebtedness. SECTION 11.04. Payment Permitted if No Default. Nothing contained in this Article, elsewhere in this Indenture or in any of the Notes shall prevent the Issuer, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshaling of assets and liabilities of the Issuer referred to in Section 11.02 or under the conditions described in Section 11.03, from making payments at any time of principal of, premium, if any, or interest on the Notes. SECTION 11.05. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of, premium, if any, and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders or the Trustee, shall, as among the Issuer, its creditors other than holders of Senior Indebtedness, and the Holders, be deemed to be a payment or distribution by the Issuer to or on account of the Senior Indebtedness. SECTION 11.06. Provisions Solely to Define Relative Rights. The provisions of this Article are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Notes is intended to or shall (i) impair, as among the Issuer, its creditors other than holders of Senior Indebtedness and the Holders, the obligation of the Issuer, which is absolute and unconditional, to pay to the Holders the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms; or (ii) affect the relative rights against the Issuer of the Holders and creditors of the Issuer other than their rights in relation to the holders of Senior Indebtedness; or (iii) prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, under this Article of the holders of Senior Indebtedness to receive distributions and payments otherwise payable to Holders (A) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshaling of assets and liabilities of the Issuer 80 referred to in Section 11.02, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (B) under the conditions specified in Section 11.03, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 11.03(c). SECTION 11.07. Trustee to Effectuate Subordination. Each Holder by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Issuer whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the indebtedness of Issuer owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a proper claim at least 30 days before the expiration of the time to file such claim, then the holders of Senior Indebtedness, and their agents, trustees or other representatives are authorized to do so for and on behalf of the Holders. SECTION 11.08. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or any Holder or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Issuer or any Holder with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, or waive compliance with the terms of, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection or payment of Senior Indebtedness; (iv) exercise or refrain from exercising any rights against the Issuer and any other Person; (v) amend, supplement, restate or otherwise modify or restructure the Senior Indebtedness; and (vi) otherwise deal with any Person liable on account of Senior Indebtedness; provided, however, that in no event shall any such actions limit the right of the Holders to take any action to accelerate the maturity of the Notes pursuant to Article Six of this Indenture or to pursue any rights or remedies hereunder or under applicable laws if the taking of such action does not otherwise violate the terms of this Article, subject to the rights, if any, under this 81 Article, of the holders, from time to time, of Senior Indebtedness to receive the cash, property or securities receivable upon the exercise of such rights or remedies. SECTION 11.09. Notice to Trustee. (a) The Issuer shall give prompt written notice to the Trustee of any fact known to the Issuer which would prohibit the making of any payment to or by the Trustee in respect of the Notes. Notwithstanding the provisions of this Article or any provision of this Indenture, the Trustee or any Paying Agent shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee or any Paying Agent in respect of the Notes, unless and until the Trustee shall have received written notice thereof from the Issuer or a holder of Senior Indebtedness or from a Senior Representative or any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of, premium, if any, or interest on any Note), then, anything herein contained to the contrary notwithstanding but without limiting the rights and remedies of the holders of Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date; nor shall the Trustee be charged with knowledge of the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. (b) The Trustee shall be entitled to rely on the delivery to it of a written notice to the Trustee and the Issuer by a Person representing himself to be a Senior Representative or a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a Senior Representative or a holder of Senior Indebtedness (or a trustee, fiduciary or agent thereof and the Trustee shall have no duty to investigate the authenticity thereof or the authority of the person signing and shall have no liability for relying thereon); provided, however, that failure to give such notice to the Issuer shall not affect in any way the ability of the Trustee to rely on such notice. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment or the Trustee or the Paying Agent may deposit the funds in question with a court of competent jurisdiction. 82 SECTION 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Issuer referred to in this Article, the Trustee and the Holders shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article, provided that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article. SECTION 11.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder of Senior Indebtedness. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 11.12. Trust Moneys and Escrowed Funds Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from (x) money or the proceeds of U.S. Government Obligations held in trust under Article Eight by the Trustee for the payment of principal of, premium, if any, and interest on the Notes (provided that at the time deposited, such deposit did not violate any then outstanding Senior Indebtedness) and (y) money or the proceeds of U.S. Government Securities held under the Escrow Agreement shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article Eleven, and none of the Holders shall be obligated to pay over any such amount to any holder of Senior Indebtedness. SECTION 11.13. No Suspension of Remedies. Nothing contained in this Article shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Notes pursuant to Article Six of this Indenture or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article of the holders, from time to time, of Senior Indebtedness to receive the cash, property or securities receivable upon the exercise of such rights or remedies. SECTION 11.14. Trustee's Relation to Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Article 83 against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. SECTION 11.15. Other Rights of Holders of Senior Indebtedness. All rights and interests under this Indenture of the holders of Senior Indebtedness, and all agreements and obligations of the Trustee, the Holders and the Issuer under this Article shall remain in full force and effect irrespective of (i) any lack of validity or enforceability of the Credit Facility, and promissory notes evidencing the Credit Facility or any other agreement or instrument relating thereto or to any other Senior Indebtedness or (ii) any other circumstance that might constitute a defense available to, or a discharge of, a guarantor or surety (other than as a result of any payments indefeasibly made on the Credit Facility or any other Senior Indebtedness). The holders of Senior Indebtedness are hereby authorized to demand specific performance of this Article, whether or not the Issuer shall have complied with any provisions of this Article applicable to it, at any time when the Trustee or any Holder shall have failed to comply with any of these provisions. The provisions of this Article shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise be returned by any holder of Senior Indebtedness upon the insolvency, bankruptcy or reorganization of the Issuer or otherwise, all as though such payment had not been made. ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act of 1939. Prior to the effectiveness of the Registration Statement, this Indenture shall incorporate and be governed by the provisions of the TIA that are required to be part of and to govern indentures qualified under the TIA. After the effectiveness of the Registration Statement, this Indenture shall be subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA 318(c), the imposed duties shall control. SECTION 12.02. Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person, mailed by first-class mail or sent by telecopier transmission addressed as follows: 84 if to the Issuer: Genesis ElderCare Acquisition Corp. 148 West State Street Kennett Square, PA 19348 Telecopier No.: (610) 444-7483 Attention: George V. Hager, Jr. if to the Trustee: PNC Bank, National Association Corporate Trust Department 1600 Market Street Philadelphia, PA 19103 Telecopier No.: (215) 585-8872 Attention: Sheila Wallbridge if to the Paying Agent: Banque Internationale a Luxembourg S.A. 69, route d'Esch L-1470 Luxembourg Telecopier No.: (352) 4590-4227 Attention: Jacques Kinnen The Issuer, the Trustee or the Paying Agent by notice to the other may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Paying Agent at the same time. Any notice or communication (i) mailed to a Holder shall be mailed to it at its address as it appears on the Security Register by first-class mail and shall be sufficiently given to him if so mailed within the time prescribed and (ii) for so long as the Notes are listed on the Luxembourg Stock Exchange, shall be published in a leading newspaper of general circulation in Luxembourg, not later than the latest date, and not earlier than the earliest date, prescribed 85 in the Notes for the giving of such notice or communication. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. Failure to transmit a notice or communication to a Holder as provided herein or any defect in any such notice shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed in the manner provided in this Section 12.02, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 12.03. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee: (i) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (ii) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such Counsel, all such conditions precedent have been complied with. SECTION 12.04. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (i) a statement that each person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; 86 (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (iii) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; provided, however, that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 12.05. Rules by Trustee, Paying Agent or Registrar. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 12.06. Payment Date Other Than a Business Day. If an Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity of any Note shall not be a Business Day, then payment of principal of, premium, if any, or interest on such Note, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Payment Date or Redemption Date, or at the Stated Maturity or date of maturity of such Note; provided that no interest shall accrue for the period from and after such Interest Payment Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as the case may be. SECTION 12.07. Governing Law. The laws of the State of New York shall govern this Indenture and the Notes. The Trustee, the Issuer and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture or the Notes. SECTION 12.08. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Issuer or any Subsidiary of the Issuer. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.09. No Recourse Against Others. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Issuer contained in this Indenture, or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator or against any past, present or future partner, shareholder, other equityholder, officer, director, 87 employee or controlling person, as such, of the Issuer or of any successor Person, either directly or through the Issuer or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes. SECTION 12.10. Successors. All agreements of the Issuer in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.11. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.12. Separability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.13. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof. SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. GENESIS ELDERCARE ACQUISITION CORP. By: /s/ Michael R. Walker ------------------------------------ Name: Michael R. Walker Title: Chairman and Chief Executive Officer Attest: /s/ Ira C. Gubernick --------------------------- Name: Ira C. Gubernick Title: Secretary PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------ Name: Title: BANQUE INTERNATIONALE A LUXEMBOURG S.A. By: ------------------------------------ Name: Title: SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. GENESIS ELDERCARE ACQUISITION CORP. By: ------------------------------------ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: /s/ Sheila Wallbridge ------------------------------------ Name: Sheila Wallbridge Title: Assistant Vice President BANQUE INTERNATIONALE A LUXEMBOURG S.A. By: ------------------------------------ Name: Title: SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. GENESIS ELDERCARE ACQUISITION CORP. By: ------------------------------------ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------ Name: Title: BANQUE INTERNATIONALE A LUXEMBOURG S.A. By: /s/ J. KINNEN /s/ Daniel Schammo ------------------------------------ Name: J. KINNEN Daniel Schammo Title: Premier Consellier EXHIBIT A [FACE OF NOTE] GENESIS ELDERCARE ACQUISITION CORP. 9% Senior Subordinated Note due 2007 [CUSIP] [CINS] [__________] No. $_________ GENESIS ELDERCARE ACQUISITION CORP., a Delaware corporation (the "Issuer", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to _____________, or its registered assigns, the principal sum of ____________ ($____) on August 1, 2007. Interest Payment Dates: February 1 and August 1, commencing February 1, 1998. Regular Record Dates: January 15 and July 15. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officers. Date: August 11, 1997 GENESIS ELDERCARE ACQUISITION CORP. By: ------------------------------------ Name: Title: (Trustee's Certificate of Authentication) This is one of the 9% Senior Subordinated Notes due 2007 described in the within-mentioned Indenture. PNC BANK, NATIONAL ASSOCIATION as Trustee By: ------------------------------------ Authorized Signatory A-4 [REVERSE SIDE OF NOTE] GENESIS ELDERCARE ACQUISITION CORP. 9% Senior Subordinated Note due 2007 1. Principal and Interest. The Issuer will pay the principal of this Note on August 1, 2007. The Issuer promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. Interest will be payable semiannually (to the holders of record of the Notes at the close of business on the January 15 or July 15 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing February 1, 1998. If an exchange offer (the "Exchange Offer") registered under the Securities Act is not consummated and a shelf registration statement (the "Shelf Registration Statement") under the Securities Act with respect to resales of the Notes is not declared effective by the Commission, on or prior to the earlier of (x) the date that is six months after the Merger Closing Date and (y) March 31, 1998, in accordance with the terms of the Registration Rights Agreement dated as of August 11, 1997 between the Issuer and Morgan Stanley & Co. Incorporated, First Union Capital Markets Corp. and Montgomery Securities, the per annum interest rate borne by the Notes shall be increased by 0.5% from the rate shown above accruing from the earlier of (x) the date that is six months after the Merger Closing Date and (y) March 31, 1998, payable in cash semiannually, in arrears, on each Interest Payment Date, commencing August 1, 1998 until the Exchange Offer is consummated or the Shelf Registration Statement is declared effective. The Holder of this Note is entitled to the benefits of such Registration Rights Agreement. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from August 11, 1997; provided that, if there is no existing default in the payment of interest and this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum that is 2% in excess of the rate otherwise payable. A-5 2. Method of Payment. The Issuer will pay interest (except defaulted interest) on the principal amount of the Notes as provided above on each February 1 and August 1 commencing February 1, 1998 to the persons who are Holders (as reflected in the Security Register at the close of business on the January 15 or July 15 immediately preceding the Interest Payment Date), in each case, even if the Note is cancelled on registration of transfer or registration of exchange after such record date; provided that, with respect to the payment of principal, the Issuer will make payment to the Holder that surrenders this Note to a Paying Agent on or after August 1, 2007. The Issuer will pay principal, premium, if any, and as provided above, interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Issuer may pay principal, premium, if any, and interest by its check payable in such money. It may mail an interest check to a Holder's registered address (as reflected in the Security Register). If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Paying Agent and Registrar. Initially, the Trustee will act as authenticating agent, Paying Agent and Registrar. The Issuer may change any authenticating agent, Paying Agent or Registrar without notice. The Issuer, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar. 4. Indenture; Limitations. The Issuer issued the Notes under an Indenture dated as of August 11, 1997 (the "Indenture"), between the Issuer, PNC Bank, National Association, trustee (the "Trustee") and Banque Internationale a Luxembourg S.A., a paying agent. Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are general obligations of the Issuer. A-6 5. Optional Redemption. The Notes will be redeemable, at the Issuer's option, in whole or in part, at any time or from time to time, on or after August 1, 2002 and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's last address, as it appears in the Security Register, at the following Redemption Prices (expressed in percentages of principal amount), plus accrued and unpaid interest to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date), if redeemed during the 12-month period commencing August 1 of the years set forth below: Redemption Year Price ---- ---------- 2002.................... 104.500% 2003.................... 102.250 2004 and thereafter..... 100.000 Notes in original denominations larger than $1,000 may be redeemed in part. On and after the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless the Issuer defaults in the payment of the Redemption Price. 6. Special Redemption. In the event that the Tender Offer is not consummated and certain other conditions set forth in the Escrow Agreement are not satisfied by the Expiration Date, or if it appears, in the sole judgment of the Issuer, that the Tender Offer will not be consummated and such conditions will not be satisfied by the Expiration Date, the Issuer shall redeem the Notes in whole, on 10 days' prior notice mailed by first-class mail to each Holder's last address as it appears in the Security Register, at a Redemption Price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to the Redemption Date. On the earlier of (i) the Expiration Date, if the Trustee has not received the Escrow Agreement Officers' Certificate that the Tender Offer has been consummated (or will be consummated promptly upon the release of the escrowed proceeds of the offering of the Notes to the Issuer) and certain conditions have been satisfied and the Escrow Agreement Opinion of Counsel, and (ii) such date on which the Trustee receives an officer's certificate under the Escrow Agreement that the Tender Offer will not be consummated and such conditions will not be satisfied by the Expiration Date, the Trustee will mail by first-class mail to each Holder's last address as it appears in the Security Register a written notice that the Notes will be redeemed within 10 days of such notice. A-7 7. Repurchase upon Change of Control. Upon the occurrence of any Change of Control, each Holder shall have the right to require the repurchase of its Notes by the Issuer in cash pursuant to the offer described in the Indenture at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "Payment Date"). A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder at its last address as it appears in the Security Register. Notes in original denominations larger than $1,000 may be sold to the Issuer in part. On and after the Payment Date, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by the Issuer, unless the Issuer defaults in the payment of the purchase price. 8. Denominations; Transfer; Exchange. The Notes are in registered form without coupons in denominations of $1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before the day of mailing of a notice of redemption of Notes selected for redemption. 9. Persons Deemed Owners. A Holder shall be treated as the owner of a Note for all purposes. 10. Unclaimed Money. If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Issuer at its request. After that, Holders entitled to the money must look to the Issuer for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 11. Discharge Prior to Redemption or Maturity. If the Issuer deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or maturity, the Issuer will be discharged from the Indenture and the Notes, A-8 except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, the Issuer will be discharged from certain covenants set forth in the Indenture. 12. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 13. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Issuer and its Restricted Subsidiaries, among other things, to Incur additional Indebtedness, make Restricted Payments, use the proceeds from Asset Sales, engage in transactions with Affiliates or merge, consolidate or transfer substantially all of its assets. Within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), the Issuer must report to the Trustee on compliance with such limitations. 14. Subordination. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full, in cash or Cash Equivalents, of all Senior Indebtedness. 15. Successor Persons. When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 16. Defaults and Remedies. The following events constitute "Events of Default" under the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, whether or not such payment is prohibited by the subordination provisions set forth in Article Eleven; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default A-9 continues for a period of 30 days, whether or not such payment is prohibited by the subordination provisions set forth in Article Eleven; (c) default in the performance or breach of Article Five or Section 3.01(b) of the Indenture or the failure to make or consummate an Offer to Purchase in accordance with Section 4.10 or 4.11 of the Indenture; (d) default in the performance of or breach of any covenant or agreement of the Issuer in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above), and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) there occurs with respect to any issue or issues of Indebtedness of the Issuer or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Issuer or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Issuer or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or any Significant Subsidiary or for all or substantially all of the property and assets of the Issuer or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Issuer or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) the Issuer or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or any Significant Subsidiary or for all or substantially all of the property and assets of the Issuer or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; or (i) the Guaranty Documents are not executed and delivered within three Business Days after the consummation of the Tender Offer (unless prior to or at the end of such three Business Days the Merger shall have been consummated). A-10 If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee may, and at the direction of the Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall, declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Issuer occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. 17. Trustee Dealings with Issuer. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates as if it were not the Trustee. 18. No Recourse Against Others. No incorporator or any past, present or future partner, stockholder, other equity holder, officer, director, employee or controlling person as such, of the Issuer or of any successor Person shall have any liability for any obligations of the Issuer under the Escrow Agreement, the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 19. Authentication. This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 20. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). The Issuer will furnish a copy of the Indenture to any Holder upon written request and without charge. Requests may be made to Genesis ElderCare Acquisition Corp., 148 West State Street, Kennett Square, Pennsylvania 19348; Attention: George V. Hager, Jr. A-11 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. ________________________________________________________________________________ Please print or typewrite name and address including zip code of assignee ________________________________________________________________________________ the within Note and all rights thereunder, hereby irrevocably constituting and appointing ___________________________________ attorney to transfer said Note on the books of the Issuer with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE NOTES, PERMANENT OFFSHORE GLOBAL NOTES AND PERMANENT OFFSHORE PHYSICAL NOTES] In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date the Shelf Registration Statement is declared effective or (ii) the end of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933 provided by Rule 144A thereunder. or [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. A-12 If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.08 of the Indenture shall have been satisfied. Date:___________________ __________________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933 and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:____________________ _______________________________________________ NOTICE: To be executed by an executive officer A-13 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.11 of the Indenture, check the Box: |_| If you wish to have a portion of this Note purchased by the Issuer pursuant to Section 4.10 or 4.11 of the Indenture, state the amount: $___________________. Date: _________________ Your Signature: ________________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ______________________________ EXHIBIT B Form of Certificate ________________, __ PNC Bank, National Association 1600 Market Street Philadelphia, PA 19103 Attention: Corporate Trust Department Re: Genesis ElderCare Acquisition Corp. (the "Issuer") 9% Senior Subordinated Notes due 2007 (the "Notes") Dear Sirs: This letter relates to U.S. $______ principal amount of Notes represented by a Note (the "Legended Note") which bears a legend outlining restrictions upon transfer of such Legended Note. Pursuant to Section 2.01 of the Indenture dated as of August 11, 1997 (the "Indenture") relating to the Notes, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount of Notes, all in the manner provided for in the Indenture. You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: --------------------------------- Authorized Signature EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ________________, __ PNC Bank, National Association 1600 Market Street Philadelphia, PA 19103 Attention: Corporate Trust Department Re: Genesis ElderCare Acquisition Corp. (the "Issuer") 9% Senior Subordinated Notes due 2007 (the "Notes") Dear Sirs: In connection with our proposed purchase of $____________ aggregate principal amount of the Notes, we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of August 11, 1997 (the "Indenture"), relating to the Notes, and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933 (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes, we will do so only (A) to the Issuer or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Issuer a signed letter substantially in the form of this letter, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 3. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Issuer such certifications, legal opinions and other information as you and C-2 the Issuer may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ----------------------------- Authorized Signature EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ________________, __ PNC Bank, National Association 1600 Market Street Philadelphia, PA 19103 Attention: Corporate Trust Department Re: Genesis ElderCare Acquisition Corp. (the "Issuer") 9% Senior Subordinated Notes due 2007 (the "Notes") Dear Sirs: In connection with our proposed sale of U.S.$ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933 and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ------------------------------ Authorized Signature EXHIBIT E FORM OF FIRST SUPPLEMENTAL INDENTURE THE FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of __________, 1997, among The Multicare Companies, Inc., a Delaware corporation ("Multicare"), Genesis ElderCare Acquisition Corp., a Delaware corporation (the "Issuer"), PNC Bank, National Association, as trustee under the indenture referred to below (the "Trustee") and Banque Internationale a Luxembourg S.A. (a "Paying Agent"). R E C I T A L S WHEREAS, the Issuer heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of August 11, 1997, providing for the issuance of an aggregate principal amount of $250,000,000 of 9% Senior Subordinated Notes due 2007 (the "Notes"); WHEREAS, the Tender Offer is required to be consummated by the Expiration Date and the Merger is required to be consummated within four months after consummation of the Tender Offer; WHEREAS, Multicare desires to guarantee, on a senior subordinated basis, the obligations of the Issuer under the Indenture and the Notes and to comply with the requirements of the Indenture with respect to the execution of a supplemental indenture in connection with its senior subordinated guaranty; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Issuer and the Trustee are authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Issuer, Multicare and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows: 2 ARTICLE ONE DEFINITIONS SECTION 1.01. Definitions. Unless otherwise defined herein, terms defined in the Indenture are used herein as defined therein. In addition, as used herein: "Guaranteed Obligations" has the meaning provided in Section 2.01. "Guarantor Senior Indebtedness" means the following obligations whether outstanding on the Closing Date or thereafter Incurred: (a) all Indebtedness and other monetary obligations of Multicare or any Subsidiary of Multicare under or in respect of the Credit Facility (including obligations in respect of any lease financing facility of the Credit Facility) or any Interest Rate Contract or Currency Agreement related to Indebtedness under the Credit Facility, whether for principal, interest (including interest accruing after the filing of a petition by or against Multicare or any Subsidiary of Multicare under any state or federal Bankruptcy Laws, whether or not such interest is allowed as a claim after such filing in any proceeding under such law), fees, expenses, indemnification or otherwise, and (b) the principal of, premium, if any, and interest on all other Indebtedness of Multicare (other than the Multicare Senior Subordinated Guaranty) unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall be pari passu with or subordinated in right of payment to the Multicare Senior Subordinated Guaranty. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness that is by its terms subordinate in right of payment to any Indebtedness of Multicare, (ii) Indebtedness which when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Law is without recourse to Multicare, (iii) any repurchase, redemption or other obligation in respect of Redeemable Capital Stock, (iv) Indebtedness for goods, materials or services purchased in the ordinary course of business or indebtedness consisting of trade payables or other current liabilities, (v) Indebtedness of or amounts owed by Multicare to employees, officers, or directors, (vi) any liability for federal, state, local or other taxes owed or owing by Multicare, (vii) Indebtedness of Multicare to a Subsidiary of Multicare or any other Affiliate of Multicare or any of such Affiliate's subsidiaries, (viii) that portion of any Indebtedness which at the time of issuance is issued in violation of the Indenture and (ix) amounts owing under leases (other than Capital Lease Obligations). "Guarantor Designated Senior Indebtedness" means (i) all Guarantor Senior Indebtedness under, or in respect of, the Credit Facility and any Interest Rate Contract or Currency Agreement related to Indebtedness under the Credit Facility and (ii) any other Guarantor Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding, together with any commitments to lend additional amounts, of at least $30,000,000 and is specifically designated in the 3 instrument evidencing such Senior Indebtedness as "Guarantor Designated Senior Indebtedness." "Guarantor Subordinated Indebtedness" means any Indebtedness of Multicare subordinated in right of payment to the Multicare Senior Subordinated Guaranty. "Multicare Restricted Subsidiary" means any Subsidiary of Multicare other than a Multicare Unrestricted Subsidiary. "Multicare Unrestricted Subsidiary" means (i) any Subsidiary of Multicare that at the time of determination shall be designated a Multicare Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (ii) any Subsidiary of a Multicare Unrestricted Subsidiary. The Board of Directors may designate any Multicare Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of Multicare) to be a Multicare Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, Multicare or any Multicare Restricted Subsidiary; provided that (A) any guarantee by Multicare or any Multicare Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by Multicare or such Multicare Restricted Subsidiary (or both, if applicable) at the time of such designation; (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04 of the Indenture and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Sections 4.03 and 4.04 of the Indenture. The Board of Directors may designate any Multicare Unrestricted Subsidiary to be a Multicare Restricted Subsidiary; provided that (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation and (ii) all Liens and Indebtedness of such Multicare Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of the Indenture. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "Multicare Senior Subordinated Guaranty" means the unconditional guaranty by Multicare of the Guaranteed Obligations on the terms and conditions provided herein. "Placement Agreement" means the placement agreement between the Issuer and Morgan Stanley & Co. Incorporated, Montgomery Securities and First Union Capital Markets Corp. dated August 4, 1997. 4 ARTICLE TWO MULTICARE SENIOR SUBORDINATED GUARANTY SECTION 2.01. Multicare Senior Subordinated Guaranty. Subject to the provisions of this Article Two, Multicare, as primary obligor and not merely as surety, hereby fully, unconditionally and irrevocably guarantees, from the consummation of the Tender Offer to and until the consummation of the Merger, to each Holder and to the Trustee on behalf of the Holders: (i) the due and punctual payment of the principal of, premium, if any, on and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of the Issuer to the Holders or the Trustee (the "Guaranteed Obligations"), all in accordance with the terms of such Note and the Indenture and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at Stated Maturity, by acceleration or otherwise. Multicare hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Issuer any right to require a proceeding first against the Issuer the benefit of discussion, protest or notice with respect to any such Note or the debt evidenced thereby and all demands whatsoever, and covenants that this Multicare Senior Subordinated Guaranty will not be discharged as to any such Note except upon the earlier of (x) the payment in full of the principal thereof, premium, if any, and interest thereon and (y) the consummation of the Merger. The maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Article Two. In the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by Multicare for the purpose of this Article Two. In addition, without limiting the foregoing provisions, upon the effectiveness of any acceleration under Article Six of the Indenture, the Trustee shall promptly make a demand for payment on the Notes under the Multicare Senior Subordinated Guaranty provided for in this Article Two. If the Trustee or the Holder of any Note is required by any court or otherwise to return to the Issuer or Multicare, or any custodian, receiver, liquidator, trustee, sequestrator or other similar official acting in relation to the Issuer or Multicare, any amount paid to the Trustee or such Holder in respect of a Note, this Multicare Senior Subordinated Guaranty, to the extent theretofore discharged, shall be reinstated in full force and effect. Multicare further agrees, to the fullest extent that it may lawfully do so, that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Two hereof for the purposes of this Multicare Senior Subordinated Guaranty, notwithstanding any stay, injunction or other prohibition extant under any applicable bankruptcy law preventing such acceleration in respect of the obligations guaranteed hereby. 5 Until such time as the Notes are fully and finally paid, including all interest, premium, principal and liquidated damages with respect thereto, Multicare hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Issuer that arise from the existence, payment, performance or enforcement of its obligations under this Multicare Senior Subordinated Guaranty and the Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Issuer or any collateral which any such Holder or the Trustee on behalf of such Holder hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Issuer, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to Multicare in violation of the preceding sentence and the principal of, premium, if any, and accrued interest on the Notes shall not have been paid in full, such amount shall be deemed to have been paid to Multicare for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Multicare acknowledges that it will receive direct and indirect benefits from the issuance of the Notes pursuant to this Indenture and that the waivers set forth in this Section 2.01 are knowingly made in contemplation of such benefits. The Multicare Senior Subordinated Guaranty set forth in this Section 2.01 shall not be valid or become obligatory for any purpose with respect to a Note until the certificate of authentication on such Note shall have been signed by or on behalf of the Trustee. SECTION 2.02. Obligations Unconditional. Subject to Section 2.05, nothing contained in this Article Two or in the Indenture or in the Notes is intended to or shall impair, as between Multicare and the Holders, the obligation of Multicare, which is absolute and unconditional, upon failure by the Issuer, to pay to the Holders the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of Multicare, nor shall anything herein or therein prevent any Holder or the Trustee on their behalf from exercising all remedies otherwise permitted by applicable law upon default under the Indenture. Without limiting the foregoing, nothing contained in this Article Two will restrict the right of the Trustee or the Holders to take any action to declare the Multicare Senior Subordinated Guaranty to be due and payable prior to the Stated Maturity of the Notes pursuant to Section 6.02 of the Indenture or to pursue any rights or remedies hereunder. SECTION 2.03. Notice to Trustee. Multicare shall give prompt written notice to the Trustee of any fact known to Multicare which would prohibit the making of any payment 6 to or by the Trustee in respect of the Multicare Senior Subordinated Guaranty pursuant to the provisions of this Article Two. SECTION 2.04. This Article Not to Prevent Events of Default. The failure to make a payment on account of principal of, premium, if any, or interest on the Notes by reason of any provision of this Article will not be construed as preventing the occurrence of an Event of Default. SECTION 2.05. Net Worth Limitation. Notwithstanding any other provision of the Indenture or the Notes, this Multicare Senior Subordinated Guaranty shall not be enforceable against Multicare in an amount in excess of the net worth of Multicare at the time that determination of such net worth is, under applicable law, relevant to the enforceability of this Multicare Senior Subordinated Guaranty. Such net worth shall include any claim or future claim of Multicare against the Issuer for reimbursement and any claim against any grantor of a Guarantee for contribution. ARTICLE THREE SUBORDINATION SECTION 3.01. Agreement to Subordinate. Multicare, for itself, its successors and assigns, covenants and agrees, and each Holder, by his or her acceptance thereof, likewise covenants and agrees, that the payment of the principal of and premium, if any, and interest on each and all of the Notes under this Multicare Senior Subordinated Guaranty (including any payment in connection with the repurchase, redemption or other acquisition thereof) is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full, in cash or Cash Equivalents of all Guarantor Senior Indebtedness. This Article Three constitutes a continuing offer to all persons or entities who become holders of, or continue to hold, Guarantor Senior Indebtedness, each of whom is an obligee hereunder and is entitled to enforce such holder's rights hereunder, subject to the provisions hereof, without any act or notice of acceptance hereof or reliance hereon. All provisions of this Article Three shall be subject to Section 3.12. For the purposes of this Article Three, (a) no Guarantor Senior Indebtedness shall be deemed to have been paid in full unless and until all commitments or other obligations of the holders of the Senior Indebtedness thereunder to make advances or otherwise extend credit shall have terminated and the holders thereof shall have indefeasibly received payment in full in cash or Cash Equivalents, and (b) the term "Guarantor Senior Representative" shall mean the indenture trustee or other trustee, agent or representative for any Guarantor Senior Indebtedness. 7 SECTION 3.02. Distribution on Dissolution, Liquidation, Bankruptcy or Reorganization. Upon any distribution of assets of Multicare upon any total or partial dissolution, winding up, liquidation or reorganization of Multicare, whether in bankruptcy, insolvency, reorganization or receivership proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of Multicare or otherwise, (a) the holders of Guarantor Senior Indebtedness shall be entitled to receive payment in full in cash or Cash Equivalents or, as acceptable to each holder of Guarantor Senior Indebtedness, in any other manner, of all amounts and obligations due on or in respect of all Guarantor Senior Indebtedness before the Holders are entitled to receive any payment or distribution of any kind or character (excluding securities of Multicare provided for in a plan of reorganization with respect to Multicare approved by the bankruptcy court that are equity securities or are subordinated in right of payment to all Guarantor Senior Indebtedness to the same extent as, or to a greater extent than, the Multicare Senior Subordinated Guaranty is so subordinated as provided in this Article; such securities are hereinafter collectively referred to as "Multicare Permitted Junior Notes") on account of principal of, premium, if any, or interest on the Notes (including any payment or other distribution which may be received from the holders of Guarantor Subordinated Indebtedness as a result of any payment on such Guarantor Subordinated Indebtedness); (b) any payment or distribution of assets of Multicare or any Subsidiary of Multicare of any kind or character, whether in cash, property or securities (excluding Multicare Permitted Junior Notes), by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article (including any payment or other distribution which may be received from the holders of Guarantor Subordinated Indebtedness as a result of any payment on such Guarantor Subordinated Indebtedness) shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Guarantor Senior Indebtedness or their Guarantor Senior Representative or Representatives, ratably according to the aggregate amounts remaining unpaid on account of the Guarantor Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash, Cash Equivalents or in any other form acceptable to each, of all Guarantor Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Guarantor Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing provisions of this Section 3.02, the Trustee or any Holder shall have received any payment or distribution of assets of Multicare or any Subsidiary of Multicare of any kind or character, whether in cash, property or securities (excluding Multicare Permitted Junior Notes), in respect of principal, premium, if any, and interest on the Notes before all Guarantor Senior 8 Indebtedness is paid in full in cash, then and in such event, such payment or distribution (including any payment or other distribution which may be received from the holders of Guarantor Subordinated Indebtedness as a result of any payment on such Guarantor Subordinated Indebtedness) shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of Multicare for application to the payment of all Guarantor Senior Indebtedness remaining unpaid to the extent necessary to pay all Guarantor Senior Indebtedness in full in cash, Cash Equivalents or, as acceptable to each holder of Guarantor Senior Indebtedness, any other manner, after giving effect to any concurrent payment or distribution to or for the holders of Guarantor Senior Indebtedness or deposited with a court of competent jurisdiction. The consolidation of Multicare with, or the merger of Multicare into, another corporation or the liquidation or dissolution of Multicare following the sale or conveyance of its property or assets as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article Five of the Indenture shall not be deemed a dissolution, winding up, liquidation or reorganization of Multicare for the purposes of this Article Three if such other corporation shall, as a part of such consolidation, merger, sale or conveyance, comply with the conditions stated in Article Five of the Indenture. If the Trustee or any Holder does not file a proper claim or proof of debt in the form required in any proceeding referred to above prior to 30 days before the expiration of the time to file such claim in such proceeding, then the holder of any Guarantor Senior Indebtedness (or its Guarantor Senior Representative) is hereby authorized, and has the right, to file an appropriate claim or claims for or on behalf of such Holder. SECTION 3.03. Suspension of Payment When Guarantor Senior Indebtedness in Default. (a) Unless Section 3.02 shall be applicable, upon the occurrence of a Payment Default in respect of Guarantor Designated Senior Indebtedness, then no payment or distribution of any assets of Multicare or any Subsidiary of Multicare of any kind or character (excluding Multicare Permitted Junior Notes) shall be made by Multicare or any Subsidiary of Multicare or on behalf of or out of the property of Multicare, or received by the Trustee or any Holder on account of principal of, premium, if any, or interest on, the Notes or on account of the purchase, redemption, defeasance (whether under Section 8.02 or 8.03 of the Indenture) or other acquisition of or in respect of the Notes unless and until such Payment Default shall have been cured or waived in writing by the holders of the Guarantor Designated Senior Indebtedness or shall have ceased to exist or the Guarantor Designated Senior Indebtedness shall have been paid in full in cash, Cash Equivalents or in any other manner as acceptable to each holder of such Guarantor Designated Senior Indebtedness, after which Multicare shall resume making any and all required payments in respect of the Notes, including any missed payments. 9 (b) Unless Section 3.02 shall be applicable, upon (i) the occurrence of a Non-payment Default pursuant to which the maturity of the applicable Designated Senior Indebtedness may be accelerated in respect of Guarantor Designated Senior Indebtedness, either iimmediately or upon the giving of notice, the passage of time, or both, and (ii) receipt by the Trustee and Multicare from a Guarantor Senior Representative or the holder of any Guarantor Designated Senior Indebtedness of written notice of such occurrence, no payment (other than any payments made pursuant to Section 8.02 or 8.03 of the Indenture or from the money or proceeds of U.S. Government Securities held under the Escrow Agreement as provided in Section 10.01 of the Indenture) or distribution of any assets of Multicare or any Subsidiary of Multicare thereof of any kind or character (excluding Multicare Permitted Junior Notes) shall be made by Multicare or any Subsidiary of Multicare thereof or on behalf of or out of the property of Multicare or any Subsidiary of Multicare, or received by the Trustee or any Holder on account of any principal of, premium, if any, or interest on, the Notes (including payments under any guaranty thereof) or on account of the purchase, redemption or other acquisition of or in respect of Notes (including payments under any guaranty thereof) for a period ("Payment Blockage Period") commencing on the date of receipt by the Trustee of such notice until the earliest of (x) 179 days after receipt of such written notice by the Trustee (provided any Guarantor Designated Senior Indebtedness as to which notice was given shall theretofore have not been accelerated), (y) the date such Non-payment Default and all other Non-payment Defaults as to which notice is also given after such period is initiated shall have been cured or waived in writing by the holders of the Guarantor Designated Senior Indebtedness or shall have ceased to exist or the Guarantor Senior Indebtedness related thereto shall have been paid in full in cash or Cash Equivalents or (z) the date such Payment Blockage Period and any Payment Blockage Periods initiated during such period shall have been terminated by written notice to Multicare or the Trustee from the Guarantor Senior Representative and the holders of the Guarantor Designated Senior Indebtedness that have given notice of a Non-payment Default at or after the initiation of such Payment Blockage Period, after which in the case of clause (x), (y) or (z), Multicare shall resume making any and all required payments in respect of the Notes including any missed payments. Notwithstanding any other provision of this Supplemental Indenture, in no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt by Multicare or the Trustee of the notice referred to in clause (ii) of this paragraph (b) (the "Initial Blockage Period"). Not more than one Payment Blockage Period may be commenced with respect to the Notes during any period of 360 consecutive days; provided that subject to the limitations set forth in the next sentence, the commencement of a Payment Blockage Period by the representative of Guarantor Designated Senior Indebtedness other than the Credit Facility shall not bar the commencement of another Payment Blockage Period by the representative for the Credit Facility within such period of 360 consecutive days. Notwithstanding anything in this Supplemental Indenture to the contrary, there must be 180 days in any 360-day period in which no Payment Blockage Period is in effect. No event of default (other than an event of default pursuant to the financial maintenance covenants under the Credit Facility) that existed or was continuing (it being acknowledged that any subsequent action that would give rise to an event of default pursuant to any provision under which an event of default previously existed or was 10 continuing shall constitute a new event of default for this purpose) on the date of commencement of any Payment Blockage Period with respect to the Guarantor Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or shall be made, the basis for the commencement of a second Payment Blockage Period by the representative for, or the holders of, such Guarantor Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. (c) In the event that, notwithstanding the foregoing, Multicare or any of its Subsidiaries shall make, or the Trustee or any Holder shall receive, any payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to a Guarantor Senior Representative of the holders of the Guarantor Designated Senior Indebtedness. SECTION 3.04. Payment Permitted If No Default. Nothing contained in this Article, in the Indenture or in any of the Notes shall prevent Multicare, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshaling of assets and liabilities of Multicare referred to in Section 3.02 of this Supplemental Indenture and Section 11.02 of the Indenture or under the conditions described in Section 3.03 of this Supplemental Indenture and Section 11.03 of the Indenture, from making payments at any time of principal of, premium, if any, or interest on the Notes. SECTION 3.05. Subrogation to Rights of Holders of Guarantor Senior Indebtedness. Subject to the payment in full of all Guarantor Senior Indebtedness, Holders shall be subrogated to the rights of the holders of such Guarantor Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Guarantor Senior Indebtedness until the principal of, premium, if any, and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Guarantor Senior Indebtedness of any cash, property or securities to which the Holders or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Guarantor Senior Indebtedness by Holders or the Trustee, shall, as among Multicare, its creditors other than holders of Guarantor Senior Indebtedness, and the Holders, be deemed to be a payment or distribution by Multicare to or on account of the Guarantor Senior Indebtedness. SECTION 3.06. Provisions Solely to Define Relative Rights. The provisions of this Article are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Guarantor Senior Indebtedness on the other hand. Nothing contained herein or in the Indenture or in the Notes is intended to or shall (i) impair, as among Multicare, its creditors other than holders of Guarantor Senior Indebtedness and the Holders, the obligation of Multicare, which is absolute and unconditional, to pay to the Holders the 11 principal of, premium, if any, and interest on the Notes under this Multicare Senior Subordinated Guaranty in accordance with its terms; or (ii) affect the relative rights against Multicare of the Holders and creditors of Multicare other than their rights in relation to the holders of Guarantor Senior Indebtedness; or (iii) prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under the Indenture, subject to the rights, under this Article of the holders of Guarantor Senior Indebtedness to receive distributions and payments otherwise payable to Holders (A) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshaling of assets and liabilities of Multicare referred to in Section 3.02 of this Supplemental Indenture, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (B) under the conditions specified in Section 3.03 of this Supplemental Indenture, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 3.03(c) of this Supplemental Indenture. SECTION 3.07. Trustee to Effectuate Subordination. Each Holder by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of Multicare whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the indebtedness of Multicare owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a proper claim at least 30 days before the expiration of the time to file such claim, then the holders of Guarantor Senior Indebtedness, and their agents, trustees or other representatives are authorized to do so for and on behalf of the Holders. SECTION 3.08. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Guarantor Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of Multicare or any Holder or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by Multicare or any Holder with the terms, provisions and covenants of this Supplemental Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section, the holders of Guarantor Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of Guarantor Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, or waive compliance with the terms of, Guarantor Senior 12 Indebtedness or any instrument evidencing the same or any agreement under which Guarantor Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Indebtedness; (iii) release any Person liable in any manner for the collection or payment of Guarantor Senior Indebtedness; (iv) exercise or refrain from exercising any rights against Multicare and any other Person; (v) amend, supplement, restate or otherwise modify or restructure the Guarantor Senior Indebtedness; and (vi) otherwise deal with any Person liable on account of Guarantor Senior Indebtedness; provided, however, that in no event shall any such actions limit the right of the Holders to take any action to accelerate the maturity of the Notes pursuant to Article Six of the Indenture or to pursue any rights or remedies thereunder or under applicable laws if the taking of such action does not otherwise violate the terms of this Article, subject to the rights, if any, under this Article, of the holders, from time to time, of Guarantor Senior Indebtedness to receive the cash, property or securities receivable upon the exercise of such rights or remedies. SECTION 3.09. Notice to Trustee. (a) Multicare shall give prompt written notice to the Trustee of any fact known to Multicare which would prohibit the making of any payment to or by the Trustee in respect of the Notes. Notwithstanding the provisions of this Article or any provision of the Indenture, the Trustee or any Paying Agent shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee or any Paying Agent in respect of the Notes, unless and until the Trustee shall have received written notice thereof from Multicare, a holder of Senior Indebtedness or a holder of Guarantor Senior Indebtedness or from a Guarantor Senior Representative or any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of, premium, if any, or interest on any Note), then, anything herein contained to the contrary notwithstanding but without limiting the rights and remedies of the holders of Guarantor Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date; nor shall the Trustee be charged with knowledge of the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. (b) The Trustee shall be entitled to rely on the delivery to it of a written notice to the Trustee and Multicare by a Person representing himself to be a Guarantor Senior Representative or a holder of Guarantor Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a Guarantor Senior Representative or a holder of Guarantor Senior Indebtedness (or a trustee, fiduciary or agent thereof and the Trustee shall have no duty to investigate the authenticity thereof or the authority of the person 13 signing and shall have no liability for relying thereon); provided, however, that failure to give such notice to Multicare shall not affect in any way the ability of the Trustee to rely on such notice. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Guarantor Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment or the Trustee or the Paying Agent may deposit the funds in question with a court of competent jurisdiction. SECTION 3.10. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of Multicare referred to in this Article, the Trustee and the Holders shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Guarantor Senior Indebtedness and other indebtedness of Multicare, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article, provided that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article. SECTION 3.11. Rights of Trustee as a Holder of Guarantor Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Guarantor Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Guarantor Senior Indebtedness, and nothing in this Supplemental Indenture shall deprive the Trustee of any of its rights as such holder of Guarantor Senior Indebtedness. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 of the Indenture. SECTION 3.12. Trust Moneys and Escrowed Funds Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from (x) money or the proceeds of U.S. Government Obligations held in trust under Article Eight by the Trustee for the payment of principal of, premium, if any, and interest on the Notes (provided that at the time deposited, such deposit did not violate any then outstanding Guarantor Senior Indebtedness) and (y) money or the proceeds of U.S. Government Securities held under the Escrow Agreement shall not be subordinated to the prior payment of any Guarantor Senior Indebtedness or subject 14 to the restrictions set forth in this Article Three, and none of the Holders shall be obligated to pay over any such amount to any holder of Guarantor Senior Indebtedness. SECTION 3.13. No Suspension of Remedies. Nothing contained in this Article shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Notes pursuant to Article Six of the Indenture or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article of the holders, from time to time, of Guarantor Senior Indebtedness to receive the cash, property or securities receivable upon the exercise of such rights or remedies. SECTION 3.14. Trustee's Relation to Guarantor Senior Indebtedness. With respect to the holders of Guarantor Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article, and no implied covenants or obligations with respect to the holders of Guarantor Senior Indebtedness shall be read into this Article against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Indebtedness. SECTION 3.15. Other Rights of Holders of Guarantor Senior Indebtedness. All rights and interests under this Supplemental Indenture of the holders of Guarantor Senior Indebtedness, and all agreements and obligations of the Trustee, the Holders and Multicare under this Article shall remain in full force and effect irrespective of (i) any lack of validity or enforceability of the Credit Facility, and promissory notes evidencing the Credit Facility or any other agreement or instrument relating thereto or to any Guarantor Senior Indebtedness or (ii) any other circumstance that might constitute a defense available to, or a discharge of, a guarantor or surety (other than as a result of any payments indefeasibly made on the Credit Facility or any Guarantor Senior Indebtedness). The holders of Guarantor Senior Indebtedness are hereby authorized to demand specific performance of this Article, whether or not Multicare shall have complied with any provisions of this Article applicable to it, at any time when the Trustee or any Holder shall have failed to comply with any of these provisions. The provisions of this Article shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guarantor Senior Indebtedness is rescinded or must otherwise be returned by any holder of Guarantor Senior Indebtedness upon the insolvency, bankruptcy or reorganization of Multicare or otherwise, all as though such payment had not been made. 15 ARTICLE FOUR EXECUTION AND DELIVERY OF MULTICARE SENIOR SUBORDINATED GUARANTY SECTION 4.01. Execution of Multicare Senior Subordinated Guaranty. (a) To evidence its Multicare Senior Subordinated Guaranty set forth in this Supplemental Indenture, Multicare hereby agrees that a notation of such Multicare Senior Subordinated Guaranty substantially in the form of Annex A hereto shall be endorsed by an officer of Multicare on each Note authenticated and delivered by the Trustee after the date hereof until consummation of the Merger. (b) Notwithstanding the foregoing, Multicare hereby agrees that the Multicare Senior Subordinated Guaranty set forth herein shall remain in full force and effect for the term provided herein notwithstanding any failure to endorse on each Note a notation of such Multicare Senior Subordinated Guaranty. (c) If an officer whose signature is on this Supplemental Indenture or on the Multicare Senior Subordinated Guaranty no longer holds that office at the time the Trustee authenticates the Note on which a Multicare Senior Subordinated Guaranty is endorsed, the Multicare Senior Subordinated Guaranty shall be valid nevertheless. SECTION 4.02. Delivery and Enforceability of Multicare Senior Subordinated Guaranty. (a) The delivery of the Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Multicare Senior Subordinated Guaranty set forth in this Supplemental Indenture on behalf of Multicare. (b) Multicare hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or this Supplemental Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. SECTION 4.03. Waiver of Presentment; Rights and Remedies. (a) Multicare hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenants that the Multicare Senior Subordinated Guaranty made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (b) If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Supplemental Indenture and such proceeding has been discontinued 16 or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, Multicare, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of Multicare, the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE FIVE MISCELLANEOUS PROVISIONS SECTION 5.01. Releases upon Release of Multicare Senior Subordinated Guaranty. Concurrently with the release or discharge of this Multicare Senior Subordinated Guaranty (other than a release or discharge by or as a result of payment under such guarantee of Guaranteed Obligations), Multicare shall automatically be released from and relieved of its obligations under this Supplemental Indenture. Upon delivery by the Issuer to the Trustee of an Officers' Certificate to the effect that such release or discharge has occurred, the Trustee shall execute any documents reasonably required in order to evidence the release of Multicare from its obligations under this Supplemental Indenture. SECTION 5.02. Effect of Supplemental Indenture. Upon the execution and delivery of this Supplemental Indenture by Multicare, the Issuer and the Trustee, the Indenture shall be supplemented in accordance herewith, and this Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered under the Indenture shall be bound thereby. SECTION 5.03. Indenture Remains in Full Force and Effect. Except as supplemented hereby, all provisions in the Indenture shall remain in full force and effect. SECTION 5.04. Indenture and Supplemental Indenture Construed Together. This Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, and the Indenture and this Supplemental Indenture shall henceforth be read and construed together. SECTION 5.05. Conflict with Trust Indenture Act. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act that is required under such Act to be part of and govern any provision of this Supplemental Indenture, the provision of such Act shall control. If any provision of this Supplemental Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provision of such Act shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. 17 SECTION 5.06. Separability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 5.07. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 5.08. Benefits of Supplemental Indenture, Etc. Nothing in this Supplemental Indenture, the Indenture or the Notes express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder and the Holders, any benefit of any legal or equitable right, remedy or claim under the Indenture, this Supplemental Indenture or the Notes. SECTION 5.09. Successors and Assigns. All covenants and agreements in this Supplemental Indenture by Multicare shall bind its successors and assigns, whether so expressed or not. SECTION 5.10. Certain Duties and Responsibilities of Trustee. In entering into this Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee, whether or not elsewhere herein so provided. SECTION 5.11. Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. SECTION 5.12. Counterparts. This Supplemental Indenture may be executed in counterparts, each of which, when so executed, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Dated: _____________, 1997 THE MULTICARE COMPANIES, INC. By: ---------------------------------------- Name: Title GENESIS ELDERCARE ACQUISITION Dated: _____________, 1997 CORP. By: ---------------------------------------- Name: Title Dated: _____________, 1997 PNC BANK, NATIONAL ASSOCIATION as Trustee By: ---------------------------------------- Name: Title ANNEX A TO SUPPLEMENTAL INDENTURE FORM OF NOTATION OF MULTICARE SENIOR SUBORDINATED GUARANTY ON NOTE The Multicare Companies, Inc. ("Multicare"), as primary obligor and not merely as surety, fully unconditionally and irrevocably guarantees (a) the due and punctual payment of the principal of, premium, if any, or interest on the Notes, whether at Stated Maturity or an Interest Payment Date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest on the Notes and (c) that in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Notwithstanding the foregoing, in the event that the Multicare Senior Subordinated Guaranty would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of Multicare under its Multicare Senior Subordinated Guaranty shall be limited to such amount as will not, after giving effect thereto, and to all other liabilities of Multicare, result in such amount constituting a fraudulent transfer or conveyance. The Multicare Senior Subordinated Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which the Multicare Senior Subordinated Guaranty is noted shall have been executed by the Trustee under the Indenture by the manual or facsimile signature of one of its authorized officers. THE MULTICARE COMPANIES, INC. By: ---------------------------------------- Name: Title EX-99 4 EX (B)(5) CREDIT AGREEMENT (SHORT TERM AGREEMENT) ================================================================================ CREDIT AGREEMENT dated as of October 9, 1997 by and among THE MULTICARE COMPANIES, INC. and ITS DIRECT AND INDIRECT SUBSIDIARIES, AS BORROWERS, THE FINANCIAL INSTITUTIONS IDENTIFIED HEREIN, AS LENDERS, MELLON BANK, N.A., AS ISSUER OF LETTERS OF CREDIT, MELLON BANK, N.A., AS ADMINISTRATIVE AGENT, CITICORP USA, INC., AS SYNDICATION AGENT, NATIONSBANK, N.A., AS SYNDICATION AGENT, and FIRST UNION NATIONAL BANK, AS DOCUMENTATION AGENT ================================================================================ TABLE OF CONTENTS Page ---- CREDIT AGREEMENT........................................................... 1 ARTICLEARTICLE 1 - CREDIT FACILITY......................................... 2 1.1 COMMITMENT TO LEND............................................ 2 1.2 JOINT AND SEVERAL OBLIGATIONS................................. 2 1.3 MANNER OF BORROWING.......................................... 2 1.4 REPAYMENT AND MANDATORY PREPAYMENTS.......................... 5 1.5 VOLUNTARY PREPAYMENTS........................................ 6 1.6 PAYMENTS BY THE BORROWERS IN GENERAL......................... 7 1.7 REDUCTIONS OF COMMITMENT..................................... 9 1.8 INTEREST..................................................... 9 1.9 FEES......................................................... 10 1.10 COMPUTATION OF INTEREST AND FEES.............................. 10 1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT.......................... 10 1.12 PRO RATA TREATMENT............................................ 11 1.13 TAXES ON PAYMENTS............................................. 11 1.14 CHANGE OF LENDING OFFICE..................................... 12 ARTICLE 1A.-LETTERS OF CREDIT.............................................. 14 1A.1 ISSUANCE OF LETTERS OF CREDIT..................................14 ARTICLE 2 - CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS................................................. 20 2.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING.............................................. 20 2.2 CONDITIONS TO EACH LOAN....................................... 26 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES................................. 28 3.1 REPRESENTATIONS............................................... 28 3.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE...................... 37 ARTICLE 4 - AFFIRMATIVE COVENANTS.......................................... 38 4.1 REPORTING REQUIREMENTS....................................... 38 4.2 MAINTENANCE OF EXISTENCE..................................... 43 4.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY........................................... 43 4.4 MAINTENANCE OF RECORDS; FISCAL YEAR.......................... 44 4.5 COMPLIANCE WITH LAWS......................................... 44 -i- 4.6 ERISA........................................................ 45 4.7 RIGHT OF INSPECTION.......................................... 46 4.8 INSURANCE.................................................... 46 4.9 PAYMENT OF TAXES AND OTHER CHARGES........................... 46 4.10 SUBSIDIARIES TO BE BORROWERS................................. 46 4.11 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS................ 47 4.12 CORPORATE SEPARATENESS....................................... 47 4.13 TRANSACTIONS WITH AFFILIATES.................................. 48 4.14 MERGER........................................................ 48 4.15 USE OF PROCEEDS............................................... 48 4.16 CERTAIN DISPOSITIONS.......................................... 48 ARTICLE 5 - FINANCIAL COVENANTS............................................ 49 5.1 CERTAIN FINANCIAL COVENANTS................................... 49 ARTICLE 6 - NEGATIVE COVENANTS............................................. 52 6.1 INDEBTEDNESS................................................. 52 6.2 LIENS........................................................ 53 6.3 LOANS, ADVANCES AND INVESTMENTS.............................. 55 6.4 ACQUISITIONS, ETC............................................ 56 6.5 DISPOSITIONS................................................. 57 6.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS.................................................... 58 6.7 LEASES........................................................ 58 6.8 DIVIDENDS AND RELATED DISTRIBUTIONS.......................... 59 6.9 CONSOLIDATED TAX RETURN...................................... 59 6.10 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASEMENT AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS............................................. 60 6.11 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS............. 60 6.12 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS................. 61 6.13 LIMITATIONS ON MERGERS, ETC.................................. 61 6.14 AVOIDANCE OF OTHER CONFLICTS................................. 61 6.15 CAPITAL EXPENDITURES......................................... 61 6.16 MANAGEMENT FEE................................................ 61 ARTICLE 7 - DEFAULTS....................................................... 63 7.1 EVENTS OF DEFAULT............................................ 63 7.2 CONSEQUENCES OF AN EVENT OF DEFAULT........................... 66 7.3 APPLICATION OF PROCEEDS...................................... 67 ARTICLE 8 - THE ADMINISTRATIVE AGENT....................................... 69 8.1 APPOINTMENT.................................................. 69 8.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES.............. 69 -ii- 8.3 EXERCISE OF POWERS........................................... 70 8.4 GENERAL EXCULPATORY PROVISIONS............................... 70 8.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT................... 71 8.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS....................................... 72 8.7 INDEMNIFICATION.............................................. 72 8.8 HOLDERS OF NOTES............................................. 73 8.9 SUCCESSOR ADMINISTRATIVE AGENT............................... 73 8.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT........................................................ 74 8.11 CALCULATIONS................................................. 74 8.12 OTHER AGENTS................................................. 74 8.13 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.............. 74 ARTICLE 8A- SPECIAL INTER-BORROWER PROVISIONS.............................. 76 8A.1 CERTAIN BORROWER ACKNOWLEDGEMENTS............................ 76 8A.2 CERTAIN INTER-BORROWER AGREEMENTS............................ 76 8A.3 RECORDS...................................................... 77 ARTICLE 9 - DEFINITIONS; CONSTRUCTION...................................... 78 9.1 CERTAIN DEFINITIONS........................................... 78 9.2 CONSTRUCTION................................................. 98 9.3 ACCOUNTING PRINCIPLES........................................ 99 ARTICLE 10- MISCELLANEOUS..................................................101 10.1 NOTICES......................................................101 10.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT.......................101 10.3 SEVERABILITY..................................................101 10.4 DESCRIPTIVE HEADINGS..........................................102 10.5 GOVERNING LAW.................................................102 10.6 NON-MERGER OF REMEDIES........................................102 10.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES.......................102 10.8 AMENDMENTS; WAIVERS...........................................103 10.9 SUCCESSORS AND ASSIGNS........................................104 10.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES........................................................106 10.11 MAXIMUM LAWFUL INTEREST RATE..................................106 10.12 INDEMNIFICATION...............................................107 10.13 EXPENSES.....................................................108 10.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY................109 10.15 AUTHORIZATION OF MULTICARE BY OTHER BORROWERS................109 10.17 CERTAIN WAIVERS BY BORROWERS..................................110 10.18 SET-OFF......................................................110 10.19 SHARING OF COLLECTIONS.......................................111 -iii- 10.20 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL.........................................111 -iv- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October 9, 1997, by and among THE MULTICARE COMPANIES, INC., a Delaware corporation (together with its successors, "Multicare"), the Subsidiaries of Multicare referred to on the signature pages hereto and such other Subsidiaries of Multicare which may from time to time become Borrowers hereunder in accordance with the provisions hereof (collectively with Multicare, the "Borrowers"), the Lenders referred to on the signature pages hereto and other lenders parties hereto from time to time (together with their successors and assigns, the "Lenders"), MELLON BANK, N.A., a national banking association, as Administrative Agent for itself, and for the Lenders hereunder (in such capacity, together with its successors and assigns in such capacity, the "Administrative Agent"), MELLON BANK, N.A., a national banking association, as Issuer of Letters of Credit hereunder (in such capacity, together with its successors and assigns in such capacity, the "Issuer") CITICORP USA, INC., a Delaware corporation as Syndication Agent for itself and the Lenders hereunder, NATIONSBANK, N.A., a national banking association, as Syndication Agent for itself and the Lenders hereunder and FIRST UNION NATIONAL BANK, a national banking association as Documentation Agent. Certain terms used herein are defined in Article 9 below. W I T N E S S E T H T H A T WHEREAS, Multicare has requested that the Lenders extend the Loans to the Borrowers for the purposes described herein; WHEREAS, the Lenders have agreed to extend the Loans to the Borrowers on the terms and conditions described herein; and WHEREAS, ALL OBLIGATIONS HEREUNDER AND UNDER EACH AGREEMENT AND INSTRUMENT DELIVERED IN CONNECTION HEREWITH FROM TIME TO TIME ARE "SENIOR INDEBTEDNESS" AND ARE HEREBY DESIGNATED BY MULTICARE AS "DESIGNATED SENIOR INDEBTEDNESS" WITHIN THE MEANING OF THE 1997 SUBORDINATED NOTE INDENTURE. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows. ARTICLE 1 CREDIT FACILITY 1.1 COMMITMENT TO LEND. Loans. Upon the terms and subject to the conditions of this Agreement, each Lender agrees to make, from time to time during the period from and including the Closing Date to and including the Maturity Date, one or more Loans ("RC Loans") to the Borrowers in an aggregate unpaid principal amount not exceeding at any time such Lender's Commitment at such time as set forth on Schedule 1.1 hereto. The total amount of the Commitment of all Lenders on the Agreement Date is $425,000,000.00. 1.2 JOINT AND SEVERAL OBLIGATIONS. WHETHER OR NOT EXPRESSLY STATED HEREIN OR IN ANY OTHER LOAN DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY BORROWER) HEREUNDER AND UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN CONNECTION WITH LOANS, LETTERS OF CREDIT OR OTHER OBLIGATIONS) ARE JOINT AND SEVERAL OBLIGATIONS OF ALL BORROWERS. 1.3 MANNER OF BORROWING. (a) Notice of Borrowing. (1) Revolving Credit Loans. Except for the Swing Loans (which shall be governed by paragraph (e) below) Multicare (on behalf of the Borrowers) shall give the Administrative Agent notice (which shall be irrevocable), no later than 11:00 a.m. (Philadelphia, Pennsylvania time) one Business Day prior to the requested date for the making of Loans. Each such notice shall be in the form of Exhibit B hereto and shall specify (i) the requested date for the making of such Loans which date shall be a Business Day, (ii) the amount of the requested Loans, which amount shall be $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof (except that the amount of the requested Loans may be less if the amount requested is equal to the total Available Commitment). Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof and of the amount of the Loans to be made by such Lender on the requested date specified therein. (2) Swing Loans. Upon the terms and subject to the conditions of this Agreement, the Swing Loan Lender agrees to make, from time to time, from and including the Closing Date to but excluding the Maturity Date, one or more Swing Loans to the Borrowers, in an aggregate unpaid principal amount not exceeding at any time $10,000,000.00, provided however that no Swing Loan shall be made at any time in an amount in excess of the Available Commitment. Each Swing Loan shall be in a principal -2- amount equal to $500,000.00 or an integral multiple thereof and shall be made and maintained as a Prime Rate Loan unless a fixed rate shall be agreed upon by the Swing Loan Lender and Multicare (on behalf of the Borrowers). All Swing Loans shall be disbursed by the Swing Loan Lender in Dollars in funds immediately available to Multicare (on behalf of the Borrowers) by crediting an account of Multicare at the Swing Loan Lender's Office, or in such other manner as may have been specified in the applicable notice of borrowing and as shall be acceptable to the Swing Loan Lender. (b) Funding by Lenders. Not later than 12:00 noon (Philadelphia, Pennsylvania time) on each requested date for the making of Loans (other than Swing Loans) each Lender shall make available to the Administrative Agent, in Dollars in funds immediately available to the Administrative Agent at the office designated by the Administrative Agent, the Loans to be made by such Lender on such date, provided however that if a Lender does not receive timely notice from the Administrative Agent as set forth in paragraph (a) above, such Lender shall fund the required amount promptly upon receipt of such notice. The obligations of the Lenders hereunder are several; accordingly, any Lender's failure to make any Loan to be made by it on the requested date therefor shall not relieve any other Lender of its obligation to make any Loan to be made by it on such date, but the latter shall not be liable for the former's failure. (c) Permitted Assumption as to Funding. Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. (Philadelphia, Pennsylvania time) on the requested date for the making of any Loan (other than a Swing Loan) that such Lender will not make available to the Administrative Agent the Loan requested to be made by it on such date, the Administrative Agent may assume that such Lender has made such Loan available. The Administrative Agent in its sole discretion and in reliance upon such assumption, may make available to the Borrowers on the requested date a corresponding amount on behalf of such Lender. If and to the extent such Lender shall not have made available to the Administrative Agent the Loans requested to be made by such Lender on such date and the Administrative Agent shall have so made available to the Borrowers a corresponding amount on behalf of such Lender, (i) such Lender shall, on demand, pay to the Administrative Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the Administrative Agent to the Borrowers until the date such amount shall have been paid in full to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate, and (ii) the Administrative Agent shall be entitled to all interest payable by Borrowers on such amount for the period commencing on the date such amount was advanced by the Administrative Agent to but not including the date on which such amount is received by the Administrative Agent from such Lender. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Without limiting any obligations of any Lender pursuant to this paragraph -3- (c), if such Lender does not pay such corresponding amount promptly upon the Administrative Agent's demand therefor, the Administrative Agent shall notify Multicare (on behalf of the Borrowers) and the Borrowers shall promptly repay such corresponding amount to the Administrative Agent together with accrued interest thereon at the applicable rate or rates on such Loans. (d) Disbursements of Funds to Borrowers. All amounts made available to the Administrative Agent in accordance with paragraph (b) above shall be disbursed by the Administrative Agent promptly but in any event not later than 4:00 p.m. (Philadelphia, Pennsylvania time) on the requested date therefor in Dollars, in funds immediately available to the Borrowers by crediting such amount to an account of Multicare at the Administrative Agent's office or in such other manner as may be agreed to by Multicare and the Administrative Agent. (e) Special Provisions Respecting Swing Loans. (i) Request for Borrowing. Multicare (on behalf of the Borrowers) shall give the Swing Loan Lender notice (which shall be irrevocable) of a request for a Swing Loan (with a copy to the Administrative Agent) no later than 12:00 noon (Philadelphia, Pennsylvania time) on the day such Loan is requested; if such notice is received later than 12:00 noon (Philadelphia, Pennsylvania time), then the request shall be deemed to be a request for a Swing Loan to be made on the next Business Day. The Swing Loan Lender shall provide prompt notice to the Administrative Agent of the making of any Swing Loans to the Borrowers. (ii) Participation by Lenders. Upon demand made to all of the Lenders by the Swing Loan Lender, which demand may be made before or after a Default (including a Default arising under Section 7.1(m) (Bankruptcy, Etc.)), and before or after the maturity date of the subject Swing Loans but subject to the provisions of paragraph (iv) below, each Lender (other than the Swing Loan Lender) shall promptly, irrevocably and unconditionally purchase from the Swing Loan Lender, without recourse or warranty, an undivided interest and participation in the Swing Loans then outstanding. Each Lender shall effect such purchase by paying to the Swing Loan Lender, without reduction or deduction of any kind, including reductions or deductions for set-off, recoupment or counterclaim, in Dollars immediately available to the Swing Loan Lender at the Swing Loan Lender's office, an amount equal to such Lender's pro rata share of the principal amount of all Swing Loans then outstanding. Each Lender's pro rata share of the Swing Loans shall be based on the amount of such Lender's pro rata share of the total Commitment. Thereafter, the Lenders' respective interests in such Swing Loans, and the remaining interest of the Swing Loan Lender in such Swing Loans, shall in all respects be treated as Loans under this Agreement, except that subject to Section 1.8(c) (Default Rate) such Swing Loans shall continue to bear interest at the rate specified for such Swing Loans until such Swing Loans are due and payable and such Swing Loans shall be due and payable by the Borrowers on the dates referred to in Section 1.4(b). If any Lender does not pay any amount which it is required to -4- pay promptly upon the Swing Loan Lender's demand therefor, (i) the Swing Loan Lender shall be entitled to recover such amount on demand from such Lender, together with interest thereon, at the Federal Funds Rate for the first three Business Days, and thereafter at the Prime Rate, for each day from the date of such demand, if made prior to 2:00 p.m. (Philadelphia, Pennsylvania time) on any Business Day, or, if made at any later time, from the next Business Day following the date of such demand, until the date such amount is paid in full to the Swing Loan Lender by such Lender and (ii) the Swing Loan Lender shall be entitled to all interest payable by the Borrowers on such amount until the date on which such amount is received by the Swing Loan Lender from such Lender. Moreover, any Lender that shall fail to make available the required amount shall not be entitled to vote on or consent to or approve any matter under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Swing Loan Lender by such Lender. Without limiting any obligations of any Lender pursuant to this paragraph (ii), if such Lender does not pay such corresponding amount promptly upon the Swing Loan Lender's demand therefor, the Swing Loan Lender shall notify Multicare (on behalf of the Borrowers) and the Borrowers shall promptly repay such corresponding amount to the Swing Loan Lender together with accrued interest thereon at the applicable rate on such Swing Loans. (iii) No Set-off, Etc. Subject only to the limitations set forth in the following paragraph (iv), the obligations of each Lender to make available to the Swing Loan Lender the amounts set forth in the preceding paragraph (ii) shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to qualification or exception and shall be made in accordance with the terms of this Agreement. (iv) Certain Limitations. No Lender shall be obligated to purchase a participation in any Swing Loan if such Lender proves that (A) the Swing Loan Lender did not in good faith believe that the conditions specified in clauses (i), (iii), and (iv) of Section 2.2(a) were satisfied at the time such Swing Loan was made (unless such condition was waived in accordance with the terms of this Agreement) or (B) such Lender had actual knowledge that any such condition had not been satisfied and notified the Swing Loan Lender in a writing received by the Swing Loan Lender at least one Business Day prior to the time that it made such Swing Loan that the Swing Loan Lender was not authorized to make such Swing Loan and stating with specificity the reason therefor. 1.4 REPAYMENT AND MANDATORY PREPAYMENTS. (a) RC Loans. The aggregate outstanding principal amount of the RC Loans shall mature and become due and payable, and shall be repaid by the Borrowers, on the earlier of (i) the date 120 days after the Closing Date or (ii) the date on which the Merger becomes effective (the earlier of such dates being the "Maturity Date"). -5- (b) Swing Loans. The Borrowers shall repay each Swing Loan no later than 3:00 p.m. (Philadelphia, Pennsylvania time) on the date specified in the notice of borrowing delivered under Section 1.3(e) (which shall be a date not later than the earlier of (A) the fifth Business Day after the date on which such Swing Loan is to be made and (B) the Maturity Date). The Swing Loan Lender shall provide prompt notice to the Administrative Agent of any repayment of Swing Loans by the Borrowers. (c) Letters of Credit. The Borrowers shall reimburse the Issuer, through the Administrative Agent, for each Drawing under a Letter of Credit on the date determined with respect to such Drawing in the manner set forth in Article 1A below. In addition, the Borrowers shall fund the cash collateral account securing the Letter of Credit obligations in the manner set forth in Article 1A below. (d) Mandatory Prepayments. (i) In the event there occurs a disposition of assets which would otherwise result in a mandatory prepayment under the 1997 Subordinated Notes to the extent the Borrowers are not otherwise required to make a mandatory prepayment hereunder, the Borrowers shall be required to make a mandatory prepayment hereunder in an amount and at a time not later than is necessary to avoid any prepayment under the 1997 Subordinated Notes or the 1997 Subordinated Note Indenture. (ii) At any time that the Commitment is reduced pursuant to Section 1.7 (Reductions of Commitment) to an amount less than the amount of the outstanding Loans, the Borrowers shall prepay the Loans in an amount equal to such excess amount. 1.5 VOLUNTARY PREPAYMENTS. (a) Optional Prepayments. The Borrowers may, at any time and from time to time, prepay the Loans in whole or in part, without premium or penalty, except that any optional partial prepayment (other than a prepayment of all outstanding Loans) shall be in an aggregate principal amount of $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof except that a Swing Loan (prior to the time that the Swing Loan Lender makes a demand under Section 1.3(e)(ii)) may be prepaid in an aggregate principal amount of $500,000.00 or any integral multiple thereof. Amounts to be so prepaid shall irrevocably be due and payable on the date specified in the applicable notice of prepayment delivered pursuant to paragraph (b) of this Section 1.5 together with interest thereon as provided in Section 1.8 (Interest). (b) Application and Timing of Voluntary Prepayments. (i) Notice. Subject to the provisions of the last sentence of this paragraph (i), the Borrowers shall give the Administrative Agent notice of each prepayment of Loans, no later than 11:00 a.m. (Philadelphia, Pennsylvania time) three (3) Business Days before the date of such prepayment. Each such notice of prepayment shall be in the form of Exhibit C hereto and shall specify the date and amount of such prepayment. Upon receipt of -6- any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof. Notwithstanding the foregoing, if the Borrowers wish to make a prepayment of Swing Loans only, they may prepay such Swing Loans by giving the Swing Loan Lender and the Administrative Agent written notice no later than 12:00 noon (Philadelphia time) one Business Day prior to the date of such prepayment or as otherwise agreed to by Multicare (on behalf of the Borrowers) and the Swing Loan Lender. (ii) Timing and Application of Voluntary Prepayments. Any voluntary prepayments pursuant to paragraph (a) of this Section 1.5 shall be applied in the following order: (1) First, prepayments shall be applied against the principal of the Loans. (2) Second, prepayments shall be applied to any other amounts owing under, or in respect of, the Loan Documents or deposited in the Letter of Credit cash collateral account if required under Article 1A below and, if all such Loan Obligations have been paid in full and the amount of outstanding Letters of Credit is less than the sum of the amount in the cash collateral account (as required) and the Available Commitment, then any excess amount shall be returned to Multicare (on behalf of the Borrowers) or as otherwise required by applicable Law. (c) Certain Provisions Respecting Prepayments Generally. Prepayments shall be subject to the interest payment provisions, as applicable, set forth in Section 1.8 below. 1.6 PAYMENTS BY THE BORROWERS IN GENERAL. (a) Time, Place and Manner. All payments due to the Administrative Agent under the Loan Documents shall be made to the Administrative Agent at the office designated by the Administrative Agent on the signature pages hereto or to such other Person or at such other address as the Administrative Agent may designate by written notice to Multicare on behalf of the Borrowers. Except as otherwise set forth in this Agreement, a payment shall not be deemed to have been made on any day unless such payment has been received by the required Person, at the required place of payment, in Dollars in funds immediately available to such Person, no later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day; provided, however, that the failure of the Borrowers to make any such payment by such time shall not constitute a Default hereunder so long as such payment is received no later than 3:00 p.m. (Philadelphia, Pennsylvania time) on such day, but any such payment received later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day shall be deemed to have been made on the next Business Day for the purpose of calculating interest on the amount paid, provided further, that any such payment made with the proceeds of -7- Loans shall be deemed to have been made on the date of the making of such Loans, so long as such proceeds are immediately so applied and are not otherwise disbursed to the Borrowers. (b) No Reductions. All payments due to the Administrative Agent or any Lender under this Agreement and the other Loan Documents, shall be made by the Borrowers without any reduction or deduction whatsoever, including any reduction or deduction for any charge, set-off, holdback, recoupment or counterclaim (whether sounding in tort, contract or otherwise). (c) Authorization to Charge Accounts. The Borrowers hereby authorize each Lender Party, and each participant and each Affiliate of each Lender Party, if and to the extent any amount payable by the Borrowers under the Loan Documents (whether payable to such Person or to any other Lender Party) is not otherwise paid when due, to charge such amount against any or all of the demand deposit or other accounts of any Borrower with such Person (whether maintained at a branch or office located within or without the United States), with the Borrowers remaining jointly and severally liable for any deficiency. The Person so charging any such account shall give the relevant Borrower prompt notice thereof, but any failure to give or delay in giving such notice shall not affect such Person's right to effect such charge. (d) Extension of Payment Dates if Not a Business Day. Whenever any payment to the Administrative Agent or any Lender under the Loan Documents would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day. If the due date for any payment under the Loan Documents is extended (whether by operation of any Loan Document, applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. (e) Disbursement of Payments to Lenders. The Administrative Agent shall promptly distribute to each of the applicable Lender Parties its ratable share of each payment received by the Administrative Agent under the Loan Documents for the account of such Lender Party by crediting an account of such Lender Party at the Administrative Agent's office or by wire transfer to an account of such Lender Party at an office of any other commercial bank located in the United States or at any Federal Reserve Bank designated by such Person. Unless the Administrative Agent shall have received notice from Multicare (on behalf of the Borrowers) prior to the date on which any payment is due to any Lender Parties under the Loan Documents that the Borrowers will not make such payment in full, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date and the Administrative Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each applicable Lender Party on such due date a corresponding amount with respect to the amount then due to such Person. If and to the extent that the Borrowers shall not have so made such payment in full to the Administrative Agent and the Administrative Agent shall have so distributed to such Lender -8- Party or Lender Parties a corresponding amount, such Lender Party or Lender Parties shall, on demand, repay to the Administrative Agent the amount so distributed together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date the such Person repays such amount to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate. Moreover, any Lender Party that shall have failed to make available the required amount shall not be entitled to vote on such matters as the Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender Party. Nothing in this Section 1.6 shall relieve the Borrowers from any payment obligations. 1.7 REDUCTIONS OF COMMITMENT. (a) Optional Reductions. The Borrowers may reduce the Commitment by giving the Administrative Agent notice (which shall be irrevocable) thereof no later than 11:00 a.m. (Philadelphia, Pennsylvania, time) on the third Business Day before the requested date of such reduction, provided, that each partial reduction thereof shall be in an amount equal to $10,000,000.00 or any integral multiple of $5,000,000.00 in excess thereof and, provided, further, that no reduction shall reduce the Commitment to an amount less than the aggregate of the principal amount of all Loans outstanding on such date (after giving effect to any repayment or prepayment of Loans made on or prior to such date). Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof and the amount (based on a pro rata reduction to each Lender's Commitment) to which such Lender's Commitment is to be reduced. (b) Automatic Mandatory Reductions. At the time of any mandatory prepayment of Loans pursuant to Section 1.4, the Commitment shall be reduced to the extent required by said Section 1.4, except that only the first $50,000,000 of the Net Cash Proceeds received in connection with the disposition of the assets mentioned in Section 6.5(e) hereof shall reduce the Commitment. (c) No Reinstatement of Commitment. All reductions of the Commitment are permanent and the Commitment cannot be restored without the written consent of all Lenders. 1.8 INTEREST. (a) Interest Rate in General. Subject to the terms and conditions of this Agreement, the Loans shall bear interest on the outstanding principal amount thereof until paid in full at a rate per annum equal to 1.5 percentage points in excess of the Prime Rate as -9- in effect from time to time except that Swing Loans shall bear interest at the prime Rate with no margins. (b) Interest Payment Dates. Except for Swing Loans on which interest is payable when each such Loan is due, interest shall be payable quarterly in arrears on each Quarterly Payment Date, and (ii) when the Loans shall be due (whether at maturity, by reason of notice of prepayment or acceleration or otherwise), but only to the extent then accrued on the amount then so due. Interest at the Default Rate shall be payable on demand. (c) Default Rate. At any time that an Event of Default shall have occurred and shall be continuing, any amount payable hereunder and under each other Loan Document shall bear interest (whether before or after judgment), payable on demand, at a rate per annum equal to the applicable Default Rate. 1.9 FEES. (a) Commitment Fees. The Borrowers shall pay to the Administrative Agent, for the account of each Lender, a commitment fee on the daily unused amount of such Lender's Commitment for each day from and including the Agreement Date to but excluding the Maturity Date at the rate of .50% per annum, payable in arrears (i) on each Quarterly Payment Date, and (ii) on the Maturity Date. (b) Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent, for the respective accounts of the RC Lenders, a letter of credit commission on the daily aggregate amount of the Contingent Reimbursement Obligations under each Letter of Credit at a rate per annum equal to the Applicable Margin that would be applicable to RC Loans that are LIBO Rate Loans at such time. In addition, the Borrowers shall pay to the Administrative Agent, for the sole account of the Issuer, a Letter of Credit fronting fee on the daily aggregate amount of the Contingent Reimbursement Obligations under each Letter of Credit at a rate per annum equal to .10%. Such fees shall be payable in arrears on successive Quarterly Payment Dates and at the expiration or other termination of each Letter of Credit. In addition, the Borrowers shall pay to the Administrative Agent, for the benefit of the Issuer, the Issuer's standard posted charges for such matters as opening, negotiation and transfer. (c) Other Fees. The Borrowers shall pay to the Administrative Agent for the respective accounts of the Administrative Agent, the Lenders and/or the other Agents, as the case may be, such other fees as have been or may be agreed to by the Borrowers, by Genesis, or by Acquisition Corp. in connection with the commitment to enter into this Agreement (including any facility fees referred to in any commitment letters) and the transactions contemplated by this Agreement. -10- 1.10 COMPUTATION OF INTEREST AND FEES. Interest calculated on the basis of the Federal Funds Rate shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Commitment fees, letter of credit fees and interest calculated on the basis of the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as applicable, and paid for the actual number of days elapsed. Interest, commitment fees and letter of credit fees for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. 1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT. Each Lender's Loans and the Borrowers' joint and several obligations to repay such Loans with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the records of the Administrative Agent and such Lender and a single Note payable to the order of such Lender except that the Swing Loans and the Borrowers' joint and several obligations to repay such Loans shall be evidenced by a single Swing Loan Note payable to the order of the Swing Loan Lender. Each Lender's participation in Letters of Credit shall be evidenced by this Agreement, the records of such Lender and the Issuer and the Letters of Credit. The amount of each Lender's Commitment and the amount of outstanding Loan Obligations shall at all times be ascertained from the records of the Administrative Agent, which shall be conclusive absent manifest error and the outstanding amount of any Swing Loans and the amount of unpaid interest thereon shall at all times be ascertained from the records of the Swing Loan Lender, which shall be conclusive absent manifest error. 1.12 PRO RATA TREATMENT. Except to the extent otherwise provided herein, the Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Lenders pro rata in accordance with their respective Commitments. Each participation of obligations in respect to Letters of Credit shall be allocated among, and each reimbursement for Drawings under Letters of Credit or letter of credit commissions shall be made for the account of, the Lenders pro rata in accordance with their respective amounts of Commitments. 1.13 TAXES ON PAYMENTS. (a) Taxes Payable by the Borrowers. If any Tax is required to be withheld or deducted from, or is otherwise payable by the Borrowers in connection with, any payment due to the Administrative Agent, the Issuer or any Lender that is not a "United States Person" (as such term is defined in Section 7701(a)(30) of the Code), the Borrowers (i) shall, if required, withhold or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing authority in accordance with applicable Law and (ii) except in the case of any Bank Tax, shall pay to the Issuer, such Lender or the Administrative Agent such additional amounts as may be necessary so that the net amount received by such Person with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable hereunder. If any Tax is withheld or deducted from, or is otherwise payable by the Borrowers in -11- connection with, any payment due to the Issuer, any Lender or the Administrative Agent hereunder, the Borrowers shall furnish to such Person the original or a certified copy of a receipt (if any) for such Tax from the applicable taxing authority or other evidence of payment thereof satisfactory to such Person within 30 days after the date of such payment (or, if such receipt shall not have been made available by such taxing authority within such time, the Borrowers shall use reasonable efforts to promptly obtain and furnish such receipt). If the Borrowers fail to pay any such Taxes when due to the appropriate taxing authority or fail to remit to the Issuer any Lender or the Administrative Agent the required receipts or other evidence of payment thereof satisfactory to such Person, the Borrowers shall indemnify such person for any Taxes, interest, penalties or additions to Tax that may become payable such Person as a result of any such failure. (b) Taxes Payable by the Issuer, any Lender or the Administrative Agent. The Borrowers shall, promptly upon request by the Issuer, any Lender or the Administrative Agent that is not a United States Person, pay to such Person an amount equal to (i) all Taxes (other than Bank Taxes and without duplication of amounts paid pursuant to the preceding paragraph (a)) payable by such Person with respect to any payment due to such Person hereunder and (ii) all Taxes (other than Bank Taxes) payable by such Person as a result of payments made by the Borrowers (whether made to a taxing authority or to such Person pursuant to the preceding paragraph (a) or this paragraph (b)). (c) Credits and Deductions. If any Lender or the Administrative Agent is, in its sole opinion, able to apply for any refund, offset, credit, deduction or other reduction in Taxes by reason of any payment made by the Borrowers under the preceding paragraph (a) or (b), such Lender or the Administrative Agent, as the case may be, shall use reasonable efforts to obtain such refund, offset, credit, deduction or other reduction and, upon receipt thereof, will pay to the Borrowers such amount, not exceeding the increased amount paid by the Borrowers, as is equal to the net after-tax value to such Lender or the Administrative Agent, in its sole opinion, of such part of such refund, offset, credit, deduction or other reduction as it considers to be allocable to such payment by the Borrowers, having regard to all of such Person's dealings giving rise to similar refunds, offsets, credits, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that if such Person has made a payment to the Borrowers pursuant to this paragraph (c) and the applicable refund, offset, credit, deduction or other reduction in Tax is subsequently disallowed, the Borrowers shall, promptly upon request by the Issuer, the Administrative Agent or such Lender refund to such Person that portion of such payment determined by such Person, in its sole opinion, relating to such disallowance; and provided, further that (i) the Administrative Agent or such Lender, as the case may be, shall not be obligated to disclose to the Borrowers any information regarding its Tax affairs or computations and (ii) nothing in this paragraph (c) shall interfere with the right of such Person to arrange its Tax affairs as it deems appropriate. (d) Exemption from U.S. Withholding Taxes. Each Lender that is not a United States Person shall submit to the Borrowers and the Administrative Agent, on or -12- before the fifth day prior to the first Quarterly Payment Date occurring after the Closing Date (or, in the case of a Person that is not a United States Person and that became a Lender by assignment, promptly upon such assignment), two duly completed and signed copies of either (A) Form 1001 of the United States Internal Revenue Service entitling such Lender to a complete exemption from withholding on all amounts to be received by such Lender pursuant to this Agreement and the Loans or (B) Form 4224 of the United States Internal Revenue Service relating to all amounts to be received by such Lender pursuant to this Agreement and the Loans or (C) in the case of a Lender Party that is claiming an exemption from United States withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments of "portfolio interest" two accurate and complete signed original Forms W-8 (or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Agreement or the Notes) and, if such Lender Party delivers such Forms W-8 (or successor form), two signed certificates that such Lender Party is not (1) a "bank" for purposes of Section 881(c) of the Internal Revenue Code, (2) is not a 10% shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and (3) is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code), as appropriate. Each such Lender shall, from time to time after submitting either such Form, submit to the Borrowers and the Administrative Agent such additional duly completed and signed copies of one or the other such Forms (or any successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (A) requested in writing by the Borrowers or the Administrative Agent and (B) appropriate under the circumstances and under then current United States law or regulations to avoid or reduce United States withholding taxes on payments in respect of all amounts to be received by such Lender pursuant to this Agreement or the Loans. Upon the request of the Borrowers or the Administrative Agent, each Lender that is a United States Person shall submit to the Borrowers and the Administrative Agent a certificate to the effect that it is a United States Person. 1.14 CAPITAL AND RESERVE REQUIREMENTS. If, in the determination of any Lender, such Lender or any Affiliate thereof is required, under applicable Law (including Regulation D), interpretations, directives, requests and governmental or regulatory guidelines (whether or not having the force of law), to maintain capital or deposit any reserve on account of any Loan or any commitment to make any Loan, then, upon request by such Lender, the Borrowers shall pay to such Lender such additional amounts as such Person determines will fully compensate it for any reduction in the rate of return on the capital that such Lender or such Affiliate is so required to maintain. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request by such Lender for such payment accompanied by the certificate described below and, in the case of those relating to future periods, on the dates specified, or determined in accordance with the method specified, by such Lender. -13- In making the determinations contemplated by this Section 1.14, each Lender and the Issuer shall make such estimates, assumptions, allocations and the like that such Person is good faith determines to be appropriate, and such Person's selection thereof in accordance with this Section 1.14, and the determinations made by such Person on the basis thereof, shall be final, binding and conclusive upon the Borrowers, except, the case of such determinations, for manifest errors. Each Lender and the Issuer shall furnish to the Borrowers, at the time of any request for compensation under Section 1.14, a certificate outlining in reasonable detail the computation of any amounts claimed by it under this Section 1.14 and the assumptions underlying such computations, which shall include a statement of an officer of such Lender certifying that such request for compensation is being made pursuant to a policy adopted by such Lender to seek such compensation generally from customers similar to the Borrowers and having similar provisions in agreements with such Lender. 1.15 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 1.13 (Taxes on Payments) or Section 1.14 (Capital and Reserve Requirements), with respect to such Lender, it will, if requested by the Borrowers, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that such designation is made on such terms that the such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operations of any such Section. Nothing in this Section 1.15 shall affect or postpone any of the obligations of the Borrowers or the right of any Lender provided in Section 1.13 (Taxes on Payments) or Section 1.14 (Capital and Reserve Requirements). -14- ARTICLE 1A LETTERS OF CREDIT 1A.1 ISSUANCE OF LETTERS OF CREDIT. (a) In General. Upon the terms and subject to the conditions of this Agreement, the Issuer shall, from time to time, from the Closing Date to the date which is 90 days prior to the Maturity Date, issue one or more Letters of Credit for the account of any Borrower, provided that (i) the sum of the Contingent Reimbursement Obligations (after giving effect to the requested Letter of Credit) plus the aggregate unpaid amount of all Drawings under Letters of Credit shall not exceed $5,000,000.00 and provided, further, that the face amount of the Letter of Credit so requested shall not exceed the Available Commitment at such time. Each Letter of Credit shall be in a form and shall contain such terms as shall be reasonably satisfactory to the Issuer. Letters of Credit shall be issued only on a Business Day, and shall be used for the general corporate purposes of the Borrowers or for such other purposes as shall be acceptable to the Issuer in its sole discretion. (b) Terms. Each Letter of Credit shall be denominated only in Dollars and shall expire on or before the first anniversary of the issuance thereof and in any event not later than the fifth Business Day preceding the Maturity Date. No Letter of Credit shall have an expiration date which is extendable under an "evergreen" or similar provision unless the Issuer expressly agrees to the same in its sole discretion in any particular case. All other extensions and renewals are also at the sole discretion of the Issuer. Any extension of the expiry date of a Letter of Credit to a date beyond the first anniversary of the issuance thereof shall constitute an "issuance" of such Letter of Credit for all purposes hereof. (c) Form of Request. The Borrowers shall request the issuance of a Letter of Credit by furnishing to the Administrative Agent and the Issuer, at least five Business Days before the requested date of such issuance (or at such later time as shall be acceptable to the Issuer), such notice thereof as shall be reasonably satisfactory to the Issuer to which shall be attached a certificate of the chief financial officer or other Responsible Officer of Multicare representing that Multicare is, and after giving effect to the additional Indebtedness will be, in compliance with Section 4.03 of the 1997 Subordinated Note Indenture, that the obligations with respect to such Letter of Credit constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as defined in the 1997 Subordinated Note Indenture, and as to such other matters as required by Section 2.2 below. (d) Participation by Lenders. Upon the date of issuance of a Letter of Credit, the Issuer shall be deemed to have granted to each Lender (other than the Issuer), and each Lender (other than the Issuer) shall be deemed to have acquired from the Issuer without further action by any party hereto, a participation in such Letter of Credit and any Drawings -15- that may at any time be made thereunder, to the extent of such Lender's pro rata share of the Commitment. (e) Notice of Drawings. The Issuer shall promptly notify Multicare (on behalf of the Borrowers) of its receipt of each Drawing request with respect to a Letter of Credit, stating the date and amount of the Drawing requested thereby and the date and amount of each Drawing disbursed pursuant to such request. The failure of the Issuer to give, or delay in giving, any such notice shall not release or diminish the obligations hereunder of the Borrowers in respect of such Drawing. (f) Reimbursement of Drawings by Borrowers. If at any time Multicare (on the behalf of the Borrowers) receives notice of a Drawing, the Borrowers shall reimburse such Drawing by paying to the Issuer in immediately available funds the amount of the payment made by the Issuer with respect to such Drawing, together with interest thereon at a rate per annum equal to the Prime Rate from the day that the Drawing is made until the day such reimbursement is made if such Drawing is not reimbursed on the day the Drawing is made. Such reimbursement shall be made by the Borrowers to the Issuer no later than one (1) Business Day following the date that Multicare (on behalf of Borrowers) receives the relevant notice of Drawing if such notice is received on or prior to 10:00 a.m. (Philadelphia, Pennsylvania time) and no later than two (2) Business Days following the date that Multicare receives the relevant notice of Drawing if such notice is received after 10:00 a.m. (Philadelphia, Pennsylvania time). If the Borrowers shall fail to make any payment required by this paragraph (f) at the time specified, and if at such time, there shall be any Available RC Commitment, the Administrative Agent may (but is not obligated to) assume that the Borrowers intend to use the proceeds of RC Loans to make such payment. In reliance on such assumption, the Administrative Agent may (but is not obligated to) notify the Lenders (and Multicare (on behalf of the Borrowers)) that notwithstanding the Borrowers' failure to provide notice pursuant to Section 1.3 above, such notice is deemed given pursuant to this paragraph (f) requesting an RC Loan in an amount sufficient to make the payments required by this paragraph (f). Such notice from the Administrative Agent shall be treated by the Lenders in the same manner as a notice from the Borrowers under Section 1.3 above. The Administrative Agent may, at the direction of the Issuer, apply the proceeds of such Loans to satisfy the requirements of this paragraph (f). (g) Obligations of Lenders to Issuer. In the event that the Borrowers shall fail to make any payment when due pursuant to the preceding paragraph (f) and for so long as such failure shall be continuing, the Issuer may give notice of such failure to the Administrative Agent and each Lender, which notice shall include, in the case of an Lender, the amount of such Lender's interest in such Drawing, whereupon each such Lender (other than the Issuer) shall promptly remit such amount to the Administrative Agent for the account of the Issuer as provided in this paragraph (g). Each Lender (other than the Issuer) shall, in the event it receives such notice from the Issuer at or before 12:00 noon (Philadelphia, Pennsylvania time) on any Business Day, fund its participation in any unreimbursed Drawing by remitting to the Administrative Agent, no later than 2:00 p.m. -16- (Philadelphia, Pennsylvania time) on such day, in immediately available funds its share of the reimbursement obligations in respect of each Drawing. In the event that the Administrative Agent receives such funds from an Lender at or before 2:00 p.m. (Philadelphia, Pennsylvania time) on any day, the Administrative Agent shall make available the amount thereof to the Issuer, in immediately available funds no later than 4:00 p.m. (Philadelphia, Pennsylvania time) on that same day. Any amount payable by an Lender to the Administrative Agent for the account of the Issuer under this paragraph (g), and any amount payable by the Administrative Agent to the Issuer under this paragraph (g), shall bear interest for each day from the date due (and including such day if paid after 2:00 p.m. (Philadelphia, Pennsylvania time) in the case of any such payment by a Lender to the Administrative Agent, or 4:00 p.m. (Philadelphia, Pennsylvania time), in the case of any such payment by the Administrative Agent to the Issuer, on such day) until the date it is received by the Issuer at a rate equal to the Federal Funds Rate until (and including) the third Business Day after the date due and thereafter at the Prime Rate. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Each Lender shall, upon the demand of the Issuer, reimburse the Issuer, through the Administrative Agent to the extent that the Issuer has not been reimbursed by the Borrowers after demand therefor, for the reasonable costs and expenses (including reasonable legal fees) incurred by it (other than as a result of its willful misconduct or gross negligence as finally determined by a court of competent jurisdiction) in connection with the collection of amounts due under, the administration of, and the preservation and enforcement of any rights conferred by, the Letters of Credit or the performance of the Issuer's obligations under this Agreement in respect thereof on a pro rata basis relative to such Lender's pro rata share of the Commitment (as of the time such costs and expenses are incurred). The Issuer shall refund through the Administrative Agent any costs and expenses reimbursed by such Lender that are subsequently recovered from the Borrowers in an amount equal to such Lender's ratable share thereof. (h) Cash Collateral. It is intended that at all times that the Borrowers shall have contingent or other obligations (including obligations in respect of fees) relating to Letters of Credit, there shall be sufficient availability under the Commitment to reimburse the Issuer (and the Lenders) out of proceeds of RC Loans. Accordingly, in the event that there shall, at any time, be insufficient availability under the Commitment (after giving effect to all outstanding Swing Loans and RC Loans) to do so (whether because the amount of the Commitment is reduced pursuant to a mandatory reduction or is terminated at maturity, upon acceleration or otherwise or because the amount of outstanding RC Loans, Swing Loans and such Letter of Credit obligations exceeds the amount of the Commitment for any other reason), the Borrowers shall forthwith pay to the Administrative Agent an amount equal to the aggregate face value of all outstanding Letters of Credit plus the aggregate amount of all unreimbursed Drawings plus the amount of all fees or other obligations in respect of Letters of Credit to the extent of such excess. Such amount shall be maintained by the Administrative Agent in an interest-bearing cash collateral account in the name of and for the -17- benefit of the Issuer and the Lenders to secure such payment obligations of the Borrowers until such time as all outstanding Letters of Credit have expired or been cancelled and all amounts in respect thereof have been paid in full. Upon receipt of a notice from the Issuer that there are unreimbursed Drawings or other amounts due in respect of such Letters of Credit (which notice shall set forth the amount of such unreimbursed Drawings or other obligations) the Administrative Agent shall promptly disburse from the cash collateral account the amount specified in the notice and shall pay such amount to the Issuer and Lenders ratably in accordance with the respective amounts owing to each such Person, first, for fees and indemnities until the same are paid in full and, second, for unreimbursed Drawings. The Administrative Agent and the Issuer may rely on their records as to any amounts so owing and shall be fully protected in doing so. Such records shall be conclusive, absent manifest error. At any time that the Commitment again becomes available for reimbursement of Drawings under outstanding Letters of Credit such that (i) the sum of the Commitment at that time and the amount in the cash collateral account exceeds (ii) the sum of all outstanding RC Loans and Swing Loans, the face amount of all outstanding Letters of Credit and the amount of all unreimbursed Drawings, then, upon written request of Multicare (on behalf of the Borrowers) (which request shall (A) represent that there exists no Default or Event of Default and (B) specify the amount of such excess), the Administrative Agent shall release such excess amount to the Borrowers from the cash collateral account. If all Loan Obligations (other than Loan Obligations constituting contingent obligations under indemnification provisions which survive indefinitely, so long as no unsatisfied claim has been made under any such indemnification provision) have been indefeasibly paid in full in cash, all Commitments have terminated and all Letters of Credit have expired, promptly following demand by Multicare (on behalf of the Borrowers) the Administrative Agent shall release to the Borrowers all remaining funds in the Letter of Credit cash collateral account. (i) Obligations Absolute. The obligation of each Borrower and each Lender to make available to the Issuer the amounts set forth in this Article 1A shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever, and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to any qualification or exception and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Issuer, any Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any -18- underlying transaction between such Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or (v) the occurrence of any Default or Event of Default. (j) Limitations on Liability; Protection of Issuer, Administrative Agent and Lenders. (i) Limitation on Liability of Lender Parties. Without affecting any rights any Lender Party may have under applicable Law, each of the Borrowers agrees that none of the Lenders, the Issuer, the Administrative Agent or their respective officers or directors shall be liable or responsible for, and the obligations of the Borrowers to the Lenders, the Issuer and the Administrative Agent hereunder shall not in any manner be affected by: (A) the use that may be made of any Letter of Credit or the proceeds thereof by the beneficiary thereof or any other Person or any acts or omissions of such beneficiary or any other Person; (B) the validity, sufficiency or genuineness of documents presented in connection with any Drawing, or of any endorsements thereon, even if such documents should, in fact, prove to be in any or all respects, invalid, insufficient, fraudulent or forged; or (C) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit or any other action taken or omitted to be taken by any Person under or in connection with any Letter of Credit, except that the Borrowers shall have a claim against the Issuer and the Issuer shall be liable to the Borrowers, in each case to the extent and only to the extent of any damages suffered by the Borrowers that they prove are caused by the Issuer's willful misconduct or gross negligence. In furtherance and not in limitation of the foregoing, in determining whether to pay under any Letter of Credit, the Issuer shall not have any obligation relative to the other Lenders other than to determine that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit, regardless of any notice or information to the contrary. Any action taken or omitted to be taken by the Issuer under or in connection with any Letter of Credit (if taken or omitted in the absence of gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction) shall not create for the Issuer any resulting liability to any Borrower or any Lender. (ii) Indemnification and Expenses. In addition to any other amounts payable under this Agreement, the Borrowers agree jointly and severally to protect, indemnify, pay and hold the Issuer and each Lender harmless from and against any and all -19- claims, costs, charges and expenses (including reasonable attorneys' fees) which the Issuer may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of, or payment of any drawing under, any Letter of Credit, other than as a result of the gross negligence or willful misconduct of the Issuer as finally determined by a court of competent jurisdiction or (B) the failure of the Issuer to honor a Drawing under any Letter of Credit as a result of any act or omission of any present or future government or Governmental Authority. (iii) Issuer Not Responsible. In furtherance of the foregoing limitations on liability, the Issuer shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the issuance of Letters of Credit; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part; (C) errors, omissions, interruptions, or delays in transmissions or delivery of any messages, by mail, cable, telecopy, telex or otherwise, whether or not in cipher, except for damages proven to be caused by the Issuer's gross negligence or willful misconduct; (D) the misapplication by the beneficiary of any Letter of Credit or the proceeds of any drawing under such Letter of Credit; or (E) any consequence arising from causes beyond the control of the Issuer, including any governmental acts. -20- ARTICLE 2 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS 2.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING. The effectiveness of this Agreement (other than this Article 2) and the obligation of the Lenders to make the initial Loans hereunder and the obligation of the Issuer to issue Letters of Credit hereunder are subject to the fulfillment of the following conditions on or before October 15, 1997 (unless such date is extended in writing by the Agents in their sole discretion), in each case to the satisfaction of the Agents and, to the extent specified below, to the satisfaction of each Lender (each Lender upon making its initial Loan hereunder being deemed to have waived or found satisfactory all such conditions so specified). (a) Secretary's Certificates. The Borrowers shall have delivered, or caused to be delivered, a certificate of the Secretary or an Assistant Secretary (or general partner, as applicable) of each of the Borrowers, Acquisition Corp. and Genesis ElderCare Corp., with specimen signatures of the authorized signatories to the Loan Documents, and to which shall be attached copies of the following, as applicable: articles or certificate of incorporation (each of which shall be certified as of a recent date by the Secretary of State of the state of such Borrower's, Acquisition Corp. and Genesis ElderCare Corp.), certificates of formation (each of which shall be certified as of a recent date by the Secretary of State of the state of such Person's formation), operating agreements, management agreements, bylaws, partnership agreements, resolutions and shareholder agreements. (b) Good Standing Certificates. The Borrowers shall have delivered, or caused to be delivered, a good standing or subsistence certificate, as the case may be, issued as of a recent date with respect to each Borrower (and corporate or limited liability company or limited partnership, general partners of Borrowers that are partnerships), Acquisition Corp. and Genesis ElderCare Corp., (i) issued by the Secretary of State or other appropriate official of the jurisdiction of formation of such Person and (ii) issued by the Secretary of State or other appropriate official of each jurisdiction where such Person is required to qualify to do business and, if any such certificate is dated more than seven (7) days prior to the Closing Date, a confirmation (which may be provided by a reputable corporate service) of the information in such certificate. (c) The Notes. The Borrowers shall have delivered the Notes to the Administrative Agent for distribution to the Lenders and the Swing Loan Note to the Administrative Agent. (d) Lien Searches. The Borrowers shall have delivered to the Administrative Agent Uniform Commercial Code, tax, and judgment lien searches of the Borrowers, -21- Acquisition Corp. and Genesis ElderCare Corp. as of a recent date, in such form and with such content as are acceptable to the Administrative Agent. (e) Pledge Agreement. The Borrowers shall each have executed and delivered Pledge Agreements whereby the Administrative Agent shall receive a pledge and first priority security interest for the benefit of the Lender Parties in all of the equity interests in each of the direct and indirect Subsidiaries of Multicare and all inter-Borrower notes (collectively, as such agreements are amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof, the "Pledge Agreement") in substantially the form annexed to this Agreement as Exhibit D (together with the stock certificates, assignment powers, Uniform Commercial Code financing statements (in proper form for filing in the appropriate offices to perfect the security interest of the Administrative Agent for the benefit of the Secured Parties, in the Collateral granted under the Pledge Agreement) and other items required thereunder to the extent that such items were not previously delivered to the Administrative Agent). (f) Multicare Management Agreement. Prior to or substantially contemporaneously with the initial funding hereunder, GENESIS HEALTH VENTURES, INC. ("Genesis") (and/or one or more of its Subsidiaries) shall have entered into a Management Agreement with Genesis ElderCare Corp. (the "Multicare Management Agreement") under which Genesis (and/or such Subsidiaries) will provide management services to the Borrowers and its Subsidiaries. As a further condition, Genesis and Multicare and the Agents shall enter into the Multicare Management Subordination Agreement. (g) Transaction Documents. The Borrowers shall have delivered to each of the Agents and any Lender that so requests, each of the other Transaction Documents certified by a Responsible Officer of Multicare as being a true and correct copy of such Transaction Document as in full force and effect on the Closing Date. (h) Completion of Tender Offer. Simultaneously with the Closing hereunder, the Tender Offer shall close with the purchase of at least a majority of the common stock of Multicare having been purchased for $28 per share and the other transactions contemplated by the Transaction Documents to have occurred on or before the Closing Date shall take place in strict compliance with the terms of said Transaction Documents, subject only to such modifications as are acceptable to the Agents. There shall be no legal impediment to the merger of Acquisition Corp. into Multicare under Section 253 or 251, as the case may be, of the Delaware General Corporation Law on the terms set forth in the Merger Agreement and the restrictions in Section 203 of the Delaware General Corporation Law and any other impediment under Delaware law shall be inapplicable to the acquisition of the shares of Multicare by Acquisition Corp. and the proposed merger pursuant to the terms of the Merger Agreement. (i) Multicare Board of Directors. Simultaneously with the Closing hereunder, Acquisition Corp. shall have the unrestricted right, subject to ss.14(f) of the -22- Securities Exchange Act of 1934, to designate and cause to be elected a majority of the board of directors of Multicare. (j) Approval of Merger. The board of directors of Multicare, as constituted before any change in its composition pursuant to the right described in paragraph (i) of this Section 2.1, shall have approved the Merger. (k) Certain Legal Matters. The restrictions of ss.203 of the Delaware General Corporation Law and any other impediment under the Delaware General Corporation Law shall be inapplicable to the acquisition of the Multicare Shares pursuant to the Tender Offer; no legal impediment (under ss.251 or ss.253 of the Delaware General Corporation Law or otherwise) to the Merger shall exist; and there shall not be pending or threatened any legal or administrative proceeding seeking to restrain or prevent the consummation of the Tender Offer, the Merger or any other of the transactions contemplated by this Agreement or the Transaction Documents or questioning the legality or validity thereof; and the Tender Offer and other related transactions shall be consummated in accordance with all applicable Laws. (l) Maximum Price. The total amount payable by Acquisition Corp. and the Borrowers, in connection with the Tender Offer and the Merger, including consulting, noncompetition, severance and other payments to employees of the Borrowers, and including amounts provided (hereunder or otherwise) to refinance Indebtedness of the Borrowers, plus the amount of existing Indebtedness of Multicare not repaid in connection with the Tender Offer and the Merger, shall not exceed $1,533,000,000.00. (m) Opinions of Counsel. (i) The Borrowers shall have delivered favorable opinions of counsel, dated as of the Closing Date, from: (A) Blank, Rome, Comisky & McCauley, counsel to the Borrowers, as to the absence of conflicts with other financing agreements and other material agreements of the Borrowers, the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1997 Subordinated Note Indenture, and compliance with Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, compliance with Laws applicable to the Tender Offer, the perfection of security interests under the Pledge Agreement, issuance of capital stock of the Borrowers, the due organization of the Borrowers, the due authorization of the transactions referred to herein, the enforceability of the Loan Documents, certain health care and licensing compliance issues and such other matters as the Agents may reasonably request, in form and substance satisfactory to the Agents; and (B) local counsel to the Borrowers in the States of Massachusetts, West Virginia, New Jersey, Ohio, Pennsylvania, Wisconsin, Connecticut, Illinois, Rhode Island, Vermont and Virginia as to certain health care matters and such other matters as the Agents may reasonably request, in form and substance satisfactory to the Agents. -23- (ii) Drinker Biddle & Reath LLP, special counsel to the Administrative Agent shall have delivered to the Administrative Agent a favorable opinion of counsel, dated as of the Closing Date, as to such matters as the Administrative Agent shall reasonably request. (n) Solvency Opinion. The Borrowers shall have delivered letters from their chief financial officers and from a nationally recognized appraisal firm, valuation consultant or investment banking firm satisfactory to the Agents in form and substance satisfactory to the Agents, attesting to the solvency of the Borrowers, taken as a whole, after giving effect to the transactions referred to herein (including the making of the initial Loans) (o) Officers Certificate Regarding Senior Subordinated 12-1/2% Notes and Convertible 7% Subordinated Debentures. Multicare, on behalf of Borrowers shall have delivered a certificate dated the Closing Date signed by a Responsible Officer detailing as of the Closing Date the amount of Multicare's Convertible 7% Subordinated Debentures remaining outstanding and the maximum amount necessary to redeem and retire all such Debentures by no later than March 16, 1998; and the amount of Multicare's Senior Subordinated 12-1/2% Notes remaining outstanding and the maximum amount necessary to redeem and retire all such Notes by no later than January 2, 1998. (p) Consents and Approvals. All material corporate, governmental, judicial and third party consents and approvals necessary in connection with this Agreement and the other Loan Documents, the Tender Offer and the related transactions (including without limitation consents and approvals required under or referred to in the Merger Agreement) shall have been obtained and, as applicable, become final orders (without imposition of any conditions that are not acceptable to the Lenders) and shall remain in full force and effect and, to the extent requested by any Agent, copies thereof shall have been delivered to the Administrative Agent. Without limiting the generality of the foregoing, all appropriate filings shall have been made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the applicable waiting periods relating thereto shall have expired or been terminated without requests for additional information from the reviewing agencies. (q) Financial Statements; Projections. (i) Financial Statements. The Borrowers shall have delivered, or caused to be delivered, to the Administrative Agent and the Lenders at least three (3) Business Days prior to the Closing Date each of the following: (x) a consolidated income statement of Multicare and its consolidated Subsidiaries, for the twelve calendar month period ending on June 30, 1997, adjusted, on a pro forma basis to the beginning of the period (as required for the financial covenants) to reflect the consummation of all of the transactions set forth in the Transaction Documents and all Acquisitions and dispositions which shall have -24- occurred within said twelve month period as if such transactions, Acquisitions and dispositions had occurred on the first day of such period, which statement shall be supplemented by information separating out and explaining all pro forma adjustments made thereto; and (y) a consolidated balance sheet of Multicare and its consolidated Subsidiaries as of June 30, 1997, reflecting, on a pro forma basis, the consummation of all transactions set forth in the Transaction Documents including all borrowings in connection therewith and all borrowings otherwise contemplated hereunder, the application of all proceeds of such borrowings and the amount of all outstanding Indebtedness after giving effect to the foregoing, which balance sheet shall be supplemented by information separating out and explaining all pro forma adjustments made thereto; each of which statements shall be (1) in form acceptable to the Agents, (2) accompanied by explanatory notes acceptable to the Agents and (3) certified by the chief financial officer of the Borrowers to fairly present on a pro forma basis the financial condition and results of operations as at the date, or for the period, indicated. (ii) Projections. Multicare on behalf of the Borrowers shall have delivered to each Lender projections respecting the consolidated financial condition and results of operations of Multicare and its Subsidiaries for the period commencing on January 1, 1997 and ending on December 31, 2002, which projections shall be in reasonable detail, shall reflect the consummation of the transactions contemplated hereby and the Transaction Documents including the making of the initial Loans and shall be accompanied by a written statement of the assumptions and estimates underlying such projections. (r) Officer's Compliance Certificate. Multicare on behalf of the Borrowers shall have delivered an Officer's Compliance Certificate, dated as of the Closing Date, as to the truth of the representations and warranties herein and in the other Loan Documents and the absence of any Default (in each case, both before and after giving effect to the initial Loans). The Officers Compliance Certificate shall demonstrate that EBITDA of the Borrowers for the twelve calendar month period ending June 30, 1997 (after making all adjustments referred to in paragraph Q above) is no less than $118,000,000.00 and Total Funded Indebtedness of the Borrowers is not more than $760,000,000.00. The Officers Compliance Certificate delivered pursuant to this paragraph (r) shall include a reconciliation of the financial information set forth thereon respecting Multicare and its Restricted Subsidiaries and that set forth on the financial statements for Multicare and its consolidated subsidiaries. -25- (s) Repayment of Predecessor Indebtedness. The Borrowers shall have delivered to the Administrative Agent evidence that, prior to or substantially simultaneously with the making of the initial Loans, (a) all Indebtedness of the Borrowers other than that expressly permitted under Section 6.1 (Indebtedness) below will be repaid, (b) all commitments to lend in respect of the such Indebtedness shall have been effectively terminated and (c) all collateral held in connection therewith shall have been released (or undertakings to release such collateral upon receipt of specified funds shall have been duly made) and UCC-3 termination statements and all other documents necessary in the determination of the Administrative Agent to effectively terminate of record all security interests related to such Indebtedness shall have been duly executed by the proper parties and shall have been delivered to the Administrative Agent (or undertakings to do so upon receipt of specified funds shall have been furnished to the Administrative Agent). (t) Insurance. The Borrowers shall have delivered to the Administrative Agent evidence of the insurance required by Section 4.8 below. (u) Fees and Expenses. The Borrowers shall have paid the fees required to be paid to the Agents and the Lenders on or before the Closing Date and the fees and disbursements of counsel for the Agents in connection with the negotiation, preparation, execution and delivery of the Loan Documents and the making of the initial Loans. (v) Concurrent Closing of Genesis and Acquisition Corp. Credit Facilities. All conditions to the initial funding under (i) the Third Amended and Restated Credit Agreement, dated as of the date hereof, among Genesis, certain of its Subsidiaries, Mellon as administrative agent, and certain other agents and lenders referred to therein (the "Genesis Credit Agreement") and (ii) the Credit Agreement, dated as of the date hereof, among Acquisition Corp., Mellon as administrative agent, and certain other agents and lenders referred to therein (the "Acquisition Corp. Credit Agreement") shall have been satisfied. The closings under those credit facilities shall occur substantially simultaneously with the closing under this Agreement. (w) Investment in Genesis ElderCare Corp. and in Acquisition Corp. Substantially contemporaneously with the initial funding hereunder, Genesis shall have acquired approximately 44% of the common stock of Genesis ElderCare Corp. for a cash purchase price of at least $325,000,000.00; Cypress, Nazem and TPG, collectively, shall have paid at least $420,000,000.00 in cash for the remainder of the common stock of Genesis ElderCare Corp.; substantially contemporaneously with the initial funding hereunder, Genesis ElderCare Corp. shall have contributed at least $745,000,000.00 to Acquisition Corp. in exchange for common stock of the Acquisition Corp.; and the Acquisition Corp. shall be wholly owned by Genesis ElderCare Corp. (x) 1997 Subordinated Note Indenture. The 1997 Subordinated Note Indenture with terms and conditions satisfactory to the Agents in their sole discretion, shall have been executed by the parties thereto, and Acquisition Corp. shall have received at least -26- $250,000,000.00 in gross proceeds from the sale of the 1997 Subordinated Note and the net proceeds from such issuance shall have been released to Acquisition Corp. from the escrow in which they were deposited. (y) Tax Sharing Agreement. The Borrowers shall have delivered a copy of the Tax Sharing Agreement duly executed by the Borrowers and Genesis ElderCare Corp. and the Excluded Subsidiaries (the "Tax Sharing Agreement"), limiting, as between the parties thereto, the tax liabilities of the Borrowers in connection with a consolidated tax filing (which may include as part of the consolidated group for tax purposes the Borrowers and the Excluded Subsidiaries), to the amount of tax liabilities that the Borrowers would have incurred had they filed separately. The Tax Sharing Agreement shall be certified as such by a Responsible Officer of Multicare. (z) Subordination of Management Fees. The Borrowers, the Administrative Agent and Genesis shall have entered into a subordination agreement as of the date hereof, whereby Genesis shall agree to subordinate its rights to a portion of its fees under the Multicare Management Agreement (those fees in excess of the greater of $23,900,000.00 per annum and 4% of consolidated net revenue) to the rights of the Lender Parties hereunder (the "Management Fee Subordination Agreement"). 2.2 CONDITIONS TO EACH LOAN. (a) Conditions. The obligation of the Lenders to make any Loans, including the initial Loans and the obligation of the Issuer to issue any Letters of Credit, are subject to fulfillment of each of the following conditions, in each case, unless otherwise specified, to the satisfaction of the Administrative Agent: (i) Absence of Default. There shall not, either prior to or after giving effect to each such Loan, exist an Event of Default or a Default. (ii) Borrowing Notice/L.C. Request Notice. In connection with any request for Loans (other than Swing Loans), the Administrative Agent shall have received a borrowing notice as required by Section 1.3(a)(1) above; in connection with any request for the issuance of a Letter of Credit, the Issuer and the Administrative Agent shall have received a Letter of Credit request as required by Section 1A.1(c) above; and in connection with any request for any Swing Loans, the Swing Loan Lender and the Administrative Agent shall have received a Swing Loan request as required by Section 1.3(e). (iii) Truth of Representations. The representations and warranties of the Borrowers and each other Loan Party made in this Agreement and each other Loan Document shall be true and correct in all material respects as of the date each such Loan is made or Letter of Credit issued (both immediately prior to and after giving effect to said Loan or Letter of Credit) as if made on and as of such date. -27- (iv) No Violations of Law. Neither the making of, nor use of the proceeds of, any Loans nor the issuance of, or use of the proceeds of, any Letters of Credit shall conflict with, or cause any Borrower to violate any Law. (v) Compliance with Indenture Covenants. Neither the making of such Loans nor the issuance of any Letters of Credit shall not violate the terms of the 1997 Subordinated Note Indenture and Multicare shall deliver a certificate of its chief financial officer or controller representing that, both before and after giving effect to such additional Indebtedness, (A) Multicare is in compliance with the financial covenants set forth in Section 4.03 of the 1997 Subordinated Note Indenture and (B) that the Loans or Letters of Credit as the case may be constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as defined in the 1997 Subordinated Note Indenture. (vi) Additional Information. The Lenders shall have received such additional information and documentation as the Lenders may reasonably request. (vii) Business Activities. In the case of any Loan made before the effective date of the Merger, Acquisition Corp. shall not be engaged in any business activity except in connection with the Tender Offer. (b) Deemed Representation and Warranty. The request for, and acceptance of, any Loan (including any Swing Loan) by any Borrowers shall be deemed a representation and warranty by the Borrowers that the conditions specified in clauses (i), (iii), (iv), (v), and (vii) of the preceding paragraph (a) have been satisfied. -28- ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS. The Borrowers hereby jointly and severally represent and warrant to each Lender Party as follows: (a) Status of Borrowers. Each Borrower is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Borrower has the power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage. Each Borrower is duly qualified to do business as a foreign corporation or foreign partnership and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable, except for any failures to maintain such qualifications which, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 3.1(a) hereto sets forth for each Borrower, as of the Closing Date, (i) whether it is a corporation, limited partnership or general partnership, (ii) the jurisdiction of its organization, and (iii) the jurisdictions in which it is qualified to do business as a foreign corporation or a foreign partnership, as the case may be, except where the failure to maintain such qualification could not, individually or in the aggregate, have a Material Adverse Effect. Each direct and indirect Subsidiary of Multicare (other than the Excluded Subsidiaries) is a Borrower hereunder and is designated as such on the signature pages hereto (or, after the Closing Date, on signature pages of a Joinder Supplement hereto). The states in which any Borrowers operate Health Care Businesses are Massachusetts West Virginia, New Jersey, Ohio, Pennsylvania, Wisconsin, Connecticut, Illinois, Rhode Island, Vermont and Virginia. (b) Capitalization of Borrowers. Schedule 3.1(b) hereto sets forth (i) for each corporate Borrower, (A) the authorized capitalization, (B) the names of the owners (indicating whether they are Borrowers) of the outstanding capital stock, (C) the number and class of shares issued to each such owner and (D) the percentage of outstanding shares of each class of capital stock owned by each such owner, and (ii) for each Borrower which is a partnership, (A) the names of the owners (indicating whether they are Borrowers) of the outstanding equity thereof and (B) the percentage ownership interest of, and type of equity issued to, each such owner. The outstanding equity of each Borrower has been duly authorized and validly issued. All capital stock is fully paid and nonassessable. Each Borrower owns beneficially and of record and has good title to all equity indicated as being owned by it on said Schedule 3.1(b), free and clear of any Lien, except for Liens in favor of the Administrative Agent, as agent for the benefit of the Secured Parties, as contemplated by the Loan Documents and other Permitted Liens. There are no options, warrants, calls, or similar rights relating to equity of the Borrowers. No Excluded Subsidiary has any equity interest in any Borrower. -29- (c) Authorization, Execution and Binding Effect of Loan Documents. Each Borrower has the power and authority to execute, deliver, perform, and take all actions contemplated by, each Loan Document to which it is a party, and all such action has been duly and validly authorized by all necessary corporate or partnership (as the case may be) proceedings on its part. This Agreement and each other Loan Document has been duly and validly executed and delivered by each Loan Party listed on the signature pages hereto or thereto, as the case may be. This Agreement and each other Loan Document constitutes the legal, valid and binding obligation of each Loan Party purporting to be a party hereto or thereto, as the case may be, enforceable against such Person in accordance with its terms, except as the enforceability hereof of thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. (d) Security. The Pledge Agreement creates in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable Lien on all right, title and interest of each Borrower in the Collateral described therein, and the Administrative Agent has (or, upon the filing of the UCC-1 financing statements delivered by the Borrowers on the Closing Date, will have), for the benefit of the Secured Parties, a fully perfected and continuing first priority Lien on all of the right, title and interest of each Borrower in the Collateral described in the Pledge Agreement, subject to no Liens other than Permitted Liens. (e) Governmental Approvals and Filings; Absence of Conflicts. No approval, order, consent, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with, the execution and delivery of any Loan Document by any Loan Party, or in connection with the performance of the terms hereof or thereof by such Person, other than the filing of Uniform Commercial Code financing and continuation statements as referred to in the Pledge Agreement. No Loan Party is subject to any Law which purports to restrict or regulate its ability to borrow money, obtain credit or provide a guarantee or other form of credit support as a consequence of the nature of the business conducted by such Loan Party. Neither the execution and delivery of this Agreement or any other Loan Document by any Loan Party, nor the performance of or compliance with the terms and conditions hereof or thereof (including the execution, delivery and performance of the Transaction Documents) by any Loan Party does or will (i) violate or conflict with any Law or any judgment, decree, or order of a court or Governmental Authority or any settlement agreement, (ii) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or cause an acceleration of, or result in the creation or imposition of any Lien upon any of property of any Loan Party (except for any Lien in favor of the Administrative Agent pursuant to the Pledge Agreement) under or in connection with, -30- (x) its articles or certificate of incorporation or bylaws, partnership agreement or operating agreement (or other constituent documents), (y) any agreement or instrument creating, evidencing or securing any Indebtedness in the aggregate amount of $250,000.00 or more to which any Loan Party is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, or (z) any other agreement or instrument or arrangement to which it is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, in the case of the foregoing clause (z), for matters that, individually or in the aggregate, could not have a Material Adverse Effect, or (iii) result in a Limitation on any Licenses applicable to the operations or properties of any Borrower, or adversely affect the ability of any Borrower to participate in any Third Party Payor Arrangement. (iv) except to the extent that the failure to obtain the same could not have a Material Adverse Effect, no approval, order, consent of, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with the Tender Offer and merger of Acquisition Corp. into Multicare except such consents as are listed on Schedule 3.1(e) hereto all of which have been obtained and are in full force and effect. (f) Financial Statements. Multicare has heretofore furnished to the Administrative Agent and each Lender consolidated balance sheets of Multicare and its consolidated Subsidiaries as of December 31, 1996 and December 31, 1995 and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal years then ended, as examined and reported on by KPMG Peat Marwick, independent certified public accountants for Multicare, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of Multicare and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP. Multicare has heretofore furnished to the Administrative Agent, the Issuer and each Lender interim consolidated balance sheets of Multicare and its consolidated Subsidiaries as of the first two fiscal quarters of the fiscal year beginning January 1, 1997, together with the related consolidated statements of income, cash flows and changes in stockholders' equity for the applicable fiscal periods ending on each such date. Such financial statements (including the notes thereto), as well as those financial statements -31- delivered pursuant to paragraph (q) of Section 2.1 above, present fairly the financial condition of Multicare and its consolidated Subsidiaries (or Persons referred to therein) as of the date specified and the results of their operations and their cash flows for the fiscal periods specified, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments, except that such financial statements do not contain all of the footnote disclosures required by GAAP. There are no material liabilities of the Borrowers except as disclosed on such financial statements. Schedule 6.1 hereto sets forth, as of the Closing Date, all Indebtedness (and commitments for Indebtedness) of the Borrowers. (g) Projections. The projections delivered pursuant to Section 2.1(q) above and the assumptions and estimates referred to therein are as of the Closing Date reasonable, are made in good faith, are consistent with the Loan Documents and represent the Borrowers' best judgment as to such matters. Nothing has come to the attention of any Borrower which would lead such Borrower to believe that such projections will not be attained or exceeded provided, however, that nothing contained in this paragraph (g) shall constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. (h) Absence of Material Adverse Change. Since December 31, 1996, there has been no material adverse change in the business, operations, condition (financial or otherwise), properties or prospects of the Borrowers taken as a whole or the industry served by the Borrowers. (i) Title to Property. Each Borrower has good and marketable title to all property owned or purported to be owned by it, including but not limited to all property reflected in the most recent balance sheets delivered to the Lenders pursuant to this Agreement (except such property as was sold or otherwise disposed of in accordance with Section 6.5 (Dispositions) below) subject to no Liens except Permitted Liens. Schedule 6.2 hereto sets forth, as of the Closing Date, all Liens on property of the Borrowers. (j) Solvency. The present fair saleable value of the assets of the Borrowers, taken as a whole, after giving effect to all the transactions contemplated by the Loan Documents and the funding of the Loans and the issuance of the Letters of Credit hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of such Borrowers, taken as a whole, as they mature. Multicare does not intend to, nor does Multicare believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by Multicare, and of amounts to be payable on or in respect of debt of Multicare). The property of each Borrower does not constitute unreasonably small capital for such Borrower to carry out its business as now conducted and as proposed to be conducted including the capital needs of such Borrower. The cash available to each Borrower after taking into account all other anticipated uses of the cash of such Borrower, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Borrower when such amounts are required to be paid. -32- (k) Accurate and Complete Disclosure. The information heretofore, contemporaneously or hereafter provided in writing by or on behalf of any Borrower to any Lender Party pursuant to or in connection with this Agreement or any other Loan Document is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by such Lender Party) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. (l) Legal and Administrative Proceedings. There is no action, suit, litigation or proceeding pending, or to the knowledge of the Borrowers, threatened nor, to the knowledge of the Borrowers, is there any investigation pending or threatened, in any court or before any arbitrator or Governmental Authority or any payor appeals bodies respecting or relating to any Borrowers (or any officer or director thereof) or any property of any Borrowers that, individually or in the aggregate, (i) could have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrowers taken as a whole or (ii) could materially adversely affect the Lenders' rights and remedies hereunder or under the other Loan Documents, this Agreement or other Loan Documents or the ability of the Borrowers to perform their obligations hereunder or thereunder. (m) Absence of Violations and Conflicts. No Borrower is in violation of, in default under, or is subject to any contingent liability on account of any violation of or conflict with: (i) any Law; (ii) its articles or certificate of incorporation, bylaws, partnership agreement, operating agreement (or other constituent documents); or (iii) any financing agreement or other instrument or arrangement to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clauses (i) or (iii) above for matters that, individually or in the aggregate, could not have a Material Adverse Effect. (n) Operation of Health Care Facilities. (i) Except where the failure to possess the same, either individually or in the aggregate, could not have a Material Adverse Effect, each Borrower possesses all Licenses and Reimbursement Approvals necessary to operate its Health Care Business substantially as now operated and as presently proposed to be operated. No Borrower is in material violation of the terms of its Licenses and Reimbursement Approvals. (ii) Except for Limitations which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, there is no threatened or pending Limitation of any material License or Reimbursement Approval relating to the operation of any of Borrowers' Health Care Businesses. -33- (iii) Except where the failure to file same, either individually or in the aggregate, could not have a Material Adverse Effect, each of the Borrowers has caused there to be accurately prepared and filed (or obtained extensions for) all applicable cost reports with respect to any and all Third Party Payor Arrangements that are material to conduct its Health Care Businesses substantially as now conducted. (iv) No Borrower is subject to any claim (including any claim for overpayment), litigation, proceeding or other action or, to any Borrower's knowledge, investigation relating to a claim or action by any Governmental Authority, except matters that, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (v) Each of the Borrowers participates in an internal comprehensive compliance program respecting compliance with all Laws affecting the types of business carried on by Borrowers (including health care Laws) and has made such program available for review by any Lender, upon request. (vi) Each of the foregoing statements in this paragraph (n) are also true as applied to Persons managed by any Borrower to the extent that the failure of any such statement to be true (as applied to any Person managed by a Borrower) could have a Material Adverse Effect. (o) Management Agreements. Schedule 3.1(o) sets forth as of the Closing Date, a complete and correct list of all Management Agreements relating to (i) the operation and management by a Person that is not a Borrower of each health care facility owned by a Borrower and (ii) the operation and management by a Borrower of each health care facility owned by a Person that is not a Borrower. As of the Closing Date, each such Management Agreement is in full force and effect subject to no material default. (p) Health Care Business. Schedule 3.1(p) sets forth, as of the Closing Date, a complete and correct list of all Health Care Businesses owned or operated by the Borrowers and the locations thereof indicating which such Health Care Businesses are operated but not owned. (q) Leased Properties. Schedule 3.1(q) identifies all properties leased by any Borrower as of the Closing Date. As of the Closing Date, all leases relating to such leased properties are in full force and effect subject to no material default. Such leases comply with the provisions of Section 6.7 below. (r) Intellectual Property. Each Borrower owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including computer programs and software), processes, data bases and other rights (collectively, "intellectual property"), free from burdensome restrictions, necessary to own and operate its properties and to carry on its -34- business as presently conducted and presently planned to be conducted without conflict with the rights of others. No Borrower is in material violation of the rights of others with respect to any intellectual property. (s) Employee Benefits/ERISA. (i) The Borrowers and the members of their Controlled Groups maintain only those Defined Benefit Pension Plans, Defined Contribution Plans and other Plans listed on Schedule 3.1(s) attached hereto and contribute to only those Multiemployer Plans listed on Schedule 3.1(s). (ii) Each Defined Benefit Plan and Defined Contribution Plan, as most recently amended, including amendments to any trust agreement, group annuity, or insurance contracts, or other governing instrument, is the subject of a favorable determination letter by the Internal Revenue Service with respect to its qualification under ss.401(a) of the Code. (iii) All Plans comply, both in form and in operation, with the requirements of the Code and ERISA. (iv) There is not now, and has not been, any material violation of the Code or ERISA with respect to the filing of applicable reports, documents, and notices regarding any Plan with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity or the furnishing of such documents to the participants or beneficiaries of any Plan. Borrowers have furnished to the Lenders copies of the most recent annual report, audited financial statements, and other reports filed with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity with respect to each Plan. (v) All Pension Plans, as of the date hereof, meet the minimum funding standards of ss.412 of the Code and ss.302 of ERISA without regard to any funding waiver. Borrowers and the members of their Controlled Group have, as of the date hereof, made all contributions or payments to or under Pension Plans required by the terms of any such Plan or any contract or agreement. (vi) No Material liability to the PBGC has been, or is expected by any Borrower or any member of its Controlled Group to be, incurred by the Borrower or any member of its Controlled Group. (vii) No Defined Benefit Pension Plan has any Amount of Unfunded Benefit Liabilities except as listed on Schedule 5.1(s) which, in the aggregate, do not exceed $500,000.00. -35- (viii) No trust was established in connection with any Defined Benefit Pension Plan pursuant to ss.4049 of ERISA (as in effect on December 17, 1987) and no liabilities (whether or not such liability is being litigated) have been asserted against any Borrower or any member of its Controlled Group in connection with any such Defined Benefit Pension Plan by the PBGC or by a trustee appointed pursuant to ss.4042(b) or (c) of ERISA, and no lien has been attached and no person has threatened to attach a lien on any property of any Borrower or any member of its Controlled Group as a result of any failure to comply with the Code or ERISA. (ix) No Prohibited Transaction has occurred with respect to any Plan. (x) No Reportable Event has occurred with respect to any Defined Benefit Plan. (xi) No Borrower or any member of its Controlled Group has any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA). (xii) There is not now, and has not been, any COBRA Violation with respect to any Plan to which such continuation coverage requirements apply which has a material adverse effect, directly or indirectly, on the financial condition of any of the Borrowers. (xiii) Borrowers and the members of their Controlled Group have established only those irrevocable trusts the assets of which remain subject to the general creditors of Borrowers and/or members of their Controlled Group (sometimes referred to as "rabbi trusts") listed on Schedule 3.1(s) attached hereto and have furnished to the Lenders copies of each such "rabbi trust." (xiv) If any Borrower or any member of its Controlled Group were obligated to pay the entire potential Withdrawal Liabilities for which any of them would be liable if each of them were to withdraw from the Multiemployer Plans to which any of them makes contributions, such obligations would not be in excess of $500,000.00. (xv) Borrowers and the members of their Controlled Group have complied with the requirements of ss.515 of ERISA with respect to Multiemployer Plans. (t) Environmental Matters. (i) Each Borrower and each of its respective Environmental Affiliates is and has been, in full compliance with all applicable Environmental Laws, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. There are no circumstances that may prevent or interfere with such full compliance now or in the future. -36- (ii) Each Borrower and each of its respective Environmental Affiliates have all Environmental Approvals necessary or desirable for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated, in the future, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. (iii) There is no Environmental Claim pending or, to the knowledge of any Borrower after due inquiry, threatened, and there are no past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Borrower or any Environmental Affiliates of Borrowers) that could form the basis of any Environmental Claim against any Borrower or any such Environmental Affiliates, except for matters which, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (iv) No facility or property now or previously owned, operated or leased by any Borrower or any of their respective Environmental Affiliates is an Environmental Cleanup Site. No Borrower and none of their respective Environmental Affiliates has directly transported or disposed of or arranged for the transportation or disposal of any Environmental Concern Materials to any Environmental Cleanup Site. No Lien exists, and, to the Borrowers' knowledge after due inquiry, no condition exists which could result in the filing of a Lien, against any property of any Borrower or any Subsidiary of any Borrower or any of their respective Environmental Affiliates, under any Environmental Law. (u) Margin Regulations. No proceeds of any Loan hereunder will be used for the purpose of purchasing or carrying any "margin stock," as such term is used in Regulations G and U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of purchasing or carrying any "margin stock". Neither the making of any Loan or issuance of any Letter of Credit nor any use of proceeds of the Loans will violate or conflict with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. (v) Regulation O. No director, executive officer or principal shareholder of any Borrower is a "director," "executive officer" or "principal shareholder" of any Lender, as such terms are used in Regulation O of the Board of Governors of the Federal Reserve System, as amended. -37- (w) 1997 Subordinated Notes. Multicare hereby confirms that the Loan Obligations are "Senior Indebtedness" and hereby designates the Loan Obligations as "Designated Senior Indebtedness" under the 1997 Subordinated Note Indenture. All of the Loan Obligations constitute and will constitute "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning ascribed to such terms in such indenture. The subordination provisions therein are enforceable against the respective issuers thereunder and the holders, from time to time, of the 1997 Subordinated Notes. The respective issuers are not in default under any such indenture. (x) Certain Documents and Transactions. Each of the Transaction Documents (including the Multicare Management Agreement), and the Tax Sharing Agreement are in full force and effect and no amendments, modifications or supplements have been made to any such documents as the same were delivered to the Agents pursuant to Article 2 above, except such amendments, modifications or supplements to Transaction Documents as could not reasonably be expected to have an adverse effect on any Borrower (including the condition, financial or otherwise, properties or prospects of such Borrower), the Loan Documents or any Lender Parties and supplements or amendments to the Tax Sharing Agreement necessary to join any other Subsidiaries of Multicare which may hereafter be consolidated with Multicare for tax purposes. There exists no default under any such agreements except for immaterial breaches. (y) Labor Matters. There are no existing, or, to the best of Borrowers' knowledge, threatened or contemplated, strikes, slowdowns, picketing or work stoppages by any employees against any Borrower, any lockouts by any Borrower of any of its employees or any labor trouble or other occurrence, event or condition of a similar character which individually or in the aggregate, could have a Material Adverse Effect. 3.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE. The representations and warranties of the Borrowers set forth in this Article 3 are unaffected by any prior or subsequent investigation by, or knowledge of, any Agent or any Lender. -38- ARTICLE 4 AFFIRMATIVE COVENANTS So long as any Loan Obligation shall remain unpaid or any Lender shall have any Commitment under this Agreement, each of the Borrowers shall comply with the following covenants. 4.1 REPORTING REQUIREMENTS. (a) Annual Financial Statements. As soon as practicable, and in any event within 90 days after the close of each fiscal year of Multicare, Multicare (on behalf of the Borrowers) shall furnish to the Administrative Agent and each Lender, audited (i) consolidated statements of income, cash flows and changes in stockholders' equity of Multicare and its consolidated Subsidiaries (the "Multicare Group") for such fiscal year and a consolidated balance sheet of such Persons as of the close of such fiscal year. If at any time the Cash Flow of the Excluded Subsidiaries in the aggregate exceeds 3.0% of the Cash Flow of Multicare and its consolidated Subsidiaries, Multicare on behalf of the Borrowers shall furnish statements of income, cash flows and changes in stockholders equity of the Borrowers, on a consolidated basis, for such fiscal year and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal year, in lieu of the requirements of the preceding sentence; and (ii) statements of income, cash flows and changes in stockholders equity of Genesis and its Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal year and a balance sheet of Genesis and its Subsidiaries, on a consolidated basis, as of the close of such fiscal year, and with respect to all of the foregoing financial statements referred to above setting forth the appropriate footnotes, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such financial statements shall be accompanied by an unqualified opinion in form and substance satisfactory to the Administrative Agent of independent certified public accountants of recognized national standing selected by the Borrowers and satisfactory to the Administrative Agent. (b) Quarterly Financial Statements. As soon as practicable, and in any event within 45 days after the close of each fiscal quarter of each fiscal year of Multicare, Multicare, on behalf of the Borrowers, shall furnish to the Administrative Agent, the Issuer and each Lender, the following unaudited financial statements: (i) consolidated statements of income, cash flows, and changes in stockholders' equity of the Multicare Group for such fiscal quarter and the applicable year to date period, and a consolidated balance sheet of such Persons as of the close of such fiscal quarter. If at any time the Cash Flow of the Excluded Subsidiaries in the aggregate exceeds 3.0% of the Cash Flow of Multicare and its Subsidiaries, Multicare, on behalf of the Borrowers, shall furnish statements of income, cash flows and changes in stockholders equity -39- of the Borrowers, on a consolidated basis, for such fiscal quarter and applicable year-to-date period, in lieu of the requirements of the preceding sentence; and (ii) statements of income, cash flows and changes in stockholders' equity for Genesis and its Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal quarter, together with the applicable year to date period and a balance sheet of such Persons on a consolidated basis as of the end of such fiscal quarter, all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the balance sheets, which shall set forth in comparative form the corresponding balance sheets as of the prior fiscal year end), together with a consolidating schedule showing the financial information respecting Multicare and its Subsidiaries, the financial information respecting Genesis and its Subsidiaries and any adjustments made to reconcile the financial information of Multicare and its Subsidiaries and Genesis and its Subsidiaries, on a consolidated basis. Such financial statements shall be certified by the chief financial officer or other Responsible Officer of Multicare as presenting fairly the financial position of the subject entities as of the end of such fiscal quarter and year-to-date period, and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal quarter and year-to-date period, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) Quarterly Compliance Certificates. Multicare, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, an Officer's Compliance Certificate concurrently with the delivery of the financial statements referred to in paragraph (a) of this Section 4.1 (with respect to the fiscal year, and paragraph (b) of this Section 4.1 (with respect to the first three fiscal quarters). Each such Officer's Compliance Certificate shall include among other things referred to therein the calculations necessary to demonstrate the Borrowers' compliance with the covenants set forth in Article 5 hereof. In addition, the Officers' Compliance Certificate shall show the calculations necessary to confirm compliance with the financial covenants set forth in Section 4.03 of the 1997 Subordinated Note Indenture. The Officer's Compliance Certificate delivered pursuant to this paragraph (c) shall include a reconciliation of the financial information set forth thereon respecting Multicare and its Restricted Subsidiaries and that set forth on the financial statements for Multicare and its consolidated Subsidiaries. (d) Other Information To Be Delivered Annually. Multicare, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, the following: (i) annually, within one hundred twenty (120) days of the end of the Borrowers' fiscal year, an accountants' management letter provided by independent certified public accountants satisfactory to the Administrative Agent, and (ii) annually, no later than ninety (90) days prior to the commencement of each fiscal year of the Borrowers, an annual budget, setting forth in reasonable detail, expected sources and uses of funds, for the fiscal year then beginning in form and substance satisfactory to the Administrative Agent. -40- (e) SEC Filings and Other Disclosure. Promptly upon their becoming available to any Borrower but no later than ten Business Days after the same are filed with the Securities Exchange Commission or any securities exchange, Multicare, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which any Borrower or any of its Affiliates shall file with the Securities and Exchange Commission or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by any Borrower or any of its Affiliates to its stockholders, bondholders or the financial community generally, (iii) all accountants' management letters (not otherwise delivered pursuant to the preceding paragraph (d)) and all other reports submitted by accountants in connection with any audit of any Borrower, and (iv) copies of all compliance certificates and notices delivered to or from the trustees under the 1997 Subordinated Note Indenture. (f) Notice of Certain Events. Promptly upon any Borrower becoming aware of any of the following, such Borrower or Multicare, on behalf of the Borrowers, shall give the Administrative Agent notice thereof, together with a written statement setting forth the details thereof and any action with respect thereto taken or proposed to be taken by any Borrower: (i) Loss of Licenses or Reimbursement Approvals. Any actual Limitation (other than in the ordinary course of business) or any threatened Limitation (to the extent that it individually or in the aggregate with all other actual or threatened Limitations is material) of any License or Reimbursement Approval relating to the operation of a Health Care Business or, if the same individually or in the aggregate could have a Material Adverse Effect, any Limitation of any License or Reimbursement Approval of any Person managed by any Borrower; (ii) Default. Any Event of Default or Default; (iii) Material Adverse Change. Any material adverse change in the business, operations, or condition (financial or otherwise), or prospects of any Borrower; (iv) Material Litigation. Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting any Borrower (or any officer or director thereof) or any property of any Borrower, except for matters that if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect; (v) Breach or Termination of Certain Agreements. Any breach, claimed breach, termination, or purported or threatened termination (including a copy of any notice of termination) of (A) the Multicare Management -41- Agreement, (B) any other Transaction Document (except a termination in accordance with its terms), (C) any other Management Agreement except in the ordinary course of business, (D) the 1997 Subordinated Note Indenture (including a copy of any notice of default delivered thereunder), or (E) any other agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of Multicare and its Restricted Subsidiaries taken as a whole. (vi) ERISA. (A) Any taxes, penalties, interest charges and other financial obligations in excess of $250,000.00 that have been assessed or otherwise imposed or which any Borrower has reason to believe may be assessed or otherwise imposed in excess of $250,000.00, against any Borrower or any member of its Controlled Group by the Internal Revenue Service, the PBGC, the Department of Labor or any other governmental entity with respect to any Plan or Multiemployer Plan; (B) Any application for a waiver by a Borrower or any member of its Controlled Group of the minimum funding standard under ss.412 of the Code with respect to a Pension Plan; (C) The adoption of any Plan, including but not limited to a Defined Benefit Pension Plan, or any obligation to contribute to any Multiemployer Plan by a Borrower or any member of its Controlled Group; (D) Any Prohibited Transaction with respect to a Plan. (E) (1) that any Reportable Event has or will occur with respect to any Defined Benefit Pension Plan maintained by any Borrower or any member of its Controlled Group, (2) that any Defined Benefit Pension Plan maintained by any Borrower or any member of its Controlled Group is to be terminated in "distress termination" (within the meaning ofss.4041(c) of ERISA), (3) that the PBGC has instituted or will institute proceedings under Title IV of ERISA to terminate any Defined Benefit Pension Plan maintained by any Borrower or any member of its Controlled Group, (4) that any Borrower has incurred Withdrawal Liability -42- from a Multiemployer Plan maintained by it or any member of its Controlled Group, (5) that any Multiemployer Plan to which any Borrower or any member of its Controlled Group has made contributions is or will be in Reorganization, or (6) that any other condition exists with respect to a Defined Benefit Pension Plan or Multiemployer Plan which presents a material risk of termination of any such Plan, Borrowers will furnish a statement to the Lenders setting forth the details of such Reportable Event, distress termination, termination proceedings, Withdrawal Liability, Reorganization or condition, and the action that Borrowers propose to take with respect thereto, together with a copy of any notice of such Reportable Event or distress termination given to the PBGC, or a copy of any notice of termination proceedings, Withdrawal Liability or Reorganization received by such Borrower or any member of its Controlled Group. (F) any default by any Borrower or any member of its Controlled Group (as defined in ss.4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required by reason of its withdrawal (as defined in ss.4203 or ss.4205 of ERISA). (G) any action brought against any Borrower or any member of its Controlled Group under ss.502 of ERISA with respect to its failure to comply with ss.519 of ERISA. (vii) Environmental. Any Environmental Claim pending or threatened against any Borrower or any of its Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Borrower or any of its Environmental Affiliates) that could form the basis of such Environmental Claim, which Environmental Claim, if adversely resolved, individually or in the aggregate, could have a Material Adverse Effect. (g) Other ERISA Information. The Borrowers shall deliver to the Administrative Agent copies of the following: -43- (A) Promptly after the filing thereof with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity, copies of each annual report, each audited financial statement and any other report so filed with respect to each Plan. (B) As soon as possible (and in any event within five days) after the receipt by any Borrower or any member of its Controlled Group of a demand letter from the PBGC notifying any Borrower or any member of its Controlled Group of the final decision finding liability and the date by which such liability must be paid, Borrowers will furnish to the Lenders a copy of such letter together with a statement to the Lenders setting forth the action which Borrowers propose to take with respect thereto. (C) Borrowers will furnish to the Lenders as soon as possible after receipt thereof a copy of any notice that any Borrower or any member of its Controlled Group receives from the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity or the sponsor of any Multiemployer Plan that sets forth or proposes any action to be taken or determination made by the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity or the sponsor of any Multiemployer Plan with respect to any Plan. (h) Amendments to Transaction Documents. Multicare (on behalf of the Borrowers) shall furnish the Administrative Agent copies or drafts of all proposed amendments, modifications or waivers to any Transaction Documents (1) in the case of any amendments, modifications or waivers requiring the consent of the Required Lenders at least 20 Business Days prior to the effective date thereof and (2) in all other cases, at least 5 Business Days prior to the effective date thereof. (i) Non-Renewal of Management Agreement. Multicare, on behalf of the Borrowers shall give the Administrative Agent written notice promptly upon receipt of delivery of any notice of non-renewal or termination delivered under or relating to the Multicare Management Agreement. The Administrative Agent shall give each Lender a copy of any notice delivered pursuant to this paragraph (i). (j) Notices under Indenture. Multicare, on behalf of the Borrowers shall furnish to the Administrative Agent copies of all notices, reports, certificates or other material delivered to or by the trustee or any other party under the 1997 Subordinated Note Indenture, promptly upon receipt thereof. -44- (k) Other Information. In addition, the Borrowers will promptly furnish to the Administrative Agent such other information as any Lender Party, through the Administrative Agent, may reasonably request including information submitted by the Borrowers or the Surety to any Governmental Authority and the Administrative Agent will furnish such information to the requesting Lender Party. 4.2 MAINTENANCE OF EXISTENCE. Each Borrower shall preserve and maintain, its corporate or partnership existence, as the case may be, and good standing in the jurisdiction of its organization, provided, however, upon giving written notice to the Administrative Agent, the Borrowers may dissolve any Subsidiary if (a) such Subsidiary is not (either individually or in the aggregate with all other entities dissolved pursuant to this proviso) a material Borrower (or material Borrowers) and (b) Multicare determines that it is in the best interest of the Borrowers, taken as a whole, that such Subsidiary be dissolved. Multicare and (to the extent that any failure to qualify or remain qualified could have a Material Adverse Effect) each Restricted Subsidiary, shall qualify and remain qualified as a foreign corporation or partnership in each jurisdiction in which such qualification is required, provided, however nothing in this Section 4.2 shall prohibit any sales or other dispositions permitted under Section 6.5. 4.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY. (a) Type of Business. Each Borrower shall continue to engage in the business of the same general type as conducted by the Borrowers on the Closing Date and not engage in any other type of business without the consent of the Required Lenders. (b) Healthcare and Regulatory Rights. Except where the failure to take any of the following actions, individually or in the aggregate, could not have a Material Adverse Effect, each Borrower shall (i) maintain in effect all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it owns or operates and (ii) obtain all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it acquires and (iii) continue its participation in any and all Third Party Payor Arrangements. Except where such failure to so comply (together with all other failures from time to time by the same or other Borrowers) could not reasonably be expected to have a Material Adverse Effect, each Borrower shall comply with any and all rules, regulations, standard procedures and decrees necessary to maintain its participation in any such Third Party Payor Arrangements and prepare and file, all applicable cost reports with respect to all Third Party Payor Arrangements to the extent required thereby. Each Borrower shall use its best efforts to cause each Person managed by it to obtain and maintain its Licenses and Reimbursement Approvals necessary for the conduct of its business and to continue its participation in Third Party Payor Arrangements and comply with all rules, regulations, standard procedures and decrees relating thereto to the extent that the failure to do so could have a Material Adverse Effect. -45- (c) Maintenance of Property. Each Borrower shall maintain, keep and preserve all of its property necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted (except for sales and other dispositions of property permitted under Section 6.5 below (Dispositions)). Without limiting the generality of the foregoing, each Borrower shall maintain in full force and effect each lease, Management Agreement and other material agreement used or useful in its business, subject to no material default except where the loss of, or default under, such lease, Management Agreement or other agreement (i) could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (ii) is not otherwise prohibited by the terms of this Agreement. 4.4 MAINTENANCE OF RECORDS; FISCAL YEAR. Each Borrower shall keep adequate records and books of account, in which complete entries will be made in accordance with historical practice and GAAP, reflecting all financial transactions of the Borrowers. Each Borrower shall maintain, and shall cause the Surety to maintain, a fiscal year end of December 31. 4.5 COMPLIANCE WITH LAWS. Each Borrower shall comply (and maintain procedures to assure compliance) in all material respects with all applicable Laws (including environmental and health care Laws) and all judgments, decrees or orders of any court or Governmental Authority and all settlement agreements. Without limiting the generality of the foregoing, each of the Borrowers shall maintain in full force and effect an internal compliance program respecting compliance with all Laws affecting the types of businesses carried on by the Borrowers (including healthcare Laws) and make such program available for review by any Lender, upon request. 4.6 ERISA. (a) Each Borrower will, and will cause each member of its Controlled Group, to comply in all material respects with the provisions of ERISA and the Code with respect to any Plan both in form and in operation. (b) Each Borrower will cause to be made all contributions required to avoid any Accumulated Funding Deficiency, whether or not waived, with respect to any Pension Plan. (c) No Borrower will adopt or permit the adoption by any member of its Controlled Group of any Defined Benefit Pension Plan which would result in any Amount of Unfunded Benefit Liabilities in excess of $500,000.00. -46- (d) No Borrower will acquire, or permit the acquisition by any member of its Controlled Group of, any trade or business which has incurred either directly or indirectly any Amount of Unfunded Benefit Liabilities under any Defined Benefit Pension Plan in excess of $500,000.00. (e) The Borrowers will not permit with respect to any Plan, any Prohibited Transaction or Prohibited Transactions under ERISA or the Code resulting in liability of any Borrower or any member of its Controlled Group which together with any other liabilities subject to this paragraph (e) would in the aggregate be in excess of $500,000.00, unless such Borrower or any member of its Controlled Group will be contesting in good faith and by appropriate proceedings any such matter and measures are available and are being taken which have the effect of preventing the seizure of property of such Borrower or any member of its Controlled Group pending the outcome of such contest. (f) No Borrower will withdraw, or permit any member of its Controlled Group to withdraw, from any Multiemployer Plan to which any of them may hereafter contribute if the Withdrawal Liability which would thereupon be incurred would have a material adverse effect, directly or indirectly, on the financial condition of any of the Borrowers. (g) No Borrower will permit any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA) of any Borrower and of any member of its Controlled Group in excess of $500,000.00 in the aggregate with all other liabilities subject to this paragraph (g). (h) No Borrower will, or will permit any member of its Controlled Group to, cause or suffer to exist a COBRA Violation with respect to any Plan to which such continuation coverage requirements apply if the violation(s) could result in a liability in excess of $500,000.00 in the aggregate. 4.7 RIGHT OF INSPECTION. Each Borrower shall, at any reasonable time and from time to time, and upon reasonable advance notice (but no advance notice shall be required if a Default or an Event of Default shall then exist), permit the Administrative Agent or any Lender or any agent or representative thereof, to examine and make copies and abstracts from the records and books of account of, and visit and inspect the properties of, any Borrower, and to discuss the affairs, finances and accounts of such Borrower with any of its officers, directors and independent accountants. 4.8 INSURANCE. Each Borrower shall maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as are customary in the case of Persons engaged in the same or similar businesses or having similar -47- properties similarly situated, including insurance covering its respective properties, buildings, machinery, equipment, tools, furniture, fixtures and operations, and medical malpractice, professional liability and public liability, as well as business interruption. The Borrowers shall have the Administrative Agent named to receive certificates evidencing such insurance annually at least thirty days prior to the anniversary date of such insurance policies and any other time requested by the Administrative Agent. 4.9 PAYMENT OF TAXES AND OTHER CHARGES. Each Borrower shall (a) on or prior to the date on which penalties attach thereto, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties; and (b) on or prior to the date when due, pay all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons and all other lawful claims which, in each case if unpaid, might result in the creation of a Lien upon any of its properties, provided that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Borrower need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is being contested in good faith and by appropriate proceedings diligently conducted and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. 4.10 SUBSIDIARIES TO BE BORROWERS. (a) Each Borrower shall cause all of its Subsidiaries, other than Excluded Subsidiaries, at all times to be Borrowers hereunder (by signing Joinder Supplements hereto, each a "Joinder Supplement"), executing Notes or allonges thereto and taking such other action as the Administrative Agent may reasonably request) and cause all the capital stock or other equity interests in such Subsidiaries, other than Excluded Subsidiaries, and all notes or other rights to receive payment from another Borrower to be pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge Agreement. Without limiting the generality of the foregoing, when the Borrowers are required, in connection with an Acquisition or otherwise, to cause one or more (direct or indirect) Subsidiaries of Multicare (each, a "Joining Subsidiary") to become Borrowers hereunder, then the Borrowers and each such Joining Subsidiary shall take the actions set forth on Schedule 4.10, in the case of the formation of a new Subsidiary, promptly upon such formation, and in the case of the acquisition of an entity which shall become a Subsidiary, no later than the date of the consummation of the relevant Acquisition. (b) With the prior written consent of the Administrative Agent, Multicare (on behalf of the Borrowers) may from time to time redesignate one or more Subsidiaries which are designated as Excluded Subsidiaries on Schedule 11.1 to be Borrowers and Restricted Subsidiaries hereunder, Pledgors under the Pledge Agreement and comparable -48- parties under the other Loan Documents (and not Excluded Subsidiaries). Thereupon and upon satisfaction of the requirements set forth in paragraph (a) above for Joining Subsidiaries, such redesignated Subsidiaries shall be Borrowers hereunder, Pledgors under the Pledge Agreement and comparable parties to the other Loan Documents. The Administrative Agent shall give the Lenders notice of any such redesignation. 4.11 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS. The Borrowers shall comply with the terms of the 1997 Subordinated Note Indenture. Each Borrower shall promptly take or cause Genesis to take, as appropriate, all action necessary or requested by the Administrative Agent at any time to protect, preserve and give effect to the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture (if and when applicable to Multicare or the other Borrowers) and the 1997 Subordinated Note Indenture. 4.12 CORPORATE SEPARATENESS. Each Borrower shall observe all requirements necessary to cause it to be treated as a separate legal entity for all purposes under applicable corporate law. Without limiting the foregoing requirement, each Borrower specifically shall (i) maintain and cause each Excluded Subsidiary to maintain separate corporate and financial records and to observe all corporate formalities; (ii) maintain, and cause each Excluded Subsidiary to maintain, capitalization adequate to meet its business needs; (iii) cause all reports, filings and public information to refer to such Borrower or Excluded Subsidiary, as the case may be, as a separate company (and not a division of each other); and (iv) otherwise conduct and cause each Excluded Subsidiary to conduct its dealings with third parties in its own name and as a separate and independent entity. Without limiting the generality of the foregoing, except as expressly permitted or required elsewhere by this Agreement or unless specifically agreed to by the Required Lenders, no Borrower may enter into any merger or other combination with or transfer assets to Genesis or any of its Subsidiaries, make any loan to, advance to, or other investment in Genesis or any of its Subsidiaries, guarantee any Indebtedness or otherwise be liable for obligations of Genesis or any of its Subsidiaries or any Excluded Subsidiaries, provided, nothing in this Section 4.12 shall prohibit the execution and delivery of the MultiCare Management Agreement or the Tax Sharing Agreement or the transactions contemplated thereby. Notwithstanding the foregoing, the Borrowers may make such Investments in, borrow money from, and carry on other transactions with, Excluded Subsidiaries on an arm's length basis to the extent that this Agreement permits the Borrowers to carry on such activities with unrelated third parties. 4.13 TRANSACTIONS WITH AFFILIATES. Each Borrower shall effect all transactions with Affiliates (excluding transactions with other Borrowers) on a basis at least as favorable to such Borrower as would at the time be obtainable for a comparable transaction on an arm's length dealing with an unrelated third party, except that this Section 4.13 shall not apply to (a) the Tax Sharing Agreement or (b) the Transaction Documents or -49- (c) transaction fees and expenses payable to Genesis, Cypress and TPG within seven days of the Closing Date, to the extent such are permitted by the 1997 Subordinated Note Indenture. 4.14 MERGER. The Borrowers and Acquisition Corp. shall use their best efforts to cause the Merger to occur as soon after the Closing Date as practicable in accordance with the terms of the Merger Agreement. 4.15 USE OF PROCEEDS. The Borrowers will apply the proceeds of the Loans only (i) to refinance all of the existing Indebtedness of Multicare and its Subsidiaries (including without limitation Indebtedness acquired by Multicare as a result of its merger with Acquisition Corp.) except Indebtedness identified on Schedule 6.1 hereto, (ii) to fund working capital and Capital Expenditure needs, subject to the other limitations set forth in this Agreement, (iii) to fund interest and principal payments on the Loans and other permitted Indebtedness, (iv) to pay fees, expenses or any other amounts owing hereunder or under any other Loan Document, and (v) for general corporate purposes. 4.16 CERTAIN DISPOSITIONS. On or before December 31, 1997, the Borrowers shall sell to Genesis and/or one or more of its Subsidiaries (other than the Surety or Multicare or any Subsidiary of either of them) their contract therapy business for a cash purchase price of approximately $24,000,000.00 and their institutional pharmacy business for a cash purchase price of approximately $50,000,000.00, each on terms and conditions satisfactory to the Agents. -50- ARTICLE 5 FINANCIAL COVENANTS 5.1 CERTAIN FINANCIAL COVENANTS. So long as any Loan Obligations shall remain unpaid or any Lender has any Commitment under this Agreement, the Borrowers shall comply with the following financial covenants. (a) Fixed Charge Coverage. The Fixed Charge Coverage Ratio shall be at least equal to the ratios set forth below during the periods indicated below: Period Ratio ------ ----- 9/30/97 through 6/30/99 1.20 7/1/99 through 9/30/01 1.25 10/1/01 through 9/30/02 1.30 10/1/02 and thereafter 1.35 (b) Consolidated Net Worth. The total amount of stockholders' equity of Multicare and the Restricted Subsidiaries, on a consolidated basis, at any date of determination after the Agreement Date shall be not less than the sum of (i) Six Hundred Eighty Five Million Dollars ($685,000,000.00) plus (ii) an amount equal to the sum of: (A) an amount equal to the net proceeds of all equity offerings of the Genesis ElderCare Corp. on a cumulative basis commencing on the Agreement Date through such date of determination, plus (B) 75% of the cumulative amount of Net Income (which shall not be reduced by the amount of any net loss for any fiscal quarter) of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the period commencing on the first day of the fiscal quarter in which the Agreement Date occurs through the last day of the fiscal quarter ending on, or most recently prior to, such date of determination, plus (C) any reduction in the amount of debt of Multicare and its Restricted Subsidiaries as a result of the conversion of convertible debt securities into equity (excluding Multicare's Convertible Subordinated 7% Debentures). -51- (c) Adjusted Total Debt/Cash Flow. The Adjusted Total Debt/Cash Flow Ratio shall be not greater than the ratios set forth below during the periods indicated below: Period Ratio ------ ----- 9/30/97 through 9/30/98 6.50 10/1/98 through 9/30/99 5.75 10/1/99 through 9/30/00 5.25 10/1/00 and thereafter 4.50 (d) Adjusted Senior Debt/Cash Flow. The Adjusted Senior Debt/Cash Flow Ratio shall be not greater than the ratios set forth below during the periods indicated below: Period Ratio ------ ----- 9/30/97 through 9/30/98 4.50 10/1/98 through 9/30/99 4.00 10/1/99 and thereafter 3.50 5.2 CALCULATION OF FINANCIAL COVENANTS. The financial covenants set forth in this Article 5 shall be maintained continuously and shall be tested at the end of each fiscal quarter and at such other times as may be required by the terms of this Agreement. Following the effective date of any Acquisition that is effected by Multicare or any of its Restricted Subsidiaries and that is permitted under Section 6.4 hereof (Acquisitions Etc.), the financial covenants set forth in this Article 5 shall be computed on a pro forma basis as if the effective date of such Acquisition had been the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, such actual date of the Acquisition. For purposes of such computation, the Borrowers may elect to make pro forma income statement adjustments at the time of the effective date of such Acquisition under the following circumstances: (i) adjustments to reflect the elimination of that portion of salary and employee benefit expenses that will no longer be incurred after the Acquisition, to the extent demonstrated by Multicare to the satisfaction of the Administrative Agent, and (ii) adjustments to reflect any other savings in expenses which will be realized by such Person so acquired as a consequence of such Acquisition, to the extent demonstrated by Multicare to the satisfaction of the Administrative Agent. Following the effective date of any disposition that is effected by Multicare or any of its Restricted Subsidiaries and that is permitted under Section 6.5 hereof (Dispositions), the financial covenants set forth in this Article 5 shall be computed on a pro forma basis as if the effective date of such disposition had been the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, such actual date of disposition. Following the Closing Date, the financial covenants set forth in this Article 5 shall be computed on a pro forma basis as if all transactions in connection with the Transaction Documents had been consummated, including as if the Multicare Management Agreement had been in effect since the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, the Closing Date. Unless otherwise agreed to by the Required Lenders, the financial condition and results of operations of the Excluded -52- Subsidiaries shall not be combined with those of the Borrowers for purposes of calculating the financial covenants set forth in this Article 5. -53- ARTICLE 6 NEGATIVE COVENANTS So long as any Loan Obligations shall remain unpaid or any Lender shall have any Commitment under this Agreement, each of the Borrowers shall comply with the following covenants. 6.1 INDEBTEDNESS. No Borrower shall, at any time, create, incur, assume or suffer to exist any Indebtedness (including any Guaranties, Capitalized Leases or Assumed Indebtedness), except: (a) Indebtedness to the Lender Parties pursuant to this Agreement and the other Loan Documents; (b) Indebtedness constituting inter-Borrower loans and advances evidenced by promissory notes duly pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the terms of the Pledge Agreement; (c) A guaranty of the obligations of Acquisition Corp. of its obligations under the Acquisition Corp. Credit Agreement and a subordinated guaranty of Acquisition Corp.'s obligations under the 1997 Subordinated Notes; (d) Indebtedness (including the indebtedness under the 1997 Subordinated Notes) existing on the Closing Date acceptable to the Agents and described on Schedule 6.1 hereto, which sets forth certain Indebtedness in a principal amount not exceeding $300,000,000; and any extensions, renewals, refinancings of the same so long as such extensions, renewals and refinancings (i) are in a principal amount no greater than the amount the Indebtedness so extended, renewed or refinanced, (ii) have maturity dates (and amortization schedules) no earlier than the debt being refinanced, (iii) are incurred pursuant to agreements or instruments which do not prohibit the Indebtedness or Liens created pursuant to the Loan Documents or otherwise conflict with the terms of the Loan Documents, and (iv) are not made at a time that a Default or an Event of Default has occurred and is continuing or would be caused thereby. (e) With respect to the Borrowers other Indebtedness incurred from time to time, in an aggregate outstanding principal amount not to exceed Five Million Dollars ($5,000,000.00) at any time so long as such Indebtedness is incurred pursuant to agreements or instruments which do not cause a Default or Event of Default hereunder, which contain terms and conditions no more onerous than the terms and conditions hereof and which do not mature, or have principal amortization prior to, the Maturity Date; -54- (f) With respect to the Borrowers, Indebtedness in an aggregate amount not to exceed $20,000,000 incurred to finance the construction of the of the assisted living facilities identified on Schedule 6.1(f) attached hereto provided that the Borrowers' obligations with respect to such Indebtedness shall be terminated in connection with the disposition of such facilities as contemplated in Section 6.5 (Dispositions) hereto; (g) Provided that the terms of this Agreement and the consummation of the transactions contemplated hereby and by the Transaction Documents are consistent with, and do not cause a default under, Multicare's Convertible Subordinated 7% Debentures or the Indenture under which they were issued, Indebtedness evidenced by Multicare's Convertible Subordinated 7% Debentures in the original principal amount of $86,250,000.00 of which no more than $39,424,000 in principal amount shall remain outstanding as of the Closing Date, provided that the Borrowers shall cause all such Indebtedness to be redeemed or converted, by no later than March 16, 1998, at an aggregate cost to the Borrowers (including amounts expended prior to, on and after the Closing Date) not to exceed $122,000,000.00 plus interest through the redemption date; (h) Provided that the terms of this Agreement and the consummation of the transactions contemplated hereby and by the Transaction Documents are consistent with, and do not cause a default under, Multicare's Senior Subordinated 12-1/2% Notes on the Indenture under which they were issued, Indebtedness evidenced by Multicare's Senior Subordinated 12-1/2% Notes in the original principal amount of $100,000,000.00 of which no more than $75,000.00 in principal amount shall remain outstanding as of the Closing Date provided that the Borrowers shall cause all such Indebtedness to be redeemed by no later than January 2, 1998, at an aggregate cost to the Borrowers (including amounts expended prior to, on and after the Closing Date) not to exceed $26,000,000.00 plus interest through the redemption date. provided, however, that all Indebtedness incurred pursuant to paragraph (e) above shall be subject to the following: (i) it shall be incurred on terms which do not prohibit the Indebtedness created pursuant to the Loan Documents, or otherwise conflict with the terms hereof or the other Loan Documents; (ii) at the time such Indebtedness is incurred, no Default or Event of Default shall have occurred and be continuing or shall be caused or created thereby; (iii) prior to the incurrence of such Indebtedness, Multicare (on behalf of the Borrowers) shall deliver to the Administrative Agent a certificate of a Responsible Officer of Multicare (A) stating the amount of such Indebtedness, (B) containing a representation that such Indebtedness was incurred in compliance with the provisions of this Section 6.1 and showing calculations thereof, and (C) containing a representation that such Indebtedness was incurred in compliance with the financial covenants set forth herein, in Section 5.9 of the 1995 Subordinated Note Indenture and in Section 5.9 of the 1996 Subordinated Note Indenture, if and when applicable to Multicare as set forth in Section 5.1(w), and the 1997 Subordinated Note Indenture and showing calculations thereof; (iv) the terms of the instruments and agreements respecting such Indebtedness shall be no more restrictive than the terms of this Agreement; and (v) the instruments and agreements respecting such -55- Indebtedness shall not contain provisions that would violate the terms of Section 6.12 (Limitation on Certain Restrictive Provisions) below. 6.2 LIENS. No Borrower shall, at any time, create, incur, assume or suffer to exist any Lien on any of its assets (now owned or hereafter acquired), except for the following ("Permitted Liens"): (a) Liens granted pursuant to the Loan Documents; (b) Liens acceptable to the Agents and existing on the Closing Date securing obligations existing on the Closing Date which Liens and obligations are listed on Schedule 6.2 hereto (and any extension, renewal and replacement Liens upon the same property theretofore subject to a listed Lien, provided that (i) the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the corresponding Lien theretofore existing) and (ii) such replacement Liens are incurred pursuant to agreements or instruments which do not prohibit the Liens or Indebtedness created pursuant to the Loan Documents or otherwise conflict with the terms of the Loan Documents); (c) Liens arising from taxes, assessments, charges or claims described in Section 4.9 hereof to the extent permitted by said Section 4.9, provided that the aggregate amount secured by all Liens described in this clause (c) shall not at any time exceed $500,000.00; (d) Other Liens (other than on Collateral) securing Indebtedness incurred pursuant to paragraph (f) of Section 6.1 above in an amount not to exceed $20,000,000 in the aggregate; (e) Liens in respect of property or assets of the Borrowers imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrowers taken as a whole or (ii) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such lien and that adequate reserves have been set aside on the Borrower's books to protect against an adverse result; (f) Liens arising from judgments, decrees or attachments and Liens securing appeal bonds arising from judgments, in each case in circumstances not constituting an Event of Default under Section 7.1(g); (g) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, -56- unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); and (h) easements, rights-of-way, restrictions, minor defects or irregularities in title to real property and other similar charges or encumbrances on real property not interfering in any material respect with the ordinary conduct of the business of the Borrowers taken as a whole or the value or salability of the assets so encumbered or affecting their use for their intended purposes; (i) Liens existing on real estate and equipment acquired by any Borrower in an Acquisition permitted under Section 6.4 hereof so long as any such Lien secures only the corresponding Assumed Indebtedness permitted under clause (e) of Section 6.1, above; (j) With respect to the Borrowers other (i) purchase money Liens encumbering only the property purchased with the proceeds from the corresponding Indebtedness, and (ii) Capitalized Leases, in each case securing Indebtedness permitted under clause (e) of Section 6.1 above; provided, however, that no Lien permitted under clauses (d), (i) and (j) above shall be created at any time, if there shall exist, either before or after giving effect to such transaction, a Default or an Event of Default. "Permitted Lien" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law. 6.3 LOANS, ADVANCES AND INVESTMENTS. No Borrower shall, at any time (i) make or suffer to exist any loan or advance to, or (ii) purchase, acquire or own (beneficially or of record) any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other interest in, or (iii) make any capital contribution to, or other investment in (collectively, "Investments") any other Person, except: (a) Receivables owing to such Borrower arising from provision of services or sales of inventory under usual and customary terms in the ordinary course of business; and loans and advances extended by a Borrower to subcontractors or suppliers under usual and customary terms in the ordinary course of business; (b) Loans from Multicare to a wholly-owned Restricted Subsidiary of Multicare or loans from a wholly-owned Restricted Subsidiary of Multicare to Multicare or another wholly-owned Restricted Subsidiary of Multicare, provided, however, all such loans and advances shall be evidenced by promissory notes duly pledged to the Administrative Agreement for the benefit of the Secured Parties pursuant to the Pledge Agreement; -57- (c) The capital stock or other ownership interests in other Borrowers duly pledged to the Administrative Agent, for the benefit of the Secured Parties; (d) Cash Equivalent Investments; and (e) Investments existing on the Closing Date in an amount not greater than $20,050,000.00 which are listed on Schedule 6.3 hereto. (f) Acquisitions permitted under Section 6.4 (Acquisitions) below; (g) The capital stock or other ownership interests in the Excluded Subsidiaries existing on the Closing Date and set forth on Schedule 9.1 hereto; (h) With respect to the Borrowers other Investments not covered by clauses (a) through (h) of this Section 6.3 provided, that (i) at the time that any Investment is made, the aggregate amount (which shall include all existing amounts and all new commitments therefor) of all Investments pursuant to this paragraph (i) shall not exceed $5,000,000.00; and (ii) no Default or Event of Default shall then exist either before or after giving effect to such transaction. Investments referred to in paragraph (e) which are existing on the Closing Date and the amount of each such Investment are listed on Schedule 6.3 hereto. On or before (if practicable) but in any event within 5 days after any Investment is made pursuant to the preceding paragraph (h), Multicare (on behalf of the Borrowers) shall deliver to the Administrative Agent a supplement to Schedule 6.3 showing the proposed Investment, together with a certificate of a Responsible Officer of Multicare stating that such Investment was made in compliance with this Section 6.3 and in compliance with the provisions of the 1997 Subordinated Note Indenture. The "amount" of any Investment referred to in this Section 6.3 shall mean the sum of the following (without duplication): the amount of cash paid for or contributed to such Investment; the fair market value of any equity or assets constituting consideration for or contributed to such Investment; and any commitment to pay, contribute, incur, or become liable for any of the foregoing. 6.4 ACQUISITIONS, ETC. No Borrower shall engage in any Acquisition (other than an acquisition of assets in the ordinary course of business) except: (a) A Borrower may merge with or into or consolidate with Multicare or any direct or indirect wholly-owned Restricted Subsidiary of Multicare, provided that (i) if Multicare is a party to the merger, Multicare is the surviving entity and (ii) if Multicare is not a party to the merger, a wholly-owned Restricted Subsidiary of -58- Multicare is the surviving entity and provided, further, that no Event of Default or Default shall occur and be continuing before or after giving effect to such transaction; and (b) So long as no Default or Event of Default has occurred or would exist after giving effect to such Acquisition, any Borrower may make an Acquisition not covered by clause (a) of this Section 6.4, provided, however, that (i) the Acquisition Cost of all Acquisitions made pursuant to this paragraph (b) does not exceed $5,000,000.00 in any fiscal year, and (ii) the "Acquisition Conditions" set forth on Schedule 6.4 hereto shall have been satisfied. 6.5 DISPOSITIONS. No Borrower shall sell, convey, assign, lease as lessor, transfer, abandon or otherwise dispose of (collectively, for purposes of this Section 6.5, "transfer"), voluntarily or involuntarily, any of its assets, except: (a) A Borrower may sell inventory in the ordinary course of business; (b) A Borrower may dispose of equipment which is obsolete or no longer useful in its business; (c) A Borrower may transfer its properties to Multicare or a wholly-owned Restricted Subsidiary of Multicare so long as no Event of Default or Default shall exist either before or after giving effect to such transfer; (d) Subject to the mandatory prepayment provisions set forth above, the Borrowers may transfer at any time the facilities identified on Schedule 6.5(d) located in the states of Ohio, Wisconsin or Illinois (i) for a cash price, or (ii) in connection with a swap of assets of the same type and generating cash flow at approximately the same level, or greater, than the facilities identified in Schedule 6.5(d) being transferred, as certified by a Responsible Officer of Multicare, on behalf of the Borrowers, in writing prior to such transfer with such detail and supporting financing information as the Administrative Agent may require; provided that in the case of either (i) or (ii) above, the Board of Directors of Multicare determines that the fair market value in either case is equal to the fair market value in an arm's length transaction with an unrelated third party and such transfer is on such terms as are (A) reflective of market conditions at the time of sale, (B) consistent with the terms of this Agreement, and (C) satisfactory to the Administrative Agent. (e) Subject to the mandatory prepayment provisions set forth above, the Borrowers shall sell to Genesis (i) their contract therapy business for a cash purchase price of approximately $24,000,000.00 and (ii) their institutional pharmacy business for a cash price of approximately $50,000,000.00. -59- (f) Subject to the mandatory prepayment provisions set forth above, the Borrowers may transfer the assisted living facilities described in Schedule 6.5(f) attached hereto to a Person who is not a Borrower for a sales price at least sufficient to repay any Indebtedness associated therewith provided that the Cash Flow for the immediately preceding four fiscal quarters such facilities (and if such facilities have not been in operation for four fiscal quarters, then such Cash Flow for the period since operations commenced on an annualized basis) does not exceed 15% of the associated Indebtedness. (g) The Borrowers may grant Liens permitted under Section 6.2 (Liens). (h) So long as no Default or Event of Default has occurred or would exist after giving effect to such transfer, a Borrower may transfer other assets (including ownership interests of a Restricted Subsidiary), provided, however, that (i) the "Disposition Conditions" set forth on Schedule 6.5(h) hereto shall have been satisfied and (ii) both of the following financial tests shall be satisfied: The sum of the aggregate fair market value of the property subject to such proposed transfer plus the aggregate fair market value of all property previously transferred pursuant to this paragraph (h) at any time after the Closing Date (in each case determined as of the date of transfer or proposed transfer, as the case may be) is less than (A) an amount equal to 5% of the total assets of Multicare and its Restricted Subsidiaries on a consolidated basis, determined as of the fiscal year ending on, or most recently prior to, the date of the proposed transfer and (B) $5,000,000.00. (i) Subject to the mandatory prepayment provisions set forth above, so long as no Default or Event of Default has occurred or would exist after giving effect to such transfer, any Borrower may transfer its interest in Excluded Subsidiaries. 6.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS. The Borrowers shall not create, acquire, dispose of, or change any interest in any Restricted Subsidiary except as follows: (a) Restricted Subsidiaries of Borrower(s) (or any interest therein) may be created or acquired in connection with an Acquisition to the extent permitted under Section 6.4 above (Acquisitions, Etc.); (b) Restricted Subsidiaries of Borrowers (or any interest therein) may be created or acquired in connection with an Investment to the extent permitted under Section 6.3 above (Loans, Advances and Investments); (c) Restricted Subsidiaries of Borrowers may be created as wholly-owned direct or indirect Subsidiaries of Multicare for other purposes consistent with the terms of this Agreement; and -60- (d) Restricted Subsidiaries (or any interest therein) may be disposed of pursuant to the provisions of Section 6.5 above (Dispositions); provided, however, that with respect to Subsidiaries created or acquired in accordance with paragraphs (a), (b) or (c) above, they shall become "Borrowers" hereunder and corresponding parties to the other Loan Documents, their equity shall be pledged to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the Pledge Agreement and they shall become parties to the Tax Sharing Agreement. 6.7 LEASES. The Borrowers shall not at any time, enter into or suffer to remain in effect any lease, as lessee, of any property, except: (a) Leases (including subleases) by Multicare or a wholly-owned Subsidiary of Multicare as lessor (or sublessor) to Multicare or another wholly-owned Subsidiary of Multicare as lessee (or sublessee); (b) Capitalized Leases permitted under Section 6.1 above; and (c) Other leases which are not Capitalized Leases or Synthetic Leases but only to the extent that the aggregate Rental Expense of the Borrowers with respect to all such other leases does not exceed (i) during the fiscal year ending December 31, 1997, $15,000,000.00 and (ii) during each fiscal year thereafter, an amount equal to the amount permitted in the preceding year plus an additional $2,000,000.00 (e.g., $17,000,000.00 in the fiscal year ending December 31, 1998). 6.8 DIVIDENDS AND RELATED DISTRIBUTIONS. Except for dividends from Multicare to Acquisition Corp. and from Acquisition Corp. to Genesis ElderCare Corp. in an amount necessary to permit Acquisition Corp. and Genesis ElderCare Corp. to pay their respective taxes and general corporate operating expenses of the type typically incurred by a corporation whose only assets are the stock of operating companies with no other business activity, Multicare shall not, and the Borrowers shall not permit Acquisition Corp. to (a) declare or pay any dividends, (b) purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, or (c) make any distribution of assets to its stockholders as such whether in cash, assets or obligations of Multicare, (d) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption or retirement of, any shares of its capital stock, (e) or make any other distribution by return of capital or otherwise in respect of any shares of its capital stock except that Multicare may declare and pay dividends and make distributions payable solely in its common stock, or options, warrants or other rights to purchase common stock provided that such stock, warrants, options or other rights are pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge Agreement. 6.9 CONSOLIDATED TAX RETURN. No Borrower shall file or consent to the filing of any consolidated income tax return with any Person other than other Borrowers or -61- other Persons party to the Tax Sharing Agreement or become party to any tax sharing or tax allocation agreement with any other Person other than the other Borrowers, except as contemplated in the Tax Sharing Agreement. From and after the effective date of the Tax Sharing Agreement (which shall be on or about the Closing Date), each of the Borrowers shall cause the Tax Sharing Agreement to remain in full force and effect, subject to no amendments or modifications other than (a) joinder of additional Subsidiaries of Multicare, from time to time, such that at all times all Subsidiaries of Multicare shall be parties thereto, and (b) such amendments or modifications which, individually or in the aggregate, could not reasonably be expected to have an adverse effect on the Borrowers taken as a whole (including the business, operations, condition, financial or otherwise, properties or prospects of the Borrowers), the Loan Documents or any Lender Party. 6.10 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASEMENT AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS. (a) No Borrower shall, or shall permit any of its Subsidiaries, directly or indirectly, pay, prepay, purchase, defease, redeem, retire, acquire, or otherwise make any payment (on account of principal, interest, premium or otherwise) in respect of any obligation under, or evidenced by the 1997 Subordinated Note Indenture (or cause or allow any event or condition to exist which would require any payment, prepayment, purchase, defeasance, redemption, retirement, acquisition or other payment of any such obligation), except that a Borrower may make cash interest payments on the aforesaid Indebtedness, as and when required to do so by the mandatory terms thereof, all to the extent consistent with the subordination provisions applicable thereto. Multicare shall not amend, modify or supplement the terms or provisions contained in the aforementioned debt agreements or any agreement or instrument evidencing or applicable thereto. Multicare shall not take or omit to take any action under or in connection with, any such agreement or instrument, which would violate or impair the subordination provisions thereof. No Loan Party shall designate any of its Indebtedness as "Designated Senior Indebtedness" for purposes of the 1997 Subordinated Note Indenture except Indebtedness incurred pursuant to this Agreement. (b) No Borrower will make or give any notice that it shall make any voluntary or optional payment or prepayment or redemption or acquisition for value of, or will refund, refinance or exchange any Indebtedness (excluding Loan Obligations) if at such time any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof. No Loan Party shall designate any of its Indebtedness as "Designated Senior Indebtedness" for purposes of the 1997 Subordinated Note Indenture except Indebtedness incurred pursuant to this Agreement, the other Loan Documents, or Qualifying Interest Rate Hedging Agreements. -62- 6.11 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS. (a) Constituent Documents. No Borrower shall, amend, modify or supplement its articles or certificate of incorporation, bylaws, partnership agreement or similar constituent documents (i) if a Material Adverse Effect could result from such amendment, modification or supplement or (ii) if such amendment, modification or waiver could reasonably be expected to materially adversely affect the rights or interests of the Agents or the Lenders. (b) Transaction Documents. No Borrower shall amend, modify or supplement the other Transaction Documents, except for such amendments, modifications or supplements which could not reasonably be expected to have an adverse effect on the Borrowers, taken as a whole (including the condition (financial or otherwise), properties or prospects of the Borrowers, the Loan Documents or any Lender Party. 6.12 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS. No Borrower shall enter into, or remain a party to, any agreement or instrument which would impose any restriction (a) on the right of such Person from time to time to declare and pay dividends or take similar actions with respect to capital stock owned by such Person or pay any Indebtedness, obligations or liabilities from time to time owed to a another Borrower; or (b) that would prohibit the grant of any Lien upon any of its properties (now owned or hereafter acquired) to secure any senior Indebtedness except for restrictions in agreements respecting Permitted Liens to the extent that the prohibition applies only to property subject to the Permitted Lien; or (c) that would prohibit, or require the consent of any Person to, any amendment, modification or supplement to any of the Loan Documents except (i) restrictions set forth in the Loan Documents; (ii) legal restrictions of general applicability; and (iii) restrictions in the 1997 Subordinated Note Indenture. 6.13 LIMITATIONS ON MERGERS, ETC. No Borrower shall merge or consolidate with or into any Person, except (a) mergers of any Borrower with Multicare where Multicare is the survivor, (b) mergers of any Restricted Subsidiary of Multicare with any wholly-owned Restricted Subsidiary of Multicare where such wholly-owned Restricted Subsidiary is the survivor, or (c) any merger pursuant to an Acquisition permitted under Section 6.4 above (Acquisitions, Etc.) or (d) any merger pursuant to a transfer permitted under Section 6.5 (Dispositions) above. 6.14 AVOIDANCE OF OTHER CONFLICTS. No Borrower shall violate or conflict with, be in default under, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with (a) its articles or certificate of incorporation, bylaws or partnership agreement (or other constituent documents), or (b) any agreement or instrument to which it is party or by which any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clause (b), for matters that could not, individually or in the aggregate, have a Material Adverse Effect. -63- 6.15 CAPITAL EXPENDITURES. No Borrower shall make or commit to make any Capital Expenditure if, after giving effect to such Capital Expenditure, the aggregate amount of all Capital Expenditures of the Borrowers incurred (i) during the fiscal year ending December 31, 1997, would exceed $45,000,000.00, and (ii) during any fiscal year thereafter, would exceed $35,000,000.00 6.16 MANAGEMENT FEE. The Borrowers shall not pay management fees under the Multicare Management Agreement in any fiscal year in an amount less than $23,900,000.00, or in excess of 6% of the consolidated net revenue of the Borrowers. All such management fees shall be subordinated to the obligations of the Borrowers hereunder in accordance with the terms contained in the Management Fee Subordination Agreement as in effect on the Agreement Date. Such management fees may be accrued but not paid except that such fees may be paid to the extent they do not exceed in any fiscal year the greater of (a) 4% of the consolidated net revenue of the Borrowers, and (b) $23,900,000.00. To the extent such management fees in any fiscal year (including the payment in such year of accrued management fees) would exceed the amount specified in the preceding sentence, such excess amount shall be payable only to the extent that, both before and after giving effect to such payment, (i) there exists no Event of Default or Default, (ii) Borrower's Fixed Charge Coverage Ratio shall be not less than 1.4 for the two most recent completed fiscal quarters of the Borrowers, and (iii) the Adjusted Total Debt/Cash Flow Ratio for the two most recently completed fiscal quarters of the Borrowers shall be less than 4.00. No Borrower shall agree with any Person (other than the Lender Parties) to withhold, defer or change the amount or timing of payments under the Multicare Management Agreement. -64- ARTICLE 7 DEFAULTS 7.1 "EVENTS OF DEFAULT" An Event of Default means any one of the following events (whatever the reason for such Event of Default, whether it shall be voluntary or involuntary and whether it shall be by action or inaction, by operation of law, pursuant to a court order or any rule or regulation of any Governmental Authority or otherwise): (a) Failure to Pay Principal. The Borrowers shall fail to make any payment of the principal of any Loan on the date when the same shall become due and payable, whether at stated maturity or at a date fixed for any installment or prepayment thereof or otherwise; or the Borrowers shall fail to make any reimbursement of any Drawing under a Letter of Credit or shall fail to deposit any amount into the cash collateral account, in either case, at the times and in the amounts specified in Article 1A above. (b) Failure to Pay Interest, Fees and Other Amounts. The Borrowers shall fail to make any payment of interest on any Loan or shall fail to pay any fees or any other amounts owing hereunder or under any other Loan Documents (other than as specified in paragraph (a) above) on the dates when such interest, fees or other amounts shall become due and payable and such failure continues for more than three (3) Business Days. (c) Covenant Defaults. (i) There shall occur a default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to any of Sections 4.1(f)(ii), 4.2, 4.3, 4.7, 4.10, 4.11, 4.13 or 4.15 or Article 5 or Article 6. (ii) There shall occur any default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to the provisions of this Agreement (other than as provided in paragraph (a) or paragraph (b) above or subparagraph (i) of this paragraph (c)) and, if capable of being remedied, such default shall continue unremedied for thirty (30) days after any Borrower becomes aware, or should in the exercise of reasonable diligence have become aware, of such default. (d) Misrepresentation. Any representation or warranty made or deemed made by any Loan Party in or pursuant to or in connection with any Loan Document shall prove to have been false or misleading in any material respect as of the time when made or deemed made. (e) Subordinated Debentures. Any "Event of Default" (or similar term) as defined in the 1997 Subordinated Note Indenture and any other subordinated indentures to which any Borrower may from time to time be a party shall have occurred and be -65- continuing; or, any term or provision of the subordination provisions contained in any such indenture shall cease to be in full force and effect in accordance with its respective terms, or any Loan Party or any holder of any 1997 Subordinated Note or other subordinated note or other subordinated obligations (or any trustee or agent on behalf of such holder) shall terminate, repudiate, declare voidable or void or otherwise contest any term or provision of such subordination provisions; or Multicare shall make, or shall be required to make or to offer to make, any defeasance, redemption or purchase of 1997 Subordinated Notes under the 1997 Subordinated Note Indenture, or Multicare shall make, or be required to make, or offer to make, any defeasance, redemption or purchase of subordinated notes under any similar provision, if any, under any such other subordinated indentures or other subordinated note or other subordinated obligations. (f) Other Cross-Defaults. (i) Any Loan Party shall fail to pay, in accordance with its terms and when due and payable, any Indebtedness (other than Indebtedness referred in paragraph (a) or (e) above) under, or arising out of an agreement or instrument (or group or series of related agreements or instruments) which evidences outstanding Indebtedness in excess of $5,000,000.00; (ii) the maturity of any such Indebtedness shall, in whole or in part, have been accelerated, or any such Indebtedness shall, in whole or in part, have been required to be prepaid or purchased prior to the stated maturity thereof; (iii) any event shall have occurred and be continuing that permits any holder or holders of such Indebtedness, any trustee or agent acting on behalf of such holder or holders or any other Person to accelerate the maturity thereof or require any prepayment or repurchase thereof; (iv) a default by any Loan Party shall be continuing under any other instrument or agreement (whether or not relating to Indebtedness) binding upon such Person, except a default that, together with all other such defaults under this clause (iv), could not have a Material Adverse Effect; or (v) there shall have occurred and be continuing any "Event of Default" as such term is defined in the Acquisition Corp. Credit Agreement. (g) Judgments and Executions. One or more judgments for the payment of money shall have been entered against any Loan Party or Loan Parties which judgment or judgments, to the extent not paid or fully covered by insurance, exceed $1,000,000.00 in the aggregate, and such judgment or judgments shall have remained undischarged and unstayed for a period of 30 consecutive days; or one or more writs or warrants of attachment, garnishment, execution, distraint or similar process or any attachment (prejudgment or otherwise) of assets exceeding in value the aggregate amount of $1,000,000.00 shall have been issued against any Loan Party or Loan Parties or any of its or their respective properties. (h) Invalidity or Noncompliance With Loan Documents. Any of the Loan Parties shall fail to perform any of its obligations under any of the Loan Documents (after taking into account any applicable cure period set forth in such agreements), or the validity of this Agreement or any of the other Loan Documents, or the subordination provisions of any other instrument or document intended by the parties hereto to benefit the Lender Parties, shall have been challenged or disaffirmed by or on behalf of any of the Loan -66- Parties, or any of the Loan Documents shall cease to be in full force and effect (other than pursuant to its terms) or, other than as a direct result of any action or inaction of a Lender Party, any Liens created or intended to be created by any of the Loan Documents shall at any time cease to be valid and perfected subject to no equal or prior Liens except Permitted Liens. (i) Material Adverse Effect. The Required Lenders shall have determined in good faith that an event or condition has occurred which could have a Material Adverse Effect. (j) Environmental. Any one or more of the events or conditions set forth in the following clauses (i) or (ii) shall have occurred with respect to any Borrower or any Loan Party or any of their respective Environmental Affiliates, and the Required Lenders shall determine in good faith (which determination shall be conclusive) that such events or conditions, individually or in the aggregate, could have a Material Adverse Effect: (i) any past or present violation of any Environmental Law by such Person which has not been cured to the satisfaction of the Required Lenders, or (ii) the existence of any pending or threatened Environmental Claim against any such Person, or the existence of any past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim against any such Person. (k) Change of Control. A Change of Control shall have occurred; or a "Change in Control" (as defined in the 1997 Subordinated Note Indenture) shall have occurred. (l) Subsidiaries as Loan Parties. Any direct or indirect Subsidiary of Multicare, other than Excluded Subsidiaries, shall fail to be, or shall cease to be, or fail to become, a Borrower hereunder; or the equity of any such Person owned by any Borrower or of Multicare shall cease to be, or fail to be, pledged under the Pledge Agreement. (m) Insolvency, Bankruptcy, Etc. Any Loan Party shall make an assignment for the benefit of creditors or a composition with creditors, shall generally not be paying its debts as they mature, shall admit its inability to pay its debts as they mature, shall file a petition in bankruptcy, shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, custodian, liquidator or trustee of or for it or any substantial part of its property or assets, shall commence any proceeding relating to it under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or there shall be commenced against such Loan Party, any such proceeding and the same shall not be dismissed within thirty (30) days or an order, judgment or decree approving the petition in any such proceeding shall be entered against such Loan Party; or any Loan Party, Acquisition Corp., or Genesis ElderCare Corp. shall by any act or failure to act indicate its consent to, approval of or acquiescence in, any such proceeding or any appointment of any receiver, custodian, liquidator or trustee of or for it or for any -67- substantial part of its property or assets, or shall suffer the appointment of any receiver, liquidator or trustee, or shall take any corporate action for the purpose of effecting any of the foregoing; or any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding and the same shall not be dismissed within thirty (30) days or a receiver or a trustee or other officer or representative of a court or of creditors, or any court, governmental office or agency, shall, under color of legal authority, take and hold possession of any substantial part of the property or assets of such Person and shall not have relinquished possession within thirty (30) days, or such Loan Party, Acquisition Corp., or Genesis ElderCare Corp. shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors, or any of them, or any Loan Party shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint. (n) Termination of Multicare Management Agreement or other Transaction Documents. Except as permitted by the Required Lenders, (i) the Multicare Management Agreement shall cease to be in full force and effect or there shall be any breach by any party thereto or a default thereunder, or an amendment, modification or supplement thereto not permitted by the terms of this Agreement or any notice a non-renewal or termination thereunder shall have been delivered by any party thereto, or (ii) any other Transaction Document shall cease to be in full force and effect (other than by its terms) or there shall be any material breach by any party thereto or a default thereunder or any such document shall be amended, restated, modified or supplemented in a manner not expressly permitted by the terms of this Agreement or (iii) any other Management Agreement of any Borrower shall be terminated or cease to be renewed or extended or shall be amended, restated, modified or supplemented if such termination, failure to renew or extend or amendment, restatement, modification or supplement (either singly or collectively with all other such events relating to other Management Agreements) could have a Material Adverse Effect. (o) Loss of Licenses, Reimbursement Approvals, Etc. There shall be a Limitation of one or more Licenses or Reimbursement Approvals of any Borrower or Borrowers or Persons managed by a Borrower or Borrowers and the Required Lenders shall determine in good faith that such Limitation, and individually or collectively all such Limitations could reasonably be expected to have a Material Adverse Effect. 7.2 CONSEQUENCES OF AN EVENT OF DEFAULT (a) Events of Default in General. If an Event of Default (other than one specified in paragraph (m) of Section 7.1 (Insolvency, Bankruptcy, Etc.) hereof) shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Administrative Agent or any other Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans, the Issuer shall be under no further obligation to issue Letters of Credit hereunder, and the Administrative Agent may, (and upon the written request of the -68- Required Lenders, shall), by notice to Multicare (on behalf of the Borrowers), from time to time do any or all of the following: (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (iii) Direct the Borrowers to pay (and the Borrowers jointly and severally agree that upon receipt of notice they will pay) to the Administrative Agent cash for deposit to the credit of the Letter of Credit collateral account in accordance with Article 1A hereof. (iv) Take any and all actions permitted under the Pledge Agreement or other Loan Documents. (v) Exercise such other remedies as may be available to the Lender Parties under applicable Law. (b) Automatic Acceleration; Certain Bankruptcy-Related Events. If an Event of Default specified in paragraph (m) of Section 7.1 (Insolvency, Bankruptcy, Etc.) hereof shall occur or exist, then, in addition to all other rights and remedies which any Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans and the Issuer shall be under no further obligation to issue Letters of Credit hereunder and the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations including those referred to in clause (iii) of the preceding paragraph (a), shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue, and in addition, the Administrative Agent may, (and upon the written request of the Required Lenders), shall, by notice to Multicare (on behalf of the Borrowers), do one or more of the following: (i) take any and all actions permitted under the Pledge Agreement or any other Loan Document or (ii) exercise such other remedies as may be available to the Lender Parties under applicable Law. (c) Equitable Remedies. It is agreed that, in addition to all other rights hereunder or under Law, the Administrative Agent shall have the right to institute proceedings in equity or other appropriate proceedings for the specific performance of any -69- covenant or agreement made in any of the Loan Documents or for an injunction against the violation of any of the terms of any of the Loan Documents or in aid of the exercise of any power granted in any of the Loan Documents or by Law or otherwise. 7.3 APPLICATION OF PROCEEDS. After the occurrence of an Event of Default and acceleration of the Loans, any amounts received on account of Loan Obligations shall be applied by the Administrative Agent in the following order: First, to payment of that portion of the Loan Obligations constituting fees, indemnities, expenses and other amounts due to the Administrative Agent in its capacity as such; Second, to payment of that portion of the Loan Obligations constituting fees, indemnities (other than those paid pursuant to the preceding clause First) due to the Lender Parties, ratably among them in proportion to the amounts described in this clause Second due to them; Third, to payment of that portion of the Loan Obligations constituting accrued and unpaid interest on Loans and accrued and unpaid interest on Drawings, ratably among the Lender Parties in proportion to the respective amounts described in this clause Third due to them; Fourth, to payment of that portion of the Loan Obligations constituting unpaid principal of the Loans or unreimbursed Drawings ratably among the Lender Parties in proportion to the respective amounts described in this clause Fourth due to them; Fifth, to be deposited in such cash collateral account, if any, as may be required under Article 1A above. Sixth, to payment of all other Loan Obligations, ratably among the Lender Parties in proportion to the respective amounts described in this clause Sixth due to them; and Finally, the balance, if any, after all of the Loan Obligations have been indefeasibly paid in full and all of the Letters of Credit shall have terminated (or funds equal to the amount of any contingent liabilities in respect thereof shall have been deposited in the Letter of Credit cash collateral account), to Multicare (on behalf of the Borrowers) or as otherwise required by Law. -70- ARTICLE 8 - THE ADMINISTRATIVE AGENT 8.1 APPOINTMENT. Each Lender Party hereby irrevocably appoints Mellon to act as Administrative Agent for such Lender Party under this Agreement and the other Loan Documents. Each Lender Party hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender Party under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon hereby agrees to act as Administrative Agent on behalf of the Lender Parties on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 8.9 hereof. Each Lender Party hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Administrative Agent. Each Lender Party agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent (or a Person designated by the Administrative Agent), and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent, if any, expressly provided herein or therein. 8.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any other Loan Document or shall otherwise exist. (b) The duties and responsibilities of the Administrative Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship with respect to any Lender Party. (c) The Administrative Agent's relationship with and to the Lender Parties is governed exclusively by the terms of this Agreement and the other Loan Documents. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, any Lender Party or any other Person or (except only as expressly provided in this Agreement and the other Loan Documents) any other duty or responsibility to such Lender Party or other Person. -71- (d) The Administrative Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Administrative Agent believes in good faith that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified. (e) The authority of the Administrative Agent to request information from the Borrowers or take any other voluntary action hereunder shall impose no duty of any kind on the Administrative Agent to make such request or take any such action. 8.3 EXERCISE OF POWERS. The Administrative Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Administrative Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or as otherwise provided in the Loan Documents). In the absence of such direction, the Administrative Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent that this Agreement or such other Loan Document expressly requires the direction or consent of the Required Lenders (or all of the Lenders, or some other Person or group of Persons), in which case the Administrative Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on each Lender Party (whether or not it so consented). The Administrative Agent shall not have any liability to any Person as a result of any action or inaction in conformity with this Section 8.3. 8.4 GENERAL EXCULPATORY PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) The Administrative Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, except only for direct (as opposed to consequential or other) damages suffered by a Person and only to the extent that such Person proves that such damages were caused by the Administrative Agent's own gross negligence or willful misconduct. (b) The Administrative Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of any Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, any Loan Document, (iii) any failure of any Loan Party or any Lender to perform any of their respective obligations under any Loan Document, (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any Loan Document or otherwise from time to time, or (v) caring for, protecting, insuring, or paying any taxes, charges or assessments with respect to any Collateral or (vi) the enforceability of any subordination. -72- (c) The Administrative Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of any Loan Party, (ii) the business, operations, condition (financial or otherwise) or prospects of any Loan Party or any other Person (even if the Administrative Agent knows or should know that some event or condition exists or fails to exist), or (iii) except to the extent set forth in Section 8.5(f) below, the existence of any Event of Default or Default. (d) The Administrative Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender Party with any notices, reports or information of any nature, whether in its possession presently or hereafter, whether obtained under or in connection with this Agreement or otherwise, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Administrative Agent to such Lender Party. 8.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) The Administrative Agent may consult with legal counsel (including in-house counsel for the Administrative Agent or in-house or other counsel for any Loan Party), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to any Loan Party or Lender Party, such matter may be established by a certificate of such Loan Party or Lender Party, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) The Administrative Agent may fail or refuse to take any action unless it shall be directed by the Required Lenders (or all of the Lenders, or some other Person or -73- group of Persons, if this Agreement or another Loan Document so expressly requires) to take such action and it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Administrative Agent by reason of taking or continuing to take any such action. (e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. (f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Event of Default or Default unless the Administrative Agent has received notice from a Lender Party or a Borrower referring to this Agreement, describing such Event of Default or Default, and stating that such notice is a "notice of default." If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender Party. 8.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS. Each Lender Party acknowledges as follows: (a) neither the Administrative Agent nor any other Lender Party has made any representations or warranties to it, and no act taken hereafter by the Administrative Agent or any other Lender Party shall be deemed to constitute any representation or warranty by the Administrative Agent or such other Lender Party to it; (b) it has, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents; and (c) it will, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. 8.7 INDEMNIFICATION. Each Lender agrees to reimburse and indemnify each Agent and its directors, officers, employees and agents (to the extent not reimbursed by a Loan Party and without limitation of the obligations of the Loan Parties to do so), in proportion to the Lenders' respective pro rata share of (without duplication) the Commitment and the Loans, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including the fees and disbursements of counsel for such Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against such Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, -74- this Agreement, any other Loan Document, any Acquisition or any other transaction from time to time contemplated hereby or thereby, or any transaction actually or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that such Lender Party proves were the result of the gross negligence or willful misconduct of such Agent or such other Person. Payments under this Section 8.7 shall be due and payable on demand. 8.8 HOLDERS OF NOTES. The Administrative Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until a an Assignment and Acceptance with respect to the assignment or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.9 hereof. 8.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the other Lender Parties and Multicare on behalf of the Borrowers. The Administrative Agent may be removed by the Required Lenders at any time for cause by such Required Lenders giving 30 days' prior written notice thereof to the Administrative Agent, the other Lender Parties and Multicare on behalf of the Borrowers. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent with (so long as no Default or Event of Default shall have occurred and then be continuing) the consent of Multicare on behalf of the Borrowers whose consent shall not be unreasonably withheld. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent may (but shall not be required to) appoint a successor Administrative Agent. Each successor Administrative Agent shall be a Lender if any Lender shall at the time be willing to become the successor Administrative Agent, and if no Lender shall then be so willing, then such successor Administrative Agent shall be an Eligible Institution. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent in its capacity as such, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, such Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Loan Party or Lender Party for whose account such payment is made. -75- 8.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT. If the Administrative Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lender Parties, the Administrative Agent and the Borrowers shall (and the Borrowers shall cause the other Loan Parties to) execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable, in the opinion of the Administrative Agent, to constitute one or more other Persons designated by the Administrative Agent, to act as co-Administrative Agent or agent with respect to any part of the Collateral, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such other Person as such co-Agent or separate agent, as the case may be, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. 8.11 CALCULATIONS. The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith and without gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender Party to whom payment was due but not made shall be to recover from the other Lender Parties any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the appropriate Loan Party, to recover such amount from the appropriate Loan Party. 8.12 OTHER AGENTS. (a) In General. The title "Syndication Agent" given to Citicorp USA, Inc. and NationsBank, in this Agreement and the title "Documentation Agent" given to First Union National Bank in this Agreement are solely for identification purposes and imply no rights in favor of such Person and no responsibility by such Person except such rights or obligations of "Agents" (including the right to make certain determinations) as are expressly stated herein. No such Agent shall be liable for any act or failure to act on its part except for that which the claimant proves constitutes the gross negligence or willful misconduct of such Agent. (b) Successor Agents. Any Syndication Agent and the Documentation Agent may resign at any time and such Agents may be removed at any time for cause by the other Agents and Multicare in which event, Multicare (on behalf of the Borrowers) if no Default or Event of Default shall then exist, and the Administrative Agent may (in their sole discretion) appoint a successor Agent. 8.13 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each -76- other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender", "Holder of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, enter into Interest Rate Hedging Agreements with, serve as "Administrative Agent" for other financing vehicles, issue letters of credit on behalf of, and engage in any other business with (a) any Loan Party, or any stockholder, Subsidiary of Affiliate of any Loan Party, or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. -77- ARTICLE 8A SPECIAL INTER-BORROWER PROVISIONS 8A.1 CERTAIN BORROWER ACKNOWLEDGEMENTS. (a) Each Borrower acknowledges that it will enjoy significant benefits from the business conducted by the other Borrowers because of, inter alia, their combined ability to bargain with other Persons including without limitation their ability to receive the credit facilities on favorable terms granted by this Agreement and other Loan Documents which would not have been available to an individual Borrower acting alone. Each Borrower has determined that it is in its best interest to procure credit facilities which each Borrower may utilize directly and which receive the credit support of the other Borrowers as contemplated by this Agreement and the other Loan Documents. (b) The Lenders have advised the Borrowers that they are unwilling to enter into this Agreement and the other Loan Documents and make available the credit facilities extended hereby to any Borrower unless each Borrower agrees, among other things, to be jointly and severally liable for the due and proper payment of the obligations of each other Borrower under this Agreement and other Loan Documents. Each Borrower has determined that it is in its best interest and in pursuit of its purposes that it so induce the Lenders to extend credit pursuant to this Agreement and the other documents executed in connection herewith (i) because of the desirability to each Borrower of the credit facilities, the interest rates and the modes of borrowing available hereunder, (ii) because each Borrower may engage in transactions jointly with other Borrowers and (iii) because each Borrower may require, from time to time, access to funds under this Agreement for the purposes herein set forth. (c) Each Borrower has determined that it has and, after giving effect to the transactions contemplated by this Agreement and the other Loan Documents (including, without limitation, the inter-Borrower arrangement set forth in this Article 8A) will have assets having a fair saleable value in excess of the amount required to pay its probable liability on its existing debts as they fall due for payment and that the sum of its debts is not and will not then be greater than all of its property at a fair valuation, that such Borrower has, and will have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection therewith as such debts mature and that the value of the benefits to be derived by such Borrower from the access to funds under this Agreement (including, without limitation, the inter-Borrower arrangement set forth in this Section 8A) is reasonably equivalent to the obligations undertaken pursuant hereto. 8A.2 CERTAIN INTER-BORROWER AGREEMENTS. (a) Subject to paragraph (b) below, each Borrower as indemnitor shall indemnify the other Borrowers as indemnitees for all Loan Obligations incurred by the indemnitee Borrowers for Loans advanced to, or Letters of Credit issued for the account of, the indemnitor Borrower. -78- (b) The rights and obligations of the Borrowers pursuant to paragraph (a) above shall be subordinated in all respects to the rights of the Administrative Agent and the other Lender Parties with respect to the Loan Obligations and, accordingly, each Borrower agrees that it shall not make any payment or receive any payment pursuant to the preceding paragraph (a) at any time a Default has occurred and is continuing or would be caused thereby. Each Borrower agrees that in the event it receives any payment described by this paragraph (a), it shall accept such payment as agent of the Administrative Agent, for the benefit of the Lender Parties, and hold the same in trust on behalf of and for the benefit of the Administrative Agent, for the benefit of the Lender Parties. 8A.3 RECORDS. Multicare (on behalf of each Borrower) shall maintain records specifying (a) all Loan Obligations incurred by each Borrower, (b) the date of such incurrence, (c) the date and amount of any payments made in respect of such Loan Obligations and (d) all inter-Borrower obligations pursuant to paragraph 8A.2 above. Multicare shall make copies of such records available to the Administrative Agent, upon request. -79- ARTICLE 9 DEFINITIONS; CONSTRUCTION 9.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the following meanings, (terms defined in the singular to have a correlative meaning when used in the plural) unless the context hereof otherwise clearly requires: "Accumulated Funding Deficiency" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Acquisition" means any acquisition by one or more of the Borrowers, directly or indirectly, whether in one transaction or in a series of related transactions (and whether by merger, consolidation, acquisition of assets or otherwise) of all or any substantial portion of the ownership interests in or assets of any separate business enterprise. "Acquisition Corp." means Genesis ElderCare Acquisition Corp., a Delaware corporation. "Acquisition Corp. Credit Agreement" has the meaning ascribed to such term in Section 2.1(v). "Acquisition Cost" means, with respect to any Acquisition, the value in Dollars of the total consideration paid or payable (whether immediate or deferred and whether in cash, equity or other assets) by any of the Borrowers (such consideration including the amount of any Assumed Indebtedness) for or in respect of the ownership interests or assets being acquired in such Acquisition. "Adjusted Senior Debt/Cash Flow Ratio" means as of any date of determination: (a) Adjusted Senior Debt as of such date of determination divided by (b) Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, such date of determination. "Adjusted Senior Debt" means, as of any date of determination, the result of: (a) Adjusted Total Indebtedness, as of such date of determination -80- less (b) the sum of (i) Indebtedness which is evidenced by the 1997 Subordinated Notes, and (ii) any other Indebtedness which is both permitted under the terms of this Agreement and expressly subordinated in right of payment to all Loan Obligations under terms satisfactory to the Administrative Agent. "Adjusted Total Debt/Cash Flow Ratio" means, as of any date of determination, the ratio of: (a) Adjusted Total Indebtedness as of such date of determination divided by (b) Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ended on, or most recently prior to, such date of determination. "Adjusted Total Indebtedness" means, as at any date of determination, the sum of: (a) Total Funded Indebtedness as of such date of determination plus (b) the product of (i) the amount of Rental Expense of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ended on, or most recently prior to, such date of determination multiplied by (ii) eight (8). "Administrative Agent" has the meaning ascribed to such term in the preamble of this Agreement. "Affiliate" of a Person means (a) any other Person which directly or indirectly controls, or is controlled by, or is under common control with, such Person, (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of such Person or of a Person who is an Affiliate of such Person, and (c) any individual related to such Person or Affiliate by consanguinity or adoption within the third degree. For purposes of the preceding sentence, "control" of a Person means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise and (b) in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 5% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person -81- that is not a corporation, 5% or more of any class of equity interest). Excluded Subsidiaries may be "Affiliates" of Multicare. "Agents" means collectively the Administrative Agent, Citicorp USA, Inc., and NationsBank, N.A., each as a Syndication Agent, and First Union National Bank, as Documentation Agent. "Agreement" means this Credit Agreement as the same may be amended, modified, restated or supplemented from time to time in accordance with its terms. "Agreement Date" means the date first-above written. "Amount of Unfunded Benefit Liabilities" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Assignment and Acceptance" shall have the meaning ascribed to such term in Section 10.9. "Assumed Indebtedness" means Indebtedness incurred by a Person which is not a Borrower and which (a) is existing at the time such Person (or assets of such Person) is acquired by a Borrower and (b) is assumed by a Borrower in connection with such Acquisition, other than Indebtedness incurred by the original obligor in connection with, or in contemplation of, such Acquisition. "Available Commitment" means, as of any date, the difference between (a) and (b) where (a) is the amount of the RC Commitment on such date and (b) is the sum of (i) the aggregate outstanding principal amount of all Loans on such date, (ii) the face amount of all outstanding Letters of Credit on such date, (iii) the aggregate unpaid amount of all Drawings under Letters of Credit as of such date, (iv) the aggregate outstanding principal amount of all Swing Loans on such date, (v) the maximum amount necessary to redeem by March 16, 1998, all shares of stock issuable on conversion of Multicare's Convertible Subordinated 7% Debentures outstanding on the date of determination of "Available Commitment," and (v) the maximum amount (including principal, interest, premiums and fees, if any) necessary to repay by January 2, 1998, all of Multicare's Senior Subordinated 12-1/2% Notes outstanding on the date of determination of "Available Commitment." For purposes of clauses (iv) and (v) the phrase "outstanding on the date of determination of "Available Commitment" shall initially be determined with reference to the Officers Certificate delivered by Multicare pursuant to Section 2.1(r) hereof and thereafter shall be determined with reference to updated Officer's Certificates (in the form and with the same level of detail as the Officer's Certificate delivered pursuant to Section 4.1(c) above) which Multicare may deliver to the Administrative Agent from time to time, provided that Multicare shall deliver not more than four (4) such updated Officer's Certificates hereunder. -82- "Bank Taxes" means (i) any Tax based on or measured by net income of a Lender Party, any franchise Tax and any doing business Tax imposed upon any Lender Party by any jurisdiction (or any political subdivision thereof) in which such Lender Party or any lending office of a Lender Party is located and (ii) for the purposes of Section 1.13, any other Tax imposed by a jurisdiction other than the United States or a political subdivision thereof that would not have been imposed but for a present or former connection between such Lender Party or lending office (as the case may be) and such jurisdiction. "Borrowers" has the meaning ascribed to such term in the preamble hereto. It is the intent of the parties (and a covenant of the Borrowers herein) that each Person which is now or hereafter becomes a direct or indirect Subsidiary of Multicare other than Excluded Subsidiaries shall at all times after becoming a Subsidiary of Multicare be a "Borrower" pursuant to the terms of this Agreement. "Business Day" means any day other than a Saturday, Sunday, public holiday under the laws of the Commonwealth of Pennsylvania and the State of New York, or other day on which banking institutions are authorized or obligated to close in the city in which the Administrative Agent's domestic lending office is located. "Capital Expenditures", with respect to any Person, means, for any period, all expenditures (whether paid in cash or accrued as liabilities) of such Person during such period which are, or should be, classified as capital expenditures in accordance with GAAP. "Capitalized Lease" means at any time any lease which is, or should be, capitalized on the balance sheet of the lessee at such time in accordance with GAAP. "Capitalized Lease Obligation" of any Person at any time means the aggregate amount which is, or should be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease in accordance with GAAP. "Cash Equivalent Investments" means any of the following: (i) full faith and credit obligations of the United States of America, or fully guaranteed as to interest and principal by the full faith and credit of the United States of America, maturing in not more than one year from the date such investment is made; (ii) time deposits and certificates of deposit having a final maturity of not more than one year after the date of issuance thereof of any commercial bank incorporated under the laws of the United States of America or any state thereof or the District of Columbia, which bank is a member of the Federal Reserve System and has a combined capital and surplus of not less than $1,000,000,000.00 and with a senior unsecured debt credit rating of at least "A" by Moody's Investors Service, Inc. or "A" by Standard & Poor's Ratings Group; (iii) commercial paper of companies, banks, trust companies or national banking associations (in each case excluding Multicare and its Affiliates) incorporated or doing business under the laws of the United States or one of the States thereof, in each case having a remaining term until maturity of not more than 180 days from the date such investment is made and rated at least P-1 by Moody's Investors Service, -83- Inc. or at least A-1 by Standard & Poor's Ratings Group; and (iv) repurchase agreements with any financial institution having combined capital and surplus of not less than $1,000,000,000.00 with a term of not more than seven days for underlying securities of the type referred to in clause (i) above. "Cash Flow", with respect to any Person, for any period, means (a) Net Income of such Person plus (b) each of the following to the extent deducted in determining Net Income: (i) Interest Expense, (ii) Rental Expense, (iii) depreciation expense, (iv) amortization expense and, (v) income taxes, all as adjusted for changes in accrued management fees under the Multicare Management Agreement, in each case for such period. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than a Permitted Holder (as hereinafter defined), in a single transaction or through a series of related transactions, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, except that a Person shall be deemed a "beneficial owner" of all securities that such Person has a right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than, on a fully diluted basis, 35% of the total Voting Stock of the Genesis ElderCare Corp. (and all rights and options to purchase such Voting Stock) if such beneficial ownership is greater than the amount of voting power of the Voting Stock (and all rights and options to purchase such Voting Stock) of Genesis ElderCare Corp. held by Genesis and its Affiliates on such date; (b) if TPG, Cypress, Nazem and Genesis, collectively, shall cease to own beneficially and of record at least 51% of the shares of each class of capital stock of Genesis ElderCare Corp. (and all rights and options to purchase such shares of capital stock) subject to no Liens; (c) if Genesis ElderCare Corp. at any time fails to own beneficially and of record 100% of the capital stock of Acquisition Corp (and all rights and options to purchase such capital stock); -84- (d) if Acquisition Corp. at any time fails to own beneficially and of record at least 51% of the capital stock of Multicare (and all rights and options to purchase such capital stock); (e) if Multicare at any time fails to own beneficially and of record 100% of the capital stock (and all rights and options to purchase such capital stock) of all the Borrowers (subject to any permitted disposition pursuant to Section 6.5 hereof); (f) if Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party consolidates or merges with or into another corporation or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates or merges with or into Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party, in any such event pursuant to a transaction in which the outstanding Voting Stock of Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party is changed into or exchanged for cash, securities or other property, other than the Merger and other than any such transaction where (i) the outstanding Voting Stock of Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock (as hereinafter defined) or (y) cash, securities or other property in an amount which such party would not be prohibited, under the 1997 Subordinated Note Indenture if then in effect from paying as a "restricted payment" (as defined in such indentures), and (ii) the holders of the Voting Stock of Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party, as the case may be, immediately prior to such transaction own, directly or indirectly, not less than 50% of the Voting Stock of the surviving corporation immediately after such transaction; (g) if during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party (together with any new directors whose election by any such Board of Directors or whose nomination for election by the stockholders of such company was approved by a vote of at least 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; except in the case of a change in the composition of the Board of Directors of Acquisition Corp. or Genesis ElderCare Corp., approved by Genesis in connection with its acquisition of the common stock of Genesis ElderCare Corp. held by Nazem, Cypress and TPG; or -85- (h) if Genesis, Genesis ElderCare Corp., Acquisition Corp., Multicare or any other Loan Party is liquidated or dissolved or adopts a plan of liquidation. For purposes of this definition of "Change of Control," (A) "Voting Stock" shall mean stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency); (B) "Redeemable Capital Stock" of a Person shall mean any capital stock or equity interests that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any stated maturity of the principal of the 1997 Subordinated Notes or is redeemable at the option of the holder thereof at any time prior to any such stated maturity, or is convertible into or exchangeable for debt securities at any time prior to any such stated maturity at the option of the holder thereof; (C) "Board of Directors" of a company shall mean the board of directors of such company or the executive committee of such company; and (D) "Permitted Holder" shall mean (i) Genesis, Cypress and TPG, in the case of Genesis ElderCare Corp., (ii) Genesis ElderCare Corp. in the case of Acquisition Corp., (iii) Genesis ElderCare Corp. or Acquisition Corp. in the case of Multicare, and (iv) Multicare in the case of its Subsidiaries. "Closing Date" means the date that the initial Loans are made hereunder. "COBRA Violation" means any violation of the "continuation coverage requirements" of "group health plans" of former ss.162(k) of the Code (as in effect for tax years beginning on or before December 31, 1988) and of ss.4980B of the Code (as in effect for tax years beginning on or after January 1, 1989) and Part 6 of Subtitle B of Title I of ERISA. "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time, and the Treasury regulations thereunder. "Collateral" means (a) the cash collateral account, if any, in respect of Letters of Credit from time to time and (b) the collateral subject to, or purported to be subject to, the Liens of the Pledge Agreement, from time to time. "Commitment" means, (1) with respect to any Lender, (i) the amount set forth opposite such Lender's name under the heading "Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Commitment assigned to such Lender, in either case as the same may be reduced from time to time pursuant to Section 1.7 or increased or reduced from time to time pursuant to assignments in accordance with Section 10.9 or (ii) as the context may require, -86- the obligation of such Lender to make Loans in an aggregate unpaid principal amount not exceeding such amount pursuant to this Agreement, and with respect to the Issuer, to issue Letters of Credit; and (2) with respect to all Lenders, the sum of each Lender's Commitment. "Contingent Reimbursement Obligation" means the contingent obligation of the Borrowers to reimburse the Issuer for any Drawings that may be made under an outstanding Letter of Credit, whenever issued. Without limiting the generality of the foregoing, the amount of all Contingent Reimbursement Obligations at any time shall be the aggregate amount available to be drawn under outstanding Letters of Credit at such time. "Controlled Group" means a group of employers, of which any Borrower is a member and which group constitutes: (a) A controlled group of corporations (as defined inss.414(b) of the Code); (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in ss.414(c) of the Code); (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in ss.414(m) of the Code); or (d) Any other entity required to be aggregated with any Borrower pursuant to ss.414(o) of the Code. "Cypress" shall mean The Cypress Group L.L.C., a Delaware limited liability company together with (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Cypress" shall include Cypress Associates L.P., Cypress Offshore Partners L.P., Cypress Merchant Banking Partners L.P. and Cypress Advisors Inc. "Default" means any event or condition which with notice, passage of time or both, would constitute an Event of Default. "Default Rate" means, with respect to any amounts payable hereunder or under the other Loan Documents, a rate equal to the sum of (a) two percent (2%) per annum plus (b) the interest rate otherwise in effect with respect to such amounts. "Defined Benefit Pension Plan" means a defined benefit plan (other than a Multiemployer Plan) as defined in ss.3(35) of ERISA which is maintained by any Borrower or any member of its Controlled Group. -87- "Defined Contribution Plan" means an individual account plan (other than a Multiemployer Plan) as defined in ss.3(34) of ERISA which is maintained by any Borrower or any member of its Controlled Group. "Dollar," "Dollars" and the symbol "$" means lawful money of the United States of America. "Drawing" means (a) any amount disbursed by the Issuer pursuant to the terms of a Letter of Credit or (b) as the context may require, the obligation of the Borrowers to reimburse the Issuer for such disbursement. "EBITDA" means Net Income before Interest Expense, provision for income taxes, depreciation and amortization, as adjusted on a pro forma basis for the transactions contemplated by the Multicare Management Agreement. "Eligible Institution" means (i) a Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital surplus of at least $1,000,000,000.00; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital surplus of at least $1,000,000,000.00; (v) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrower or under the laws of a political subdivision of any such country, and having a combined capital and surplus of at least $1,000,000,000.00, so long as such bank is acting through a branch or agency located in the United States; and (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having a combined capital and surplus or total assets of at least $500,000,000.00 and (vii) with respect to any Lender that is a fund, any other fund with assets in excess of $100,000,000.00 that invests in bank loans and is managed by the same investment advisor as such Lender; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Institution under this definition. "Environmental Affiliate" means, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" means any approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, any Governmental Authority pursuant to or required under any Environmental Law. -88- "Environmental Claim" means, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Environmental Concern Materials at any location, whether or not owned by such Person. "Environmental Cleanup Site" means any location which is listed or proposed for listing on the National Priorities List (as established under CERCLA), on CERCLIS or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding or investigation related to or arising from any alleged violation of any Environmental Law. "Environmental Concern Materials" means (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product of any substance specified in or regulated or otherwise affected by any Environmental Law (including but not limited to any "hazardous substance" as defined in CERCLA or any similar state Law), (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polychlorinated biphenyls, radon and urea formaldehyde. "Environmental Law" means any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the manufacture, use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder. "Event of Default" means any of the Events of Default described in Section 7.1 hereof. -89- "Excluded Subsidiaries" means the entities listed on Schedule 9.1 attached hereto and, after the Closing Date, each Subsidiary of any Excluded Subsidiary. "Federal Funds Rate" for any day means the rate per annum determined by the Administrative Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by federal funds brokers on the previous trading day, or, if such Federal Reserve Bank does not announce such rate on any day, the rate for the last day on which such rate was announced. "Fixed Charge Coverage Ratio" means, as of any date of determination, the result of: (a) Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, such date of determination divided by (b) the sum of (i) Interest Expense, income taxes and Rental Expense of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to such date of determination and (ii) principal payments scheduled or required to be made on Total Funded Indebtedness for the four fiscal quarters ending on, or most recently prior to, such date of determination. "GAAP" has the meaning set forth in Section 9.3(a) hereof. "Genesis" has the meaning ascribed to such term in Section 2.1(f) hereof. "Genesis Credit Agreement" has the meaning ascribed to such term in Section 2.1 hereof. "Genesis ElderCare Corp." means the Delaware corporation of that name, formerly named Waltz Corp. "Genesis Group" means Genesis and those of its Subsidiaries which filed tax returns on a consolidated basis with Genesis prior to the acquisition of capital stock of Multicare by Acquisition Corp. under the Tender Offer. "Governmental Authority" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of -90- either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guaranty" means, with respect to any Person (a "Guarantor"), any contractual or other obligation, contingent or otherwise, of such Person to pay any Indebtedness or other obligation of any other Person or to otherwise protect the holder of any such Indebtedness or other obligation against loss (whether such obligation arises by agreement to pay, to keep well, to purchase assets, goods, securities or services or otherwise) provided, however, that the term "Guaranty" shall not include an endorsement for collection or deposit in the ordinary course of business. The term, "Guaranty," when used as a verb has the correlative meaning. "Health Care Business" means any healthcare related business including a facility, unit, operation, or business supplying health care services, supplies or products, including long-term care, rehabilitation therapy, specialized health care, health care management and pharmacies. "Indebtedness" of any Person means (without duplication): (a) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person for the deferred purchase price of property or services; (d) all obligations secured by a Lien on property owned by such Person (whether or not assumed) provided, however, for purposes of determining the amount of such Indebtedness under this clause (d), the amount of any such non-recourse Indebtedness shall be limited to the lesser of (i) the fair market value of the asset subject to such Lien and (ii) the amount of such Indebtedness; (e) all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (f) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; -91- (g) all obligations of such Person with respect to acceptances or similar obligations issued for the account of such Person; (h) all obligations of such Person under a product financing or similar arrangement described in paragraph 8 of FASB Statement of Accounting Standards No. 49 or any similar requirement of GAAP; (i) all obligations of such Person under any Interest Rate Hedging Agreement or any currency protection agreement, currency future, option or swap or other currency hedge agreement; (j) all Guaranties of such Person; and (k) all obligations of such Person under, or in respect of, any Synthetic Leases. Indebtedness shall not include accounts payable to trade creditors arising out of purchases of goods or services in the ordinary course of business, provided that (i) such accounts payable are payable on usual and customary trade terms, and (ii) such accounts payable are not overdue by more than 60 days according to the original terms of sale except (if no foreclosure, distraint, levy, sale or similar proceeding shall have been commenced) where such payments are being contested in good faith by appropriate proceedings diligently conducted and subject to such reserves or other appropriate provisions as may be required by GAAP. "Indemnified Parties" means collectively, the Lender Parties and their respective Affiliates and (without duplication) the directors, officers, employees, attorneys and agents of each of the foregoing. "Indemnitees" has the meaning set forth in Section 10.12 hereof. "Interest Expense" means, for any Person, for any period, the sum (without duplication) of (a) all interest accrued (or accreted) on Indebtedness of such Person during such period whether or not actually paid excluding any obligations under any Synthetic Leases) plus (b) the net amount accrued under any Interest Rate Hedging Agreements (or less the net amount receivable thereunder) during such period. "Interest Rate Hedging Agreement" means any rate swap, cap or collar agreement to which any or all of the Borrowers are party and which is on terms and conditions satisfactory to the Administrative Agent. "Investments" has the meaning set forth in Section 6.3 hereof. -92- "JCAHO" means Joint Commission on Accreditation of Healthcare Organizations. "Joinder Effective Date" means the date that any Joining Subsidiary becomes a Borrower hereunder. "Joinder Supplement" has the meaning ascribed to such term in Section 4.10 hereof. "Joining Subsidiary" has the meaning set forth in Section 4.10 hereof. "Law" means any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lender" has the meaning ascribed to such term in the preamble hereto and shall include the Swing Loan Lender. "Lender Parties" means collectively the Lenders and the Agents. "Letter of Credit" means any letter of credit issued by the Issuer pursuant to Article 1A hereof. "Letter of Credit Participation" means, with respect to any Lender, the participation interest of such Lender in any Letter of Credit acquired pursuant to Article 1A above. The amount of the Letter of Credit Participation of a Lender in any Letter of Credit shall be deemed to be the amount equal to such Lender's pro rata share (determined on the basis of the Commitment at such time) of the sum of (a) the aggregate unpaid amount of all Drawings thereunder at such time and (b) the amount of any Contingent Reimbursement Obligations with respect thereto at such time. "Licenses" means any and all licenses, including provisional licenses, certificates of need, JCAHO and/or other accreditations, permits, franchises, rights to conduct business, approvals by a Governmental Authority or otherwise, consents, qualifications, operating authority, and/or any other authorizations. "Lien" means any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Limitation" means a revocation, suspension, termination, impairment, probation, limitation, non-renewal, forfeiture, declaration of ineligibility, loss of status as a participating provider in a Third Party Payor Arrangement and/or loss of any other rights. -93- "Loans" means RC Loans or Swing Loans or either or both as the context indicates. "Loan Documents" means this Agreement, the Notes, Letters of Credit, the Pledge Agreement, each Joinder Supplement and all other agreements and instruments executed in connection herewith or therewith, in each case as the same may be amended, modified or supplemented from time to time. "Loan Obligations" means all obligations, from time to time, of any Loan Party to any Lender Party or other Indemnified Party under, or arising out of, this Agreement or any Loan Document whether such obligations are direct or indirect, absolute or contingent, due or to become due, now or hereafter arising (specifically including obligations arising or accruing after the commencement of any bankruptcy, insolvency, or similar proceeding with respect to any Loan Party, or which would have accrued but for the commencement of such proceeding even if the claim is not allowed in such proceeding under applicable law). "Loan Parties" means the Borrowers and any other Person who from time to time grants or purports to grant to the Administrative Agent a Lien on any property pursuant to the Pledge Agreement or is a Guarantor of any Loan Obligations. "Management Agreement" means any agreement pursuant to which a Person (or group of Persons) manages the business of another Person (or group of Persons). "Management Fee Subordination Agreement" has the meaning given to such term in Section 2.1 (z) hereof. "Material Adverse Effect" means (a) a material adverse effect on the business, operations, condition (financial or otherwise), properties or prospects of Multicare or of the Borrowers, taken as a whole, or (b) an adverse effect on the legality, validity, binding effect or enforceability of any Loan Document, or the ability of the Administrative Agent or any Lender Party to enforce any rights or remedies under or in connection with any Loan Document. Without limiting the generality of the foregoing, as used in connection with any provisions respecting the ownership or operation of any Health Care Business, Material Adverse Effect may include, among other things, any loss or suspension of a License or Reimbursement Approval for any material nursing home or other material Health Care Business or material group of nursing homes or other material group of Health Care Businesses of the Borrowers, or any event, occurrence or matter or series thereof giving rise to a reasonable probability of any of the foregoing consequences. "Maturity Date" has the meaning ascribed to such term in Section 1.4 hereof. "Mellon" means Mellon Bank, N.A., a national banking association, and any successor or assign thereof. -94- "Merger" means the merger of Acquisition Corp., into Multicare on the terms stated in the Merger Agreement without any change therein or waiver of any provision thereof not approved the Required Lenders. "Merger Agreement" means the Agreement and Plan of Merger dated as of June 16, 1997, among Multicare, Genesis ElderCare Corp. and Acquisition Corp. "Multicare" has the meaning ascribed to such term in the preamble of this Agreement. "Multicare Group" has the meaning ascribed to such term in Section 4.1 hereof. "Multicare Management Agreement" has the meaning ascribed to such term in Section 2.1(f). "Multicare Management Subordination Agreement" means the Subordination Agreement among Genesis, Multicare and the Agents dated of even date herewith whereby Genesis has agreed to subordinate its rights to payments under the Multicare Management Agreement to the extent and on the terms and conditions as set forth in the Multicare Management Subordination Agreement, which such terms and conditions are subject to the Agents' approval. "Multicare Shares" means shares of Multicare common stock, par value $0.01 per share. "Multiemployer Plan" means such term in ss.4001(a)(3) of ERISA. "Nazem" means Nazem, Inc., a Delaware corporation and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Nazem" shall include Genesis ElderCare Portfolio K, L.P. "Net Cash Proceeds" means, with respect to any transaction involving a Borrower, the gross proceeds thereof in the form of cash or cash equivalents, net of the sum of the following (without duplication): (a) payments made to retire obligations (other than to a Borrower) that are attributable to or secured by the properties that are the subject of a sale, assignment or other disposition which is part of the transaction, (b) reasonable brokerage commissions and other reasonable fees and expenses (including reasonable fees and expenses of legal counsel and investment bankers) related to such transaction, and (c) all taxes actually paid or estimated in good faith to be or become payable as a result of such transaction. "Net Cash Provided by Operations" means for any period, the Net Income of the Borrowers on a consolidated basis for such period plus amortization and depreciation -95- expense of the Borrowers for such period plus cash extraordinary gains less Capital Expenditures of the Borrowers for such period (to the extent permitted by this Agreement), all as adjusted for changes in working capital (as determined in accordance with GAAP) of the Borrowers during such period less increases in working capital (or plus decreases in working capital). "Net Income" means, with respect to any Person, for any period the net earnings (or loss) after taxes of such Person for such period less non-cash interest income, less extraordinary gains, plus extraordinary non-cash losses. "1997 Subordinated Note Indenture" means the Indenture, dated as of August 11, 1997 between Acquisition Corp., PNC Bank, National Association as trustee, and Banque Internationale a Luxembourg, S.A., as paying agent, relating to the 1997 Subordinated Notes, as such Indenture may be amended, restated, modified or supplemented from time to time in accordance with the terms of this Agreement. "1997 Subordinated Notes" means Acquisition Corp.'s 9% Senior Subordinated Note issued pursuant to the 1997 Subordinated Note Indenture, in the original principal amount of $250,000,000.00. "Note" means each promissory note of the Borrowers issued to Lender relating to such Lender's RC Loans and Commitments substantially in the form of Exhibit A-1 hereto, together with any allonges thereto, from time to time, and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part, in each case as the same may be amended, modified or supplemented from time to time. "Officer's Compliance Certificate" means a certificate, as of a specified date, of the chief financial officer or controller of Multicare in substantially the form of Exhibit E hereto as to each of the following: (a) the absence of any Event of Default or Default on such date, (b) the truth of the representations and warranties herein and in the other Loan Documents as of such date, and (c) compliance (or if required by the terms of this Agreement respecting the delivery of any such Officer's Compliance Certificate, pro forma compliance after taking account of such acquisitions, dispositions, indebtedness or other events as this Agreement shall direct for such pro forma compliance statement) with the financial covenants set forth in Article 5 and the financial limitations set forth in Sections 6.1(e), 6.2(i), 6.4(b), and 6.7(c). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a pension plan (as defined in ss.3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA or subject to ss.412 of the Code and maintained by any Borrower or any member of its Controlled Group. -96- "Permitted Liens" has the meaning set forth in Section 6.2 hereof. "Person" means an individual, corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Plan" means an employee benefit plan (other than a Multiemployer Plan) as defined in ss.3(3) of ERISA which is either (1) maintained by any Borrower or any member of its Controlled Group, or (2) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which any Borrower or any member of its Controlled Group is then making or accruing an obligation to make contributions or has ever been obligated to make contributions. "Pledge Agreement" has the meaning ascribed to such term in Section 2.1(e) hereof. "Premises" has the meaning set forth in Section 10.12 hereof. "Prime Rate" means the interest rate per annum announced from time to time by the Administrative Agent as its prime rate. The Prime Rate may be greater or less than other interest rates charged by the Administrative Agent to other borrowers. "Prohibited Transaction" has the meaning given to such term in ss.406 of ERISA or ss.4975(c) of the Code. "Quarterly Payment Date" means the last Business Day of each December, March, June and September. "RC Loans" has the meaning ascribed to such term in Section 1.1 hereof. "Regulatory Action" has the meaning set forth in Section 10.12 hereof. "Regulatory Change" means any applicable law, interpretation, directive, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that becomes effective or is implemented or first required or expected to be complied with after the Agreement Date (including any applicable law that shall have become such as the result of any act of omission of the Borrowers or any of their Affiliates, without regard to when such applicable law shall have been enacted or implemented), whether the same is (i) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority or otherwise or (ii) enacted, adopted, issued or proposed before or after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. -97- "Reimbursement Approvals" means, with respect to all Third Party Payor Arrangements, any and all certifications, provider numbers, provider agreements, participation agreements, accreditations (including JCAHO accreditation) and/or any other agreements with or approvals by organizations and Governmental Authorities. "Rental Expense" means, with respect to any Person for any period, the aggregate rental obligations of such Person, payable in respect of any leases (including Synthetic Leases but excluding Capitalized Leases) during such period, but in any case including obligations for taxes, insurance, maintenance and similar costs which the lessee is obligated to pay under the terms of such leases and which are attributable to the leases for such period (whether such amounts are accrued or paid during such period). "Required Lenders" means, as of any date, Lenders (otherwise eligible to vote pursuant to the terms of this Agreement) holding, in the aggregate, at least 51% of the aggregate outstanding Loans, participations in Letters of Credit and available Commitments held by Lenders so eligible to vote. "Reserved Commitment" has the meaning ascribed to such term in Section 1.1. hereof. "Responsible Officer" of a Person means the President, the Secretary, the Chief Executive Officer, any Vice President, the Controller, the Treasurer or the Chief Financial Officer of such Person. "Restricted Subsidiaries" means all direct and indirect Subsidiaries of Multicare at any time, other than Excluded Subsidiaries. "Secured Parties" has the meaning ascribed to such term in the Pledge Agreement. "Subsidiary" of a Person at any time means: (a) any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; (b) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; -98- (c) any partnership, limited liability company, joint venture or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person; or (d) any entity which is consolidated with such Person for financial reporting purposes. "Swing Loan" means an amount advanced by the Swing Loan Lender pursuant to Section 1.3 hereof. "Swing Loan Lender" means Mellon, in its capacity as such. "Swing Loan Note" means the promissory note of the Borrowers issued to the Swing Loan Lender in substantially the form of Exhibit A-2 hereto, together with any allonges thereto from time to time and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or in part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Syndication Agents" has the meaning ascribed to such term in the preamble of this Agreement. "Synthetic Lease" means any lease (other than a Capitalized Lease) wherein the lessee is treated (or purported to be treated) as the owner of the leased property for income tax purposes. "Tax" means any federal, state, local or foreign tax assessment or other governmental charge or levy (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "Tax Sharing Agreement" has the meaning ascribed to such term in Section 2.1(y) hereof. "Tender Offer" means Acquisition Corp.'s offer to purchase the outstanding common shares of Multicare as contained in its "Offer to Purchase for Cash All Outstanding Shares of Common Stock of Multicare Companies" dated June 20, 1997, as extended from time to time. "Third Party Claims" has the meaning set forth in Section 10.12 hereof. -99- "Third Party Payor Arrangements" means any and all arrangements with Medicare, Medicaid, CHAMPUS, and any other Governmental Authority, or quasi-public agency, Blue Cross, Blue Shield, any and all managed care plans and organizations, including but not limited to HMOs and preferred provider organizations, private commercial insurance companies, employee assistance programs and/or any other third party arrangements, plans or programs for payment or reimbursement in connection with health care services, products or supplies. "Total Funded Indebtedness" means the aggregate amount of consolidated Indebtedness (including the current portion thereof), of Multicare and its Restricted Subsidiaries (including without limitation all Indebtedness consisting of Capitalized Lease Obligations, Synthetic Leases, Guaranties and letter of credit reimbursement obligations). "TPG" means TPG Partners II L.P., a Delaware limited partnership and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limitation to the generality of the foregoing, "TPG" shall include TPG Parallel II, L.P., TPG Investors II, L.P. and TPG MC Coinvestment, L.P. "Transaction Documents" means each of the material documents as may exist on the date that the Tender Offer is consummated with such changes thereto as are permitted by the terms of this Agreement respecting (i) the Tender Offer, (ii) the proposed merger between the Acquisition Corp. and Multicare, (iii) the relationship between Genesis, Cypress, Nazem and TPG and the rights and obligations relating thereto and (iv) related matters including the Put/Call Agreement and the Stockholders Agreement respecting Genesis ElderCare Corp., the Merger Agreement and the Multicare Management Agreement. "United States Person" has the meaning ascribed to such term in Section 1.13 hereof. "Withdrawal Liability" has the meaning given to such term in ss.4201 of ERISA. 9.2 CONSTRUCTION. In this Agreement and each other Loan Document, unless the context otherwise clearly requires, (a) references to the plural include the singular, the singular the plural and the part the whole; (b) "or" has the inclusive meaning represented by the phrase "and/or;" (c) the terms "property" and "assets" each include all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed, now existing or hereafter acquired; -100- (d) the words "hereof," "herein" and "hereunder" (and similar terms) in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document; (e) the words "includes" and "including" (and similar terms) in this Agreement or any other Loan Document mean "includes, without limitation" and "including, without limitation," respectively whether or not stated; and (f) references to "determination" (and similar terms) by any Lender Party include good faith estimates by such Lender Party (in the case of quantitative determinations) and good faith beliefs by such Lender Party (in the case of qualitative determinations). No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting thereof shall apply to this Agreement or any other Loan Document. The section and other headings contained in this Agreement and in each other Loan Document, and any tables of contents contained herein or therein, are for reference purposes only and shall not affect the construction or interpretation of this Agreement or such other Loan Document in any respect. Whenever this Agreement requires the delivery of financial projections, it is understood that the projections shall be made in good faith, consistent with the Loan Documents and based on Multicare's reasonable judgment as to the anticipated financial performance and results of operations. However, any such financial projections shall not constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. 9.3 ACCOUNTING PRINCIPLES. (a) As used herein, "GAAP" shall mean generally accepted accounting principles (other than as set forth herein as to consolidation) in the United States, applied on a basis consistent with the principles used in preparing the financial statements of Multicare and its consolidated Subsidiaries as of December 31, 1996 and for the fiscal year then ended. When the word "consolidated" is used in this Agreement, it shall be used in a manner consistent with generally accepted accounting principles in the United States except that such principals relating to what entities shall be consolidated shall be superseded by any terms of this Agreement which designate what entities shall be consolidated for purposes relating hereto. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. -101- ARTICLE 10 - MISCELLANEOUS 10.1 NOTICES. Unless otherwise expressly provided under this Agreement all notices, requests, demands, directions and other communications (collectively "notices") given to or made upon any party under the provisions of this Agreement (and unless otherwise specified, in each other Loan Document) shall be by telephone (immediately confirmed in writing) or in writing (including facsimile communication) and if in writing shall be delivered by hand, nationally recognized overnight courier or U.S. mail or sent by facsimile to the respective parties at the addresses and numbers set forth under their respective names on the signature pages of this Agreement or in accordance with any subsequent unrevoked written direction from any party to the others. All notices shall, except as otherwise expressly provided in this Agreement, be effective (a) in the case of facsimile, when received, (b) in the case of hand-delivered notice, when hand delivered, (c) in the case of telephone, when telephoned, provided, however, that in order to be effective unless otherwise expressly provided, telephonic notices must be confirmed in writing no later than the next day by letter or facsimile, (d) if given by U.S. mail, the day after such communication is deposited in the mails with overnight first class postage prepaid, return receipt requested, and (e) if given by any other means (including by air courier), when delivered; provided, further, that notices to the Administrative Agent shall not be effective until received. Any Lender giving any notice to the Borrowers shall simultaneously send a copy of such notice to the Administrative Agent, and the Administrative Agent shall promptly notify the other Lenders of the receipt by it of any such notice. Except as otherwise provided in this Agreement, in the event of a discrepancy between any telephonic or written notice, the written notice shall control. 10.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein except as expressly provided otherwise (e.g., certain fee agreements and fee arrangements set forth in the commitment letter relating hereto). This Agreement and the other Loan Documents represent the entire agreement between the parties to this Agreement with respect to the transactions contemplated hereby or thereby and, except as expressly provided herein or in the other Loan Documents, shall not be affected by reference to any other documents. 10.3 SEVERABILITY. Every provision of this Agreement and each of the other Loan Documents is intended to be severable, and if any term or provision of this Agreement or any of the other Loan Documents shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, be deemed -102- amended to modify or delete, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it or them valid and enforceable to the maximum extent permitted by applicable Law, without in any manner affecting the validity or enforceability of such provision or provisions in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 10.4 DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not affect the meaning or construction of any of the provisions of this Agreement. 10.5 GOVERNING LAW. This Agreement and the rights and obligations of the parties under this Agreement and under the other Loan Documents shall be construed in accordance with and shall be governed by the laws of the Commonwealth of Pennsylvania. 10.6 NON-MERGER OF REMEDIES. The covenants and obligations of the Borrowers and the rights and remedies of the Administrative Agent and other Lender Parties hereunder and under the other Loan Documents shall not merge with or be extinguished by the entry of a judgment hereunder or thereunder, and such covenants, obligations, rights and remedies shall survive any entry of a judgment until payment in full of the Loan Obligations and termination of the Commitment. All obligations under the Loan Documents shall continue to apply with respect to and during the collection of amounts due under the Loan Documents or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms of this Agreement or of any rights under this Agreement or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings. Without limiting the generality of the foregoing, post-judgment interest rate shall be the interest rate provided in paragraph (c) of Section 1.8 (Default Rate) above. 10.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and no delay or failure of the Administrative Agent or any other Lender Party in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent and the other Lender Parties under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any other Lender Party would otherwise have hereunder or thereunder, at law, in equity or otherwise. Any waiver of a specific default made in accordance with Section 10.8 below shall be effective only as to such specific default and shall not apply to any subsequent default. -103- 10.8 AMENDMENTS; WAIVERS. Any term, covenant, agreement or condition of any Loan Document to which the Lenders (or the Administrative Agent) are party may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver is in writing and is signed by the Required Lenders (or by the Administrative Agent at the direction of the Required Lenders); provided, however, if the rights and duties of the Administrative Agent are affected thereby, such amendment or waiver must be executed by the Administrative Agent; and provided, further, that any amendment or waiver of the terms of Article 1A hereof or any other amendment or waiver that relates to Letters of Credit or rights or obligations relating thereto or the rights or obligations of the Issuer must also be executed by the Issuer; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by each Lender referred to below, if it would (a) increase such Lender's Commitment or the outstanding amount of such Lender's Loans or Letters of Credit Participation, or (b) extend the maturity of any Loan held by such Lender or the time of any scheduled principal payment of any Loan of such Lender, or (c) decrease the rate of interest or amount of fees due to such Lender, or decrease the principal amount in respect of any Loan held by such Lender or extend the time of payment of interest or fees due to such Lender, provided that the written consent of the Required Lenders, rather than the consent of all Lenders, shall be sufficient to waive imposition of the Default Rate, or (d) reduce or waive any payment owing to such Lender in respect to any unreimbursed Drawings; or (e) change the number of Lenders which are required to consent to any proposed action under this Agreement before such action may be taken under this Agreement if such change could cause such Lender to lose its right to participate in such consent; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by all the Lenders if it would (i) amend the definition of "Required Lenders" or (ii) release any Borrower of its Obligations or release any guaranty or collateral security granted pursuant to the Loan Documents; provided, however, the Administrative Agent may, without the consent of any Person, release any Borrower, guarantor or collateral security granted pursuant to the Loan Documents, (A) as a court of competent jurisdiction may direct, or (B) in connection with a disposition permitted under Section 6.5 above (other -104- than a disposition to another Borrower) or as may be otherwise provided under the Loan Documents and provided, further, that for purposes of determining whether "all Lenders", "the Required Lenders" or "any Lender" has consented to any amendment or waiver, no effect shall be given to the determination of any Lender who has lost its right to vote pursuant to Sections 1.3(c), 1.3(e)(iii), or 1.6(e). Without limiting the generality of the foregoing, the Administrative Agent is authorized and directed to take such action as it deems necessary or desirable (including, without limitation, the execution and filing of UCC-3 termination statements or the giving of direction to another Person to do the same) to release any security interest referred to in the proviso to this clause (ii). Further, the Administrative Agent and the Lenders may amend or modify the provisions of Article 8 hereof (except for Section 8.9 (Successor Administrative Agent) and Section 8.12(b) (Successor Agent)) without the need for any consent or approval from the Borrowers, it being acknowledged that the Borrowers are not third party beneficiaries of the provisions of said Article 8 (except for Section 8.9 (Successor Administrative Agent) and Section 8.12(b) (Successor Agent)) and (y) without the consent of any Lenders, the Administrative Agent may enter into amendments and modifications to this Agreement and the other Loan Documents as necessary or desirable to cure any ambiguities herein or therein or to add additional borrowers or add additional Collateral. 10.9 SUCCESSORS AND ASSIGNS (a) Assignments by the Borrowers. Without the prior written consent of all of the Lenders, no Borrower may assign any of its rights or delegate any of its duties or obligations under this Agreement or any other Loan Document. (b) Participations. Any Lender may sell participations to one or more Eligible Institutions of all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment); provided, however, that, with respect to any Lender, (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties to this Agreement for the performance of such obligations, (iii) all amounts payable by the Borrowers under this Agreement shall be determined as if such transferor Lender had not sold such participation and no participant shall be entitled to receive any greater amount pursuant to this Agreement than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred, (iv) such participant shall agree to be bound by the provisions of this Agreement and the other Loan Documents, and (v) with respect to any sale of a participation hereunder, such Lender shall contemporaneously sell to the same participant a proportionately equal amount of its interest in the Acquisition Corp. Credit Agreement, the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such transferor Lender in connection with such Lender's rights -105- and obligations under this Agreement, and such Lender shall retain the sole rights and responsibility vis-a-vis the Borrowers to enforce the obligations of the Borrowers relating to the Loans and Letters of Credit including the right to approve any amendment, modification or waiver of any provision of this Agreement (except that such Lender may give its participants the right to direct such Lender to approve or disapprove any amendment, modification or waiver which would require such Lender's consent under clause (a), (c), (i) or (ii) of the preceding Section 10.8). (c) Assignments by Lenders. Each Lender may assign to one or more Eligible Institutions all or a portion of its interest, rights and obligations under this Agreement (including all or a portion of its Commitment) and the other Loan Documents; provided, however, that with respect to any assignment, (i) unless the assignee is (prior to the effective time of the assignment) an existing Lender or an Affiliate of an existing Lender, the Administrative Agent and, if no Event of Default has occurred and is continuing, Multicare (on behalf of the Borrowers) must give their prior written consent to such assignment (which consents shall not be unreasonably withheld), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent and, unless an Event of Default has occurred and is continuing Multicare (on behalf of the Borrowers), for their acceptance, an Assignment and Acceptance Agreement in substantially the form of Exhibit F hereto (the "Assignment and Acceptance"), together with (A) any Note subject to such assignment, and (B) a processing and recordation fee of $3,500.00 or such lesser amount as is required for the Administrative Agent to receive an aggregate amount equal to $3,500.00 under this Agreement and the Acquisition Corp. Credit Agreement in respect of such transfer, (iii) with respect to any assignment of or interest hereunder, such Lender shall contemporaneously assign to the same assignee a proportionately equal amount of its interest in the Acquisition Corp. Credit Agreement, (iv) no Lender may make a partial assignment if the amount of its portion of the Commitment and (without duplication) the outstanding Loans, together with the amount of its interest under the Acquisition Corp. Credit Agreement assigned in accordance with clause (vi) below is, or after giving effect to the proposed assignment would be, less than Ten Million Dollars ($10,000,000.00), (v) unless the assignee is (prior to the effective time of the assignment) a Lender hereunder, the aggregate amount of any interest so sold to any assignee pursuant to any partial assignment hereunder, together with the aggregate amount so sold to such assignee in accordance with clause (vi) below may not be less than Ten Million Dollars ($10,000,000.00), and (vi) with respect to any assignment of an interest hereunder, the assigner shall contemporaneously assign to the same assignee a proportionately equal amount of its interest under the Acquisition Corp. Credit Agreement. "Partial assignment" as used in clauses (iv) and (v) above means any assignment of a Lender's rights and obligations hereunder except an assignment of all of such Lender's rights and obligations such that after the assignment such Lender shall have no Commitment and no interest in any Loans or Letters of Credit hereunder. Upon compliance with clauses (i) through (vi) above, from and after the effective date specified in the relevant Assignment and Acceptance, (x) the assignee shall be a party to this Agreement and the other Loan Documents to which the assignor was a party, and to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and under -106- the other Loan Documents and (y) the assigning Lender shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents. (d) Procedures Respecting Assignment. Upon their receipt of an Assignment and Acceptance executed by the assignor and the assignee, subject to the conditions set forth in the preceding paragraph (c), the Administrative Agent and (unless an Event of Default shall have occurred and be continuing) Multicare (on behalf of the Borrowers) shall accept such Assignment and Acceptance. Within thirty (30) Business Days after such Assignment and Acceptance is signed and accepted by all parties, the Borrowers, at their own expense, shall execute and deliver to the Administrative Agent new Notes in exchange for the surrendered Notes, each to the order of such assignee in an amount equal to its portion of the Commitment and Loans assigned to it pursuant to such Assignment and Acceptance and new Notes to the order of the assigning Lender in an amount equal to the Commitment and Loans retained by it. Such Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the date of such surrendered Notes (each assignee shall confirm in the Assignment and Acceptance that, notwithstanding the date of the new Notes made in favor of such assignee, such assignee shall have no right to, or interest in, any fees or interest which shall have accrued on the Loans prior to the effective date of the Assignment and Acceptance). Cancelled or replaced Notes shall be returned to the Borrowers upon the execution of such new Notes. (e) Assignments to Federal Reserve Bank. Notwithstanding any of the terms of this Section 10.9, without consent of Administrative Agent or Borrower any Lender may assign all or any portion of its rights to payments in connection with this Agreement to a Federal Reserve Bank as collateral in accordance with Regulation A of the Board of Governors of the Federal Reserve System. Such assignment shall not affect any other rights or any obligations of the assigning Lender. 10.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES. Any Loan Document may be executed in one or more counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument. Delivery of a photocopy or telecopy of an executed counterpart of a signature page to any Loan Document shall be as effective as delivery of a manually executed counterpart of such Loan Document. 10.11 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision contained in this Agreement or the Notes or any other Loan Document, the total liability of the Borrowers for payment of interest pursuant to this Agreement and the Notes shall not exceed the maximum amount of such interest permitted by Law to be charged, collected, or received from the Borrowers, and if any payment by the Borrowers includes interest in excess of such a maximum amount, each Lender shall apply such excess to the reduction of the unpaid principal amount due pursuant to this Agreement and the Notes, or if none is due, -107- to the other Loan Obligations, if any, and then such excess shall be refunded to Multicare (on behalf of the Borrowers). 10.12 INDEMNIFICATION. (a) Whether or not any fundings are made under this Agreement, the Borrowers jointly and severally shall unconditionally upon demand, pay or reimburse the Administrative Agent and other Lender Parties for, and indemnify and save the Administrative Agent, the other Lender Parties and their respective Affiliates, officers, directors, employees, agents, attorneys, shareholders and consultants (collectively, "Indemnitees") harmless from and against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnitee as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any Acquisition or transaction from time to time contemplated hereby or by any other Loan Document, the Tender Offer, the Merger, or any transaction actually or proposed to be financed in whole or in part or directly or indirectly with the proceeds of any Loan pr Letter of Credit, any transaction contemplated by the Transaction Documents but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that the Borrower proves were the result solely of the gross negligence or willful misconduct of such Indemnitee, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrowers under this paragraph (a), or any other indemnification obligation of the Borrowers hereunder or under any other Loan Document are unenforceable for any reason, the Borrowers hereby agree, jointly and severally, to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. (b) Without limiting the generality of the foregoing, the Borrowers jointly and severally hereby indemnify and agree to defend and hold harmless each Indemnitee, from and against any and all claims, actions, causes of action, liabilities, penalties, fines, damages, judgments, losses, suits, expenses, legal or administrative proceedings, interest, costs and expenses (including court costs and attorneys', consultants' and experts' fees) arising out of or in any way relating to: (i) the use, handling, management, production, treatment, processing, storage, transfer, transportation, disposal, release or threat of release of any Environmental Concern Material by or on behalf of, any Borrower or any of its Environmental Affiliates; (ii) the presence of Environmental Concern Materials on, about, beneath or arising from any premises owned or occupied by any Borrower or any of its Environmental Affiliates (herein collectively, the "Premises"); (iii) the failure of any Borrower or Environmental Affiliate of a Borrower or any occupant of any Premises to comply with the Environmental Laws; (iv) any Borrower's breach of any of the representations, warranties and covenants contained herein or in any Loan Documents; (v) -108- Regulatory Actions (as hereinafter defined) and Third Party Claims (as hereinafter defined); or (vi) the imposition or recording of a Lien against any Premises in connection with any release at, on or from any Premises or any activities undertaken on or occurring at any Premises, or arising from such Premises or pursuant to any Environmental Law. The Borrowers' indemnity and defense obligations under this section shall include, whether foreseeable or unforeseeable, any and all costs related to any remedial action. "Regulatory Action" means any notice of violation, citation, complaint, request for information, order, directive, compliance schedule, notice of claim, consent decree, action, litigation or proceeding brought or instituted by any governmental authority under or in connection with any Environmental Law involving any Borrower or any occupant of any of the Premises or involving any of the Premises or any activities undertaken on or occurring at any Premises. "Third Party Claims" means claims by a party (other than a party to this Agreement and other than Regulatory Actions) based on negligence, trespass, strict liability, nuisance, toxic tort or detriment to human health or welfare due to Environmental Concern Materials on, about, beneath or arising from any Premises or in any way related to any alleged violation of any Environmental Laws or any activities undertaken on or occurring at any Premises. (c) The indemnities contained herein shall survive repayment of the Loan Obligations, termination of the Commitment and satisfaction, release, and discharge of the Loan Documents, whether through full payment of the Loans, foreclosure, deed in lieu of foreclosure or otherwise. (d) The foregoing amounts are in addition to any other amounts which may be due and payable to the Administrative Agent and/or the Lenders under this Agreement. A certification by the Administrative Agent or a Lender hereunder of the amount of liabilities, losses, costs, expenses, claims and/or charges shall be conclusive, absent manifest error. 10.13 EXPENSES (a) Whether or not there shall be any funding hereunder, the Borrowers agree, jointly and severally, to pay promptly or cause to be paid promptly and to hold harmless: (i) with respect to matters relating to clause (A) of this paragraph (i), the Agents, and with respect to matters relating to (B) and (C) of this paragraph (i), the Administrative Agent (and after an Event of Default and for the period in which the same shall continue, each Lender Party) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to (A) the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents (B) the administration and performance of this Agreement and the other Loan Documents, and (C) any requested amendments, -109- modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any other Loan Documents; (ii) the Administrative Agent (and, with respect to clause (D) below, after an Event of Default and for the period in which the same shall continue, each Lender Party), against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to the enforcement or preservation of rights under, or administration of, this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) the creation, perfection or protection of any Lien on any Collateral, (B) the protection, collection, lease, sale, taking possession of, preservation of, or realization on, any Collateral, including advances for storage, insurance premiums, transportation charges, taxes, filing fees and the like, (C) collection or enforcement of an outstanding Loan Obligation, and (D) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the other Loan Documents); and (iii) each Lender Party against liability for all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by any Lender Party to be payable in connection with this Agreement or any other Loan Documents. 10.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY. To the extent that applicable Law otherwise would render the full amount of the joint and several obligations of any Subsidiary of Multicare hereunder and under the other Loan Documents invalid or unenforceable, such Borrower's obligations hereunder and under the other Loan Documents shall be limited to the maximum amount which does not result in such invalidity or unenforceability, provided, however, that each Borrower's obligations hereunder and under the other Loan Documents shall be presumptively valid and enforceable to their fullest extent in accordance with the terms hereof or thereof, as if this Section 10.14 were not a part of this Agreement. 10.15 AUTHORIZATION OF MULTICARE BY OTHER BORROWERS. (a) Each of the Borrowers hereby irrevocably authorizes Multicare to give notices, make requests, make payments, receive payments and notices, give receipts and execute agreements, make agreements or take any other action whatever on behalf of such Borrower under and with respect to any Loan Document and each Borrower shall be bound thereby. This authorization is coupled with an interest and shall be irrevocable, and the Administrative Agent and each Lender Party may rely on any notice, request, information supplied by Multicare and every document executed by Multicare, agreement made by Multicare or other action taken by Multicare in respect of the Borrowers or any thereof as if the same were supplied, made or taken by any or all Borrowers. Without limiting the generality of the foregoing, the failure of one or more Borrowers to join in the execution of any writing in -110- connection herewith shall not, unless the context clearly requires, relieve any such Borrower from obligations in respect of such writing. The Borrowers acknowledge that the credit provided hereunder is on terms more favorable than any Borrower acting alone would receive and that each Borrower benefits indirectly from all Loans and Letters of Credit hereunder. Multicare and, subject only to the terms of the preceding paragraph (a), each of the other Borrowers, shall be jointly and severally liable for all Loan Obligations, regardless of, inter alia, which Borrower requested (or received the proceeds of) a particular Loan. 10.16 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender," "Holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, serve as "Administrative Agent" for other financing vehicles, issue letters of credit on behalf of, and engage in any other business with, (a) any Loan Party or any stockholder, Subsidiary or Affiliate of any Loan Party or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. 10.17 CERTAIN WAIVERS BY BORROWERS. Each Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Loan Obligations and any requirement that any Lender Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any other Borrower or any other Person or any collateral or other direct or indirect security for any of the Loan Obligations. Without limiting the generality of the foregoing, each Borrower acknowledges and agrees that the Administrative Agent or other Lender Party may commence an action against such Borrower whether or not any action is brought against any other Borrower or against any collateral and it shall be no defense to any action brought against any Borrower that the Lender Parties have failed to bring an action against any other Loan Party or any Collateral. 10.18 SET-OFF. The Borrowers hereby agree that, to the fullest extent permitted by Law, if any Loan Obligation shall be due and payable (by acceleration or otherwise), each Lender Party shall have the right, without notice to any Borrower, to set-off against and to appropriate and apply to such Loan Obligation any indebtedness, liability or obligation of any nature owing to any Borrower by such Lender Party, including but not limited to all deposits now or hereafter maintained by any Borrower with such Lender Party. Such right shall exist whether or not such Lender Party or any other Person shall have given notice or made any demand to any Borrower or any other Person. The Borrowers hereby agree that, to the -111- fullest extent permitted by Law, any participant and any Affiliate of any Lender Party or any participant shall have the same rights of set-off as a Lender Party as provided in this Section 10.18. The rights provided by this Section 10.18 are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender Party (or any such participant, or Affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise. 10.19 SHARING OF COLLECTIONS. The Lender Parties hereby agree among themselves that if any Lender Party shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loan Obligations in greater proportion than any such amount received by any other Lender Party (based on the relative amount of each such Lender Party's interest in the Loan Obligations), then the Lender Party receiving such proportionately greater payment shall notify each other Lender Party and the Administrative Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section 10.19 so that, in effect, all such excess amounts will be shared ratably among all of the Lender Parties. The Lender Party receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lender Parties a participation in the applicable Loan Obligations owed to such other Lender Parties in such amount as shall result in a ratable sharing by all Lender Parties of such excess amount (and to such extent the receiving Lender Party shall be a participant). If all or any portion of such excess amount is thereafter recovered from the Lender Party making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender Party making such purchase. The Borrowers hereby consent to and confirm the foregoing arrangements. Each participant shall be bound by this Section 10.19 as fully as if it were a Lender hereunder. 10.20 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL. (a) Consent to Jurisdiction. For the purpose of enforcing payment and performance of the Loan Documents, including, any payment under the Notes and performance of other obligations under the Loan Documents, or in any other matter relating to, or arising out of, the Loan Documents, each of the Borrowers hereby consents to the jurisdiction and venue of the courts of the Commonwealth of Pennsylvania or of any federal court located in such state, waive personal service of any and all process upon it and consents that all such service of process be made by certified or registered mail directed to Multicare (on behalf of the applicable Borrowers) at the address provided for in Section 10.1 and service so made shall be deemed to be completed upon actual receipt or execution of a receipt by any Person at such address. Each of the Borrowers hereby waives the right to contest the jurisdiction and venue of the courts located in the Commonwealth of Pennsylvania on the ground of inconvenience or otherwise and, further, waives any right to bring any action or proceeding against (a) the Administrative Agent in any court outside the -112- Commonwealth of Pennsylvania, or (b) any other Lender other than in a state within the United States designated by such Lender. The provisions of this Section 10.20 shall not limit or otherwise affect the right of the Administrative Agent or any other Lender Party to institute and conduct an action in any other appropriate manner, jurisdiction or court. (b) WAIVER OF JURY TRIAL; DAMAGES. NEITHER ANY LENDER PARTY NOR ANY LOAN PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF THE FOREGOING SHALL SEEK A JURY TRIAL IN ANY PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, OR INVOLVING ANY COLLATERAL OR ANY GUARANTY RELATING TO THE INDEBTEDNESS HEREUNDER OR THE RELATIONSHIP BETWEEN OR AMONG SUCH PERSONS OR ANY OF THEM. NO SUCH PERSON WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT WAIVES ANY RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION 10.20 ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS AGREEMENT (i) CERTIFIES THAT NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER PARTY NOR ANY REPRESENTATIVE, OR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR SUCH LENDER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH (b) OF SECTION 10.20. THE PROVISIONS OF THIS SECTION 10.20 HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND THE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 10.20 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. -113- Agents and Lenders: MELLON BANK, N.A., as a Lender and as Administrative Agent By ---------------------------------- Name: Title: Address for notices: street address: AIM 199-5220 Mellon Independence Center 701 Market Street Philadelphia, Pennsylvania 19106 mailing address: AIM 199-5220 P.O. Box 7899 Philadelphia, Pennsylvania 19101-7899 Attention: Linda Sigler, Loan Administration Telephone: 215-553-4583 Facsimile: 215-553-4789 With a copy to Plymouth Meeting Executive Campus 610 W. Germantown Pike, Suite 200 Plymouth Meeting, Pennsylvania 19462 Attention: Barbara J. Hauswald Vice President Telephone: 610-941-8612 Facsimile: 610-941-4136 -114- Domestic Lending Office: CITICORP, USA, INC., as a Lender and as Syndication Agent By --------------------------------------- Name: Title: Address for notices: 399 Park Avenue 8th Floor New York, NY 10043 Attention: Margaret A. Brown Telephone: 212-559-0501 Facsimile: 212-793-3053 -115- FIRST UNION NATIONAL BANK, as a Lender and as Documentation Agent By --------------------------------------- Name: Title: Address for notices: One First Union Center TW-5 Charlotte, NC 28288-0735 Attention: Mr. Joseph H. Towell Telephone: 704-383-3844 Facsimile: 704-374-4092 NATIONSBANK, N.A., as a Lender and as a Syndication Agent By --------------------------------------- Name: Title: Address for notices: 1 Nationsbank Plaza 5th Floor Nashville, TN 37239 Attention: Scott Ward Telephone: Facsimile: 615-749-4640 -116- BORROWERS: THE MULTICARE COMPANIES, INC., a Delaware corporation By____________________________ Name: James V. McKeon Title: Vice President, Controller and Assistant Secretary Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 ADS APPLE VALLEY LIMITED PARTNERSHIP, a Massachusetts limited partnership, by: ADS Apple Valley, Inc. its General Partner ADS DARTMOUTH GENERAL PARTNERSHIP, a Massachusetts general partnership, by ADS Dartmouth ALF, Inc. and ADS Senior Housing, Inc., its General Partners ADS HINGHAM LIMITED PARTNERSHIP, a Massachusetts limited partnership, by ADS Hingham Nursing Facility, Inc., its General Partner ADS RECUPERATIVE CENTER LIMITED PARTNERSHIP, a Massachusetts limited partnership, by ADS Recuperative Center, Inc., its General Partner CARE 4, L.P., a Delaware limited partnership, by Institutional Health Care Services, Inc., its General Partner CARE HAVEN ASSOCIATES LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc. and GMA Partnership Holding Company, Inc., its General Partners --------------------- Initials of Signor -117- CUMBERLAND ASSOCIATES OF RHODE ISLAND, L.P., a Delaware limited partnership, by Health Resources of Cumberland, Inc., its General Partner GLENMARK PROPERTIES I, LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc. and GMA Partnership Holding Company, Inc., its General Partners GROTON ASSOCIATES OF CONNECTICUT, L.P., a Delaware limited partnership, by Health Resources of Groton, Inc., its General Partner MIDDLETOWN (RI) ASSOCIATES OF RHODE ISLAND, L.P., a Delaware limited partnership, by Health Resources of Middletown (R.I.), Inc., its General Partner POINT PLEASANT HAVEN LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner RALEIGH MANOR LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner ROMNEY HEALTH CARE CENTER LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner SISTERVILLE HAVEN LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner TEAYS VALLEY HAVEN LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner THE STRAUS GROUP - HOPKINS HOUSE, L.P., a New Jersey limited partnership, by Encare of Wyncote, Inc., its General Partner THE STRAUS GROUP - QUAKERTOWN MANOR, L.P., a New Jersey limited partnership, by Encare of Quakertown, Inc., its General Partner WALLINGFORD ASSOCIATES OF CONNECTICUT, L.P., a Delaware limited partnership, by Health Resources of Wallingford, Inc., its General Partner WARWICK ASSOCIATES OF RHODE ISLAND, L.P., a Delaware limited partnership, by Health Resources of Warwick, Inc., its General Partner Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 By:__________________________ On behalf of each of the foregoing as Vice President, Controller and Assistant Secretary of the General Partner -118- HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P., a Delaware limited partnership, by Encare of Mendham, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P., a Delaware limited partnership, by Breyut Convalescent Center, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager POMPTON ASSOCIATES, L.P., a New Jersey limited partnership, by Pompton Corp., L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager THE STRAUS GROUP - OLD BRIDGE, L.P., a New Jersey limited partnership, by Health Resources of Emery, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager THE STRAUS GROUP - RIDGEWOOD, L.P., a New Jersey limited partnership, by Health Resources of Ridgewood, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager By:__________________________ On behalf of each of the foregoing as Vice President, Controller and Assistant Secretary of the manager Address for notices: 149 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -119- ACADEMY NURSING HOME, INC., a Massachusetts corporation ADS APPLE VALLEY, INC., a Massachusetts corporation ADS CONSULTING, INC., a Massachusetts corporation ADS DANVERS ALF, INC., a Delaware corporation ADS DARTMOUTH ALF, INC., a Delaware corporation ADS HINGHAM ALF, INC., a Delaware Corporation ADS HINGHAM NURSING FACILITY, INC., a Massachusetts corporation ADS HOME HEALTH, INC., a Delaware corporation ADS MANAGEMENT, INC., a Massachusetts corporation ADS/MULTICARE, INC., a Delaware corporation ADS RECUPERATIVE CENTER, INC., a Massachusetts corporation ADS SENIOR HOUSING, INC., a Massachusetts corporation ADS VILLAGE MANOR, INC., a Massachusetts corporation ANR, INC., a Delaware corporation APPLEWOOD HEALTH RESOURCES, INC., a Delaware corporation AUTOMATED PROFESSIONAL ACCOUNTS, INC., a West Virginia corporation BERKS NURSING HOMES, INC., a Pennsylvania corporation BETHEL HEALTH RESOURCES, INC., a Delaware corporation BRIGHTWOOD PROPERTY, INC., a West Virginia corporation CENTURY CARE CONSTRUCTION, INC., a New Jersey corporation CENTURY CARE MANAGEMENT, INC., a Delaware corporation CHATEAU VILLAGE HEALTH RESOURCES, INC., a Delaware corporation CHG INVESTMENT CORP., INC., a Delaware corporation CHNR-1, INC., a Delaware corporation COLONIAL HALL HEALTH RESOURCES, INC., a Delaware corporation COLONIAL HOUSE HEALTH RESOURCES, INC., a Delaware corporation COMPASS HEALTH SERVICES, INC., a West Virginia corporation CONCORD HEALTH GROUP, INC., a Delaware corporation -------------------- Initials of Signor -120- CONCORD HOME HEALTH, INC., a Pennsylvania corporation CONCORD PHARMACY SERVICES, INC., a Pennsylvania corporation CONCORD REHAB, INC., a Pennsylvania corporation CONCORD SERVICE CORPORATION, a Pennsylvania corporation CVNR, INC., a Delaware corporation DELM NURSING, INC., a Pennsylvania corporation ELMWOOD HEALTH RESOURCES, INC., a Delaware corporation ENCARE OF MASSACHUSETTS, INC., a Delaware corporation ENCARE OF PENNYPACK, INC., a Pennsylvania corporation ENCARE OF QUAKERTOWN, INC., a Pennsylvania corporation ENCARE OF WYNCOTE, INC., a Pennsylvania corporation ENR, INC., a Delaware corporation GLENMARK ASSOCIATES, INC., a West Virginia corporation GMA - BRIGHTWOOD, INC., a West Virginia corporation GMA CONSTRUCTION, INC., a West Virginia corporation GMA - MADISON, INC., a West Virginia corporation GMA PARTNERSHIP HOLDING COMPANY, INC., a West Virginia corporation GMA - UNIONTOWN, INC., a Pennsylvania corporation HEALTH RESOURCES OF BROADMAN, INC., a Delaware corporation HEALTH RESOURCES OF CEDAR GROVE, INC., a New Jersey corporation HEALTH RESOURCES OF COLCHESTER, INC., a Connecticut corporation HEALTH RESOURCES OF COLUMBUS, INC., a Delaware corporation HEALTH RESOURCES OF CUMBERLAND, INC., a Delaware corporation HEALTH RESOURCES OF EATONTOWN, INC., a New Jersey corporation HEALTH RESOURCES OF FARMINGTON, INC., a Delaware corporation HEALTH RESOURCES OF GARDNER, INC., a Delaware corporation -------------------- Initials of Signor -121- HEALTH RESOURCES OF GLASTONBURY, INC., a Connecticut corporation HEALTH RESOURCES OF GROTON, INC., a Delaware corporation HEALTH RESOURCES OF LAKEVIEW, INC., a New Jersey corporation HEALTH RESOURCES OF LEMONT, INC., a Delaware corporation HEALTH RESOURCES OF LYNN, INC., a New Jersey corporation HEALTH RESOURCES OF KARMENTA AND MADISON, INC., a Delaware corporation HEALTH RESOURCES OF MARCELLA, INC., a Delaware corporation HEALTH RESOURCES OF MIDDLETOWN (R.I.), INC., a Delaware corporation HEALTH RESOURCES OF MORRISTOWN, INC., a New Jersey corporation HEALTH RESOURCES OF NORFOLK, INC., a Delaware corporation HEALTH RESOURCES OF NORWALK, INC., a Connecticut corporation HEALTH RESOURCES OF PENNINGTON, INC., a New Jersey corporation HEALTH RESOURCES OF ROCKVILLE, INC., a Delaware corporation HEALTH RESOURCES OF SOUTH BRUNSWICK, INC., a New Jersey corporation HEALTH RESOURCES OF TROY HILLS, INC., a New Jersey corporation HEALTH RESOURCES OF WALLINGFORD, INC., a Delaware corporation HEALTH RESOURCES OF WARWICK, INC., a Delaware corporation HEALTHCARE REHAB SYSTEMS, INC., a Pennsylvania corporation HORIZON ASSOCIATES, INC., a West Virginia corporation HORIZON MEDICAL EQUIPMENT AND SUPPLY, INC., a West Virginia corporation HORIZON MOBILE, INC., a West Virginia corporation HORIZON REHABILITATION, INC., a West Virginia corporation HR OF CHARLESTON, INC., a West Virginia corporation HRWV Huntington, Inc., a West Virginia corporation -------------------- Initials of Signor -122- INSTITUTIONAL HEALTH CARE SERVICES, INC., a New Jersey corporation LAKEWOOD HEALTH RESOURCES, INC., a Delaware corporation LAUREL HEALTH RESOURCES, INC., a Delaware corporation LEHIGH NURSING HOMES, INC., a Pennsylvania corporation LWNR, INC., a Delaware corporation MABRI CONVALESCENT CENTER, INC., a Connecticut corporation MARKGLEN, INC., a West Virginia corporation MARSHFIELD HEALTH RESOURCES, INC., a Delaware corporation MONTGOMERY NURSING HOMES, INC., a Pennsylvania corporation MULTICARE AMC, INC., a Delaware Corporation MULTICARE HOME HEALTH OF ILLINOIS, INC., a Delaware corporation NATIONAL PHARMACY SERVICE, INC., a Pennsylvania corporation NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC., a Massachusetts corporation PHC OPERATING CORP., a Delaware corporation POCAHONTAS CONTINUOUS CARE CENTER, INC., a West Virginia corporation PRESCOTT NURSING HOME, INC., a Massachusetts corporation PROGRESSIVE REHABILITATION CENTERS, INC., a Delaware corporation PROVIDENCE HEALTH CARE, INC., a Delaware corporation REST HAVEN NURSING HOME, INC, a West Virginia corporation RIDGELAND HEALTH RESOURCES, INC., a Delaware corporation RIVER PINES HEALTH RESOURCES, INC., a Delaware corporation RIVERSHORES HEALTH RESOURCES, INC., a Delaware corporation RLNR, INC., a Delaware corporation ROSE HEALTHCARE, INC., a New Jersey corporation ROSE VIEW MANOR, INC., a Pennsylvania corporation RSNR, INC., a Delaware corporation RVNR, INC., a Delaware corporation SENIOR LIVING VENTURES, INC., a Pennsylvania corporation ------------------ Initials of Signor -123- SCHUYLKILL NURSING HOMES, INC., a Pennsylvania corporation SCHUYLKILL PARTNERSHIP ACQUISITION CORP., a Pennsylvania corporation SENIOR SOURCE, INC., a Massachusetts corporation SNOW VALLEY HEALTH RESOURCES, INC., a Delaware corporation SOLOMONT FAMILY FALL RIVER VENTURE, INC., a Massachusetts corporation SOLOMONT FAMILY MEDFORD VENTURE, INC., a Massachusetts corporation STAFFORD CONVALESCENT CENTER, INC., a Delaware corporation S.T.B. INVESTORS, LTD., a New York corporation SVNR, INC., a Delaware corporation THE ADS GROUP, INC., a Massachusetts corporation TRI-STATE MOBILE MEDICAL SERVICES, INC., a West Virginia corporation WESTFORD NURSING AND RETIREMENT CENTER, INC., a Massachusetts corporation WILLOW MANOR NURSING HOME, INC., a Massachusetts corporation By:_______________________ On behalf of each of the foregoing as Vice President, Controller and Assistant Secretary Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -124- BREYUT CONVALESCENT CENTER, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager ENCARE OF MENDHAM, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF BRIDGETON, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF CINNAMINSON, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF CRANBURY, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF EMERY, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF ENGLEWOOD, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF EWING, L.L.C., a New Jersey limited liability company. by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF FAIR LAWN, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF JACKSON, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF RIDGEWOOD, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF WEST ORANGE, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager POMPTON CARE, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager ROEPHEL CONVALESCENT CENTER, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager ------------------ Initials of Signor -125- TOTAL REHABILITATION CENTER, L.L.C., a New Jersey limited liability corporation, by Century Care Management, Inc., its authorized manager By:_______________________ On behalf of each of the foregoing Vice President, Controller and Assistant Secretary of the manager Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -126- The Surety hereby joins this Credit Agreement for the purposes of (1) acknowledging the terms and conditions and receipt of a true, correct and complete copy hereof, (2) representing and warranting to the Lender Parties that the representations and warranties contained herein are true and correct, and (3) agreeing with the Lender Parties to comply with the affirmative, financial and negative covenants contained herein to the extent they apply, by their terms, to the Surety. GENESIS ELDERCARE CORP. By ---------------------------------- Title: -127- LIST OF SCHEDULES 1.1 Lenders' Commitments 3.1(a) Corporate/Partnership Status of Borrowers 3.1(b) Capitalization of Borrowers 3.1(o) Management Agreements 3.1(p) Health Care Businesses 3.1(q) Leases of Borrowers 3.1(s) Employee Benefits/ERISA Matters 4.10 Adding Borrowers 6.1 Existing Indebtedness 6.2 Permitted Liens 6.3 Investments 6.4 Acquisition Conditions 6.5(d) Ohio, Illinois and Wisconsin Operations 6.5(f) Assisted Living Facilities 6.5(h) Disposition Conditions 9.1 Excluded Subsidiaries -128- LIST OF EXHIBITS A-1 Form of Note A-2 Form of Swing Loan Note B Form of Advance Request C Form of Prepayment Notice D Form of Pledge Agreement E Form of Officer's Compliance Certificate F Form of Assignment and Acceptance Agreement -129- SCHEDULE 1.1 Allocations Multicare Short Term Facility $425,000,000.00 Bank ---- Mellon $106,250,000.00 Citibank $106,250,000.00 NationsBank $106,250,000.00 First Union $106,250,000.00 -130- SCHEDULE 4.10 JOINDER OF BORROWERS 1. Joinder Supplement. Multicare (on behalf of itself and the other Borrowers) and each Joining Subsidiary shall execute and deliver to the Administrative Agent, with an executed counterpart for each Lender Party, a "Joinder Supplement" as defined in Section 4.10 to this Agreement as to becoming a party hereto and to the relevant Loan Documents. 2. Notes. Each Joining Subsidiary and each existing Borrower shall execute and deliver to the Administrative Agent a replacement Note or Allonge for each Lender, as necessary. 3. Collateral. Each applicable Borrower and each applicable Joining Subsidiary shall deliver to the Administrative Agent (1) certificates and instruments representing the stock certificates and other instruments to be pledged pursuant to the Pledge Agreement accompanied by duly executed instruments of transfer or assignments in blank to the extent required by the Pledge Agreement and (2) evidence of the completion of all recordings and filings (including Uniform Commercial Code financing statements) as may be necessary or, in the opinion of the Administrative Agent or the Collateral Agent, desirable to create or perfect the Liens granted and created or purported to be granted and created by each Joining Subsidiary (or by each existing Borrower in the collateral comprised of equity of any Joining Subsidiaries) under and pursuant to the Pledge Agreement. 4. Lien Searches. For each Joining Subsidiary which is acquired by a Borrower pursuant to an Acquisition, each Joining Subsidiary shall deliver to the Administrative Agent such evidence of recent searches of Uniform Commercial Code, tax, judgment records and other appropriate registers as the Administrative Agent shall request. 5. Corporate or Partnership Proceedings. Each Joining Subsidiary shall deliver to the Administrative Agent, with an executed counterpart for each Lender Party, certificates by the Secretary or Assistant Secretary of each Joining Subsidiary (or general partner thereof), dated as of the Joinder Effective Date (as defined below) as to the incumbency and signatures of the respective officers of such Joining Subsidiary who are authorized to sign Loan Documents, together with (i) true copies of the articles of incorporation and bylaws or partnership agreement (or other constituent documents) of such Joining Subsidiary in effect on such date, (ii) true copies of all corporate or partnership action taken by such Joining Subsidiary relative to this Agreement, the Joinder Supplement and the other Loan Documents. Each Joining Subsidiary shall also deliver certificates from the appropriate Secretaries of State or other applicable Governmental Authorities dated not more than 30 days before the relevant Joinder Effective Date showing the good standing of -131- such Joining Subsidiary in its state of incorporation or organization and each state in which such Joining Subsidiary does business. 6. Legal Opinions of Counsel. The Borrowers and each Joining Subsidiary collectively shall cause to be delivered to the Administrative Agent, with an executed counterpart for each Lender, an opinion or opinions addressed to each Lender, dated the relevant Joinder Effective Date, of counsel to such Joining Subsidiary, Genesis and each of the other Borrowers as to such matters as may be requested by the Administrative Agent, all in form and substance satisfactory to the Administrative Agent. 7. Fees, Expenses, Etc. The Borrowers and each Joining Subsidiary shall pay or cause to be paid all fees and other compensation required to be paid to the Lender pursuant hereto or pursuant to any other written agreement on or prior to the Joinder Effective Date. 8. Additional Matters. The Borrowers and each Joining Subsidiary shall deliver, or cause to be delivered, to the Administrative Agent such other revised schedules, certificates, opinions, instruments and other documents (including those relating to licensing) as may be requested by the Administrative Agent. All such schedules, certificates, opinions, instruments and other documents shall be satisfactory in form and substance to the Administrative Agent. -132- SCHEDULE 6.4 ACQUISITION CONDITIONS 1. Notice. Not later than 15 Business Days before the consummation of a proposed Acquisition, Multicare (on behalf of the Borrowers) shall have delivered to each Lender a notice of the proposed Acquisition, together with the following: (1) copies of audited financial statements of the entity to be acquired (the "Target") for its last three fiscal years (to the extent that such audited statements are available, or, to the extent such audited statements are not so available, unaudited statements for as much of such period as is available); (2) copies of the interim financial statements of the Target for the latest fiscal quarter; (3) a pro forma projected balance sheet of Multicare and its Restricted Subsidiaries as of the date of, and after giving effect to, the proposed Acquisition and a pro forma income statement of Multicare and its Restricted Subsidiaries for the four fiscal quarters ended on, or most recently prior to, the date of such proposed Acquisition after giving effect thereto; (4) an Officer's Compliance Certificate showing pro forma compliance with the covenants referred to therein after giving effect to the proposed Acquisition (which certificate may be delivered after the other items referred to in this paragraph (1) but no later than five (5) Business Days prior to the date of the proposed Acquisition); and (5) revisions to the most recent financial projections delivered to the Lender Parties by Multicare, which revisions shall take into account the projected financial condition and results of operations of the Target for the period covered by such projections. 2. Other Information. In addition, Multicare (on behalf of the Borrowers) shall have delivered to the Administrative Agent (and with respect to the information referred to in paragraph (2) below, the requesting Lender) the following: (1) copies of any agreements entered into or proposed to be entered into by such Borrower in connection with such Acquisition; and (2) such other information about the Target or such Acquisition as any Lender may reasonably request. -133- 3. Board Approval. The board of directors (or equivalent governing body) of the Target shall have approved such Acquisition. 4. Line of Business. Not less than 75% of the Target's revenues during its most recently completed fiscal year shall have been derived from lines of business which are, at the time of the Acquisition, among the principal lines of business of any of the Borrowers. 5. No Default. No Event of Default or Default shall have occurred and be continuing before, or after giving effect to, the consummation of the Acquisition. 6. Limitations on Mergers and Consolidations. If any merger is effected in connection with the Acquisition, a Borrower (including an entity that becomes a Borrower consistent with the provisions of this Agreement) shall be the surviving entity in the merger. No consolidation shall be permitted in connection with any Acquisition. 7. Joinder to Loan Documents. The Borrowers shall cause any new (direct or indirect) Subsidiary of Genesis which is created or acquired as a direct or indirect result of, or in connection with, such Acquisition, to become a Borrower hereunder pursuant to and in accordance with the terms of Section 4.10 of this Agreement and shall cause the ownership interests therein to be pledged under the Pledge Agreement. 8. Arm's Length. The Acquisition shall be made in good faith in an arm's-length transaction to a Person which is not an Affiliate of any Borrower, except as otherwise agreed to by the Lenders. Without limiting the generality of the foregoing, the total consideration paid for the Acquisition shall be no greater than the fair market value of the subject assets (including intangible assets). -134- SCHEDULE 6.5(h) DISPOSITION CONDITIONS 1. Notice. Multicare (on behalf of the Borrowers) shall have given each Lender Party at least 5 days prior written notice of any transfer (as defined in Section 6.5 of this Agreement), together with an Officer's Compliance Certificate showing pro forma compliance with the financial covenants referred to therein (including the financial tests set forth in paragraph (h) of Section 6.5) after giving effect to such transfer. 2. Arm's Length. The transfer shall be made in good faith in an arm's-length transaction to a Person which is not an Affiliate of any Borrower, except as otherwise agreed to by the Required Lenders. Without limiting the generality of the foregoing, the total consideration for the transfer shall be at least equal to the fair market value of the subject assets (including intangible assets). 3. Transfer of Equity of a Borrower. In the event that any shares of capital stock, partnership interests or other ownership interests of a Borrower are to be disposed of or otherwise transferred in such transaction each of the following additional conditions shall be met: (a) All Loans made to such Borrower and all intercompany obligations of such Borrower shall have been repaid in full and such Borrower shall sign an acknowledgement that all obligations of the Lender to it are terminated; and (b) The Administrative Agent shall have received such replacement Notes, certificates, opinions, documents and/or instruments it shall reasonably request. 4. 1997 Subordinated Debt Indenture. The disposition shall not be prohibited by or result in a default or breach under, or trigger a mandatory prepayment requirement under the terms of the 1997 Subordinated Debt Indenture. -135- EX-99 5 EX-B.(6) CREDIT AGREEMENT ================================================================================ CREDIT AGREEMENT dated as of October 9, 1997 by and among GENESIS ELDERCARE ACQUISITION CORP., AS BORROWER, THE FINANCIAL INSTITUTIONS IDENTIFIED HEREIN AS LENDERS, MELLON BANK, N.A. AS ADMINISTRATIVE AGENT and the OTHER AGENTS IDENTIFIED HEREIN ================================================================================ Page ---- ARTICLE 1 CREDIT FACILITY............................ 1 1.1 COMMITMENT TO LEND....................................... 1 1.2 MANNER OF BORROWING...................................... 2 1.3 REPAYMENT................................................ 3 1.4 VOLUNTARY PREPAYMENTS.................................... 4 1.5 PAYMENTS BY THE BORROWER IN GENERAL...................... 4 1.6 REDUCTIONS OF COMMITMENT................................. 6 1.7 INTEREST................................................. 6 1.8 FEES..................................................... 7 1.9 COMPUTATION OF INTEREST AND FEES......................... 7 1.10 PROMISSORY NOTES; RECORDS OF ACCOUNT...................... 7 1.11 PRO RATA TREATMENT........................................ 7 1.12 TAXES ON PAYMENTS......................................... 7 1.13 CAPITAL AND RESERVE REQUIREMENTS.......................... 9 1.14 REGISTERED NOTES.......................................... 10 1.15 REPLACEMENT OF LENDERS.................................... 11 1.16 CHANGE OF LENDING OFFICE.................................. 12 ARTICLE 2 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS.............................. 13 2.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING.......................................... 13 2.2 CONDITIONS TO EACH LOAN.................................. 18 ARTICLE 3 REPRESENTATIONS AND WARRANTIES..................... 19 3.1 REPRESENTATIONS.......................................... 19 3.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE.................. 28 ARTICLE 4 AFFIRMATIVE COVENANTS......................... 29 4.1 REPORTING REQUIREMENTS................................... 29 Page ---- 4.2 MAINTENANCE OF EXISTENCE................................. 34 4.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY....................................... 34 4.4 MAINTENANCE OF RECORDS; FISCAL YEAR...................... 35 4.5 COMPLIANCE WITH LAWS..................................... 35 4.6 ERISA.................................................... 35 4.7 RIGHT OF INSPECTION...................................... 36 4.8 INSURANCE................................................ 36 4.9 PAYMENT OF TAXES AND OTHER CHARGES....................... 37 4.10 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS............ 37 4.11 CORPORATE SEPARATENESS................................... 37 4.12 TRANSACTIONS WITH AFFILIATES............................. 38 4.13 MERGER................................................... 38 4.14 USE OF PROCEEDS.......................................... 38 4.15 CERTAIN DISPOSITIONS..................................... 38 ARTICLE 5 NEGATIVE COVENANTS........................... 39 5.1 INDEBTEDNESS............................................. 39 5.2 LIENS.................................................... 39 5.3 LOANS, ADVANCES AND INVESTMENTS.......................... 40 5.4 ACQUISITIONS, ETC........................................ 40 5.5 DISPOSITIONS............................................. 40 5.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS................................................ 40 5.7 LEASES................................................... 41 5.8 DIVIDENDS AND RELATED DISTRIBUTIONS...................... 41 5.9 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASANCE AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS.............................................. 41 5.10 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS......... 42 5.11 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS. .......... 42 5.12 LIMITATIONS ON MERGERS, ETC.............................. 42 5.13 AVOIDANCE OF OTHER CONFLICTS............................. 43 ARTICLE 6 DEFAULTS................................ 43 6.1 "EVENT OF DEFAULT"....................................... 43 6.2 CONSEQUENCES OF AN EVENT OF DEFAULT...................... 47 6.3 APPLICATION OF PROCEEDS.................................. 48 ARTICLE 7 -ii- Page ---- THE ADMINISTRATIVE AGENT........................ 48 7.1 APPOINTMENT.............................................. 48 7.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES.......... 49 7.3 EXERCISE OF POWERS....................................... 50 7.4 GENERAL EXCULPATORY PROVISIONS........................... 50 7.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT............... 51 7.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS................................... 52 7.7 INDEMNIFICATION.......................................... 52 7.8 HOLDERS OF NOTES......................................... 53 7.9 SUCCESSOR ADMINISTRATIVE AGENT........................... 53 7.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT.................................................... 54 7.11 CALCULATIONS............................................. 54 7.12 OTHER AGENTS............................................. 54 7.13 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.......... 55 ARTICLE 8 DEFINITIONS; CONSTRUCTION....................... 55 8.1 CERTAIN DEFINITIONS...................................... 55 8.2 CONSTRUCTION............................................. 72 8.3 ACCOUNTING PRINCIPLES.................................... 73 ARTICLE 9 MISCELLANEOUS............................. 74 9.1 NOTICES.................................................. 74 9.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT................... 74 9.3 SEVERABILITY............................................. 74 9.4 DESCRIPTIVE HEADINGS..................................... 75 9.5 GOVERNING LAW............................................ 75 9.6 NON-MERGER OF REMEDIES................................... 75 9.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES................... 75 9.8 AMENDMENTS; WAIVERS...................................... 76 9.9 SUCCESSORS AND ASSIGNS................................... 77 9.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES.................................................... 79 9.11 MAXIMUM LAWFUL INTEREST RATE............................. 79 9.12 INDEMNIFICATION.......................................... 79 9.13 EXPENSES................................................. 81 9.14 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.......... 82 9.15 CERTAIN WAIVERS BY BORROWER.............................. 82 9.16 SET-OFF.................................................. 82 -iii- 9.17 SHARING OF COLLECTIONS................................... 83 9.18 OTHER LOAN DOCUMENTS..................................... 83 9.19 CERTAIN BORROWER ACKNOWLEDGEMENTS........................ 83 9.20 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL............................................ 84 -iv- CREDIT AGREEMENT CREDIT AGREEMENT, dated as of October 9, 1997, by and among GENESIS ELDERCARE ACQUISITION CORP., a Delaware corporation formerly named Waltz Acquisition Corp. (together with its successors, the "Borrower"), the Lenders referred to on the signature pages hereto together with other lenders parties hereto from time to time pursuant to Section 9.9 below and their successors and assigns, the "Lenders"), MELLON BANK, N.A., a national banking association, as Administrative Agent for itself, the other Agents, and for the Lenders hereunder (in such capacity, together with its successors and assigns in such capacity, the "Administrative Agent"), and CITICORP USA, INC., a Delaware corporation, as Syndication Agent, NATIONSBANK, N.A., a national banking association, as Syndication Agent and FIRST UNION NATIONAL BANK, a national banking association, as Documentation Agent. Certain terms used herein are defined in Article 8 below. WITNESSETH THAT WHEREAS, the Borrower has requested that the Lenders extend the Loans to the Borrower for the purposes described herein; and WHEREAS, the Lenders have agreed to extend the Loans to the Borrower on the terms and conditions described herein; and WHEREAS, ALL OBLIGATIONS HEREUNDER AND UNDER EACH AGREEMENT AND INSTRUMENT DELIVERED IN CONNECTION HEREWITH FROM TIME TO TIME ARE "SENIOR INDEBTEDNESS" AND ARE HEREBY DESIGNATED BY THE BORROWER AS "DESIGNATED SENIOR INDEBTEDNESS" WITHIN THE MEANING OF THE 1997 SUBORDINATED NOTE INDENTURE. ARTICLE 1 CREDIT FACILITY 1.1 COMMITMENT TO LEND. (a) Loans. Upon the terms and subject to the conditions of this Agreement, each Lender agrees to make, from time to time, during the period from and including the Closing Date to but excluding the Maturity Date, one or more Loans ("Loans") to the Borrower in an aggregate unpaid principal amount not exceeding at any time such Lender's Commitment at such time; provided, however, that the Borrower shall not request, and the Lenders shall have no obligation to make, any Loans at any time in excess of the Available Commitment. The total amount of the Commitment of all Lenders on the Agreement Date is $150,000,000. (b) Reserved Commitment. $5,000,000 of the Commitment (the "Reserved Commitment") shall be reserved and may be borrowed only for the purpose of paying interest on the Loans and fees and other amounts payable to the Administrative Agent and the Lenders under the Loan Documents. 1.2 MANNER OF BORROWING. (a) Notice of Borrowing. The Borrower shall give the Administrative Agent notice (which shall be irrevocable) no later than 11:00 a.m. (Philadelphia, Pennsylvania, time) one Business Day prior to the requested date for the making of Loans. Each such notice shall be in the form of Exhibit A hereto and shall specify (i) the requested date for the making of such Loans, which date shall be a Business Day, (ii) the amount of the requested Loans, which shall be $5,000,000 or any integral multiple of $1,000,000 in excess thereof (except in the case of Loans under the Reserved Commitment and except that the amount of the requested Loans may be less if the amount requested is equal to the total Available Commitment). Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof and of the amount of the Loan to be made by such Lender on the requested date specified therein. (b) Funding by Lenders. Not later than 12:00 noon (Philadelphia, Pennsylvania, time) on each requested date for the making of Loans, each Lender shall make available to the Administrative Agent, in Dollars in funds immediately available to the Administrative Agent at the office designated by the Administrative Agent, the Loan to be made by such Lender on such date, provided however that if a Lender does not receive timely notice from the Administrative Agent as set forth in paragraph (a) above, such Lender shall fund the required amount promptly upon receipt of such notice. The obligations of the Lenders hereunder are several; accordingly, any Lender's failure to make any Loan to be made by it on the requested date therefor shall not relieve any other Lender of its obligation to make any Loan to be made by it on such date, but the latter shall not be liable for the former's failure. (c) Permitted Assumption as to Funding. Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. (Philadelphia, Pennsylvania, time) on the requested date for the making of any Loan that such Lender will not make available to the Administrative Agent the Loan requested to be made by it on such date, the Administrative Agent may assume that such Lender has made such Loan available. The Administrative Agent in its sole discretion and reliance upon such assumption, may make available to the Borrower on the requested date a corresponding amount on behalf of such Lender. If and to the extent such Lender shall not have made available to the Administrative Agent the Loan requested to be made by such Lender on such date and the -2- Administrative Agent shall have so made available to the Borrower a corresponding amount on behalf of such Lender, (i) such Lender shall, on demand, pay to the Administrative Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the Administrative Agent to the Borrower until the date such amount shall have been paid in full to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate and (ii) the Administrative Agent shall be entitled to all interest payable by the Borrower on such amount for the period commencing on the date such amount was advanced by the Administrative Agent to but not including the date on which such amount is received by the Administrative Agent from such Lender. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as the Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Without limiting any obligations of any Lender pursuant to this paragraph (c), if such Lender does not pay such corresponding amount promptly upon the Administrative Agent's demand therefor, the Administrative Agent shall notify the Borrower and the Borrower shall promptly repay such corresponding amount to the Administrative Agent together with accrued interest thereon at the applicable rate or rates on such Loans. (d) Disbursements of Funds to Borrower. All amounts made available to the Administrative Agent in accordance with paragraph (b) above shall be disbursed by the Administrative Agent promptly but in any event not later than 4:00 p.m. (Philadelphia, Pennsylvania, time) on the requested date therefor in Dollars in funds immediately available to the Borrower by crediting such amount to an account of the Borrower at the Administrative Agent's office or in such other manner as may be agreed to by the Borrower and the Administrative Agent. (e) Certain Loans to be Made Without Request. Notwithstanding paragraph (a) of this Section 1.2, Loans under the Reserved Commitment may be made for the purposes specified in Section 1.1(b) without any request by the Borrower on notice to the Lenders from the Administrative Agent. If the proceeds of any Loan under this paragraph (e) are to be paid ratably to the Lenders, it shall not be necessary for any Lender to make the proceeds of its Loan available to the Administrative Agent. 1.3 REPAYMENT. The Loans shall mature and become due and payable and shall be repaid by the Borrower on the earliest of (i) the date 120 days after the Closing Date, (ii) the date on which the Merger becomes effective, or (iii) if Multicare and the Borrower decide to abandon the Merger, the date on which they so notify the Administrative Agent in writing (the earliest of such dates being the "Maturity Date"). -3- 1.4 VOLUNTARY PREPAYMENTS. The Borrower may, at any time and from time to time, prepay the Loans in whole or in part, without premium or penalty, except that any optional partial prepayment (other than a prepayment of all outstanding Loans) shall be in an aggregate principal amount of $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof. Amounts to be so prepaid shall irrevocably be due and payable on the date specified in the applicable notice of prepayment delivered pursuant to this Section 1.4, together with interest thereon as provided in Section 1.7. The Borrower shall give the Administrative Agent notice of each prepayment of Loans no later than 11:00 a.m. (Philadelphia, Pennsylvania, time) three (3) Business Days before the date of such prepayment. Each such notice of prepayment shall be in the form of Exhibit B hereto and shall specify the date and amount of such prepayment. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof. Any voluntary prepayments pursuant to this Section 1.4 shall be applied first to interest, second to principal and last to any other amounts owing in respect of the Loan Obligations. 1.5 PAYMENTS BY THE BORROWER IN GENERAL. (a) Time, Place and Manner. All payments due to the Administrative Agent under the Loan Documents shall be made to the Administrative Agent at the office designated by the Administrative Agent or to such other Person or at such other address as the Administrative Agent may designate by notice to the Borrower. Except as otherwise set forth in this Agreement, a payment shall not be deemed to have been made on any day unless such payment has been received by the required Person, at the required place of payment, in Dollars in funds immediately available to such Person, no later than 1:00 p.m. (Philadelphia, Pennsylvania, time) on such day; provided, however, that the failure of the Borrower to make any such payment by such time shall not constitute a Default hereunder so long as such payment is received no later than 3:00 p.m. (Philadelphia, Pennsylvania, time) on such day, but any such payment received later than 1:00 p.m. (Philadelphia, Pennsylvania, time) on such day shall be deemed to have been made on the next Business Day for the purpose of calculating interest on the amount paid, provided further, that any such payment made with the proceeds of Loans shall be deemed to have been made on the date of the making of such Loans, so long as such proceeds are immediately so applied and are not otherwise disbursed to the Borrower. (b) No Reductions. All payments due to the Administrative Agent or any Lender under this Agreement and the other Loan Documents shall be made by the Borrower without any reduction or deduction whatsoever, including any reduction or deduction for any charge, set-off, holdback, recoupment or counterclaim (whether sounding in tort, contract or otherwise). (c) Authorization to Charge Accounts. The Borrower hereby authorizes the Administrative Agent, each Lender, and each participant and each Affiliate of each Lender Party, if and to the extent any amount payable by the Borrower under the Loan Documents (whether payable to such Person or to any other Lender Party) is not otherwise paid when -4- due, to charge such amount against any or all of the demand deposit or other accounts of the Borrower with such Person (whether maintained at a branch or office located within or without the United States), with the Borrower remaining liable for any deficiency. The Person so charging any such account shall give the Borrower prompt notice thereof, but any failure to give or delay in giving such notice shall not affect such Person's right to effect such charge. Such charging of accounts shall be subject to the provisions of Section 9.17 hereof. (d) Extension of Payment Dates if Not a Business Day. Whenever any payment to the Administrative Agent or any Lender under the Loan Documents would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day. If the due date for any payment under the Loan Documents is extended (whether by operation of any Loan Document, applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. (e) Disbursement of Payments to Lenders. The Administrative Agent shall promptly distribute to each Lender its ratable share of each payment received by the Administrative Agent under the Loan Documents for the account of such Lender by crediting an account of such Lender at the Administrative Agent's office or by wire transfer to an account of such Lender at an office of any other commercial bank located in the United States or at any Federal Reserve Bank designated by such Lender. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Parties under the Loan Documents that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent, in its sole discretion may, in reliance upon such assumption, cause to be distributed to the applicable Lender Parties on such due date, a corresponding amount with respect to the amount then due to the applicable Lender Parties. If and to the extent that the Borrower shall not have so made such payment in full to the Administrative Agent, and the Administrative Agent shall have so distributed to any Lender Parties a corresponding amount, each applicable Lender Party shall, on demand, repay to the Administrative Agent the amount so distributed to it, together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date the such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as the Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Nothing in this Section 1.5 shall relieve the Borrower from any payment obligations. -5- 1.6 REDUCTIONS OF COMMITMENT. (a) Optional Reductions. The Borrower may reduce the Commitment by giving the Administrative Agent notice (which shall be irrevocable) thereof no later than 11:00 a.m. (Philadelphia, Pennsylvania, time) on the third Business Day before the requested date of such reduction, provided, that each partial reduction thereof shall be in an amount equal to $10,000,000.00 or any integral multiple of $5,000,000.00 in excess thereof and, provided, further, that no reduction shall reduce the Commitment to an amount less than the aggregate of the principal amount of all Loans outstanding on such date (after giving effect to any repayment or prepayment of Loans made on or prior to such date). Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof and the amount to which such Lender's Commitment is to be reduced. (b) Automatic Reductions. At the time of any prepayment of Loans pursuant to Section 1.4, the Commitment shall be reduced by the amount of the prepayment. (c) No Reinstatement of Commitment. All reductions of the Commitment are permanent, and the Commitment cannot be restored without the written consent of all Lenders. 1.7 INTEREST. (a) Interest Rate in General. Subject to the terms and conditions of this Agreement, the Loans shall bear interest on the outstanding principal amount thereof until paid in full at a rate per annum 1.5 percentage points in excess of the Prime Rate as in effect from time to time. (b) Interest Payment Dates. Interest shall be payable (i) quarterly in arrears on each Quarterly Payment Date and (ii) when the Loans shall be due (whether at maturity, by reason of notice of prepayment or acceleration, or otherwise), but only to the extent then accrued on the amount then so due. Interest at the Default Rate shall be payable on demand. (c) Default Rate. At any time that an Event of Default shall have occurred and shall be continuing, any amount payable hereunder and under each other Loan Document shall bear interest (whether before or after judgment), payable on demand, at a rate per annum equal to the applicable Default Rate. -6- 1.8 FEES. (a) Commitment Fees. The Borrower shall pay to the Administrative Agent, for the account of each Lender, a commitment fee on the daily unused amount of such Lender's Commitment for each day from and including the Agreement Date to but excluding the Maturity Date at the rate of 0.5% per annum. (b) Other Fees. The Borrower shall pay to the Administrative Agent, for the respective accounts of the Administrative Agent, the Lenders and the other Agents, such other fees as have been or may be agreed to by the Borrower or by Genesis in connection with the commitment to enter into this Agreement (including any facility fees referred to in any commitment letters) and the transactions contemplated by this Agreement. 1.9 COMPUTATION OF INTEREST AND FEES. Interest calculated on the basis of the Federal Funds Rate shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Commitment fees and interest calculated on the basis of the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as applicable, and paid for the actual number of days elapsed. Interest and commitment fees for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. 1.10 PROMISSORY NOTES; RECORDS OF ACCOUNT. Each Lender's Loans and the Borrower's obligation to repay such Loans with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the records of the Administrative Agent and such Lender and a single Note payable to the order of such Lender. The records of each Lender shall be prima facie evidence of such Lender's Loans and, in each case, of accrued interest thereon and all payments made in respect thereof. In the event there is any dispute concerning the amount of any such obligations, the amount of each Lender's Commitment and the amount of outstanding Loan Obligations of each and every type shall at all times be ascertained from the records of the Administrative Agent, which shall be conclusive absent manifest error. 1.11 PRO RATA TREATMENT. Except to the extent otherwise provided herein, the Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Lenders pro rata in accordance with their respective Commitments. 1.12 TAXES ON PAYMENTS. (a) Taxes Payable by the Borrower. If any Tax is required to be withheld or deducted from, or is otherwise payable by the Borrower in connection with, any payment -7- due to the Administrative Agent or any Lender that is not a "United States Person" (as such term is defined in Section 7701(a)(30) of the Code), the Borrower (i) shall, if required, withhold or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing authority in accordance with applicable Law and (ii) except in the case of any Bank Tax, shall pay to such Lender or the Administrative Agent such additional amounts as may be necessary so that the net amount received by such Person with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable hereunder. If any Tax is withheld or deducted from, or is otherwise payable by the Borrower in connection with, any payment due to any Lender or the Administrative Agent hereunder, the Borrower shall furnish to such Person the original or a certified copy of a receipt (if any) for such Tax from the applicable taxing authority or other evidence of payment thereof satisfactory to such Person within 30 days after the date of such payment (or, if such receipt shall not have been made available by such taxing authority within such time, the Borrower shall use reasonable efforts to promptly obtain and furnish such receipt). If the Borrower fails to pay any such Taxes when due to the appropriate taxing authority or fail to remit to any Lender or the Administrative Agent the required receipts or other evidence of payment thereof satisfactory to such Person, the Borrower shall indemnify such Person for any Taxes, interest, penalties or additions to Tax that may become payable such Person as a result of any such failure. (b) Taxes Payable by any Lender or the Administrative Agent. The Borrower shall, promptly upon request by any Lender or the Administrative Agent that is not a United States Person, pay to such Person an amount equal to (i) all Taxes (other than Bank Taxes and without duplication of amounts paid pursuant to the preceding paragraph (a)) payable by such Person with respect to any payment due to such Person hereunder and (ii) all Taxes (other than Bank Taxes) payable by such Person as a result of payments made by the Borrower (whether made to a taxing authority or to such Person pursuant to the preceding paragraph (a) or this paragraph (b)). (c) Credits and Deductions. If any Lender or the Administrative Agent is, in its sole opinion, able to apply for any refund, offset, credit, deduction or other reduction in Taxes by reason of any payment made by the Borrower under the preceding paragraph (a) or (b), such Lender or the Administrative Agent, as the case may be, shall use reasonable efforts to obtain such refund, offset, credit, deduction or other reduction and, upon receipt thereof, will pay to the Borrower such amount, not exceeding the increased amount paid by the Borrower, as is equal to the net after-tax value to such Lender or the Administrative Agent, in its sole opinion, of such part of such refund, offset, credit, deduction or other reduction as it considers to be allocable to such payment by the Borrower, having regard to all of such Person's dealings giving rise to similar refunds, offsets, credits, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that if such Person has made a payment to the Borrower pursuant to this paragraph (c) and the applicable refund, offset, credit, deduction or other reduction in Tax is subsequently disallowed, the Borrower shall, promptly upon request by the Administrative Agent or such Lender refund to such Person that portion of such payment determined by -8- such Person, in its sole opinion, relating to such disallowance; and provided, further that (i) the Administrative Agent or such Lender, as the case may be, shall not be obligated to disclose to the Borrower any information regarding its Tax affairs or computations and (ii) nothing in this paragraph (c) shall interfere with the right of such Person to arrange its Tax affairs as it deems appropriate. (d) Exemption from U.S. Withholding Taxes. Each Lender that is not a United States Person shall submit to the Borrower and the Administrative Agent, on or before the fifth day prior to the first Quarterly Payment Date occurring after the Closing Date (or, in the case of a Person that is not a United States Person and that became a Lender by assignment, promptly upon such assignment), two duly completed and signed copies of either (A) Form 1001 of the United States Internal Revenue Service entitling such Lender to a complete exemption from withholding on all amounts to be received by such Lender pursuant to this Agreement and the Loans, (B) Form 4224 of the United States Internal Revenue Service relating to all amounts to be received by such Lender pursuant to this Agreement and the Loans or (C) in the case of a Lender Party that is claiming an exemption from United States withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments of "portfolio interest" two accurate and complete signed original Forms W-8 (or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Agreement or the Notes) and, if such Lender Party delivers such Forms W-8 (or successor form), two signed certificates that such Lender Party is not (1) a "bank" for purposes of Section 881(c) of the Internal Revenue Code, (2) is not a 10% shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and (3) is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code), as appropriate. Each such Lender shall, from time to time after submitting either such Form, submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other such Forms (or any successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (A) requested in writing by the Borrower or the Administrative Agent and (B) appropriate under the circumstances and under then current United States law or regulations to avoid or reduce United States withholding taxes on payments in respect of all amounts to be received by such Lender pursuant to this Agreement or the Loans. Upon the request of the Borrower or the Administrative Agent, each Bank that is a United States Person shall submit to the Borrower and the Administrative Agent a certificate to the effect that it is a United States Person. (e) Obligations under this Section 1.12 shall survive payment of the Loans. 1.13 CAPITAL AND RESERVE REQUIREMENTS. If, in the determination of any Lender, such Lender or any Affiliate thereof is required, under applicable Law (including Regulation D) or interpretations, directives, requests and governmental or regulatory guidelines (whether or not having the force of law), to maintain capital or deposit -9- any reserve on account of any Loan or any commitment to make any Loan, then, upon request by such Lender, the Borrower shall pay to such Lender such additional amounts as such Lender determines will fully compensate it for any reduction in the rate of return on the capital that such Lender or such Affiliate is so required to maintain. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request for such payment by such Lender accompanied by the certificate described below (provided that the Borrower shall not be liable for any amount payable with respect to any period more than 90 days before the date of such request or certificate, or, if earlier, the retroactive effective date of such determination if made during such 90-day period), and, in the case of those relating to future periods, on the dates specified, or determined in accordance with a method specified, by such Lender. In making the determinations contemplated by this Section 1.13, each Lender may make such estimates, assumptions, allocations and the like that such Lender in good faith determines to be appropriate, and such Lender's selection thereof in accordance with this Section 1.13, and the determinations made by such Lender on the basis thereof, shall be final, binding and conclusive upon the Borrower, except, in the case of such determinations, for manifest errors. Each Lender shall furnish to the Borrower, at the time of any request for compensation under this Section 1.13 a certificate outlining in reasonable detail the computation of any amounts claimed by it under this Section 1.13 and the assumptions underlying such computations, which shall include a statement of an officer of such Lender certifying that such request for compensation is being made pursuant to a policy adopted by such Lender to seek such compensation generally from customers similar to the Borrower and having similar provisions in agreements with such Lender. 1.14 REPLACEMENT OF LENDERS. If any Lender requests compensation pursuant to Sections 1.12 (Taxes on Payments), or 1.13 (Capital and Reserve Requires), or such Lender has defaulted on its obligations to make or participate in Loans pursuant to Section 1.2 (Manner of Borrowing), the Borrower, upon three Business Days' notice, may require that such Lender transfer all of its right, title and interest under this Agreement, such Lender's Notes, and the other Loan Documents to any Eligible Institution identified by the Borrower subject to (a) the consent of the Administrative Agent (which consent shall not be unreasonably withheld), (b) satisfaction of the other conditions specified in Section 9.9 below (Successors and Assigns), (c) the agreement of the proposed transferee to assume all of the obligations of such Lender hereunder and under the other Loan Documents for consideration equal to the outstanding principal amount of such Lender's Loans, payable to the transferor, interest thereon to the date of such transfer, and all other amounts payable hereunder to such Lender to the date of transfer, -10- (d) such transferor Lender shall have been paid on or prior to the date of such transfer all fees and other amounts payable to such transferor hereunder including those amounts payable under said Sections 1.12 or 1.13, as applicable, or arrangements satisfactory to the transferor Lender shall have been made for such payments, and (e) satisfaction of the condition that if the Lender being replaced has requested compensation pursuant to Sections 1.12 or 1.13, the proposed transferee's aggregate requested compensation, if any, pursuant to Sections 1.12 or 1.13 with respect to such replaced Lender's Loans is lower than that of the Lender replaced. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements of the Borrower contained in Sections 1.12 (Taxes on Payments), 1.13 (Capital and Reserve Requirements, 9.12 (Indemnification) and 9.13 (Expenses) (without duplication of any payments made to such Lender by the Borrower or the proposed transferee) shall survive for the benefit of any Lender replaced under this Section 1.14 with respect to the time prior to such replacement. 1.15 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Sections 1.12 (Taxes on Payments) or 1.13 (Capital and Reserve Requirements) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section. Nothing in this Section 1.15 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Section 1.12 (Taxes on Payments) or 1.13 (Capital and Reserve Requirements). ARTICLE 2 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS 2.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING. The effectiveness of this Agreement and the obligation of the Lenders to make the initial Loans hereunder are subject to the fulfillment of the following conditions on or before October 15, 1997 (unless such date is extended in writing by the Agents in their sole discretion), in each case to the satisfaction of the Agents and, to the extent specified below, to the satisfaction of each Lender (each Lender upon making its initial Loan hereunder being deemed to have waived or found satisfactory all such conditions so specified). -11- (a) Secretary's Certificates. The Borrower shall have delivered, or caused to be delivered, a certificate of the Secretary or an Assistant Secretary, of each of the Borrower, Genesis ElderCare Corp. and Multicare (each of which shall be certified as of a recent date by the Secretary of State of the state of such Person's incorporation), with specimen signatures of the authorized signatories to the Loan Documents, and to which shall be attached copies of the following, as applicable: articles or certificate of incorporation, bylaws, resolutions and shareholder agreements. (b) Good Standing Certificates. The Borrower shall have delivered, or caused to be delivered, a good standing or subsistence certificate, as the case may be, issued as of a recent date with respect to Borrower, Genesis ElderCare Corp., Multicare and each member of the Multicare Group issued by (i) the Secretary of State or other appropriate official of the jurisdiction of formation of such Person and (ii) the Secretary of State or other appropriate official of each jurisdiction where such Person is required to qualify to do business and, if any such certificate is dated more than seven (7) days prior to the Closing Date, a confirmation (which may be provided by a reputable corporate service) of the information in such certificate. (c) The Notes. The Borrower shall have delivered the Notes to the Administrative Agent for distribution to the Lenders. (d) Lien Searches. The Borrower shall have delivered to the Administrative Agent Uniform Commercial Code, tax, and judgment lien searches of the Borrower, Genesis ElderCare Corp., Multicare and each member of the Multicare Group, all as of a recent date, in such form and with such content as are acceptable to the Administrative Agent. (e) Pledge Agreements. The Borrower and Genesis ElderCare Corp. shall have executed and delivered the Pledge Agreements relating to the Tendered Multicare Shares and all the outstanding capital stock of the Borrower, respectively, in substantially the forms of Exhibit C and Exhibit D respectively (together with the stock certificates, assignment powers, Uniform Commercial Code financing statements (in proper form for filing in the appropriate offices to perfect the security interest of the Administrative Agent for the benefit of the Lender Parties in the Collateral granted under the Pledge Agreements) and other items required thereunder). (f) Guaranties. Genesis ElderCare Corp. shall have executed and delivered the Genesis ElderCare Corp. Guaranty in substantially the form of Exhibit E, and Multicare shall have executed and delivered the Multicare Guaranty in substantially the form of Exhibit F. (g) Multicare Management Agreement. Prior to or substantially contemporaneously with the initial funding hereunder, Genesis (and/or one or more of its Subsidiaries) shall have entered into a Management Agreement with Genesis Eldercare Corp. (the "Multicare Management Agreement"), under which Genesis (and/or such Subsidiaries) -12- will provide management services to Genesis Eldercare Corp. and its Subsidiaries. As a further condition, Genesis, Multicare and the Agents shall enter into the Multicare Management Subordination Agreement. (h) Other Transaction Documents. The Borrower shall have delivered to each of the Agents and any Lender that so requests, each of the other Transaction Documents certified by a Responsible Officer of the Borrower as being a true and correct copy of such Transaction Document as in full force and effect on the Closing Date. The Tender Offer and the other transactions contemplated by the Transaction Documents to have occurred on or before the Closing Date shall have taken place in strict compliance with the terms of said Transaction Documents, subject only to such modifications as are acceptable to the Agents. (i) Completion of Tender Offer. Simultaneously with the closing hereunder, more than a majority of the outstanding Multicare Shares (including, for this purpose, shares of common stock of Multicare issuable upon the conversion of convertible securities or the exercise of options, warrants or other rights to purchase or subscribe for shares of common stock of Multicare) shall have been validly tendered to and purchased by the Borrower pursuant to the Tender Offer at a price of $28 per share. (j) Multicare Board of Directors. Simultaneously with the closing hereunder, the Borrower shall have the unrestricted right, subject to ss.14(f) of the Securities Exchange Act of 1934, to designate and cause to be elected a majority of the board of directors of Multicare. (k) Approval of Merger. The board of directors of Multicare, as constituted before any change in its composition pursuant to the right described in paragraph (j) of this Section 2.1, shall have recommended acceptance of the Tender Offer and shall have approved the Merger. (l) Certain Legal Matters. The restrictions of ss.203 of the Delaware General Corporation Law and any other impediment under the Delaware General Corporation Law shall be inapplicable to the acquisition of the Multicare Shares pursuant to the Tender Offer; no legal impediment (under ss.251 or ss.253 of the Delaware General Corporation Law or otherwise) to the Merger exists or would exist upon completion of the Tender Offer; and there shall not be pending or threatened any legal or administrative proceeding seeking to restrain or prevent the consummation of the Tender Offer, the Merger or any of the transactions contemplated by this Agreement or the Transaction Documents or questioning the legality or validity thereof; and the Tender Offer and other related transactions shall be consummated in accordance with all applicable Laws. (m) Maximum Price. The total amount payable by the Borrower, Multicare and its Subsidiaries in connection with the Tender Offer and the Merger, including consulting, noncompetition, severance and other payments to employees of Multicare or its Subsidiaries, and including amounts provided to refinance Indebtedness of Multicare or any -13- of its Subsidiaries, plus the amount of existing Indebtedness of Multicare not repaid in connection with the Tender Offer and the Merger, shall not exceed $1,533,000,000. (n) Opinions of Counsel. (i) The Borrower shall have delivered favorable opinions of counsel, dated as of the Closing Date, from: (1) Blank Rome Comisky & McCauley, counsel to the Borrower, as to the absence of conflicts with other financing agreements and other material agreements of the Borrower, the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1997 Subordinated Note Indenture, compliance with the Margin Rules, compliance with Laws applicable to the Tender Offer, the perfection of security interests under the Pledge Agreement, the due organization of the Loan Parties, the due authorization of the transactions referred to herein, the enforceability of the Loan Documents, certain health care and licensing compliance issues and such other matters as the Agents may reasonably request, in form reasonably satisfactory to the Lenders; and (2) local counsel to the Borrower in the States of Massachusetts, West Virginia, New Jersey, Ohio, Pennsylvania, Wisconsin, Connecticut, Illinois, Rhode Island, Vermont, and Virginia as to certain health care matters and such other matters as the Agents may reasonably request, in form and substance satisfactory to the Agents. (3) Drinker Biddle & Reath LLP, special counsel to the Administrative Agent, shall have delivered an opinion to the Administrative Agent a favorable opinion of counsel, dated as of the Closing Date, as to such matters as the Administrative Agent shall reasonably request. (o) [INTENTIONALLY OMITTED] (p) Consents and Approvals. All material corporate, governmental, judicial and third party consents and approvals necessary in connection with this Agreement and the other Loan Documents, the Tender Offer and the related transactions (including consents and approvals required under or referred to in the Merger Agreement) shall have been obtained and, as applicable, become final orders (without imposition of any conditions that are not acceptable to the Lenders) and shall remain in full force and effect and, to the extent requested by any Agent, copies thereof shall have been delivered to the Administrative Agent. Without limiting the generality of the foregoing, all appropriate filings shall have been made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the applicable waiting periods relating thereto shall have expired or been terminated without requests for additional information from the reviewing agencies. (q) Financial Statements; Projections. -14- (i) Financial Statements. The Borrower shall have delivered, or caused to be delivered, to the Administrative Agent and the Lenders at least three (3) Business Days prior to the Closing Date each of the following: (x) a consolidated income statement of Multicare and its consolidated Subsidiaries, for the twelve calendar month period ending on June 30, 1997, adjusted on a pro forma basis, to the beginning of the period (as required for financial covenants) to reflect the consummation of all of the transactions set forth in the Transaction Documents and all Acquisitions and dispositions which shall have occurred within said twelve month period as if such transactions, Acquisitions and dispositions had occurred on the first day of such period, which statement shall be supplemented by information separating out and explaining all pro forma adjustments made thereto; and (y) a consolidated balance sheet of Multicare and its consolidated Subsidiaries as of June 30, 1997, reflecting, on a pro forma basis, the consummation of all transactions set forth in the Transaction Documents, including all borrowings in connection therewith and all borrowings otherwise contemplated hereunder, the application of all proceeds of such borrowings and the amount of all outstanding Indebtedness after giving effect to the foregoing, which balance sheet shall be supplemented by information separating out and explaining all pro forma adjustments made thereto, each of which statements shall be (1) in form acceptable to the Agents, (2) accompanied by explanatory notes acceptable to the Agents and (3) certified by the chief financial officer of the Borrower to fairly present on a pro forma basis the financial condition and results of operations as at the date, or for the period, indicated. (ii) Projections. The Borrower shall have delivered to each Lender projections respecting the consolidated financial condition and results of operations of Multicare and its Subsidiaries for the period commencing on January 1, 1997 and ending on December 31, 2005, which projections shall be in reasonable detail, shall reflect the consummation of the transactions contemplated hereby and the Transaction Documents, including the making of the initial Loans, and shall be accompanied by a written statement of the assumptions and estimates underlying such projections. (r) Officer's Compliance Certificate. The Borrower shall have delivered an Officer's Compliance Certificate, dated as of the Closing Date, as to the truth of the -15- representations and warranties herein and in the other Loan Documents and the absence of any Default (in each case, both before and after giving effect to the initial Loans). (s) Fees and Expenses. The Borrower shall have paid the fees required to be paid to the Agents and the Lenders on or before the Closing Date and the fees and disbursements of counsel for the Agents in connection with the negotiation, preparation, execution and delivery of the Loan Documents and the making of the initial Loans. (t) Closing of Genesis and Multicare Credit Facilities. All conditions to the initial funding under (i) the Third Amended and Restated Credit Agreement, dated as of the date hereof, among Genesis, certain of its Subsidiaries, Mellon as administrative agent, and certain other agents and lenders referred to therein (the "Genesis Credit Agreement") and (ii) either the (Short-Term Pre-Merger) Credit Agreement or the (Long-Term) Credit Agreement, dated as of the date hereof, among Multicare, certain of the Subsidiaries of Multicare, Mellon as administrative agent, and certain other agents and lenders referred to therein (as applicable, the "Multicare Credit Agreement") shall have been satisfied. (u) Investment in Genesis ElderCare Corp. and in the Borrower. Genesis shall have acquired approximately 44% of the common stock of Genesis ElderCare Corp. for a purchase price of at least $325,000,000.00; Cypress, Nazem and TPG, collectively, shall have paid at least $420,000,000.00 in cash for the remainder of the common stock of Genesis ElderCare Corp.; Genesis ElderCare Corp. shall have contributed at least $745,000,000.00 to the Borrower in exchange for common stock of the Borrower; and the Borrower shall be wholly owned by Genesis ElderCare Corp. (v) 1997 Subordinated Notes. The 1997 Subordinated Note Indenture with terms and conditions satisfactory to the Agents in their sole discretion shall have been executed by the parties thereto and the Borrower shall have received gross proceeds of at least $250,000,000.00 from the sale of the 1997 Subordinated Notes and the net proceeds from such sale shall have been released to the Borrower from the escrow in which they were deposited. 2.2 CONDITIONS TO EACH LOAN. (a) Conditions. The obligation of the Lenders to make any Loans, including the initial Loans, are subject to fulfillment of each of the following conditions, in each case, unless otherwise specified, to the satisfaction of the Administrative Agent: (i) Absence of Default. There shall not, either prior to or after giving effect to each such Loan, exist an Event of Default or a Default. -16- (ii) Borrowing Notice. In connection with any request for Loans (other than Loans described in Section 1.1(b)), the Administrative Agent shall have received a borrowing notice as required by Section 1.2 above. (iii) Truth of Representations. The representations and warranties of the Borrower and each other Loan Party made in this Agreement and each other Loan Document shall be true and correct in all material respects as of the date each such Loan is made (both immediately prior to and after giving effect to said Loan) as if made on and as of such date. (iv) No Violations of Law. Neither the making of, nor the use of proceeds of, such Loans shall conflict with or cause the Borrower to violate any Law. (v) Compliance with Indenture Covenants. The making of such Loans shall not violate the terms of the 1997 Subordinated Note Indenture, and the Borrower shall deliver a certificate of its chief financial officer or other Responsible Officer representing that, both before and after giving effect to such additional Indebtedness, the Borrower is in compliance with the financial covenants set forth in Section 4.03 of the 1997 Subordinated Note Indenture and that such Loans constitute Senior Indebtedness and Designated Senior Indebtedness (as defined in the 1997 Subordinated Note Indenture). (vi) Additional Information. The Lenders shall have received such additional information and documentation as the Lenders may reasonably request. (vii) Business Activities. In the case of any Loan made before the effective date of the Merger, the Borrower shall not be engaged in any business activity except in connection with the Tender Offer. (viii) Pledge of Multicare Shares. Such action as shall be specified by the Administrative Agent shall have been taken so that the Administrative Agent has a perfected, first priority security interest in all Tendered Shares purchased by the Borrower in the Tender Offer, including Tendered Shares purchased with the proceeds of such Loan. (ix) Prior Application of Equity Contributions. All amounts contributed to the equity of the Borrower, as described in Section 2.1(u) shall have been used, or shall simultaneously be used, to pay for Tendered Shares purchased in the Tender Offer. (x) Application of Proceeds of Subordinated Financing. The amount of proceeds of the issuance of the 1997 Subordinated Notes used to purchase Tendered Shares (including any such proceeds so used concurrently with the making of such -17- Loan) shall equal or exceed the amount of all Loans outstanding after giving effect to such Loan. (xi) Ratio of Tendered Share Value to Indebtedness. After giving effect to the making of such Loan and the purchase of Tendered Shares with the proceeds thereof, the "current market value" (determined as provided in Regulation U of the Board of Governors of the Federal Reserve System) of all Tendered Shares purchased by the Borrower with funds provided by all sources shall not be less than 2.5 times the amount of the Borrower's Indebtedness, and the Borrower shall have furnished a certificate to the Agents demonstrating this in form, substance and detail satisfactory to the Agents. (b) Deemed Representation and Warranty. The request for, and acceptance of, any Loan by the Borrower shall be deemed a representation and warranty by the Borrower that the conditions specified in clauses (i), (iii), (iv), (v) and (vii) through (xi) of the preceding paragraph (a) have been satisfied. ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS. The Borrower hereby represents and warrants to each Lender Party as follows: (a) Status of Loan Parties. Each Loan Party is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Loan Party has the power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage. Each Loan Party is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable, except for any failures to maintain such qualifications which, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 3.1(a) hereto sets forth for each Loan Party, as of the Closing Date, the jurisdictions in which it is qualified to do business as a foreign corporation. (b) Capitalization of Loan Parties. Schedule 3.1(b) hereto sets forth the authorized capitalization of each Loan Party. As of the Closing Date, the Borrower is a wholly-owned subsidiary of Genesis ElderCare Corp., and Genesis ElderCare Corp. is owned as described in Section 2.1(u). The outstanding equity securities of each Loan Party have been duly authorized and validly issued and are fully paid and nonassessable. The equity securities of the Borrower and Genesis ElderCare Corp. are owned beneficially and of record as stated in Section 2.1(u) and are free and clear of any Lien, except for Liens in favor of the Administrative Agent for the benefit of the Secured Parties as contemplated by -18- the Loan Documents and other Permitted Liens. Except as provided in the Transaction Documents, there are no options, warrants, calls, or similar rights relating to equity securities of the Loan Parties. No Excluded Subsidiary has any equity interest in any member of the Multicare Group. (c) Authorization, Execution and Binding Effect of Loan Documents. Each Loan Party has the power and authority to execute, deliver, perform, and take all actions contemplated by, each Loan Document to which it is a party, and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. This Agreement and each other Loan Document has been duly and validly executed and delivered by each Loan Party listed on the signature pages hereto or thereto, as the case may be. This Agreement and each other Loan Document constitutes the legal, valid and binding obligation of each Loan Party purporting to be a party hereto or thereto, as the case may be, enforceable against such Person in accordance with its terms, except as the enforceability hereof of thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. (d) Security. The Pledge Agreements create in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable Lien on all right, title and interest of the Borrower and Genesis ElderCare Corp. in the Collateral described therein, and the Administrative Agent has, for the benefit of the Secured Parties, a fully perfected and continuing first priority Lien on all of the right, title and interest of the Borrower and Genesis ElderCare Corp. in the Collateral described in the Pledge Agreements, subject to no Liens other than Permitted Liens. (e) Governmental Approvals and Filings; Absence of Conflicts. Except as described in Schedule 3.1(e), no approval, order, consent, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with, the execution and delivery of any Loan Document by any Loan Party, or in connection with the performance of the terms hereof or thereof by such Person, other than the filing of Uniform Commercial Code financing and continuation statements as referred to in the Pledge Agreements. No Loan Party is subject to any Law which purports to restrict or regulate its ability to borrow money, obtain credit or provide a guarantee or other form of credit support as a consequence of the nature of the business conducted by such Loan Party. Neither the execution and delivery of this Agreement or any other Loan Document by any Loan Party, nor the performance of or compliance with the terms and conditions hereof or thereof by any Loan Party does or will (i) violate or conflict with any Law or any judgment, decree, or order of a court or Governmental Authority or any settlement agreement, -19- (ii) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or cause an acceleration of, or result in the creation or imposition of any Lien upon any of property of any Loan Party (except for any Lien in favor of the Administrative Agent pursuant to the Pledge Agreements) under or in connection with, (x) its articles or certificate of incorporation or bylaws (or other constituent documents), (y) any agreement or instrument creating, evidencing or securing any Indebtedness in the aggregate amount of $250,000.00 or more to which any Loan Party is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, or (z) any other agreement or instrument or arrangement to which it is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, in the case of the foregoing clause (z), for matters that,individually or in the aggregate, could not have a Material Adverse Effect, or (iii) result in a Limitation on any Licenses applicable to the operations or properties of any Loan Party or any Subsidiary of any Loan Party, or adversely affect the ability of any Loan Party or any Subsidiary of any Loan Party to participate in any Third-Party Payor Arrangement. Except to the extent that the failure to obtain the same could not have a Material Adverse Effect, no approval, order, consent of, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with the Tender Offer or the Merger except such consents as are listed on Schedule 3.1(e) hereto, all of which have been obtained and are in full force and effect. (f) Financial Statements. The Borrower has heretofore furnished to the Administrative Agent and each Lender consolidated balance sheets of Multicare and its consolidated Subsidiaries as of December 31, 1996 and December 31, 1995 and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal years then ended, as examined and reported on by KPMG Peat Marwick, independent certified public accountants for Multicare, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of Multicare and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP. The Borrower has heretofore furnished to the Administrative Agent -20- and each Lender interim consolidated balance sheets of Multicare and its consolidated Subsidiaries as of the first two fiscal quarters of the fiscal year beginning January 1, 1997, together with the related consolidated statements of income, cash flows and changes in stockholders' equity for the applicable fiscal periods ending on each such date. Such financial statements (including the notes thereto), as well as those financial statements delivered pursuant to Section 2.1(q) above, present fairly the financial condition of Multicare and its consolidated Subsidiaries as of the date specified and the results of their operations and their cash flows for the fiscal periods specified, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments, except that such financial statements do not contain all of the footnote disclosures required by GAAP. There are no material liabilities of the parties reported on except as disclosed on such financial statements. Schedule 3.1(f) hereto sets forth, as of the Closing Date, all Indebtedness (and commitments for Indebtedness) of the Borrower. (g) Projections. The projections delivered pursuant to Section 2.1(q) above and the assumptions and estimates referred to therein are reasonable, are, as of the Closing Date, made in good faith, are consistent with the Loan Documents and represent the Borrower's best judgment as to such matters. Nothing has come to the attention of the Borrower which would lead the Borrower to believe that such projections will not be attained or exceeded provided, however, that nothing contained in this paragraph (g) shall constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. (h) Absence of Material Adverse Change. Since December 31, 1996, there has been no material adverse change in the business, operations, condition (financial or otherwise), properties or prospects of the members of the Multicare Group taken as a whole or the industry served by the members of the Multicare Group. (i) Title to Property. Each Loan Party and each of the members of the Multicare Group has good and marketable title to all property owned or purported to be owned by it, including but not limited to all property reflected in the most recent balance sheets delivered to the Lenders pursuant to this Agreement (except such property as was sold or otherwise disposed of in accordance with Section 5.5 below) subject to no Liens except Permitted Liens. (j) Solvency. The present fair saleable value of the assets of the Loan Parties, taken as a whole, after giving effect to all the transactions contemplated by the Loan Documents and the funding of the Loans hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of the Loan Parties, taken as a whole, as they mature. The property of each Loan Party does not constitute unreasonably small capital for such Loan Party to carry out its business as now conducted and as proposed to be conducted including the capital needs of such Loan Party. Each Loan Party does not intend to, nor does such Loan Party believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account -21- the timing and amounts of cash to be received by such Loan Party, and of amounts to be payable on or in respect of debt of such Loan Party). The cash available to each Loan Party after taking into account all other anticipated uses of the cash of such Loan Party, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Loan Party when such amounts are required to be paid. (k) Accurate and Complete Disclosure. The information heretofore, contemporaneously or hereafter provided in writing by or on behalf of any Loan Party to any Lender Party pursuant to or in connection with this Agreement or any other Loan Document is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by such Lender Party) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. (l) Legal and Administrative Proceedings. There is no action, suit, litigation or proceeding pending, or to the knowledge of the Borrower, threatened nor, to the knowledge of the Borrower, is there any investigation pending or threatened, in any court or before any arbitrator or Governmental Authority or any payor appeals bodies respecting or relating to any Loan Party or any of the members of the Multicare Group (or any officer or director thereof) or any property of any Loan Party or any of the members of the Multicare Group that, individually or in the aggregate, (i) could have a material adverse effect on the Tender Offer, the Merger or the business, condition (financial or otherwise), operations, properties or prospects of the Loan Parties and the members of the Multicare Group taken as a whole or (ii) in the judgment of the Majority Lenders, could materially adversely affect the Lenders' rights and remedies hereunder or under the other Loan Documents, this Agreement or other Loan Documents or the ability of the Loan Parties to perform their obligations hereunder or thereunder. (m) Absence of Violations and Conflicts. No Loan Party and no member of the Multicare Group is in violation of, in default under, or is subject to any contingent liability on account of any violation of or conflict with: (i) any Law; (ii) its articles or certificate of incorporation, bylaws, partnership agreement, operating agreement (or other constituent documents); or (iii) any financing agreement or other instrument or arrangement to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clauses (i) or (iii) above, for matters that, individually or in the aggregate, could not have a Material Adverse Effect. (n) Operation of Health Care Facilities. (i) Except where failure to possess the same, either individually or in the aggregate, could not have a Material Adverse Effect, Multicare and each member of the Multicare Group possess all Licenses and Reimbursement Approvals necessary to operate its Health Care Businesses substantially as now operated and as -22- presently proposed to be operated. Neither Borrower, Multicare nor any member of the Multicare Group is in material violation of the terms of its Licenses and Reimbursement Approvals. (ii) Except for Limitations which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, there is no threatened or pending Limitation of any material License or Reimbursement Approval relating to the operation of Multicare or any member of the Multicare Group's Health Care Businesses. (iii) Except where the failure to file the same, either individually or in the aggregate, could not have a Material Adverse Effect, Multicare and each member of the Multicare Group have caused there to be accurately prepared and filed (or obtained extensions for) all applicable cost reports with respect to any and all Third Party Payor Arrangements that are material to conduct its Health Care Businesses substantially as now conducted. (iv) Neither Multicare nor any member of the Multicare Group is subject to any claim (including any claim for overpayment), litigation, proceeding or other action or, to any Loan Party's knowledge, investigation relating to a claim or action by any Governmental Authority except matters that if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (v) Multicare and each member of the Multicare Group participate in an internal comprehensive compliance program respecting compliance with all Laws affecting the types of businesses carried on by Multicare and any member of the Multicare Group (including health care Laws) and has made such program available for review by any Lender, upon request. (vi) Each of the foregoing statements in this paragraph (n) are also true as applied to Persons managed by any member of the Multicare Group to the extent that the failure of any such statement to be true (as applied to any Person managed by a member of the Multicare Group) could have a Material Adverse Effect. (o) Management Agreements. Schedule 3.1(o) sets forth as of the Closing Date, a complete and correct list of all Management Agreements relating to (i) the operation and management by a Person that is not a Loan Party or a member of the Multicare Group of each health care facility owned by Multicare or any member of the Multicare Group and (ii) the operation and management by Multicare or any member of the Multicare Group of each health care facility owned by a Person that is not a Loan Party or a member of the Multicare Group. As of the Closing Date, each such Management Agreement is in full force and effect subject to no material default. (p) Health Care Businesses. Schedule 3.1(p) sets forth, as of the Closing Date, a complete and correct list of all Health Care Businesses owned or operated by -23- Multicare or any member of the Multicare Group and the locations thereof, indicating which such Health Care Businesses are operated but not owned. (q) Leased Properties. Schedule 3.1(q) identifies all properties leased by Multicare or any member of the Multicare Group as of the Closing Date. As of the Closing Date, all leases relating to such leased properties are in full force and effect subject to no material default. Such leases comply with the provisions of Section 5.7 below. (r) Intellectual Property. Each Loan Party and each member of the Multicare Group owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases and other rights (collectively, "intellectual property"), free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others. No Loan Party nor any member of the Multicare Group is in material violation of the rights of others with respect to intellectual property. (s) Employee Benefits/ERISA. (i) The Loan Parties and the members of their Controlled Groups maintain only those Defined Contribution Plans and other Plans listed on Schedule 3.1(s) attached hereto and contribute only to those Multiemployer Plans listed on Schedule 3.1(s) attached hereto. No Loan Party nor any member of its Controlled Groups has ever maintained or made contributions to, or has ever been required to make contributions to, any Multiemployer Plan or any Defined Benefit Pension Plan. (ii) Each Defined Contribution Plan, as most recently amended, including amendments to any trust agreement, group annuity, or insurance contracts, or other governing instrument, is the subject of a favorable determination letter by the Internal Revenue Service with respect to its qualification under ss.401(a) of the Code. (iii) All Plans comply, both in form and in operation, with the requirements of the Code and ERISA. (iv) There is not now, and has not been, any material violation of the Code or ERISA with respect to the filing of applicable reports, documents, and notices regarding any Plan with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity or the furnishing of such documents to the participants or beneficiaries of any Plan. The Borrower has furnished to the Lenders copies of the most recent annual report, audited financial statements, and other reports filed with the Secretary of Labor, the -24- Secretary of the Treasury, the PBGC or any other governmental entity with respect to each Plan. (v) All Pension Plans, as of the date hereof, meet the minimum funding standards of ss.412 of the Code and ss.302 of ERISA without regard to any funding waiver. The Loan Parties and the members of their Controlled Groups have, as of the date hereof, made all contributions or payments to or under Pension Plans required by the terms of any such Plan or any contract or agreement. (vi) No Prohibited Transaction has occurred with respect to any Plan. (vii) No Loan Party or any member of its Controlled Group has any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA). (viii) There is not now, and has not been, any COBRA Violation with respect to any Plan to which such continuation coverage requirements apply which has a material adverse effect, directly or indirectly, on the financial condition of any Loan Party or any member of the Multicare Group. (ix) The Loan Parties and the members of their Controlled Groups have established only those irrevocable trusts the assets of which remain subject to the general creditors of the Loan Parties and/or members of their Controlled Group (sometimes referred to as "rabbi trusts") listed on Schedule 3.1(s) attached hereto and have furnished to the Lenders copies of each such "rabbi trust." (x) If the Borrower or any member of its Controlled Group were obligated to pay the entire potential withdrawal liabilities for which any of them would be liable if each of them were to withdraw from the Multiemployer Plans to which any of them makes contributions, such obligations would not be in excess of $500,000.00 (xi) The Borrower and the members of its Controlled Group have complied with the requirements of ss.515 of ERISA with respect to Multiemployer Plans. (t) Environmental Matters. (i) Each Loan Party and each of their respective Environmental Affiliates is and has been, in full compliance with all applicable Environmental Laws, except for matters which, individually or in the aggregate, could not -25- have a Material Adverse Effect. There are no circumstances that may prevent or interfere with such full compliance now or in the future. (ii) Each Loan Party and their respective Environmental Affiliates have all Environmental Approvals necessary or desirable for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated in the future, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. (iii) There is no Environmental Claim pending or, to the knowledge of any Loan Party after due inquiry, threatened, and there are no past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Loan Party or any Environmental Affiliates of the Loan Parties) that could form the basis of any Environmental Claim against any Loan Party or any such Environmental Affiliates, except for matters which, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (iv) No facility or property now or previously owned, operated or leased by any Loan Party or any of their respective Environmental Affiliates is an Environmental Cleanup Site. No Loan Party and none of their respective Environmental Affiliates has directly transported or disposed of or arranged for the transportation or disposal of any Environmental Concern Materials to any Environmental Cleanup Site. No Lien exists, and, to the Loan Parties' knowledge after due inquiry, no condition exists which could result in the filing of a Lien, against any property of any Subsidiary of any Loan Party or any of their Environmental Affiliates, under any Environmental Law. (u) Margin Rules. Neither the making of the Loans nor any use of proceeds of the Loans will violate or conflict with the provisions of the Margin Rules. (v) Regulation O. No director, executive officer or principal shareholder of any Loan Party is a "director," "executive officer" or "principal shareholder" of any Lender, as such terms are used in Regulation O of the Board of Governors of the Federal Reserve System, as amended. (w) 1997 Subordinated Notes. The Borrower hereby confirms that the Loan Obligations are "Senior Indebtedness" and hereby designates the Loan Obligations as "Designated Senior Indebtedness" under the 1997 Subordinated Note Indenture. All of the Loan Obligations constitute and will constitute "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning ascribed to such terms in the 1997 Subordinated Note -26- Indenture and the subordination provisions therein are enforceable against Genesis or the Borrower, as the case may be, and against the holders, from time to time, of the 1997 Subordinated Notes. The Borrower is not in default under the 1997 Subordinated Note Indenture. (x) Certain Documents and Transactions. Each of the Transaction Documents (including the Multicare Management Agreement) is in full force and effect and no amendments, modifications or supplements have been made to any such documents as the same were delivered to the Agents pursuant to Article 2 above except such amendments, modifications or supplements to Transaction Documents as could not reasonably be expected to have an adverse effect on any Loan Party (including the condition (financial or otherwise), properties or prospects of such Loan Party), the Loan Documents or any Lender Parties. There exists no default under any such agreements except for immaterial breaches. (y) Labor Matters. There are no existing, or, to the best of Borrower's knowledge, threatened or contemplated, strikes, slowdowns, picketing or work stoppages by any employees against any Loan Party or any member of the Multicare Group, any lockouts by any Loan Party or any member of the Multicare Group of any of its employees or any labor trouble or other occurrence, event or condition of a similar character which, individually or in the aggregate, could have a Material Adverse Effect. 3.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE. The representations and warranties of the Borrower set forth in this Article 3 are unaffected by any prior or subsequent investigation by, or knowledge of, any Agent or any Lender. ARTICLE 4 AFFIRMATIVE COVENANTS So long as any Loan Obligation shall remain unpaid or any Lender shall have any Commitment under this Agreement, the Borrower shall comply, and shall cause the other Loan Parties to comply, with the following covenants. 4.1 REPORTING REQUIREMENTS. (a) Annual Financial Statements. As soon as practicable, and in any event within 90 days after the close of each fiscal year of the Borrower, the Borrower shall furnish to the Administrative Agent and each Lender, audited: (i) consolidated statements of income, cash flows and changes in stockholders' equity of the Borrower and its Subsidiaries for such fiscal year -27- and a consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal year. If at any time the Cash Flow of the Excluded Subsidiaries in the aggregate exceeds 3% of the Cash Flow of Borrower and its consolidated Subsidiaries, the Borrower shall furnish statements of income, cash flows and changes in stockholders equity of the Borrower and its Subsidiaries on a consolidated basis, for such fiscal year and a balance sheet of the Borrower and its Subsidiaries, on a consolidated basis, as of the close of such fiscal year, in lieu of the requirements of the preceding sentence; and (ii) statements of income, cash flows and changes in stockholders equity of Genesis and its Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal year and a balance sheet of Genesis and its Subsidiaries, on a consolidated basis, as of the close of such fiscal year, and with respect to all of the foregoing financial statements referred to above setting forth the appropriate footnotes, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such financial statements shall be accompanied by an unqualified opinion in form and substance satisfactory to the Administrative Agent of independent certified public accountants of recognized national standing selected by the Borrower and satisfactory to the Administrative Agent. (b) Quarterly Financial Statements. As soon as practicable, and in any event within 45 days after the close of each fiscal quarter of each fiscal year of the Borrowers, the Borrower shall furnish to the Administrative Agent and each Lender, the following unaudited financial statements: (i) consolidated statements of income, cash flows and changes in stockholders' equity of the Borrower and its Subsidiaries for such fiscal quarter and the applicable year to date period, and a consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal quarter. If at any time the Cash Flow of the Excluded Subsidiaries in the aggregate exceeds 3% of the Cash Flow of Borrower and its Subsidiaries, the Borrower shall furnish statements of income, cash flows and changes in stockholders equity of the Borrower and its Subsidiaries on a consolidated basis, for such fiscal quarter and applicable year-to-date period, in lieu of the requirements of the preceding sentence; and (ii) statement of income, cash flows and changes in stockholders' equity for Genesis and its Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal quarter, together with the applicable year to date period and a balance sheet of such Persons on a consolidated basis as of the end of such fiscal quarter. -28- all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the balance sheets, which shall set forth in comparative form the corresponding balance sheets as of the prior fiscal year end). Such financial statements shall be certified by the chief financial officer or other Responsible Officer of the Borrower as presenting fairly the financial position of the subject entities as of the end of such fiscal quarter and year-to-date period, and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal quarter and year-to-date period, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) SEC Filings and Other Disclosure. Promptly upon their becoming available to the Borrower but no later than ten Business Days after the same are filed with the Securities Exchange Commission or any securities exchange (if they are so filed), the Borrower shall deliver to the Administrative Agent and each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which any Loan Party shall file with the Securities and Exchange Commission or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by any Loan Party to its stockholders, bondholders or the financial community generally, (iii) all accountants' management letters (not otherwise delivered pursuant to the preceding paragraph (b)) and all other reports submitted by accountants in connection with any audit of any Loan Party, and (iv) copies of all compliance certificates furnished to the trustee under the 1997 Subordinated Note Indenture. (d) Notice of Certain Events. Promptly upon the Borrower becoming aware of any of the following, the Borrower shall give the Administrative Agent notice thereof, together with a written statement setting forth the details thereof and any action with respect thereto taken or proposed to be taken by any Loan Party: (i) Loss of Licenses or Reimbursement Approvals. Any actual Limitation (other than in the ordinary course of business) or any threatened Limitation (to the extent that it individually or in the aggregate with all other actual or threatened Limitations is material) of any License or Reimbursement Approval relating to the operation of a Health Care Business or, if the same individually or in the aggregate could have a Material Adverse Effect, any Limitation of any License or Reimbursement Approval of any Person managed by the Borrower or any member of the Multicare Group; (ii) Default. Any Event of Default or Default; (iii) Material Adverse Change. Any material adverse change in the business, operations or condition (financial or otherwise) or prospects of any Loan Party; -29- (iv) Material Litigation. Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting any Loan Party or any member of the Multicare Group (officer or director thereof) or any property of any Loan Party or any member of the Multicare Group, except for matters that if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect; (v) Breach or Termination of Certain Agreements. Any breach, claimed breach, termination or purported or threatened termination (including a copy of any notice of termination) of (A) the Multicare Management Agreement, (B) any other Transaction Document (except a termination in accordance with its terms), (C) any other Management Agreement except in the ordinary course of business, (D) the 1997 Subordinated Note Indenture (including a copy of any notice of default received thereunder), or (E) any other agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of any Loan Party and the members of the Multicare Group taken as a whole; (vi) ERISA. (A) any taxes, penalties, interest charges and other financial obligations in excess of $250,000.00 that have been assessed or otherwise imposed, or which the Borrower has reason to believe may be assessed or otherwise imposed in excess of $250,000.00, against any Loan Party or any member of its Controlled Group by the Internal Revenue Service, the PBGC, the Department of Labor or any other governmental entity with respect to any Plan or Multiemployer Plan; (B) any application for a waiver by a Loan Party or any member of its Controlled Group of the minimum funding standard under ss.412 of the Code with respect to a Pension Plan; (C) the adoption of any Plan, including but not limited to a Defined Benefit Pension Plan, or any obligation to contribute to any Multiemployer Plan by a Loan Party or any member of its Controlled Group. (D) any Prohibited Transaction with respect to a Plan. (E) (1) that any Loan Party has incurred Withdrawal Liability from a Multiemployer Plan maintained by it or any member of its Controlled Group, (2) that any Multiemployer Plan to which any Loan Party or any member of its Controlled Group has made contributions is or will be in Reorganization, or (3) that any other -30- condition exists with respect to a Multiemployer Plan which presents a material risk of termination of any such Plan, the Borrower will furnish a statement to the Lenders setting forth the details of such Withdrawal Liability, Reorganization or condition, and the action that the Borrower proposes to take with respect thereto, together with a copy of any notice of Withdrawal Liability or Reorganization received by such Borrower or any member of its Controlled Group. (F) any default by any Loan Party or any member of its Controlled Group (as defined in ss.4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required by reason of its withdrawal (as defined in ss.4203 or ss.4205 of ERISA). (G) any action brought against any Loan Party or any member of its Controlled Group under ss.502 of ERISA with respect to its failure to comply with ss.519 of ERISA. (vii) Environmental. Any Environmental Claim pending or threatened against any Loan Party or any of its Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Loan Party or any of its respective Environmental Affiliates) that could form the basis of such Environmental Claim, which Environmental Claim, if adversely resolved, individually or in the aggregate, could have a Material Adverse Effect. (e) Other ERISA Information. The Borrower shall deliver to the Administrative Agent copies of the following: (A) Promptly after the filing thereof with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity, copies of each annual report, each audited financial statement and any other report so filed with respect to each Plan. (B) The Borrower will furnish to the Lenders as soon as possible after receipt thereof, a copy of any notice that any Loan Party or any member of its Controlled Group receives from the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity that sets forth or proposes any action to be taken or determination made by the PBGC, the Internal Revenue Service, the -31- Department of Labor or any other governmental entity with respect to any Plan. (f) Amendments to Transaction Documents. The Borrower shall furnish the Administrative Agent with copies or drafts of all proposed amendments, modifications or waivers to any Transaction Documents (1) in the case of any amendments, modifications or waivers requiring the consent of the Required Lenders at least 20 Business Days prior to the effective date thereof and (2) in all other cases, at least 5 Business Days prior to the effective date thereof. (g) Notice of Non-Renewal of Management Agreement. The Borrower shall give the Administrative Agent written notice promptly upon receipt of delivery of any notice of non-renewal or termination delivered under or relating to the Multicare Management Agreement. The Administrative Agent shall promptly give each Lender a copy of any notice delivered pursuant to this paragraph (g). (h) Notices under Indenture. The Borrower shall furnish to the Administrative Agent copies of all notices, reports, certificates or other material delivered to or by the trustee or any other party under the 1997 Subordinated Note Indenture, promptly upon receipt thereof. (i) Other Information. In addition, the Borrower will promptly furnish to the Administrative Agent such other information as any Lender through the Administrative Agent may reasonably request, including information submitted by the Borrower to any Governmental Authority, and the Administrative Agent will furnish such information to the requesting Lender. 4.2 MAINTENANCE OF EXISTENCE. Each Loan Party shall, and shall cause the members of the Multicare Group to, preserve and maintain its corporate or partnership existence, as the case may be, and good standing in the jurisdiction of its organization, and shall qualify and remain qualified as a foreign corporation or partnership in each jurisdiction in which such qualification is required, provided, however nothing in this Section 4.2 shall prohibit any sales or other dispositions permitted under Section 5.5. 4.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY. (a) Type of Business. The Borrower shall not engage in any business activity except in connection with the Tender Offer. The Borrower shall cause Genesis ElderCare Corp. not to engage in any business activity other than the ownership of the capital stock of the Borrower. The Borrower shall cause the Multicare Group to continue to engage in the business of the same general type as conducted by the Multicare Group on the -32- Closing Date and not to engage in any other type of business without the consent of the Required Lenders. (b) Healthcare and Regulatory Rights. Except where the failure to take any of the following actions, individually or in the aggregate, could not have a Material Adverse Effect, the Borrower shall cause the Multicare Group to (i) maintain in effect all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it owns or operates, (ii) obtain all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it acquires, and (iii) continue its participation in any and all Third Party Payor Arrangements. Except where such failure to so comply (together with all other failures from time to time by the same or other members, could not reasonably be expected to have a Material Adverse Effect, the Borrower shall cause each member of the Multicare Group to comply with any and all rules, regulations, standard procedures and decrees necessary to maintain its participation in any such Third Party Payor Arrangements and prepare and file all applicable cost reports with respect to all Third Party Payor Arrangements to the extent required. The Borrower shall cause the Multicare Group to use its efforts to cause each Person managed by it to obtain and maintain its Licenses and Reimbursement Approvals necessary for the conduct of its business and to continue its participation in Third Party Payor Arrangements and comply with all rules, regulations, standard procedures and decrees relating thereto to the extent that the failure to do so could have a Material Adverse Effect. (c) Maintenance of Property. The Borrower shall cause each member of the Multicare Group to maintain, keep and preserve all of its property necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted (except for sales and other dispositions of property permitted under Section 5.5 below (Dispositions)). Without limiting the generality of the foregoing, the Borrower shall cause each member of the Multicare Group to maintain in full force and effect each lease, Management Agreement and other material agreement used or useful in its business, subject to no material default except where the loss of, or default under, such lease, Management Agreement or other agreement (i) could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect or (ii) is not otherwise prohibited by the terms of this Agreement. 4.4 MAINTENANCE OF RECORDS; FISCAL YEAR. Each Loan Party and each member of the Multicare Group shall keep adequate records and books of account, in which complete entries will be made in accordance with historical practice and GAAP, reflecting all financial transactions of the Borrowers. Each Loan Party shall maintain a fiscal year end of December 31. -33- 4.5 COMPLIANCE WITH LAWS. Each Loan Party and each member of the Multicare Group shall comply (and maintain procedures to assure compliance) in all material respects with all applicable Laws (including environmental and health care Laws) and all judgments, decrees or orders of any court or Governmental Authority and all settlement agreements. Without limiting the generality of the foregoing, each Loan Party and each member of the Multicare Group shall maintain in full force and effect an internal compliance program respecting compliance with all Laws affecting the types of businesses carried on by it (including healthcare Laws) and make such program available for review by any Lender, upon request. 4.6 ERISA. (a) Each Loan Party will, and will cause each member of its Controlled Group, to comply in all material respects with the provisions of ERISA and the Code with respect to any Plan both in form and in operation. (b) Each Loan Party will cause to be made all contributions required to avoid any Accumulated Funding Deficiency, whether or not waived, with respect to any Pension Plan. (c) No Loan Party will adopt or permit the adoption by any member of its Controlled Group of any Defined Benefit Pension Plan which would result in any Amount of Unfunded Benefit Liabilities in excess of $500,000.00. (d) No Loan Party will acquire, or permit the acquisition by any member of its Controlled Group of, any trade or business which has incurred either directly or indirectly any Amount of Unfunded Benefit Liabilities under any Defined Benefit Pension Plan in excess of $500,000.00. (e) The Loan Parties will not permit with respect to any Plan, any Prohibited Transaction or Prohibited Transactions under ERISA or the Code resulting in liability of any Loan Party or any member of its Controlled Group which together with any other liabilities subject to this paragraph (e) would in the aggregate be in excess of $500,000.00, unless such Loan Party or any member of its Controlled Group will be contesting in good faith and by appropriate proceedings any such matter and measures which are available and are being taken which have the effect of preventing the seizure of property of such Loan Party or any member of its Controlled Group pending the outcome of such contest. (f) No Loan Party will withdraw, or permit any member of its Controlled Group to withdraw, from any Multiemployer Plan to which any of them may hereafter contribute if the Withdrawal Liability which would thereupon be incurred would have a -34- material adverse effect, directly or indirectly, on the financial condition of any of the Loan Parties. (g) No Loan Party will permit any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA) of any Loan Party and of any member of its Controlled Group in excess of $500,000.00 in the aggregate with all other liabilities subject to this paragraph (g). (h) No Loan Party will, or will permit any member of its Controlled Group to, cause or suffer to exist a COBRA Violation with respect to any Plan to which such continuation coverage requirements apply if the violation(s) could result in a liability in excess of $500,000.00 in the aggregate. 4.7 RIGHT OF INSPECTION. Each Loan Party and each member of the Multicare Group shall, at any reasonable times and from time to time, and upon reasonable advance notice (but no advance notice shall be required if a Default or an Event of Default shall then exist), permit the Administrative Agent or any Lender or any agent or representative thereof, to examine and make copies and abstracts from the records and books of account of, and visit and inspect the properties of, any Loan Party and any member of the Multicare Group, and to discuss the affairs, finances and accounts of such Loan Party and any member of the Multicare Group with any of its officers, directors and independent accountants. 4.8 INSURANCE. Each Loan Party and each member of the Multicare Group shall maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as are customary in the case of Persons engaged in the same or similar businesses or having similar properties similarly situated, including insurance covering its respective properties, buildings, machinery, equipment, tools, furniture, fixtures and operations, and medical malpractice, professional liability and public liability, as well as "stop loss" and business interruption. The Borrower shall have the Administrative Agent named to receive certificates evidencing such insurance annually at least thirty days prior to the anniversary date of such insurance policies and any other time requested by the Administrative Agent. 4.9 PAYMENT OF TAXES AND OTHER CHARGES. Each Loan Party and each member of the Multicare Group shall (a) on or prior to the date on which penalties attach thereto, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties; and -35- (b) on or prior to the date when due, pay all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons and all other lawful claims which, in each case if unpaid, might result in the creation of a Lien upon any of its properties, provided that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Loan Party or member of the Multicare Group need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is being contested in good faith and by appropriate proceedings diligently conducted and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. 4.10 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS. The Borrower shall comply with the terms of the 1997 Subordinated Note Indenture. The Borrower shall promptly take all action necessary or requested by the Administrative Agent at any time to protect, preserve and give effect to the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1997 Subordinated Note Indenture. 4.11 CORPORATE SEPARATENESS. Each of the Loan Parties and each member of the Multicare Group shall observe all requirements necessary to cause it to be treated as a separate legal entity for all purposes under applicable corporate law. Without limiting the foregoing requirement, each of the Loan Parties and each member of the Multicare Group specifically shall (i) maintain and cause each Excluded Subsidiary to maintain separate corporate and financial records and observing all corporate formalities; (ii) maintain, and cause each Excluded Subsidiary to maintain, capitalization adequate to meet its business needs; (iii) cause all reports, filings and public information to refer to such Person or Excluded Subsidiary, as the case may be, as a separate company (and not a division of each other); and (iv) otherwise conduct and cause each Excluded Subsidiary to conduct, its dealings with third parties in its own name and as a separate and independent entity. Without limiting the generality of the foregoing, except as permitted or required by this Agreement or unless specifically agreed to by the Required Lenders, no Loan Party nor any member of the Multicare Group may enter into any merger or other combination with or transfer assets to any of its Excluded Subsidiaries or to Genesis or any of its Subsidiaries, or make any loan to, advance to, or other investment in any of its Excluded Subsidiaries or in Genesis or any of its Subsidiaries, or guarantee any Indebtedness of any of its Excluded Subsidiaries or of Genesis or any of its Subsidiaries, provided, nothing in this Section 4.11 shall prohibit the execution and delivery of the MultiCare Management Agreement, the MultiCare Management Agreement Termination Letter or the Tax Sharing Agreement, and the transactions contemplated thereby. Notwithstanding the foregoing, the Loan Parties and each member of the Multicare Group may make such Investments in, borrow money from, and carry on other transactions with, Excluded Subsidiaries on an arm's length basis to the -36- extent that this Agreement permits the Loan Parties and each member of the Multicare Group to carry on such activities with unrelated third parties. 4.12 TRANSACTIONS WITH AFFILIATES. Each Loan Party and each member of the Multicare Group shall effect all transactions with Affiliates (excluding transactions among members of the Multicare Group) on a basis at least as favorable to such Loan Party as would at the time be obtainable for a comparable transaction on an arm's length dealing with an unrelated third party, except that this Section 4.12 shall not apply to (a) the Tax Sharing Agreement, (b) the Transaction Documents, or (c) transaction fees and expenses to Genesis, Cypress and TPG within seven days of the Closing Date, to the extent such are permitted by the 1997 Subordinated Note Indenture. 4.13 MERGER. The Borrower and Multicare shall use their best efforts to cause the Merger to occur as soon after the Closing Date as practicable in accordance with the terms of the Merger Agreement. 4.14 USE OF PROCEEDS. The Borrower will apply the proceeds of the Loans only (i) to purchase Tendered Shares pursuant to the Tender Offer and (ii) for the purposes described in Section 1.1(b). 4.15 CERTAIN DISPOSITIONS. On or before December 31, 1997, the Borrower shall cause Multicare and its applicable Subsidiaries to sell to Genesis and/or one or more of its Subsidiaries (other than the Borrower, Genesis ElderCare Corp. or Multicare or any Subsidiary of any of them) their contract therapy business for a cash purchase price of approximately $24,000,000.00 and their institutional pharmacy business for a cash purchase price of approximately $50,000,000.00, each on terms and conditions satisfactory to the Agents. ARTICLE 5 NEGATIVE COVENANTS So long as any Loan Obligation shall remain unpaid or any Lender shall have any Commitment under this Agreement, the Borrower shall comply, and shall cause the other Loan Parties to comply, with the following covenants. -37- 5.1 INDEBTEDNESS. No Loan Party and no member of the Multicare Group shall, at any time, create, incur, assume or suffer to exist any Indebtedness (including any Guaranties, Capitalized Leases or Assumed Indebtedness), except: (a) Indebtedness to the Lender Parties pursuant to this Agreement and the other Loan Documents; and (b) Indebtedness of the Borrower evidenced by the 1997 Subordinated Notes; and (c) Indebtedness of Genesis ElderCare Corp. and members of the Multicare Group under or permitted by the Multicare Credit Agreement. 5.2 LIENS. No Loan Party and no member of the Multicare Group shall, at any time create, incur, assume or suffer to exist any Lien on any of its assets (now owned or hereafter acquired), except for the following ("Permitted Liens"): (a) Liens pursuant to the Loan Documents; (b) Liens on property of members of the Multicare Group under or permitted by the Multicare Credit Agreement; and (c) Liens on property of the Borrower or Genesis ElderCare Corp. arising from taxes, assessments, charges or claims described in Section 4.9 hereof to the extent permitted by said Section 4.9, provided that the aggregate amount secured by all Liens described in this clause (c) shall not at any time exceed $500,000.00. 5.3 LOANS, ADVANCES AND INVESTMENTS. No Loan Party and no member of the Multicare Group shall, at any time (i) make or suffer to exist any loan or advance to, or (ii) purchase, acquire or own (beneficially or of record) any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other interest in, or (iii) make any capital contribution to, or other investment in (collectively, "Investments") any other Person, except: (a) in the case of the Borrower, Multicare Shares; (b) in the case of Genesis ElderCare Corp., the capital stock of the Borrower; (c) in the case of members of the Multicare Group, as permitted by the Multicare Credit Agreement; (d) Cash Equivalent Investments; and -38- (e) in the case of members of the Multicare Group, acquisitions permitted under Section 5.4(c). 5.4 ACQUISITIONS, ETC. No Loan Party and no member of the Multicare Group shall engage in any Acquisition (other than an acquisition of assets in the ordinary course of business) except: (a) the Borrower may acquire Multicare Shares; (b) Genesis ElderCare Corp. may acquire the capital stock of the Borrower; and (c) members of the Multicare Group may make Acquisitions permitted by the Multicare Credit Agreement. 5.5 DISPOSITIONS. No Loan Party and no member of the Multicare Group shall sell, convey, assign, lease as lessor, transfer, abandon or otherwise dispose of (collectively, for purposes of this Section 5.5, "transfer"), voluntarily or involuntarily, any of its properties, except that members of the Multicare Group may do so if permitted or required by the Multicare Credit Agreement. 5.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS. No Loan Party and no member of the Multicare Group shall create, acquire, dispose of, or change any interest in any Subsidiary except that members of the Multicare Group may do so if permitted by the Multicare Credit Agreement. 5.7 LEASES. No Loan Party and no member of the Multicare Group shall at any time enter into or suffer to remain in effect any lease, as lessee, of any property, except that members of the Multicare Group may do so if permitted by the Multicare Credit Agreement. 5.8 DIVIDENDS AND RELATED DISTRIBUTIONS. No Loan Party and no members of the Multicare Group shall (a) declare or pay any dividends, (b) purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, or (c) make any distribution of assets to its stockholders as such whether in cash, assets or obligations, (d) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption or retirement of, any shares of its capital stock, (e) or make any other distribution by return of capital or otherwise in respect of any shares of its capital stock, except that members of the Multicare Group may do so if permitted by the Multicare Credit Agreement, and except that the Borrower or -39- Genesis ElderCare Corp. may declare and pay dividends and make distributions payable solely in its common stock, or options, warrants or other rights to purchase common stock provided that any such stock, warrants, options or other rights (other than such as are issued by Genesis ElderCare Corp. to Cypress, Nazem or TPG) are pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge Agreements. 5.9 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASANCE AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS. No Loan Party shall, or shall permit any of its Subsidiaries to, directly or indirectly, pay, prepay, purchase, defease, redeem, retire, acquire, or otherwise make any payment (on account of principal, interest, premium or otherwise) in respect of any obligation under, or evidenced by the 1997 Subordinated Note Indenture (or cause or allow any event or condition to exist which would require any payment, prepayment, purchase, defeasance, redemption, retirement, acquisition or other payment of any such obligation) except that the Borrower may make cash interest payments on the 1997 Subordinated Notes as and when required to do so by the mandatory terms thereof, all to the extent consistent with the subordination provisions applicable thereto. The Borrower shall not amend, modify or supplement the terms or provisions contained in the 1997 Subordinated Notes, the 1997 Subordinated Note Indenture, or any agreement or instrument evidencing, relating or applicable thereto. The Borrower shall not take or omit to take any action under or in connection with the 1997 Subordinated Notes, the 1997 Subordinated Note Indenture, or any related agreement or instrument which would violate or impair the subordination provisions thereof. No Loan Party will make (or give any notice that it shall make) any voluntary or optional payment or prepayment or redemption or acquisition for value of, or will refund, refinance or exchange any Indebtedness (excluding Loan Obligations) if at such time any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof. No Loan Party shall designate any of its Indebtedness as "Designated Senior Indebtedness" for purposes of the 1997 Subordinated Note Indenture except Indebtedness incurred pursuant to this Agreement or the Multicare Credit Agreement. 5.10 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS. (a) Constituent Documents. No Loan Party and no member of the Multicare Group shall amend, modify or supplement its articles or certificate of incorporation, bylaws, partnership agreement or similar constituent documents (i) if a Material Adverse Effect could result from such amendment, modification or supplement or (ii) if such amendment, modification or waiver could reasonably be expected to materially adversely affect the rights or interests of the Agents or the Lenders. (b) Transaction Documents. No Loan Party shall amend, modify or supplement any Transaction Document, except for such amendments, modifications or supplements which could not reasonably be expected to have an adverse effect on the Loan -40- Parties and the members of the Multicare Group taken as a whole (including the condition (financial or otherwise), properties or prospects of such Persons), the Loan Documents or any Lender Party. 5.11 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS. No Loan Party and no member of the Multicare Group shall enter into, or remain a party to, any agreement or instrument which would impose any restriction; (a) on the right of such Person from time to time to declare and pay dividends or take similar actions with respect to capital stock owned by such Person or pay any Indebtedness, obligations or liabilities from time to time owed to a another Loan Party or Subsidiary; or (b) that would prohibit the grant of any Lien upon any of its properties (now owned or hereafter acquired) to secure any senior Indebtedness except for restrictions in agreements respecting Permitted Liens to the extent that the prohibition applies only to property subject to the Permitted Lien; or (c) would prohibit, or require the consent of any Person to, any amendment, modification or supplement to any of the Loan Documents, except (i) restrictions set forth in the Loan Documents or in documents entered into in connection with the Multicare Credit Agreement; (ii) legal restrictions of general applicability; and (iii) restrictions pursuant to the 1997 Subordinated Note Indenture. 5.12 LIMITATIONS ON MERGERS, ETC. No Loan Party and no member of the Multicare Group shall merge or consolidate with or into any Person, except (a) the Merger and (b) in the case of Multicare and its Subsidiaries, mergers permitted by the Multicare Credit Agreement. 5.13 AVOIDANCE OF OTHER CONFLICTS. No Loan Party and no member of the Multicare Group shall violate or conflict with, be in default under, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with (a) its articles or certificate of incorporation, bylaws or partnership agreement (or other constituent documents), or (b) any agreement or instrument to which it is party or by which any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clause (b), for matters that could not, individually or in the aggregate, have a Material Adverse Effect. -41- ARTICLE 6 DEFAULTS 6.1 "EVENT OF DEFAULT" means any one of the following events (whatever the reason for such Event of Default, whether it shall be voluntary or involuntary and whether it shall be by action or inaction, by operation of law, pursuant to a court order or any rule or regulation of any Governmental Authority or otherwise): (a) Failure to Pay Principal. The Borrower shall fail to make any payment of the principal of any Loan on the date when the same shall become due and payable, whether at stated maturity or at a date fixed for any prepayment thereof or otherwise. (b) Failure to Pay Interest, Fees and Other Amounts. The Borrower shall fail to make any payment of interest on any Loan or shall fail to pay any fees or any other amounts owing hereunder or under any other Loan Documents (other than as specified in paragraph (a) above) on the dates when such interest, fees or other amounts shall become due and payable and such failure continues for more than three (3) Business Days. (c) Covenant Defaults. (i) There shall occur a default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to any of Sections 4.1(d)(ii), 4.2, 4.3, 4.7, 4.10, 4.12, or 4.14 or any Section of Article 5. (ii) There shall occur any default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to the provisions of this Agreement (other than as provided in paragraph (a) or paragraph (b) above or subparagraph (i) of this paragraph (c)) and, if capable of being remedied, such default shall continue unremedied for thirty (30) days after the Borrower becomes aware, or should in the exercise of reasonable diligence have become aware, of such default. (d) Misrepresentation. Any representation or warranty made or deemed made by any Loan Party in or pursuant to or in connection with any Loan Document shall prove to have been false or misleading in any material respect as of the time when made or deemed made. (e) Multicare Credit Agreement Default. There shall have occurred and be continuing any "Event of Default" as such term is defined in the Multicare Credit Agreement. (f) Subordinated Notes. Any "Event of Default" (or similar term) as defined in the 1997 Subordinated Note Indenture and any other subordinated indenture to -42- which any Loan Party may from time to time be party shall have occurred and be continuing; or, any term or provision of the subordination provisions contained in such Indenture shall cease to be in full force and effect in accordance with its respective terms, or any Loan Party or any holder of any 1995 Subordinated Note or of any 1996 Subordinated Note or other subordinated note or other subordinated obligations or of any 1997 Subordinated Note (or any trustee or agent on behalf of such holder) shall terminate, repudiate, declare voidable or void or otherwise contest any term or provision of such subordination provisions; or the Borrower shall make, or shall be required to make or to offer to make, any purchase, defeasance or redemption of 1997 Subordinated Notes under the 1997 Subordinated Note Indenture or the Borrower shall make, or shall be required to make or offer to make any defeasance, redemption or purchase of subordinate notes under any similar provisions, if any, under any other such subordinated indenture or other subordinated obligations. (g) Other Cross-Defaults. (i) Any Loan Party shall fail to pay, in accordance with its terms and when due and payable, any Indebtedness (other than Indebtedness referred in paragraph (a), (e) or (f) above) under, or arising out of an agreement or instrument (or group or series of related agreements or instruments) which evidences outstanding Indebtedness in excess of $5,000,000.00; (ii) the maturity of any such Indebtedness shall, in whole or in part, have been accelerated, or any such Indebtedness shall, in whole or in part, have been required to be prepaid or purchased prior to the stated maturity thereof; (iii) any event shall have occurred and be continuing that permits any holder or holders of such Indebtedness, any trustee or agent acting on behalf of such holder or holders or any other Person to accelerate the maturity thereof or require any prepayment or repurchase thereof; or (iv) a default by any Loan Party shall be continuing under any other instrument or agreement (whether or not relating to Indebtedness) binding upon such Person, except a default that, together with all other such defaults under this clause (iv), could not have a Material Adverse Effect. (h) Judgments and Executions. One or more judgments for the payment of money shall have been entered against any Loan Party or Loan Parties, which judgment or judgments, to the extent not paid or fully covered by insurance, exceed $1,000,000.00 in the aggregate, and such judgment or judgments shall have remained undischarged and unstayed for a period of 30 consecutive days; or one or more writs or warrants of attachment, garnishment, execution, distraint or similar process or any attachment (prejudgment or otherwise) of assets exceeding in value the aggregate amount of $1,000,000.00 shall have been issued against any Loan Party or Loan Parties or any of its or their respective properties. (i) Invalidity or Noncompliance With Loan Documents. Any of the Loan Parties shall fail to perform any of its obligations under any of the Loan Documents (after taking into account any applicable cure period set forth in such agreements), or the validity of this Agreement or any of the other Loan Documents shall have been challenged or disaffirmed by or on behalf of any of the Loan Parties, or any of the Loan Documents shall cease to be in full force and effect (other than pursuant to its terms) or, other than as a direct -43- result of any action or inaction of a Lender Party, any Liens created or intended to be created by any of the Loan Documents shall at any time cease to be valid and perfected subject to no equal or prior Liens except Permitted Liens. (j) Material Adverse Effect. The Required Lenders shall have determined in good faith that an event or condition has occurred which could have a Material Adverse Effect. (k) Environmental. Any one or more of the events or conditions set forth in the following clauses (i) or (ii) shall have occurred with respect to any Loan Party or any of their respective Environmental Affiliates, and the Required Lenders shall determine in good faith (which determination shall be conclusive) that such event(s) or condition(s), individually or in the aggregate, could have a Material Adverse Effect: (i) any past or present violation of any Environmental Law by such Person which has not been cured to the satisfaction of the Required Lenders, or (ii) the existence of any pending or threatened Environmental Claim against any such Person, or the existence of any past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim against any such Person. (l) Change of Control. A Change of Control shall have occurred; or a "Change in Control" (as defined in the 1997 Subordinated Note Indenture) shall have occurred. (m) Insolvency, Bankruptcy, Etc. Any Loan Party or any entity in the Multicare Group shall make an assignment for the benefit of creditors or a composition with creditors, shall generally not be paying its debts as they mature, shall admit its inability to pay its debts as they mature, shall file a petition in bankruptcy, shall become insolvent (howsoever such insolvency may be evidenced), shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, custodian, liquidator or trustee of or for it or any substantial part of its property or assets, shall commence any proceeding relating to it under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or there shall be commenced against Loan Party or any entity in the Multicare Group any such proceeding and the same shall not be dismissed within thirty (30) days, or an order, judgment or decree approving the petition in any such proceeding shall be entered against any Loan Party or any entity in the Multicare Group; or any Loan Party or any entity in the Multicare Group shall by any act or failure to act indicate its consent to, approval of or acquiescence in, any such proceeding or any appointment of any receiver, custodian, liquidator or trustee of or for it or for any substantial part of its property or assets, or shall suffer the appointment of any receiver, liquidator or trustee, or shall take any corporate action for the purpose of effecting any of the foregoing; or any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding and the same shall not be dismissed within thirty (30) days or a receiver or a trustee or other officer or representative of a court or of creditors, or any court, -44- governmental office or agency, shall, under color of legal authority, take and hold possession of any substantial part of the property or assets of such Loan Party or any entity in the Multicare Group and shall not have relinquished possession within thirty (30) days, or any Loan Party or any entity in the Multicare Group shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors, or any of them, or any Loan Party or any entity in the Multicare Group shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint. (n) Termination of Multicare Management Agreement or other Transaction Documents. Except as permitted by the Required Lenders, (i) the Multicare Management Agreement shall cease to be in full force and effect or there shall be any breach by any party thereto or a default thereunder or an amendment, modification or supplement thereto not permitted by the terms of this Agreement or any notice of non-renewal or termination thereunder shall have been delivered by any party thereto or (ii) any other Transaction Document shall cease to be in full force and effect (other than by its terms) or there shall be any material breach by any party thereto or a default thereunder or any such document shall be amended, modified, restated or supplemented in a manner not expressly permitted by the terms of this Agreement or (iii) any other Management Agreement of any entity in the Multicare Group shall be terminated or cease to be renewed or extended or shall be amended, modified, restated or supplemented if such termination, failure to renew or extend or amendment, modification, restatement, or supplement (either singly or collectively with all other such events relating to other Management Agreements) could have a Material Adverse Effect. (o) Loss of Licenses, Reimbursement Approvals, Etc. There shall be a Limitation of one or more Licenses or Reimbursement Approvals of any Loan Party or any member of the Multicare Group or any Person managed thereby and the Required Lenders shall determine in good faith that such Limitation, and individually or collectively all such Limitations, could reasonably be expected to have a Material Adverse Effect. 6.2 CONSEQUENCES OF AN EVENT OF DEFAULT (a) Events of Default in General. If an Event of Default (other than one specified in paragraph (m) of Section 6.1 hereof (Insolvency, Bankruptcy, Etc.) shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Administrative Agent or any other Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans, and the Administrative Agent may, (and upon the written request of the Required Lenders, shall), by notice to the Borrower, from time to time do any or all of the following: -45- (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (iii) Take any and all actions permitted under the Security Documents. (iv) Exercise such other remedies as may be available to the Lender Parties under applicable Law. (b) Automatic Acceleration; Certain Bankruptcy-Related Events. If an Event of Default specified in paragraph (m) of Section 6.1 hereof (Insolvency, Bankruptcy, Etc.) shall occur or exist, then, in addition to all other rights and remedies which any Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans, and the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue, and in addition, the Administrative Agent may, (and upon the written request of the Required Lenders), shall, by notice to the Borrower, do one or more of the following: (i) take any and all actions permitted under the Pledge Agreement or any other Loan Document or (ii) exercise such other remedies as may be available to the Lender Parties under applicable Law. (c) Equitable Remedies. It is agreed that, in addition to all other rights hereunder or under Law, the Administrative Agent shall have the right to institute proceedings in equity or other appropriate proceedings for the specific performance of any covenant or agreement made in any of the Loan Documents or for an injunction against the violation of any of the terms of any of the Loan Documents or in aid of the exercise of any power granted in any of the Loan Documents or by Law or otherwise. 6.3 APPLICATION OF PROCEEDS. After the occurrence of an Event of Default and acceleration of the Loans, any amounts received on account of Loan Obligations shall be applied by the Administrative Agent in the following order: -46- First, to payment of that portion of the Loan Obligations constituting fees, indemnities, expenses and other amounts due to the Administrative Agent in its capacity as such; Second, to payment of that portion of the Loan Obligations constituting fees, indemnities (other than those paid pursuant to the preceding clause First), expenses and other amounts due to the Lender Parties, ratably among them in proportion to the amounts described in this clause Second due to them; Third, to payment of that portion of the Loan Obligations constituting accrued and unpaid interest on Loans, ratably among the Lender Parties in proportion to the respective amounts described in this clause Third due to them; Fourth, to payment of that portion of the Loan Obligations constituting unpaid principal of the Loans ratably among the Lender Parties in proportion to the respective amounts described in this clause Fourth due to them; Fifth, to payment of all other Loan Obligations, ratably among the Lender Parties in proportion to the respective amounts described in this clause Fifth due to them; and Finally, the balance, if any, after all of the Loan Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law. ARTICLE 7 THE ADMINISTRATIVE AGENT 7.1 APPOINTMENT. Subject to the provisions of the second sentence of Section 7.9 below, each Lender Party hereby irrevocably appoints Mellon to act as Administrative Agent for such Lender Party under this Agreement and the other Loan Documents. Each Lender Party hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender Party under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon hereby agrees to act as Administrative Agent on behalf of the Lender Parties on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 7.9 hereof. Each Lender Party hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Administrative Agent. Each Lender Party agrees that the rights and remedies granted to the Administrative Agent under -47- the Loan Documents shall be exercised exclusively by the Administrative Agent (or a Person designated by the Administrative Agent), and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent, if any, expressly provided herein or therein. 7.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any other Loan Document or shall otherwise exist. (b) The duties and responsibilities of the Administrative Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship with respect to any Lender Party. (c) The Administrative Agent's relationship with and to the Lender Parties is governed exclusively by the terms of this Agreement and the other Loan Documents. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, any Lender Party or any other Person or (except only as expressly provided in this Agreement and the other Loan Documents) any other duty or responsibility to such Lender Party or other Person. (d) The Administrative Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Administrative Agent believes in good faith that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified. (e) The authority of the Administrative Agent to request information from the Borrower or to take any other voluntary action hereunder shall impose no duty of any kind on the Administrative Agent to make such request or take any such action. 7.3 EXERCISE OF POWERS. The Administrative Agent shall take any action of the type specified in this Agreement or other Loan Document as being within the Administrative Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or as otherwise provided in the Loan Documents). In the absence of such -48- direction, the Administrative Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent that this Agreement or such other Loan Document expressly requires the direction or consent of the Required Lenders (or all of the Lenders, or some other Person or group of Persons), in which case the Administrative Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on each Lender Party (whether or not it so consented). The Administrative Agent shall not have any liability to any Person as a result of any action or inaction in conformity with this Section 7.3. 7.4 GENERAL EXCULPATORY PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) The Administrative Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, except only for direct (as opposed to consequential or other) damages suffered by a Person and only to the extent that such Person proves that such damages were caused by the Administrative Agent's own gross negligence or willful misconduct. (b) The Administrative Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of any Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, any Loan Document, (iii) any failure of any Loan Party or any Lender to perform any of their respective obligations under any Loan Document, (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any Loan Document or otherwise from time to time, or (v) caring for, protecting, insuring, or paying any taxes, charges or assessments with respect to any Collateral. (c) The Administrative Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement, any other Loan Document on the part of any Loan Party, (ii) the business, operations, condition (financial or otherwise) or prospects of any Loan Party or any other Person (even if the Administrative Agent knows or should know that some event or condition exists or fails to exist), or (iii) except to the extent set forth in Section 7.5(f) below, the existence of any Event of Default or Default. (d) The Administrative Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender Party with any notices, reports or information of any nature, whether in its possession presently or hereafter, whether obtained under or in connection with this Agreement or otherwise, except for such notices, reports -49- and other information expressly required by this Agreement or any other Loan Document to be furnished by the Administrative Agent to such Lender Party. 7.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) The Administrative Agent may consult with legal counsel (including in-house counsel for the Administrative Agent or in-house or other counsel for any Loan Party), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to any Loan Party or Lender Party, such matter may be established by a certificate of such Loan Party or Lender Party, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) The Administrative Agent may fail or refuse to take any action unless it shall be directed by the Required Lenders (or all of the Lenders, or some other Person or group of Persons, if this Agreement or another Loan Document so expressly requires) to take such action and it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Administrative Agent by reason of taking or continuing to take any such action. (e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. -50- (f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Event of Default or Default unless the Administrative Agent has received notice from a Lender Party or the Borrower referring to this Agreement, describing such Event of Default or Default, and stating that such notice is a "notice of default." If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender Party. 7.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS. Each Lender Party acknowledges as follows: (a) neither the Administrative Agent nor any other Lender Party has made any representations or warranties to it, and no act taken hereafter by the Administrative Agent or any other Lender Party shall be deemed to constitute any representation or warranty by the Administrative Agent or such other Lender Party to it; (b) it has, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents; and (c) it will, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. 7.7 INDEMNIFICATION. Each Lender agrees to reimburse and indemnify each Agent and its directors, officers, employees and agents (to the extent not reimbursed by a Loan Party and without limitation of the obligations of the Loan Parties to do so), in proportion to the Lenders' respective pro rata share of (without duplication) the Commitment and the Loans, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including the fees and disbursements of counsel for such Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against such Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, the Tender Offer, the Merger, any Acquisition or any other transaction from time to time contemplated hereby or thereby, or any transaction actually or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that such Lender proves were the result of the gross negligence or willful misconduct of such Agent or such other Person. Payments under this Section 7.7 shall be due and payable on demand. -51- 7.8 HOLDERS OF NOTES. The Administrative Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until an Assignment and Acceptance with respect to the assignment or transfer thereof shall have been delivered to the Administrative Agent in accordance with Section 9.9 hereof. 7.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the other Lender Parties and the Borrower. The Administrative Agent may be removed by the Required Lenders at any time for cause by such Required Lenders giving 30 days' prior written notice thereof to the Administrative Agent, the other Lender Parties and the Borrower. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent with (so long as no Default or Event of Default shall have occurred and then be continuing) the consent of the Borrower, whose consent shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent may (but shall not be required to) appoint a successor Administrative Agent. Each successor Administrative Agent shall be a Lender if any Lender shall at the time be willing to become the successor Administrative Agent, and if no Lender shall then be so willing, then such successor Administrative Agent shall be an Eligible Institution. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent in its capacity as such, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, such Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Loan Party or Lender Party for whose account such payment is made. 7.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT. If the Administrative Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lender Parties, the Administrative Agent and the Borrower shall (and the Borrower shall cause the other Loan Parties to) execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable, in the opinion of the Administrative -52- Agent, to constitute one or more other Persons designated by the Administrative Agent, to act as co-Administrative Agent or agent with respect to any part of the Collateral, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such other Person as such co-Agent or separate agent, as the case may be, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. 7.11 CALCULATIONS. The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith and without gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender Party to whom payment was due but not made shall be to recover from the other Lender Parties any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the appropriate Loan Party, to recover such amount from the appropriate Loan Party. 7.12 OTHER AGENTS. (a) In General. The title "Syndication Agent" given to Citicorp USA, Inc., and NationsBank, N.A. in this Agreement and the title "Documentation Agent" given to First Union National Bank in this Agreement are solely for identification purposes and imply no rights in favor of such Person and no responsibility by such Person except such rights or obligations of "Agents" (including the right to make certain determinations) as are expressly stated herein. No such Agent shall be liable for any act or failure to act on its part except for that which the claimant proves constitutes the gross negligence or willful misconduct of such Agent. (b) Successor Agents. Any Syndication Agent and the Documentation Agent may resign at any time and such Agents may be removed at any time for cause by the other Agents and the Borrower in which event, the Borrower (if no Default or Event of Default shall then exist) and the Administrative Agent may (in their sole discretion) appoint a successor Agent. 7.13 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender", "Holder of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits -53- from, acquire debt or equity interests in, act as trustee under indentures of, serve as "Administrative Agent" for other financing vehicles, issue letters of credit on behalf of, and engage in any other business with, (a) any Loan Party or any stockholder, Subsidiary or Affiliate of any Loan Party or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. ARTICLE 8 DEFINITIONS; CONSTRUCTION 8.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the following meanings, (terms defined in the singular to have a correlative meaning when used in the plural) unless the context hereof otherwise clearly requires: "Accumulated Funding Deficiency" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Acquisition" means any acquisition by any Loan Party or any member of the Multicare Group, directly or indirectly, whether in one transaction or in a series of related transactions (and whether by merger, consolidation, acquisition of assets or otherwise) of all or any substantial portion of the ownership interests in or assets of any separate business enterprise. "Administrative Agent" has the meaning ascribed to such term in the preamble of this Agreement. "Affiliate" of a Person means (a) any other Person which directly or indirectly controls, or is controlled by, or is under common control with, such Person, (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of such Person or of a Person who is an Affiliate of such Person, and (c) any individual related to such Person or Affiliate by consanguinity or adoption within the third degree. For purposes of the preceding sentence, "control" of a Person means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise and (b) in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 5% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person that is not a corporation, 5% or more of any class of equity interest). -54- "Agents" means collectively the Administrative Agent, Citicorp USA, Inc., and NationsBank, N.A., each as a Syndication Agent, and First Union National Bank, as Documentation Agent. "Agreement" means this Credit Agreement as the same may be amended, modified, restated or supplemented from time to time in accordance with its terms. "Agreement Date" means the date first-above written. "Amount of Unfunded Benefit Liabilities" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Assignment and Acceptance" has the meaning ascribed to such term in Section 9.9. "Assumed Indebtedness" means Indebtedness incurred by a Person which is not a Loan Party or a Subsidiary of a Loan Party and which (a) is existing at the time such Person (or assets of such Person) is acquired by a Loan Party or a Subsidiary of a Loan Party and (b) is assumed by a Loan Party or a Subsidiary of a Loan Party in connection with such Acquisition, other than Indebtedness incurred by the original obligor in connection with, or in contemplation of, such Acquisition. "Available Commitment" means, as of any date, the difference between (a) the amount of the Commitment on such date and (b) the aggregate principal amount of all Loans made on or before such date. "Bank Tax" means (i) any Tax based on or measured by net income of a Lender Party, any franchise Tax and any doing business Tax imposed upon any Lender Party by any jurisdiction (or any political subdivision thereof) in which such Lender Party or any lending office of a Lender Party is located and (ii) for the purposes of Section 1.12, any other Tax imposed by a jurisdiction other than the United States or a political subdivision thereof that would not have been imposed but for a present or former connection between such Lender Party or lending office (as the case may be) and such jurisdiction. "Borrower" has the meaning ascribed to such term in the preamble hereto. "Business Day" means any day other than a Saturday, Sunday, public holiday under the laws of the Commonwealth of Pennsylvania or other day on which banking institutions are authorized or obligated to close in the city in which the Administrative Agent's lending office is located. "Capitalized Lease" means at any time any lease which is, or should be, capitalized on the balance sheet of the lessee at such time in accordance with GAAP. -55- "Capitalized Lease Obligation" of any Person at any time means the aggregate amount which is, or should be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease in accordance with GAAP. "Cash Equivalent Investments" means any of the following: (i) full faith and credit obligations of the United States of America, or fully guaranteed as to interest and principal by the full faith and credit of the United States of America, maturing in not more than one year from the date such investment is made; (ii) time deposits and certificates of deposit having a final maturity of not more than one year after the date of issuance thereof of any commercial bank incorporated under the laws of the United States of America or any state thereof or the District of Columbia, which bank is a member of the Federal Reserve System and has a combined capital and surplus of not less than $1,000,000,000.00 and with a senior unsecured debt credit rating of at least "A" by Moody's Investors Service, Inc. or "A" by Standard & Poor's Ratings Services; (iii) commercial paper of companies, banks, trust companies or national banking associations (in each case excluding Multicare and its Affiliates) incorporated or doing business under the laws of the United States or one of the States thereof, in each case having a remaining term until maturity of not more than 180 days from the date such investment is made and rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by Standard & Poor's Ratings Services; and (iv) repurchase agreements with any financial institution having combined capital and surplus of not less than $1,000,000,000.00 with a term of not more than seven days for underlying securities of the type referred to in clause (i) above. "Cash Flow", with respect to any Person, for any period, means (a) Net Income of such Person plus (b) each of the following to the extent deducted in determining Net Income: (i) Interest Expense, (ii) Rental Expense, (iii) depreciation expense, (iv) amortization expense and (v) income taxes, all as adjusted for changes in accrued management fees under the Multicare Management Agreement, in each case for such period. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended), other than a Permitted Holder (as hereinafter defined), in a single transaction or through a series of related transactions, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, except -56- that a Person shall be deemed to be the "beneficial owner" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than, on a fully diluted basis, 35% of the total Voting Stock of Genesis ElderCare Corp. (and all rights and options to purchase such Voting Stock) if such "beneficial ownership" is greater than the amount of voting power of the Voting Stock of Genesis ElderCare Corp. (and all rights and options to purchase such Voting Stock), held by Genesis and its Affiliates on such date; (b) TPG, Cypress, Nazem and Genesis, collectively, shall cease to own beneficially and of record at least 51% of the shares of each class of capital stock of Genesis ElderCare Corp. (and all rights and options to purchase such shares of capital stock) subject to no Liens; (c) Genesis ElderCare Corp. shall cease to own beneficially and of record 100% of the capital stock of the Borrower or, after the Merger, of Multicare (and all rights and options to purchase such shares of capital stock); (d) Multicare at any time fails to own beneficially and of record 100% of the capital stock of each of its Subsidiaries (subject to any disposition permitted by this Agreement); (e) any "person" or "group" (as defined in paragraph (a) of this definition), in a single transaction or through a series of related transactions, is or becomes the "beneficial owner" (as defined in paragraph (a) of this definition), directly or indirectly, of more than 50% of the total Voting Stock (as hereinafter defined) of Genesis; (f) Genesis or any Loan Party consolidates or merges with or into another corporation or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates or merges with or into Genesis or any Loan Party, in any such event pursuant to a transaction in which the outstanding Voting Stock of Genesis or such Loan Party is changed into or exchanged for cash, securities or other property, other than the Merger and other than any such transaction where (i) the outstanding Voting Stock of Genesis or such Loan Party is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock (as hereinafter defined) or (y) cash, securities or other property in an amount which (as applicable) Genesis would not be prohibited, under Section 5.10 of the 1995 Subordinated Note Indenture if then in effect, or under Section 5.10 of the 1996 Subordinated Note Indenture if then in effect, from paying as a "restricted payment" (as defined in such indentures), or which the Borrower would not be prohibited, under Section 4.04 of the 1997 Subordinated Note -57- Indenture if then in effect from paying as a "restricted payment" (as defined in such indenture), and (ii) the holders of the Voting Stock of Genesis or such Loan Party immediately prior to such transaction own, directly or indirectly, not less than 50% of the Voting Stock of the surviving corporation immediately after such transaction; (g) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Genesis or of a Loan Party (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of Genesis or such Loan Party was approved by a vote of at least 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Genesis or of such Loan Party then in office, except in the case of a change in the composition of the Board of Directors of Multicare, approved by Genesis in connection with its acquisition of the Common Stock of Genesis ElderCare Corp. held by Cypress, Nazem and TPG ; or (h) Genesis or any Loan Party is liquidated or dissolved or adopts a plan of liquidation. For purposes of this definition of "Change of Control," (A) "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency); (B) "Redeemable Capital Stock" of a Person means any capital stock or equity interests that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any stated maturity of the principal of the 1995 Subordinated Notes, the 1996 Subordinated Notes or the 1997 Subordinated Notes or is redeemable at the option of the holder thereof at any time prior to any such stated maturity, or is convertible into or exchangeable for debt securities at any time prior to any such stated maturity at the option of the holder thereof; (C) "Board of Directors" of a Person means the board of directors of such Person or the executive committee of such Person; and (D) "Permitted Holder" means Genesis, Cypress, Nazem, TPG and their wholly-owned Subsidiaries. "Closing Date" means the date that the initial Loans are made hereunder. "COBRA Violation" means any violation of the "continuation coverage requirements" of "group health plans" of former ss.162(k) of the Code (as in effect for tax years beginning on or before December 31, 1988) and of ss.4980B of the Code (as in effect -58- for tax years beginning on or after January 1, 1989) and Part 6 of Subtitle B of Title I of ERISA. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time, and the Treasury regulations thereunder. "Collateral" means the collateral subject to, or purported to be subject to, the Liens of the Pledge Agreements, from time to time. "Commitment" means, with respect to any Lender, (i) the amount set forth opposite such Lender's name under the heading "Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Commitment assigned to such Lender, in either case as the same may be reduced from time to time pursuant to Section 1.6 above or increased or reduced from time to time pursuant to assignments in accordance with Section 9.9 below or (ii) as the context may require, the obligation of such Lender to make Loans in an aggregate unpaid principal amount not exceeding such amount. "Commitment" means with respect to all Lenders, the sum of each Lender's Commitment. "Controlled Group" means a group of employers, of which any Loan Party is a member and which group constitutes: (a) A controlled group of corporations (as defined inss.414(b) of the Code); (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in ss.414(c) of the Code); (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in ss.414(m) of the Code); or (d) Any other entity required to be aggregated with the Borrower pursuant to ss.414(o) of the Code. "Cypress" means The Cypress Group L.L.C., a Delaware limited liability company and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Cypress" shall include Cypress Associates L.P., Cypress Offshore Partners L.P., Cypress Merchant Banking Partners L.P. and Cypress Advisors Inc. "Default" means any event or condition which with notice, passage of time or both, would constitute an Event of Default. -59- "Default Rate" means, with respect to any amounts payable hereunder or under the other Loan Documents, a rate equal to the sum of (a) two percent (2%) per annum plus (b) the interest rate otherwise in effect with respect to such amounts. "Defined Benefit Pension Plan" means a defined benefit plan (other than a Multiemployer Plan) as defined in ss.3(35) of ERISA which is maintained by the Borrower or any member of its Controlled Group. "Defined Contribution Plan" means an individual account plan as defined in ss.3(34) of ERISA which is maintained by the Borrower or any member of its Controlled Group. "Dollar," "Dollars" and the symbol "$" means lawful money of the United States of America. "Eligible Institution" means (i) a Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $1,000,000,000; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $1,000,000,000; (v) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development (the OECD) or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow or under the laws of a political subdivision of any such country, and having a combined capital and surplus of at least $1,000,000,000, so long as such bank is acting through a branch or agency located in the United States; (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having a combined capital and surplus or total assets of at least $500,000,000; and (vii) with respect to any Lender that is a fund, any other fund with assets in excess of $100,000,000 that invests in bank loans and is managed by the same investment advisor as such Lender; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Institution under this definition. "Environmental Affiliate" means, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" means any approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, any Governmental Authority pursuant to or required under any Environmental Law. -60- "Environmental Claim" means, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Environmental Concern Materials at any location, whether or not owned by such Person. "Environmental Cleanup Site" means any location which is listed or proposed for listing on the National Priorities List (as established under CERCLA), on CERCLIS or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding or investigation related to or arising from any alleged violation of any Environmental Law. "Environmental Concern Materials" means (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product of any substance specified in or regulated or otherwise affected by any Environmental Law (including but not limited to any "hazardous substance" as defined in CERCLA or any similar state Law), (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polychlorinated biphenyls, radon and urea formaldehyde. "Environmental Law" means any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the manufacture, use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder. "Event of Default" means any of the Events of Default described in Section 6.1 hereof. -61- "Excluded Subsidiaries" means the entities listed on Schedule 8.1 attached hereto and, after the Closing Date, each Subsidiary of any Excluded Subsidiary, except, in any case, any such entity that shall have been designated a "Restricted Subsidiary" pursuant to Section 6.10(b) of the Multicare Credit Agreement. "Federal Funds Rate" for any day means the rate per annum determined by the Administrative Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by federal funds brokers on the previous trading day, or, if such Federal Reserve Bank does not announce such rate on any day, the rate for the last day on which such rate was announced. "GAAP" has the meaning set forth in Section 8.3 below. "Genesis" means Genesis Health Ventures, Inc., a Pennsylvania corporation. "Genesis Credit Agreement" has the meaning set forth in Section 2.1(t). "Genesis ElderCare Corp." means the Delaware corporation of that name, formerly named Waltz Corp. "Genesis ElderCare Corp. Guaranty" means the guaranty of even date herewith executed by Genesis ElderCare Corp. in favor the Administrative Agent and the Lenders, as it may be amended, modified, restated or supplemented form time to time in accordance with the terms hereof and thereof. "Governmental Authority" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guaranty" means, with respect to any Person (a "Guarantor"), any contractual or other obligation, contingent or otherwise, of such Person to pay any Indebtedness or other obligation of any other Person or to otherwise protect the holder of any such Indebtedness or other obligation against loss (whether such obligation arises by agreement to pay, to keep well, to purchase assets, goods, securities or services or otherwise) provided, however, that the term "Guaranty" shall not include an endorsement for collection or deposit in the ordinary course of business. The term, "Guaranty," when used as a verb has the correlative meaning. "Health Care Business" means any healthcare related business including any facility, unit, operation or business supplying health care services, supplies or products, including long-term care, rehabilitation therapy, specialized health care, health care management, and pharmacies. -62- "Indebtedness" of any Person means (without duplication): (a) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person for the deferred purchase price of property or services; (d) all obligations secured by a Lien on property owned by such Person (whether or not assumed) provided, however, for purposes of determining the amount of such Indebtedness under this clause (d), the amount of any such non-recourse Indebtedness shall be limited to the lesser of (i) the fair market value of the asset subject to such Lien and (ii) the amount of such Indebtedness; (e) all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (f) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (g) all obligations of such Person with respect to acceptances or similar obligations issued for the account of such Person; (h) all obligations of such Person under a product financing or similar arrangement described in paragraph 8 of FASB Statement of Accounting Standards No. 49 or any similar requirement of GAAP; (i) all obligations of such Person under any Interest Rate Hedging Agreement or any currency protection agreement, currency future, option or swap or other currency hedge agreement; and (j) all Guaranties of such Person. Indebtedness shall not include accounts payable to trade creditors arising out of purchases of goods or services in the ordinary course of business, provided that (i) -63- such accounts payable are payable on usual and customary trade terms, and (ii) such accounts payable are not overdue by more than 60 days according to the original terms of sale except (if no foreclosure, distraint, levy, sale or similar proceeding shall have been commenced) where such payments are being contested in good faith by appropriate proceedings diligently conducted and subject to such reserves or other appropriate provisions as may be required by GAAP. "Indemnified Parties" means, collectively, the Lender Parties and their respective Affiliates and (without duplication) the directors, trustees, officers, employees, attorneys and agents of each of the foregoing. "Interest Expense" means, for any Person, for any period, the sum (without duplication) of (a) all interest accrued (or accreted) on Indebtedness of such Person during such period whether or not actually paid plus (b) the net amount accrued under any Interest Rate Hedging Agreements (or less the net amount receivable thereunder) during such period. "Interest Rate Hedging Agreement" means any rate swap, cap or collar agreement to which any or all of the Loan Parties are party. "Investments" has the meaning set forth in Section 5.3 above. "JCAHO" - Joint Commission on Accreditation of Healthcare Organizations. "Law" means any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lender" has the meaning ascribed to such term in the preamble hereto. "Lender Parties" means, collectively, the Lenders and the Agents. "Licenses" means any and all licenses, including provisional licenses, certificates of need, JCAHO and/or other accreditations, permits, franchises, rights to conduct business, approvals by a Governmental Authority or otherwise, consents, qualifications, operating authority, and/or any other authorizations. "Lien" means any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Limitation" means a revocation, suspension, impairment, termination, probation, limitation, non-renewal, forfeiture, declaration of ineligibility, loss of status as a participating provider in a Third Party Payor Arrangement and/or loss of any other rights. -64- "Loans" has the meaning ascribed to such term in Section 1.1 of this Agreement. "Loan Documents" means this Agreement, the Notes, the Pledge Agreements, and all other agreements and instruments executed in connection herewith or therewith in each case as the same may be amended, modified, restated or supplemented from time to time. "Loan Obligations" means all obligations, from time to time, of any Loan Party to any Lender Party or other Indemnified Party under, or arising out of, this Agreement or any Loan Document whether such obligations are direct or indirect, absolute or contingent, due or to become due, now or hereafter arising, (specifically including obligations arising or accruing after the commencement of any bankruptcy, insolvency, or similar proceeding with respect to any Loan Party, or which would have accrued but for the commencement of such proceeding even if the claim is not allowed in such proceeding under applicable law). "Loan Parties" means the Borrower, Genesis ElderCare Corp., MultiCare and any other Person who from time to time grants or purports to grant to the Administrative Agent a Lien on any property pursuant to the Pledge Agreement or is a Guarantor of any Loan Obligations. "Management Agreement" means any agreement pursuant to which a Person (or group of Persons) manages the business of another Person (or group of Persons). "Margin Rules" means Regulations G, T, U and X of the Board of Governors of the Federal Reserve System. "Material Adverse Effect" means (a) a material adverse effect on the business, operations, condition (financial or otherwise), properties or prospects of any Loan Party, Multicare and the members of the Multicare Group, taken as a whole, or (b) an adverse effect on the legality, validity, binding effect or enforceability of any Loan Document, or the ability of the Administrative Agent or any Lender Party to enforce any rights or remedies under or in connection with any Loan Document. Without limiting the generality of the foregoing, as used in connection with any provisions respecting the ownership or operation of any Health Care Business, Material Adverse Effect may include, among other things, any loss or suspension of a License or Reimbursement Approval for any material nursing home or other material Health Care Business or material group of nursing homes or other material group of Health Care Businesses of any member of the Multicare Group, or any event, occurrence or matter or series thereof giving rise to a reasonable probability of any of the foregoing consequences. "Maturity Date" has the meaning ascribed to such term in Section 1.3. -65- "Mellon" means Mellon Bank, N.A., a national banking association, and any successor or assign thereof. "Merger" means the merger of the Borrower into Multicare on the terms stated in the Merger Agreement without any change therein or waive of any provision thereof not approved by the Required Lenders. "Merger Agreement" means the Agreement and Plan of Merger dated as of June 16, 1997, among the Borrower, Genesis ElderCare Corp. and Multicare. "Multicare" means The Multicare Companies, Inc., a Delaware corporation. "Multicare Credit Agreement" has the meaning assigned to such term in Section 2.1(t). "Multicare Group" means Multicare and/or any of Multicare's Subsidiaries from time to time other than Excluded Subsidiaries. "Multicare Guaranty" means the guaranty of even date herewith executed by Multicare in favor of the Administrative Agent and the Lenders, as it may be amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof. "Multicare Management Agreement" has the meaning ascribed to such term in Section 2.1(g) above. "Multicare Management Subordination Agreement" means the Subordination Agreement among Genesis, Multicare and the Agents dated of even date herewith whereby Genesis has agreed to subordinate its rights to payments under the Multicare Management Agreement to the extent and on the terms and conditions as set forth in the Multicare Management Subordination Agreement, which such terms and conditions are subject to the Agents' approval. "Multicare Shares" means shares of Multicare common stock, par value $0.01 per share. "Multiemployer Plan" means such term in ss.4001(a)(3) of ERISA. "Nazem" means Nazem, Inc., a Delaware corporation and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Nazem" includes Genesis ElderCare Portfolio K, L.P. -66- "Net Income" means, with respect to any Person, for any period the net earnings (or loss) after taxes of such Person for such period less non-cash interest income, less extraordinary gains plus extraordinary non-cash losses. "1995 Subordinated Note Indenture" means the Indenture dated as of June 15, 1995 between Genesis and Delaware Trust Company, as Trustee, relating to the 1995 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1995 Subordinated Notes" means Genesis' 9-3/4% Senior Subordinated Notes issued pursuant to the 1995 Subordinated Note Indenture in the original aggregate principal amount of $120,000,000. "1996 Subordinated Note Indenture" means the Indenture, dated as of October 7, 1996, between Genesis and First Union National Bank, as Trustee, relating to the 1996 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1996 Subordinated Notes" means Genesis' 9 1/4% Senior Subordinated Notes issued pursuant to the 1996 Subordinated Note Indenture, in the original aggregate principal amount of ($125,000,000). "1997 Subordinated Note Indenture" means the Indenture, dated as of August 11, 1997, between the Borrower, PNC Bank, National Association, as trustee, and Banque Internationale a Luxembourg S.A., as paying agent, relating to the 1997 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1997 Subordinated Notes" means the Borrower's 9% Senior Subordinated Notes issued pursuant to the 1997 Subordinated Note Indenture, in the original principal amount of $250,000,000. "Non-U.S. Lender" has the meaning ascribed to such term in Section 1.14 above. " Note" means each promissory note of the Borrower issued to a Lender relating to such Lender's Loans and Commitments substantially in the form of Exhibit A-1 hereto, together with any allonges thereto, from time to time, and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Officer's Compliance Certificate" means a certificate, as of a specified date, of a Responsible Officer of the Borrower as to each of the following: (a) the absence of any -67- Event of Default or Default on such date, (b) the truth of the representations and warranties herein and in the other Loan Documents as of such date. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a pension plan (as defined in ss.3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA or subject to ss.412 of the Code and maintained by the Borrower or any member of its Controlled Group. "Permitted Liens" has the meaning set forth in Section 5.2 above. "Person" means an individual, corporation, partnership, limited liability company, trust, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Plan" means an employee benefit plan (other than a Multiemployer Plan) as defined in ss.3(3) of ERISA which is either (1) maintained by the Borrower or any member of its Controlled Group, or (2) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Borrower or any member of its Controlled Group is then making or accruing an obligation to make contributions or has ever been obligated to make contributions. "Pledge Agreements" means (i) the pledge agreement of even date herewith executed by the Borrower in favor of the Administrative Agent for the benefit of itself and the Lenders, and (ii) the pledge agreement of even date herewith executed by Genesis ElderCare Corp. in favor of the Administrative Agent for the benefit of itself and the Lenders, as each may be amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof. "Put/Call Agreement" means the Put/Call Agreement dated _________, 1997, among Genesis, TPG and Cypress. "Prime Rate" means the greater of (A) the interest rate per annum announced from time to time by the Administrative Agent as its prime rate or (B) the Federal Funds Rate plus .50%. The Prime Rate may be greater or less than other interest rates charged by the Administrative Agent to other borrowers. "Prohibited Transaction" has the meaning given to such term in ss.406 of ERISA or ss.4975(c) of the Code. "Quarterly Payment Date" means the last Business Day of each January, April, July and October. -68- "Registered Noteholder" has the meaning ascribed to such term in Section 1.14 above. "Regulatory Change" means any applicable law, interpretation, directive, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that becomes effective or is implemented or first required or expected to be complied with after the Agreement Date (including any applicable law that shall have become such as the result of any act of omission of the Borrower or any of its Affiliates, without regard to when such applicable law shall have been enacted or implemented), whether the same is (i) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority or otherwise or (ii) enacted, adopted, issued or proposed before or after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. "Reimbursement Approvals" means, with respect to all Third Party Payor Arrangements, any and all certifications, provider numbers, provider agreements, participation agreements, accreditations (including JCAHO accreditation) and/or any other agreements with or approvals by organizations and Governmental Authorities. "Rental Expense" means, with respect to any Person for any period, the aggregate rental obligations of such Person, payable in respect of any leases other than Capital Leases during such period, but in any case including obligations for taxes, insurance, maintenance and similar costs which the lessee is obligated to pay under the terms of such leases and which are attributable to the leases for such period (whether such amounts are accrued or paid during such period). "Required Lenders" means, as of any date, Lenders otherwise eligible to vote pursuant to the terms of this Agreement holding, in the aggregate, at least 51% of the outstanding Loans and unused Commitments held by all Lenders so eligible to vote. "Reserved Commitment" has the meaning ascribed to such term in Section 1.1(b). "Responsible Officer" of a Person means the President, the Secretary, the Chief Executive Officer, any Vice President, the Controller, the Treasurer or the Chief Financial Officer of such Person. "Secured Parties" has the meaning ascribed to such term in the Pledge Agreements. "Subsidiary" of a Person at any time means: -69- (a) any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; (b) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; (c) any partnership, limited liability company, joint venture or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person; or (d) any entity which is consolidated with such Person for financial reporting purposes. "Tax" means any federal, state, local or foreign tax assessment or other governmental charge or levy (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "Tax Sharing Agreement" means the Tax Sharing Agreement among the members of the Multicare Group, Genesis ElderCare Corp. and the Excluded Subsidiaries delivered pursuant to the Multicare Credit Agreement. "Tendered Multicare Shares" means Multicare Shares tendered pursuant to the Tender Offer. "Tender Offer" means the Borrower's offer to purchase the outstanding Multicare Shares as contained in its "Offer to Purchase for Cash All Outstanding Shares of Common Stock of the Multicare Companies," dated June 20, 1997, as extended from time to time. "Third Party Payor Arrangements" means any and all arrangements with Medicare, Medicaid, CHAMPUS, and any other Governmental Authority, or quasi-public agency, Blue Cross, Blue Shield, any and all managed care plans and organizations, including but not limited to HMOs and preferred provider organizations, private commercial insurance companies, employee assistance programs and/or any other third party -70- arrangements, plans or programs for payment or reimbursement in connection with health care services, products or supplies. "TPG" means TPG Partners II, L.P., a Delaware limited partnership and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "TPG" includes TPG Paralell II, L.P., TPG Investors II, L.P. and TPG MC Coinvestment, L.P. "Transaction Documents" means each of the material documents as may exist on the date that the Tender Offer is consummated with such changes as are permitted by the terms of this Agreement respecting (i) the Tender Offer, (ii) the Merger, (iii) the relationship between Genesis, Cypress, Nazem and TPG and the rights and obligations relating thereto and (iv) related matters including the Put/Call Agreement, the Shareholders Agreement respecting Genesis ElderCare Corp. and the Merger Agreement. "United States Person" has the meaning ascribed to such term in Section 1.12 above. "Withdrawal Liability" has the meaning given to such term in ss.4201 of ERISA. 8.2 CONSTRUCTION. In this Agreement and each other Loan Document, unless the context otherwise clearly requires, (a) references to the plural include the singular, the singular the plural and the part the whole; (b) "or" has the inclusive meaning represented by the phrase "and/or;" (c) the terms "property" and "assets" each include all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed, now existing or hereafter acquired; (d) the words "hereof," "herein" and "hereunder" (and similar terms) in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document; (e) the words "includes" and "including" (and similar terms) in this Agreement or any other Loan Document mean "includes, without limitation" and "including, without limitation," respectively whether or not stated; and -71- (f) references to "determination" (and similar terms) by any Lender Party include good faith estimates by such Lender Party (in the case of quantitative determinations) and good faith beliefs by such Lender Party (in the case of qualitative determinations). No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting thereof shall apply to this Agreement or any other Loan Document. The section and other headings contained in this Agreement and in each other Loan Document, and any tables of contents contained herein or therein, are for reference purposes only and shall not affect the construction or interpretation of this Agreement or such other Loan Document in any respect. Whenever this Agreement requires the delivery of financial projections, it is understood that the projections shall be made in good faith, consistent with the Loan Documents and based on the Borrower's reasonable judgment as to the anticipated financial performance and results of operations. However, any such financial projections shall not constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. 8.3 ACCOUNTING PRINCIPLES. (a) As used herein, "GAAP" means generally accepted accounting principles (other than as set forth in this Section 8.3(a) as to consolidation) in the United States, applied on a basis consistent with the principles used in preparing the financial statements of Multicare and its consolidated Subsidiaries as of December 31, 1996 and for the fiscal year then ended. When the word "consolidated" is used in this Agreement, it shall be used in a manner consistent with generally accepted accounting principles in the United States except that such principles relating to what entities shall be consolidated shall be superseded by any terms of this Agreement which designate what entities shall be consolidated for purposes relating hereto. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. ARTICLE 9 MISCELLANEOUS 9.1 NOTICES. Unless otherwise expressly provided under this Agreement all notices, requests, demands, directions and other communications (collectively "notices") -72- given to or made upon any party under the provisions of this Agreement (and unless otherwise specified, in each other Loan Document) shall be by telephone (immediately confirmed in writing) or in writing (including facsimile communication) and if in writing shall be delivered by hand, nationally recognized overnight courier or U.S. mail or sent by facsimile to the respective parties at the addresses and numbers set forth under their respective names on the signature pages of this Agreement or in accordance with any subsequent unrevoked written direction from any party to the others. All notices shall, except as otherwise expressly provided in this Agreement, be effective (a) in the case of facsimile, when received, (b) in the case of hand-delivered notice, when hand delivered, (c) in the case of telephone, when telephoned, provided, however, that in order to be effective unless otherwise expressly provided, telephonic notices must be confirmed in writing no later than the next day by letter or facsimile, (d) if given by U.S. mail, the day after such communication is deposited in the mails with overnight first class postage prepaid, return receipt requested, and (e) if given by any other means (including by air courier), when delivered; provided, further, that notices to the Administrative Agent shall not be effective until received. Any Lender giving any notice to the Borrower shall simultaneously send a copy of such notice to the Administrative Agent, and the Administrative Agent shall promptly notify the other Lenders of the receipt by it of any such notice. Except as otherwise provided in this Agreement, in the event of a discrepancy between any telephonic or written notice, the written notice shall control. 9.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein except as expressly provided otherwise (e.g., certain fee agreements and fee arrangements set forth in the commitment letter relating hereto and indemnification obligations under the Existing Credit Agreement). This Agreement and the other Loan Documents represent the entire agreement between the parties to this Agreement with respect to the transactions contemplated hereby or thereby and, except as expressly provided herein or in the other Loan Documents, shall not be affected by reference to any other documents. 9.3 SEVERABILITY. Every provision of this Agreement and each of the other Loan Documents is intended to be severable, and if any term or provision of this Agreement or any of the other Loan Documents shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, be deemed amended to modify or delete, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it or them valid and enforceable to the maximum extent -73- permitted by applicable Law, without in any manner affecting the validity or enforceability of such provision or provisions in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 9.4 DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not affect the meaning or construction of any of the provisions of this Agreement. 9.5 GOVERNING LAW. This Agreement and the rights and obligations of the parties under this Agreement and under the other Loan Documents shall be construed in accordance with and shall be governed by the laws of the Commonwealth of Pennsylvania. 9.6 NON-MERGER OF REMEDIES. The covenants and obligations of the Borrower and the rights and remedies of the Administrative Agent and other Lender Parties hereunder and under the other Loan Documents shall not merge with or be extinguished by the entry of a judgment hereunder or thereunder, and such covenants, obligations, rights and remedies shall survive any entry of a judgment until payment in full of the Loans Obligations and termination of the Commitment. All obligations under the Loan Documents shall continue to apply with respect to and during the collection of amounts due under the Loan Documents or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms of this Agreement or of any rights under this Agreement or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings. Without limiting the generality of the foregoing, post-judgment interest rate shall be the interest rate provided in paragraph (c) of Section 1.7 above. 9.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and no delay or failure of the Administrative Agent or any other Lender Party in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent and the other Lender Parties under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any other Lender Party would otherwise have hereunder or thereunder, at law, in equity or otherwise. Any waiver of a specific default made in accordance with Section 9.8 below shall be effective only as to such specific default and shall not apply to any subsequent default. -74- 9.8 AMENDMENTS; WAIVERS. Any term, covenant, agreement or condition of any Loan Document to which the Lenders (or the Administrative Agent) are party may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver is in writing and is signed by the Required Lenders (or by the Administrative Agent at the direction of the Required Lenders); provided, however, if the rights and duties of the Administrative Agent are affected thereby such amendment or waiver must be executed by the Administrative Agent; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by each Lender referred to below, if it would (a) increase such Lender's Commitment or the outstanding amount of such Lender's Loans, (b) extend the maturity of the Note of such Lender, (c) decrease the rate of interest or amount of fees due to such Lender or decrease the principal amount in respect of the Note of such Lender or extend the time of payment of interest or fees due to such Lender, provided that the written consent of the Required Lenders, rather than the consent of all Lenders, shall be sufficient to waive imposition of the Default Rate, or (d) change the number of Lenders which are required to consent to any proposed action under this Agreement before such action may be taken under this Agreement if such change could cause such Lender to lose its right to participate in such consent; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by all the Lenders if it would (i) amend the definition of "Required Lenders" or (ii) release the Borrower of its Obligations or release any guaranty or collateral security granted pursuant to the Loan Documents. Further, the Administrative Agent and the Lenders may amend or modify the provisions of Article 7 hereof (except for Section 7.9 (Successor Administrative Agent) and paragraph (b) of Section 7.12 (Other Agents)) without the need for any consent or approval from the Borrower, it being acknowledged that the Borrower is not a third party beneficiary of the provisions of said Article 7 (except for Section 7.9 (Successor Administrative Agent) and paragraph (b) of Section 7.12 (Other Agents)) and (y) without the consent of any Lenders, the Administrative Agent may enter into amendments and modifications to this Agreement and the other Loan Documents as necessary or desirable to cure any ambiguities herein or therein or to add additional borrowers or add additional Collateral. -75- 9.9 SUCCESSORS AND ASSIGNS (a) Assignments by the Borrower. Without the prior written consent of all of the Lenders, the Borrower may not assign any of its rights or delegate any of its duties or obligations under this Agreement or any other Loan Document. (b) Participations. Any Lender may sell participations to one or more Eligible Institutions of all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment); provided, however, that, with respect to any Lender, (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties to this Agreement for the performance of such obligations, (iii) all amounts payable by the Borrower under this Agreement shall be determined as if such transferor Lender had not sold such participation and no participant shall be entitled to receive any greater amount pursuant to this Agreement than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred, (iv) such participant shall agree to be bound by the provisions of this Agreement and the other Loan Documents, and (v) with respect to any sale of a participation hereunder, such Lender shall contemporaneously sell to the same participant a proportionately equal amount of its interest in the Multicare Credit Agreement and (vi) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such transferor Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole rights and responsibility vis-a-vis the Borrower to enforce the obligations of the Borrower relating to the Loans, including the right to approve any amendment, modification or waiver of any provision of this Agreement (except that such Lender may give its participants the right to direct such Lender to approve or disapprove any amendment, modification or waiver which would require such Lender's consent under clause (a) (b), (c), (i) or (ii) of the preceding Section 9.8). (c) Assignments by Lenders. Each Lender may assign to one or more Eligible Institutions all or a portion of its interest, rights and obligations under this Agreement (including all or a portion of its Commitment) and the other Loan Documents; provided, however, that with respect to any assignment, (i) unless the assignee is (prior to the effective time of the assignment) an Existing Lender or an Affiliate of an existing Lender, the Administrative Agent and, if no Event of Default has occurred and is continuing, the Borrower must give their prior written consent to such assignment (which consents shall not be unreasonably withheld), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent and, unless an Event of Default has occurred and is continuing, the Borrower, for their acceptance, an Assignment and Acceptance Agreement in form and content satisfactory to the Administrative Agent (the "Assignment and Acceptance"), together with (A) any Note subject to such assignment, and (B) a processing and recordation fee of $3,500 (or such lesser amount as is required for the Administrative Agent to receive an aggregate amount equal to $3,500.00 under this Agreement and the -76- Multicare Credit Agreement in respect of such transfer), (iii) no Lender may make a partial assignment if the amount of its portion of the Commitment and (without duplication) the outstanding Loans, together with the amount of its interest under the Multicare Credit Agreement assigned in accordance with clause (v) below, is, or after giving effect to the proposed assignment would be, less than Ten Million Dollars ($10,000,000.00), (iv) unless the assignee is (prior to the effective time of the assignment) a Lender hereunder, the aggregate amount of any interest so sold to any assignee pursuant to any partial assignment hereunder, together with the aggregate amount so sold to such assignee in accordance with clause (v) below, may not be less than Ten Million Dollars ($10,000,000.00), and (v) with respect to any assignment of an interest hereunder, the assignor shall contemporaneously assign to the same assignee a proportionately equal amount of its interest under the Multicare Credit Agreement. "Partial assignment" as used in clauses (iii) and (iv) above means any assignment of a Lender's rights and obligations hereunder except an assignment of all of such Lender's rights and obligations such that after the assignment such Lender shall have no Commitment and no interest in any Loans hereunder. Upon compliance with clauses (i) through (iii) above, from and after the effective date specified in the relevant Assignment and Acceptance, (x) the assignee shall be a party to this Agreement and the other Loan Documents to which the assignor was a party, and to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and under the other Loan Documents and (y) the assigning Lender shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents. (d) Procedures Respecting Assignment. Upon their receipt of an Assignment and Acceptance executed by the assignor and the assignee, subject to the conditions set forth in the preceding paragraph (c), the Administrative Agent and (unless an Event of Default shall have occurred and be continuing) the Borrower shall accept such Assignment and Acceptance. Within thirty (30) days after such Assignment and Acceptance is signed and accepted by all parties, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent new Notes in exchange for the surrendered Notes, each to the order of such assignee in an amount equal to its portion of the Commitment and Loans assigned to it pursuant to such Assignment and Acceptance and new Notes to the order of the assigning Lender in an amount equal to the Commitment and Loans retained by it. Such Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the date of such surrendered Notes (each assignee shall confirm in the Assignment and Acceptance that, notwithstanding the date of the new Notes made in favor of such assignee, such assignee shall have no right to, or interest in, any fees or interest which shall have accrued on the Loans prior to the effective date of the Assignment and Acceptance). Cancelled Notes shall be returned to the Borrower upon the execution of such new Notes. -77- (e) Assignments to Federal Reserve Bank. Notwithstanding any of the terms of this Section 9.9, without the consent of the Administrative Agent or the Borrower, any Lender may assign all or any portion of its rights to payments in connection with this Agreement to a Federal Reserve Bank as collateral in accordance with Regulation A of the Board of Governors of the Federal Reserve System. Such assignment shall not affect any other rights or any obligations of the assigning Lender. 9.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES. Any Loan Document may be executed in one or more counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument. Delivery of a photocopy or telecopy of an executed counterpart of a signature page to any Loan Document shall be as effective as delivery of a manually executed counterpart of such Loan Document. 9.11 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision contained in this Agreement or the Notes or any other Loan Document, the total liability of the Borrower for payment of interest pursuant to this Agreement and the Notes shall not exceed the maximum amount of such interest permitted by law to be charged, collected, or received from the Borrower, and if any payment by the Borrower includes interest in excess of such a maximum amount, each Lender shall apply such excess to the reduction of the unpaid principal amount due pursuant to this Agreement and the Notes, or if none is due, to the other Loan Obligations, if any, and then such excess shall be refunded to the Borrower. 9.12 INDEMNIFICATION. (a) Whether or not any fundings are made under this Agreement, the Borrower shall unconditionally upon demand, pay or reimburse the Administrative Agent and other Lender Parties for, and indemnify and save the Administrative Agent, the other Lender Parties and their respective Affiliates, officers, directors, employees, agents, attorneys, shareholders and consultants (collectively, "Indemnitees") harmless from and against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnitee as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, the Tender Offer, the Merger, any transaction actually or proposed to be financed in whole or in part or directly or indirectly with the proceeds of any Loan, any transaction contemplated by the Transaction Documents, but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that the Borrower -78- proves were the result solely of the gross negligence or willful misconduct of such Indemnitee, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrower under this paragraph (a), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. (b) Without limiting the generality of the foregoing, the Borrower hereby indemnifies and agrees to defend and hold harmless each Indemnitee, from and against any and all claims, actions, causes of action, liabilities, penalties, fines, damages, judgments, losses, suits, expenses, legal or administrative proceedings, interest, costs and expenses (including court costs and attorneys', consultants' and experts' fees) arising out of or in any way relating to: (i) the use, handling, management, production, treatment, processing, storage, transfer, transportation, disposal, release or threat of release of any Environmental Concern Material by or on behalf of, the Borrower or any of its Environmental Affiliates; (ii) the presence of Environmental Concern Materials on, about, beneath or arising from any premises owned or occupied by the Borrower or any of its Environmental Affiliates (herein collectively, the "Premises"); (iii) the failure of the Borrower or any of its Environmental Affiliates or any occupant of any Premises to comply with the Environmental Laws; (iv) the breach by the Borrower of any of the representations, warranties and covenants contained herein or in any Loan Documents; (v) Regulatory Actions (as hereinafter defined) and Third Party Claims (as hereinafter defined); or (vi) the imposition or recording of a Lien against any Premises in connection with any release at, on or from any Premises or any activities undertaken on or occurring at any Premises, or arising from such Premises or pursuant to any Environmental Law. The Borrower's indemnity and defense obligations under this section shall include, whether foreseeable or unforeseeable, any and all costs related to any remedial action. "Regulatory Action" means any notice of violation, citation, complaint, request for information, order, directive, compliance schedule, notice of claim, consent decree, action, litigation or proceeding brought or instituted by any governmental authority under or in connection with any Environmental Law involving the Borrower or any occupant of any of the Premises or involving any of the Premises or any activities undertaken on or occurring at any Premises. "Third Party Claims" means claims by a party (other than a party to this Agreement and other than Regulatory Actions) based on negligence, trespass, strict liability, nuisance, toxic tort or detriment to human health or welfare due to Environmental Concern Materials on, about, beneath or arising from any Premises or in any way related to any alleged violation of any Environmental Laws or any activities undertaken on or occurring at any Premises. (c) The indemnities contained herein shall survive repayment of the Loan Obligations, termination of the Commitment and satisfaction, release, and discharge of the Loan Documents, whether through full payment of the Loans, foreclosure, deed in lieu of foreclosure or otherwise. -79- (d) The foregoing amounts are in addition to any other amounts which may be due and payable to the Administrative Agent and/or the Lenders under this Agreement. A certification by the Administrative Agent or a Lender hereunder of the amount of liabilities, losses, costs, expenses, claims and/or charges shall be conclusive, absent manifest error. 9.13 EXPENSES (a) Whether or not there shall be any funding the Borrower agrees to pay promptly or cause to be paid promptly and to hold harmless: (i) with respect to matters relating to clause (A) of this paragraph (i), the Agents, and with respect to clauses (B) and (C) of this paragraph (i), the Administrative Agent (and after an Event of Default and for the period in which the same shall continue, each Lender Party) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to (A) the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents, (B) the administration and performance of this Agreement and the other Loan Documents, and (C) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any other Loan Document; (ii) the Administrative Agent (and after an Event of Default, and for the period in which the same shall continue, each Lender Party with respect to matters relating to clause (B) of this paragraph (ii)) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting evaluation and consulting costs) incurred by it from time to time arising from or relating to the enforcement or preservation of rights under, or administration of, this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) the creation, perfection or protection of any Lien on any Collateral, (B) the protection, collection, lease, sale, taking possession of, preservation of, or realization on, any Collateral, including advances for storage, insurance premiums, transportation charges, taxes, filing fees and the like, (C) collection or enforcement of an outstanding Loan Obligation, and (D) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the other Loan Documents); and (iii) each Lender Party against liability for all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by any Lender Party to be payable in connection with this Agreement or any other Loan Documents. -80- 9.14 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender," "Holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, enter into Interest Rate Hedging Agreements with, serve as "Administrative Agent" for other financing vehicles, issue letters of credit on behalf of, and engage in any other business with, (a) any Loan Party or any stockholder, Subsidiary or Affiliate of any Loan Party or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. 9.15 CERTAIN WAIVERS BY BORROWER. The Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Loan Obligations and any requirement that any Lender Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any other Person or any collateral or other direct or indirect security for any of the Loan Obligations. Without limiting the generality of the foregoing, the Borrower acknowledges and agrees that the Administrative Agent or other Lender Party may commence an action against the Borrower whether or not any action is brought against any other Loan Party or against any collateral and it shall be no defense to any action brought against the Borrower that the Lender Parties have failed to bring an action against any other Loan Party or any Collateral. 9.16 SET-OFF. The Borrower hereby agrees that, to the fullest extent permitted by Law, if any Loan Obligation shall be due and payable (by acceleration or otherwise), each Lender Party shall have the right, without notice to the Borrower, to set-off against and to appropriate and apply to such Loan Obligation any indebtedness, liability or obligation of any nature owing to the Borrower by such Lender Party, including but not limited to all deposits now or hereafter maintained by the Borrower with such Lender Party. Such right shall exist whether or not such Lender Party or any other Person shall have given notice or made any demand to the Borrower or any other Person. The Borrower hereby agrees that, to the fullest extent permitted by Law, any participant and any Affiliate of any Lender Party or any participant shall have the same rights of set-off as a Lender Party as provided in this Section 9.16. The rights provided by this Section 9.16 are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender Party (or any such participant, or Affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise. -81- 9.17 SHARING OF COLLECTIONS. The Lender Parties hereby agree among themselves that if any Lender Party shall receive (by voluntary payment, realization upon security, charging of accounts, set-off or from any other source) any amount on account of the Loan Obligations in greater proportion than any such amount received by any other Lender Party (based on the relative amount of each such Lender Party's interest in the Loan Obligations), then the Lender Party receiving such proportionately greater payment shall notify each other Lender Party and the Administrative Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section 9.17 so that, in effect, all such excess amounts will be shared ratably among all of the Lender Parties. The Lender Party receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lender Parties a participation in the applicable Loan Obligations owed to such other Lender Parties in such amount as shall result in a ratable sharing by all Lender Parties of such excess amount (and to such extent the receiving Lender Party shall be a participant). If all or any portion of such excess amount is thereafter recovered from the Lender Party making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender Party making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each participant shall be bound by this Section 9.17 as fully as if it were a Lender hereunder. 9.18 OTHER LOAN DOCUMENTS. Each Lender acknowledges that on signing this Agreement it is bound by the terms of the Loan Documents. 9.19 CERTAIN BORROWER ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that neither the Administrative Agent nor any other Lender Party has any fiduciary relationship with, or any fiduciary duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents and the relationship between the Administrative Agent and the other Lender Parties, on the one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. 9.20 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL. (a) Consent to Jurisdiction. For the purpose of enforcing payment and performance of the Loan Documents, including, any payment under the Notes and performance of other obligations under the Loan Documents, or in any other matter relating to, or arising out of, the Loan Documents, the Borrower hereby consents to the jurisdiction and venue of the courts of the Commonwealth of Pennsylvania or of any federal court -82- located in such state, waive personal service of any and all process upon it and consents that all such service of process be made by certified or registered mail directed to the Borrower at the address provided for in Section 9.1 and service so made shall be deemed to be completed upon actual receipt or execution of a receipt by any Person at such address. The Borrower hereby waives the right to contest the jurisdiction and venue of the courts located in the Commonwealth of Pennsylvania on the ground of inconvenience or otherwise and, further, waives any right to bring any action or proceeding against (a) the Administrative Agent in any court outside the Commonwealth of Pennsylvania, or (b) any other Lender other than in a state within the United States designated by such Lender. The provisions of this Section 9.20 shall not limit or otherwise affect the right of the Administrative Agent or any other Lender Party to institute and conduct an action in any other appropriate manner, jurisdiction or court. (b) WAIVER OF JURY TRIAL; DAMAGES. NEITHER ANY LENDER PARTY NOR THE BORROWER NOR ANY OTHER LOAN PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF THE FOREGOING SHALL SEEK A JURY TRIAL IN ANY PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, OR INVOLVING ANY COLLATERAL OR ANY GUARANTY RELATING TO THE INDEBTEDNESS HEREUNDER OR THE RELATIONSHIP BETWEEN OR AMONG SUCH PERSONS OR ANY OF THEM. NO SUCH PERSON WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT WAIVES ANY RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION 9.20 ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS AGREEMENT (i) CERTIFIES THAT NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER NOR ANY REPRESENTATIVE OR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR SUCH LENDER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH (b) OF SECTION 9.20. THE PROVISIONS OF THIS SECTION 9.20 HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND THE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 9.20 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. -83- IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. BORROWER: GENESIS ELDERCARE ACQUISITION CORP., a Delaware corporation By -------------------------------- Name: Title: Address for notices: Suite 100 148 West State Street Kennett Square, PA 19348 Attention: Senior Vice President and Chief Financial Officer Telephone: 610-444-6350 Facsimile: 610-444-3365 -84- AGENTS AND LENDERS: MELLON BANK, N.A., as a Lender and as Administrative Agent By -------------------------------- Name: Title: Address for notices: street address: AIM 199-5220 Mellon Independence Center 701 Market Street Philadelphia, Pennsylvania 19106 mailing address: AIM 199-5220 P.O. Box 7899 Philadelphia, Pennsylvania 19101-7899 Attention: Linda WP, Loan Administration Telephone: 215-553-4583 Facsimile: 215-553-4789 With a copy to Plymouth Meeting Executive Campus 610 W. Germantown Pike, Suite 200 Plymouth Meeting, Pennsylvania 19462 Attention: Barbara J. Hauswald Vice President Telephone: 610-941-8409 Facsimile: 610-941-4136 -85- With a copy for notices respecting assignments to: MELLON BANK, N.A. One Mellon Bank Center, 45th Floor Pittsburgh, PA 15258-0001 Attention: Dean Hazleton Telephone: 412-236-0316 Facsimile: 412-234-4612 -86- CITICORP USA, INC., as a Lender and as a Syndication Agent By -------------------------------- Name: Title Address for notices: 399 Park Avenue 8th Floor, Zone 6 New York, NY 10043 Attention: Margaret A. Brown Telephone: 212-559-0501 Facsimile: 212-793-0289 -87- FIRST UNION NATIONAL BANK, as a Lender and as Documentation Agent By -------------------------------- Name: Title: Address for notices: One First Union Center TW-5 Charlotte, NC 28288-0735 Attention: Mr. Joseph H. Towell Telephone: 704-383-3844 Facsimile: 704-374-4092 -88- NATIONSBANK, N.A., as a Lender and as a Syndication Agent By ------------------------------- Name: Title: Address for notices: 101 North Tryon Street 15th Floor Charlotte, NC 28225 NC1-001-15-11 Attention: Jacquetta Banks Telephone: 704-388-1111 Facsimile: 704-386-8694 With a copy to: 100 North Tryon Street 8th Floor Charlotte, NC 28225 NC1-007-0813 Attention: Scott S. Ward Telephone: 704-388-7839 Facsimile: 704-388-6002 -89- JOINDERS GENESIS ELDERCARE CORP. and THE MULTICARE COMPANIES, INC. hereby join in the execution and delivery of this Agreement and, by so doing, (1) confirm the accuracy of all representations and warranties in this Agreement concerning them, both as of the date of this Agreement and as of each time on which such representations and warranties are deemed to be restated, and (2) agree to perform and comply with (and, in the case of Multicare, cause its Subsidiaries to comply with) all covenants and obligations stated in this Agreement to be applicable to them or which the Borrower agrees to cause them to perform or comply with. The obligations of the undersigned under this joinder are separate from and independent of their obligations under the Genesis ElderCare Guaranty, the Multicare Guaranty, the Pledge Agreements and any other Loan Documents to which either of them is or becomes a party. Further, Genesis ElderCare Corp. agrees that all cash proceeds it receives from the issuance or sale of equity securities or as capital contributions will be immediately contributed by it to the capital of the Borrower or, after the Merger, Multicare. GENESIS ELDERCARE CORP. THE MULTICARE COMPANIES, INC. By By ------------------------------- ------------------------------------ Name: Name: Title: Title: EX-99 6 EX-B.(7) THIRD AMENDED AND RESTATED CREDIT AGREEM EXECUTION COPY ================================================================================ THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 9, 1997 by and among GENESIS HEALTH VENTURES, INC. and CERTAIN OF ITS SUBSIDIARIES, AS BORROWERS, THE FINANCIAL INSTITUTIONS IDENTIFIED HEREIN AS LENDERS, MELLON BANK, N.A. AS ISSUER OF LETTERS OF CREDIT, MELLON BANK, N.A. AS ADMINISTRATIVE AGENT CITICORP USA, INC. AS SYNDICATION AGENT FIRST UNION NATIONAL BANK AS DOCUMENTATION AGENT NATIONSBANK, N.A. AS SYNDICATION AGENT and the OTHER AGENTS IDENTIFIED HEREIN ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1 - CREDIT FACILITY................................................. 2 1.1 COMMITMENT TO LEND............................................. 2 1.2 JOINT AND SEVERAL OBLIGATIONS.................................. 3 1.3 MANNER OF BORROWING............................................ 4 1.4 SCHEDULED REPAYMENTS........................................... 7 1.5 VOLUNTARY PREPAYMENTS AND UNSCHEDULED, MANDATORY PREPAYMENTS.......................................... 9 1.6 PAYMENTS BY THE BORROWERS IN GENERAL........................... 13 1.7 REDUCTIONS OF RC COMMITMENT.................................... 15 1.8 INTEREST....................................................... 15 1.9 FEES........................................................... 17 1.10 COMPUTATION OF INTEREST AND FEES............................... 18 1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT........................... 18 1.12 PRO RATA TREATMENT............................................. 19 1.13 TAXES ON PAYMENTS.............................................. 19 1.14 REGISTERED NOTES AND LOANS..................................... 21 ARTICLE 2 - YIELD PROTECTION AND BREAKAGE INDEMNITY.........................22 2.1 MANDATORY SUSPENSION AND CONVERSION OF LIBO RATE LOANS.......................................................... 22 2.2 REGULATORY CHANGES............................................. 23 2.3 CAPITAL AND RESERVE REQUIREMENTS............................... 24 2.4 BREAKAGE....................................................... 24 2.5 DETERMINATIONS................................................. 25 2.6 REPLACEMENT OF LENDERS......................................... 25 2.7 CHANGE OF LENDING OFFICE....................................... 26 ARTICLE 3 - LETTERS OF CREDIT.............................................. 26 3.1 ISSUANCE OF LETTERS OF CREDIT.................................. 26 ARTICLE 4 - CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS................................................... 32 4.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING................................................ 32 4.2 CONDITIONS TO EACH LOAN AND ISSUANCE OF EACH LETTER OF CREDIT............................................... 38 4.3 RELATIONSHIP WITH EXISTING CREDIT AGREEMENT.................... 39 -i- ARTICLE 5 - REPRESENTATIONS AND WARRANTIES................................. 39 5.1 REPRESENTATIONS................................................ 39 5.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE........................ 47 ARTICLE 6 - AFFIRMATIVE COVENANTS.......................................... 47 6.1 REPORTING REQUIREMENTS......................................... 48 6.2 MAINTENANCE OF EXISTENCE....................................... 53 6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY............................................. 53 6.4 MAINTENANCE OF RECORDS; FISCAL YEAR............................ 54 6.5 COMPLIANCE WITH LAWS........................................... 54 6.6 ERISA.......................................................... 54 6.7 RIGHT OF INSPECTION............................................ 55 6.8 INSURANCE...................................................... 55 6.9 PAYMENT OF TAXES AND OTHER CHARGES............................. 55 6.10 SUBSIDIARIES TO BE BORROWERS................................... 56 6.11 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS.................. 56 6.12 INTEREST RATE HEDGING AGREEMENTS............................... 56 6.13 CORPORATE SEPARATENESS......................................... 57 6.14 TRANSACTIONS WITH AFFILIATES................................... 57 6.15 MERGER OF GENESIS ELDERCARE ACQUISITION CORP. INTO MULTICARE...................................................... 57 6.16 CERTAIN ACQUISITIONS........................................... 57 6.17 USE OF PROCEEDS................................................ 57 ARTICLE 7 - FINANCIAL COVENANTS............................................ 58 7.1 CERTAIN FINANCIAL COVENANTS.................................... 58 7.2 CALCULATION OF FINANCIAL COVENANTS............................. 59 ARTICLE 8 - NEGATIVE COVENANTS............................................. 60 8.1 INDEBTEDNESS................................................... 60 8.2 LIENS.......................................................... 62 8.3 LOANS, ADVANCES AND INVESTMENTS................................ 63 8.4 ACQUISITIONS, ETC.............................................. 65 8.5 DISPOSITIONS................................................... 65 8.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS...................................................... 67 8.7 LEASES......................................................... 67 8.8 DIVIDENDS AND RELATED DISTRIBUTIONS............................ 68 8.9 CONSOLIDATED TAX RETURN........................................ 68 8.10 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASEMENT AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS.................................................... 68 -ii- 8.11 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS; EXERCISE OF PUT/CALL AND UNDERTAKINGS RESPECTING PUT/CALL....................................................... 69 8.12 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS. ................ 69 8.13 LIMITATIONS ON MERGERS, ETC.................................... 70 8.14 AVOIDANCE OF OTHER CONFLICTS................................... 70 8.15 CAPITAL EXPENDITURES........................................... 70 ARTICLE 9 - DEFAULTS....................................................... 71 9.1 EVENTS OF DEFAULT.............................................. 71 9.2 CONSEQUENCES OF AN EVENT OF DEFAULT............................ 74 9.3 APPLICATION OF PROCEEDS........................................ 76 ARTICLE 10 - THE ADMINISTRATIVE AGENT...................................... 77 10.1 APPOINTMENT.................................................... 77 10.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES................ 77 10.3 EXERCISE OF POWERS............................................. 78 10.4 GENERAL EXCULPATORY PROVISIONS................................. 78 10.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT..................... 79 10.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS......................................... 80 10.7 INDEMNIFICATION................................................ 80 10.8 REGISTER....................................................... 81 10.9 SUCCESSOR ADMINISTRATIVE AGENT................................. 81 10.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT.......................................................... 82 10.11 CALCULATIONS................................................... 82 10.12 OTHER AGENTS................................................... 82 ARTICLE 10A - SPECIAL INTERCREDITOR PROVISIONS............................. 83 10A.1 SPECIAL PROVISIONS APPLICABLE TO LENDER PARTIES AS PARTIES TO THE MULTICARE CREDIT AGREEMENT...................... 83 ARTICLE 10B - SPECIAL INTER-BORROWER PROVISIONS............................ 83 10B.1 CERTAIN BORROWER ACKNOWLEDGEMENTS.............................. 83 10B.2 CERTAIN INTER-BORROWER AGREEMENTS.............................. 84 10B.3 RECORDS........................................................ 84 ARTICLE 11 - DEFINITIONS; CONSTRUCTION..................................... 85 11.1 CERTAIN DEFINITIONS............................................ 85 11.2 CONSTRUCTION...................................................108 11.3 ACCOUNTING PRINCIPLES..........................................109 -iii- ARTICLE 12 - MISCELLANEOUS.................................................109 12.1 NOTICES........................................................109 12.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT.........................110 12.3 SEVERABILITY...................................................110 12.4 DESCRIPTIVE HEADINGS...........................................110 12.5 GOVERNING LAW..................................................110 12.6 NON-MERGER OF REMEDIES.........................................110 12.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES.........................111 12.8 AMENDMENTS; WAIVERS............................................111 12.9 SUCCESSORS AND ASSIGNS.........................................113 12.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES.........................................................115 12.11 MAXIMUM LAWFUL INTEREST RATE...................................115 12.12 INDEMNIFICATION................................................116 12.13 EXPENSES.......................................................117 12.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY..................118 12.15 AUTHORIZATION OF GENESIS BY OTHER BORROWERS....................118 12.16 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY................118 12.17 CERTAIN WAIVERS BY BORROWERS...................................119 12.18 SET-OFF........................................................119 12.19 SHARING OF COLLECTIONS.........................................119 12.20 OTHER LOAN DOCUMENTS...........................................120 12.21 CERTAIN BORROWER ACKNOWLEDGEMENTS..............................120 12.22 CERTAIN LENDER PARTY ACKNOWLEDGEMENTS..........................120 12.23 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL..................................................120 -iv- THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 9, 1997, by and among GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation (together with its successors, "Genesis"), the Subsidiaries of Genesis referred to on the signature pages hereto (and such other Subsidiaries of Genesis which may from time to time become Borrowers hereunder in accordance with the provisions hereof) (collectively with Genesis, the "Borrowers"), the Lenders referred to on the signature pages hereto (together with other lenders parties hereto from time to time pursuant to Section 12.9 below, and their successors and assigns, the "Lenders"), MELLON BANK, N.A., a national banking association, as issuer of Letters of Credit hereunder (in such capacity, together with its successors and assigns in such capacity, the "Issuer"), MELLON BANK, N.A., a national banking association, as Administrative Agent for itself and for the other Agents, the Lenders and the Issuer hereunder (in such capacity, together with its successors and assigns in such capacity, the "Administrative Agent"), CITICORP USA, INC., a Delaware corporation, as Syndication Agent, FIRST UNION NATIONAL BANK, a national banking association, as Documentation Agent, and NATIONSBANK, N.A., a national banking association, as Syndication Agent. Certain terms used herein are defined in Article 11 below. W I T N E S S E T H T H A T WHEREAS, certain Borrowers, certain Lenders, the Issuer and the Administrative Agent are parties to that certain Credit Agreement, dated as of November 22, 1993, as amended pursuant to that certain First Amendment and Waiver to Loan Documents, dated as of July 15, 1994, as further amended pursuant to that certain Second Amendment to Credit Agreement, dated as of September 23, 1994, as further amended pursuant to that certain Third Amendment to Credit Agreement, dated as of February 10, 1995, as further amended pursuant to that certain Fourth Amendment and Modification to Loan Documents and Consent dated as of June 15, 1995, as further amended pursuant to that certain Amended and Restated Credit Agreement, dated as of September 29, 1995, as further amended pursuant to that certain First Amendment to Credit Documents, dated as of April 12, 1996, as further amended pursuant to that Second Amendment and Waiver to Loan Documents, dated as of July 19, 1996, as further amended pursuant to that certain Second Amended and Restated Credit Agreement, dated as of October 7, 1996, as further amended pursuant to that certain Amendment No. 1 to Second Amended and Restated Credit Agreement, dated as of March 7, 1997, and as further amended pursuant to that certain Amendment No. 2 to Second Amended and Restated Credit Agreement, dated as of June 20, 1997 (as so amended, the "Existing Credit Agreement"); WHEREAS, the Borrowers would like to increase the amount of the total commitment under the Existing Credit Agreement to Eight Hundred and Fifty Million Dollars ($850,000,000) and would like to modify certain other terms of the Existing Credit Agreement; WHEREAS, the Lenders are willing to so amend and restate the Existing Credit Agreement and to so extend credit to the Borrowers on the terms and subject to the conditions set forth herein; WHEREAS, Genesis and its Subsidiaries, from time to time, other than Excluded Subsidiaries, are joint and several "Borrowers" hereunder; WHEREAS, as more particularly set forth in the Pledge Agreement, certain collateral securing the obligations hereunder is to be shared with certain creditors party to the Synthetic Lease Facility and certain creditors party to the Qualifying Interest Rate Hedging Agreements (as each such term is defined in Article 11 below); and WHEREAS, ALL OBLIGATIONS HEREUNDER AND UNDER EACH AGREEMENT AND INSTRUMENT DELIVERED IN CONNECTION HEREWITH FROM TIME TO TIME ARE "SENIOR INDEBTEDNESS" AND ARE HEREBY DESIGNATED BY GENESIS AS "DESIGNATED SENIOR INDEBTEDNESS" WITHIN THE MEANING OF THE 1995 SUBORDINATED NOTE INDENTURE AND THE 1996 SUBORDINATED NOTE INDENTURE; NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows. ARTICLE 1 CREDIT FACILITY 1.1 COMMITMENT TO LEND. (a) Term Loans. (i) Tranche A Term Loans. Upon the terms and subject to the conditions of this Agreement, each Tranche A Lender agrees to make, on the Closing Date, a Loan (a "Tranche A Term Loan") to the Borrowers in the amount of such Lender's Tranche A Commitment. The total amount of the Tranche A Commitment of all Tranche A Lenders on the Agreement Date is $200,000,000.00. -2- (ii) Tranche B Term Loans. Upon the terms and subject to the conditions of this Agreement, each Tranche B Lender agrees to make, on the Closing Date, a Loan (a "Tranche B Term Loan") to the Borrowers in the amount of such Lender's Tranche B Commitment. The total amount of the Tranche B Commitment of all Tranche B Lenders on the Agreement Date is $200,000,000.00. (iii) Tranche C Term Loans. Upon the terms and subject to the conditions of this Agreement, each Tranche C Lender agrees to make, on the Closing Date, a Loan (a "Tranche C Term Loan") to the Borrowers in the amount of such Lender's Tranche C Commitment. The total amount of the Tranche C Commitment of all Tranche C Lenders on the Agreement Date is $200,000,000.00. (b) Revolving Credit Loans. Upon the terms and subject to the conditions of this Agreement, each RC Lender agrees to make, from time to time, during the period from and including the Closing Date to but excluding the RC Maturity Date, one or more Loans ("RC Loans") to the Borrowers in an aggregate unpaid principal amount not exceeding at any time such Lender's RC Commitment at such time; provided, however, that the Borrowers shall not request, and the Lenders shall have no obligation to make, any RC Loans at any time in excess of the Available RC Commitment. The total amount of the RC Commitment of all RC Lenders on the Agreement Date is $250,000,000.00. (c) Swing Loans. Upon the terms and subject to the conditions of this Agreement, the Swing Loan Lender agrees to make, from time to time, from and including the Closing Date to but excluding the RC Maturity Date, one or more Swing Loans to the Borrowers, in an aggregate unpaid principal amount not exceeding at any time $15,000,000.00 provided, however, that no Swing Loan shall be made at any time in an amount in excess of the Available RC Commitment. Each Swing Loan shall be in a principal amount equal to $500,000.00 or an integral multiple thereof and shall be made and maintained as a Prime Rate Loan unless a fixed rate shall be agreed upon by the Swing Loan Lender and Genesis (on behalf of the Borrowers). All Swing Loans shall be disbursed by the Swing Loan Lender in Dollars in funds immediately available to Genesis (on behalf of the Borrowers) by crediting an account of Genesis at the Swing Loan Lender's Domestic Lending Office, or in such other manner as may have been specified in the applicable notice of borrowing and as shall be acceptable to the Swing Loan Lender. 1.2 JOINT AND SEVERAL OBLIGATIONS. WHETHER OR NOT EXPRESSLY STATED HEREIN OR IN ANY OTHER LOAN DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY BORROWER) HEREUNDER AND UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN CONNECTION WITH LOANS, LETTERS OF CREDIT OR OTHER OBLIGATIONS) ARE JOINT AND SEVERAL OBLIGATIONS OF ALL BORROWERS. -3- 1.3 MANNER OF BORROWING. (a) Notice of Borrowing. (i) Except for requests for Swing Loans which shall be governed by paragraph (e) below, Genesis (on behalf of the Borrowers) shall give the Administrative Agent notice (which shall be irrevocable), in the case of Prime Rate Loans, no later than 11:00 a.m. (Philadelphia, Pennsylvania time) one Business Day prior to the requested date for the making of such Loans and, in the case of LIBO Rate Loans, 11:00 a.m. (Philadelphia, Pennsylvania time) three Business Days before the requested date for the making of such Loans. Each such notice shall be in the form of Exhibit B hereto and shall specify (ii) whether the requested Loans are to be Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans or RC Loans, (iii) the requested date for the making of such Loans, which date shall be a Business Day, (iv) the Type or Types of Loans requested and (v) the amount of each such Type of Loan, which amount shall be $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof (except that in the case of RC Loans, the amount of the requested Loan may be less if the amount requested is equal to the total Available RC Commitment). Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof and of the amount and Type of each Loan to be made by such Lender on the requested date specified therein. (b) Funding by Lenders. Not later than 12:00 noon (Philadelphia, Pennsylvania time) on each requested date for the making of Loans (other than Swing Loans), each Lender shall make available to the Administrative Agent, in Dollars in funds immediately available to the Administrative Agent at the office designated by the Administrative Agent, the Loans to be made by such Lender on such date, provided, however, that if a Lender does not receive timely notice from the Administrative Agent as set forth in paragraph (a) (i) above, such Lender shall fund the required amount promptly upon receipt of such notice. The obligations of the Lenders hereunder are several; accordingly, any Lender's failure to make any Loan to be made by it on the requested date therefor shall not relieve any other Lender of its obligation to make any Loan to be made by it on such date, but the latter shall not be liable for the former's failure. (c) Permitted Assumption as to Funding. Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. (Philadelphia, Pennsylvania time) on the requested date for the making of any Loan (other than a Swing Loan) that such Lender will not make available to the Administrative Agent the Loan requested to be made by it on such date, the Administrative Agent may assume that such Lender has made such Loan available. The Administrative Agent in its sole discretion and in reliance upon such assumption, may make available to the Borrowers on the requested date a corresponding amount on behalf of such Lender. If and to the extent such Lender shall not have made available to the Administrative Agent the Loans requested to be made by such Lender on such date and the Administrative Agent shall have so made available to the Borrowers a corresponding amount on behalf of such Lender, (i) such Lender shall, on demand, pay to the Administrative Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the -4- Administrative Agent to the Borrowers until the date such amount shall have been paid in full to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate and (ii) the Administrative Agent shall be entitled to all interest payable by the Borrowers on such amount for the period commencing on the date such amount was advanced by the Administrative Agent to but not including the date on which such amount is received by the Administrative Agent from such Lender. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as the Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Without limiting any obligations of any Lender pursuant to this paragraph (c), if such Lender does not pay such corresponding amount promptly upon the Administrative Agent's demand therefor, the Administrative Agent shall notify Genesis (on behalf of the Borrowers) and the Borrowers shall promptly repay such corresponding amount to the Administrative Agent together with accrued interest thereon at the applicable rate or rates on such Loans. (d) Disbursements of Funds to Borrowers. All amounts made available to the Administrative Agent in accordance with paragraph (b) above shall be disbursed by the Administrative Agent promptly but in any event not later than 4:00 p.m. (Philadelphia, Pennsylvania time) on the requested date therefor in Dollars in funds immediately available to the Borrowers by crediting such amount to an account of Genesis at the Administrative Agent's Domestic Lending Office or in such other manner as may be agreed to by Genesis and the Administrative Agent. (e) Special Provisions Respecting Swing Loans. (i) Request for Borrowing. Genesis (on behalf of the Borrowers) shall give the Swing Loan Lender notice (which shall be irrevocable) of a request for a Swing Loan (with a copy to the Administrative Agent) no later than 12:00 noon (Philadelphia, Pennsylvania time) on the day such Loan is requested; if such notice is received later than 12:00 noon (Philadelphia, Pennsylvania time), then the request shall be deemed to be a request for a Swing Loan to be made on the next Business Day. The Swing Loan Lender shall provide prompt notice to the Administrative Agent of the making of any Swing Loans to the Borrowers. (ii) Participation by RC Lenders. Upon demand made to all of the RC Lenders by the Swing Loan Lender, which demand may be made before or after a Default (including a Default arising under Section 9.1(n) (Bankruptcy, Etc.)), and before or after the maturity date of the subject Swing Loans, but subject to the provisions of paragraph (iv) below, each RC Lender (other than the Swing Loan Lender) shall promptly, irrevocably and unconditionally purchase from the Swing Loan Lender, without recourse or warranty, an undivided interest and participation in the Swing Loans then outstanding. Each RC Lender shall effect such purchase by paying to the Swing Loan Lender, without reduction or -5- deduction of any kind, including reductions or deductions for set-off, recoupment or counterclaim, in Dollars immediately available to the Swing Loan Lender at the Swing Loan Lender's Domestic Lending Office, an amount equal to such RC Lender's pro rata share of the principal amount of all Swing Loans then outstanding. Each RC Lender's pro rata share of the Swing Loans shall be based on the amount of such RC Lender's pro rata share of the total RC Commitment. Thereafter, the RC Lenders' respective interests in such Swing Loans, and the remaining interest of the Swing Loan Lender in such Swing Loans, shall in all respects be treated as RC Loans under this Agreement, except that subject to Section 1.8(d) (Default Rate) such Swing Loans shall continue to bear interest at the rate specified for such Swing Loans until such Swing Loans are due and payable and such Swing Loans shall be due and payable by the Borrowers on the dates referred to in Section 1.4(e). If any RC Lender does not pay any amount which it is required to pay promptly upon the Swing Loan Lender's demand therefor, (i) the Swing Loan Lender shall be entitled to recover such amount on demand from such RC Lender, together with interest thereon, at the Federal Funds Rate for the first three Business Days, and thereafter at the Prime Rate, for each day from the date of such demand, if made prior to 2:00 p.m. (Philadelphia, Pennsylvania time) on any Business Day, or, if made at any later time, from the next Business Day following the date of such demand, until the date such amount is paid in full to the Swing Loan Lender by such RC Lender and (ii) the Swing Loan Lender shall be entitled to all interest payable by the Borrowers on such amount until the date on which such amount is received by the Swing Loan Lender from such RC Lender. Moreover, any RC Lender that shall fail to make available the required amount shall not be entitled to vote on or consent to or approve any matter under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Swing Loan Lender by such RC Lender. Without limiting any obligations of any RC Lender pursuant to this paragraph (ii), if such RC Lender does not pay such corresponding amount promptly upon the Swing Loan Lender's demand therefor, the Swing Loan Lender shall notify Genesis (on behalf of the Borrowers) and the Borrowers shall promptly repay such corresponding amount to the Swing Loan Lender together with accrued interest thereon at the applicable rate on such Swing Loans. (iii) No Set-off, Etc. Subject only to the limitations set forth in the following paragraph (iv), the obligations of each RC Lender to make available to the Swing Loan Lender the amounts set forth in the preceding paragraph (ii) shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to qualification or exception and shall be made in accordance with the terms of this Agreement. (iv) Certain Limitations. No RC Lender shall be obligated to purchase a participation in any Swing Loan if such RC Lender proves that (A) the Swing Loan Lender did not in good faith believe that the conditions specified in clauses (i), (iii), (iv) and (v) of Section 4.2(a) were satisfied at the time such Swing Loan was made (unless such condition was waived in accordance with the terms of this Agreement) or (B) such RC Lender had actual knowledge that any such condition had not been satisfied and notified the -6- Swing Loan Lender in a writing received by the Swing Loan Lender at least one Business Day prior to the time that it made such Swing Loan that the Swing Loan Lender was not authorized to make such Swing Loan and stating with specificity the reason therefor. 1.4 SCHEDULED REPAYMENTS. (a) Tranche A Term Loans. The Tranche A Term Loans shall mature and become due and payable and shall be repaid by the Borrowers in quarterly installments, payable on successive Quarterly Payment Dates commencing on the first Quarterly Payment Date after the Closing Date and ending on the Tranche A Maturity Date (whether or not such date would otherwise be a Quarterly Payment Date). Each such installment shall be in an amount equal to one quarter of the amount set forth below for the applicable year), provided that the final installment shall be in an amount equal to the aggregate amount of the Tranche A Term Loans then outstanding. Year Ending Amount (Assuming Full Percent of ----------- $200,000,000.00 is Borrowed Tranche A and Not Otherwise Prepaid) Term Loans -------------------------- ---------- 9/30/98 $15,000,000.00 7 1/2% 9/30/99 $25,000,000.00 12 1/2% 9/30/00 $35,000,000.00 17 1/2% 9/30/01 $35,000,000.00 17 1/2% 9/30/02 $45,000,000.00 22 1/2% 9/30/03 $45,000,000.00 22 1/2% In the event that less than the full amount of the Tranche A Term Loans is advanced, the amount of each annual repayment will be equal to the amount actually advanced multiplied by the applicable percentage shown above, as such amount may be further reduced pursuant to Section 1.5 below. (b) Tranche B Term Loans. The Tranche B Term Loans shall mature and become due and payable and shall be repaid by the Borrowers in quarterly installments, payable on successive Quarterly Payment Dates commencing with the first Quarterly Payment Date after the Closing Date and ending with the Tranche B Maturity Date (whether or not such date would otherwise be an Quarterly Payment Date). Each such installment shall be in an amount equal to one quarter of the amount set forth below for the applicable year, provided that the final installment shall be in an amount equal to the aggregate amount of Tranche B Term Loans then outstanding. -7- Amount (Assuming Full Percent of $200,000,000.00 is Borrowed Tranche B Year Ending and Not Otherwise Prepaid) Term Loans ----------- -------------------------- ---------- 9/30/98 $2,000,000.00 1% 9/30/99 $2,000,000.00 1% 9/30/00 $2,000,000.00 1% 9/30/01 $2,000,000.00 1% 9/30/02 $2,000,000.00 1% 9/30/03 $2,000,000.00 1% 9/30/04 $188,000,000.00 94% In the event that less than the full amount of the Tranche B Term Loans is advanced, the amount of each annual repayment will be equal to the amount actually advanced multiplied by the applicable percentage shown above, as such amount may be further reduced pursuant to Section 1.5 below. (c) Tranche C Term Loans. The Tranche C Term Loans shall mature and become due and payable and shall be repaid by the Borrowers in quarterly installments, payable on each successive March 1, June 1, September 1 and December 1 commencing with December 1, 1997 and ending with the Tranche C Maturity Date (whether or not such date would otherwise be a date specified above in this paragraph (c)). Each such installment shall be in an amount equal to one quarter of the amount set forth below for the applicable year (except that for the year ending June 1, 1998, each such installment shall be in an amount equal to one third of the amount set forth below for the applicable year), provided that the final installment shall be in an amount equal to the aggregate amount of Tranche C Term Loans then outstanding. -8- Amount (Assuming Full Percent of $200,000,000.00 is Borrowed Tranche C Year Ending and Not Otherwise Prepaid) Term Loans ----------- -------------------------- ---------- 6/1/98 $2,000,000.00 1% 6/1/99 $2,000,000.00 1% 6/1/00 $2,000,000.00 1% 6/1/01 $2,000,000.00 1% 6/1/02 $2,000,000.00 1% 6/1/03 $2,000,000.00 1% 6/1/04 $2,000,000.00 1% 6/1/05 $186,000,000.00 93% In the event that less than the full amount of the Tranche C Term Loans is advanced, the amount of each annual repayment will be equal to the amount actually advanced multiplied by the applicable percentage shown above, as such amount may be further reduced pursuant to Section 1.5 below. (d) RC Loans. The aggregate outstanding principal amount of the RC Loans shall mature and become due and payable, and shall be repaid by the Borrowers, on the RC Maturity Date. (e) Swing Loans. The Borrowers shall repay each Swing Loan no later than 3:00 p.m. (Philadelphia, Pennsylvania time) on the date specified in the notice of borrowing delivered under Section 1.3(e) (which shall be a date not later than the earlier of (A) the fifth Business Day after the date on which such Swing Loan is to be made and (B) the RC Maturity Date). The Swing Loan Lender shall provide prompt notice to the Administrative Agent of any repayment of Swing Loans by the Borrowers. (f) Letters of Credit. The Borrowers shall reimburse the Issuer, through the Administrative Agent, for each Drawing under a Letter of Credit on the date determined with respect to such Drawing in the manner set forth in Article 3 below. In addition, the Borrowers shall fund the cash collateral account securing Letter of Credit obligations in the manner set forth in Article 3 below. 1.5 VOLUNTARY PREPAYMENTS AND UNSCHEDULED, MANDATORY PREPAYMENTS. (a) Optional Prepayments. The Borrowers may, at any time and from time to time, prepay the Loans in whole or in part, without premium or penalty (but with -9- any payment required under Section 2.4 (Breakage)), except that any optional partial prepayment (other than a prepayment of all outstanding RC Loans) shall be in an aggregate principal amount of $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof except that a Swing Loan (prior to the time that the Swing Loan Lender makes a demand under Section 1.3(e)(ii)) may be prepaid in an aggregate principal amount of $500,000.00 or any integral multiple thereof. Amounts to be so prepaid shall irrevocably be due and payable on the date specified in the applicable notice of prepayment delivered pursuant to paragraph (c) of this Section 1.5 together with interest thereon as provided in Section 1.8 (Interest) and together with any payment required under Section 2.4 (Breakage). (b) Mandatory Prepayments. (i) Excess Cash Flow. For each fiscal year of the Borrowers commencing with the fiscal year ending September 30, 1998, upon the earlier of (x) the date on which the Administrative Agent receives the annual financial statements specified in Section 6.1 hereof and (y) the date by which the Borrowers are required to provide such financial statements, the Borrowers shall prepay a portion of the Loans in an amount equal to fifty percent (50%) of the Excess Cash Flow for such fiscal year. (ii) Net Proceeds of Dispositions. No more than five (5) Business Days after the date of any sale, assignment, transfer or other disposition by any Borrower of any assets (other than pursuant to paragraphs (a), (b), (c), (d) or (f) of Section 8.5 (Dispositions) below) whether now owned or hereafter acquired (collectively, a "disposition of assets"), Genesis, on behalf of the Borrowers, shall notify the Administrative Agent in writing that such disposition of assets has occurred, the date of such event and the amount of the Net Cash Proceeds received in connection therewith. The Administrative Agent shall promptly forward a copy of such notice to each Lender Party. In the event that the Borrowers have not, within 364 days of the date of any such disposition of assets, reinvested all of the corresponding Net Cash Proceeds in their business pursuant to an Acquisition in a Health Care Business permitted by Section 8.4 (and so state in reasonable detail in a certificate delivered by Genesis (on their behalf) to the Administrative Agent), then Genesis (on behalf of the Borrowers) shall give written notice of prepayment to the Administrative Agent (at least five (5) days prior to the date of the subject prepayment) and shall repay on or before the 364th day following such disposition of assets the Loans in an amount equal to the amount of such Net Cash Proceeds not so reinvested. Notwithstanding anything to the contrary contained in this Agreement, in the event there occurs a disposition of assets which would otherwise result in a mandatory prepayment under the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture, to the extent the Borrowers are not otherwise required to make a mandatory prepayment hereunder, the Borrowers shall be obligated to make a mandatory prepayment hereunder in an amount not less than the amount, and at a time not later than such time, necessary to avoid any required prepayment under the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. (iii) Net Proceeds of Sales of Capital Stock or Issuance of Debt Securities. Within five (5) days of the sale or issuance of any capital stock or debt securities of any Borrower (other than (w) a sale or issuance of common stock of Genesis the proceeds of which are used exclusively for the purpose of making capital contributions or other Investments in the Multicare Group permitted under the terms of Section 6.13 below (Corporate Separateness), (x) a sale to a Borrower, (y) a sale or issuance of non-redeemable -10- capital stock of Genesis used to finance the purchase of capital stock of Genesis Eldercare Corp. pursuant to the Put/Call Agreement or (z) a refinancing of the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture permitted by Section 8.1 (Indebtedness) below), the Borrowers shall prepay a portion of the Loans in an amount equal to the amount of the Net Cash Proceeds of such sale of stock or debt securities. (c) Application and Timing of Prepayments. (i) Notice. Subject to the provisions of the last sentence of this paragraph (i), the Borrowers shall give the Administrative Agent notice of each prepayment of Loans, which notice, in the case of a prepayment of Prime Rate Loans, shall be given no later than 11:00 a.m. (Philadelphia, Pennsylvania time) three (3) Business Days before and, in the case of a prepayment of LIBO Rate Loans, no later than 11:00 A.M. (Philadelphia, Pennsylvania time) five (5) Business Days before, the date of such prepayment. Each such notice of prepayment shall be in the form of Exhibit C hereto and shall specify (i) the date such prepayment is to be made and (ii) whether the Loans to be prepaid are Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, RC Loans or Swing Loans (consistent with the provisions of this Agreement), (iii) the amount and Type and, in the case of any LIBO Rate Loan, the last day of the applicable Interest Period for the Loan to be prepaid, (iv) whether the prepayment is a voluntary prepayment pursuant to paragraph (a) of this Section 1.5 or a mandatory prepayment pursuant to paragraph (b) of this Section 1.5 and (v) if a mandatory prepayment, the reason therefor. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof. Notwithstanding the foregoing, if the Borrowers wish to make a prepayment of Swing Loans only, they may prepay such Swing Loans by giving the Swing Loan Lender and the Administrative Agent written notice no later than 12:00 noon (Philadelphia time) one Business Day prior to the date of such prepayment or as otherwise agreed to by Genesis (on behalf of the Borrowers) and the Swing Loan Lender. (ii) Timing and Application of Voluntary Prepayments and Mandatory Prepayments in Respect of Net Cash Proceeds of The One Time Disposition. Any voluntary prepayments pursuant to paragraph (a) of this Section 1.5 and any mandatory prepayments in respect of Net Cash Proceeds of the One Time Disposition made in accordance with paragraph (e) of Section 8.5 below (Dispositions) shall be applied in the following order: (1) First, prepayments shall be applied against the RC Loans and Swing Loans (but with no corresponding reduction in the amount of the RC Commitment unless otherwise specified by Genesis (on behalf of the Borrowers)) and shall be applied among the RC Loans and Swing Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. (2) Second, (subject to the terms of paragraph (d) below (Tranche B/Tranche C Opt-Out)) prepayments shall be applied against the Term Loans and shall be applied among the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans at the time outstanding on a pro rata -11- basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. Prepayments of the various Term Loans shall be applied to each of the respective remaining installments thereof set forth in Section 1.4 on a pro rata basis in accordance with the relative amounts thereof. Any excess shall be applied to any other amounts owing in respect of the Loan Obligations or deposited in the Letter of Credit cash collateral account if required under Article 3 below and, if all such Loan Obligations have been then paid in full and the amount of outstanding Letters of Credit is less than the sum of the amount in the cash collateral account (as required) and the Available RC Commitment, then any excess amount shall be returned to Genesis (on behalf of the Borrowers) or as otherwise required by applicable Law. (iii) Timing and Application of Mandatory Prepayments. Other than mandatory prepayments of Net Cash Proceeds of the One Time Disposition pursuant to paragraph (e) of Section 8.5 below (Dispositions), any mandatory prepayments pursuant to paragraph (b) of this Section 1.5 shall be applied in the following order: (1) First, (subject to the terms of paragraph (d) below (Tranche B/Tranche C Opt-Out)) prepayments shall be applied against the Term Loans and shall be applied among the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. Prepayments of the various Term Loans shall be applied to each of the respective remaining installments thereof set forth in Section 1.4 on a pro rata basis in accordance with the relative amounts thereof. (2) Second, prepayments shall be applied against the RC Loans and Swing Loans with a corresponding reduction in the amount of the RC Commitment and shall be applied among the RC Loans and the Swing Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amount thereof held by each applicable Lender provided, however, the Borrowers need not prepay the RC Loans to the extent that there would be, after giving effect to the reduction in the amount of the RC Commitment (which commitment reduction is unaffected by the terms of this proviso), sufficient Available RC Commitment to reborrow such amounts. The preceding proviso shall not apply to prepayments in respect of Net Cash Proceeds of dispositions. Any excess shall be applied to any other amounts owing in respect of the Loan Obligations or deposited in the Letter of Credit cash collateral account and, if all such Loan Obligations have been paid in full and the amount of outstanding Letters of Credit is less than the sum of the amount in the cash collateral account and the Available RC Commitment, then any excess amount shall be returned to Genesis (on behalf of the Borrowers) or as otherwise required by applicable Law. -12- (d) Tranche B/Tranche C Opt-Out. With respect to any prepayment of the Tranche B Term Loans or Tranche C Term Loans, the Administrative Agent shall ratably pay the Tranche B Lenders or Tranche C Lenders, as the case may be, as required under paragraph (c) of this Section 1.5, unless the Administrative Agent shall have received written notice from any Tranche B Lender or Tranche C Lender, as the case may be, not later than 11:00 a.m. two (2) Business Days prior to the date of such prepayment, that such Tranche B Lender or Tranche C Lender, as the case may be, elects not to receive any prepayment under this paragraph (d) (a "Tranche B Opt-Out Lender" or "Tranche C Opt-Out Lender", as applicable). Any prepayment which would have been remitted to a Tranche B Opt-Out Lender or Tranche C Opt-Out Lender but for its election to not receive such prepayment, shall be paid ratably to the remaining Lender Parties in the order and as provided in paragraph (c) of this Section 1.5; provided, however, that notwithstanding the foregoing provisions of this paragraph (d), Tranche B Lenders and Tranche C Lenders must accept any prepayment made pursuant to this Section 1.5 on any date on which the Tranche A Term Loans have been paid in full (or are to be concurrently paid in full). (e) Certain Provisions Respecting Prepayments Generally. Prepayments shall be subject to the interest payment provisions, as applicable, set forth in Section 1.8 below and the breakage indemnity provisions, as applicable, set forth in Section 2.4 below. 1.6 PAYMENTS BY THE BORROWERS IN GENERAL. (a) Time, Place and Manner. All payments due to the Administrative Agent under the Loan Documents shall be made to the Administrative Agent at the office designated by the Administrative Agent on the signature pages hereto or to such other Person or at such other address as the Administrative Agent may designate by written notice to Genesis (on behalf of the Borrowers). All payments due to any Lender under the Loan Documents, whether made to the Administrative Agent or directly to a Lender or the Issuer, shall be made for the account of, in the case of payments in respect of LIBO Rate Loans, such Lender's or Issuer's Eurodollar Lending Office and, in the case of all other payments, such Lender's or Issuer's Domestic Lending Office. Except as otherwise set forth in this Agreement, a payment shall not be deemed to have been made on any day unless such payment has been received by the required Person, at the required place of payment, in Dollars in funds immediately available to such Person, no later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day; provided, however, that the failure of the Borrowers to make any such payment by such time shall not constitute a Default hereunder so long as such payment is received no later than 3:00 p.m. (Philadelphia, Pennsylvania time) on such day, but any such payment received later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day shall be deemed to have been made on the next Business Day for the purpose of calculating interest on the amount paid, provided further, that any such payment made with the proceeds of Loans shall be deemed to have been made on the date of the making of such Loans, so long as such proceeds are immediately so applied and are not otherwise disbursed to the Borrowers. (b) No Reductions. All payments due to the Administrative Agent, the Issuer or any Lender under this Agreement and the other Loan Documents shall be made by the Borrowers without any reduction or deduction whatsoever, including any reduction or -13- deduction for any charge, set-off, holdback, recoupment or counterclaim (whether sounding in tort, contract or otherwise). (c) Authorization to Charge Accounts. The Borrowers hereby authorize each Lender Party, each participant and each Affiliate of each Lender Party, if and to the extent any amount payable by the Borrowers under the Loan Documents (whether payable to such Person or to any other Lender Party) is not otherwise paid when due, to charge such amount against any or all of the demand deposit or other accounts of any Borrower with such Person (whether maintained at a branch or office located within or without the United States), with the Borrowers remaining jointly and severally liable for any deficiency. The Person so charging any such account shall give the relevant Borrower prompt notice thereof, but any failure to give or delay in giving such notice shall not affect such Person's right to effect such charge. Such charging of accounts shall be subject to the provisions of Section 12.19 (Sharing of Collections) hereof. (d) Extension of Payment Dates if Not a Business Day. Whenever any payment to the Administrative Agent, the Issuer or any Lender under the Loan Documents would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day unless, in the case of a payment of the principal of LIBO Rate Loans, such extension would cause payment to be due in the next succeeding calendar month, in which case such due date shall be advanced to the next preceding Eurodollar Business Day. If the due date for any payment under the Loan Documents is extended (whether by operation of any Loan Document, applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. (e) Disbursement of Payments to Lenders and Issuer. The Administrative Agent shall promptly distribute to each applicable Lender Party its ratable share of each payment received by the Administrative Agent under the Loan Documents for the account of such Lender Party by crediting an account of such Lender Party at the Administrative Agent's office or by wire transfer to an account of the Lender Party at an office of any other commercial bank located in the United States or at any Federal Reserve Bank designated by such Person. Unless the Administrative Agent shall have received notice from Genesis (on behalf of the Borrowers) prior to the date on which any payment is due to any Lender Parties under the Loan Documents that the Borrowers will not make such payment in full, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date and the Administrative Agent, in its sole discretion may, in reliance upon such assumption, cause to be distributed to each applicable Lender Party on such due date, a corresponding amount with respect to the amount then due to such Person. If and to the extent that the Borrowers shall not have so made such payment in full to the Administrative Agent, and the Administrative Agent shall have so distributed to such Lender or Lenders or the Issuer a corresponding amount, such Lender Parties shall, on demand, repay to the Administrative Agent the amount so distributed, together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date the such Person repays such amount to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate. Moreover, any Lender Party that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lenders are otherwise entitled to vote on or consent to or -14- approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Nothing in this Section 1.6 shall relieve the Borrowers from any payment obligations. (f) Breakage Costs on LIBO Rate Loans. Any repayment or prepayment of a LIBO Rate Loan made on a day other than the last day of the applicable Interest Period therefor shall be subject to payments in respect of breakage costs as required to be paid in respect thereof pursuant to Section 2.4 below. 1.7 REDUCTIONS OF RC COMMITMENT. (a) Optional Reductions. The Borrowers may reduce the RC Commitment by giving the Administrative Agent notice (which shall be irrevocable) thereof no later than 11:00 a.m. (Philadelphia, Pennsylvania time) on the third Business Day before the requested date of such reduction, provided, that each partial reduction thereof shall be in an amount equal to $10,000,000.00 or any integral multiple of $5,000,000.00 in excess thereof and, provided, further, that no reduction shall reduce the RC Commitment to an amount less than the sum of (i) the aggregate of the principal amount of all Swing Loans outstanding on such date (after giving effect to any repayment of Swing Loans made on or prior to such date) (ii) the aggregate of the principal amount of all RC Loans outstanding on such date (after giving effect to any repayment or prepayment of RC Loans made on or prior to such date), (iii) the aggregate amount of the Contingent Reimbursement Obligations and (iv) the aggregate amount of all unreimbursed Drawings. Upon receipt of any such notice, the Administrative Agent shall promptly notify each RC Lender of the contents thereof and the amount (based on a pro rata reduction to each RC Lender's Commitment) to which such RC Lender's RC Commitment is to be reduced. (b) Mandatory Reductions. At the time of any mandatory prepayment of RC Loans pursuant to Section 1.5, the RC Commitment shall be reduced to the extent required by said Section 1.5 (which reduction does not apply to proceeds of the One Time Disposition). (c) No Reinstatement of RC Commitment. All reductions of the RC Commitment are permanent and the RC Commitment cannot be restored without the written consent of all RC Lenders. 1.8 INTEREST. (a) Interest Rates in General. Except for Swing Loans which shall bear the interest rate specified in Section 1.1(c) above, subject to the terms and conditions of this Agreement, each Loan shall, at the option of the Borrowers, bear interest on the outstanding principal amount thereof until paid in full at a rate per annum equal to (i) the Prime Rate as in effect from time to time or (ii) the applicable LIBO Rate for a specified Interest Period plus in the case of both (i) and (ii) the Applicable Margin, if any. (b) Election of LIBO Rate. Unless otherwise designated by the Borrowers as a LIBO Rate Loan in accordance with this paragraph (b), each Loan (other -15- than a Swing Loan which is subject to Section 1.1(c) above) shall be deemed to be a Prime Rate Loan as more fully set forth below. (i) Prime Rate Unless Otherwise Designated. Prime Rate Loans shall continue as Prime Rate Loans unless and until such Loans are converted into Loans of another Type. LIBO Rate Loans for any Interest Period shall continue as Loans of such Type until the end of the then current Interest Period therefor, at which time they shall be automatically converted into Prime Rate Loans unless Genesis (on behalf of the Borrowers) shall have given the Administrative Agent notice in accordance with clause (ii) below requesting that such Loans continue as LIBO Rate Loans for another Interest Period of a specified duration. (ii) Election of LIBO Rate. To elect a LIBO Rate, Genesis (on behalf of the Borrowers) shall give the Administrative Agent notice (which shall be irrevocable) no later than 11:00 a.m. (Philadelphia, Pennsylvania time) three (3) Eurodollar Business Days before the requested date of the funding, conversion or continuation which date shall be a Eurodollar Business Day. Each such notice shall be in the form of Exhibit D hereto and shall specify (A) the requested date of such funding, conversion or continuation, (B) whether the subject Loan is a new advance or an existing Loan that is to be converted or continued, (C) in the case of any LIBO Rate Loan being continued, the last day of the current Interest Period, (D) whether such Loan is to be a Tranche A Term Loan, Tranche B Term Loan, Tranche C Term Loan or an RC Loan and (E) the amount of, and the desired Interest Period for, the Loan subject to such LIBO Rate election provided that the Borrowers shall not be entitled to select an Interest Period for any Loan which shall end on a date later than the Maturity Date applicable to such Loan. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof. (iii) LIBO Rate Suspended During Event of Default. Notwithstanding anything to the contrary contained in clauses (i) or (ii) of this paragraph (b), so long as an Event of Default shall have occurred and be continuing, the Administrative Agent may (and, at the request of the Required Lenders, shall) notify Genesis (on behalf of the Borrowers) that Loans may only be converted into or continued upon the expiration of the applicable current Interest Period therefor as Prime Rate Loans or Loans of such specified Types as shall be acceptable to the Required Lenders. Thereafter, until no Event of Default shall continue to exist, Loans may not be converted into or continued as Loans of any Type other than Prime Rate Loans or one or more of such specified Types. (iv) Limitation on Types of Loans. Notwithstanding anything to the contrary contained in this Agreement, the Borrowers shall borrow, prepay, convert and continue Loans in a manner such that (A) unless otherwise agreed to by the Administrative Agent, the aggregate principal amount of LIBO Rate Loans of the same Type shall, at all times, be not less than $10,000,000.00 and (B) there shall be, at any one time, no more than the number of Interest Periods specified below in effect for each Tranche: Maximum No. of Interest Periods Tranche ------------------------------- ------- five (5) RC Loans three (3) Tranche A -16- three (3) Tranche B three (3) Tranche C (v) Flexibility as to Source. Each Lender may fund LIBO Rate Loans from any source that such Lender deems (in its sole discretion) appropriate without loss of any rights hereunder. (c) Interest Payment Dates. Interest shall be payable (i) in the case of Prime Rate Loans, quarterly in arrears on each Quarterly Payment Date, (ii) in the case of LIBO Rate Loans, on the last day of each applicable Interest Period (and, in the case of any LIBO Rate Loan having an Interest Period longer than three months, on each three-month anniversary of the first day of such Interest Period) and (iii) in the case of any Loan (including Swing Loans), when such Loan shall be due (whether at maturity, upon mandatory prepayment, by reason of notice of prepayment or acceleration, or otherwise) or converted, but only to the extent then accrued on the amount then so due or converted. (d) Default Rate. At any time that an Event of Default shall have occurred and shall be continuing, any amount payable hereunder and under each other Loan Document shall bear interest (whether before or after judgment), payable on demand, at a rate per annum equal to the applicable Default Rate. 1.9 FEES. (a) Commitment Fees. The Borrowers shall pay to the Administrative Agent, for the account of each RC Lender, a commitment fee on the daily unused amount of such RC Lender's RC Commitment for each day from and including the Agreement Date to but excluding the RC Maturity Date. The rate per annum shall initially be equal to .50% of such unused amount but shall be adjusted five (5) Business Days following delivery of the annual Officer's Compliance Certificate for the year ending September 30, 1997 pursuant to Section 6.1 below and thereafter shall be readjusted on the fifth (5th) Business Day following delivery of such quarterly or annual Officer's Compliance Certificates. At any time that such annual or quarterly Officer's Compliance Certificate is required to be delivered pursuant to said Section 6.1 and is not so delivered, then the Commitment Fee shall be based on the highest percentage set forth below in this Section 1.9(a). The adjustments in the rate shall be based on the Adjusted Total Debt/Cash Flow Ratio as set forth in the chart below. The commitment fee shall be payable in arrears (i) on successive Quarterly Payment Dates beginning with the first Quarterly Payment Date after the Closing Date, (ii) on the date of any reduction of the RC Commitment (to the extent accrued and unpaid on the amount of such reduction) and (iii) on the RC Maturity Date. Adjusted Total Commitment Debt/Cash Flow Ratio Fee -------------------- ---------- less than 3.5 .25% -17- greater than or equal to 3.5 but less than 4.5 .3125% greater than or equal to 4.5 but less than 5.0 .375% greater than or equal to 5.0 .50% (b) Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent, for the respective accounts of the RC Lenders, a letter of credit commission on the daily aggregate amount of the Contingent Reimbursement Obligations under each Letter of Credit at a rate per annum equal to the Applicable Margin that would be applicable to RC Loans that are LIBO Rate Loans at such time. In addition, the Borrowers shall pay to the Administrative Agent, for the sole account of the Issuer, a Letter of Credit fronting fee on the daily aggregate amount of the Contingent Reimbursement Obligations under each Letter of Credit at a rate per annum equal to .10%. Such fees shall be payable in arrears on successive Quarterly Payment Dates and at the expiration or other termination of each Letter of Credit. In addition, the Borrowers shall pay to the Administrative Agent, for the benefit of the Issuer, the Issuer's standard posted charges for such matters as opening, negotiation and transfer. (c) Other Fees. The Borrowers shall pay to the Administrative Agent, for the respective accounts of the Administrative Agent, the Issuer, the Lenders and/or the other Agents, as the case may be, such other fees as have been or may be agreed to in writing by the Borrowers or by Genesis in connection with the commitment to enter into this Agreement (including any facility fees referred to in any commitment letters) and the transactions contemplated by this Agreement. 1.10 COMPUTATION OF INTEREST AND FEES. Interest calculated on the basis of the LIBO Rate or the Federal Funds Rate shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Commitment fees, letter of credit fees and interest calculated on the basis of the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as applicable, and paid for the actual number of days elapsed. Interest, commitment fees and letter of credit fees for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. 1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT. Each Lender's Loans and the Borrowers' joint and several obligations to repay such Loans with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the Register and other records of the Administrative Agent and such Lender and, in the case of Tranche A Term Loans, a single Tranche A Term Note payable to the order of such Lender, in the case of RC Loans, a single RC Note payable to the order of such Lender and, in the case of Swing Loans, a single Swing Loan Note payable to the order of the Swing Loan Lender. The records of each Lender shall be prima facie evidence of such Lender's Loans and, in each case, of accrued interest thereon and all payments made in respect thereto. Each Lender's participation in Letters of Credit shall be evidenced by this Agreement, the -18- records of such Lender and the Issuer and the Letters of Credit. In the event that there is any dispute concerning the amount of any such obligations, the amount of each Lender's Commitment with respect to RC Loans, Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans and the amount of outstanding Loan Obligations of each and every Type shall at all times be ascertained from the records of the Administrative Agent, including, without limitation, the Register, all of which shall be conclusive absent manifest error except that the outstanding face amount of any Letters of Credit, the amount of any unpaid Drawings, the amount of unpaid interest accrued thereon and fees relating to Letters of Credit shall at all times be ascertained from the records of the Issuer, which shall be conclusive absent manifest error and the outstanding amount of any Swing Loans and the amount of unpaid interest thereon shall at all times be ascertained from the records of the Swing Loan Lender, which shall be conclusive absent manifest error. 1.12 PRO RATA TREATMENT. Except to the extent otherwise provided herein, (a) Tranche A Term Loans shall be made by, and principal interest and fees in respect thereof shall be paid or repaid to, the Tranche A Lenders pro rata in accordance with their respective Tranche A Commitments and interest in Tranche A Loans; (b) Tranche B Term Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Tranche B Lenders pro rata in accordance with their respective Tranche B Commitments and interest in Tranche B Loans; (c) Tranche C Term Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Tranche C Lenders pro rata in accordance with their respective Tranche C Commitments and interest in Tranche C Loans; and (d) RC Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the RC Lenders pro rata in accordance with their respective RC Commitments and interest in RC Loans. Each participation of obligations in respect of Letters of Credit and Swing Loans shall be allocated among, and each reimbursement of Drawings under Letters of Credit or letter of credit commissions shall be made for the account of, the RC Lenders pro rata in accordance with their respective amounts of RC Commitments. 1.13 TAXES ON PAYMENTS. (a) Taxes Payable by the Borrowers. If any Tax is required to be withheld or deducted from, or is otherwise payable by the Borrowers in connection with, any payment due to the Administrative Agent, the Issuer or any Lender that is not a "United States Person" (as such term is defined in Section 7701(a)(30) of the Code), the Borrowers (i) shall, if required, withhold or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing authority in accordance with applicable Law and (ii) except in the case of any Bank Tax, shall pay to the Issuer, such Lender or the Administrative Agent such additional amounts as may be necessary so that the net amount received by such Person with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable hereunder. If any Tax is withheld or deducted from, or is otherwise payable by the Borrowers in connection with, any payment due to the Issuer, any Lender or the Administrative Agent hereunder, the Borrowers shall furnish to such Person the original or a certified copy of a receipt (if any) for such Tax from the applicable taxing authority or other evidence of payment thereof satisfactory to such Person within 30 days after the date of such payment (or, if such receipt shall not have been made available by such taxing authority within such time, the Borrowers shall use reasonable efforts to promptly obtain and furnish such receipt). -19- If the Borrowers fail to pay any such Taxes when due to the appropriate taxing authority or fail to remit to the Issuer, any Lender or the Administrative Agent the required receipts or other evidence of payment thereof satisfactory to such Person, the Borrowers shall indemnify such person for any Taxes, interest, penalties or additions to Tax that may become payable by such Person as a result of any such failure. (b) Taxes Payable by the Issuer, any Lender or the Administrative Agent. The Borrowers shall, promptly upon request by the Issuer, any Lender or the Administrative Agent that is not a United States Person, pay to such Person an amount equal to (i) all Taxes (other than Bank Taxes and without duplication of amounts paid pursuant to the preceding paragraph (a)) payable by such Person with respect to any payment due to such Person hereunder and (ii) all Taxes (other than Bank Taxes) payable by such Person as a result of payments made by the Borrowers (whether made to a taxing authority or to such Person pursuant to the preceding paragraph (a) or this paragraph (b)). (c) Credits and Deductions. If the Issuer, any Lender or the Administrative Agent is, in its sole opinion, able to apply for any refund, offset, credit, deduction or other reduction in Taxes by reason of any payment made by the Borrowers under the preceding paragraph (a) or (b), the Issuer, such Lender or the Administrative Agent, as the case may be, shall use reasonable efforts to obtain such refund, offset, credit, deduction or other reduction and, upon receipt thereof, will pay to the Borrowers such amount, not exceeding the increased amount paid by the Borrowers, as is equal to the net after-tax value to the Issuer, such Lender or the Administrative Agent, in its sole opinion, of such part of such refund, offset, credit, deduction or other reduction as it considers to be allocable to such payment by the Borrowers, having regard to all of such Person's dealings giving rise to similar refunds, offsets, credits, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that if such Person has made a payment to the Borrowers pursuant to this paragraph (c) and the applicable refund, offset, credit, deduction or other reduction in Tax is subsequently disallowed, the Borrowers shall, promptly upon request by the Issuer, the Administrative Agent or such Lender refund to such Person that portion of such payment determined by such Person, in its sole opinion, relating to such disallowance; and provided, further that (i) the Issuer, the Administrative Agent or such Lender, as the case may be, shall not be obligated to disclose to the Borrowers any information regarding its Tax affairs or computations and (ii) nothing in this paragraph (c) shall interfere with the right of such Person to arrange its Tax affairs as it deems appropriate. (d) Exemption from U.S. Withholding Taxes. Each Lender that is not a United States Person shall submit to the Borrowers and the Administrative Agent, on or before the fifth day prior to the first Quarterly Payment Date occurring after the Closing Date (or, in the case of a Person that is not a United States Person and that became a Lender by assignment, promptly upon such assignment), two duly completed and signed copies of either (A) Form 1001 of the United States Internal Revenue Service entitling such Lender to a complete exemption from withholding on all amounts to be received by such Lender pursuant to this Agreement and the Loans, (B) Form 4224 of the United States Internal Revenue Service relating to all amounts to be received by such Lender pursuant to this Agreement and the Loans, or (C) in the case of a Lender Party that is claiming an exemption from United States withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments of "portfolio interest", two accurate and complete signed -20- original Forms W-8 (or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Agreement or the Notes) and, if such Lender Party delivers Forms W-8 (or successor form), two signed certificates certifying that such Lender Party is not (1) a "bank" for purposes of Section 881(c) of the Internal Revenue Code, (2) is not a 10% shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of any Borrower and (3) is not a controlled foreign corporation related to any Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code), as appropriate. Each such Lender shall, from time to time after submitting either such Form, submit to the Borrowers and the Administrative Agent such additional duly completed and signed copies of one or the other such Forms (or any successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (A) requested in writing by the Borrowers or the Administrative Agent and (B) appropriate under the circumstances and under then current United States law or regulations to avoid or reduce United States withholding taxes on payments in respect of all amounts to be received by such Lender pursuant to this Agreement or the Loans. Upon the request of the Borrowers or the Administrative Agent, each Lender that is a United States Person shall submit to the Borrowers and the Administrative Agent a certificate to the effect that it is a United States Person. (e) Obligations under this Section 1.13 shall survive payment of the Loans. 1.14 REGISTERED NOTES AND LOANS. (a) Request for Registration. Any Lender may request the Borrowers (through the Administrative Agent), and the Borrowers agree thereupon, to register such Loans as provided in Section 1.14(c) and, if such Lender is otherwise entitled to a Note hereunder, to issue such Lender's Note evidencing such Loans, or to exchange such Note for a new Note, registered as provided in Section 1.14(c) (a "Registered Note"). A Registered Note may not be exchanged for a Note that is not in registered form. A Registered Note shall be deemed to be and shall be a Note for all purposes of this Agreement and the other Loan Documents. (b) Delivery of Tax Forms. Each Non-U.S. Lender that requests or holds a Registered Note pursuant to Section 1.14(a) or registers its Loans pursuant to Section 1.14(a) (a "Registered Lender") (or, if such Registered Lender is not the beneficial owner thereof, such beneficial owner) shall deliver to Genesis (on behalf of the Borrowers) (with a copy to the Administrative Agent) prior to or at the time such Non-U.S. Lender becomes a Registered Lender, the applicable form described in Section 1.13(d) (or such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States) together with an annual certificate stating that such Registered Lender or beneficial owner, as the case may be, is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and is not otherwise described in Section 881(c)(3) of the Code. Each Registered Lender or beneficial owner, as the case may be, shall promptly notify Genesis (on behalf of the Borrowers) (with a copy to the Administrative Agent) if at any time such Registered Lender or beneficial owner, as the case may be, determines that it is no longer in a position to provide such previously delivered certificate to the Borrowers (or any -21- other form of certification adopted by the relevant taxing authorities of the United States for such purposes). (c) Registration of Loans. The Administrative Agent, acting, for this purpose, as agent of the Borrowers, shall, upon request of any Registered Lender, enter in the Register the name, address and taxpayer identification number (if provided) of the Registered Lender or beneficial owner as the case may be. In addition to the requirements of Section 12.9 (Successors and Assigns), a Registered Note and the Loans evidenced thereby (or such Loans pending delivery of such Registered Note) or any other Loans registered pursuant to Section 1.14 (a) above may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Note and/or the Loans so registered on the Register (and each such Registered Note shall expressly so provide). Any assignment or transfer of all or part of such Loans and such Registered Note shall be registered on the Register only upon compliance with the provisions of Section 12.9 and, in the case of Registered Notes, surrender for registration of assignment or transfer of the Registered Note evidencing such Loans, duly endorsed by (or accompanied by a written instrument of assignment or transfer fully executed by) the Registered Lender thereof, and thereupon one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s) and, if less than all of such Registered Notes is thereby being assigned or transferred, the assignor or transferor. ARTICLE 2 YIELD PROTECTION AND BREAKAGE INDEMNITY 2.1 MANDATORY SUSPENSION AND CONVERSION OF LIBO RATE LOANS. Any Lender's obligations to make, continue or convert into LIBO Rate Loans of any Type shall be suspended, all such Lender's outstanding Loans of such Type shall be converted into Prime Rate Loans on the last day of their applicable Interest Periods (or, in the case of clause (c) below, on the last day such Lender may lawfully continue to maintain Loans of such Type if earlier, or, in the case of clause (d) below, on the day determined by such Lender to be the last Business Day before the effective date of the applicable restriction), and all pending requests for the making or continuation of or conversion into Loans of such Type by such Lender shall be deemed requests for Prime Rate Loans, if: (a) on or prior to the date required for the determination of a LIBO Rate for any Interest Period, the Administrative Agent determines that for any reason appropriate information is not available to it for purposes of determining the LIBO Rate for such Interest Period; (b) on or prior to the first day of any Interest Period for a LIBO Rate Loan, the Required Lenders have informed the Administrative Agent of their determination that the LIBO Rate as determined by the Administrative Agent for such Interest Period would not accurately reflect the cost to such Lenders of making, continuing or converting into a LIBO Rate Loan for such Interest Period; -22- (c) at any time such Lender determines that any Regulatory Change makes it unlawful or impracticable for such Lender or its applicable Eurodollar Lending Office to make, continue or convert into a LIBO Rate Loan of such Type, or to comply with its obligations hereunder in respect thereof; or (d) such Lender notifies the Administrative Agent of its determination that (i) by reason of any Regulatory Change, such Lender or its applicable Eurodollar Lending Office is restricted, directly or indirectly, in the amount that it may hold of (A) a category of liabilities that includes deposits by reference to which, or on the basis of which, the interest rate applicable to LIBO Rate Loans of such Type is directly or indirectly determined or (B) the category of assets that includes LIBO Rate Loans of such Type and (ii) in connection therewith, such Lender has elected not to make available hereunder LIBO Rate Loans of such Type. If, as a result of this Section 2.1, any Loan of any Lender that would otherwise be made or maintained as or converted into a LIBO Rate Loan for any Interest Period is instead made or maintained as or converted into a Prime Rate Loan, then, unless the corresponding Loan of each of the other Lenders is also to be made or maintained as or converted into a Prime Rate Loan, such Loan shall be treated as being a LIBO Rate Loan of such Type for such Interest Period for all purposes of this Agreement (including the timing, application and proration among the Lenders of interest payments, conversions and prepayments) except for the calculation of the interest rate borne by such Loan. The Administrative Agent shall promptly notify Genesis (on behalf of the Borrowers) and each Lender of the existence or occurrence of any condition or circumstance specified in clause (a) or (b) above, and each Lender shall promptly notify Genesis (on behalf of the Borrowers) and the Administrative Agent of the existence, occurrence or termination of any condition or circumstance specified in clause (c) or (d) above applicable to such Lender's Loans, but the failure by the Administrative Agent or such Lender to give any such notice shall not affect such Lender's rights hereunder. 2.2 REGULATORY CHANGES. If in the determination of any Lender or, in the case of any Letter of Credit or Drawing, the Issuer, (a) any Regulatory Change shall directly or indirectly. (i) reduce the amount of any sum received or receivable by (A) such Lender with respect to any LIBO Rate Loan or Letter of Credit Participation or the return to be earned by such Lender on any LIBO Rate Loan or Letter of Credit Participation or (B) the Issuer with respect to any Letter of Credit or Drawing, (ii) impose a cost on (A) such Lender or any Affiliate of such Lender that is attributable to the making or maintaining of, or such Lender's commitment to make or acquire, any LIBO Rate Loan or Letter of Credit Participation or (B) the Issuer or any of its Affiliates that is attributable to the issuance or maintaining of, or the commitment to issue, any Letter of Credit or the making or maintaining of any Drawing, (iii) require (A) such Lender or any Affiliate of such Lender to make any payment on or calculated by reference to any amount received by such Lender in respect of its LIBO Rate Loans or its obligations to make LIBO Rate Loans or (B) the Issuer or any of its Affiliates to make any payment on or calculated by reference to -23- any amount received by the Issuer or any of its Affiliates in respect of any Letter of Credit or its commitment to issue any Letter of Credit or Drawing, or (iv) reduce, or have the effect of reducing, the rate of return on any capital (A) such Lender or any Affiliate of such Lender is required to maintain on account of any LIBO Rate Loan or Letter of Credit Participation or such Lender's commitment to make any LIBO Rate Loan or Letter of Credit Participation or (B) the Issuer or any of its Affiliates is required to maintain on account of any Letter of Credit or Drawing or the Issuer's commitment to issue any Letter of Credit, and (b) such reduction, increased cost or payment shall not be fully compensated for by an adjustment in the applicable rates of interest payable under the Loan Documents, then the Borrowers shall pay to such Lender or the Issuer such additional amounts as such Lender or the Issuer, determines will fully compensate it for such reduction, increased cost or payment. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request for such payment by such Lender or the Issuer, as the case may be, accompanied by the certificate described in Section 2.5 and, in the case of those applicable to future periods, on the dates specified, or determined in accordance with a method specified, by such Lender or the Issuer, as the case may be provided, that the Borrowers shall not be liable for any amount payable with respect to any period more than 90 days before the date of such request or certificate or, if earlier, the retroactive effective date of the Regulatory Change if it occurred during such 90 day period. 2.3 CAPITAL AND RESERVE REQUIREMENTS. If, in the determination of any Lender or the Issuer, such Lender, the Issuer or any Affiliate thereof is required, under applicable Law (including Regulation D), or interpretations, directives, requests and governmental or regulatory guidelines (whether or not having the force of law), to maintain capital or deposit any reserve on account of any Loan, any Letter of Credit (whether drawn or undrawn) or any commitment to make any Loan or issue any Letter of Credit, then, upon request by such Lender or the Issuer, the Borrowers shall pay to such Lender or the Issuer, as the case may be, such additional amounts as such Person determines will fully compensate it for any reduction in the rate of return on the capital that such Lender, the Issuer or such Affiliate thereof is so required to maintain. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request by such Lender or the Issuer, as the case may be, for such payment accompanied by the certificate described in Section 2.5 (provided, that the Borrowers shall not be liable for any amount payable with respect to any period more than 90 days before the date of such request or certificate or, if earlier, the retroactive effective date of the Regulatory Change if it occurred during such 90-day period) and, in the case of those relating to future periods, on the dates specified, or determined in accordance with a method specified, by such Lender or the Issuer, as the case may be. 2.4 BREAKAGE. The Borrowers shall pay to each Lender, upon request, such amount as such Lender reasonably determines is necessary to compensate it for any loss, cost or expense (excluding loss of the Applicable Margin) incurred by it as a result of (a) any payment, prepayment or conversion of a LIBO Rate Loan on a date other than the last day of an Interest Period for such LIBO Rate Loan or (b) a LIBO Rate Loan for any reason not being made or converted, or any payment of principal thereof or interest thereon not being made, on the date therefor determined in accordance with the applicable provisions of this -24- Agreement. At the election of such Lender, and without limiting the generality of the foregoing, but without duplication, such compensation on account of losses may include an amount equal to the excess of (i) the interest that would have been received from the Borrowers under this Agreement (excluding the Applicable Margin) during the remainder of the applicable Interest Period over (ii) the interest component of the return that such Lender determines it could have obtained had it placed such amount on deposit in the interbank Dollar market for a period equal to such remaining portion of the Interest Period. 2.5 DETERMINATIONS. In making the determinations contemplated by this Article 2, each Lender and the Issuer shall make such estimates, assumptions, allocations and the like that such Person in good faith determines to be appropriate, and such Person's selection thereof in accordance with this Section 2.5, and the determinations made by such Person on the basis thereof, shall be final, binding and conclusive upon the Borrowers, except, in the case of such determinations, for manifest errors. Each Lender and the Issuer shall furnish to the Borrowers, at the time of any request for compensation under Section 2.2 or 2.3, a certificate outlining in reasonable detail the computation of any amounts claimed by it under this Article 2 and the assumptions underlying such computations, which shall include a statement of an officer of such Person certifying that such request for compensation is being made pursuant to a policy adopted by such Person to seek such compensation generally from customers similar to the Borrowers and having similar provisions in agreements with such Person. 2.6 REPLACEMENT OF LENDERS. If any Lender requests compensation pursuant to Sections 1.13 (Taxes on Payments), 2.2 (Regulatory Changes) or 2.3 (Capital and Reserve Requirements), or such Lender's obligation to make or continue Loans as LIBO Rate Loans shall be suspended pursuant to Section 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans) or such Lender has defaulted on its obligations to make or participate in Loans pursuant to Section 1.3 (Manner of Borrowing), Genesis (on behalf of the Borrowers), upon three Business Days' notice, may require that such Lender transfer all of its right, title and interest under this Agreement, such Lender's Notes, if any, and the other Loan Documents to any Eligible Institution identified by Genesis (on behalf of the Borrowers) subject to (a) the consent of the Administrative Agent (which consent shall not be unreasonably withheld), (b) satisfaction of the other conditions specified in Section 12.9 below (Successors and Assigns), (c) the agreement of the proposed transferee to assume all of the obligations of such Lender hereunder and under the other Loan Documents for consideration equal to the outstanding principal amount of such Lender's Loans, unreimbursed Drawings payable to the transferor, interest thereon to the date of such transfer, and all other amounts payable hereunder to such Lender to the date of transfer, (d) such transferor Lender shall have been paid on or prior to the date of such transfer all fees and other amounts payable to such transferor hereunder including those amounts payable under said Sections 1.13, 2.2, or 2.3, as applicable (and including any fees accrued hereunder and any amounts that would be payable under Section 2.4 (Breakage) as if -25- all of such Lender's Loans and share of unreimbursed Drawings were being prepaid in full on such date) or arrangements satisfactory to the transferor Lender shall have been made for such payments, and (e) satisfaction of the condition that if the Lender being replaced has requested compensation pursuant to Sections 1.13, 2.2 or 2.3, the proposed transferee's aggregate requested compensation, if any, pursuant to Sections 1.13, 2.2 or 2.3 with respect to such replaced Lender's Loans is lower than that of the Lender replaced. Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements of the Borrowers contained in Sections 1.13 (Taxes on Payments), 2.2 (Regulatory Changes), 2.3 (Capital and Reserve Requirements), 2.4 (Breakage), 12.12 (Indemnification) and 12.13 (Expenses) (without duplication of any payments made to such Lender by the Borrowers or the proposed transferee) shall survive for the benefit of any Lender replaced under this Section 2.6 with respect to the time prior to such replacement. 2.7 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Sections 1.13 (Taxes on Payments), 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans), 2.2 (Regulatory Changes) or 2.3 (Capital and Reserve Requirements) with respect to such Lender, it will, if requested by the Borrowers, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending officer for any Loans affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section. Nothing in this Section 2.7 shall affect or postpone any of the obligations of the Borrowers or the right of any Lender provided in Sections 1.13 (Taxes on Payments), 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans), 2.2 (Regulatory Changes) or 2.3 (Capital and Reserve Requirements). ARTICLE 3 LETTERS OF CREDIT 3.1 ISSUANCE OF LETTERS OF CREDIT. (a) In General. Upon the terms and subject to the conditions of this Agreement, the Issuer shall, from time to time, from the Closing Date to the date which is 90 days prior to the RC Maturity Date, issue one or more Letters of Credit for the account of any Borrower, provided that (i) the sum of the Contingent Reimbursement Obligations (after giving effect to the requested Letter of Credit) plus the aggregate unpaid amount of all Drawings under Letters of Credit shall not exceed $25,000,000.00 and provided, further, that the face amount of the Letter of Credit so requested shall not exceed the Available RC Commitment at such time. Each Letter of Credit shall be in a form and shall contain such terms as shall be reasonably satisfactory to the Issuer. Letters of Credit shall be issued only on a Business Day, and shall be used for the general corporate purposes of the Borrowers or for such other purposes as shall be acceptable to the Issuer in its sole discretion. -26- (b) Letters of Credit Issued Pursuant to the Existing Credit Agreement. The letters of credit issued in connection with the Existing Credit Agreement and outstanding on the Closing Date shall, from and after the effective date of this Agreement, constitute Letters of Credit for all purposes hereunder. (c) Terms. Each Letter of Credit shall be denominated only in Dollars and shall expire on or before the first anniversary of the issuance thereof and in any event not later than the fifth Business Day preceding the RC Maturity Date. No Letter of Credit shall have an expiration date which is extendable under an "evergreen" or similar provision unless the Issuer expressly agrees to the same in its sole discretion in any particular case. All other extensions and renewals are also at the sole discretion of the Issuer. Any extension of the expiry date of a Letter of Credit to a date beyond the first anniversary of the issuance thereof shall constitute an "issuance" of such Letter of Credit for all purposes hereof. (d) Form of Request. The Borrowers shall request the issuance of a Letter of Credit by furnishing to the Administrative Agent and the Issuer, at least five Business Days before the requested date of such issuance (or at such later time as shall be acceptable to the Issuer), such notice thereof as shall be reasonably satisfactory to the Issuer to which shall be attached a certificate of the chief financial officer or other Responsible Officer of Genesis representing that Genesis is, and after giving effect to the additional Indebtedness will be, in compliance with Section 5.9 of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture, that the obligations with respect to such Letter of Credit constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as such terms are defined in said indentures and such other matters as required by Section 4.2 below. (e) Participation by RC Lenders. Upon the date of issuance of a Letter of Credit (or, in the case of the Letters of Credit referred to in paragraph (b) above, on the Closing Date), the Issuer shall be deemed to have granted to each RC Lender (other than the Issuer), and each RC Lender (other than the Issuer) shall be deemed to have acquired from the Issuer without further action by any party hereto, a participation in such Letter of Credit and any Drawings that may at any time be made thereunder, to the extent of such Lender's pro rata share of the RC Commitment. (f) Notice of Drawings. The Issuer shall promptly notify Genesis (on behalf of the Borrowers) of its receipt of each Drawing request with respect to a Letter of Credit, stating the date and amount of the Drawing requested thereby and the date and amount of each Drawing disbursed pursuant to such request. The failure of the Issuer to give, or delay in giving, any such notice shall not release or diminish the obligations hereunder of the Borrowers in respect of such Drawing. (g) Reimbursement of Drawings by Borrowers. If at any time Genesis (on the behalf of the Borrowers) receives notice of a Drawing, the Borrowers shall reimburse such Drawing by paying to the Issuer in immediately available funds the amount of the payment made by the Issuer with respect to such Drawing, together with interest thereon at a rate per annum equal to the Prime Rate from the day that the Drawing is made until the day such reimbursement is made if such Drawing is not reimbursed on the day the Drawing is made. Such reimbursement shall be made by the Borrowers to the Issuer no later than one (1) Business Day following the date that Genesis (on behalf of Borrowers) receives the -27- relevant notice of Drawing if such notice is received on or prior to 10:00 a.m. (Philadelphia, Pennsylvania time) and no later than two (2) Business Days following the date that Genesis receives the relevant notice of Drawing if such notice is received after 10:00 a.m. (Philadelphia, Pennsylvania time). If the Borrowers shall fail to make any payment required by this paragraph (g) at the time specified, and if at such time, there shall be any Available RC Commitment, the Administrative Agent may (but is not obligated to) assume that the Borrowers intend to use the proceeds of RC Loans to make such payment. In reliance on such assumption, the Administrative Agent may (but is not obligated to) notify the RC Lenders (and Genesis (on behalf of the Borrowers)) that notwithstanding the Borrowers' failure to provide notice pursuant to Section 1.3 above, such notice is deemed given pursuant to this paragraph (g) requesting an RC Loan bearing interest at the Prime Rate in an amount sufficient to make the payments required by this paragraph (g). Such notice from the Administrative Agent shall be treated by the Lenders in the same manner as a notice from the Borrowers under Section 1.3 above. The Administrative Agent may, at the direction of the Issuer, apply the proceeds of such Loans to satisfy the requirements of this paragraph (g). (h) Obligations of RC Lenders to Issuer. In the event that the Borrowers shall fail to make any payment when due pursuant to the preceding paragraph (g) and for so long as such failure shall be continuing, the Issuer may give notice of such failure to the Administrative Agent and each RC Lender, which notice shall include, in the case of an RC Lender, the amount of such RC Lender's interest in such Drawing, whereupon each such RC Lender (other than the Issuer) shall promptly remit such amount to the Administrative Agent for the account of the Issuer as provided in this paragraph (h). Each RC Lender (other than the Issuer) shall, in the event it receives such notice from the Issuer at or before 12:00 noon (Philadelphia, Pennsylvania time) on any Business Day, fund its participation in any unreimbursed Drawing by remitting to the Administrative Agent, no later than 2:00 p.m. (Philadelphia, Pennsylvania time) on such day, in immediately available funds its share of the reimbursement obligations in respect of each Drawing. In the event that the Administrative Agent receives such funds from an RC Lender at or before 2:00 p.m. (Philadelphia, Pennsylvania time) on any day, the Administrative Agent shall make available the amount thereof to the Issuer, in immediately available funds no later than 4:00 p.m. (Philadelphia, Pennsylvania time) on that same day. Any amount payable by an RC Lender to the Administrative Agent for the account of the Issuer under this paragraph (h), and any amount payable by the Administrative Agent to the Issuer under this paragraph (h), shall bear interest for each day from the date due (and including such day if paid after 2:00 p.m. (Philadelphia, Pennsylvania time) in the case of any such payment by an RC Lender to the Administrative Agent, or 4:00 p.m. (Philadelphia, Pennsylvania time), in the case of any such payment by the Administrative Agent to the Issuer, on such day) until the date it is received by the Issuer at a rate equal to the Federal Funds Rate until (and including) the third Business Day after the date due and thereafter at the Prime Rate. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lender are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Each RC Lender shall, upon the demand of the Issuer, reimburse the Issuer, through the Administrative Agent to the extent that the Issuer has not been reimbursed by the Borrowers after demand therefor, for the reasonable costs and expenses (including reasonable legal fees) incurred by it (other than as a result of its willful misconduct or gross negligence as finally determined by a court of competent jurisdiction) in connection with the collection of amounts due under, the administration of, -28- and the preservation and enforcement of any rights conferred by, the Letters of Credit or the performance of the Issuer's obligations under this Agreement in respect thereof on a pro rata basis relative to such RC Lender's pro rata share of the RC Commitment (as of the time such costs and expenses are incurred). The Issuer shall refund through the Administrative Agent any costs and expenses reimbursed by such RC Lender that are subsequently recovered from the Borrowers in an amount equal to such RC Lender's ratable share thereof. (i) Cash Collateral. It is intended that at all times that the Borrowers shall have contingent or other obligations (including obligations in respect of fees) relating to Letters of Credit, there shall be sufficient availability under the RC Commitment to reimburse the Issuer (and the RC Lenders) out of proceeds of RC Loans. Accordingly, in the event that there shall, at any time, be insufficient availability under the RC Commitment (after giving effect to all outstanding Swing Loans and RC Loans) to do so (whether because the amount of the RC Commitment is reduced pursuant to a mandatory reduction or is terminated at maturity, upon acceleration or otherwise or because the amount of outstanding RC Loans, Swing Loans and such Letter of Credit obligations exceeds the amount of the RC Commitment for any other reason), the Borrowers shall forthwith pay to the Administrative Agent an amount equal to the aggregate face value of all outstanding Letters of Credit plus the aggregate amount of all unreimbursed Drawings plus the amount of all fees or other obligations in respect of Letters of Credit to the extent of such excess. Such amount shall be maintained by the Administrative Agent in an interest-bearing cash collateral account in the name of and for the benefit of the Issuer and the RC Lenders to secure such payment obligations of the Borrowers until such time as all outstanding Letters of Credit have expired or been cancelled and all amounts in respect thereof have been paid in full. Upon receipt of a notice from the Issuer that there are unreimbursed Drawings or other amounts due in respect of such Letters of Credit (which notice shall set forth the amount of such unreimbursed Drawings or other obligations) the Administrative Agent shall promptly disburse from the cash collateral account the amount specified in the notice and shall pay such amount to the Issuer and RC Lenders ratably in accordance with the respective amounts owing to each such Person, first, for fees and indemnities until the same are paid in full and, second, for unreimbursed Drawings. The Administrative Agent and the Issuer may rely on their records as to any amounts so owing and shall be fully protected in doing so. Such records shall be conclusive, absent manifest error. At any time that the RC Commitment again becomes available for reimbursement of Drawings under outstanding Letters of Credit such that (i) the sum of the RC Commitment at that time and the amount in the cash collateral account exceeds (ii) the sum of all outstanding RC Loans and Swing Loans, the face amount of all outstanding Letters of Credit and the amount of all unreimbursed Drawings, then, upon written request of Genesis (on behalf of the Borrowers) (which request shall (A) represent that there exists no Default or Event of Default and (B) specify the amount of such excess), the Administrative Agent shall release such excess amount to the Borrowers from the cash collateral account. If all Loan Obligations (other than Loan Obligations constituting contingent obligations under indemnification provisions which survive indefinitely, so long as no unsatisfied claim has been made under any such indemnification provision) have been indefeasibly paid in full in cash, all Commitments have terminated and all Letters of Credit have expired, promptly following demand by Genesis (on behalf of the Borrowers) the Administrative Agent shall release to the Borrowers all remaining funds in the Letter of Credit cash collateral account. -29- (j) Obligations Absolute. The obligation of each Borrower and each RC Lender to make available to the Issuer the amounts set forth in this Article 3 shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever, and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to any qualification or exception and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Issuer, any RC Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between such Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or (v) the occurrence of any Default or Event of Default. (k) Limitations on Liability; Protection of Issuer, Administrative Agent and Lenders. (i) Limitation on Liability of Lender Parties. Without affecting any rights any Lender Party may have under applicable Law, each of the Borrowers agrees that none of the RC Lenders, the Issuer, the Administrative Agent or their respective officers or directors shall be liable or responsible for, and the obligations of the Borrowers to the RC Lenders, the Issuer and the Administrative Agent hereunder shall not in any manner be affected by: (A) the use that may be made of any Letter of Credit or the proceeds thereof by the beneficiary thereof or any other Person or any acts or omissions of such beneficiary or any other Person; (B) the validity, sufficiency or genuineness of documents presented in connection with any Drawing, or of any endorsements thereon, even if such documents should, in fact, prove to be in any or all respects, invalid, insufficient, fraudulent or forged; or (C) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit or any other action taken or omitted to be taken by any Person under or in connection with any Letter of Credit, except that the Borrowers shall have a claim against the Issuer and the Issuer shall be liable to the Borrowers, in each case to the extent and only to the extent of any damages suffered by the Borrowers that they prove are caused by the Issuer's willful misconduct or gross negligence. In furtherance and not in limitation of the foregoing, in determining whether to pay under any Letter of Credit, the Issuer shall not have any obligation relative to the other Lenders other than to determine that any documents -30- required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit, regardless of any notice or information to the contrary. Any action taken or omitted to be taken by the Issuer under or in connection with any Letter of Credit (if taken or omitted in the absence of gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction) shall not create for the Issuer any resulting liability to any Borrower or any Lender. (ii) Indemnification and Expenses. In addition to any other amounts payable under this Agreement, the Borrowers agree jointly and severally to protect, indemnify, pay and hold the Issuer and each RC Lender harmless from and against any and all claims, costs, charges and expenses (including reasonable attorneys' fees) which the Issuer may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of, or payment of any drawing under, any Letter of Credit, other than as a result of the gross negligence or willful misconduct of the Issuer as finally determined by a court of competent jurisdiction or (B) the failure of the Issuer to honor a Drawing under any Letter of Credit as a result of any act or omission of any present or future government or Governmental Authority. (iii) Issuer Not Responsible. In furtherance of the foregoing limitations on liability, the Issuer shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the issuance of Letters of Credit; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part; (C) errors, omissions, interruptions, or delays in transmissions or delivery of any messages, by mail, cable, telecopy, telex or otherwise, whether or not in cipher; (D) the misapplication by the beneficiary of any Letter of Credit or the proceeds of any drawing under such Letter of Credit; or (E) any consequence arising from causes beyond the control of the Issuer, including any governmental acts except for damages proven to be caused by the Issuer's gross negligence or willful misconduct. -31- ARTICLE 4 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS 4.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING. The effectiveness of this Agreement, the obligation of the Lenders to make the initial Loans hereunder and the obligation of the Issuer to issue Letters of Credit hereunder are subject to the fulfillment of the following conditions on or before October 15, 1997 (unless such date is extended in writing by the Agents in their sole discretion), in each case to the satisfaction of the Agents and, to the extent specified below, to the satisfaction of each Lender (each Lender upon making its initial Loan hereunder being deemed to have waived or found satisfactory all such conditions so specified). (a) Secretary's Certificates. The Borrowers shall have delivered, or caused to be delivered, a certificate of the Secretary or an Assistant Secretary (or general partner, as applicable) of each of the Borrowers, with specimen signatures of the authorized signatories to the Loan Documents, and to which shall be attached copies of the following, as applicable: articles or certificates of incorporation, bylaws, partnership agreements, resolutions and shareholder agreements provided, however, if any such articles, by-laws or partnership agreements of Subsidiaries were delivered to the Administrative Agent since October 1, 1996 and if there have been no changes to such documents, additional copies need not be delivered pursuant to this paragraph (a) so long as the certifying officer signs a statement to such effect in the applicable Secretary's Certificate. (b) Good Standing Certificates. The Borrowers shall have delivered, or caused to be delivered, a good standing or subsistence certificate, as the case may be, issued as of a recent date (i) with respect to each Borrower (and corporate general partner of Borrowers that are partnerships), issued by the Secretary of State or other appropriate official of the jurisdiction of formation of such Person and (ii) with respect to Genesis, issued by the Secretary of State or other appropriate official of its jurisdiction of incorporation and also each jurisdiction where it is required to qualify to do business and, if any such certificate is dated more than twenty-one (21) days prior to the Closing Date, a confirmation (which may be provided by a reputable corporate service) of the information in such certificate. (c) The Notes. The Borrowers shall have delivered to the Administrative Agent for distribution to each of the RC Lenders, the Tranche A Lenders and the Swing Loan Lender the applicable Notes referred to in Section 1.11 above. (d) Lien Searches. The Borrowers shall have delivered to the Administrative Agent Uniform Commercial Code, tax, and judgment lien searches of the Borrowers, in such form, as of such date and with such content as are acceptable to the Administrative Agent. -32- (e) Pledge Agreement. The Borrowers shall have executed and delivered a Third Amended and Restated Pledge Agreement whereby the Collateral Agent shall receive a first priority security interest for the benefit of the Secured Parties in all of the Borrowers' equity interests in each of the direct and indirect Restricted Subsidiaries of Genesis and in Genesis ElderCare Corp. and all inter-Borrower notes (as such agreement is amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof, the "Pledge Agreement") in substantially the form annexed to this Agreement as Exhibit E (together with the stock certificates, assignment powers, Uniform Commercial Code financing statements (in proper form for filing in the appropriate offices to perfect the security interest of the Collateral Agent, for the benefit of the Secured Parties, in the Collateral granted under the Pledge Agreement) and other items required thereunder to the extent that such items were not previously delivered to the Collateral Agent). (f) Collateral Agency Agreement. The Borrowers shall have caused to be delivered a Third Amended and Restated Collateral Agency Agreement, duly executed by the Borrowers, the Administrative Agent and the agent for the Synthetic Lease Facility (as so executed and as amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof, the "Collateral Agency Agreement") in substantially the form annexed to this Agreement as Exhibit F. (g) Multicare Management Agreement. Prior to or substantially contemporaneously with the initial funding hereunder, Genesis (and/or one or more of its Restricted Subsidiaries) shall have entered into a Management Agreement with Genesis ElderCare Corp. or Multicare (the "Multicare Management Agreement") pursuant to which Genesis (and/or such Restricted Subsidiaries) will provide management services to Multicare (or Genesis ElderCare Corp.) and its Subsidiaries. The Multicare Management Agreement shall be on terms and conditions reasonably satisfactory to the Agents. (h) Other Transaction Documents. (i) The Borrowers shall have delivered to each of the Agents and any Lender that so requests, each of the other Transaction Documents certified by a Responsible Officer of Genesis as being a true and correct copy of such Transaction Document as in full force and effect on the Closing Date. (ii) The Tender Offer shall have closed with the purchase of at least a majority of the common stock of Multicare having been purchased for $28 per share and the other transactions contemplated by the Transaction Documents to have occurred on or before the Closing Date shall have taken place in strict compliance with the terms of said Transaction Documents, subject only to such modifications as are acceptable to the Agents. There shall be no legal impediment to the merger of Genesis ElderCare Acquisition Corp. into Multicare under Section 253 or 251, as the case may be, of the Delaware General Corporation Law on the terms set forth in the Merger Agreement and the restrictions in Section 203 of the Delaware General Corporation Law and any other impediment under Delaware law shall be inapplicable to the acquisition of the shares of Multicare by Genesis ElderCare Acquisition Corp. and the proposed merger pursuant to the terms of the Merger Agreement. -33- (i) Synthetic Lease Facility. The Borrowers shall have delivered documents relating to the Synthetic Lease Facility (other than those previously delivered under the Existing Credit Agreement), which documents shall be in form and substance satisfactory to the Agents. (j) Opinions of Counsel. (i) The Borrowers shall have delivered favorable opinions of counsel, dated as of the Closing Date, from Blank Rome Comisky & McCauley, counsel to the Borrowers, as to the absence of conflicts with other financing agreements and other material agreements of the Borrowers, the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture, compliance with Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, the perfection of security interests under the Security Documents, issuance of capital stock of the Borrowers, the due organization of the Borrowers, the due authorization of the transactions referred to herein, the enforceability of the Loan Documents and such other matters as the Agents may reasonably request, in form and substance satisfactory to the Agents. (ii) Drinker Biddle & Reath LLP, special counsel to the Administrative Agent, shall deliver to the Lender Parties an opinion as to the status of the Loan Obligations as "Senior Indebtedness" within the meaning of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture and as to such other matters as the Administrative Agent shall reasonably request. (iii) Simpson, Thatcher & Bartlett, counsel to Cypress (other than Cypress Offshore Partners L.P.) Cleary, Gottlieb, Steen & Hamilton, counsel to TPG and Latham & Watkins, counsel to Nazem, shall have delivered to the Lender Parties a favorable opinion as to the due authorization and execution of the Investors' Subordination Agreement. (k) Solvency Opinion. The Borrowers shall have delivered an opinion of Valuation Research which shall be in form and substance satisfactory to the Agents, attesting to the solvency of the Borrowers, taken as a whole, after giving effect to the transactions referred to herein (including the making of the initial Loans and the purchase of the equity investment in Genesis ElderCare Corp.). (l) Senior Indebtedness Certification. Genesis shall have delivered to the Lenders a certificate of Price Waterhouse LLP or other independent certified public accountants satisfactory to the Agents in their sole discretion calculating the Fixed Charge Coverage Ratio (as defined in the relevant indenture), which calculation shall demonstrate compliance with the requirements of Section 5.9 of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture, both before and after giving effect to the consummation of the transactions contemplated by (i) this Agreement, and (ii) the Transaction Documents (including the consummation of the Tender Offer), which certificate shall be in form and content satisfactory to the Agents. (m) Consents and Approvals. All material corporate, governmental, judicial and third party consents and approvals necessary in connection with this Agreement -34- and the other Loan Documents, the Tender Offer and the related transactions (including consents and approvals required under or referred to in the Merger Agreement) shall have been obtained and, as applicable, become final orders (without imposition of any conditions that are not acceptable to the Lenders) and shall remain in full force and effect and, to the extent requested by any Agent, copies thereof shall have been delivered to the Administrative Agent. Without limiting the generality of the foregoing, all appropriate filings shall have been made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the applicable waiting periods relating thereto shall have expired or been terminated without requests for additional information from the reviewing agencies. (n) Financial Statements; Projections. (i) Financial Statements. The Borrowers shall have delivered, or caused to be delivered, to the Administrative Agent, the Issuer and the Lenders at least three (3) Business Days prior to the Closing Date each of the following: (x) a consolidated income statement of Genesis and its consolidated Subsidiaries (excluding the Multicare Group) for the twelve calendar month period ending on June 30, 1997, adjusted on a pro forma basis to the beginning of the period (as required for the financial covenants) to reflect the consummation of all of the transactions set forth in the Transaction Documents and all Acquisitions and dispositions which shall have occurred within said twelve month period as if such transactions, Acquisitions and dispositions had occurred on the first day of such period, which statement shall be supplemented by information separating out and explaining all pro forma adjustments made thereto; and (y) a consolidated balance sheet of Genesis and its consolidated Subsidiaries (excluding the Multicare Group) as of June 30, 1997, reflecting, on a pro forma basis, the consummation of all transactions in connection with the purchase of the equity of Genesis ElderCare Corp., the consummation of the transactions set forth in the Transaction Documents including all borrowings in connection therewith and all borrowings otherwise contemplated hereunder, the application of all proceeds of such borrowings and the amount of all outstanding Indebtedness after giving effect to the foregoing, which balance sheet shall be supplemented by information separating out and explaining all pro forma adjustments made thereto, each of which statements shall be (1) in form acceptable to the Agents, (2) accompanied by explanatory notes acceptable to the Agents and (3) certified by the chief financial officer of Genesis to fairly present on a pro forma basis the financial condition and results of operations as at the date, or for the period, indicated. (ii) Projections. Genesis (on behalf of the Borrowers) shall have delivered to each Lender projections respecting the consolidated financial condition and results of operations of Genesis and its consolidated Subsidiaries -35- (other than the Multicare Group) for the period commencing on January 1, 1997 and ending on December 31, 2002, which projections shall be in reasonable detail, shall reflect the consummation of the transactions contemplated hereby and the Transaction Documents including the making of the initial Loans and shall be accompanied by a written statement of the assumptions and estimates underlying such projections. (o) Officer's Compliance Certificate. Genesis (on behalf of the Borrowers) shall have delivered an Officer's Compliance Certificate, dated as of the Closing Date, as to the truth of the representations and warranties herein and in the other Loan Documents and the absence of any Default (in each case, both before and after giving effect to the initial Loans). In addition, the Officer's Compliance Certificate shall demonstrate that EBITDA of the Borrowers for the twelve calendar month ending June 30, 1997 (after making all adjustments as referred to above including those adjustments which relate to the inclusion of additional general expenses and corporate overhead costs of the Multicare Group as further adjusted to reflect savings of approximately $14,000,000.00 resulting from synergies relating to the proposed merger) is no less than $180,000,000.00 and the Total Funded Indebtedness of the Borrowers, is not more than $1,130,000,000.00. The Officer's Compliance Certificate delivered pursuant to this paragraph (o) shall include a reconciliation of the financial information set forth thereon respecting Genesis and its Restricted Subsidiaries and that set forth on the financial statements for Genesis and its consolidated Subsidiaries (excluding the Multicare Group). (p) Repayment of Predecessor Indebtedness. The Borrowers shall have delivered to the Administrative Agent evidence that, prior to or substantially simultaneously with the making of the initial Loans, (a) all Indebtedness of the Borrowers (including Indebtedness arising under the Existing Credit Agreement other than contingent obligations under outstanding letters of credit which shall be obligations of the Borrowers hereunder) other than that expressly permitted under Section 8.1 (Indebtedness) below will be repaid, (b) all commitments to lend in respect of such Indebtedness shall have been effectively terminated and (c) all collateral held in connection therewith (other than collateral securing Indebtedness under the Existing Credit Agreement to the extent that such collateral shall continue to secure the Loan Obligations) shall have been released (or undertakings to release such collateral upon receipt of specified funds shall have been duly made) and UCC-3 termination statements and all other documents necessary in the determination of the Administrative Agent to effectively terminate of record all security interests related to such Indebtedness shall have been duly executed by the proper parties and shall have been delivered to the Administrative Agent (or undertakings to do so upon receipt of specified funds shall have been furnished to the Administrative Agent). (q) Insurance. The Borrowers shall have delivered to the Administrative Agent evidence of the insurance required by Section 6.8 below. (r) Fees and Expenses. The Borrowers shall have paid the fees required to be paid to the Agents and the Lenders on or before the Closing Date and the fees and disbursements of counsel for the Agents in connection with the negotiation, preparation, execution and delivery of the Loan Documents and the making of the initial Loans. -36- (s) Closing of Multicare Credit Facilities. All conditions to the initial funding under (i) the Credit Agreement, dated as of the date hereof, among Genesis ElderCare Acquisition Corp., Genesis ElderCare Corp., Mellon as administrative agent, and certain other agents and lenders referred to therein (the "Genesis ElderCare Credit Agreement") and (ii) the (Short-Term Pre-Merger) Credit Agreement, dated as of the date hereof, among Multicare, the Subsidiaries of Multicare, Mellon as administrative agent, and certain other agents and Lenders referred to therein (the "Short-Term Multicare Credit Agreement") shall have been satisfied. The closings under those credit facilities shall occur substantially simultaneously with the closing under this Agreement unless (x) with respect to the Short-Term Multicare Credit Agreement, it is not utilized because the merger of Genesis ElderCare Acquisition Corp. into Multicare shall take place on or about the Closing Date and the Multicare Credit Agreement is funded in place of such short-term facility or (y) with respect to the Genesis ElderCare Credit Agreement, it is not funded because Genesis ElderCare Acquisition Corp. and Genesis ElderCare Corp. shall have received sufficient cash from the issuance of equity securities and the incurrence of subordinated debt to purchase the shares of Multicare tendered pursuant to the Tender Offer without borrowing any amounts under the Genesis ElderCare Credit Agreement. Without limiting the generality of the foregoing, the Supplemental Indenture referred to in the Indenture, dated August 11, 1997, among Genesis ElderCare Acquisition Corp. as Issuer, PNC Bank, National Association as Trustee and Banque Internationale, a Luxembourg S.A. shall have been executed and delivered by Multicare if and as required under such Indenture. (t) Investment in Genesis ElderCare Corp. Substantially contemporaneously with the initial funding hereunder, Genesis shall acquire approximately 44% of the common stock of Genesis ElderCare Corp. for a purchase price of at least $325,000,000.00 and prior to or substantially contemporaneously with the initial funding hereunder Cypress, TPG and Nazem, collectively, shall have paid, or shall pay, at least $420,000,000 for the remainder of the common stock of Genesis ElderCare Corp. (u) Tax Sharing Agreement. The Borrowers shall have delivered a copy of the Tax Sharing Agreement duly executed by Genesis and each of its Subsidiaries (the "Tax Sharing Agreement"), limiting, as between the parties thereto, the tax liabilities of the Borrowers in connection with any consolidated tax filings (which may include as part of the consolidated group for tax purposes both the Borrowers and the Excluded Subsidiaries (other than the Multicare Group)) to the amount of tax liabilities that the Borrowers would have incurred had they filed separately. The Tax Sharing Agreement shall be duly certified as such by a Responsible Officer of Genesis. (v) Investors' Subordination Agreement. The Borrowers shall have delivered an Investors' Subordination Agreement, duly executed by Cypress, TPG and Nazem (as such agreement is amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof, the "Investors' Subordination Agreement") in substantially the form annexed to this Agreement as Exhibit J. -37- 4.2 CONDITIONS TO EACH LOAN AND ISSUANCE OF EACH LETTER OF CREDIT. (a) Conditions. The obligation of the Lenders to make any Loans, including the initial Loans, and the obligation of the Issuer to issue any Letters of Credit are subject to fulfillment of each of the following conditions, in each case, unless otherwise specified, to the satisfaction of the Administrative Agent: (i) Absence of Default. There shall not, either prior to or after giving effect to each such Loan or Letter of Credit, as the case may be, exist an Event of Default or a Default. (ii) Borrowing Notice/L.C. Request. In connection with any request for Loans (other than Swing Loans), the Administrative Agent shall have received a borrowing notice as required by Section 1.3 above; in connection with any request for the issuance of a Letter of Credit, the Issuer and the Administrative Agent shall have received a Letter of Credit request as required by Section 3.1 above; and in connection with any request for any Swing Loans, the Swing Loan Lender and the Administrative Agent shall have received a Swing Loan request as required by Section 1.3(e). (iii) Truth of Representations. The representations and warranties of the Borrowers and each other Loan Party made in this Agreement and each other Loan Document and those of the subordinated creditors in the Investors' Subordination Agreement shall be true and correct in all material respects as of the date each such Loan is made or Letter of Credit issued (both immediately prior to and after giving effect to said Loan or Letter of Credit) as if made on and as of such date. (iv) No Violations of Law. Neither the making of, nor use of proceeds of, such Loans nor the issuance of, or use of the proceeds of, such Letters of Credit shall conflict with, or cause any Borrower to violate any Law. (v) Compliance with Indenture Covenants. Neither the making of such Loans nor the issuance of such Letters of Credit shall violate the terms of the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture and Genesis shall deliver a certificate of its chief financial officer or controller representing that, both before and after giving effect to such additional Indebtedness, Genesis is in compliance with the financial covenants set forth in Section 5.9 of each such indenture and that such Loans or obligations under the Letters of Credit constitute "Senior Indebtedness" and "Designated Senior Indebtedness" (as defined in each such indenture). (vi) Additional Information. The Lenders shall have received such additional information and documentation as the Lenders may reasonably request. (b) Deemed Representation and Warranty. The request for, and acceptance of, any Loan (including any Swing Loan) or Letter of Credit by any Borrowers shall be deemed a representation and warranty by the Borrowers that the conditions specified in clauses (i), (iii) and (iv) of the preceding paragraph (a) have been satisfied. -38- 4.3 RELATIONSHIP WITH EXISTING CREDIT AGREEMENT. Upon the effectiveness of this Agreement pursuant to Section 4.1 above, the terms and conditions of, and the agreements, representations and warranties set forth in, the Existing Credit Agreement are hereby replaced and superseded in their entirety by the terms, conditions, agreements, representations and warranties set forth in this Agreement and the other Loan Documents and the Existing Credit Agreement shall be of no further force and effect provided, however, that nothing contained herein or in any of the other Loan Documents shall (a) impair, limit or affect the continuation of the liability of each Borrower for indemnity obligations heretofore incurred under, or in connection with, the Existing Credit Agreement which by their express terms survive the effective date of this Agreement or (b) impair, limit or affect the continuation of the Liens heretofore granted, pledged and assigned to the Administrative Agent or the Collateral Agent, for the benefit of the Secured Parties by the Borrowers to the extent that such Liens secure the obligations under this Agreement and the other Loan Documents. Until this Agreement shall become effective pursuant to Section 4.1 above, the Existing Credit Agreement shall remain in full force and effect. ARTICLE 5 REPRESENTATIONS AND WARRANTIES 5.1 REPRESENTATIONS. The Borrowers hereby jointly and severally represent and warrant to each Lender Party as follows: (a) Status of Borrowers. Each Borrower is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Borrower has the power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage. Each Borrower is duly qualified to do business as a foreign corporation or foreign partnership and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable, except for any failures to maintain such qualifications which, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 5.1(a) hereto sets forth for each Borrower, as of the Closing Date, (i) whether it is a corporation, limited partnership or general partnership, (ii) the jurisdiction of its organization, and (iii) the jurisdictions in which it is qualified to do business as a foreign corporation or a foreign partnership, as the case may be, except where the failure to maintain such qualification could not, individually or in the aggregate, have a Material Adverse Effect. Each direct and indirect Subsidiary of Genesis, other than the Excluded Subsidiaries, is a Borrower hereunder and is designated as such on the signature pages hereto (or, after the Closing Date, on signature pages of a Joinder Supplement hereto). The states in which any Borrowers operate Health Care Businesses are Pennsylvania, New Jersey, Maryland, New Hampshire, Florida, Connecticut, Delaware, Virginia and Massachusetts. (b) Capitalization of Borrowers. Schedule 5.1(b) hereto sets forth (i) for each corporate Borrower (other than Genesis), (A) the authorized capitalization, (B) the names of the owners (indicating whether they are Borrowers) of the outstanding capital stock, (C) the number and class of shares issued to each such owner and (D) the percentage of outstanding shares of each class of capital stock owned by each such owner, and (ii) for each -39- Borrower which is a partnership, (A) the names of the owners (indicating whether they are Borrowers) of the outstanding equity thereof and (B) the percentage ownership interest of, and type of equity issued to, each such owner. The outstanding equity of each Borrower has been duly authorized and validly issued. All capital stock is fully paid and nonassessable. Each Borrower owns beneficially and of record and has good title to all equity indicated as being owned by it on said Schedule 5.1(b), free and clear of any Lien, except for Liens in favor of the Collateral Agent, for the benefit of the Secured Parties, as contemplated by the Loan Documents and other Permitted Liens. There are no options, warrants, calls, or similar rights relating to equity of the Borrowers. No Excluded Subsidiary has any equity interest in any Borrower. (c) Authorization, Execution and Binding Effect of Loan Documents. Each Borrower has the power and authority to execute, deliver, perform, and take all actions contemplated by, each Loan Document to which it is a party, and all such action has been duly and validly authorized by all necessary corporate or partnership (as the case may be) proceedings on its part. This Agreement and each other Loan Document has been duly and validly executed and delivered by each Loan Party listed on the signature pages hereto or thereto, as the case may be. This Agreement and each other Loan Document constitutes the legal, valid and binding obligation of each Loan Party purporting to be a party hereto or thereto, as the case may be, enforceable against such Person in accordance with its terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. (d) Security. The Pledge Agreement creates in favor of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable Lien on all right, title and interest of each Borrower in the Collateral described therein, and the Collateral Agent has (or, upon the filing of the UCC-1 financing statements delivered by the Borrowers on the Closing Date, will have), for the benefit of the Secured Parties, a fully perfected and continuing first priority Lien on all of the right, title and interest of each Borrower in the Collateral described in the Pledge Agreement, subject to no Liens other than Permitted Liens. (e) Governmental Approvals and Filings; Absence of Conflicts. No approval, order, consent, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with, the execution and delivery of any Loan Document by any Loan Party, or in connection with the performance of the terms hereof or thereof by such Person, other than the filing of Uniform Commercial Code financing and continuation statements as referred to in the Pledge Agreement. No Loan Party is subject to any Law which purports to restrict or regulate its ability to borrow money, obtain credit or provide a guarantee or other form of credit support as a consequence of the nature of the business conducted by such Loan Party. Neither the execution and delivery of this Agreement or any other Loan Document by any Loan Party, nor the performance of or compliance with the terms and conditions hereof or thereof (including the execution, delivery and performance of the Transaction Documents) by any Loan Party does or will (i) violate or conflict with any Law or any judgment, decree, or order of a court or Governmental Authority or any settlement agreement, -40- (ii) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or cause an acceleration of, or result in the creation or imposition of any Lien upon any of property of any Loan Party (except for any Lien in favor of the Collateral Agent pursuant to the Pledge Agreement) under or in connection with, (x) its articles or certificate of incorporation, bylaws, partnership agreement or operating agreement (or other constituent documents), (y) any agreement or instrument creating, evidencing or securing any Indebtedness in the aggregate amount of $250,000.00 or more to which any Loan Party is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, or (z) any other agreement or instrument or arrangement to which it is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, in the case of the foregoing clause (z), for matters that, individually or in the aggregate, could not have a Material Adverse Effect, or (iii) result in a Limitation on any Licenses applicable to the operations or properties of any Borrower, or adversely affect the ability of any Borrower to participate in any Third Party Payor Arrangement. Except to the extent that the failure to obtain the same could not have a Material Adverse Effect, no approval, order, consent of, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with the Tender Offer and merger of Genesis ElderCare Acquisition Corp. into Multicare except such consents and other actions as are listed on Schedule 5.1(e) hereto, all of which have been obtained and are in full force and effect. (f) Financial Statements. Genesis has heretofore furnished to the Administrative Agent, the Issuer and each Lender consolidated balance sheets of Genesis and its consolidated Subsidiaries (excluding the Multicare Group) as of September 30, 1996 and September 30, 1995 and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal years then ended, as examined and reported on by KPMG Peat Marwick, independent certified public accountants for Genesis, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of the specified Persons as of the end of each such fiscal year and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP. Genesis has heretofore furnished to the Administrative Agent, the Issuer and each Lender interim consolidated balance sheets of (i) Genesis and its consolidated Subsidiaries (excluding the Multicare Group) and (ii) Genesis and its consolidated Subsidiaries (excluding the Multicare Group), in each case as of the first two fiscal quarters of the fiscal year beginning October 1, 1996, together with the related consolidated statements of income, cash flows and changes in stockholders' equity for the -41- applicable fiscal periods ending on each such date. Such financial statements (including the notes thereto), as well as those financial statements delivered pursuant to paragraph (n) Section 4.1 above, present fairly the financial condition of the specified Persons as of the date specified and the results of their operations and their cash flows for the fiscal periods specified, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments, except that such financial statements do not contain all of the footnote disclosures required by GAAP. There are no material liabilities of the Borrowers except as disclosed on such financial statements. Schedule 8.1 hereto sets forth, as of the Closing Date, all Indebtedness (and commitments for Indebtedness) of the Borrowers. (g) Projections. The projections delivered pursuant to paragraph (n) of Section 4.1 above and the assumptions and estimates referred to therein are, as of the Closing Date, reasonable, are made in good faith, are consistent with the Loan Documents and represent the Borrowers' best judgment as to such matters. Nothing has come to the attention of any Borrower which would lead such Borrower to believe that such projections will not be attained or exceeded provided, however, that nothing contained in this paragraph (g) shall constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. (h) Absence of Material Adverse Change. Since September 30, 1996, there has been no material adverse change in the business, operations, condition (financial or otherwise), properties or prospects of the Borrowers taken as a whole or the industry served by the Borrowers. (i) Title to Property. Each Borrower has good and marketable title to all property owned or purported to be owned by it, including but not limited to all property reflected in the most recent balance sheets delivered to the Lenders pursuant to this Agreement (except such property as was sold or otherwise disposed of in accordance with Section 8.5 (Dispositions) below) subject to no Liens except Permitted Liens. Schedule 8.2 hereto sets forth, as of the Closing Date, all Liens on property of the Borrowers. (j) Solvency. The present fair saleable value of the assets of the Borrowers, taken as a whole, after giving effect to all the transactions contemplated by the Loan Documents and the funding of the Loans and the issuance of the Letters of Credit hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of Borrowers, taken as a whole, as they mature. Genesis does not intend to, nor does Genesis believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by Genesis, and of amounts to be payable on or in respect of debt of Genesis). The property of each Borrower does not constitute unreasonably small capital for such Borrower to carry out its business as now conducted and as proposed to be conducted including the capital needs of such Borrower. The cash available to each Borrower after taking into account all other anticipated uses of the cash of such Borrower, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Borrower when such amounts are required to be paid. (k) Accurate and Complete Disclosure. The information heretofore, contemporaneously or hereafter provided in writing by or on behalf of any Borrower to any Lender Party pursuant to or in connection with this Agreement or any other Loan Document -42- is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by such Lender Party) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. (l) Legal and Administrative Proceedings. There is no action, suit, litigation or proceeding pending, or to the knowledge of the Borrowers, threatened nor, to the knowledge of the Borrowers, is there any investigation pending or threatened, in any court or before any arbitrator or Governmental Authority or any payor appeals bodies respecting or relating to any Borrowers (or any officer or director thereof) or any property of any Borrowers that, individually or in the aggregate, (i) could have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of Genesis or the Borrowers taken as a whole or (ii) could materially adversely affect the Lenders' rights and remedies hereunder or under the other Loan Documents, this Agreement or other Loan Documents or the ability of the Borrowers to perform their obligations hereunder or thereunder. (m) Absence of Violations and Conflicts. No Borrower is in violation of, in default under, or is subject to any contingent liability on account of any violation of or conflict with: (i) any Law; (ii) its articles or certificate of incorporation, bylaws, partnership agreement, operating agreement (or other constituent documents); or (iii) any financing agreement or other instrument or arrangement to which it is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clauses (i) or (iii) above for matters that, individually or in the aggregate, could not have a Material Adverse Effect. (n) Operation of Health Care Facilities. (i) Except where the failure to possess the same, either individually or in the aggregate, could not have a Material Adverse Effect, each Borrower possesses all Licenses and Reimbursement Approvals necessary to operate its Health Care Businesses substantially as now operated and as presently proposed to be operated. No Borrower is in material violation of the terms of its Licenses and Reimbursement Approvals. (ii) Except for Limitations which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, there is no threatened or pending Limitation of any material License or Reimbursement Approval relating to the operation of any of Borrowers' Health Care Businesses. (iii) Except where the failure to file the same, either individually or in the aggregate, could not have a Material Adverse Effect, each of the Borrowers has caused there to be accurately prepared and filed (or obtained extensions for) all applicable cost reports with respect to any and all Third Party Payor Arrangements that are material to conduct its Health Care Businesses substantially as now conducted. (iv) No Borrower is subject to any claim (including any claim for overpayment), litigation, proceeding or other action or, to any Borrower's knowledge, investigation relating to a claim or action by any Governmental Authority except matters that -43- if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (v) Each of the Borrowers participates in an internal comprehensive compliance program respecting compliance with all Laws affecting the types of businesses carried on by the Borrowers (including health care Laws) and has made such program available for review by any Lender, upon request. (vi) Each of the foregoing statements in this paragraph (n) are also true as applied to Persons managed by any Borrower to the extent that the failure of any such statement to be true (as applied to any Person managed by a Borrower) could have a Material Adverse Effect. (o) Management Agreements. Schedule 5.1(o) sets forth as of the Closing Date, a complete and correct list of all Management Agreements relating to (i) the operation and management by a Person that is not a Borrower of each health care facility owned by a Borrower and (ii) the operation and management by a Borrower of each health care facility owned by a Person that is not a Borrower. As of the Closing Date, each such Management Agreement is in full force and effect subject to no material default. (p) Nursing Home and Assisted Living Facilities. Schedule 5.1(p) sets forth, as of the Closing Date, a complete and correct list of all nursing homes and assisted living facilities owned or operated by the Borrowers and the locations thereof, indicating which such facilities are operated but not owned. (q) Leased Properties. Schedule 5.1(q) identifies all real properties leased by any Borrower as of the Closing Date. As of the Closing Date, all leases relating to such leased properties are in full force and effect subject to no material default. Such leases comply with the provisions of Section 8.7 below. (r) Intellectual Property. Each Borrower owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise including "Genesis ElderCare"), copyrights, technology (including computer programs and software), processes, data bases and other rights (collectively "intellectual property"), free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others. No Borrower is in material violation of the rights of others with respect to any intellectual property. (s) Employee Benefits/ERISA. (i) The Borrowers and the members of their Controlled Groups maintain only those Defined Contribution Plans and other Plans listed on Schedule 5.1(s) attached hereto and contribute to only those Multiemployer Plans listed on Schedule 5.1(s) attached hereto. No Borrower nor any member of its Controlled Group has ever maintained or made contributions to, or has ever been required to make contributions to any Defined Benefit Pension Plan. -44- (ii) Each Defined Contribution Plan, as most recently amended, including amendments to any trust agreement, group annuity, or insurance contracts, or other governing instrument, is the subject of a favorable determination letter by the Internal Revenue Service with respect to its qualification under ss.401(a) of the Code. (iii) All Plans comply, both in form and in operation, with the requirements of the Code and ERISA. (iv) There is not now, and has not been, any material violation of the Code or ERISA with respect to the filing of applicable reports, documents, and notices regarding any Plan with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity or the furnishing of such documents to the participants or beneficiaries of any Plan. Borrowers have furnished to the Lenders copies of the most recent annual report, audited financial statements, and other reports filed with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity with respect to each Plan. (v) All Pension Plans, as of the date hereof, meet the minimum funding standards of ss.412 of the Code and ss.302 of ERISA without regard to any funding waiver. Borrowers and the members of their Controlled Group have, as of the date hereof, made all contributions or payments to or under Pension Plans required by the terms of any such Plan or any contract or agreement. (vi) No Prohibited Transaction has occurred with respect to any Plan. (vii) No Borrower or any member of its Controlled Group has any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA). (viii) There is not now, and has not been, any COBRA Violation with respect to any Plan to which such continuation coverage requirements apply which has a material adverse effect, directly or indirectly, on the financial condition of any of the Borrowers. (ix) Borrowers and the members of their Controlled Group have established only those irrevocable trusts the assets of which remain subject to the general creditors of Borrowers and/or members of their Controlled Group (sometimes referred to as "rabbi trusts") listed on Schedule 5.1(s) attached hereto and have furnished to the Lenders copies of each such "rabbi trust." (x) If any Borrower or any member of its Controlled Group were obligated to pay the entire potential Withdrawal Liabilities for which any of them would be liable if each of them were to withdraw from the Multiemployer Plans to which any of them makes contributions, such obligations would not be in excess of $500,000.00. (xi) Borrowers and the members of their Controlled Group have complied with the requirements of ss.515 of ERISA with respect to Multiemployer Plans. -45- (t) Environmental Matters. (i) Each Borrower and each of its respective Environmental Affiliates is and has been, in full compliance with all applicable Environmental Laws, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. There are no circumstances that may prevent or interfere with such full compliance now or in the future. (ii) Each Borrower and each of its respective Environmental Affiliates have all Environmental Approvals necessary or desirable for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated in the future, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. (iii) There is no Environmental Claim pending or to the knowledge of any Borrower after due inquiry, threatened, and there are no past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Borrower or any Environmental Affiliates of Borrowers) that could form the basis of any Environmental Claim against any Borrower or any such Environmental Affiliates, except for matters which, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (iv) No facility or property now or previously owned, operated or leased by any Borrower or any of their respective Environmental Affiliates is an Environmental Cleanup Site. No Borrower and none of their respective Environmental Affiliates has directly transported or disposed of or arranged for the transportation or disposal of any Environmental Concern Materials to any Environmental Cleanup Site. No Lien exists, and, to the Borrowers' knowledge after due inquiry, no condition exists which could result in the filing of a Lien, against any property of any Borrower or any Subsidiary of any Borrower or any of their respective Environmental Affiliates, under any Environmental Law. (u) Margin Regulations. No proceeds of any Loan hereunder will be used for the purpose of purchasing or carrying any "margin stock," as such term is used in Regulations G and U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of purchasing or carrying any "margin stock". Neither the making of any Loan or issuance of any Letter of Credit nor any use of proceeds of the foregoing will violate or conflict with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. (v) Regulation O. No director, executive officer or principal shareholder of any Borrower is a "director," "executive officer" or "principal shareholder" of any -46- Lender, as such terms are used in Regulation O of the Board of Governors of the Federal Reserve System, as amended. (w) 1995 Subordinated Notes and 1996 Subordinated Notes. Genesis hereby confirms that the Loan Obligations are "Senior Indebtedness" and hereby designates the Loan Obligations as "Designated Senior Indebtedness" under the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. All of the Loan Obligations constitute and will constitute "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning ascribed to such terms in such indentures. The subordination provisions therein are enforceable against Genesis and the holders, from time to time, of the 1995 Subordinated Notes and the 1996 Subordinated Notes. Genesis is not in default under either such indenture. (x) Certain Documents and Transactions. Each of the Transaction Documents (including the Multicare Management Agreement), the Tax Sharing Agreement, and the agreements relating to the Synthetic Lease Facility are in full force and effect and no amendments, modifications or supplements have been made to any such documents as the same were delivered to the Agents pursuant to Article 4 above except (i) such amendments, modifications or supplements to Transaction Documents as could not reasonably be expected to have an adverse effect on any Borrower (including the condition (financial or otherwise), properties or prospects of such Borrower), the Loan Documents or any Lender Parties, (ii) supplements or amendments to the Tax Sharing Agreement necessary to join any other Subsidiaries of Genesis which may hereafter be consolidated with Genesis for tax purposes and (iii) amendments, modifications or supplements to the Synthetic Lease Facility permitted by the Collateral Agency Agreement. There exists no default under any such agreements except for immaterial breaches. (y) Labor Matters. There are no existing, or, to the best of Borrowers' knowledge, threatened or contemplated, strikes, slowdowns, picketing or work stoppages by any employees against any Borrower, any lockouts by any Borrower of any of its employees or any labor trouble or other occurrence, event or condition of a similar character which, individually or in the aggregate, could have a Material Adverse Effect. 5.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE. The representations and warranties of the Borrowers set forth in this Article 5 are unaffected by any prior or subsequent investigation by, or knowledge of, any Agent, the Issuer, or any Lender. ARTICLE 6 AFFIRMATIVE COVENANTS So long as any Loan Obligation shall remain unpaid or any Lender or the Issuer shall have any Commitment under this Agreement, each of the Borrowers shall comply with the following covenants. -47- 6.1 REPORTING REQUIREMENTS. (a) Annual Financial Statements. As soon as practicable, and in any event within 90 days after the close of each fiscal year of Genesis, Genesis (on behalf of the Borrowers) shall furnish to the Administrative Agent, the Issuer and each Lender, audited (i) consolidated statements of income, cash flows and changes in stockholders' equity of Genesis and its consolidated Subsidiaries (excluding the Multicare Group) for such fiscal year and a consolidated balance sheet of such Persons as of the close of such fiscal year. If at any time that the Cash Flow of the Excluded Subsidiaries in the aggregate (other than the Multicare Group) exceeds 2.5% of the Cash Flow of Genesis and its consolidated Subsidiaries (excluding the Multicare Group), Genesis on behalf of the Borrowers shall furnish statements of income, cash flows and changes in stockholders equity of the Borrowers, on a consolidated basis, for such fiscal year and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal year, in lieu of the requirements of preceding sentence; (ii) statements of income, cash flows and changes in stockholders equity of Genesis and its consolidated Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal year and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal year; (iii) statements of income, cash flows and changes in stockholders equity of the Multicare Group, on a consolidated basis, for such fiscal year and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal year; and with respect to all of the foregoing financial statements referred to above, setting forth the appropriate footnotes, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such financial statements shall be accompanied by an unqualified opinion in form and substance satisfactory to the Administrative Agent of KPMG Peat Marwick or other independent certified public accountants of recognized national standing selected by the Borrowers and satisfactory to the Administrative Agent. (b) Quarterly Financial Statements. As soon as practicable, and in any event within 45 days after the close of each fiscal quarter of each fiscal year of the Borrowers, Genesis (on behalf of the Borrowers) shall furnish to the Administrative Agent, the Issuer and each Lender, the following unaudited financial statements: (i) consolidated statements of income, cash flows and changes in stockholders' equity of Genesis and its consolidated Subsidiaries (excluding the Multicare Group) for such fiscal quarter and the applicable year to date period, and a consolidated balance sheet of such Persons as of the close of such fiscal quarter. If at any time that the Cash Flow of the Excluded Subsidiaries (other than the Multicare Group) exceeds 2.5% of the Cash Flow of Genesis and its consolidated Subsidiaries (excluding the Multicare Group), Genesis on behalf of the Borrowers furnish statements of income, cash flows and changes in stockholders of the Borrowers, on a consolidated basis, for such fiscal quarter and applicable year-to-date period -48- and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal quarter, in lieu of the requirements of preceding sentence; and (ii) statements of income, cash flows and changes in stockholders equity of the Multicare Group, on a consolidated basis, for such fiscal quarter and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal quarter; all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the balance sheets, which shall set forth in comparative form the corresponding balance sheets as of the prior fiscal year end). Such financial statements shall be certified by the chief financial officer or other Responsible Officer of Genesis as presenting fairly the financial position of the subject entities as of the end of such fiscal quarter and year-to-date period, and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal quarter and year-to-date period, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) Quarterly Compliance Certificates. Genesis, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, an Officer's Compliance Certificate concurrently with the delivery of the financial statements referred to in paragraph (a) of this Section 6.1 (with respect to the fiscal year) and paragraph (b) of this Section 6.1 (with respect to the first three fiscal quarters). Each such Officer's Compliance Certificate shall include, among other things referred to thereon, the calculations necessary to demonstrate compliance with the covenants set forth in Article 7 hereof, the calculations necessary to confirm compliance with the financial covenants set forth in Section 5.9 of the 1995 Subordinated Note Indenture and in Section 5.9 of the 1996 Subordinated Note Indenture. The Officer's Compliance Certificate delivered pursuant to this paragraph (c) shall include a reconciliation of the financial information set forth thereon respecting Genesis and its Restricted Subsidiaries and that set forth on the financial statements for Genesis and its consolidated Subsidiaries (excluding the Multicare Group). (d) Other Information To Be Delivered Annually. Genesis (on behalf of the Borrowers) shall deliver to the Administrative Agent, the Issuer and each Lender, the following: (i) annually, within one hundred twenty (120) days of the end of the fiscal year of the Borrowers, an accountants' management letter respecting Genesis and its consolidated Subsidiaries (excluding the Multicare Group) provided by KPMG Peat Marwick or other independent certified public accountants satisfactory to the Administrative Agent, and (ii) annually no later than ninety (90) days prior to the commencement of each fiscal year of the Borrowers, an annual budget respecting Genesis and its consolidated Subsidiaries (excluding the Multicare Group), setting forth in reasonable detail, expected sources and uses of funds, for the fiscal year then beginning, in form and substance satisfactory to the Administrative Agent. (e) SEC Filings and Other Disclosure. Promptly upon their becoming available to any Borrower but no later than ten Business Days after the same are filed with the Securities Exchange Commission or any securities exchange, Genesis (on behalf of the Borrowers) shall deliver to the Administrative Agent, the Issuer and each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which any Borrower shall file with the Securities and Exchange Commission or any securities -49- exchange, (ii) all reports, proxy statements, financial statements and other information distributed by any Borrower to its stockholders, bondholders or the financial community generally, (iii) all accountants' management letters (not otherwise delivered pursuant to the preceding paragraph (d)) and all other reports submitted by accountants in connection with any audit of any Borrower and (iv) copies of all compliance certificates or notices delivered to or from the trustees under the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. (f) Notice of Certain Events. Promptly upon any Borrower becoming aware of any of the following, such Borrower or Genesis (on behalf of the Borrowers) shall give the Administrative Agent notice thereof, together with a written statement setting forth the details thereof and any action with respect thereto taken or proposed to be taken by any Borrower: (i) Loss of Licenses or Reimbursement Approvals. Any actual Limitation (other than in the ordinary course of business) or any threatened Limitation (to the extent that it individually or in the aggregate with all other actual or threatened Limitations is material) of any License or Reimbursement Approval relating to the operation of a Health Care Business; or, if the same individually or in the aggregate could have a Material Adverse Effect, any Limitation of any License or Reimbursement Approval of any Person managed by any Borrower; (ii) Default. Any Event of Default or Default; (iii) Material Adverse Change. Any material adverse change in the business, operations or condition (financial or otherwise) or prospects of any Borrower; (iv) Material Litigation. Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting any Borrower (or any officer or director thereof) or any property of any Borrower, except for matters that if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect; (v) Breach or Termination of Certain Agreements. Any breach, claimed breach, termination or purported or threatened termination (including a copy of any notice of termination) of (A) the Multicare Management Agreement, (B) any other Transaction Document (except a termination in accordance with its terms), (C) any other Management Agreement except in the ordinary course of business, (D) the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture (including a copy of any notice of default delivered thereunder), (E) any agreement in respect of the Synthetic Lease Facility or (F) any other agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of Genesis and its Restricted Subsidiaries taken as a whole; (vi) ERISA. -50- (A) any taxes, penalties, interest charges and other financial obligations in excess of $250,000.00 that have been assessed or otherwise imposed, or which any Borrower has reason to believe may be assessed or otherwise imposed in excess of $250,000.00, against any Borrower or any member of its Controlled Group by the Internal Revenue Service, the PBGC, the Department of Labor or any other governmental entity with respect to any Plan or Multiemployer Plan. (B) any application for a waiver by a Borrower or any member of its Controlled Group of the minimum funding standard under ss.412 of the Code with respect to a Pension Plan. (C) the adoption of any Plan, including but not limited to a Defined Benefit Pension Plan, or any obligation to contribute to any Multiemployer Plan by a Borrower or any member of its Controlled Group. (D) any Prohibited Transaction with respect to a Plan. (E) (1) that any Borrower has incurred Withdrawal Liability from a Multiemployer Plan maintained by it or any member of its Controlled Group, (2) that any Multiemployer Plan to which any Borrower or any member of its Controlled Group has made contributions is or will be in Reorganization, or (3) that any other condition exists with respect to a Multiemployer Plan which presents a material risk of termination of any such Plan, Borrowers will furnish a statement to the Lenders setting forth the details of such Withdrawal Liability, Reorganization or condition, and the action that Borrowers propose to take with respect thereto, together with a copy of any notice of Withdrawal Liability or Reorganization received by such Borrower or any member of its Controlled Group. (F) any default by Borrower or any member of its Controlled Group (as defined in ss.4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required by reason of its withdrawal (as defined in ss.4203 or ss.4205 of ERISA). (G) any action brought against Borrower or any member of its Controlled Group under ss.502 of ERISA with respect to its failure to comply with ss.519 of ERISA. (vii) Environmental. Any Environmental Claim pending or threatened against any Borrower or any of its Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Borrower or any of its Environmental Affiliates) that could form the basis of such Environmental Claim, which Environmental Claim, if adversely -51- resolved, individually or in the aggregate, could have a Material Adverse Effect. (g) Exercise of Put/Call. Genesis (on behalf of the Borrowers) shall deliver to the Administrative Agent prompt written notice (but in any event within five (5) Business Days) of the receipt or delivery of any notice pursuant to the Put/Call Agreement relating to the exercise of the put or call provisions thereof. The Administrative Agent shall promptly give each Lender a copy of any notice delivered pursuant to this paragraph (g). (h) Notice of Non-Renewal of Management Agreement. Genesis (on behalf of the Borrowers) shall give the Administrative Agent written notice promptly upon the receipt or delivery of any notice of non-renewal or termination delivered under or relating to the Multicare Management Agreement. The Administrative Agent shall promptly give each Lender a copy of any notice delivered pursuant to this paragraph (h). (i) Other ERISA Information. The Borrowers shall deliver to the Administrative Agent, copies of the following: (A) Promptly after the filing thereof with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity, copies of each annual report, each audited financial statement and any other report so filed with respect to each Plan. (B) Borrowers will furnish to the Lenders as soon as possible after receipt thereof a copy of any notice that any Borrower or any member of its Controlled Group receives from the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity or the sponsor of any Multiemployer Plan that sets forth or proposes any action to be taken or determination made by the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity or the sponsor of any Multiemployer Plan with respect to any Plan. (j) Amendments to Transaction Documents. Genesis (on behalf of the Borrowers) shall furnish the Administrative Agent copies or drafts of all proposed amendments, modifications or waivers to any Transaction Documents (1) in the case of any amendments, modifications or waivers requiring the consent of the Required Lenders at least 20 Business Days prior to the effective date thereof and (2) in all other cases, at least 5 Business Days prior to the effective date thereof. (k) Notices under Indenture. Genesis (on behalf of the Borrowers) shall furnish to the Administrative Agent copies of all notices, reports, certificates or other material delivered to or by the trustee or any other party under the 1995 Subordinated Note Indenture or 1996 Subordinated Note Indenture, promptly upon receipt thereof. (l) Other Information. In addition, the Borrowers will promptly furnish to the Administrative Agent such other information as any Lender Party (through the Administrative Agent) may reasonably request, including information submitted by the -52- Borrowers to any Governmental Authority and the Administrative Agent will furnish such information to the requesting Lender Party. 6.2 MAINTENANCE OF EXISTENCE. Each Borrower shall preserve and maintain its corporate or partnership existence, as the case may be, and good standing in the jurisdiction of its organization provided, however, upon giving written notice to the Administrative Agent, the Borrowers may dissolve any Subsidiary if (a) such Subsidiary is not (either individually or in the aggregate with all other entities dissolved pursuant to this proviso) a material Borrower (or material Borrowers) and (b) Genesis determines that it is in the best interest of the Borrowers, taken as a whole, that such Subsidiary be dissolved. Genesis and (to the extent that any failure to qualify or remain qualified could have a Material Adverse Effect) each Restricted Subsidiary, shall qualify and remain qualified as a foreign corporation or partnership in each jurisdiction in which such qualification is required, provided, however nothing in this Section 6.2 shall prohibit any sales or other dispositions permitted under Section 8.5 or Section 8.13. 6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY. (a) Type of Business. Each Borrower shall continue to engage in the business of the same general type as conducted by the Borrowers on the Closing Date and shall not engage in any other type of business without the consent of the Required Lenders. (b) Healthcare and Regulatory Rights. Except where the failure to take any of the following actions, individually or in the aggregate, could not have a Material Adverse Effect, each Borrower shall, (i) maintain in effect all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it owns or operates and (ii) obtain all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it acquires and (iii) continue its participation in any and all Third Party Payor Arrangements. Except where such failure to so comply (together with all other failures from time to time by the same or other Borrowers), could not reasonably be expected to have a Material Adverse Effect, each Borrower shall comply with any and all rules, regulations, standard procedures and decrees necessary to maintain its participation in any such Third Party Payor Arrangements and prepare and file all applicable cost reports with respect to all Third Party Payors Arrangements to the extent required. Each Borrower shall use its best efforts to cause each Person managed by it to obtain and maintain its Licenses and Reimbursement Approvals necessary for the conduct of its business and to continue its participation in Third Party Payor Arrangements and comply with all rules, regulations, standard procedures and decrees relating thereto to the extent that the failure to do so could have a Material Adverse Effect. (c) Maintenance of Property. Each Borrower shall maintain, keep and preserve all of its property necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted (except for sales and other dispositions of property permitted under Section 8.5 below (Dispositions)). Without limiting the generality of the foregoing, each Borrower shall maintain in full force and effect each lease, Management Agreement and other material agreement used or useful in its business, -53- subject to no material default except where the loss of, or default under, such lease, Management Agreement or other agreement (i) could not individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (ii) is not otherwise prohibited by the terms of this Agreement. 6.4 MAINTENANCE OF RECORDS; FISCAL YEAR. Each Borrower shall keep adequate records and books of account, in which complete entries will be made in accordance with historical practice and GAAP, reflecting all financial transactions of the Borrowers. Each Borrower shall maintain a fiscal year end of September 30. 6.5 COMPLIANCE WITH LAWS. Each Borrower shall comply (and maintain procedures to assure compliance) in all material respects with all applicable Laws (including environmental and health care Laws) and all judgments, decrees or orders of any court or Governmental Authority and all settlement agreements. Without limiting the generality of the foregoing, each of the Borrowers shall maintain in full force and effect an internal compliance program respecting compliance with all Laws affecting the types of businesses carried on by the Borrowers (including healthcare Laws) and make such program available for review by any Lender, upon request. 6.6 ERISA. (a) Each Borrower will, and will cause each member of its Controlled Group, to comply in all material respects with the provisions of ERISA and the Code with respect to any Plan both in form and in operation. (b) Each Borrower will cause to be made all contributions required to avoid any Accumulated Funding Deficiency, whether or not waived, with respect to any Pension Plan. (c) No Borrower will adopt or permit the adoption by any member of its Controlled Group of any Defined Benefit Pension Plan which would result in any Amount of Unfunded Benefit Liabilities in excess of $500,000.00. (d) No Borrower will acquire, or permit the acquisition by any member of its Controlled Group of, any trade or business which has incurred either directly or indirectly any Amount of Unfunded Benefit Liabilities under any Defined Benefit Pension Plan in excess of $500,000.00. (e) The Borrowers will not permit with respect to any Plan, any Prohibited Transaction or Prohibited Transactions under ERISA or the Code resulting in liability of any Borrower or any member of its Controlled Group which together with any other liabilities subject to this paragraph (e) would in the aggregate be in excess of $500,000.00, unless such Borrower or any member of its Controlled Group will be contesting in good faith and by appropriate proceedings any such matter and measures are available and are being taken which have the effect of preventing the seizure of property of such Borrower or any member of its Controlled Group pending the outcome of such contest. -54- (f) No Borrower will withdraw, or permit any member of its Controlled Group to withdraw, from any Multiemployer Plan to which any of them may hereafter contribute if the Withdrawal Liability which would thereupon be incurred would have a material adverse effect, directly or indirectly, on the financial condition of any of the Borrowers. (g) No Borrower will permit any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA) of any Borrower and of any member of its Controlled Group in excess of $500,000.00 in the aggregate with all other liabilities subject to this paragraph (g). (h) No Borrower will, or will permit any member of its Controlled Group to, cause or suffer to exist a COBRA Violation with respect to any Plan to which such continuation coverage requirements apply if the violation(s) could result in a liability in excess of $500,000.00 in the aggregate. 6.7 RIGHT OF INSPECTION. Each Borrower shall, at any reasonable time and from time to time, and upon reasonable advance notice (but no advance notice shall be required if a Default or an Event of Default shall then exist), permit the Administrative Agent, the Issuer or any Lender or any agent or representative thereof, to examine and make copies and abstracts from the records and books of account of, and visit and inspect the properties of, any Borrower, and to discuss the affairs, finances and accounts of such Borrower with any of its officers, directors and independent accountants. 6.8 INSURANCE. Each Borrower shall maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as are customary in the case of Persons engaged in the same or similar businesses or having similar properties similarly situated, including insurance covering its respective properties, buildings, machinery, equipment, tools, furniture, fixtures and operations, and medical malpractice, professional liability and public liability, as well as "stop loss" and business interruption. The Borrowers shall have the Administrative Agent named to receive certificates evidencing such insurance annually and at least thirty days prior to the anniversary date of such insurance policies and any other time requested by the Administrative Agent. 6.9 PAYMENT OF TAXES AND OTHER CHARGES. Each Borrower shall (a) on or prior to the date on which penalties attach thereto, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties; and (b) on or prior to the date when due, pay all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons and all other lawful claims which, in each case if unpaid, might result in the creation of a Lien upon any of its properties, provided that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Borrower need not pay or discharge any such tax, assessment, -55- charge or claim so long as (x) the validity thereof is being contested in good faith and by appropriate proceedings diligently conducted and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. 6.10 SUBSIDIARIES TO BE BORROWERS. (a) Each Borrower shall cause all of its Subsidiaries, other than Excluded Subsidiaries, at all times to be Borrowers hereunder (by signing Joinder Supplements hereto, executing Notes or allonges thereto and taking such other action as the Administrative Agent may reasonably request) and cause all the capital stock or other equity interests in such Subsidiaries owned by Borrowers, other than capital stock or other equity interests in Excluded Subsidiaries, and all notes or other rights to receive payment from another Borrower to be pledged to the Collateral Agent for the benefit of the Secured Parties pursuant to the Pledge Agreement. Without limiting the generality of the foregoing, when the Borrowers are required, in connection with an Acquisition or otherwise, to cause one or more (direct or indirect) Subsidiaries of Genesis (each, a "Joining Subsidiary") to become "Borrowers" hereunder, then the Borrowers and each such Joining Subsidiary shall take the actions set forth on Schedule 6.10 hereto, in the case of the formation of a new Subsidiary, promptly upon such formation, and in the case of the acquisition of an entity which shall become a Subsidiary, no later than the date of the consummation of the relevant Acquisition. (b) With the prior written consent of the Administrative Agent, Genesis (on behalf of the Borrowers) may from time to time redesignate one or more Subsidiaries which are designated as Excluded Subsidiaries on Schedule 11.1 to be Borrowers and Restricted Subsidiaries hereunder, Pledgors under the Pledge Agreement and comparable parties under the other Loan Documents (and not Excluded Subsidiaries). Thereupon and upon satisfaction of the requirements set forth in paragraph (a) above for Joining Subsidiaries, such redesignated Subsidiaries shall be Borrowers hereunder, Pledgors under the Pledge Agreement and comparable parties to the other Loan Documents. The Administrative Agent shall give the Lenders notice of any such redesignation. 6.11 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS. The Borrowers shall comply with the terms of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. Each Borrower shall promptly take all action necessary or requested by the Administrative Agent at any time to protect, preserve and give effect to the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. 6.12 INTEREST RATE HEDGING AGREEMENTS. At all times from and after ninety (90) days after the Closing Date, the Borrowers shall maintain one or more Interest Rate Hedging Agreements to the extent necessary to ensure that at all times at least fifty percent (50%) of the Total Funded Indebtedness of the Borrowers effectively bears, or is capped at, a fixed interest rate provided, however, that no Borrower shall enter into any rate swap, cap or collar agreement which is not an Interest Rate Hedging Agreement. -56- 6.13 CORPORATE SEPARATENESS. Each Borrower shall observe all requirements necessary to cause it to be treated as a separate legal entity for all purposes under applicable corporate law. Without limiting the foregoing requirement, each Borrower specifically shall (i) maintain, and cause each Excluded Subsidiary to maintain, separate corporate and financial records and observing all corporate formalities; (ii) maintain, and cause each Excluded Subsidiary to maintain, capitalization adequate to meet its business needs; (iii) cause all reports, filings and public information to refer to such Borrower or Excluded Subsidiary, as the case may be, as a separate company (and not a division of each other); and (iv) otherwise conduct, and cause each Excluded Subsidiary to conduct, its dealings with third parties in its own name and as a separate and independent entity. Without limiting the generality of the foregoing, unless specifically agreed to by the Required Lenders, no Borrower may enter into any merger or other combination with or transfer assets to any Excluded Subsidiary, or make any loan to, advance to, or other investment in any Excluded Subsidiary, or guarantee any Indebtedness or otherwise be liable for obligations of any Excluded Subsidiary except as expressly permitted by this Agreement, provided, nothing in this Section 6.13 shall prohibit the execution and delivery of the Multicare Management Agreement or the Tax Sharing Agreement and the transactions contemplated thereby. Notwithstanding the foregoing (a) the Borrowers may make such Investments in, borrow money from, and carry on other transactions with, Excluded Subsidiaries on an arm's length basis to the extent that this Agreement permits the Borrowers to carry on such activities with unrelated third parties and (b) so long as no Default or Event of Default shall then exist or be caused thereby, the Borrowers may contribute capital to, or make other Investments in, The Multicare Group from the proceeds of the sale of equity of Genesis common stock (to the extent that such proceeds are so used promptly upon the receipt thereof). 6.14 TRANSACTIONS WITH AFFILIATES. Each Borrower shall effect all transactions with Affiliates (excluding transactions with other Borrowers) on a basis at least as favorable to such Borrower as would at the time be obtainable for a comparable transaction on an arm's length dealing with an unrelated third party, except that this Section 6.14 shall not apply to (a) the Tax Sharing Agreement and (b) the Transaction Documents. 6.15 MERGER OF GENESIS ELDERCARE ACQUISITION CORP. INTO MULTICARE. The Borrowers shall use their best efforts to cause the merger of Genesis ElderCare Acquisition Corp. into Multicare either on the Closing Date or as soon thereafter as practicable in accordance with the terms of the Merger Agreement. 6.16 CERTAIN ACQUISITIONS. On or before December 31, 1997, Genesis and/or one or more of its Restricted Subsidiaries shall acquire the contract therapy business of Multicare for a cash purchase price of approximately $24,000,000.00 and the institutional pharmacy business of Multicare for a cash purchase price of approximately $50,000,000.00 unless, in either case, there shall have been a material adverse change in such business or Borrowers shall be (either before or after giving effect to either of such Acquisitions) in default under this Agreement or any other Loan Document. 6.17 USE OF PROCEEDS. The Borrowers will apply the proceeds of the Loans only (i) to refinance existing Indebtedness on the Closing Date, (ii) to fund working capital -57- and Capital Expenditure needs, subject to the other limitations set forth in this Agreement, (iii) to purchase approximately 44% of the common stock of Genesis Eldercare Corp. for an aggregate purchase price at least equal to $325,000,000.00, (iv) to purchase the contract therapy business of Multicare for approximately $24,000,000.00, to purchase the institutional pharmacy business of Multicare for approximately $50,000,000.00 and to fund other Acquisitions permitted by the terms of this Agreement, (v) to fund interest and principal payments on the Loans and other permitted Indebtedness and (vi) for general corporate purposes. ARTICLE 7 FINANCIAL COVENANTS 7.1 CERTAIN FINANCIAL COVENANTS. So long as any Loan Obligations shall remain unpaid or any Lender or the Issuer has any Commitment under this Agreement, the Borrowers shall comply with the following financial covenants. (a) Fixed Charge Coverage. The Fixed Charge Coverage Ratio shall be at least equal to the ratios set forth below during the periods indicated below: Period Ratio ------ ----- September 30, 1997 through June 30, 2001 1.30 to 1.00 July 1, 2001 and thereafter 1.50 to 1.00 (b) Consolidated Net Worth. The total amount of stockholders' equity of Genesis and its Restricted Subsidiaries, on a consolidated basis, at any date of determination after the Agreement Date shall be not less than the sum of (i) Five Hundred and Fifty Million Dollars ($550,000,000.00) plus (ii) an amount equal to the sum of: (A) an amount equal to 100% of the net proceeds of all equity offerings of Genesis on a cumulative basis commencing on the Agreement Date through such date of determination (other than proceeds used to acquire the shares of Genesis ElderCare Corp. pursuant to the Put/Call Agreement or used to make loans or advances to, or other investments in, the Multicare Group as permitted by Section 8.3 below), (B) 75% of the cumulative amount of Net Income (which shall not be reduced by the amount of any net loss for any fiscal quarter) of Genesis and its Restricted Subsidiaries, on -58- a consolidated basis, for the period commencing on the first day of the fiscal quarter in which the Agreement Date occurs through the last day of the fiscal quarter ending on, or most recently prior to, such date of determination, and (C) any reduction in the amount of debt as a result of the conversion of convertible debt securities into equity. (c) Adjusted Total Debt/Cash Flow Ratio. The Adjusted Total Debt/Cash Flow Ratio shall be not greater than the ratios set forth below during the periods indicated below: Period Ratio ------ ----- September 30, 1997 through June 30, 1998 6.25 to 1.00 July 1, 1998 through June 30, 1999 5.75 to 1.00 July 1, 1999 through June 30, 2000 5.00 to 1.00 July 1, 2000 and thereafter 4.50 to 1.00 (d) Adjusted Senior Debt/Cash Flow. The Adjusted Senior Debt/Cash Flow Ratio shall be not greater than the ratios set forth below during the periods indicated below: Period Ratio ------ ----- September 30, 1997 through June 30, 1998 5.25 to 1.00 July 1, 1998 through June 30, 1999 4.50 to 1.00 July 1, 1999 through June 30, 2000 4.00 to 1.00 July 1, 2000 and thereafter 3.50 to 1.00 7.2 CALCULATION OF FINANCIAL COVENANTS. The financial covenants set forth in this Article 7 shall be maintained continuously and shall be tested at the end of each fiscal quarter and at such other times as may be required by the terms of this Agreement. Following the effective date of any Acquisition that is effected by Genesis or any of its Restricted Subsidiaries and that is permitted under Section 8.4 below (Acquisitions, Etc.), the financial covenants set forth in this Article 7 shall be computed on a pro forma basis as if the effective date of such Acquisition had been the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, such actual date of the Acquisition. For purposes of such computation, the Borrowers may elect to make pro forma income statement adjustments at the time of the effective date of such Acquisition under the following circumstances: (i) adjustments to reflect the elimination of that portion of salary and employee benefit expenses that will no longer be incurred after the Acquisition, to the extent demonstrated by Genesis to the satisfaction of the Administrative Agent, and (ii) adjustments to reflect any other savings in expenses which will be realized by such Person so acquired as a consequence of such Acquisition, to the extent demonstrated by Genesis to the satisfaction of the Administrative Agent. Following the effective date of any disposition that is effected by Genesis or any of its Restricted Subsidiaries and that is permitted under -59- Section 8.5 below (Dispositions), the financial covenants set forth in this Article 7 shall be computed on a pro forma basis as if the effective date of such disposition had been the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, such actual date of disposition. Following the Closing Date, the financial covenants set forth in this Article 7 shall be computed on a pro forma basis as if all transactions in connection with the Transaction Documents had been consummated, including as if the Multicare Management Agreement had been in effect since the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, the Closing Date. Unless otherwise agreed to by the Required Lenders, the financial condition and results of operations of the Multicare Group or other Excluded Subsidiaries shall not be combined with those of the Borrowers for purposes of calculating the financial covenants set forth in this Article 7 except that distributions actually made to the Borrowers by Genesis Eldercare Corp. shall be included in the financial statements of the Borrower Group as income on its Investments. ARTICLE 8 NEGATIVE COVENANTS So long as any Loan Obligations shall remain unpaid or any Lender or the Issuer shall have any Commitment under this Agreement, each of the Borrowers shall comply with the following covenants. 8.1 INDEBTEDNESS. No Borrower shall, at any time, create, incur, assume or suffer to exist any Indebtedness (including any Guaranties, Capitalized Leases or Assumed Indebtedness), except: (a) Indebtedness to the Lender Parties pursuant to this Agreement and the other Loan Documents; (b) Indebtedness constituting intercompany (i.e., inter-Borrower) loans and advances evidenced by promissory notes duly pledged to the Collateral Agent (for the benefit of the Secured Parties) pursuant to the terms of the Pledge Agreement; (c) Indebtedness in a principal amount not to exceed at any time Fifty Million Dollars ($50,000,000.00) owing to the Designated Acquiror (as such term is defined in Section 8.5 below) on terms and conditions no more onerous than those set forth in this Agreement and the other Loan Documents the proceeds of which shall be used for the development of new assisted living facilities (the "Newly Developed Facilities"); (d) Obligations of Genesis under Interest Rate Hedging Agreements entered into pursuant to Section 6.12 hereof; (e) Indebtedness in respect of the Synthetic Lease Facility in a principal amount not to exceed Eighty Million Dollars ($80,000,000.00); -60- (f) Indebtedness (including the indebtedness under the 1995 Subordinated Notes and the 1996 Subordinated Notes) existing on the Closing Date acceptable to the Agents and described on Schedule 8.1 hereto, which sets forth certain Indebtedness in a principal amount not exceeding $368,000,000.00; and any extensions, renewals, refinancings of the same so long as such extensions, renewals and refinancings (i) are in a principal amount no greater than the amount of the Indebtedness so extended, renewed or refinanced, (ii) are incurred pursuant to agreements or instruments which do not prohibit the Indebtedness or Liens created pursuant to the Loan Documents or otherwise conflict with the terms of the Loan Documents or contains terms and conditions which are more onerous than the terms and conditions in the existing agreements and instruments, (iii) are not made at a time that a Default or Event of Default has occurred and is continuing or would be caused thereby, (iv) have maturity dates (and amortization schedules) no earlier than the debt being refinanced and (v) in the case of any extension, renewal or refinancing of the 1995 Subordinated Notes or 1996 Subordinated Notes, shall have subordination provisions at least as favorable to the senior lenders as those set forth in the agreement refinanced or extended and shall generally be on terms acceptable to the Administrative Agent; (g) Other Indebtedness incurred from time to time, in an aggregate outstanding principal amount not to exceed Thirty Million Dollars ($30,000,000.00) at any time, so long as such Indebtedness (other than Assumed Indebtedness) is incurred pursuant to agreements or instruments which contain terms and conditions no more onerous than the terms and conditions hereof and which do not mature, or have principal amortization prior to, the Maturity Date; and (h) Indebtedness in an aggregate principal amount not in excess of $200,000,000.00 which is subordinated to the Loan Obligations and obligations in respect of the Synthetic Lease Facility on terms substantially the same or more favorable to the senior lenders as those set forth in the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture and which shall not require any principal payments until after the Maturity Date; provided, however, that all Indebtedness incurred pursuant to paragraph (c), (g) or (h) above shall be subject to the following (without duplication): (i) it shall be incurred on terms which do not prohibit the Indebtedness created pursuant to the Loan Documents or otherwise conflict with the terms hereof or the other Loan Documents; (ii) at the time such Indebtedness is incurred, no Default or Event of Default shall have occurred and be continuing or shall be caused or created thereby; (iii) prior to the incurrence of such Indebtedness, Genesis (on behalf of the Borrowers) shall deliver to the Administrative Agent a certificate of a Responsible Officer of Genesis stating: (1) the amount of such Indebtedness, (2) a representation that such Indebtedness was incurred in compliance with the provisions of this Section 8.1 (indicating how much of the permitted Indebtedness under the relevant paragraph of this Section 8.1 is available before and after giving effect thereto) and (3) a representation that such Indebtedness was incurred in compliance with the financial covenants set forth herein, in Section 5.9 of the 1995 Subordinated Note Indenture and in Section 5.9 of the 1996 Subordinated Note Indenture and, in the case of Indebtedness incurred pursuant to paragraph (h) above, showing the calculations thereof; (iv) the terms of the instruments and agreements respecting such Indebtedness shall be no more restrictive than the terms of this Agreement; and (v) the instruments and agreements respecting such -61- Indebtedness shall not contain provisions that would violate the terms of Section 8.12 (Limitation on Certain Restrictive Provisions) below. 8.2 LIENS. No Borrower shall, at any time create, incur, assume or suffer to exist any Lien on any of its assets (now owned or hereafter acquired), except for the following ("Permitted Liens"): (a) Liens pursuant to the Loan Documents; (b) Liens acceptable to the Agents and existing on the Closing Date securing obligations existing on the Closing Date, which Liens and obligations are listed in Schedule 8.2 hereto (and any extension, renewal and replacement Liens upon the same property theretofore subject to a listed Lien, provided that (i) the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the corresponding Lien theretofore existing and (ii) such replacement Liens are incurred pursuant to agreements or instruments which do not prohibit the Liens or Indebtedness created pursuant to the Loan Documents or otherwise conflict with the terms of the Loan Documents); (c) Liens arising from taxes, assessments, charges or claims described in Section 6.9 hereof to the extent permitted by said Section 6.9, provided that the aggregate amount secured by all Liens described in this clause (c) shall not at any time exceed $500,000.00; (d) Liens existing on real estate and equipment acquired by any Borrower in an Acquisition permitted under Section 8.4 hereof so long as any such Lien (i) secures only the corresponding Assumed Indebtedness permitted under clause (g) of Section 8.1 above; (e) Liens on the property subject to the Synthetic Lease Facility securing the obligations in respect of the Synthetic Lease Facility; (f) Other (i) purchase money Liens encumbering only the property purchased with the proceeds of the corresponding Indebtedness and (ii) Capitalized Leases, in each case, securing Indebtedness permitted under clause (g) of Section 8.1 above and in an amount not to exceed $30,000,000.00 in the aggregate at any time; (g) Liens on property which constitutes Newly Developed Facilities securing Indebtedness to the Designated Acquiror incurred pursuant to paragraph (c) of Section 8.1 above; (h) Liens in respect of property or assets of the Borrowers imposed by law which were incurred in the ordinary course of business, such as carriers, warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrowers taken as a whole or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or -62- sale of the property or asset subject to such lien and that adequate reserves have been set aside on the applicable Borrower's books to protect against an adverse result; (i) Liens arising from judgments, decrees or attachments and Liens securing appeal bonds arising from judgments, in each case in circumstances not constituting an Event of Default under Section 9.1(h); (j) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (k) easements, rights-of-way, restrictions, minor defects or irregularities in title to real property and other similar charges or encumbrances on real property not interfering in any material respect with the ordinary conduct of the business of the Borrowers taken as a whole or the value or saleability of the assets so encumbered or affecting their use for their intended purposes; and (l) Other Liens (which may be Capitalized Leases, purchase money Liens or other types of Liens) securing Indebtedness in a principal amount not to exceed at any time Ten Million Dollars ($10,000,000.00) incurred pursuant to paragraph (g) of Section 8.1 above, provided, however, no Lien permitted under clauses (d), (f), (g) or (h) above shall be created at any time, if there shall exist, either before or after giving effect to such transaction, a Default or an Event of Default. "Permitted Liens" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law. 8.3 LOANS, ADVANCES AND INVESTMENTS. No Borrower shall, at any time (i) make or suffer to exist any loan or advance to, or (ii) purchase, acquire or own (beneficially or of record) any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other interest in, or (iii) make any capital contribution to, or other investment in (collectively, "Investments") any other Person, except: (a) Receivables owing to such Borrower arising from provision of services or sales of inventory under usual and customary terms in the ordinary course of business; and loans and advances extended by a Borrower to subcontractors or suppliers under usual and customary terms in the ordinary course of business; (b) (i) Loans or advances from Genesis to a wholly-owned Restricted Subsidiary of Genesis or (ii) loans from a wholly-owned Restricted Subsidiary of Genesis to Genesis or another wholly-owned Restricted Subsidiary of Genesis provided, however, all such loans and advances shall be evidenced by promissory notes duly pledged to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the Pledge Agreement; -63- (c) The capital stock or other ownership interests in other Borrowers duly pledged to the Collateral Agent, for the benefit of the Secured Parties; (d) Cash Equivalent Investments; (e) Acquisitions permitted under Section 8.4 below (Acquisitions); (f) The Borrowers' initial Investment in the capital stock of Genesis ElderCare Corp. for $325,000,000.00; the option/obligation to purchase the remaining capital stock of Genesis ElderCare Corp. pursuant to the Put/Call Agreement; and the exercise of the option (or the fulfillment of the obligation) to purchase the remaining equity of Genesis ElderCare Corp. pursuant to the Put/Call Agreement in exchange solely for (i) common stock of Genesis and/or (ii) net cash proceeds received by Genesis from a substantially contemporaneous sale of its common stock; (g) (i) the capital stock or other ownership interests in the Excluded Subsidiaries (other than the Multicare Group) existing on the Closing Date and set forth on Schedule 11.1 hereto and (ii) the capital contributions and other Investments in the Multicare Group referred to in the final proviso of Section 6.13 (Corporate Separateness); (h) Other Investments not covered by paragraphs (a) through (g) of this Section 8.3 provided, that (i) at the time that any investment is made, the aggregate amount (which shall include all existing amounts and all new commitments therefor) of all Investments pursuant to this paragraph (h) shall not exceed an amount equal to 8.5% of the total consolidated assets of the Borrowers (determined at the time such Investment is made); (ii) no Investment in any entity shall be made pursuant to this paragraph (h) if the Borrowers' existing Investment in such entity exceeds $25,000,000.00 or if such additional Investment would cause the total amount of the Borrowers' Investment in such entity to exceed Twenty Five Million Dollars ($25,000,000.00) except that the Borrowers may make an additional Investment in an amount not exceeding Five Million Dollars ($5,000,000.00) in the aggregate from the Closing Date in Doctors Health Systems and an additional Investment in an aggregate amount not exceeding Five Million Dollars ($5,000,000.00) in the aggregate from the Closing Date in Age Institute of Florida; and (iii) no Default or Event of Default shall then exist either before or after giving effect to such transaction. Investments referred to in paragraph (h) which are existing on the Closing Date and the amount of each such Investment are listed on Schedule 8.3 hereto. On or before (if practicable) but in any event within 5 days after any Investment is made pursuant to the preceding paragraph (h), Genesis (on behalf of the Borrowers) shall deliver to the Administrative Agent a supplement to Schedule 8.3 showing the proposed Investment, together with a certificate of a Responsible Officer of Genesis stating that such Investment -64- was made in compliance with this Section 8.3 (and showing the aggregate amount of permitted Investments which may be made under said paragraph (h) above, the amount of the existing Investments thereunder and the amount of the proposed Investment) and in compliance with the provisions of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. The "amount" of any Investment referred to in this Section 8.3 shall mean the sum of the following (without duplication): the amount of cash paid for or contributed to such Investment; the fair market value of any equity or assets constituting consideration for or contributed to such Investment; and any commitment to pay, contribute, incur, or become liable for any of the foregoing. 8.4 ACQUISITIONS, ETC. No Borrower shall engage in any Acquisition (other than an acquisition of assets in the ordinary course of business) except: (a) A Borrower may merge with or into Genesis or any direct or indirect wholly-owned Restricted Subsidiary of Genesis, provided that (i) if Genesis is a party to the merger, it is the surviving entity and (ii) if Genesis is not a party to the merger, a wholly-owned Restricted Subsidiary of Genesis is the surviving entity and provided, further, that no Event of Default or Default shall occur and be continuing before or after giving effect to such transaction; (b) One or more Borrowers may purchase the institutional pharmacy business and/or the contract therapy business of Multicare on the terms and subject to the conditions set forth in Section 6.16 (Certain Acquisitions) above; (c) One or more Borrowers may acquire Genesis ElderCare Corp. on the terms and subject to the conditions set forth in paragraph (f) of Section 8.3 (Investments) above; and (d) So long as no Default or Event of Default has occurred or would exist after giving effect to such Acquisition, any Borrower may make an Acquisition not covered by paragraph (a), (b) or (c) of this Section 8.4, subject to the following: (i) the "Acquisition Conditions" set forth on Schedule 8.4 hereto shall have been satisfied; and (ii) the Acquisition Cost of all Acquisitions made pursuant to this paragraph (d) shall not exceed Fifty Million Dollars ($50,000,000.00) in any fiscal year, provided, that if the Adjusted Total Debt/Cash Flow Ratio is, and has been for two consecutive fiscal quarters, less than or equal to 4.5 to 1.0, then the Acquisition Cost of all Acquisitions pursuant to this paragraph (d) shall not exceed One Hundred Million Dollars ($100,000,000.00) in any fiscal year but no single Acquisition (or series of related Acquisitions) shall have an Acquisition Cost in excess of Fifty Million Dollars ($50,000,000.00). 8.5 DISPOSITIONS. No Borrower shall sell, convey, assign, lease as lessor, transfer, abandon or otherwise dispose of (collectively, for purposes of this Section 8.5, "transfer"), voluntarily or involuntarily, any of its assets, except: (a) A Borrower may sell inventory in the ordinary course of business; -65- (b) A Borrower may dispose of equipment which is obsolete or no longer useful in its business; (c) A Borrower may transfer its properties to Genesis or a wholly-owned Restricted Subsidiary of Genesis so long as no Event of Default or Default shall exist either before or after giving effect to such transfer; (d) The Borrowers may carry out the transactions contemplated by the Synthetic Lease Facility; (e) The Borrowers may make a one-time disposition (the "One Time Disposition") of some or all of the assets described on Schedule 8.5 (e) hereto having an aggregate fair market value equal to no more than $125,000,000.00, in one transaction or in a series of related transactions, to a single entity (the "Designated Acquiror") in exchange for cash in a like amount on or before March 31, 1998 so long as no Event of Default shall exist either before or after giving effect to such disposition; after March 31, 1998, the Borrowers may, from time to time, transfer Newly Developed Facilities to the Designated Acquiror in exchange for cash and cancellation of liabilities in an amount equal to the fair market value of the facilities so transferred so long as no Default or Event of Default shall exist either before or after giving effect to such disposition and so long as no more than Fifty Million Dollars ($50,000,000) worth of such assets are transferred in any consecutive four fiscal quarter period; (f) The Borrowers may grant Liens permitted under Section 8.2 (Liens) above; (g) So long as no Default or Event of Default has occurred or would exist after giving effect to such transfer, a Borrower may transfer other assets (including ownership interests in Restricted Subsidiaries) provided, however, that (i) the "Disposition Conditions" set forth on Schedule 8.5 (g) hereto shall have been satisfied and (ii) both of the following financial tests shall be satisfied: (A) The sum of the aggregate fair market value of the property subject to such proposed transfer plus the aggregate fair market value of all property previously transferred pursuant to this paragraph (g) at any time after the Closing Date (in each case determined as of the date of transfer or proposed transfer, as the case may be) is less than an amount equal to 5% of the total assets of Genesis and its Restricted Subsidiaries, on a consolidated basis, determined as of the fiscal quarter ending on, or most recently prior to, the date of the proposed transfer; and (B) The sum of the amount of Cash Flow attributable to the property subject to such proposed transfer plus the amount of Cash Flow attributable to all property previously transferred pursuant to this paragraph (g) at any time after the Closing Date (in each case for the four fiscal quarters ended on, or most -66- recently prior to, the date of the transfer or proposed transfer, as the case may be) is less than an amount equal to 5% of the Cash Flow of Genesis and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, the date of the proposed transfer. (h) So long as no Default or Event of Default has occurred or would exist after giving effect to such transfer, the Borrowers may dispose of interests in Excluded Subsidiaires. 8.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS. The Borrowers shall not create, acquire, dispose of, or change any interest in any Restricted Subsidiary except as follows: (a) Restricted Subsidiaries of Borrowers (or any interest therein) may be created or acquired in connection with an Acquisition to the extent permitted under Section 8.4 above (Acquisitions, Etc.); (b) Restricted Subsidiaries of Borrowers (or any interest therein) may be created or acquired in connection with an Investment to the extent permitted under Section 8.3 above (Loans, Advances and Investments); (c) Restricted Subsidiaries of Borrowers may be created as direct or indirect Restricted Subsidiaries of Genesis for other purposes consistent with the terms of this Agreement; and (d) Restricted Subsidiaries (or any interest therein) may be disposed of pursuant to the provisions of Section 8.5 above (Dispositions). provided, however, that with respect to Restricted Subsidiaries created or acquired in accordance with paragraphs (a), (b) or (c) above, they shall become "Borrowers" hereunder and corresponding parties to the other Loan Documents, their equity owned by Borrowers shall be pledged to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the Pledge Agreement (all as more fully set forth in Section 6.10 above) and they shall become parties to the Tax Sharing Agreement. 8.7 LEASES. The Borrowers shall not at any time enter into or suffer to remain in effect any lease, as lessee, of any property, except: (a) Leases (including subleases) by Genesis or a wholly-owned Restricted Subsidiary of Genesis as lessor (or sublessor) to Genesis or another wholly-owned Restricted Subsidiary of Genesis as lessee (or sublessee); (b) Capitalized Leases and Synthetic Leases permitted under Section 8.1 above; and (c) Other leases which are not Capitalized Leases or Synthetic Leases but only to the extent that the aggregate Rental Expense of the Borrowers with respect to -67- all such other leases does not exceed (i) during the fiscal year ending September 30, 1997, Thirty Million Dollars ($30,000,000) and (ii) during each fiscal year thereafter, an amount equal to the amount permitted in the preceding year plus an additional Five Million Dollars ($5,000,000) (e.g., $35,000,000 in the fiscal year ending September 30, 1998). 8.8 DIVIDENDS AND RELATED DISTRIBUTIONS. Genesis shall not (a) declare or pay any dividends, (b) purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, or (c) make any distribution of assets to its stockholders as such whether in cash, assets or obligations of Genesis, (d) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption or retirement of, any shares of its capital stock, (e) or make any other distribution by return of capital or otherwise in respect of any shares of its capital stock provided, however, notwithstanding the foregoing, (i) Genesis may declare and pay dividends and make distributions payable solely in its common stock, or options, warrants or other rights to purchase common stock and (ii) at any time that the Adjusted Total Debt/Cash Flow Ratio is, and has been for two consecutive fiscal quarters, less than 4.5 to 1.0, Genesis may, upon giving written notice thereof to the Administrative Agent, redeem or otherwise purchase outstanding shares of its capital stock in an aggregate amount not to exceed Fifty Million Dollars ($50,000,000) from the Closing Date so long as such action would not result in "Event of Acceleration" under the Put/Call Agreement and so long as both before and after giving effect to such action there would exist no Default or Event of Default hereunder. 8.9 CONSOLIDATED TAX RETURN. No Borrower shall (a) file or consent to the filing of any consolidated income tax return with any Person other than other Borrowers or other Persons party to the Tax Sharing Agreement or (b) become party to any tax sharing or tax allocation agreement with any Person other than the Tax Sharing Agreement. From and after the effective date of the Tax Sharing Agreement (which shall be on or about the Closing Date), each of the Borrowers shall cause the Tax Sharing Agreement to remain in full force and effect, subject to no amendments or modifications other than (a) joinder of additional Subsidiaries of Genesis, from time to time, such that at all times all Subsidiaries of Genesis shall be parties thereto, and (b) such amendments or modifications which, individually or in the aggregate, could not reasonably be expected to have an adverse effect on the Borrowers taken as a whole (including the business, operations, condition, financial or otherwise, properties or prospects of the Borrowers), the Loan Documents or any Lender Party. 8.10 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASEMENT AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS. No Borrower shall, directly or indirectly, pay, prepay, purchase, defease, redeem, retire, acquire, or otherwise make any payment (on account of principal, interest, premium or otherwise) in respect of any obligation under, or evidenced by, the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture (or cause or allow any event or condition to exist which would require any payment, prepayment, purchase, defeasance, redemption, retirement, acquisition or other payment of any such obligation) except that Genesis may make cash interest payments on the aforesaid Indebtedness, as and when required to do so by -68- the mandatory terms thereof, all to the extent consistent with the subordination provisions applicable thereto. No Borrower shall amend, modify or supplement the terms or provisions contained in the aforementioned debt agreements or any agreement or instrument evidencing, relating or applicable thereto. No Borrower shall take or omit to take any action under or in connection with, any such agreement or instrument, which would violate or impair the subordination provisions thereof. No Borrower will make (or give any notice that it shall make) any voluntary or optional payment or prepayment or redemption or acquisition for value of, or will refund, refinance or exchange any Indebtedness (excluding Loan Obligations) if at such time any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof. No Borrower shall designate any of its Indebtedness as "Designated Senior Indebtedness" for purposes of the 1995 Subordinated Note Indenture or 1996 Subordinated Note Indenture except Indebtedness incurred pursuant to this Agreement, the other Loan Documents, Qualifying Interest Rate Hedging Agreements or the Synthetic Lease Facility. Notwithstanding the foregoing, Genesis may refinance the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture in accordance with Section 8.1(f) above. 8.11 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS; EXERCISE OF PUT/CALL AND UNDERTAKINGS RESPECTING PUT/CALL. (a) Constituent Documents. No Borrower shall amend, modify or supplement its articles or certificate of incorporation, bylaws, partnership agreement or other constituent documents (i) if a Material Adverse Effect could result from such amendment, modification or supplement or (ii) if such amendment, modification or waiver could reasonably be expected to materially adversely affect the rights or interests of the Agents, the Issuer or the Lenders. (b) Transaction Documents. No Borrower shall amend, modify or supplement any Transaction Document, except for such amendments, modifications or supplements which could not reasonably be expected to have an adverse effect on the Borrowers taken as a whole (including the condition (financial or otherwise), properties or prospects of the Borrowers), the Loan Documents or any Lender Party. (c) Put/Call Agreement. Genesis shall not purchase or otherwise pay for, directly or indirectly, any stock of Genesis ElderCare Corp. (pursuant to the Put/Call Agreement or otherwise) for cash, or permit Genesis ElderCare Corp. to do so, except with the consent of the Required Lenders provided, however that Genesis may purchase the stock of Genesis Eldercare Corp. under the Put/Call Agreement with proceeds of the issuance of capital stock of Genesis. Genesis shall cause each of the conditions to the ability of Genesis to issue Genesis common stock in lieu of paying the Option Price (as defined in the Put/Call Agreement) in cash under Section 3.2 of the Put/Call Agreement (or any successor section thereto) to be satisfied at all times relevant to the Put/Call Agreement. 8.12 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS. No Borrower shall enter into, or remain a party to, any agreement or instrument which would -69- impose any restriction; (a) on the right of such Person from time to time to declare and pay dividends or take similar actions with respect to capital stock owned by such Person or pay any Indebtedness, obligations or liabilities from time to time owed to another Borrower; or (b) that would prohibit the grant of any Lien upon any of its properties (now owned or hereafter acquired) to secure any senior Indebtedness except for restrictions in agreements respecting Permitted Liens to the extent that the prohibition applies only to property subject to the Permitted Lien; or (c) would prohibit, or require the consent of any Person to, any amendment, modification or supplement to any of the Loan Documents except: (i) restrictions set forth in the Loan Documents or in documents entered into in connection with the Synthetic Lease Facility; (ii) legal restrictions of general applicability; and (iii) restrictions pursuant to the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture or any amendment or refinancing thereof permitted by Section 8.1(f) above; and (iv) any public subordinated indenture permitted under Section 8.1(h). 8.13 LIMITATIONS ON MERGERS, ETC. No Borrower shall merge or consolidate with or into any Person, except (a) mergers of any Borrower with Genesis where Genesis is the survivor, (b) mergers of any Restricted Subsidiary of Genesis with any wholly-owned Restricted Subsidiary of Genesis where such wholly-owned Restricted Subsidiary is the survivor, (c) any merger pursuant to an Acquisition permitted under Section 8.4 above (Acquisitions, Etc.) or (d) any merger pursuant to a disposition permitted under Section 8.5 above (Dispositions). 8.14 AVOIDANCE OF OTHER CONFLICTS. No Borrower shall violate or conflict with, be in default under, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with (a) its articles or certificate of incorporation, bylaws or partnership agreement (or other constituent documents), or (b) any agreement or instrument to which it is party or by which any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clause (b), for matters that could not, individually or in the aggregate, have a Material Adverse Effect. 8.15 CAPITAL EXPENDITURES. No Borrower shall make or commit to make any Capital Expenditure if, after giving effect to such Capital Expenditure, the aggregate amount of all Capital Expenditures of the Borrowers incurred (i) during the fiscal year ending September 30, 1997, would exceed Forty Million Dollars ($40,000,000.00) and (ii) in each fiscal year thereafter, would exceed an amount equal to the amount permitted in the preceding year plus an additional Five Million Dollars ($5,000,000.00) (e.g., $45,000,000.00 in the fiscal year ending September 30, 1998) provided, however, that in addition to the foregoing amounts, the Borrowers may make or commit to make Capital Expenditures in connection with the development of the Newly Developed Facilities so long as the amount of such Capital Expenditures do not exceed Twenty Million Dollars ($20,000,000.00) during any four consecutive fiscal quarters. -70- ARTICLE 9 DEFAULTS 9.1 EVENTS OF DEFAULT. An "Event of Default" means any one of the following events (whatever the reason for such Event of Default, whether it shall be voluntary or involuntary and whether it shall be by action or inaction, by operation of law, pursuant to a court order or any rule or regulation of any Governmental Authority or otherwise): (a) Failure to Pay Principal or Reimburse Drawings. The Borrowers shall fail to make any payment of the principal of any Loan on the date when the same shall become due and payable, whether at stated maturity or at a date fixed for any installment or prepayment thereof or otherwise; or the Borrowers shall fail to make any reimbursement of any Drawing under a Letter of Credit or shall fail to deposit any amount into the cash collateral account, in either case, at the times and in the amounts specified in Article 3 above. (b) Failure to Pay Interest, Fees and Other Amounts. The Borrowers shall fail to make any payment of interest on any Loan or shall fail to pay any fees or any other amounts owing hereunder or under any other Loan Documents (other than as specified in paragraph (a) above) on the dates when such interest, fees or other amounts shall become due and payable and such failure continues for more than three (3) Business Days. (c) Covenant Defaults. (i) There shall occur a default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to any of Sections 6.1(f)(ii), 6.2, 6.3, 6.7, 6.10, 6.11, 6.14 or 6.17 or any Sections in Article 7 or Article 8. (ii) There shall occur any default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to the provisions of this Agreement (other than as provided in paragraph (a) or paragraph (b) above or subparagraph (i) of this paragraph (c)) and, if capable of being remedied, such default shall continue unremedied for thirty (30) days after any Borrower becomes aware, or should in the exercise of reasonable diligence have become aware, of such default. (d) Misrepresentation. Any representation or warranty made or deemed made by any Loan Party in or pursuant to or in connection with any Loan Document or made or deemed made by any subordinated creditor in or pursuant to or in connection with the Investors' Subordination Agreement shall prove to have been false or misleading in any material respect as of the time when made or deemed made. (e) Synthetic Lease Default. There shall have occurred and be continuing any "Lease Event of Default" or "Loan Event of Default" as such terms are defined in the documents relating to the Synthetic Lease Facility. (f) Subordinated Debentures. Any "Event of Default" (or similar term) as defined in the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture -71- or any other subordinated indentures to which any Borrower may from time to time be party shall have occurred and be continuing; or, any term or provision of the subordination provisions contained in any such indentures or the Investors' Subordination Agreement shall cease to be in full force and effect in accordance with its respective terms; or any Loan Party or any holder of any 1995 Subordinated Note or of any 1996 Subordinated Note or subordinated obligation under the Investors' Subordination Agreement or other subordinated note or other subordinated obligations (or any trustee or agent on behalf of such holder) shall terminate, repudiate, declare voidable or void or otherwise contest any term or provision of such subordination provisions; or Genesis shall make, or shall be required to make or to offer to make, any defeasance, redemption or purchase of 1995 Subordinated Notes under Section 4.5 or 5.13 of the 1995 Subordinated Note Indenture or Genesis shall make, or shall be required to make or to offer to make, any purchase of 1996 Subordinated Notes under Section 4.5 or 5.13 of the 1996 Subordinated Note Indenture; or Genesis shall make, or shall be required to make or to offer to make, any purchase, defeasance or redemption of subordinated notes under any similar provision, if any, under any such other subordinated indentures or other subordinated obligations. (g) Other Cross-Defaults. (i) Any Loan Party shall fail to pay, in accordance with its terms and when due and payable, any Indebtedness (other than Indebtedness referred in paragraph (a), (e) or (f) above) under, or arising out of any Qualifying Interest Rate Hedging Agreement or an agreement or instrument (or group or series of related agreements or instruments) which evidences outstanding Indebtedness in excess of $5,000,000.00; (ii) the maturity of any such Indebtedness shall, in whole or in part, have been accelerated, or any such Indebtedness shall, in whole or in part, have been required to be prepaid or purchased prior to the stated maturity thereof; (iii) any event shall have occurred and be continuing that permits any holder or holders of such Indebtedness, any trustee or agent acting on behalf of such holder or holders or any other Person to accelerate the maturity thereof or require any prepayment or repurchase thereof; or (iv) a default by any Loan Party shall be continuing under any other instrument or agreement (whether or not relating to Indebtedness) binding upon such Person, except a default that, together with all other such defaults under this clause (iv), could not have a Material Adverse Effect. (h) Judgments and Executions. One or more judgments for the payment of money shall have been entered against any Loan Party or Loan Parties which judgment or judgments, to the extent not paid or fully covered by insurance, exceed $1,000,000.00 in the aggregate, and such judgment or judgments shall have remained undischarged and unstayed for a period of 30 consecutive days; or one or more writs or warrants of attachment, garnishment, execution, distraint or similar process or any attachment (prejudgment or otherwise) of assets exceeding in value the aggregate amount of $1,000,000.00 shall have been issued against any Loan Party or Loan Parties or any of its or their respective properties. (i) Invalidity or Noncompliance With Loan Documents. Any of the Loan Parties shall fail to perform any of its obligations under any of the Loan Documents (after taking into account any applicable cure period set forth in such agreements), or the validity of this Agreement or any of the other Loan Documents or the subordination provisions of any other instrument or document intended by the parties hereto to benefit the Lender Parties shall have been challenged or disaffirmed by or on behalf of any of the Loan Parties or subordinated creditors, or any of the Loan Documents shall cease to be in full -72- force and effect (other than pursuant to its terms) or, other than as a direct result of any action or inaction of a Lender Party, any Liens created or intended to be created by any of the Loan Documents shall at any time cease to be valid and perfected subject to no equal or prior Liens except Permitted Liens. (j) Material Adverse Effect. The Required Lenders shall have determined in good faith that an event or condition has occurred which could have a Material Adverse Effect. (k) Environmental. Any one or more of the events or conditions set forth in the following clauses (i) or (ii) shall have occurred with respect to any Borrower or any Loan Party or any of their respective Environmental Affiliates, and the Required Lenders shall determine in good faith (which determination shall be conclusive) that such event(s) or condition(s), individually or in the aggregate, could have a Material Adverse Effect: (i) any past or present violation of any Environmental Law by such Person which has not been cured to the satisfaction of the Required Lenders, or (ii) the existence of any pending or threatened Environmental Claim against any such Person, or the existence of any past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim against any such Person. (l) Change of Control. A Change of Control shall have occurred; or a "Change in Control" as defined in the 1995 Subordinated Note Indenture shall have occurred; or a "Change in Control" as defined in the 1996 Subordinated Note Indenture shall have occurred; or a "Change of Control" as defined in the Put/Call Agreement shall have occurred. (m) Subsidiaries as Loan Parties. Any direct or indirect Subsidiary of Genesis, other than Excluded Subsidiaries, shall fail to be, or shall cease to be, or fail to become, a Borrower hereunder; or the equity of any such Person owned by any Borrower shall cease to be, or fail to be, pledged under the Pledge Agreement. (n) Insolvency, Bankruptcy, Etc. Any Loan Party shall make an assignment for the benefit of creditors or a composition with creditors, shall generally not be paying its debts as they mature, shall admit its inability to pay its debts as they mature, shall file a petition in bankruptcy, shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, custodian, liquidator or trustee of or for it or any substantial part of its property or assets, shall commence any proceeding relating to it under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or there shall be commenced against such Loan Party, any such proceeding and the same shall not be dismissed within thirty (30) days or an order, judgment or decree approving the petition in any such proceeding shall be entered against such Loan Party; or any Loan Party shall by any act or failure to act indicate its consent to, approval of or acquiescence in, any such proceeding or any appointment of any receiver, custodian, liquidator or trustee of or for it or for any substantial part of its property or assets, or shall suffer the appointment of any receiver, liquidator or trustee, or shall take any corporate action for the purpose of effecting any of the foregoing; or any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding and the same shall not be dismissed within thirty (30) days or a receiver or a trustee or other officer or -73- representative of a court or of creditors, or any court, governmental office or agency, shall, under color of legal authority, take and hold possession of any substantial part of the property or assets of such Loan Party and shall not have relinquished possession within thirty (30) days, or such Loan Party shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors, or any of them, or any Loan Party shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint. (o) Termination of Multicare Management Agreement or other Transaction Documents. Except as permitted by the Required Lenders, (i) the Multicare Management Agreement shall cease to be in full force and effect or there shall be any breach by any party thereto or a default thereunder or an amendment, modification or supplement thereto not permitted by the terms of this Agreement or any notice of non-renewal or termination thereunder shall have been delivered by any party thereto or (ii) any other Transaction Document shall cease to be in full force and effect (other than by its terms) or there shall be any material breach by any party thereto or a default thereunder or any such document shall be amended, modified, restated or supplemented in a manner not expressly permitted by the terms of this Agreement or (iii) any other Management Agreement of any Borrower shall be terminated or cease to be renewed or extended or shall be amended, modified, restated or supplemented if such termination, failure to renew or extend or amendment, modification or supplement (either singly or collectively with all other such events relating to other Management Agreements) could have a Material Adverse Effect or (iv) at the time of the exercise by the Sponsors (as defined in the Put/Call Agreement) or their rights as set forth in Section 2.2 of the Put/Call Agreement or Section 6.9 of the Put/Call Agreement, any circumstance shall exist which would, under the terms of the Put/Call Agreement, prohibit Genesis from paying the Put Option Exercise Price (as defined in the Put/Call Agreement) in Genesis Common Stock (or with the proceeds of a concurrent offering of Genesis Common Stock) as permitted under the Put/Call Agreement, or (v) there shall be any "Event of Acceleration" (or successor concept) under the Put/Call Agreement, or (vi) any event shall occur which would entitle the Sponsors to exercise any remedy under Section 8.9 of the Put/Call Agreement. (p) Loss of Licenses, Reimbursement Approvals, Etc. There shall be a Limitation of one or more Licenses or Reimbursement Approvals of any Borrower or Borrowers or Persons managed by a Borrower or Borrowers and the Required Lenders shall determine in good faith that such Limitation, individually or collectively all such Limitations, could reasonably be expected to have a Material Adverse Effect. 9.2 CONSEQUENCES OF AN EVENT OF DEFAULT (a) Events of Default in General. If an Event of Default (other than one specified in paragraph (n) of Section 9.1 (Insolvency, Bankruptcy, Etc.) hereof) shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Administrative Agent, the Collateral Agent or any other Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans, the Issuer shall be under no further obligation to issue Letters of Credit hereunder, and the Administrative Agent may, (and upon the written -74- request of the Required Lenders, shall), by notice to Genesis (on behalf of the Borrowers), from time to time do any or all of the following: (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (iii) Direct the Borrowers to pay (and the Borrowers jointly and severally agree that upon receipt of notice they will pay) to the Administrative Agent cash for deposit to the credit of the Letter of Credit collateral account in accordance with Article 3 hereof. (iv) Take (or direct the Collateral Agent to take) any and all actions permitted under the Pledge Agreement or other Loan Documents. (v) Exercise such other remedies as may be available to the Lender Parties under applicable Law. (b) Automatic Acceleration; Certain Bankruptcy-Related Events. If an Event of Default specified in paragraph (n) of Section 9.1 (Insolvency, Bankruptcy, Etc.) hereof shall occur or exist, then, in addition to all other rights and remedies which any Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans and the Issuer shall be under no further obligation to issue Letters of Credit hereunder, and the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations, including those referred to in clause (iii) of the preceding paragraph (a), shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue, and in addition, the Administrative Agent may, (and upon the written request of the Required Lenders), shall, by notice to Genesis (on behalf of the Borrowers), do (or shall direct the Collateral Agent to do) one or more of the following: (i) take any and all actions permitted under the Pledge Agreement or any other Loan Document or (ii) exercise such other remedies as may be available to the Lender Parties under applicable Law. (c) Directions to Collateral Agent. It is understood that notwithstanding any direction that may be given by the Administrative Agent to the Collateral Agent hereunder, the Collateral Agent shall take such action as appropriate under applicable Law and the Pledge Agreement, the Collateral Agency Agreement and such other agreements as may bind the Collateral Agent; the Administrative Agent shall not be liable to any Person for any act or failure to act by the Collateral Agent regardless of any direction given, or any failure to give direction, by the Administrative Agent. -75- (d) Equitable Remedies. It is agreed that, in addition to all other rights hereunder or under Law, the Administrative Agent shall have the right to institute proceedings in equity or other appropriate proceedings for the specific performance of any covenant or agreement made in any of the Loan Documents or for an injunction against the violation of any of the terms of any of the Loan Documents or in aid of the exercise of any power granted in any of the Loan Documents or by Law or otherwise. 9.3 APPLICATION OF PROCEEDS. After the occurrence of an Event of Default and acceleration of the Loans, any amounts received on account of Loan Obligations (whether received under the Collateral Agency Agreement or otherwise) shall be applied by the Administrative Agent in the following order: First, to payment of that portion of the Loan Obligations constituting fees, indemnities, expenses and other amounts due to the Administrative Agent in its capacity as such; Second, to payment of that portion of the Loan Obligations constituting fees, indemnities (other than those paid pursuant to the preceding clause First) due to the Lender Parties, ratably among them in proportion to the amounts described in this clause Second due to them; Third, to payment of that portion of the Loan Obligations constituting accrued and unpaid interest on Loans and accrued and unpaid interest on Drawings, ratably among the Lender Parties in proportion to the respective amounts described in this clause Third due to them; Fourth, to payment of that portion of the Loan Obligations constituting unpaid principal of the Loans or unreimbursed Drawings ratably among the Lender Parties in proportion to the respective amounts described in this clause Fourth due to them; Fifth, to be deposited in such cash collateral account, if any, as may be required under Article 3 above; Sixth, to payment of all other Loan Obligations, ratably among the Lender Parties in proportion to the respective amounts described in this clause Sixth due to them; and Finally, the balance, if any, after all of the Loan Obligations have been indefeasibly paid in full and all of the Letters of Credit shall have terminated (or funds equal to the amount of any contingent liabilities in respect thereof shall have been deposited in the Letter of Credit cash collateral account), to Genesis (on behalf of the Borrowers) or as otherwise required by Law. -76- ARTICLE 10 THE ADMINISTRATIVE AGENT 10.1 APPOINTMENT. Subject to the provisions of the second sentence of Section 10.9 below, each Lender Party hereby irrevocably appoints Mellon to act as Administrative Agent for such Lender Party under this Agreement and the other Loan Documents. Each Lender Party hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender Party under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon hereby agrees to act as Administrative Agent on behalf of the Lender Parties on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 10.9 hereof. Each Lender Party hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Administrative Agent. Each Lender Party agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent (or a Person designated by the Administrative Agent), and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent, if any, expressly provided herein or therein. 10.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any other Loan Document or shall otherwise exist. (b) The duties and responsibilities of the Administrative Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship with respect to any Lender Party. (c) The Administrative Agent's relationship with and to the Lender Parties is governed exclusively by the terms of this Agreement and the other Loan Documents. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, any Lender Party or any other Person or (except only as expressly provided in this Agreement and the other Loan Documents) any other duty or responsibility to such Lender Party or other Person. (d) The Administrative Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Administrative Agent believes in good faith that taking such action may conflict with any Law or any provision of this -77- Agreement or any other Loan Document, or may require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified. (e) The authority of the Administrative Agent to request information from the Borrowers or to take any other voluntary action hereunder shall impose no duty of any kind on the Administrative Agent to make such request or take any such action. (f) The Administrative Agent shall have no duty to inquire whether any Interest Rate Hedging Agreement conforms to the terms and limitations of this Agreement and shall have no duty to inquire as to whether the Borrowers maintain any Interest Rate Hedging Agreements. 10.3 EXERCISE OF POWERS. The Administrative Agent shall take any action of the type specified in this Agreement or other Loan Document as being within the Administrative Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or as otherwise provided in the Loan Documents). In the absence of such direction, the Administrative Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent that this Agreement or such other Loan Document expressly requires the direction or consent of the Required Lenders (or all of the Lenders, or some other Person or group of Persons), in which case the Administrative Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on each Lender Party (whether or not it so consented). The Administrative Agent shall not have any liability to any Person as a result of any action or inaction in conformity with this Section 10.3. 10.4 GENERAL EXCULPATORY PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) The Administrative Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, except only for direct (as opposed to consequential or other) damages suffered by a Person and only to the extent that such Person proves that such damages were caused by the Administrative Agent's own gross negligence or willful misconduct. (b) The Administrative Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of any Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, any Loan Document, (iii) any failure of any Loan Party, any Lender or the Issuer to perform any of their respective obligations under any Loan Document, (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any Loan Document or otherwise from time to time, (v) caring for, protecting, insuring, or paying any taxes, charges or assessments with respect to any Collateral or (vi) the enforceability of any subordination. -78- (c) The Administrative Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of any Loan Party, (ii) the business, operations, condition (financial or otherwise) or prospects of any Loan Party or any other Person (even if the Administrative Agent knows or should know that some event or condition exists or fails to exist), or (iii) except to the extent set forth in Section 10.5(f) below, the existence of any Event of Default or Default. (d) The Administrative Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender Party with any notices, reports or information of any nature, whether in its possession presently or hereafter, whether obtained under or in connection with this Agreement or otherwise, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Administrative Agent to such Lender Party. 10.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) The Administrative Agent may consult with legal counsel (including in-house counsel for the Administrative Agent or in-house or other counsel for any Loan Party), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to any Loan Party or Lender Party, such matter may be established by a certificate of such Loan Party or Lender Party, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) The Administrative Agent may fail or refuse to take any action unless it shall be directed by the Required Lenders (or all of the Lenders, or some other Person or group of Persons, if this Agreement or another Loan Document so expressly requires) to take such action and it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred -79- by or asserted against the Administrative Agent by reason of taking or continuing to take any such action. (e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. (f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Event of Default or Default unless the Administrative Agent has received notice from a Lender Party or a Borrower referring to this Agreement, describing such Event of Default or Default, and stating that such notice is a "notice of default." If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender Party. 10.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS. Each Lender Party acknowledges as follows: (a) neither the Administrative Agent nor any other Lender Party has made any representations or warranties to it, and no act taken hereafter by the Administrative Agent or any other Lender Party shall be deemed to constitute any representation or warranty by the Administrative Agent or such other Lender Party to it; (b) it has, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents; and (c) it will, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. 10.7 INDEMNIFICATION. Each Lender agrees to reimburse and indemnify each Agent and its directors, officers, employees and agents (to the extent not reimbursed by a Loan Party and without limitation of the obligations of the Loan Parties to do so), in proportion to the Lenders' respective pro rata share of (without duplication) the Commitment, the Loans and Letter of Credit Participations, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including the fees and disbursements of counsel for such Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against such Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, the Existing Credit Agreement or any other "Loan Document" referred to therein, the Tender Offer, any Acquisition or any other transaction from time to time contemplated hereby or thereby, or any transaction actually or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or Letter of Credit or any loan or letter of credit under the Existing Credit Agreement, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, -80- penalties, actions, judgments, suits, costs or disbursements that such Lender proves were the result of the gross negligence or willful misconduct of such Agent or such other Person, and, provided, further that no Lender that was not a party to the Existing Credit Agreement shall be obligated to indemnify the Agents or their directors, officers, employees or agents from losses and other liabilities referred to above to the extent that such liabilities were the result of, arose solely out of, or were related solely to the Existing Credit Agreement or other "Loan Documents" referred to therein and as to those liabilities which are not subject to indemnification by the new Lenders by reason of this proviso, the pro rata shares of the other Lenders shall be adjusted accordingly to fully indemnify the Agents. Payments under this Section 10.7 shall be due and payable on demand. 10.8 REGISTER. The Administrative Agent shall maintain at its address referred to in Section 12.1 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans and stated interest thereon owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Genesis on behalf of the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. 10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the other Lender Parties and Genesis (on behalf of the Borrowers). The Administrative Agent may be removed by the Required Lenders at any time for cause by such Required Lenders giving 30 days' prior written notice thereof to the Administrative Agent, the other Lender Parties and Genesis (on behalf of the Borrowers). Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent with (so long as no Default or Event of Default shall have occurred and then be continuing) the consent of Genesis (on behalf of the Borrowers) whose consent shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent may (but shall not be required to) appoint a successor Administrative Agent. Each successor Administrative Agent shall be a Lender if any Lender shall at the time be willing to become the successor Administrative Agent, and if no Lender shall then be so willing, then such successor Administrative Agent shall be an Eligible Institution. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent in its capacity as such, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, such Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the -81- Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Loan Party or Lender Party for whose account such payment is made. 10.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT. If the Administrative Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lender Parties, the Administrative Agent and the Borrowers shall (and the Borrowers shall cause the other Loan Parties to) execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable, in the opinion of the Administrative Agent, to constitute one or more other Persons designated by the Administrative Agent, to act as co-Administrative Agent or agent with respect to any part of the Collateral, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such other Person as such co-Agent or separate agent, as the case may be, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. 10.11 CALCULATIONS. The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith and without gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender Party to whom payment was due but not made shall be to recover from the other Lender Parties any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the appropriate Loan Party, to recover such amount from the appropriate Loan Party. 10.12 OTHER AGENTS. (a) In General. The title "Syndication Agent" given to Citicorp USA, Inc. and NationsBank, N.A. in this Agreement and the title "Documentation Agent" given to First Union National Bank in this Agreement are solely for identification purposes and imply no rights in favor of such Person and no responsibility by such Person except such rights or obligations of "Agents" (including the right to make certain determinations) as are expressly stated herein. No such Agent shall be liable for any act or failure to act on its part except for that which the claimant proves constitutes the gross negligence or willful misconduct of such Agent. (b) Successor Agents. Any Syndication Agent and the Documentation Agent may resign at any time and such Agents may be removed at any time for cause by the other Agents and Genesis in which event, Genesis (on behalf of the Borrowers) if no Default or Event of Default shall then exist, and the Administrative Agent may (in their sole discretion) appoint a successor Agent. -82- ARTICLE 10A SPECIAL INTERCREDITOR PROVISIONS 10A.1 SPECIAL PROVISIONS APPLICABLE TO LENDER PARTIES AS PARTIES TO THE MULTICARE CREDIT AGREEMENT. There are certain understandings about the Multicare Credit Agreement which the Lenders have relied upon in entering into this Agreement and wish to confirm in an intercreditor agreement with the parties to the Multicare Credit Agreement. Because each of the Lenders hereunder is also a "Lender" under the Multicare Credit Agreement, this provision (and a corresponding provision in the Multicare Credit Agreement) shall take the place of a separate agreement and shall serve as an intercreditor agreement among the lenders party to this Agreement and the lenders party to the Multicare Credit Agreement. Accordingly, each of the Lenders hereunder, in its capacity as a "Lender" under the Multicare Credit Agreement, agree to be bound by the following covenants so long as it remains a party to the Multicare Credit Agreement: (a) Without the written consent of the Required Lenders, the parties to the Multicare Credit Agreement will not amend, modify, supplement or restate the assignment provisions of the Multicare Credit Agreement (currently set forth in Section 12.9 of the Multicare Credit Agreement) which require that assignments or participations of any lender's rights and obligations thereunder be made concurrent with a like assignment or participation of such lender's rights and obligations hereunder; and (b) Without the written consent of the Required Lenders, the parties to the Multicare Credit Agreement will not amend, modify, supplement or restate the provisions of the Multicare Credit Agreement (currently set forth in Section 8.16 of the Multicare Credit Agreement) which set forth tests respecting when management fees under the Multicare Management Agreement may be paid in cash, which provisions are incorporated by reference into the Multicare Management Agreement. ARTICLE 10B SPECIAL INTER-BORROWER PROVISIONS 10B.1 CERTAIN BORROWER ACKNOWLEDGEMENTS. (a) Each Borrower acknowledges that it will enjoy significant benefits from the business conducted by the other Borrowers because of, inter alia, their combined ability to bargain with other Persons including without limitation their ability to receive the credit facilities on favorable terms granted by this Agreement and other Loan Documents which would not have been available to an individual Borrower acting alone. Each Borrower has determined that it is in its best interest to procure credit facilities which each Borrower may utilize directly and which receive the credit support of the other Borrowers as contemplated by the Credit Agreement and the other Loan Documents. -83- (b) The Lenders have advised the Borrowers that they are unwilling to enter into this Agreement and the other Loan Documents and make available the credit facilities extended hereby to any Borrower unless each Borrower agrees, among other things, to be jointly and severally liable for the due and proper payment of the obligations of each other Borrower under this Agreement and other Loan Documents. Each Borrower has determined that it is in its best interest and in pursuit of its purposes that it so induce the Lenders to extend credit pursuant to this Agreement and the other documents executed in connection herewith (i) because of the desirability to each Borrower of the credit facilities, the interest rates and the modes of borrowing available hereunder, (ii) because each Borrower may engage in transactions jointly with other Borrowers and (iii) because each Borrower may require, from time to time, access to funds under this Agreement for the purposes herein set forth. (c) Each Borrower has determined that it has and, after giving effect to the transactions contemplated by this Agreement and the other Loan Documents (including, without limitation, the inter-Borrower arrangement set forth in this Article 10B) will have, assets having a fair saleable value in excess of the amount required to pay its probable liability on its existing debts as they fall due for payment and that the sum of its debts is not and will not then be greater than all of its property at a fair valuation, that such Borrower has, and will have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection therewith as such debts mature and that the value of the benefits to be derived by such Borrower from the access to funds under this Agreement (including, without limitation, the inter-Borrower arrangement set forth in this Section 10B) is reasonably equivalent to the obligations undertaken pursuant hereto. 10B.2 CERTAIN INTER-BORROWER AGREEMENTS. (a) Subject to paragraph (b) below, each Borrower as indemnitor shall indemnify the other Borrowers as indemnitees for all Loan Obligations incurred by the indemnitee Borrowers for Loans advanced to, or Letters of Credit issued for the account of, the indemnitor Borrower. (b) The rights and obligations of the Borrowers pursuant to paragraph (a) above shall be subordinated in all respects to the rights of the Administrative Agent and the other Lender Parties with respect to the Loan Obligations and, accordingly, each Borrower agrees that it shall not make any payment or receive any payment pursuant to the preceding paragraph (a) at any time a Default has occurred and is continuing or would be caused thereby. Each Borrower agrees that in the event it receives any payment described by or in violation of this paragraph (b), it shall accept such payment as agent of the Administrative Agent, for the benefit of the Lender Parties, and hold the same in trust on behalf of and for the benefit of the Administrative Agent, for the benefit of the Lender Parties. 10B.3 RECORDS. Genesis (on behalf of each Borrower) shall maintain records specifying (a) all Loan Obligations incurred by each Borrower, (b) the date of such incurrence, (c) the date and amount of any payments made in respect of such Loan Obligations and (d) all inter-Borrower obligations pursuant to paragraph 10B.2 above. Genesis shall make copies of such records available to the Administrative Agent, upon request. -84- ARTICLE 11 DEFINITIONS; CONSTRUCTION 11.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the following meanings, (terms defined in the singular to have a correlative meaning when used in the plural) unless the context hereof otherwise clearly requires: "Accumulated Funding Deficiency" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Acquisition" means, any acquisition by one or more of the Borrowers, directly or indirectly, whether in one transaction or in a series of related transactions (and whether by merger, consolidation, acquisition of assets or otherwise) of all or any substantial portion of the ownership interests in or assets of any separate business enterprise. "Acquisition Cost" means, with respect to any Acquisition, the value in Dollars, of the total consideration paid or payable (whether immediate or deferred and whether in cash, equity or other assets) by any of the Borrowers (such consideration including the amount of any Assumed Indebtedness) for or in respect of the ownership interests or assets being acquired in such Acquisition. "Adjusted Senior Debt/Cash Flow Ratio" means as of any date of determination: (a) Adjusted Senior Debt as of such date of determination divided by (b) Cash Flow of Genesis and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, such date of determination. "Adjusted Senior Debt" means, as of any date of determination, the result of: (a) Adjusted Total Indebtedness, as of such date of determination less (b) the sum of (i) Indebtedness which is evidenced by the 1995 Subordinated Notes, (ii) Indebtedness which is evidenced by the 1996 Subordinated Notes and (iii) any other Indebtedness which is both permitted under the terms of this Agreement and expressly subordinated in right of payment to all Loan Obligations under terms satisfactory to the Administrative Agent. "Adjusted Total Debt/Cash Flow Ratio" means, as of any date of determination, the ratio of: -85- (a) Adjusted Total Indebtedness as of such date of determination divided by (b) Cash Flow of Genesis and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ended on, or most recently prior to, such date of determination. "Adjusted Total Indebtedness" means, as of any date of determination, the sum of: (a) Total Funded Indebtedness as of such date of determination plus (b) the product of (i) the amount of Rental Expense of Genesis and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ended on, or most recently prior to, such date of determination multiplied by (ii) eight (8). "Administrative Agent" has the meaning ascribed to such term in the preamble of this Agreement. "Affiliate" of a Person means (a) any other Person which directly or indirectly controls, or is controlled by, or is under common control with, such Person, (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of such Person or of a Person who is an Affiliate of such Person, and (c) any individual related to such Person or Affiliate by consanguinity or adoption within the third degree. For purposes of the preceding sentence, "control" of a Person means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise and (b) in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 5% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person that is not a corporation, 5% or more of any class of equity interest). Excluded Subsidiaries may be "Affiliates" of Genesis. "Agents" means collectively the Administrative Agent, Citicorp USA, Inc. as Syndication Agent, First Union National Bank as Documentation Agent and NationsBank, N.A. as Syndication Agent. "Agreement" means this Third Amended and Restated Credit Agreement as the same may be amended, modified, restated or supplemented from time to time in accordance with its terms. "Agreement Date" means the date first-above written. "Amount of Unfunded Benefit Liabilities" has the meaning given to such term in ss.4001(a)(18) of ERISA. -86- "Applicable Margin" means a marginal rate of interest which is added to the LIBO Rate or Prime Rate, as the case may be, to determine the effective rate of interest on LIBO Loans and other payments as specified in the Loan Documents. Until the Officer's Compliance Certificate for the fiscal year ended September 30, 1997 is delivered to the Administrative Agent and Lenders pursuant to Section 6.1 above, the Applicable Margin (a) for LIBO Rate Loans shall be the following: 2.5% for any RC Loans or Tranche A Term Loans; 2.75% for any Tranche B Term Loans; and 3.0% for any Tranche C Term Loan and (b) for Prime Rate Loans shall be .75% for RC Loans and Tranche A Loans, shall be 1.0% for Tranche B Loans and shall be 1.25% for Tranche C Loans. Thereafter, the Applicable Margin shall be determined in the following manner: (a) For any RC Loans or Tranche A Term Loans, the Applicable Margin shall be the percentage amount set forth below under the caption "Applicable Margin for RC Loans and Tranche A Term Loans" opposite the relevant Adjusted Total Debt/Cash Flow Ratio: Adjusted Total Applicable Margin for RC Loans Debt/Cash Flow Ratio and Tranche A Term Loans -------------------- ------------------------ Prime Rate Loans LIBO Rate Loans ---------------- --------------- below 3.0 0% .75% >= 3.0 < 3.5 0% 1.00% >= 3.5 < 4.0 0% 1.25% >= 4.0 < 4.5 0% 1.50% >= 4.5 < 5.0 0% 1.75% >= 5.0 < 5.5 .25% 2.00% >= 5.5 < 6.0 .50% 2.25% >= 6.0 .75% 2.50% (b) For any Tranche B Term Loans, the Applicable Margin for LIBO Rate Loans shall be 2.75%, provided, however, that any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0, the Applicable Margin for Tranche B Term Loans shall be 2.5%. The Applicable Margin for Tranche B Term Loans which are Prime Rate Loans shall be 1.0% provided, however, that at any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0, the Applicable Margin for Tranche B Loans which are Prime Rate Loans shall be .75%. (c) For any Tranche C Term Loans, the Applicable Margin for LIBO Rate Loans shall be 3.0%, provided, however, that any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0, the Applicable Margin for Tranche C Term Loans shall be 2.75%. The Applicable Margin for Tranche C Term Loans which are Prime Rate Loans shall be 1.25% provided, however, that at any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0, the Applicable Margin for Tranche C Loans which are Prime Rate Loans shall be 1.00%. (d) The Applicable Margin for Swing Loans at all times shall be zero. -87- The Applicable Margin shall be adjusted five Business Days after receipt of the annual or quarterly Officer's Compliance Certificate, delivered pursuant to Section 6.1. At any time that such annual or quarterly Officer's Compliance Certificate is required to be delivered pursuant to said Section 6.1 and is not so delivered, then the Applicable Margin shall be the highest rate specified for the subject Tranche of Loan until the Officer's Compliance Certificate is so delivered. "Assignment and Acceptance" shall have the meaning ascribed to such term in Section 12.9. "Assumed Indebtedness" means Indebtedness incurred by a Person which is not a Borrower and which (a) is existing at the time such Person (or assets of such Person) is acquired by a Borrower and (b) is assumed by a Borrower in connection with such Acquisition, other than Indebtedness incurred by the original obligor in connection with, or in contemplation of, such Acquisition. "Available RC Commitment" means, as of any date, the difference between (a) and (b) where (a) is the amount of the RC Commitment on such date and (b) is the sum of (i) the aggregate outstanding principal amount of all RC Loans on such date, (ii) the face amount of all outstanding Letters of Credit on such date, (iii) the aggregate unpaid amount of all Drawings under Letters of Credit as of such date and (iv) the aggregate outstanding principal amount of all Swing Loans on such date. "Bank Tax" means (i) any Tax based on or measured by net income of a Lender Party, any franchise Tax and any doing business Tax imposed upon any Lender Party by any jurisdiction (or any political subdivision thereof) in which such Lender Party or any lending office of a Lender Party is located and (ii) for the purposes of Section 1.13, any other Tax imposed by a jurisdiction other than the United States or a political subdivision thereof that would not have been imposed but for a present or former connection between such Lender Party or lending office (as the case may be) and such jurisdiction. "Borrowers" has the meaning ascribed to such term in the preamble hereto. It is the intent of the parties (and a covenant of the Borrowers herein) that each Person which is now or hereafter becomes a direct and indirect Subsidiary of Genesis other than the Excluded Subsidiaries shall at all times after becoming a Subsidiary of Genesis be a "Borrower" pursuant to the terms of this Agreement. "Business Day" means any day other than a Saturday, Sunday, public holiday under the laws of the Commonwealth of Pennsylvania, the State of New York or other day on which banking institutions are authorized or obligated to close in the city in which the Administrative Agent's Domestic Lending Office is located or, as applicable, in the city in which the Issuer's Domestic Lending Office is located provided, however, that whether or not expressly stated in this Agreement or other Loan Documents, when "Business Day" is used with respect to any LIBO Rate Loan, such Business Day must also be a Eurodollar Business Day. "Capital Expenditures", with respect to any Person, means, for any period, all expenditures (whether paid in cash or accrued as liabilities) of such Person during such period which are, or should be, classified as capital expenditures in accordance with GAAP. -88- "Capitalized Lease" means at any time any lease which is, or should be, capitalized on the balance sheet of the lessee at such time in accordance with GAAP, and "Capitalized Lease Obligation" of any Person at any time shall mean the aggregate amount which is, or should be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease in accordance with GAAP. "Cash Equivalent Investments" means any of the following: (i) full faith and credit obligations of the United States of America, or fully guaranteed as to interest and principal by the full faith and credit of the United States of America, maturing in not more than one year from the date such investment is made; (ii) time deposits and certificates of deposit having a final maturity of not more than one year after the date of issuance thereof of any commercial bank incorporated under the laws of the United States of America or any state thereof or the District of Columbia, which bank is a member of the Federal Reserve System and has a combined capital and surplus of not less than $1,000,000,000.00 and with a senior unsecured debt credit rating of at least "A" by Moody's Investors Service, Inc. or "A" by Standard & Poor's Ratings Services; (iii) commercial paper of companies, banks, trust companies or national banking associations (in each case excluding Genesis and its Affiliates) incorporated or doing business under the laws of the United States or one of the States thereof, in each case having a remaining term until maturity of not more than 180 days from the date such investment is made and rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by Standard & Poor's Ratings Group; and (iv) repurchase agreements with any financial institution having combined capital and surplus of not less than $1,000,000,000.00 with a term of not more than seven days for underlying securities of the type referred to in clause (i) above. "Cash Flow", with respect to any Person, for any period, means (a) Net Income of such Person plus (b) each of the following to the extent deducted in determining Net Income: (i) Interest Expense, (ii) Rental Expense, (iii) depreciation expense, (iv) amortization expense, and (v) income taxes, all as adjusted for changes in accrued management fees under the Multicare Management Agreement, in each case for such period. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended), in a single transaction or through a series of related transactions, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, except that a Person shall be deemed to be the "beneficial owner" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of -89- time, upon the happening of an event or otherwise), directly or indirectly, of more than 50% of the total Voting Stock (as hereinafter defined) of Genesis; (b) Genesis consolidates or merges with or into another corporation or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates or merges with or into Genesis, in any such event pursuant to a transaction in which the outstanding Voting Stock of Genesis is changed into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of Genesis is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock (as hereinafter defined) or (y) cash, securities or other property in an amount which Genesis would not be prohibited, under Section 5.10 of the 1995 Subordinated Note Indenture if then in effect, or under Section 5.10 of the 1996 Subordinated Note Indenture if then in effect, from paying as a "restricted payment" (as defined in such indentures), and (ii) the holders of the Voting Stock of Genesis immediately prior to such transaction own, directly or indirectly, not less than 50% of the Voting Stock of the surviving corporation immediately after such transaction; (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Genesis (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of Genesis was approved by a vote of at least 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Genesis then in office; or (d) Genesis is liquidated or dissolved or adopts a plan of liquidation. For purposes of this definition of "Change of Control," (A) "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency); (B) "Redeemable Capital Stock" of a Person shall mean any capital stock or equity interests that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any stated maturity of the principal of the 1995 Subordinated Notes or 1996 Subordinated Notes or is redeemable at the option of the holder thereof at any time prior to any such stated maturity, or is convertible into or exchangeable for debt securities at any time prior to any such stated maturity at the option of the holder thereof; and (C) "Board of Directors" of Genesis shall mean the board of directors of Genesis or the executive committee of Genesis. "Closing Date" means the date that the initial Loans are made hereunder. -90- "COBRA Violation" means any violation of the "continuation coverage requirements" of "group health plans" of former ss.162(k) of the Code (as in effect for tax years beginning on or before December 31, 1988) and of ss.4980B of the Code (as in effect for tax years beginning on or after January 1, 1989) and Part 6 of Subtitle B of Title I of ERISA. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time, and the Treasury regulations thereunder. "Collateral" means (a) the cash collateral account, if any, in respect of Letters of Credit from time to time and (b) the collateral subject to, or purported to be subject to, the Liens of the Pledge Agreement, from time to time. "Collateral Agency Agreement" means the Third Amended and Restated Collateral Agency Agreement, dated as of the date hereof, among the Borrowers, the Administrative Agent, Mellon as SLF Agent (as defined therein) Mellon as Collateral Agent as same may be amended, modified, supplemented or restated from time to time consistent with the provisions hereof. "Collateral Agent" has the meaning assigned to that term in the Collateral Agency Agreement. "Commitment" means, with respect to any Lender, the obligation of such Lender to make Loans pursuant to the terms of this Agreement and, with respect to the Issuer, to issue Letters of Credit. "Commitment" means, with respect to all Lender Parties, the sum of each Lender Party's Commitment. "Contingent Reimbursement Obligation" means the contingent obligation of the Borrowers to reimburse the Issuer for any Drawings that may be made under an outstanding Letter of Credit, whenever issued. Without limiting the generality of the foregoing, the amount of all Contingent Reimbursement Obligations at any time shall be the aggregate amount available to be drawn under outstanding Letters of Credit at such time. "Controlled Group" means a group of employers, of which any Borrower is a member and which group constitutes: (a) A controlled group of corporations (as defined inss.414(b) of the Code); (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in ss.414(c) of the Code); (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in ss.414(m) of the Code); or (d) Any other entity required to be aggregated with any Borrower pursuant to ss.414(o) of the Code. -91- "Cypress" means The Cypress Group L.L.C., a Delaware limited liability company and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Cypress" shall include Cypress Associates L.P., Cypress Offshore Partners L.P., Cypress Merchant Banking Partners L.P., Cypress Advisors Inc. "Default" means any event or condition which with notice, passage of time or both, would constitute an Event of Default. "Default Rate" means, with respect to any amounts payable hereunder or under the other Loan Documents, a rate equal to the sum of (a) two percent (2%) per annum plus (b) the interest rate otherwise in effect with respect to such amounts or, if no such rate is otherwise in effect with respect to such amounts, a rate equal to the sum of (i) the Prime Rate plus (ii) the highest Applicable Margin thereon plus (iii) two percent (2%). "Defined Benefit Pension Plan" means a defined benefit plan (other than a Multiemployer Plan) as defined in ss.3(35) of ERISA which is maintained by any Borrower or any member of its Controlled Group. "Defined Contribution Plan" means an individual account plan (other than a Multiemployer Plan) as defined in ss.3(34) of ERISA which is maintained by any Borrower or any member of its Controlled Group. "Designated Acquiror" has the meaning ascribed to such term in Section 8.5 above. "Dollar," "Dollars" and the symbol "$" means lawful money of the United States of America. "Domestic Lending Office" means, with respect to any Lender or the Issuer, the branch or office of such Lender or the Issuer, as the case may be, designated, from time to time, by such Person in a notice to the Administrative Agent and Genesis. "Drawing" means (a) any amount disbursed by the Issuer pursuant to the terms of a Letter of Credit or (b) as the context may require, the obligation of the Borrowers to reimburse the Issuer for such disbursement. "EBITDA" means Net Income before Interest Expense, provision for income taxes, depreciation and amortization as adjusted on a pro forma basis for the transactions contemplated by the Multicare Management Agreement. "Eligible Institution" means (i) a Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $1,000,000,000.00; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $1,000,000,000.00; (v) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development (the OECD) or has concluded special lending arrangements with the International Monetary Fund associated with its -92- General Arrangements to Borrow or under the laws of a political subdivision of any such country, and having a combined capital and surplus of at least $1,000,000,000.00, so long as such bank is acting through a branch or agency located in the United States; and (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having a combined capital and surplus or total assets of at least $500,000,000.00; and (vii) with respect to any Lender that is a fund, any other fund with assets in excess of $100,000,000.00 that invests in bank loans and is managed by the same investment advisor as such Lender; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Institution under this definition. "Environmental Affiliate" means, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim, such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" means any approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, any Governmental Authority pursuant to or required under any Environmental Law. "Environmental Claim" means, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Environmental Concern Materials at any location, whether or not owned by such Person. "Environmental Cleanup Site" means any location which is listed or proposed for listing on the National Priorities List (as established under CERCLA), on CERCLIS or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding or investigation related to or arising from any alleged violation of any Environmental Law. "Environmental Concern Materials" means (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product of any substance specified in or regulated or otherwise affected by any Environmental Law (including but not limited to any "hazardous substance" as defined in CERCLA or any similar state Law), (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polychlorinated biphenyls, radon and urea formaldehyde. -93- "Environmental Law" means any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the manufacture, use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder. "Eurodollar Business Day" means any Business Day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks are open for domestic and international business (include dealings in Dollar deposits) in London, England. "Eurodollar Lending Office" means, with respect to any Lender or the Issuer, the branch or office of such Lender or the Issuer, as the case may be, designated by such Person in a notice to the Administrative Agent and Genesis. "Event of Default" means any of the Events of Default described in Section 9.1 hereof. "Excess Cash Flow" means, for any fiscal year of the Borrowers, the amount, if any, by which Net Cash Provided by Operations for such fiscal year exceeds the sum of (a) the aggregate principal amount of Total Funded Indebtedness incurred consistently with the terms of this Agreement, and scheduled to have been repaid or prepaid during such fiscal year and (b) the amount of any Investments made pursuant to Section 8.3(h). "Excluded Subsidiaries" means, subject to Section 6.10(b), the entities listed on Schedule 11.1 attached hereto and, whether or not the same would otherwise be Subsidiaries of Genesis, the Multicare Group and, after the Closing Date, each Subsidiary of any Excluded Subsidiary. "Existing Credit Agreement" has the meaning set forth in the recitals hereof. "Federal Funds Rate" for any day means the rate per annum determined by the Administrative Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by federal funds brokers on the previous trading day, or, if such Federal Reserve Bank does not announce such rate on any day, the rate for the last day on which such rate was announced. "Fixed Charge Coverage Ratio" means, as of any date of determination, the result of: -94- (a) Cash Flow of Genesis and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, such date of determination divided by (b) the sum of (i) Interest Expense, income taxes and Rental Expense of Genesis and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to such date of determination and (ii) principal payments scheduled or required to be made on Total Funded Indebtedness for the four fiscal quarters ending on, or most recently prior to, such date of determination. "GAAP" has the meaning set forth in Section 11.3 below. "Genesis" has the meaning ascribed to such term in the preamble hereto. "Genesis ElderCare Acquisition Corp." means the Delaware corporation of that name, formerly Waltz Acquisition Corp. "Genesis ElderCare Corp." means the Delaware corporation of that name, formerly Waltz Corp. "Genesis Eldercare Credit Agreement" has the meaning specified in Section 4.1(s). "Governmental Authority" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guaranty" means, with respect to any Person (a "Guarantor"), any contractual or other obligation, contingent or otherwise, of such Person to pay any Indebtedness or other obligation of any other Person or to otherwise protect the holder of any such Indebtedness or other obligation against loss (whether such obligation arises by agreement to pay, to keep well, to purchase assets, goods, securities or services or otherwise) provided, however, that the term "Guaranty" shall not include an endorsement for collection or deposit in the ordinary course of business. The term, "Guaranty," when used as a verb has the correlative meaning. "Health Care Business" means any healthcare related business including any facility, unit, operation or business supplying health care services, supplies or products, including long-term care, rehabilitation therapy, specialized health care, health care management, and pharmacies. "Indebtedness" of any Person means (without duplication): -95- (a) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person for the deferred purchase price of property or services; (d) all obligations secured by a Lien on property owned by such Person (whether or not assumed) provided, however, for purposes of determining the amount of such Indebtedness under this clause (d), the amount of any such non-recourse Indebtedness shall be limited to the lesser of (i) the fair market value of the asset subject to such Lien and (ii) the amount of such Indebtedness; (e) all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (f) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (g) all obligations of such Person with respect to acceptances or similar obligations issued for the account of such Person; (h) all obligations of such Person under a product financing or similar arrangement described in paragraph 8 of FASB Statement of Accounting Standards No. 49 or any similar requirement of GAAP; (i) all obligations of such Person under any Interest Rate Hedging Agreement or any currency protection agreement, currency future, option or swap or other currency hedge agreement; (j) all Guaranties of such Person; and (k) all obligations of such Person under, or in respect of, any Synthetic Leases. Indebtedness shall not include accounts payable to trade creditors arising out of purchases of goods or services in the ordinary course of business, provided that (i) such accounts payable are payable on usual and customary trade terms, and (ii) such accounts payable are not overdue by more than 60 days according to the original terms of sale except (if no foreclosure, distraint, levy, sale or similar proceeding shall have been commenced) where such payments are being contested in good faith by appropriate proceedings diligently -96- conducted and subject to such reserves or other appropriate provisions as may be required by GAAP. "Indemnified Parties" means the Lender Parties and their respective Affiliates and (without duplication) the directors, trustees, officers, employees, attorneys and agents of each of the foregoing. "Interest Expense" means, for any Person, for any period, the sum (without duplication) of (a) all interest accrued (or accreted) on Indebtedness of such Person during such period whether or not actually paid (excluding any obligations under any Synthetic Leases) plus (b) the net amount accrued under any Interest Rate Hedging Agreements (or less the net amount receivable thereunder) during such period. "Interest Period" means with respect to any LIBO Rate Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, and ending one, two, three or six months thereafter as selected by the Borrowers pursuant to Section 1.8 above and (b) thereafter, each period commencing on the day after the last day of the preceding Interest Period and ending one, two, three or six months thereafter, as selected by the Borrowers pursuant to Section 1.8 above provided, however, if any such Interest Period would otherwise end on a day which is not a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day and provided, further, if any such Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period (as may be the case with an Interest Period commencing at the end of a calendar month) the Interest Period shall end on the last Eurodollar Business Day of the relevant calendar month. "Interest Rate Hedging Agreement" means any rate swap, cap or collar agreement with a term of at least three years or such shorter term as may be acceptable to the Administrative Agent to which any or all of the Borrowers are party and which is on terms and conditions satisfactory to the Administrative Agent. "Investments" has the meaning set forth in Section 8.3 above. "Investors' Subordination Agreement" has the meaning ascribed to such term in Section 4.1 above. "Issuer" has the meaning ascribed to such term in the preamble hereto. "JCAHO" - Joint Commission on Accreditation of Healthcare Organizations. "Joinder Effective Date" means the date that any Joining Subsidiary becomes a Borrower hereunder pursuant to Section 6.10 above. "Joinder Supplement" has the meaning set forth in Schedule 6.10 hereto. "Joining Subsidiary" has the meaning set forth in Section 6.10 hereof. -97- "Law" means any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lender" has the meaning ascribed to such term in the preamble hereto and shall include the Swing Loan Lender. "Lender Parties" means, collectively, the Lenders, the Issuer, and the Agents. "Letter of Credit" means (i) any letter of credit issued by the Issuer pursuant to Article 3 hereof or (ii) any letter of credit issued under the Existing Credit Agreement and outstanding on the Closing Date. "Letter of Credit Participation" means, with respect to any RC Lender, the participation interest of such Lender in any Letter of Credit acquired pursuant to Article 3 above. The amount of the Letter of Credit Participation of an RC Lender in any Letter of Credit shall be deemed to be the amount equal to such RC Lender's pro rata share (determined on the basis of the RC Commitments at such time) of the sum of (a) the aggregate unpaid amount of all Drawings thereunder at such time and (b) the amount of any Contingent Reimbursement Obligations with respect thereto at such time. "LIBO Rate" means the rate per annum determined by the Administrative Agent by dividing (the resulting quotient to be rounded upward to the nearest 1/100 of 1%) (a) the rate of interest (which shall be the same for each day in such Interest Period) determined in good faith by the Administrative Agent (which determination shall be conclusive) to be the average of the rates per annum for deposits in Dollars offered to major money center banks in the London interbank market at approximately 11:00 a.m., London time, two Eurodollar Business Days prior to the first day of the applicable Interest Period for delivery on the first day of such Interest Period in similar amounts and maturities as the proposed LIBO Rate Loan by (b) a number equal to 1.0 minus the Reserve Percentage. "Reserve Percentage" for any day means the percentage (expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as determined in good faith by the Administrative Agent (which determination shall be conclusive), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System representing the maximum reserve requirement (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a member bank in such System. The LIBO Rate shall be adjusted automatically as of the effective date of each change in the Reserve Percentage. "LIBO Rate Loan" means a Loan bearing interest at the per annum rate of the LIBO Rate plus Applicable Margin. "Licenses" means any and all licenses, including provisional licenses, certificates of need, JCAHO and/or other accreditations, permits, franchises, rights to conduct business, approvals by a Governmental Authority or otherwise, consents, qualifications, operating authority, and/or any other authorizations. "Lien" means any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including -98- but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Limitation" means a revocation, suspension, termination, impairment, probation, limitation, non-renewal, forfeiture, declaration of ineligibility, loss of status as a participating provider in a Third Party Payor Arrangement and/or loss of any other rights. "Loans" means, collectively, the Swing Loans, the Tranche A Term Loans, the Tranche B Term Loans, the Tranche C Term Loans and the RC Loans. A "Loan" means any of the Loans. "Loan Documents" means this Agreement, the Notes, the Letters of Credit, the Investors' Subordination Agreement, the Pledge Agreement, the Collateral Agency Agreement, each Joinder Supplement and all other agreements and instruments executed in connection herewith or therewith in each case as the same may be amended, modified, restated or supplemented from time to time. "Loan Obligations" means all obligations, from time to time, of any Loan Party to any Lender Party or other Indemnified Party under, or arising out of, this Agreement or any Loan Document whether such obligations are direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising (specifically including obligations arising or accruing after the commencement of any bankruptcy, insolvency or similar proceeding with respect to any Loan Party, or which would have accrued but for the commencement of such proceeding even if the claim is not allowed in such proceeding under applicable law). "Loan Parties" means the Borrowers and any other Person who from time to time grants or purports to grant to the Collateral Agent a Lien on any property pursuant to the Pledge Agreement or is a Guarantor of any Loan Obligations. "Management Agreement" means any agreement pursuant to which a Person (or group of Persons) manages the business of another Person (or group of Persons). "Material Adverse Effect" means (a) a material adverse effect on the business, operations, condition (financial or otherwise), properties or prospects of Genesis or of the Borrowers, taken as a whole, or (b) an adverse effect on the legality, validity, binding effect or enforceability of any Loan Document, or the ability of the Collateral Agent or any Lender Party to enforce any rights or remedies under or in connection with any Loan Document. Without limiting the generality of the foregoing, as used in connection with any provisions respecting the ownership or operation of any Health Care Business, Material Adverse Effect may include, among other things, any loss or suspension of a License or Reimbursement Approval for any material nursing home or other material Health Care Business or material group of nursing homes or other material group of Health Care Businesses of the Borrowers or any event, occurrence or matter or series thereof giving rise to a reasonable probability of any of the foregoing consequences. -99- "Maturity Date" means the latest of the RC Maturity Date, the Tranche A Maturity Date, the Tranche B Maturity Date or the Tranche C Maturity Date or, as the context may require, the applicable maturity date for a specified Tranche of Loan. "Mellon" means Mellon Bank, N.A., a national banking association, and any successor or assign thereof. "Merger Agreement" means the Agreement and Plan of Merger, dated as of June 16, 1997, among Genesis ElderCare Corp., Genesis ElderCare Acquisition Corp. and Multicare. "Multicare" means The Multicare Companies, Inc., a Delaware corporation. "Multicare Credit Agreement" means the long-term credit agreement, dated as of the date hereof, providing for borrowings substantially contemporaneously with the merger of Genesis ElderCare Acquisition Corp. into Multicare, among Multicare, the Subsidiaries of Multicare referred to therein, Mellon as administrative agent, and the other agents and lenders referred to therein as such agreement may be amended, modified, restated or supplemented from time to time consistent with the terms hereof. "Multicare Group" means, collectively, Genesis ElderCare Corp., Genesis ElderCare Acquisition Corp., Multicare (including the survivor of any merger between Genesis ElderCare Acquisition Corp. and Multicare) and/or any of Multicare's Subsidiaries from time to time. "Multicare Management Agreement" has the meaning ascribed to such term in paragraph (g) of Section 4.1 above. "Multiemployer Plan" means such term in ss.4001(a)(3) of ERISA. "Nazem" means Nazem, Inc., a Delaware corporation and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Nazem" includes Genesis ElderCare Portfolio K, L.P. "Net Cash Proceeds" means, with respect to any transaction involving a Borrower, the gross proceeds thereof in the form of cash or cash equivalents, net of the sum of the following (without duplication): (a) payments made to retire obligations (other than to a Borrower) that are attributable to or secured by the properties that are the subject of a sale, assignment or other disposition which is part of the transaction, (b) reasonable brokerage commissions and other reasonable fees and expenses (including reasonable fees and expenses of legal counsel and investment bankers) related to such transaction and (c) all taxes actually paid or estimated in good faith to be or become payable as a result of such transaction. "Net Cash Provided by Operations" means for any period, the Net Income of the Borrowers on a consolidated basis for such period plus amortization and depreciation expense of the Borrowers for such period plus cash extraordinary gains (other than from a disposition) less Capital Expenditures of the Borrowers for such period (to the extent -100- permitted by the terms of this Agreement), less increases in working capital (or plus decreases in working capital) of the Borrowers during such period. "Net Income" means, with respect to any Person, for any period the net earnings (or loss) after taxes of such Person for such period less extraordinary gains plus extraordinary non-cash losses. "Newly Developed Facilities" has the meaning ascribed to such term in Section 8.1 above. "1995 Subordinated Note Indenture" means the Indenture dated as of June 15, 1995 between Genesis and Delaware Trust Company, as Trustee, relating to the 1995 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1995 Subordinated Notes" means Genesis' 9-3/4% Senior Subordinated Notes issued pursuant to the 1995 Subordinated Note Indenture in the original aggregate principal amount of $120,000,000.00. "1996 Subordinated Note Indenture" means the Indenture, dated as of October 7, 1996, between Genesis and First Union National Bank, as Trustee, relating to the 1996 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1996 Subordinated Notes" means Genesis' 9 1/4% Senior Subordinated Notes issued pursuant to the 1996 Subordinated Note Indenture, in the original aggregate principal amount of $125,000,000.00. "Non-U.S. Lender" means any Lender that is not a U.S. Person. "Notes" means, collectively, the Swing Loan Note, the Tranche A Term Notes, and the RC Notes. A "Note" means any of the Notes. "Officer's Compliance Certificate" means a certificate, as of a specified date, of the chief financial officer or controller of Genesis in substantially the form of Exhibit G hereto as to each of the following: (a) the absence of any Event of Default or Default on such date, (b) the truth of the representations and warranties herein and in the other Loan Documents as of such date and (c) compliance (or if required by the terms of this Agreement respecting the delivery of any such Officer's Compliance Certificate, pro forma compliance after taking account of such acquisitions, dispositions, indebtedness or other events as this Agreement shall direct for such pro forma compliance statement) with the financial covenants set forth in Article 7 and the financial limitations set forth in Sections 8.1(g), 8.2(f), 8.3(h), 8.4(d), 8.5(g) and 8.7(c). "One Time Disposition" has the meaning ascribed to such term in Section 8.5 above. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. -101- "Pension Plan" means a pension plan (as defined in ss.3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA or subject to ss.412 of the Code and maintained by any Borrower or any member of its Controlled Group. "Permitted Liens" has the meaning set forth in Section 8.2 above. "Person" means an individual, corporation, partnership, trust, unincorporated association, limited liability company, joint venture, joint-stock company, Governmental Authority or any other entity. "Plan" means an employee benefit plan (other than a Multiemployer Plan) as defined in ss.3(3) of ERISA which is either (1) maintained by any Borrower or any member of its Controlled Group, or (2) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which any Borrower or any member of its Controlled Group is then making or accruing an obligation to make contributions or has ever been obligated to make contributions. "Pledge Agreement" has the meaning ascribed to such term in Section 4.1 hereof. "Premises" has the meaning ascribed to such term in Section 12.12 hereof. "Prime Rate" means the greater of (A) the interest rate per annum announced from time to time by the Administrative Agent as its prime rate or (B) the Federal Funds Rate plus .50%. The Prime Rate may be greater or less than other interest rates charged by the Administrative Agent to other borrowers. "Prime Rate Loan" means any Loan bearing interest at the Prime Rate plus the Applicable Margin. "Prohibited Transaction" has the meaning given to such term in ss.406 of ERISA or ss.4975(c) of the Code. "Put/Call Agreement" means the Put/Call Agreement dated as of the date hereof, among Genesis, TPG and Cypress. "Qualifying Interest Rate Hedging Agreements" means such Interest Rate Hedging Agreements as may be entered into from time to time pursuant to Section 6.12 above between any or all of the Borrowers, on the one hand, and any Lender Party, on the other hand. "Quarterly Payment Date" means the last Business Day of each December, March, June and September. "RC Commitment" means, with respect to any RC Lender, (i) the amount set forth opposite such Lender's name under the heading "RC Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's RC Commitment assigned to such Lender, in either case as the same may be reduced from time to time pursuant to Section 1.7 above or increased or -102- reduced from time to time pursuant to assignments in accordance with Section 12.9 below or (ii) as the context may require, the obligation of such Lender to make RC Loans in an aggregate unpaid principal amount not exceeding such amount; and "RC Commitment" means with respect to all RC Lenders, the sum of each RC Lender's RC Commitment. "RC Lender" means (i) any Lender with an "RC Commitment" designated on Schedule 1.1 hereto and (ii) any Person that is assigned any or all of the rights or obligations of an RC Lender with respect to its RC Commitment or RC Loans, from time to time, pursuant to Section 12.9. "RC Loan" has the meaning ascribed to such term in Section 1.1 of this Agreement. "RC Maturity Date" means September 30, 2003. "RC Note" means each promissory note of the Borrowers issued to an RC Lender relating to such Lender's RC Loans and RC Commitments substantially in the form of Exhibit A-1 hereto, together with any allonges thereto, from time to time, and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Register" has the meaning ascribed to such term in Section 10.8 hereof. "Registered Lender" has the meaning ascribed to such term in Section 1.14 hereof. "Registered Note" has the meaning ascribed to such term in Section 1.14 hereof. "Regulatory Change" means any applicable law, interpretation, directive, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that becomes effective or is implemented or first required or expected to be complied with after the Agreement Date (including any applicable law that shall have become such as the result of any act of omission of the Borrowers or any of their Affiliates, without regard to when such applicable law shall have been enacted or implemented), whether the same is (i) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority or otherwise or (ii) enacted, adopted, issued or proposed before or after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. "Reimbursement Approvals" means, with respect to all Third Party Payor Arrangements, any and all certifications, provider numbers, provider agreements, participation agreements, accreditations (including JCAHO accreditation) and/or any other agreements with or approvals by organizations and Governmental Authorities. -103- "Rental Expense" means, with respect to any Person for any period, the aggregate rental obligations of such Person, payable in respect of any leases (including Synthetic Leases but excluding Capitalized Leases during such period, but in any case including obligations for taxes, insurance, maintenance and similar costs which the lessee is obligated to pay under the terms of such leases and which are attributable to the leases for such period (whether such amounts are accrued or paid during such period). "Required Lenders" means, as of any date, Lenders otherwise eligible to vote pursuant to the terms of this Agreement holding, in the aggregate, at least 51% of the aggregate outstanding Loans, participations in Letters of Credit and available Commitments so eligible to vote. "Responsible Officer" of a Person means the President, the Secretary, the Chief Executive Officer, any Vice President, the Controller, the Treasurer or the Chief Financial Officer of such Person. "Restricted Subsidiaries" means all direct and indirect Subsidiaries of Genesis at any time other than Excluded Subsidiaries. "Secured Parties" has the meaning ascribed to such term in the Pledge Agreement. "Short-Term Multicare Credit Agreement" has the meaning ascribed to such term in Section 4.1 above. "Subsidiary" of a Person at any time means: (a) any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; (b) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; (c) any partnership, limited liability company, joint venture or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person; or (d) any entity which is consolidated with such Person for financial reporting purposes. -104- "Swing Loan" means an amount advanced by the Swing Loan Lender pursuant to Section 1.1(c) hereof. "Swing Loan Lender" means Mellon, in its capacity as such. "Swing Loan Note" means the promissory note of the Borrowers issued to the Swing Loan Lender, in substantially the form of Exhibit A-3 hereto, together with any allonges thereto, from time to time, and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or in part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Synthetic Lease" means any lease (other than a Capitalized Lease) wherein the lessee is treated (or purported to be treated) as the owner of the leased property for income tax purposes, including the Synthetic Lease Facility. "Synthetic Lease Facility" means the $80,000,000 Synthetic Lease facility evidenced by that certain Amended and Restated Participation Agreement dated as of October 7, 1996, as amended by that certain Amendment to Amended and Restated Participation Agreement dated as of January 31, 1997, that certain Second Amendment to Amended and Restated Participation Agreement dated as of March 7, 1997, and that certain Third Amendment to Amended and Restated Participation Agreement and Amendment to Other Operative Documents dated as of even date herewith (as the same may be further amended, modified or supplemented from time to time, the "Participation Agreement") and other Operative Documents (as defined in the Participation Agreement). "Tax" means any federal, state, local or foreign tax assessment or other governmental charge or levy (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "Tax Sharing Agreement" has the meaning ascribed to such term in Section 4.1 hereof. "Tender Offer" means Genesis ElderCare Acquisition Corp.'s offer to purchase the outstanding common shares of Multicare as contained in its "Offer to Purchase for Cash All Outstanding Shares of Common Stock of the Multicare Companies," dated June 20, 1997, as extended from time to time. "Term Loans" means collectively the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans. "Third Party Claims" has the meaning set forth in Section 12.12 hereof. "Third Party Payor Arrangements" means any and all arrangements with Medicare, Medicaid, CHAMPUS, and any other Governmental Authority, or quasi-public agency, Blue Cross, Blue Shield, any and all managed care plans and organizations, including but not limited to HMOs and preferred provider organizations, private commercial insurance companies, employee assistance programs and/or any other third party -105- arrangements, plans or programs for payment or reimbursement in connection with health care services, products or supplies. "Total Funded Indebtedness" means the aggregate amount of consolidated Indebtedness (including the current portion thereof) of Genesis and its Restricted Subsidiaries (including all Indebtedness consisting of Capitalized Lease Obligations, Synthetic Leases, Guaranties and letter of credit reimbursement obligations). "TPG" means TPG Partners II, L.P., a Delaware limited partnership and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "TPG" includes TPG Parallel II, L.P., TPG Investors II, L.P., TPG Coinvestment, L.P. "Tranche" means the designation of a Loan as an RC Loan, a Tranche A Term Loan, a Tranche B Term Loan or a Tranche C Term Loan and the designation of the related Commitment as an RC Commitment, a Tranche A Commitment, a Tranche B Commitment or a Tranche C Commitment, as applicable. "Tranche A Commitment" means, (1) with respect to any Tranche A Lender, (a) at any time on or prior to the Closing Date, (i) the amount set forth opposite such Lender's name under the heading "Tranche A Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Tranche A Commitment assigned to such Lender, in either case as the same may be increased or reduced from time to time pursuant to assignments in accordance with Section 12.9 or (ii) as the context may require, the obligation of such Lender to make Tranche A Loans in an aggregate unpaid principal amount not exceeding such amount, and (b) thereafter, zero and (2) with respect to all Tranche A Lenders, the sum of each Lender's Tranche A Commitment. "Tranche A Lender" means (a) any Lender with a "Tranche A Commitment" designated on Schedule 1.1 hereto and (b) any Person that is assigned any or all of the rights or obligations of a Tranche A Lender with respect to its Tranche A Commitment or Tranche A Term Loans, from time to time, pursuant to Section 12.9. "Tranche A Maturity Date" means September 30, 2003. "Tranche A Term Loan" has the meaning ascribed to that term in Section 1.1 of this Agreement. "Tranche A Term Note" means each promissory note of the Borrowers issued to a Tranche A Lender relating to such Lender's Tranche A Loans and Tranche A Commitment, substantially in the form of Exhibit A-2 hereto, together with any allonges thereto from time to time and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Tranche B Commitment" means, (1) with respect to any Tranche B Lender, (a) at any time on or prior to the Closing Date, (i) the amount set forth opposite such -106- Lender's name under the heading "Tranche B Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Tranche B Commitment assigned to such Lender, in either case as the same may be increased or reduced from time to time pursuant to assignments in accordance with Section 12.9 or (ii) as the context may require, the obligation of such Lender to make Tranche B Term Loans in an aggregate unpaid principal amount not exceeding such amount, and (b) thereafter, zero and (2) with respect to all Tranche B Lenders, the sum of each Lender's Tranche B Commitment. "Tranche B Lender" means (i) any Lender with a "Tranche B Commitment" designated on Schedule 1.1 hereto and (ii) any Person that is assigned any or all of the rights or obligations of a Tranche B Lender with respect to its Tranche B Commitment or Tranche B Term Loans, from time to time, pursuant to Section 12.9. "Tranche B Maturity Date" means September 30, 2004. "Tranche B Opt-Out Lender" has the meaning ascribed to such term in Section 1.5 hereof. "Tranche B Term Loan" has the meaning ascribed to that term in Section 1.1 of this Agreement. "Tranche C Commitment" means (1) with respect to any Tranche C Lender, (a) at any time on or prior to the Closing Date, (i) the amount set forth opposite such Lender's name under the heading "Tranche C Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Tranche C Commitment assigned to such Lender, in either case as the same may be increased or reduced from time to time pursuant to assignments in accordance with Section 12.9 or (ii) as the context may require, the obligation of such Lender to make Tranche C Term Loans in an aggregate unpaid principal amount not exceeding such amount, and (b) thereafter, zero and (2) with respect to all Tranche C Lenders the sum of each Lender's Tranche C Commitment. "Tranche C Lender" means (i) any Lender with a "Tranche C Commitment" designated on Schedule 1.1 hereto and (ii) any Person that is assigned any or all of the rights or obligations of a Tranche C Lender with respect to its Tranche C Commitment or Tranche C Term Loans, from time to time, pursuant to Section 12.9. "Tranche C Maturity Date" means June 1, 2005. "Tranche C Opt-Out Lender" has the meaning ascribed to such term in Section 1.5 above. "Tranche C Term Loan" has the meaning ascribed to that term in Section 1.1 of this Agreement. "Transaction Documents" means each of the material documents as the same exist on the Closing Date respecting (i) the Tender Offer, (ii) the proposed merger between Genesis ElderCare Acquisition Corp. and Multicare, (iii) the relationship between Genesis, -107- Cypress, Nazem and TPG and the rights and obligations relating thereto and (iv) related matters including the Put/Call Agreement, the Stockholders Agreement respecting Genesis ElderCare Corp., the Merger Agreement and the Multicare Management Agreement. "Type" means with respect to Loans, any of the following, each of which shall be deemed to be a different "Type" of Loan: Prime Rate Loans, LIBO Rate Loans having a one-month Interest Period commencing on a specified date, LIBO Rate Loans having a two-month Interest Period commencing on a specified date, LIBO Rate Loans having a three-month Interest Period and LIBO Rate Loans having a six-month Interest Period commencing on a specified date. "United States Person" has the meaning ascribed to such term in Section 1.13 hereof. "Withdrawal Liability" has the meaning given to such term in ss.4201 of ERISA. 11.2 CONSTRUCTION. In this Agreement and each other Loan Document, unless the context otherwise clearly requires, (a) references to the plural include the singular, the singular the plural and the part the whole; (b) "or" has the inclusive meaning represented by the phrase "and/or;" (c) the terms "property" and "assets" each include all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed, now existing or hereafter acquired; (d) the words "hereof," "herein" and "hereunder" (and similar terms) in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document; (e) the words "includes" and "including" (and similar terms) in this Agreement or any other Loan Document mean "includes, without limitation" and "including, without limitation," respectively whether or not stated; and (f) references to "determination" (and similar terms) by any Lender Party include good faith estimates by such Lender Party (in the case of quantitative determinations) and good faith beliefs by such Lender Party (in the case of qualitative determinations). No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting thereof shall apply to this Agreement or any other Loan Document. The section and other headings contained in this Agreement and in each other Loan Document, and any tables of contents contained herein or therein, are for reference purposes only and shall not affect the construction or interpretation of this Agreement or such other Loan Document in any respect. Whenever this Agreement requires the delivery -108- of financial projections, it is understood that the projections shall be made in good faith, consistent with the Loan Documents and based on Genesis' reasonable judgment as to the anticipated financial performance and results of operations. However, any such financial projections shall not constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. 11.3 ACCOUNTING PRINCIPLES. (a) As used herein, "GAAP" shall mean generally accepted accounting principles (other than as set forth herein as to consolidation) in the United States, applied on a basis consistent with the principles used in preparing the financial statements of Genesis and its consolidated Subsidiaries as of September 30, 1996 and for the fiscal year then ended. When the word "consolidated" is used in this Agreement, it shall be used in a manner consistent with generally accepted accounting principles in the United States except that such principles relating to what entities shall be consolidated shall be superseded by any terms of this Agreement which designate what entities shall be consolidated for purposes relating hereto. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. ARTICLE 12 MISCELLANEOUS 12.1 NOTICES. Unless otherwise expressly provided under this Agreement all notices, requests, demands, directions and other communications (collectively "notices") given to or made upon any party under the provisions of this Agreement (and unless otherwise specified, in each other Loan Document) shall be by telephone (immediately confirmed in writing) or in writing (including facsimile communication) and if in writing shall be delivered by hand, nationally recognized overnight courier or U.S. mail or sent by facsimile to the respective parties at the addresses and numbers set forth under their respective names on the signature pages of this Agreement or in accordance with any subsequent unrevoked written direction from any party to the others. All notices shall, except as otherwise expressly provided in this Agreement, be effective (a) in the case of facsimile, when received, (b) in the case of hand-delivered notice, when hand delivered, (c) in the case of telephone, when telephoned, provided, however, that in order to be effective unless otherwise expressly provided, telephonic notices must be confirmed in writing no later than the next day by letter or facsimile, (d) if given by U.S. mail, the day after such communication is deposited in the mails with overnight first class postage prepaid, return receipt requested, and (e) if given by any other means (including by air courier), when delivered; provided, further, that notices to the Administrative Agent shall not be effective -109- until received. Any Lender giving any notice to the Borrowers shall simultaneously send a copy of such notice to the Administrative Agent, and the Administrative Agent shall promptly notify the other Lenders of the receipt by it of any such notice. Except as otherwise provided in this Agreement, in the event of a discrepancy between any telephonic or written notice, the written notice shall control. 12.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein except as expressly provided otherwise (e.g., certain fee agreements and fee arrangements set forth in the commitment letter relating hereto and indemnification obligations under the Existing Credit Agreement). This Agreement and the other Loan Documents represent the entire agreement between the parties to this Agreement with respect to the transactions contemplated hereby or thereby and, except as expressly provided herein or in the other Loan Documents, shall not be affected by reference to any other documents. 12.3 SEVERABILITY. Every provision of this Agreement and each of the other Loan Documents is intended to be severable, and if any term or provision of this Agreement or any of the other Loan Documents shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, be deemed amended to modify or delete, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it or them valid and enforceable to the maximum extent permitted by applicable Law, without in any manner affecting the validity or enforceability of such provision or provisions in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 12.4 DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not affect the meaning or construction of any of the provisions of this Agreement. 12.5 GOVERNING LAW. This Agreement and the rights and obligations of the parties under this Agreement and under the other Loan Documents shall be construed in accordance with and shall be governed by the laws of the Commonwealth of Pennsylvania. 12.6 NON-MERGER OF REMEDIES. The covenants and obligations of the Borrowers and the rights and remedies of the Administrative Agent and other Lender Parties hereunder and under the other Loan Documents shall not merge with or be extinguished by the entry of a judgment hereunder or thereunder, and such covenants, obligations, rights and remedies shall survive any entry of a judgment until payment in full of the Loan Obligations and termination of the Commitment. All obligations under the Loan Documents shall -110- continue to apply with respect to and during the collection of amounts due under the Loan Documents or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms of this Agreement or of any rights under this Agreement or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings. Without limiting the generality of the foregoing, post-judgment interest rate shall be the interest rate provided in paragraph (d) of Section 1.8 (Default Rate) above. 12.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and no delay or failure of the Administrative Agent or any other Lender Party in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent and the other Lender Parties under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any other Lender Party would otherwise have hereunder or thereunder, at law, in equity or otherwise. Any waiver of a specific default made in accordance with Section 12.8 below shall be effective only as to such specific default and shall not apply to any subsequent default. 12.8 AMENDMENTS; WAIVERS. Any term, covenant, agreement or condition of any Loan Document to which the Lenders (or the Administrative Agent) are party may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver is in writing and is signed by the Required Lenders (or by the Administrative Agent at the direction of the Required Lenders); provided, however, if the rights and duties of the Administrative Agent are affected thereby, such amendment or waiver must be executed by the Administrative Agent; and provided, further, that any amendment or waiver of the terms of Article 3 hereof or any other amendment or waiver that relates to Letters of Credit or rights or obligations relating thereto or the rights or obligations of the Issuer must also be executed by the Issuer; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by each Lender referred to below, if it would (a) increase such Lender's Commitment or the outstanding amount of such Lender's Loans or Letters of Credit Participations; or (b) extend the final maturity of any Loan held by such Lender or the time of any scheduled principal payment of any Loan of such Lender; or (c) decrease the rate of interest or amount of fees due to such Lender or decrease the principal amount in respect of any Loan of such Lender or extend the time of payment of interest or fees due to such Lender, provided that the -111- written consent of the Required Lenders, rather than the consent of all Lenders, shall be sufficient to waive imposition of the Default Rate; or (d) reduce or waive any payment owing to such Lender in respect to any unreimbursed Drawings; or (e) change the number of Lenders which are required to consent to any proposed action under this Agreement before such action may be taken under this Agreement if such change could cause such Lender to lose its right to participate in such consent; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by all the Lenders if it would (i) amend the definition of "Required Lenders" or (ii) release any Borrower of its Obligations or release any guaranty or collateral security granted pursuant to the Loan Documents; provided, however, the Administrative Agent may (or may direct the Collateral Agent to), without the consent of any Person, release any Borrower, guarantor or collateral security granted pursuant to the Loan Documents, (1) as a court of competent jurisdiction may direct, or (2) in connection with a disposition permitted under Section 8.5 above (other than a disposition to another Borrower) or as may be otherwise provided under the Loan Documents or (3) release of record any security interest which was granted pursuant to the Existing Credit Agreement or predecessor thereto and provided, further, that no amendment or waiver of any terms of this Agreement or any other Loan Document shall be made without the consent of such Secured Parties as are required by the terms of the Collateral Agency Agreement, and provided, further, that for purposes of determining whether "all Lenders," "the Required Lenders" or "any Lender" has consented to any amendment or waiver, no effect shall be given to the determination of any Lender who has lost its right to vote pursuant to Sections 1.3(c), 1.3(e)(ii) or 1.6(e) above. Without limiting the generality of the foregoing, the Administrative Agent is authorized and directed to take such action as it deems necessary or desirable (including, without limitation, the execution and filing of UCC-3 termination statements or the giving of direction to another Person to do the same) to release any security interest referred to in the proviso to this clause (ii), Further, the Administrative Agent and the Lenders may amend or modify the provisions of Article 10 hereof (except for Section 10.9 (Successor Administrative Agent) and paragraph (b) of Section 10.12 (Other Agents)) and Article 10A hereof without the need for any consent or approval from the Borrowers, it being acknowledged that the Borrowers are not third party beneficiaries of the provisions of said Article 10 (except for Section 10.9 (Successor Administrative Agent) and paragraph (b) of Section 10.9 (Successor Administrative Agent)) or Article 10A; and without the consent of any Lenders, the Administrative Agent may enter into amendments and modifications to this Agreement and the other Loan Documents as -112- necessary or desirable to cure any ambiguities herein or therein or to add additional Borrowers or add additional Collateral. Reference is also made to Article 10A of the Multicare Credit Agreement which affects the right of the parties hereto to amend certain provisions set forth in Section 12.9 below without the consent of certain Lenders party thereto; accordingly, when amending Section 12.9 below, consideration shall be given to the provisions of said Section 10A of the Multicare Credit Agreement. Finally, reference is also made to Section 2.5 of the Collateral Agency Agreement which affects the right of the parties hereto to amend Articles 6, 7 and 8; accordingly, when amending those Articles, consideration shall be given to such provisions in the Collateral Agency Agreement. 12.9 SUCCESSORS AND ASSIGNS (a) Assignments by the Borrowers. Without the prior written consent of all of the Lenders, no Borrower may assign any of its rights or delegate any of its duties or obligations under this Agreement or any other Loan Document. (b) Participations. Any Lender or the Issuer may sell participations to one or more Eligible Institutions of all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment); provided, however, that, with respect to any Lender, (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties to this Agreement for the performance of such obligations, (iii) all amounts payable by the Borrowers under this Agreement shall be determined as if such transferor Lender had not sold such participation and no participant shall be entitled to receive any greater amount pursuant to this Agreement than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred, (iv) such participant shall agree to be bound by the provisions of this Agreement and the other Loan Documents, (v) with respect to any sale of a participation in any Tranche hereunder, such Lender shall contemporaneously sell to the same participant a proportionately equal amount of its interest in the same Tranche under the Multicare Credit Agreement and (vi) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such transferor Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole rights and responsibility vis-a-vis the Borrowers to enforce the obligations of the Borrowers relating to the Loans and Letters of Credit including the right to approve any amendment, modification or waiver of any provision of this Agreement (except that such Lender may give its participants the right to direct such Lender to approve or disapprove any amendment, modification or waiver which would require such Lender's consent under clause (a) (b), (c), of the preceding Section 12.8). (c) Assignments by Lenders. Each Lender and the Issuer may assign to one or more Eligible Institutions all or a portion of its interest, rights and obligations under this Agreement (including all or a portion of its Commitment) and the other Loan Documents; provided, however, that with respect to any assignment, -113- (i) unless the assignee is (prior to the effective time of the assignment) an existing Lender or the Issuer or an Affiliate of an existing Lender or the Issuer, the Administrative Agent and, if no Event of Default has occurred and is continuing, Genesis (on behalf of the Borrowers) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent and, unless an Event of Default has occurred and is continuing, Genesis (on behalf of the Borrowers), for their acceptance, an Assignment and Acceptance Agreement in substantially the form attached hereto as Exhibit I (an "Assignment and Acceptance"), together with (A) any Note subject to such assignment and (B) a processing and recordation fee of $3,500.00 (or such lesser amount as is required for the Administrative Agent to receive an aggregate amount equal to $3,500.00 under this Agreement and the Multicare Credit Agreement in respect of such transfer), (iii) no Lender may make a partial assignment if the amount of its portion of the Commitment and (without duplication) the outstanding Loans and Letter of Credit Participations, together with the amount of its interest under the Multicare Credit Agreement assigned in accordance with clause (v) below, is, or after giving effect to the proposed assignment would be, less than Ten Million Dollars ($10,000,000.00), (iv) unless the assignee is (prior to the effective time of the assignment) the Issuer or a Lender hereunder, the aggregate amount of any interest so sold to any assignee pursuant to any partial assignment hereunder, together with the aggregate amount so sold to such assignee in accordance with clause (v) below, may not be less than Ten Million Dollars ($10,000,000.00), and (v) with respect to any assignment of an interest in any Tranche hereunder, the assignor Lender shall contemporaneously assign to the same assignee a proportionately equal amount of its interest in the same Tranche under the Multicare Credit Agreement. The requirements set forth in paragraphs (iii) and (iv) above and the requirement as to an assignee being an Eligible Institution shall not apply to certain assignments approved by the Administrative Agent and Genesis (on behalf of the Borrowers) prior to the Agreement Date. "Partial assignment" as used in clauses (iii) and (iv) above means any assignment of a Lender's rights and obligations hereunder except an assignment of all of such Lender's rights and obligations such that after the assignment such Lender shall have no Commitment and no interest in any Loans or Letters of Credit hereunder. Upon compliance with clauses (i) through (v) above, from and after the effective date specified in the relevant Assignment and Acceptance, (1) the assignee shall be a party to this Agreement and the other Loan Documents, and to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and under the other Loan Documents and (2) the assigning Lender shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents. (d) Procedures Respecting Assignment. Upon their receipt of an Assignment and Acceptance executed by the assignor and the assignee, subject to the conditions set forth in the preceding paragraph (c), the Administrative Agent and (unless an -114- Event of Default shall have occurred and be continuing) Genesis (on behalf of the Borrowers) shall accept such Assignment and Acceptance. If the subject assignment is of an interest in the Tranche A Commitment and Tranche A Term Loan and/or RC Commitment and RC Loans, within thirty (30) days after such Assignment and Acceptance is signed and accepted by all parties and made effective, the Borrowers, at their own expense, shall execute and deliver to the Administrative Agent new Notes in exchange for the surrendered Notes, each to the order of such assignee in an amount equal to its portion of the Commitment and Loans assigned to it pursuant to such Assignment and Acceptance and new Notes to the order of the assigning Lender in an amount equal to the Commitment and Loans retained by it. Such Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the date of such surrendered Notes (each assignee shall confirm in the Assignment and Acceptance that, notwithstanding the date of the new Notes made in favor of such assignee, such assignee shall have no right to, or interest in, any fees or interest which shall have accrued on the Loans prior to the effective date of the Assignment and Acceptance). Cancelled or replaced Notes shall be returned to the Borrowers upon the execution of such new Notes. (e) Assignments to Federal Reserve Bank. Notwithstanding any of the terms of this Section 12.9 without the consent of the Administrative Agent and the Borrowers, (i) any Lender may assign all or any portion of its rights to payments in connection with this Agreement to a Federal Reserve Bank as collateral in accordance with Regulation A of the Board of Governors of the Federal Reserve System and (ii) in the case of any Lender that is a fund, any such Lender may collaterally assign or pledge any portion of its Loans (other than RC Loans) and its Notes (other than RC Notes) to its trustee (if such trustee is an Eligible Institution) in support of its obligations to such trustee, provided, however, that before any other transfer may be made to such trustee (whether as a result of such collateral assignment or pledge or otherwise) the conditions of paragraphs (c) and (d) above must be satisfied. Such assignment shall not affect any other rights or any obligations of the assigning Lender. 12.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES. Any Loan Document may be executed in one or more counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument. Delivery of a photocopy or telecopy of an executed counterpart of a signature page to any Loan Document shall be as effective as delivery of a manually executed counterpart of such Loan Document. 12.11 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision contained in this Agreement or the Notes or any other Loan Document, the total liability of the Borrowers for payment of interest pursuant to this Agreement and the Notes shall not exceed the maximum amount of such interest permitted by Law to be charged, collected, or received from the Borrowers, and if any payment by the Borrowers includes interest in excess of such a maximum amount, each Lender shall apply such excess to the reduction of the unpaid principal amount due pursuant to this Agreement and the Notes, or if none is due, to the other Loan Obligations, if any, and then such excess shall be refunded to Genesis (on behalf of the Borrowers). -115- 12.12 INDEMNIFICATION. (a) Whether or not any fundings are made under this Agreement, the Borrowers jointly and severally shall unconditionally upon demand, pay or reimburse the Administrative Agent and other Lender Parties for, and indemnify and save the Administrative Agent, the other Lender Parties and their respective Affiliates, officers, directors, employees, agents, attorneys, shareholders and consultants (collectively, "Indemnitees") harmless from and against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnitee as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, the Existing Credit Agreement or any "Loan Document" referred to therein, the Tender Offer, any Acquisition or transaction from time to time contemplated hereby or by any other Loan Document, or any transaction actually or proposed to be financed in whole or in part or directly or indirectly with the proceeds of any Loan or Letter of Credit, any transaction contemplated by the Transaction Documents but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that the Borrower proves were the result solely of the gross negligence or willful misconduct of such Indemnitee, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrowers under this paragraph (a), or any other indemnification obligation of the Borrowers hereunder or under any other Loan Document are unenforceable for any reason, the Borrowers hereby agree, jointly and severally, to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. (b) Without limiting the generality of the foregoing, the Borrowers jointly and severally hereby indemnify and agree to defend and hold harmless each Indemnitee, from and against any and all claims, actions, causes of action, liabilities, penalties, fines, damages, judgments, losses, suits, expenses, legal or administrative proceedings, interest, costs and expenses (including court costs and attorneys', consultants' and experts' fees) arising out of or in any way relating to: (i) the use, handling, management, production, treatment, processing, storage, transfer, transportation, disposal, release or threat of release of any Environmental Concern Material by or on behalf of, any Borrower or any of its Environmental Affiliates; (ii) the presence of Environmental Concern Materials on, about, beneath or arising from any premises owned or occupied by any Borrower or any of its Environmental Affiliates (herein collectively, the "Premises"); (iii) the failure of any Borrower or Environmental Affiliate of a Borrower or any occupant of any Premises to comply with the Environmental Laws; (iv) any Borrower's breach of any of the representations, warranties and covenants contained herein or in any Loan Documents; (v) Regulatory Actions (as hereinafter defined) and Third Party Claims (as hereinafter defined); or (vi) the imposition or recording of a Lien against any Premises in connection with any release at, on or from any Premises or any activities undertaken on or occurring at any Premises, or arising from such Premises or pursuant to any Environmental Law. The Borrowers' indemnity and defense obligations under this section shall include, whether foreseeable or unforeseeable, any and all costs related to any remedial action. "Regulatory Action" means any notice of violation, citation, complaint, request for information, order, -116- directive, compliance schedule, notice of claim, consent decree, action, litigation or proceeding brought or instituted by any governmental authority under or in connection with any Environmental Law involving any Borrower or any occupant of any of the Premises or involving any of the Premises or any activities undertaken on or occurring at any Premises. "Third Party Claims" means claims by a party (other than a party to this Agreement and other than Regulatory Actions) based on negligence, trespass, strict liability, nuisance, toxic tort or detriment to human health or welfare due to Environmental Concern Materials on, about, beneath or arising from any Premises or in any way related to any alleged violation of any Environmental Laws or any activities undertaken on or occurring at any Premises. (c) The indemnities contained herein shall survive repayment of the Loan Obligations, termination of the Commitment and satisfaction, release, and discharge of the Loan Documents, whether through full payment of the Loans, foreclosure, deed in lieu of foreclosure or otherwise. (d) The foregoing amounts are in addition to any other amounts which may be due and payable to the Administrative Agent and/or the Lenders under this Agreement. A certification by the Administrative Agent or a Lender hereunder of the amount of liabilities, losses, costs, expenses, claims and/or charges shall be conclusive, absent manifest error. 12.13 EXPENSES Whether or not there shall be any funding hereunder, the Borrowers agree, jointly and severally, to pay promptly or cause to be paid promptly and to hold harmless (i) with respect to matters relating to clause (1) of this paragraph (i), the Agents, and, with respect to clauses (2) and (3) of this paragraph (i), the Administrative Agent (and after an Event of Default and for the period in which the same shall continue, each Lender Party) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to (1) the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents, (2) the administration and performance of this Agreement and the other Loan Documents, and (3) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any other Loan Document; (ii) the Administrative Agent (and, with respect to clause (4) of this paragraph (ii) after an Event of Default and for the period in which the same shall continue, each Lender Party) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to the enforcement or preservation of rights under, or administration of, this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (1) the creation, perfection or protection of any Lien on any Collateral, (2) the protection, collection, lease, sale, taking possession of, preservation -117- of, or realization on, any Collateral, including advances for storage, insurance premiums, transportation charges, taxes, filing fees and the like, (3) collection or enforcement of an outstanding Loan Obligation, and (4) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the other Loan Documents); and (iii) each Lender Party against liability for all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by any Lender Party to be payable in connection with this Agreement or any other Loan Documents. 12.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY. To the extent that applicable Law otherwise would render the full amount of the joint and several obligations of any Subsidiary of Genesis hereunder and under the other Loan Documents invalid or unenforceable, such Borrower's obligations hereunder and under the other Loan Documents shall be limited to the maximum amount which does not result in such invalidity or unenforceability, provided, however, that each Borrower's obligations hereunder and under the other Loan Documents shall be presumptively valid and enforceable to their fullest extent in accordance with the terms hereof or thereof, as if this Section 12.14 were not a part of this Agreement. 12.15 AUTHORIZATION OF GENESIS BY OTHER BORROWERS. (a) Each of the Borrowers hereby irrevocably authorizes Genesis to give notices, make requests, make payments, receive payments and notices, give receipts and execute agreements, make agreements or take any other action whatever on behalf of such Borrower under and with respect to any Loan Document and each Borrower shall be bound thereby. This authorization is coupled with an interest and shall be irrevocable, and the Administrative Agent and each Lender Party may rely on any notice, request, information supplied by Genesis, every document executed by Genesis, every agreement made by Genesis or other action taken by Genesis in respect of the Borrowers or any thereof as if the same were supplied, made or taken by any or all Borrowers. Without limiting the generality of the foregoing, the failure of one or more Borrowers to join in the execution of any writing in connection herewith shall not, unless the context clearly requires, relieve any such Borrower from obligations in respect of such writing. (b) The Borrowers acknowledge that the credit provided hereunder is on terms more favorable than any Borrower acting alone would receive and that each Borrower benefits indirectly from all Loans and Letters of Credit hereunder. Genesis and, subject only to the terms of the preceding paragraph (a), each of the other Borrowers, shall be jointly and severally liable for all Loan Obligations, regardless of, inter alia, which Borrower requested (or received the proceeds of) a particular Loan or Letter of Credit. 12.16 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not -118- the Administrative Agent, and the terms "Lender," "Issuer," "Holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, enter into Interest Rate Hedging Agreements with, serve as "Administrative Agent" for other financing vehicles, issue letters of credit on behalf of, and engage in any other business with, (a) any Loan Party or any stockholder, Subsidiary or Affiliate of any Loan Party or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. 12.17 CERTAIN WAIVERS BY BORROWERS. Each Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Loan Obligations and any requirement that any Lender Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any other Borrower or any other Person or any collateral or other direct or indirect security for any of the Loan Obligations. Without limiting the generality of the foregoing, each Borrower acknowledges and agrees that the Administrative Agent or other Lender Party may commence an action against such Borrower whether or not any action is brought against any other Borrower or against any collateral and it shall be no defense to any action brought against any Borrower that the Lender Parties have failed to bring an action against any other Loan Party or any Collateral. 12.18 SET-OFF. The Borrowers hereby agree that, to the fullest extent permitted by Law, if any Loan Obligation shall be due and payable (by acceleration or otherwise), each Lender Party shall have the right, without notice to any Borrower, to set-off against and to appropriate and apply to such Loan Obligation any indebtedness, liability or obligation of any nature owing to any Borrower by such Lender Party, including but not limited to all deposits now or hereafter maintained by any Borrower with such Lender Party. Such right shall exist whether or not such Lender Party or any other Person shall have given notice or made any demand to any Borrower or any other Person. The Borrowers hereby agree that, to the fullest extent permitted by Law, any participant and any Affiliate of any Lender Party or any participant shall have the same rights of set-off as a Lender Party as provided in this Section 12.18. The rights provided by this Section 12.18 are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender Party (or any such participant, or Affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise. 12.19 SHARING OF COLLECTIONS. The Lender Parties hereby agree among themselves that if any Lender Party shall receive (by voluntary payment, realization upon security, charging of accounts, set-off or from any other source) any amount on account of the Loan Obligations in greater proportion than any such amount received by any other Lender Party (based on the relative amount of each such Lender Party's interest in the Loan Obligations), then the Lender Party receiving such proportionately greater payment shall notify each other Lender Party and the Administrative Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section 12.19 so that, in effect, all such -119- excess amounts will be shared ratably among all of the Lender Parties. The Lender Party receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lender Parties a participation in the applicable Loan Obligations owed to such other Lender Parties in such amount as shall result in a ratable sharing by all Lender Parties of such excess amount (and to such extent the receiving Lender Party shall be a participant). If all or any portion of such excess amount is thereafter recovered from the Lender Party making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender Party making such purchase. The Borrowers hereby consent to and confirm the foregoing arrangements. Each participant shall be bound by this Section 12.19 as fully as if it were a Lender hereunder. 12.20 OTHER LOAN DOCUMENTS. Each Lender acknowledges that on signing this Agreement is bound by the terms of the Collateral Agency Agreement and the other Loan Documents. Without limiting the generality of the foregoing, each Lender party to a Qualifying Interest Rate Hedging Agreement acknowledges that it is familiar with the provisions set forth in Section 2.3 of the Collateral Agency Agreement. 12.21 CERTAIN BORROWER ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges that neither the Administrative Agent nor any other Lender Party has any fiduciary relationship with or fiduciary duty to any Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Other Lender Parties on the one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. 12.22 CERTAIN LENDER PARTY ACKNOWLEDGEMENTS. Each Lender Party acknowledges that it has no right to any interest in any capital stock of Multicare in connection with this Agreement and the other Loan Document and, should that right otherwise arise hereunder or under the other Loan Documents, it is hereby waived. 12.23 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL. (a) Consent to Jurisdiction. For the purpose of enforcing payment and performance of the Loan Documents, including, any payment under the Notes and performance of other obligations under the Loan Documents, or in any other matter relating to, or arising out of, the Loan Documents, each of the Borrowers hereby consents to the jurisdiction and venue of the courts of the Commonwealth of Pennsylvania or of any federal court located in such state, waive personal service of any and all process upon it and consents that all such service of process be made by certified or registered mail directed to Genesis (on behalf of the applicable Borrowers) at the address provided for in Section 12.1 and service so made shall be deemed to be completed upon actual receipt or execution of a receipt by any Person at such address. Each of the Borrowers hereby waives the right to contest the jurisdiction and venue of the courts located in the Commonwealth of Pennsylvania on the ground of inconvenience or otherwise and, further, waives any right to bring any action or proceeding against (a) the Administrative Agent in any court outside the Commonwealth of Pennsylvania, or (b) any other Lender other than in a state within the -120- United States designated by such Lender. The provisions of this Section 12.23 shall not limit or otherwise affect the right of the Administrative Agent or any other Lender Party to institute and conduct an action in any other appropriate manner, jurisdiction or court. (b) WAIVER OF JURY TRIAL; DAMAGES. NEITHER ANY LENDER PARTY NOR ANY LOAN PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF THE FOREGOING SHALL SEEK A JURY TRIAL IN ANY PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, OR INVOLVING ANY COLLATERAL OR ANY GUARANTY RELATING TO THE INDEBTEDNESS HEREUNDER OR THE RELATIONSHIP BETWEEN OR AMONG SUCH PERSONS OR ANY OF THEM. NO SUCH PERSON WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT WAIVES ANY RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION 12.23 ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS AGREEMENT (i) CERTIFIES THAT NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER PARTY NOR ANY REPRESENTATIVE OR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR SUCH LENDER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH (b) OF SECTION 12.23. THE PROVISIONS OF THIS SECTION 12.23 HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND THE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 12.23 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. -121- IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. BORROWERS: Genesis: GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation By /s/ Ira C. Gubernick --------------------------------- Name: Ira C. Gubernick Title: General Counsel-Corporate and Secretary Address for notices: Suite 100 148 West State Street Kennett Square, PA 19348 Attention: Senior Vice President and Chief Financial Officer Telephone: 610-444-6350 Facsimile: 610-444-3365 Subsidiaries: BREVARD MERIDIAN LIMITED EASTON MERIDIAN LIMITED PARTNERSHIP, PARTNERSHIP, a Maryland limited partnership a Maryland limited partnership By: Meridian Healthcare, Inc., By: Meridian Health, Inc., a Pennsylvania corporation, a Pennsylvania corporation, its sole general partner its sole general partner CATONSVILLE MERIDIAN LIMITED EDELLA STREET ASSOCIATES, PARTNERSHIP, a Pennsylvania limited partnership a Maryland limited partnership By: Genesis Health Ventures of By: Meridian Health, Inc., Clarks Summit, Inc., its sole a Pennsylvania corporation, general partner one of its general partners -122- GENESIS PROPERTIES LIMITED MERIDIAN PERRING LIMITED PARTNERSHIP, PARTNERSHIP a Pennsylvania limited partnership a Maryland limited partnership By: Genesis Health Ventures By: Meridian Healthcare, Inc., of Arlington, Inc., its sole a Pennsylvania corporation, general partner its general partner GREENSPRING MERIDIAN LIMITED MERIDIAN VALLEY LIMITED PARTNERSHIP, PARTNERSHIP a Maryland limited partnership a Maryland limited partnership By: Meridian Healthcare, Inc., By: Meridian Healthcare, Inc., a Pennsylvania corporation, a Pennsylvania corporation, its sole general partner its general partner HALLMARK HEALTHCARE LIMITED MERIDIAN VALLEY VIEW LIMITED PARTNERSHIP, PARTNERSHIP a Maryland limited partnership a Maryland limited partnership By: Pharmacy Equities, Inc., By: Meridian Healthcare, Inc., a Pennsylvania corporation a Pennsylvania corporation, its general partner its general partner HAMMONDS LANE MERIDIAN LIMITED MILLVILLE MERIDIAN LIMITED PARTNERSHIP, PARTNERSHIP, a Maryland limited partnership a Maryland limited partnership By: Meridian Healthcare, Inc., By: Meridian Healthcare, Inc., a Pennsylvania corporation, a Pennsylvania corporation, one of its general partners its sole general partner MERIDIAN/CONSTELLATION LIMITED PHILADELPHIA AVENUE ASSOCIATES, a PARTNERSHIP Pennsylvania limited partnership a Maryland limited partnership By: Philadelphia Avenue Corp., By: Meridian Healthcare, Inc., a Pennsylvania corporation, its a Pennsylvania corporation, sole general partner its general partner RIVER STREET ASSOCIATES, a MERIDIAN EDGEWOOD LIMITED Pennsylvania limited partnership PARTNERSHIP By: Genesis Health Ventures of a Maryland limited partnership Wilkes-Barre, Inc., By: Meridian Healthcare, Inc., its sole general partner a Pennsylvania corporation, its general partner /s/ ICG ------------------ Initials of Signor -123- SEMINOLE MERIDIAN LIMITED GENESIS PROPERTIES OF DELAWARE PARTNERSHIP, LTD. PARTNERSHIP, L.P., a Maryland limited partnership a Delaware limited partnership By: Meridian Health, Inc., By: Genesis Properties of Delaware a Pennsylvania corporation, Corporation, a general partner its sole general partner McKERLEY HEALTH FACILITIES, a STATE STREET ASSOCIATES, L. P., a New Hampshire general partnership Pennsylvania limited partnership By: Meridian Health, Inc., a By: State Street Associates, Inc., Pennsylvania corporation, and a Pennsylvania corporation, Meridian Healthcare, Inc., a its sole general partner Pennsylvania corporation, its general partners THERAPY CARE SYSTEMS, L.P. a Pennsylvania limited partnership GENESIS HEALTH VENTURES OF WEST By: Genesis Eldercare VIRGINIA LIMITED PARTNERSHIP, Rehabilitation Services, Inc., a Pennsylvania limited partnership a Pennsylvania corporation, By: Genesis Health Ventures of West its sole general partner Virginia, Inc., a Pennsylvania corporation, its general partner VOLUSIA MERIDIAN LIMITED PARTNERSHIP, a Maryland limited partnership By: Meridian Health, Inc., a By: /s/ Ira C. Gubernick Pennsylvania corporation, its sole ------------------------------- general partner On behalf of each of the foregoing as General Counsel-Corporate and Secretary of the general partner Address for notices: Suite 100 148 West State Street Kennett Square, PA 19348 Attention: Senior Vice President and Chief Financial Officer Telephone: 610-444-6350 Facsimile: 610-444-3365 -124- GENESIS HEALTH VENTURES OF GENESIS HEALTH VENTURES OF ARLINGTON, INC., POINT PLEASANT, INC. a Pennsylvania corporation a Pennsylvania corporation GENESIS HEALTH VENTURES OF GENESIS IMMEDIATE MED BLOOMFIELD, INC., CENTER, INC., a Pennsylvania corporation a Pennsylvania corporation GENESIS HEALTH VENTURES OF GENESIS ELDERCARE HOME CARE CLARKS SUMMIT, INC., SERVICES, INC. (f/k/a HEALTHCARE a Pennsylvania corporation SERVICES NETWORK, INC.) a Pennsylvania corporation GENESIS HEALTH VENTURES OF MASSACHUSETTS, INC., GENESIS ELDERCARE PHYSICIAN a Pennsylvania corporation SERVICES, INC., (f/k/a GENESIS PHYSICIAN SERVICES, INC.) GENESIS HEALTH VENTURES OF a Pennsylvania corporation NAUGATUCK, INC., a Pennsylvania corporation HEALTHCARE RESOURCES CORP., a Pennsylvania corporation GENESIS HEALTH VENTURES OF SALISBURY, INC., KNOLLWOOD MANOR, INC., a Pennsylvania corporation a Pennsylvania corporation GENESIS HEALTH VENTURES OF MERIDIAN HEALTH, INC., WAYNE, INC., a Pennsylvania corporation a Pennsylvania corporation MERIDIAN HEALTHCARE, INC., GENESIS HEALTH VENTURES OF a Pennsylvania corporation WEST VIRGINIA, INC., a Pennsylvania corporation PHILADELPHIA AVENUE CORPORATION, a Pennsylvania corporation GENESIS HEALTH VENTURES OF WINDSOR, INC., GENESIS ELDERCARE STAFFING a Pennsylvania corporation SERVICES, INC. (f/k/a STAFF REPLACEMENT SERVICES, INC.) GENESIS HEALTH VENTURES OF a Pennsylvania corporation INDIANA, INC., a Pennsylvania corporation STATE STREET ASSOCIATES, INC., a Pennsylvania corporation GENESIS HEALTH VENTURES OF NEW GARDEN, INC. a Pennsylvania corporation /s/ ICG ------------------ Initials of Signor -125- SUBURBAN MEDICAL SERVICES, INC. GENESIS HOLDINGS, INC., a Pennsylvania corporation a Delaware corporation GENESIS ELDERCARE REHABILITATION GENESIS PROPERTIES OF DELAWARE SERVICES, INC., (f/k/a TEAM CORPORATION, REHABILITATION, INC.) a Delaware corporation a Pennsylvania corporation HILLTOP HEALTH CARE CENTER, INC., THERAPY CARE, INC., a Delaware corporation a Pennsylvania corporation KEYSTONE NURSING HOME, INC., THE TIDEWATER HEALTHCARE a Delaware corporation SHARED SERVICES GROUP, INC., a Pennsylvania corporation LINCOLN NURSING HOME, INC., a Delaware corporation WYNCOTE HEALTHCARE CORP. a Pennsylvania corporation McKERLEY HEALTH CARE CENTERS, INC., a New Hampshire corporation ASCO HEALTHCARE, INC., a Maryland corporation WAYSIDE NURSING HOME, INC., a Delaware corporation ACCUMED, INC., a New Hampshire corporation PROFESSIONAL PHARMACY SERVICES, INC., a Maryland Corporation BRINTON MANOR, INC., a Delaware corporation MEDICAL SERVICES GROUP, INC., a Maryland Corporation CONCORD HEALTHCARE CORPORATION, NEIGHBORCARE PHARMACIES, INC., a Delaware corporation a Maryland Corporation CRYSTAL CITY NURSING CENTER, DERBY NURSING CENTER CORPORATION, INC., a Connecticut Corporation a Maryland corporation GENESIS ELDERCARE NATIONAL EASTERN MEDICAL SUPPLIES, INC., CENTERS, INC., (f/k/a NATIONAL HEALTH a Maryland corporation CARE AFFILIATES, INC.) a Florida Corporation GENESIS HEALTH SERVICES CORPORATION, a Delaware corporation GENESIS HEALTHCARE CENTERS HOLDINGS, INC., a Delaware corporation /s/ ICG ------------------ Initials of Signor -126- GENESIS ELDERCARE NETWORK GERIMED CORP. SERVICES, INC., (f/k/a GENESIS a Pennsylvania corporation MANAGEMENT RESOURCES, INC.) (f/k/a TOTAL CARE SYSTEMS, INC.) GMS INSURANCE SERVICES, INC. a Pennsylvania Corporation a Pennsylvania corporation GENESIS ELDERCARE HOSPITALITY SERVICES, INC. (f/k/a HCHS, INC.) GENESIS ELDERCARE PROPERTIES, a Pennsylvania corporation INC., a Pennsylvania Corporation GENESIS ELDERCARE TRANSPORTATION SERVICES, INC. (f/k/a HSS-PARA VERSALINK, INC., a Delaware Corporation TRANSIT, INC. a Pennsylvania corporation GERIATRIC & MEDICAL COMPANIES, INC. INNOVATIVE PHARMACY SERVICES, INC. a Delaware corporation a New Jersey corporation GERIATRIC AND MEDICAL SERVICES, LIFE SUPPORT MEDICAL, INC. INC. a Pennsylvania corporation a New Jersey corporation LIFE SUPPORT MEDICAL EQUIPMENT, INC. GERIATRIC AND MEDICAL a Pennsylvania corporation INVESTMENTS CORP. a Delaware corporation METRO PHARMACEUTICALS, INC. a Pennsylvania corporation BURLINGTON WOODS CONVALESCENT CENTER, INC. NETWORK AMBULANCE SERVICES, INC. a New Jersey corporation (f/k/a REGIONAL AMBULANCE SERVICES, INC.) (f/k/a LIFE SUPPORT AMBULANCE, CRESTVIEW CONVALESCENT HOME, INC.) INC. a Pennsylvania corporation a Pennsylvania corporation UNITED HEALTH CARE SERVICES, INC. CRESTVIEW NORTH, INC. a Pennsylvania corporation a Pennsylvania corporation VALLEY MEDICAL SERVICES, INC. GENESIS ELDERCARE DIAGNOSTICS, a Pennsylvania corporation INC. (f/k/a DIVERSIFIED DIAGNOSTICS, INC.) VALLEY TRANSPORT AMBULANCE a Pennsylvania corporation SERVICE, INC. a Pennsylvania corporation GMC MEDICAL CONSULTING SERVICES, INC. a Pennsylvania corporation /s/ ICG ------------------ Initials of Signor -127- VILLAS REALTY & INVESTMENT, INC. GOVERNOR'S HOUSE NURSING HOME, a Pennsylvania corporation INC., a Delaware corporation WEISENFLUH AMBULANCE SERVICE, HEALTH CONCEPTS AND SERVICES, INC., INC. a Maryland corporation a Pennsylvania corporation INNOVATIVE HEALTH CARE MARKETING, GENESIS ELDERCARE ADULT DAY INC., a Pennsylvania corporation HEALTH SERVICES, INC., a Pennsylvania corporation KNOLLWOOD NURSING HOME, INC. a Delaware corporation GENESIS ELDERCARE HOME HEALTH SERVICES - SOUTHERN, INC., a MANOR MANAGEMENT CORPORATION OF Pennsylvania corporation GEORGIAN MANOR, INC., a Pennsylvania corporation GENESIS ELDERCARE MANAGEMENT SERVICES, INC. McKERLEY HEALTH CARE CENTER- (f/k/a BLUEFIELD MANOR, INC.) CONCORD, INC., a New Hampshire a Delaware corporation corporation CARECARD, INC. MERIDIAN HEALTHCARE INVESTMENTS, a Maryland corporation INC., a Maryland corporation CAREFLEET, INC. PHARMACY EQUITIES, INC., a a Pennsylvania corporation Pennsylvania corporation CHELTENHAM LTC MANAGEMENT, PROSPECT PARK LTC MANAGEMENT, INC. INC., a Pennsylvania corporation a Pennsylvania corporation EASTERN REHAB SERVICES, INC., WALNUT LTC MANAGEMENT, INC., a a Maryland corporation Pennsylvania corporation EIDOS, INC., WEST PHILADELPHIA LTC MANAGEMENT, a Florida corporation INC., a Pennsylvania corporation GMC LEASING CORPORATION, TRANSPORT SERVICES, INC., a Delaware corporation a Maryland corporation GMS MANAGEMENT, INC., a Pennsylvania corporation GMS MANAGEMENT-TUCKER, INC., a Pennsylvania corporation /s/ ICG ------------------ Initials of Signor -128- YORK LTC MANAGEMENT INC., a Pennsylvania corporation GENESIS ELDERCARE REHABILITATION MANAGEMENT SERVICES, INC. (f/k/a ROBINDALE MEDICAL SERVICES, INC.) a Pennsylvania corporation By: /s/ Ira C. Gubernick --------------------------------- On behalf of each of the foregoing as General Counsel-Corporate and Secretary Address for notices: Suite 100 148 West State Street Kennett Square, PA 19348 Attention: Senior Vice President and Chief Financial Officer Telephone: 610-444-6350 Facsimile: 610-444-3365 -129- [PAGES 130-138 INTENTIONALLY OMITTED] -130- AGENTS, ISSUER AND LENDERS: MELLON BANK, N.A., as a Lender, as Issuer and as Administrative Agent By /s/ Barbara J. Bauswald -------------------------------- Name: Barbara J. Bauswald Title: Vice President Address for notices: street address: AIM 199-5220 Mellon Independence Center 701 Market Street Philadelphia, Pennsylvania 19106 mailing address: AIM 199-5220 P.O. Box 7899 Philadelphia, Pennsylvania 19101-7899 Attention: Linda Sigler, Loan Administration Telephone: 215-553-4583 Facsimile: 215-553-4789 With a copy to Plymouth Meeting Executive Campus 610 W. Germantown Pike, Suite 200 Plymouth Meeting, Pennsylvania 19462 Attention: Barbara J. Hauswald Vice President Telephone: 610-941-8412 Facsimile: 610-941-4136 -139- With a copy for notices respecting assignments to: MELLON BANK, N.A. One Mellon Bank Center 45th Floor Pittsburgh, PA 15258-0001 Attention: Dean Hazelton Telephone: 412-236-0316 Facsimile: 412-234-4612 -140- CITICORP USA INC., as a Lender and as Syndication Agent By /s/ Margaret A. Brown -------------------------------- Name: Margaret A. Brown Title: Managing Director Address for notices: 399 Park Avenue 8th Floor, Zone 6 New York, NY 10043 Attention: Margaret A. Brown Telephone: 212-559-0501 Facsimile: 212-793-0289 -141- FIRST UNION NATIONAL BANK, as a Lender and as Documentation Agent By /s/ Joseph H. Towell -------------------------------- Name: Joseph H. Towell Title: Senior Vice President Address for notices: One First Union Center TW-5 Charlotte, NC 28288-0735 Attention: Mr. Joseph H. Towell Telephone: 704-383-3844 Facsimile: 704-374-4092 -142- NATIONSBANK, N.A., as a Lender and as a Syndication Agent By /s/ Scott S. Ward ------------------------------- Name: Scott S. Ward Title: Senior Vice President Address for notices: 101 North Tryon Street 15th Floor Charlotte, NC 28255 NC1-001-15-11 Attention: Jacquetta Banks Telephone: 704-388-1111 Facsimile: 704-386-8694 With a copy to 100 North Tryon Street 8th Floor Charlotte, NC 28255 NC1-007-0813 Attention: Scott Ward Telephone: 704-388-7839 Facsimile: 704-388-6002 -143- CORESTATES BANK, N.A. By /s/ Jennifer W. Leibowitz ------------------------------- Name: Jennifer W. Leibowitz Title: Vice President Address for notices: CoreStates Bank, N.A. 1339 Chestnut Street F.C. 1-8-3-22 P.O. Box 7618 Philadelphia, PA 19101-7618 Attention: Jennifer Leibowitz Telephone: (215) 786-3972 Facsimile: (215) 973-2738 -144- CREDIT LYONNAIS NEW YORK BRANCH By /s/ Farboud Tavangar ------------------------------- Name: Farboud Tavangar Title: First Vice President Address for notices: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Attention: Evan S. Wasser Telephone: (212) 261-7685 Facsimile: (212) 261-3440 -145- FLEET NATIONAL BANK By /s/ Ginger Stolzenthaler ------------------------------- Name: Ginger Stolzenthaler Title: Senior Vice President Address for notices: Fleet National Bank 75 State Street MA BO F04A Boston, MA 02109 Attention: Ginger Stolzenthaler Telephone: (617) 346-1647 Facsimile: (617) 346-1634 -146- THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ Takuya Honjo ------------------------------- Name: Takuya Honjo Title: Senior Vice President Address for notices: The Industrial Bank of Japan, Limited 1251 Avenue of the Americas New York, NY 10020 Attention: Ken Takehisa Telephone: (212) 282-3321 Facsimile: (212) 282-4490 -147- NATIONAL WESTMINSTER BANK Plc By /s/ Andrew Weinberg ------------------------------- Name: Andrew S. Weinberg Title: Vice President Address for notices: National Westminster Bank Plc 175 Water Street, 26th Floor New York, NY 10038 Attention: Andrew Weinberg Phone: (212) 602-4438 Facsimile: (212) 602-4506 with a copy to: Gleacher NatWest Inc. 660 Madison Avenue, 17th Floor New York, NY 10021 Attention: Field Smith Telephone: (212) 418-4525 Facsimile: (212) 418-4598 -148- THE SAKURA BANK, LIMITED By /s/ Yoshikazu Nagura ------------------------------- Name: Yoshikazu Nagura Title: Vice President Address for notices: The Sakura Bank, Limited 277 Park Avenue, 45th Floor New York, NY 10172 Attention: Philip Schubert Telephone: (212) 756-6945 Facsimile: (212) 888-7651 -149- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Edward S. Han ------------------------------- Name: Edward S. Han Title: Vice President Address for notices: Bank of America National Trust & Savings Associations 555 S. Flower Street, 11th Floor Los Angeles, CA 90071 Attention: Lucy Nixon Telephone: (213) 228-9716 Facsimile: (213) 228-2756 -150- BANQUE PARIBAS By /s/ David R. Laffey ------------------------------- Name: David R. Laffey Title: Director By /s/ Brett I. Mehlman ------------------------------- Name: Brett I. Mehlman Title: Vice President Address for notices: Banque Paribas 787 Seventh Avenue New York, NY 10019 Attention: David R. Laffey Telephone: (212) 841-2116 Facsimile: (212) 841-2292 -151- BANK OF MONTREAL By /s/ Peter Konigsmann ------------------------------- Name: Peter Konigsmann Title: Director Address for notices: Bank of Montreal 115 South LaSalle Street Chicago, IL 60603 Attention: Peter Konigsmann Telephone: (312) 750-8704 Facsimile: (312) 750-3834 -152- BANKBOSTON, N.A. By /s/ Charles C. Woodard ------------------------------- Name: Charles C. Woodard Title: Managing Director Address for notices: BankBoston, N.A. 100 Federal Street, 01-19-03 Boston, MA 02110 Attention: Marilyn Fenollosa Telephone: (617) 434-7684 Facsimile: (617) 434-7980 -153- THE BANK OF NEW YORK By /s/ Peter H. Abdill ------------------------------- Name: Peter H. Abdill Title: Vice President Address for notices: The Bank of New York One Wall Street, 21st Floor New York, NY 10286 Attention: Walter C. Parelli Telephone: (212) 635-6820 Facsimile: (212) 635-7978 -154- BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /s/ J. Beckwith ------------------------------- Name: J. Beckwith Title: Vice President Address for notices: Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, NY 10020-1104 Attention: Ned Komar Telephone: (212) 782-4584 Facsimile: (212) 782-4935 -155- CRESTAR BANK By /s/ Leesa McShane ------------------------------- Name: Leesa McShane Title: Vice President Address for Notices: Crestar Bank 120 E. Baltimore Street, 25th Floor Baltimore, MD 21202 Attention: Leesa McShane Telephone: (410) 986-1672 Facsimile: (410) 986-1670 -156- DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By /s/ Andrew P. Nesi ------------------------------- Name: Andrew P. Nesi Title: Vice President By /s/ Felix K. Comacho ------------------------------- Name: Felix K. Comacho Title: Assistant Treasurer Address for notices: Dresdner Bank AG, New York 75 Wall Street, 25th Floor New York, NY 10005-2889 Attention: Felix K. Camacho Telephone: (212) 429-3007 Facsimile: (212) 429-2129 -157- FINOVA CAPITAL CORPORATION By /s/ Dan Scanlan ------------------------------- Name: Dan Scanlan Title: Address for notices: Finova Capital Corporation 311 S. Wacker, Suite 4400 Chicago, IL 60606 Attention: Dan Scanlan Telephone: (312) 322-3539 Facsimile: (312) 322-3553 -158- THE FUJI BANK, LIMITED, NEW YORK BRANCH By /s/ Teiji Teramoto ------------------------------- Name: Teiji Teramoto Title: Vice President and Manager Address for notices: The Fuji Bank, Limited, New York Branch Two World Trade Center New York, NY 10048 Attention: Anh Nguyen Telephone: (212) 898-2088 Facsimile: (212) 898-2399 -159- KEY CORPORATE CAPITAL INC. By /s/ Angela Mago ------------------------------- Name: Angela Mago Title: Vice President Address for notices: Key Corporate Capital Inc. c/o Key Bank, N.A. 127 Public Square Cleveland, OH 44114 Attention: Angela Mago OH-01-27-0605 Telephone: (216) 689-3247 Facsimile: (216) 689-5970 -160- KREDIETBANK N.V. By /s/ Armen Karozichian ------------------------------- Name: Armen Karozichian Title: Vice President By /s/ Robert Shauffer ------------------------------- Name: Robert Shauffer Title: Vice President Address for notices: Kredietbank N.V. 125 W. 55th Street New York, NY 10021 Attention: Armen Karozichian Telephone: (212) 541-0717 Facsimile: (212) 541-0793 -161- FIRST NATIONAL BANK OF MARYLAND By /s/ Robert H. Hauver ------------------------------- Name: Robert H. Hauver Title: Vice President Address for notices: First National Bank of Maryland 25 S. Charles Street, 18th Floor Baltimore, MD 21201 Attention: Robert H. Hauver Telephone: (410) 244-4246 Facsimile: (410) 244-4388 -162- NATEXIS BANQUE BFCE By /s/ Kevin Dooley ------------------------------- Name: Kevin Dooley Title: Vice President By /s/ William O. Maier ------------------------------- Name: William O. Maier Title: Vice President Address for notices: Natexis Banque BFCE 645 Fifth Avenue, 20th Floor New York, NY 10022 Attention: Frank Madden Telephone: (212) 872-5180 Facsimile: (212) 872-5045 -163- ROYAL BANK OF CANADA By /s/ Marion A. Patterson ------------------------------- Name: Marion A. Patterson Title: Senior Manager Address for notices: Royal Bank of Canada Financial Square, 23rd Floor New York, NY 10005-3531 Attention: Jim Rankin, Manager Telephone: (212) 428-6204 Facsimile: (212) 428-2372 -164- NATIONAL CITY BANK OF PENNSYLVANIA By /s/ Debra W. Riefner ------------------------------- Name: Debra W. Riefner Title: Vice President Address for notices: National City Bank of Pennsylvania 20 Stanwix Street Pittsburgh, PA 15222 Loc. 46-25-191 Attention: Debra W. Riefner Telephone: (412) 644-8880 Facsimile: (412) 471-4883 -165- THE MITSUBISHI TRUST AND BANKING CORPORATION By /s/ Toshihiro Hayashi ------------------------------- Name: Toshihiro Hayashi Title: Senior Vice President Address for notices: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 26th Floor New York, NY 10022 Attention: Clifford A. Teller Telephone: (212) 891-8269 Facsimile: (212) 644-6825 or (212) 593-4691 -166- THE SANWA BANK, LIMITED By /s/ Christian Kambour ------------------------------- Name: Christian Kambour Title: Vice President Address for notices: The Sanwa Bank, Limited 55 E. 52nd Street New York, NY 10055 Attention: Christian Kambour Telephone: (212) 339-6232 Facsimile: (212) 754-1304 -167- THE SUMITOMO BANK, LIMITED By /s/ J. Wade Bell ------------------------------- Name: J. Wade Bell Title: Vice President By /s/ Michael J. Fox ------------------------------- Name: Michael J. Fox Title: Vice President and Manager Address for notices: The Sumitomo Bank, Limited One Liberty Place 1650 Market Street, Suite 2860 Philadelphia, PA 19103 Attention: J. Wade Bell Telephone: (215) 636-4440 Facsimile: (215) 636-4446 -168- TORONTO DOMINION (NEW YORK), INC. By /s/ Jorge A. Garcia ------------------------------- Name: Jorge A. Garcia Title: Mgr. Cr. Admin. Address for notices: The Toronto-Dominion Bank 909 Fannin, Suite 1700 Houston, Texas 77010 Attention: Jorge A. Garcia Telephone: (713) 653-8242 Facsimile: (713) 951-9921 -169- THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By /s/ Nobotu Kubora ------------------------------- Name: Nobotu Kubora Title: Deputy General Manager Address for notices: The Long-Term Credit Bank of Japan, Ltd. 165 Broadway New York, NY 10006 Attention: Junicchi Ebihara Telephone: (212) 335-4477 Facsimile: (212) 608-2371 -170- SUMMIT BANK By /s/ James P. Andersen ------------------------------- Name: James P. Andersen Title: Vice President and Regional Manager Address for notices: Summit Bank 250 Moore Street, 2nd Floor Hackensack, NJ 07601 Attention: James P. Andersen Telephone: (201) 646-6317 Facsimile: (201) 646-9497 -171- THE DAI-ICHI KANGYO BANK, LTD. By /s/ Ronald Wolinsky ------------------------------- Name: Ronald Wolinsky Title: Vice President and Group Leader Address for notices: The Dai-Ichi Kangyo Bank, Ltd. One World Trade Center, 48th Floor New York, NY 10048 Attention: Takayuki Kumagai Telephone: (212) 432-6651 Facsimile: (212) 488-8955 -172- CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Clifford L. Wells ------------------------------- Name: Clifford L. Wells Title: Vice President By /s/ Fiona McKone ------------------------------- Name: Fiona McKone Title: Senior Associate Address for notices: Creditanstalt Corporate Finance, Inc. Two Greenwich Plaza Greenwich, CT 06830 Attention: Fiona McKone Telephone: (203) 861-6590 Facsimile: (203) 861-0297 -173- CREDIT SUISSE FIRST BOSTON By /s/ Robert B. Potter ------------------------------- Name: Robert B. Potter Title: Vice President By /s/ Christian Bourqui ------------------------------- Name: Christian Bourqui Title: Associate Address for notices: Credit Suisse First Boston 11 Madison Avenue New York, NY 10010 Attention: Robert B. Potter Telephone: (212) 325-9154 Facsimile: (212) 325-8319 -174- FIRST NATIONAL BANK OF CHICAGO By /s/ Patricia S. Carpen ------------------------------- Name: Patricia S. Carpen Title: Assistant Vice President Address for notices: First National Bank of Chicago 1 First National Plaza Chicago, IL 60670 Attention: Tom Harkless Telephone: (312) 732-2478 Facsimile: (312) 732-2016 -175- SCOTIABANC, INC. By /s/ Dana Maloney ------------------------------- Name: Dana Maloney Title: Relationship Manager Address for notices: ScotiaBanc, Inc. 600 Peachtree Street NE Suite 2700 Atlanta, GA 30308 Attention: Dana Maloney Telephone: (404) 877-1524 Facsimile: (404) 888-8998 -176- COMMERZBANK AG, NEW YORK BRANCH By /s/ Mary F. Harold ------------------------------- Name: Mary F. Harold Title: Vice President By /s/ G. Rod McWalters ------------------------------- Name: G. Rod McWalters Title: Vice President Address for notices: Commerzbank AG, New York Branch 2 World Financial Center New York, NY 10281-1050 Attention: Mary Harold Telephone: (212) 266-7509 Facsimile: (212) 266-7374 -177- CIBC INC. By /s/ Timothy E. Doyle ------------------------------- Name: Timothy E. Doyle Title: Manager Director, CIBC Wood Gundy Securities Corp., as Agent Address for notices: CIBC Inc. 425 Lexington Avenue, 8th Floor New York, NY 10025 Attention: Tim Doyle Telephone: (212) 856-3650 Facsimile: (212) 856-3558 -178- AMSOUTH BANK By /s/ J. Ken DiFatta ------------------------------- Name: J. Ken DiFatta Title: Commercial Banking Officer Address for notices: AmSouth Bank 1900 5th Ave. N. AST7FL Birmingham, AL 35203 Attention: Ken DiFatta Telephone: (205) 801-0358 Facsimile: (205) 326-4790 -179- PFL LIFE INSURANCE COMPANY By /s/ Gregory W. Theobald ------------------------------- Name: Gregory W. Theobald Title: VP & Asst. Secretary Address for notices: PFL Life Insurance Company c/o Aegon USA Investment Management, Inc. 4333 Edgewood Road, NE Cedar Rapids, IA 52499 Attention: John Bailey, Securities Analyst Telephone: (319) 369-2811 Facsimile: (319) 369-2666 -180- PEOPLES INTERNAL BOND FUND By /s/ Kirk W. Buese ------------------------------- Name: Kirk W. Buese Title: Second Vice President-Investments Address for notices: Peoples Internal Bond Fund c/o Aegon USA Investment Management, Inc. 4333 Edgewood Road, NE Cedar Rapids, IA 52499 Attention: John Bailey, Securities Analyst Telephone: (319) 369-2811 Facsimile: (319) 369-2666 -181- ALLSTATE INSURANCE COMPANY By ------------------------------- Name: By ------------------------------- Name: Its Authorized Signatories Address for notices: Allstate Insurance Company 3075 Sanders Road, STE G3A Northbrook, IL 60062-3092 Attention: Jane Nelson Telephone: (847) 402-8383 Facsimile: (847) 402-3092 -182- [THIS PAGE INTENTIONALLY OMITTED] -183- [THIS PAGE INTENTIONALLY OMITTED] -184- FLOATING RATE PORTFOLIO By: Chancellor LGT Senior Secured Management, Inc., as attorney in fact By /s/ Christopher A. Bondy ------------------------------- Christopher A. Bondy, Vice President Address for notices: Floating Rate Portfolio c/o Chancellor LGT Senior Secured Management, Inc. 1166 Avenue of the Americas, 27th Floor New York, NY 10036 Attention: Christopher A. Bondy Telephone: (212) 278-9673 Facsimile: (212) 278-9619 -185- [THIS PAGE INTENTIONALLY OMITTED] -186- PRIME INCOME TRUST By /s/ Rafael Scolari ------------------------------- Name: Rafael Scolari Title: Senior Vice President Address for notices: Prime Income Trust c/o Dean Witter Intercapital, Inc. 72nd Floor Two World Trade Center New York, NY 10048 Attention: Louis A. Pistecchia Telephone: (212) 392-5845 Facsimile: (212) 392-5345 -187- [THIS PAGE INTENTIONALLY OMITTED] -188- DEEPROCK & COMPANY By: Eaton Vance Management as Investment Advisor By /s/ Scott H. Page ------------------------------- Name: Scott H. Page Title: Vice President and Portfolio Mgr. Address for notices: Deeprock & Company c/o Eaton Vance Management 24 Federal Street 6th Floor Boston, MA 02110 Attention: David Lochiatto Telephone: (617) 348-0195 Facsimile: (617) 695-9594 -189- ING HIGH INCOME PRINCIPAL PRESERVATION OFFERING, L.P. By /s/ Kathleen A. Lenarcic ------------------------------- Name: Kathleen A. Lenarcic Title: Vice President & Portfolio Manager Address for notices: Ing High Income Principal Preservation Offering, L.P. c/o Ing Capital Advisors, Inc. 333 S. Grand Avenue, Suite 4250 Los Angeles, CA 90071 Attention: Kathleen Lenarcic Telephone: (213) 346-3971 Facsimile: (213) 346-3995 -190- KZH-ING-1 CORPORATION By /s/ Virginia R. Conway ------------------------------- Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH-ING-1 Corporation c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -191- MASSACHUSETTS MUTUAL LIFE INSURANCE CO. By /s/ Kathleen Lynch ------------------------------- Name: Kathleen Lynch Title: Manager Director Address for notices: Massachusetts Mutual Life Insurance Co. 1295 State Street Springfield, MA 01111 Attention: John Wheeler, Managing Director Telephone: (413) 744-6228 Facsimile: (413) 744-6127 -192- MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: Merrill Lynch Asset Management, L.P., as Investment Advisor By /s/ R. Douglas Henderson ------------------------------- Name: R. Douglas Henderson Title: Authorized Signatory Address for notices: Merrill Lynch Senior Floating Rate Fund, Inc. c/o Merrill Lynch Asset Management 800 Scudders Mill Road - Area 1B Plainsboro, NJ 08536 Attention: Jill Montanye Telephone: (609) 282-3102 Facsimile: (609) 282-3542 -193- METROPOLITAN LIFE INSURANCE COMPANY By /s/ James R. Dingler ------------------------------- Name: James R. Dingler Title: Assistant Vice President Address for notices: Metropolitan Life Insurance Company 334 Madison Avenue Convent Station, NJ 07961-0633 Attention: James Dingler Asst. Vice President Telephone: (201) 254-3206 Facsimile: (201) 254-3050 -194- THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By /s/ Richard A. Strait ------------------------------- Name: Richard A. Strait Title: Vice President Address for notices: The Northwestern Mutual Life Insurance Company 720 E. Wisconsin Avenue Milwaukee, WI 53202 Attention: David A. Barras Associate Director Telephone: (414) 299-1618 Facsimile: (414) 299-7124 -195- NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: New York Life Insurance Company By /s/ Andrew H. Steuerman ------------------------------- Name: Andrew H. Steuerman Title: Investment Manager Address for notices: New York Life Insurance and Annuity Corporation c/o New York Life Insurance Company 51 Madison Avenue, Room 206 New York, NY 10010 Attention: Elise Chowdhry Telephone: (212) 576-7830 Facsimile: (212) 447-4122 -196- OAK HILL SECURITIES FUND, L.P. By: Oak Hill Securities GenPar, L.P., Its General Partner By: Oak Hill Securities MGP, Inc., Its General Partner By /s/ Glenn R. August ------------------------------- Name: Glenn R. August Title: President Address for notices: Oak Hill Securities Fund, L.P. c/o Oak Hill Partners, Inc. 65 East 55th Street - 32nd Floor New York, NY 10022 Attention: Scott D. Krase, Vice President Telephone: (212) 326-1551 Facsimile: (212) 593-3596 -197- OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (A Unit of The Chase Manhattan Bank) By /s/ Andrew D. Gordon ------------------------------- Name: Andrew D. Gordon Title: Managing Director Address for notices: Octagon Credit Investors Loan Portfolio (A Unit of The Chase Manhattan Bank) c/o Octagon Credit Investors 380 Madison Avenue, 12th Floor New York, NY 10017 Attention: James P. Ferguson Managing Director Telephone: (212) 622-3070 Facsimile: (212) 622-3797 -198- PARIBAS CAPITAL FUNDING LLC By /s/ Eric A. Green ------------------------------- Name: Eric A. Green Title: Director Address for notices: Paribas Capital Funding LLC 787 Seventh Avenue, 32nd Floor New York, NY 10019 Attention: Michael Weinberg Telephone: (212) 841-2544 Facsimile: (212) 841-2144 with a copy to: State Street Bank & Trust Co. Corporate Trust Dept. Attn: Richard Wagman Amy Molisse Phone: (617) 664-5410 Fax: (617) 664-5366(67)(68) -199- PILGRIM AMERICA PRIME RATE TRUST By /s/ Michael S. Bacevich ------------------------------- Name: Michael S. Bacevich Title: Vice President Address for notices: Pilgrim America Prime Rate Trust c/o Pilgrim America Investments, Inc. Two Renaissance Square 40 North Central Avenue, Suite 1200 Phoenix, AZ 85004-3444 Attention: Michael Bacevich, Vice President Telephone: (602) 417-8258 Facsimile: (602) 417-8327 -200- ROYALTON COMPANY By: Pacific Investment Management Company, as its Investment Advisor By /s/ Raymond Kennedy ------------------------------- Name: Raymond Kennedy Title: Vice President Address for notices: Royalton Company c/o Pacific Investment Management Co. 840 Newport Center Drive Newport Beach, CA 92658 Attention: Richard Weil/Raymond Kennedy Telephone: (714) 717-7213 (Richard) (714) 717-7363 (Raymond) Facsimile: (714) 640-3419 -201- [THIS PAGE INTENTIONALLY OMITTED] -202- NORTHERN LIFE INSURANCE COMPANY By /s/ James V. Wittich ------------------------------- Name: James V. Wittich Title: Assistant Treasurer Address for notices: Northern Life Insurance Company c/o Reliastar Investment Research, Inc. 100 Washington Avenue South, Suite 800 Minneapolis, MN 55401-2121 Attention: Tim Warrick, Vice President Telephone: (612) 372-5258 Facsimile: (612) 372-5368 -203- KZH - SOLEIL CORPORATION By /s/ Virginia R. Conway ------------------------------- Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH - Soleil Corporation c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -204- KZH HOLDING CORPORATION III By /s/ Virginia R. Conway ------------------------------- Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH Holding Corporation III c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -205- KZH-CRESCENT CORPORATION By /s/ Virginia R. Conway ------------------------------- Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH-Crescent Corporation c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -206- VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By /s/ Jeffrey W. Maillet ------------------------------- Name: Jeffrey W. Maillet Title: Senior Vice President & Director Address for notices: Van Kampen American Capital One Parkview Plaza Oakbrook Terrace, IL 60181 Attention: Jeffrey Maillet Telephone: (630) 684-6438 Facsimile: (630) 684-6740 or 6741 -207- [THIS PAGE INTENTIONALLY OMITTED] -208- CONTINENTAL ASSURANCE COMPANY Separate Account (E) By: TCW Asset Management Company as attorney-in-fact By /s/ Mark L. Gold ------------------------------- Name: Mark L. Gold Title: Managing Director By /s/ Justin L. Driscoll ------------------------------- Name: Justin L. Driscoll Title: Senior Vice President Address for notices: Continental Assurance Company c/o TCW Asset Management Company 200 Park Avenue, Suite 2200 New York, NY 10166-0228 Attention: Mark L. Gold/Justin L. Driscoll Telephone: (212) 297-4137 Facsimile: (212) 297-4159 Please Copy All Rate Set Notices To: Elaine Nagos Trust Company of the West 200 Park Avenue New York, NY 10166 Telephone: (213) 244-0830 Facsimile: (213) 244-0485 -209- CIBC INC. By /s/ Elizabeth S. Schreiber ------------------------------- Name: Elizabeth S. Schreiber Title: Director CIBC Wood Gundy Securities Corp., as Agent Address for notices: CIBC Inc. c/o Canadian Imperial Bank of Commerce 425 Lexington Avenue, 7th Floor New York, NY 10025 Attention: William Swenson Telephone: (212) 856-3935 Facsimile: (212) 856-3799 -210- MORGAN STANLEY SENIOR FUNDING, INC. By /s/ Christopher A. Pucillo ------------------------------- Name: Christopher A. Pucillo Title: Vice President Address for notices: MORGAN STANLEY SENIOR FUNDING, INC. 1585 Broadway, 10th Floor New York, New York 10036 Attention: James Morgan Telephone: (212) 761-4866 Facsimile: (212) 761-0592 -211- CRESCENT/MACH I PARTNERS, L.P. by: TCW Asset Management Company, its Investment Manager By /s/ Justin L. Driscoll ------------------------------- Name: Justin L. Driscoll Title: Senior Vice President Address for notices: Crescent/Mach I Partners L.P. c/o State Street Bank & Trust Co. Two International Place Boston, MA 02110 Attention: Jackie Kilroy Telephone: (617) 664-5477 Facsimile: (617) 664-5366 -212- NEW YORK LIFE INSURANCE COMPANY By /s/ Andrew H. Steuerman ------------------------------- Name: Andrew H. Steuerman Title: Investment Manager Address for notices: New York Life Insurance and Annuity Corporation c/o New York Life Insurance Company 51 Madison Avenue Room 206 New York, New York 10010 Attention: Elise Chowdhry Telephone: (212) 576-7830 Facsimile: (212) 447-4122 -213- SCHEDULE 6.10 JOINDER OF BORROWERS 1. Joinder Supplement. Genesis (on behalf of itself and the other Borrowers) and each Joining Subsidiary shall execute and deliver to the Administrative Agent, with an executed counterpart for each Lender Party, an agreement in substantially the form attached to this Agreement as Exhibit H (a "Joinder Supplement") as to becoming a party hereto and to the relevant Loan Documents. 2. Notes. Each Joining Subsidiary and each existing Borrower shall execute and deliver to the Administrative Agent a replacement Note or Allonge for each Tranche A Lender and each RC Lender, as necessary. 3. Collateral. Each applicable Borrower and each applicable Joining Subsidiary shall deliver to the Administrative Agent (1) certificates and instruments representing the stock certificates and other instruments to be pledged pursuant to the Pledge Agreement accompanied by duly executed instruments of transfer or assignments in blank to the extent required by the Pledge Agreement and (2) evidence of the completion of all recordings and filings (including Uniform Commercial Code financing statements) as may be necessary or, in the opinion of the Administrative Agent or the Collateral Agent, desirable to create or perfect the Liens granted and created or purported to be granted and created by each Joining Subsidiary (or by each existing Borrower in the collateral comprised of equity of any Joining Subsidiaries) under and pursuant to the Pledge Agreement. 4. Lien Searches. For each Joining Subsidiary which is acquired by a Borrower pursuant to an Acquisition, each Joining Subsidiary shall deliver to the Administrative Agent such evidence of recent searches of Uniform Commercial Code, tax, judgment records and other appropriate registers as the Administrative Agent shall request. 5. Corporate or Partnership Proceedings. Each Joining Subsidiary shall deliver to the Administrative Agent, with an executed counterpart for each Lender Party, certificates by the Secretary or Assistant Secretary of each Joining Subsidiary (or general partner thereof), dated as of the Joinder Effective Date (as defined below) as to the incumbency and signatures of the respective officers of such Joining Subsidiary who are authorized to sign Loan Documents, together with (i) true copies of the articles of incorporation and bylaws or partnership agreement (or other constituent documents) of such Joining Subsidiary in effect on such date, (ii) true copies of all corporate or partnership action taken by such Joining Subsidiary relative to this Agreement, the Joinder Supplement and the other Loan Documents. Each Joining Subsidiary shall also deliver certificates from the appropriate Secretaries of State or other applicable Governmental Authorities dated not more than 30 days before the relevant Joinder Effective Date showing the good standing of -214- such Joining Subsidiary in its state of incorporation or organization and each state in which such Joining Subsidiary does business. 6. Legal Opinions of Counsel. The Borrowers and each Joining Subsidiary collectively shall cause to be delivered to the Administrative Agent, with an executed counterpart for each Lender Party, an opinion or opinions addressed to each Lender Party, dated the relevant Joinder Effective Date, of counsel to such Joining Subsidiary, Genesis and each of the other Borrowers as to such matters as may be requested by the Administrative Agent, all in form and substance satisfactory to the Administrative Agent. 7. Fees, Expenses, Etc. The Borrowers and each Joining Subsidiary shall pay or cause to be paid all fees and other compensation required to be paid to the Lender Parties pursuant hereto or pursuant to any other written agreement on or prior to the Joinder Effective Date. 8. Additional Matters. The Borrowers and each Joining Subsidiary shall deliver, or cause to be delivered, to the Administrative Agent such other revised schedules, certificates, opinions, instruments and other documents (including those relating to licensing) as may be requested by the Administrative Agent. All such schedules, certificates, opinions, instruments and other documents shall be satisfactory in form and substance to the Administrative Agent. -215- SCHEDULE 8.4 ACQUISITION CONDITIONS 1. Notice. Not later than 15 Business Days before the consummation of a proposed Acquisition, Genesis (on behalf of the Borrowers) shall have delivered to each Lender Party a notice of the proposed Acquisition, together with the following: (1) copies of audited financial statements of the entity to be acquired (the "Target") for its last three fiscal years (to the extent that such audited statements are available, or, to the extent such audited statements are not so available, unaudited statements for as much of such period as is available); (2) copies of the interim financial statements of the Target for the latest fiscal quarter; (3) a pro forma projected balance sheet of Genesis and its Restricted Subsidiaries as of the date of, and after giving effect to, the proposed Acquisition and a pro forma income statement of Genesis and its Restricted Subsidiaries for the four fiscal quarters ended on, or most recently prior to, the date of such proposed Acquisition after giving effect thereto; (4) an Officer's Compliance Certificate showing pro forma compliance with the covenants referred to therein after giving effect to the proposed Acquisition (which certificate may be delivered after the other items referred to in this paragraph (1) but no later than five (5) Business Days prior to the date of the proposed Acquisition); and (5) revisions to the most recent financial projections delivered to the Lender Parties by Genesis, which revisions shall take into account the projected financial condition and results of operations of the Target for the period covered by such projections. 2. Other Information. In addition, Genesis (on behalf of the Borrowers) shall have delivered to the Administrative Agent (and with respect to the information referred to in paragraph (2) below, the requesting Lender Party) the following: (1) copies of any agreements entered into or proposed to be entered into by such Borrower in connection with such Acquisition; and (2) such other information about the Target or such Acquisition as any Lender Party may reasonably request. 3. Board Approval. The board of directors (or equivalent governing body) of the Target shall have approved such Acquisition. -216- 4. Line of Business. Not less than 75% of the Target's revenues during its most recently completed fiscal year shall have been derived from lines of business which are, at the time of the Acquisition, among the principal lines of business of any of the Borrowers. 5. No Default. No Event of Default or Default shall have occurred and be continuing before, or after giving effect to, the consummation of the Acquisition. 6. Limitations on Mergers and Consolidations. If any merger is effected in connection with the Acquisition, a Borrower (including an entity that becomes a Borrower consistent with the provisions of this Agreement) shall be the surviving entity in the merger. No consolidation shall be permitted in connection with any Acquisition. 7. Joinder to Loan Documents. The Borrowers shall cause any new (direct or indirect) Subsidiary of Genesis which is created or acquired as a direct or indirect result of, or in connection with, such Acquisition, to become a Borrower hereunder pursuant to and in accordance with the terms of Section 6.10 of this Agreement and shall cause the ownership interests therein to be pledged under the Pledge Agreement. 8. Arm's Length. The Acquisition shall be made in good faith in an arm's-length transaction to a Person which is not an Affiliate of any Borrower, except as otherwise agreed to by the Required Lenders. Without limiting the generality of the foregoing, the total consideration paid for the Acquisition shall be no greater than the fair market value of the subject assets (including intangible assets). 9. 1995 and 1996 Indentures. The Acquisition shall not be prohibited by or result in a default or breach under the terms of the 1995 Subordinated Note Indenture or 1996 Subordinated Note Indenture. -217- SCHEDULE 8.5(g) DISPOSITION CONDITIONS 1. Notice. Genesis (on behalf of the Borrowers) shall have given each Lender Party at least 5 days prior written notice of any transfer (as defined in Section 8.5 of this Agreement), together with an Officer's Compliance Certificate showing pro forma compliance with the financial covenants referred to therein (including the financial tests set forth in paragraph (g) of Section 8.5) after giving effect to such transfer. 2. Arm's Length. The transfer shall be made in good faith in an arm's-length transaction to a Person which is not an Affiliate of any Borrower, except as otherwise agreed to by the Required Lenders. Without limiting the generality of the foregoing, the total consideration for the transfer shall be at least equal to the fair market value of the subject assets (including intangible assets). 3. Transfer of Equity of a Borrower. In the event that any shares of capital stock, partnership interests or other ownership interests of a Borrower are to be disposed of or otherwise transferred in such transaction each of the following additional conditions shall be met: (a) All Loans made to such Borrower and all intercompany obligations of such Borrower shall have been repaid in full and such Borrower shall sign an acknowledgement that all obligations of the Lender Parties to it are terminated; and (b) The Administrative Agent shall have received such replacement Notes, certificates, opinions, documents and/or instruments it shall reasonably request. 4. 1995 and 1996 Indenture. The disposition shall not be prohibited by or result in a default or breach or mandatory prepayment under the terms of the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture. -218- EX-99 7 EX (B)(8) CREDIT AGREEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of October 9, 1997 by and among THE MULTICARE COMPANIES, INC. and CERTAIN OF ITS SUBSIDIARIES, AS BORROWERS, THE FINANCIAL INSTITUTIONS IDENTIFIED HEREIN, AS LENDERS, MELLON BANK, N.A., AS ISSUER OF LETTERS OF CREDIT, MELLON BANK, N.A., AS ADMINISTRATIVE AGENT, CITICORP USA, INC., AS SYNDICATION AGENT, FIRST UNION NATIONAL BANK, AS DOCUMENTATION AGENT NATIONSBANK, N.A., AS SYNDICATION AGENT, and OTHER AGENTS IDENTIFIED HEREIN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE 1 CREDIT FACILITY............................................................ 2 1.1 COMMITMENT TO LEND............................................. 2 1.2 JOINT AND SEVERAL OBLIGATIONS.................................. 3 1.3 MANNER OF BORROWING............................................ 3 1.4 SCHEDULED REPAYMENTS........................................... 6 1.5 VOLUNTARY PREPAYMENTS AND UNSCHEDULED, MANDATORY PREPAYMENTS........................................ 9 1.6 PAYMENTS BY THE BORROWERS IN GENERAL........................... 13 1.7 REDUCTIONS OF RC COMMITMENT.................................... 15 1.8 INTEREST....................................................... 15 1.9 FEES........................................................... 17 1.10 COMPUTATION OF INTEREST AND FEES............................... 18 1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT........................... 18 1.12 PRO RATA TREATMENT............................................. 19 1.13 TAXES ON PAYMENTS.............................................. 19 1.14 REGISTERED NOTES AND LOANS..................................... 21 ARTICLE 2 YIELD PROTECTION AND BREAKAGE INDEMNITY.................................... 23 2.1 MANDATORY SUSPENSION AND CONVERSION OF LIBO RATE LOANS........................................................ 23 2.2 REGULATORY CHANGES............................................. 24 2.3 CAPITAL AND RESERVE REQUIREMENTS............................... 25 2.4 BREAKAGE....................................................... 25 2.5 DETERMINATIONS................................................. 25 2.6 REPLACEMENT OF LENDERS......................................... 26 2.7 CHANGE OF LENDING OFFICE....................................... 26 ARTICLE 3 LETTERS OF CREDIT.......................................................... 28 3.1 ISSUANCE OF LETTERS OF CREDIT.................................. 28 ARTICLE 4 -i- CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS................................................................ 33 4.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING............................................... 33 4.2 CONDITIONS TO EACH LOAN AND ISSUANCE OF EACH LETTER OF CREDIT..................................................... 38 ARTICLE 5 REPRESENTATIONS AND WARRANTIES.............................................. 40 5.1 REPRESENTATIONS................................................. 40 5.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE......................... 48 ARTICLE 6 AFFIRMATIVE COVENANTS....................................................... 49 6.1 REPORTING REQUIREMENTS.......................................... 49 6.2 MAINTENANCE OF EXISTENCE........................................ 54 6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY.............................................. 54 6.4 MAINTENANCE OF RECORDS; FISCAL YEAR............................. 55 6.5 COMPLIANCE WITH LAWS....................................... 55 6.6 ERISA........................................................... 55 6.7 RIGHT OF INSPECTION............................................. 56 6.8 INSURANCE....................................................... 57 6.9 PAYMENT OF TAXES AND OTHER CHARGES.............................. 57 6.10 SUBSIDIARIES TO BE BORROWERS.................................... 57 6.11 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS................... 58 6.12 INTEREST RATE HEDGING AGREEMENTS................................ 58 6.13 CORPORATE SEPARATENESS.......................................... 58 6.14 TRANSACTIONS WITH AFFILIATES.................................... 59 6.15 CASH PROCEEDS OF EQUITY OF SURETY............................... 59 6.16 CAPITAL STOCK................................................... 59 6.17 USE OF PROCEEDS................................................. 59 6.18 CERTAIN DISPOSITIONS............................................ 59 ARTICLE 7 FINANCIAL COVENANTS......................................................... 60 7.1 CERTAIN FINANCIAL COVENANTS..................................... 60 7.2 CALCULATION OF FINANCIAL COVENANTS.............................. 61 ARTICLE 8 -ii- NEGATIVE COVENANTS......................................................... 62 8.1 INDEBTEDNESS................................................... 62 8.2 LIENS.......................................................... 64 8.3 LOANS, ADVANCES AND INVESTMENTS................................ 65 8.4 ACQUISITIONS, ETC.............................................. 66 8.5 DISPOSITIONS................................................... 67 8.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS.................................................... 68 8.7 LEASES......................................................... 69 8.8 DIVIDENDS AND RELATED DISTRIBUTIONS............................ 69 8.9 CONSOLIDATED TAX RETURN........................................ 69 8.10 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASEMENT AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS..................................... 70 8.11 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS............... 70 8.12 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS................... 71 8.13 LIMITATIONS ON MERGERS, ETC.................................... 71 8.14 AVOIDANCE OF OTHER CONFLICTS................................... 71 8.15 CAPITAL EXPENDITURES........................................... 71 8.16 MANAGEMENT FEE................................................. 71 ARTICLE 9 DEFAULTS................................................................... 73 9.1 "EVENTS OF DEFAULT............................................. 73 9.2 CONSEQUENCES OF AN EVENT OF DEFAULT............................ 76 9.3 APPLICATION OF PROCEEDS........................................ 77 ARTICLE 10 THE ADMINISTRATIVE AGENT................................................... 79 10.1 APPOINTMENT.................................................... 79 10.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES................ 79 10.3 EXERCISE OF POWERS............................................. 80 10.4 GENERAL EXCULPATORY PROVISIONS................................. 80 10.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT..................... 81 10.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS....................................... 82 10.7 INDEMNIFICATION................................................ 82 10.8 REGISTER....................................................... 83 10.9 SUCCESSOR ADMINISTRATIVE AGENT................................. 83 10.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT........................................................ 83 10.11 CALCULATIONS................................................... 84 -iii- 10.12 OTHER AGENTS.................................................. 84 10.13 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY............... 84 ARTICLE 10A SPECIAL INTERCREDITOR PROVISIONS........................................... 86 10A.1 SPECIAL PROVISIONS APPLICABLE TO LENDER PARTIES AS PARTIES TO THE GENESIS CREDIT AGREEMENT..................... 86 ARTICLE 10B SPECIAL INTER-BORROWER PROVISIONS.......................................... 87 10B.1 CERTAIN BORROWER ACKNOWLEDGEMENTS............................. 87 10B.2 CERTAIN INTER-BORROWER AGREEMENTS............................. 87 10B.3 RECORDS....................................................... 88 ARTICLE 11 DEFINITIONS; CONSTRUCTION.................................................. 89 11.1 CERTAIN DEFINITIONS........................................... 89 11.2 CONSTRUCTION..................................................112 11.3 ACCOUNTING PRINCIPLES.........................................113 ARTICLE 12 MISCELLANEOUS..............................................................114 12.1 NOTICES.......................................................114 12.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT........................114 12.3 SEVERABILITY..................................................114 12.4 DESCRIPTIVE HEADINGS..........................................115 12.5 GOVERNING LAW.................................................115 12.6 NON-MERGER OF REMEDIES........................................115 12.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES........................115 12.8 AMENDMENTS; WAIVERS...........................................116 12.9 SUCCESSORS AND ASSIGNS........................................117 12.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES.......................................................119 12.11 MAXIMUM LAWFUL INTEREST RATE..................................119 12.12 INDEMNIFICATION...............................................120 12.13 EXPENSES......................................................121 12.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY.................122 12.15 AUTHORIZATION OF MULTICARE BY OTHER BORROWERS.................122 12.16 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY...............123 12.17 CERTAIN WAIVERS BY BORROWERS..................................123 -iv- 12.18 SET-OFF.......................................................123 12.19 SHARING OF COLLECTIONS........................................124 12.20 OTHER LOAN DOCUMENTS..........................................124 12.21 CERTAIN BORROWER ACKNOWLEDGEMENTS.............................124 12.22 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL...............................................124 LIST OF SCHEDULES..........................................................253 LIST OF EXHIBITS...........................................................254 SCHEDULE 6.10..............................................................255 SCHEDULE 8.4...............................................................257 SCHEDULE 8.5(h)............................................................259 -v- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October 9, 1997, by and among THE MULTICARE COMPANIES, INC., a Delaware corporation (together with its successors, "Multicare"), the Subsidiaries of Multicare referred to on the signature pages hereto and such other Subsidiaries of Multicare which may from time to time become Borrowers hereunder in accordance with the provisions hereof (collectively with Multicare, the "Borrowers"), the Lenders referred to on the signature pages hereto (together with other lenders parties hereto from time to time pursuant to Section 12.9 below and their successors and assigns, the "Lenders"), MELLON BANK, N.A., a national banking association, as issuer of Letters of Credit hereunder (in such capacity, together with its successors and assigns in such capacity, the "Issuer"), MELLON BANK, N.A., a national banking association, as Administrative Agent for itself and for the other Agents, the Lenders and the Issuer hereunder (in such capacity, together with its successors and assigns in such capacity, the "Administrative Agent"), and CITICORP USA, INC., a Delaware corporation, as Syndication Agent, NATIONSBANK, N.A., a national banking association, as Syndication Agent, and FIRST UNION NATIONAL BANK, a national banking association, as Documentation Agent. Certain terms used herein are defined in Article 11 below. W I T N E S S E T H T H A T WHEREAS, Acquisition Corp. has acquired (or will be acquiring simultaneously with the execution of this Agreement) all of the shares of common stock of Multicare and has merged into, or simultaneously with the execution of this Agreement will merge into, Multicare, with Multicare being the surviving entity; and WHEREAS, Multicare has requested that the Lenders extend the Loans to the Borrowers for the purposes described herein; and WHEREAS, as more particularly set forth in the Pledge Agreement, certain collateral securing the obligations hereunder is to be shared with certain creditors party to the Qualifying Interest Rate Hedging Agreement (as such term is defined in Article 11 below). WHEREAS, the Lenders have agreed to extend the Loans to the Borrowers on the terms and conditions described herein; and WHEREAS, ALL OBLIGATIONS HEREUNDER AND UNDER EACH AGREEMENT AND INSTRUMENT DELIVERED IN CONNECTION HEREWITH FROM TIME TO TIME ARE "SENIOR INDEBTEDNESS" AND ARE HEREBY DESIGNATED BY MULTICARE AS "DESIGNATED SENIOR INDEBTEDNESS" WITHIN THE MEANING OF THE 1997 SUBORDINATED NOTE INDENTURE. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows. ARTICLE 1 CREDIT FACILITY 1.1 COMMITMENT TO LEND. (a) Term Loans. (i) Tranche A Term Loans. Upon the terms and subject to the conditions of this Agreement, each Tranche A Lender agrees to make, on the Closing Date, a Loan (a "Tranche A Term Loan") to the Borrowers in the amount of such Lender's Tranche A Commitment. The total amount of the Tranche A Commitment of all Tranche A Lenders on the Agreement Date is $200,000,000.00. (ii) Tranche B Term Loans. Upon the terms and subject to the conditions of this Agreement, each Tranche B Lender agrees to make, on the Closing Date, a Loan (a "Tranche B Term Loan") to the Borrowers in the amount of such Lender's Tranche B Commitment. The total amount of the Tranche B Commitment of all Tranche B Lenders on the Agreement Date is $150,000,000.00. (iii) Tranche C Term Loans. Upon the terms and subject to the conditions of this Agreement, each Tranche C Lender agrees to make, on the Closing Date, a Loan (a "Tranche C Term Loan") to the Borrowers in the amount of such Lender's Tranche C Commitment. The total amount of the Tranche C Commitment of all Tranche C Lenders on the Agreement Date is $50,000,000.00. (b) Revolving Credit Loans. Upon the terms and subject to the conditions of this Agreement, each RC Lender agrees to make, from time to time during the period from and including the Closing Date to but excluding the RC Maturity Date, one or more Loans ("RC Loans") to the Borrowers in an aggregate unpaid principal amount not exceeding at any time such Lender's RC Commitment at such time; provided, however, that the Borrowers shall not request, and the Lenders shall have no obligation to make, any RC Loans at any time in excess of the Available RC Commitment. The total amount of the RC Commitment of all RC Lenders on the Agreement Date is $125,000,000.00. (c) Swing Loans. Upon the terms and subject to the conditions of this Agreement, the Swing Loan Lender agrees to make, from time to time, from and including the Closing Date to but excluding the RC Maturity Date, one or more Swing Loans to the -2- Borrowers, in an aggregate unpaid principal amount not exceeding at any time $10,000,000.00, provided however that no Swing Loan shall be made at any time in an amount in excess of the Available RC Commitment. Each Swing Loan shall be in a principal amount equal to $500,000.00 or an integral multiple thereof and shall be made and maintained as a Prime Rate Loan unless a fixed rate shall be agreed upon by the Swing Loan Lender and Multicare (on behalf of the Borrowers). All Swing Loans shall be disbursed by the Swing Loan Lender in Dollars in funds immediately available to Multicare (on behalf of the Borrowers) by crediting an account of Multicare at the Swing Loan Lender's Domestic Lending Office, or in such other manner as may have been specified in the applicable notice of borrowing and as shall be acceptable to the Swing Loan Lender. 1.2 JOINT AND SEVERAL OBLIGATIONS. WHETHER OR NOT EXPRESSLY STATED HEREIN OR IN ANY OTHER LOAN DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY BORROWER) HEREUNDER AND UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN CONNECTION WITH LOANS, LETTERS OF CREDIT OR OTHER OBLIGATIONS) ARE JOINT AND SEVERAL OBLIGATIONS OF ALL BORROWERS. 1.3 MANNER OF BORROWING. (a) Notice of Borrowing. Except for requests for Swing Loans which shall be governed by paragraph (e) below, Multicare (on behalf of the Borrowers) shall give the Administrative Agent notice (which shall be irrevocable), in the case of Prime Rate Loans, no later than 11:00 a.m. (Philadelphia, Pennsylvania time) one Business Day prior to the requested date for the making of such Loans and, in the case of LIBO Rate Loans, 11:00 a.m. (Philadelphia, Pennsylvania, time) three Business Days before the requested date for the making of such Loans. Each such notice shall be in the form of Exhibit B hereto and shall specify (i) whether the requested Loans are to be Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans or RC Loans, (ii) the requested date for the making of such Loans which date shall be a Business Day, (iii) the Type or Types of Loans requested and (iv) the amount of each such Type of Loan, which amount shall be $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof (except that in the case of RC Loans, the amount of the requested Loan may be less if the amount requested is equal to the total Available RC Commitment). Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof and of the amount and Type of each Loan to be made by such Lender on the requested date specified therein. (b) Funding by Lenders. Not later than 12:00 noon (Philadelphia, Pennsylvania time) on each requested date for the making of Loans (other than Swing Loans), each Lender shall make available to the Administrative Agent, in Dollars in funds immediately available to the Administrative Agent at the office designated by the Administrative Agent, the Loans to be made by such Lender on such date, provided however -3- that if a Lender does not receive timely notice from the Administrative Agent as set forth in paragraph (a) above, such Lender shall fund the required amount promptly upon receipt of such notice. The obligations of the Lenders hereunder are several; accordingly, any Lender's failure to make any Loan to be made by it on the requested date therefor shall not relieve any other Lender of its obligation to make any Loan to be made by it on such date, but the latter shall not be liable for the former's failure. (c) Permitted Assumption as to Funding. Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. (Philadelphia, Pennsylvania time) on the requested date for the making of any Loan (other than a Swing Loan) that such Lender will not make available to the Administrative Agent the Loan requested to be made by it on such date, the Administrative Agent may assume that such Lender has made such Loan available. The Administrative Agent in its sole discretion and in reliance upon such assumption, may make available to the Borrowers on the requested date a corresponding amount on behalf of such Lender. If and to the extent such Lender shall not have made available to the Administrative Agent the Loans requested to be made by such Lender on such date and the Administrative Agent shall have so made available to the Borrowers a corresponding amount on behalf of such Lender, (i) such Lender shall, on demand, pay to the Administrative Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the Administrative Agent to the Borrowers until the date such amount shall have been paid in full to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate, and (ii) the Administrative Agent shall be entitled to all interest payable by Borrowers on such amount for the period commencing on the date such amount was advanced by the Administrative Agent to but not including the date on which such amount is received by the Administrative Agent from such Lender. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Without limiting any obligations of any Lender pursuant to this paragraph (c), if such Lender does not pay such corresponding amount promptly upon the Administrative Agent's demand therefor, the Administrative Agent shall notify Multicare (on behalf of the Borrowers) and the Borrowers shall promptly repay such corresponding amount to the Administrative Agent together with accrued interest thereon at the applicable rate or rates on such Loans. (d) Disbursements of Funds to Borrowers. All amounts made available to the Administrative Agent in accordance with paragraph (b) above shall be disbursed by the Administrative Agent promptly but in any event not later than 4:00 p.m. (Philadelphia, Pennsylvania time) on the requested date therefor in Dollars, in funds immediately available to the Borrowers by crediting such amount to an account of Multicare at the Administrative Agent's Domestic Lending Office or in such other manner as may be agreed to by Multicare and the Administrative Agent. -4- (e) Special Provisions Respecting Swing Loans. (i) Request for Borrowing. Multicare (on behalf of the Borrowers) shall give the Swing Loan Lender notice (which shall be irrevocable) of a request for a Swing Loan (with a copy to the Administrative Agent) no later than 12:00 noon (Philadelphia, Pennsylvania time) on the day such Loan is requested; if such notice is received later than 12:00 noon (Philadelphia, Pennsylvania time), then the request shall be deemed to be a request for a Swing Loan to be made on the next Business Day. The Swing Loan Lender shall provide prompt notice to the Administrative Agent of the making of any Swing Loans to the Borrowers. (ii) Participation by RC Lenders. Upon demand made to all of the RC Lenders by the Swing Loan Lender, which demand may be made before or after a Default (including a Default arising under Section 9.1(m) (Insolvency, Bankruptcy, Etc.)), and before or after the maturity date of the subject Swing Loans but subject to the provisions of paragraph (iv) below, each RC Lender (other than the Swing Loan Lender) shall promptly, irrevocably and unconditionally purchase from the Swing Loan Lender, without recourse or warranty, an undivided interest and participation in the Swing Loans then outstanding. Each RC Lender shall effect such purchase by paying to the Swing Loan Lender, without reduction or deduction of any kind, including reductions or deductions for set-off, recoupment or counterclaim, in Dollars immediately available to the Swing Loan Lender at the Swing Loan Lender's Domestic Lending Office, an amount equal to such RC Lender's pro rata share of the principal amount of all Swing Loans then outstanding. Each RC Lender's pro rata share of the Swing Loans shall be based on the amount of such RC Lender's pro rata share of the total RC Commitment. Thereafter, the RC Lenders' respective interests in such Swing Loans, and the remaining interest of the Swing Loan Lender in such Swing Loans, shall in all respects be treated as RC Loans under this Agreement, except that subject to Section 1.8(d) (Default Rate) such Swing Loans shall continue to bear interest at the rate specified for such Swing Loans until such Swing Loans are due and payable and such Swing Loans shall be due and payable by the Borrowers on the dates referred to in Section 1.4(e). If any RC Lender does not pay any amount which it is required to pay promptly upon the Swing Loan Lender's demand therefor, (i) the Swing Loan Lender shall be entitled to recover such amount on demand from such RC Lender, together with interest thereon, at the Federal Funds Rate for the first three Business Days, and thereafter at the Prime Rate, for each day from the date of such demand, if made prior to 2:00 p.m. (Philadelphia, Pennsylvania time) on any Business Day, or, if made at any later time, from the next Business Day following the date of such demand, until the date such amount is paid in full to the Swing Loan Lender by such RC Lender and (ii) the Swing Loan Lender shall be entitled to all interest payable by the Borrowers on such amount until the date on which such amount is received by the Swing Loan Lender from such RC Lender. Moreover, any RC Lender that shall fail to make available the required amount shall not be entitled to vote on or consent to or approve any matter under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Swing Loan Lender by such RC Lender. Without limiting any obligations of any RC Lender pursuant to this paragraph (ii), if such RC Lender does not pay -5- such corresponding amount promptly upon the Swing Loan Lender's demand therefor, the Swing Loan Lender shall notify Multicare (on behalf of the Borrowers) and the Borrowers shall promptly repay such corresponding amount to the Swing Loan Lender together with accrued interest thereon at the applicable rate on such Swing Loans. (iii) No Set-off, Etc. Subject only to the limitations set forth in the following paragraph (iv), the obligations of each RC Lender to make available to the Swing Loan Lender the amounts set forth in the preceding paragraph (ii) shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to qualification or exception and shall be made in accordance with the terms of this Agreement. (iv) Certain Limitations. No RC Lender shall be obligated to purchase a participation in any Swing Loan if such RC Lender proves that (A) the Swing Loan Lender did not in good faith believe that the conditions specified in clauses (i), (iii), and (iv) of Section 4.2(a) were satisfied at the time such Swing Loan was made (unless such condition was waived in accordance with the terms of this Agreement) or (B) such RC Lender had actual knowledge that any such condition had not been satisfied and notified the Swing Loan Lender in a writing received by the Swing Loan Lender at least one Business Day prior to the time that it made such Swing Loan that the Swing Loan Lender was not authorized to make such Swing Loan and stating with specificity the reason therefor. 1.4 SCHEDULED REPAYMENTS. (a) Tranche A Term Loans. The Tranche A Term Loans shall mature and become due and payable and shall be repaid by the Borrowers in quarterly installments, payable on successive Quarterly Payment Dates commencing on the first Quarterly Payment Date after the Closing Date and ending on the Tranche A Maturity Date (whether or not such date would otherwise be a Quarterly Payment Date). Each such installment shall be in an amount equal to one quarter of the amount set forth below for the applicable year, provided that the final installment shall be in an amount equal to the aggregate amount of the Tranche A Term Loans then outstanding. Year Ending Amount (Assuming Full Percent of ----------- $200,000,000.00 is Borrowed Tranche A Term Loan and Not Otherwise Prepaid) ------------------- --------------------------- September 30, 1998 $24,000,000.00 12% September 30, 1999 $28,000,000.00 14% September 30, 2000 $32,000,000.00 16% September 30, 2001 $36,000,000.00 18% -6- Year Ending Amount (Assuming Full Percent of ----------- $200,000,000.00 is Borrowed Tranche A Term Loan and Not Otherwise Prepaid) ------------------- --------------------------- September 30, 2002 $40,000,000.00 20% September 30, 2003 $40,000,000.00 20% In the event that less than the full amount of the Tranche A Term Loans is advanced, the amount of each annual repayment will be equal to the amount actually advanced multiplied by the applicable percentage shown above as such amount may be further reduced pursuant to Section 1.5 below. (b) Tranche B Term Loans. The Tranche B Term Loans shall mature and become due and payable and shall be repaid by the Borrowers in quarterly installments, payable on successive Quarterly Payment Dates commencing with the first Quarterly Payment Date after the Closing Date and ending with the Tranche B Maturity Date (whether or not such date would otherwise be a Quarterly Payment Date). Each such installment shall be in an amount equal to one quarter of the amount set forth below for the applicable year, provided that the final installment shall be in an amount equal to the aggregate amount of Tranche B Term Loans then outstanding. Year Ending Amount (Assuming Full Percent of ----------- $150,000,000.00 is Borrowed Tranche B Term Loan and Not Otherwise Prepaid) ------------------- --------------------------- September 30, 1998 $1,500,000.00 1% September 30, 1999 $1,500,000.00 1% September 30, 2000 $1,500,000.00 1% September 30, 2001 $1,500,000.00 1% September 30, 2002 $1,500,000.00 1% September 30, 2003 $1,500,000.00 1% September 30, 2004 $141,000,000.00 94% In the event that less than the full amount of the Tranche B Term Loans is advanced, the amount of each annual repayment will be equal to the amount actually advanced multiplied by the applicable percentage shown above, as such amount may be further reduced pursuant to Section 1.5 below. (c) Tranche C Term Loans. The Tranche C Term Loans shall mature and become due and payable and shall be repaid by the Borrowers in quarterly installments, payable on each successive March 1, June 1, September 1 and December 1 commencing with December 1, 1997 and ending with the Tranche C Maturity Date (whether or not such date -7- would otherwise be a date specified above in this paragraph (c)). Each such installment shall be in an amount equal to one quarter (except that for the year ending June 1, 1998 each such installment shall be in an amount equal to one third) of the amount set forth below for the applicable year, provided that the final installment shall be in an amount equal to the aggregate amount of Tranche C Term Loans then outstanding. Year Ending Amount (Assuming Full Percent of ----------- $50,000,000.00 is Borrowed Tranche C Term Loan and Not Otherwise Prepaid) ------------------- --------------------------- June 1, 1998 $ 500,000.00 1% June 1, 1999 $ 500,000.00 1% June 1, 2000 $ 500,000.00 1% June 1, 2001 $ 500,000.00 1% June 1, 2002 $ 500,000.00 1% June 1, 2003 $ 500,000.00 1% June 1, 2004 $ 500,000.00 1% June 1, 2005 $46,500,000.00 93% In the event that less than the full amount of the Tranche C Term Loans is advanced, the amount of each annual repayment will be equal to the amount actually advanced multiplied by the applicable percentage shown above, as such amount may be further reduced pursuant to Section 1.5 below. (d) RC Loans. The aggregate outstanding principal amount of the RC Loans shall mature and become due and payable, and shall be repaid by the Borrowers, on the RC Maturity Date. (e) Swing Loans. The Borrowers shall repay each Swing Loan no later than 3:00 p.m. (Philadelphia, Pennsylvania time) on the date specified in the notice of borrowing delivered under Section 1.3(e) (which shall be a date not later than the earlier of (A) the fifth Business Day after the date on which such Swing Loan is to be made and (B) the RC Maturity Date). The Swing Loan Lender shall provide prompt notice to the Administrative Agent of any repayment of Swing Loans by the Borrowers. (f) Letters of Credit. The Borrowers shall reimburse the Issuer, through the Administrative Agent, for each Drawing under a Letter of Credit on the date determined with respect to such Drawing in the manner set forth in Article 3 below. In addition, the Borrowers shall fund the cash collateral account securing Letter of Credit obligations in the -8- manner set forth in Article 3 below. 1.5 VOLUNTARY PREPAYMENTS AND UNSCHEDULED, MANDATORY PREPAYMENTS. (a) Optional Prepayments. The Borrowers may, at any time and from time to time, prepay the Loans in whole or in part, without premium or penalty (but with any payment required under Section 2.4 (Breakage)), except that any optional partial prepayment (other than a prepayment of all outstanding RC Loans) shall be in an aggregate principal amount of $5,000,000.00 or any integral multiple of $1,000,000.00 in excess thereof except that a Swing Loan (prior to the time that the Swing Loan Lender makes a demand under Section 1.3(e)(ii)) may be prepaid in an aggregate principal amount of $500,000.00 or any integral multiple thereof. Amounts to be so prepaid shall irrevocably be due and payable on the date specified in the applicable notice of prepayment delivered pursuant to paragraph (c) of this Section 1.5 together with interest thereon as provided in Section 1.8 (Interest) and together with any payment required under Section 2.4 (Breakage). (b) Mandatory Prepayments. (i) Excess Cash Flow. For each fiscal year of the Borrowers commencing with the fiscal year ending December 31, 1998, upon the earlier of (A) the date on which the Administrative Agent receives the annual financial statements specified in Section 6.1 hereof and (B) the date by which the Borrowers are required to provide such financial statements, the Borrowers shall prepay a portion of the Loans in an amount equal to fifty percent (50%) of the Excess Cash Flow for such fiscal year. (ii) Net Proceeds of Dispositions. No more than five (5) Business Days after the date of any sale, assignment, transfer or other disposition after the Agreement Date by any Borrower of any assets (other than pursuant to paragraphs (a), (b), (c) or (e) of Section 8.5 below) whether now owned or hereafter acquired (collectively, a "disposition of assets"), Multicare, on behalf of the Borrowers, shall notify the Administrative Agent in writing that such disposition of assets has occurred, the date of such event and the amount of the Net Cash Proceeds received in connection therewith. The Administrative Agent shall promptly forward a copy of such notice to each Lender Party. In the event that the Borrowers sell, assign, transfer or otherwise dispose of the assets identified on Schedule 8.5(d) or in Section 6.18 hereof, then on or before the day of such sale, Multicare, on behalf of the Borrowers, shall give written notice of prepayment to the Administrative Agent and shall repay the Loans in an amount equal to the amount of such Net Cash Proceeds. In the case of a disposition of assets other than those identified on Schedule 8.5(d) or in Section 6.18 hereof, in the event that the Borrowers have not, within 364 days after the date of any such disposition of assets, reinvested all of the corresponding Net Cash Proceeds in their business pursuant to an Acquisition in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of the Borrowers on the date of such Acquisition, which is permitted by Section 8.4 (and so state in reasonable detail in a certificate delivered by Multicare (on their behalf) to the Administrative Agent), then, Multicare, on behalf of the Borrowers, shall give written notice of prepayment to the Administrative Agent at least five -9- (5) days prior to the date of the subject prepayment, and on or before the 364th day following such sale shall repay the Loans in an amount equal to the amount of such Net Cash Proceeds not so reinvested. Notwithstanding anything to the contrary contained in this Agreement, in the event there occurs a disposition of assets which would otherwise result in a mandatory prepayment under the 1997 Subordinated Notes to the extent the Borrowers are not otherwise required to make a mandatory prepayment hereunder, the Borrowers shall be obligated to make a mandatory prepayment hereunder in an amount not less than the amount, and at a time not later than such time, necessary to avoid any required prepayment under the 1997 Subordinated Notes and the 1997 Subordinated Note Indenture. (iii) Net Proceeds of Sales of Capital Stock or Issuance of Debt. Within five (5) days of (1) the sale or issuance of any capital stock or debt securities of any Borrower (other than a sale to a Borrower), or (2) equity contributed by Surety raised from Persons other than Cypress, TPG, Nazem or Genesis in respect of common stock, the Borrowers shall prepay a portion of the Loans in an amount equal to the amount of the Net Cash Proceeds of such sale of stock or debt securities or equity contribution. (c) Application and Timing of Prepayments. (i) Notice. Subject to the provisions of the last sentence of this paragraph (i), the Borrowers shall give the Administrative Agent notice of each prepayment of Loans, which notice, in the case of a prepayment of Prime Rate Loans, shall be given no later than 11:00 a.m. (Philadelphia, Pennsylvania time) three (3) Business Days before and, in the case of a prepayment of LIBO Rate Loans, no later than 11:00 A.M. (Philadelphia, Pennsylvania, time) five (5) Business Days before, the date of such prepayment. Each such notice of prepayment shall be in the form of Exhibit C hereto and shall specify (i) the date such prepayment is to be made and (ii) whether the Loans to be prepaid are Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, RC Loans, or Swing Loans (consistent with the provisions of this Agreement), (iii) the amount and Type and, in the case of any LIBO Rate Loan, the last day of the applicable Interest Period for the Loan to be prepaid, (iv) whether the prepayment is a voluntary prepayment pursuant to paragraph (a) of this Section 1.5 or a mandatory prepayment pursuant to paragraph (b) of this Section 1.5 and (v) if a mandatory prepayment, the reason therefor. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof. Notwithstanding the foregoing, if the Borrowers wish to make a prepayment of Swing Loans only, they may prepay such Swing Loans by giving the Swing Loan Lender and the Administrative Agent written notice no later than 12:00 noon (Philadelphia time) one Business Day prior to the date of such prepayment or as otherwise agreed to by Multicare (on behalf of the Borrowers) and the Swing Loan Lender. (ii) Timing and Application of Voluntary Prepayments and Mandatory Prepayments from a Disposition Described in Section 6.18. Any voluntary prepayments pursuant to paragraph (a) of this Section 1.5 or mandatory prepayment resulting from a disposition of assets described in Section 6.18 shall be applied in the following order: (1) First, prepayments shall be applied against the RC Loans and Swing Loans but with no corresponding reduction in the amount of the RC Commitment unless otherwise specified by Multicare (on behalf of the Borrowers) and shall be applied among the RC Loans and Swing -10- Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. (2) Second, (subject to the terms of paragraph (d) below (Tranche B/Tranche C Opt-Out)) prepayments shall be applied against the Term Loans and shall be applied among the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. Prepayments of the various Term Loans shall be applied to each of the respective remaining installments thereof set forth in Section 1.4 on a pro rata basis in accordance with the relative amounts thereof. Any excess shall be applied to any other amounts owing in respect of the Loan Obligations or deposited in the Letter of Credit cash collateral account if required under Article 3 below and, if all such Loan Obligations have been then paid in full and the amount of outstanding Letters of Credit is less than the sum of the amount in the cash collateral account (as required) and the Available RC Commitment, then any excess amount shall be returned to Multicare (on behalf of the Borrowers) or as otherwise required by applicable Law. (iii) Timing and Application of Mandatory Prepayments from the Disposition of Assets Identified on Schedule 8.5(d). Any mandatory prepayments pursuant to paragraph (b) of this Section 1.5 resulting from the disposition of assets identified on Schedule 8.5(d) shall be applied in the following order: (1) First, prepayments shall be applied against the Tranche A Term Loan, on a pro rata basis in accordance with the relative aggregate principal amounts held by each applicable Lender. Prepayments of the Tranche A Term Loan shall be applied to each of the respective remaining installments thereof set forth in Section 1.4 on a pro rata basis in accordance with the relative amounts thereof. (2) Second, (subject to the terms of paragraph (d) below (Tranche B/Tranche C Opt-Out)) prepayments shall be applied against the Tranche B Term Loans and the Tranche C Term Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. Prepayments of the Tranche B Term Loans and the Tranche C Term Loans shall be applied to each of the respective remaining installments thereof set forth in Section 1.4 on a pro rata basis in accordance with the relative amounts thereof. (3) Third, prepayments shall be applied against the RC Loans and Swing Loans with a corresponding reduction in the amount of the RC Commitment and shall be applied among the RC Loans and the Swing Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amount thereof held by each applicable Lender. -11- Prepayments shall be applied to any other amounts owing in respect of the Loan Obligations or deposited in the Letter of Credit cash collateral account and, if all such Loan Obligations have been paid in full and the amount of outstanding Letters of Credit is less than the sum of the amount in the cash collateral account and the Available RC Commitment, then any excess shall be returned to Multicare (on behalf of the Borrowers) or as otherwise required by applicable law. (iv) Timing and Application of Other Mandatory Prepayments. Other than mandatory prepayments resulting from the disposition of assets identified on Schedule 8.5(d) or from the disposition of assets described in Section 6.18, any mandatory prepayments pursuant to paragraph (b) of this Section 1.5 shall be applied in the following order: (1) First, (subject to the terms of paragraph (d) below (Tranche B/Tranche C Opt-Out)) prepayments shall be applied against the Term Loans and shall be applied among the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amounts thereof held by each applicable Lender. Prepayments of the various Term Loans shall be applied to each of the respective remaining installments thereof set forth in Section 1.4 on a pro rata basis in accordance with the relative amounts thereof. (2) Second, prepayments shall be applied against the RC Loans and Swing Loans with a corresponding reduction in the amount of the RC Commitment and shall be applied among the RC Loans and the Swing Loans at the time outstanding on a pro rata basis in accordance with the relative aggregate principal amount thereof held by each applicable Lender provided, however, the Borrowers need not prepay the RC Loans to the extent that there would be, after giving effect to the reduction in the amount of the RC Commitment (which commitment reduction is unaffected by the terms of this proviso), sufficient Available RC Commitment to reborrow such amounts. The preceding proviso shall not apply to prepayments in respect of Net Cash Proceeds of dispositions. Any excess shall be applied to any other amounts owing in respect of the Loan Obligations or deposited in the Letter of Credit cash collateral account and, if all such Loan Obligations have been paid in full and the amount of outstanding Letters of Credit is less than the sum of the amount in the cash collateral account and the Available RC Commitment, then any excess amount shall be returned to Multicare (on behalf of the Borrowers) or as otherwise required by applicable Law. (d) Tranche B/Tranche C Opt-Out. With respect to any prepayment of the Tranche B Term Loans or Tranche C Term Loans, the Administrative Agent shall ratably pay the Tranche B Lenders or Tranche C Lenders, as the case may be, as required under paragraph (c) of this Section 1.5, unless the Administrative Agent shall have received written notice from any Tranche B Lender or Tranche C Lender, as the case may be, not later than 11:00 a.m. two (2) Business Days prior to the date of such prepayment, that such Tranche B -12- Lender or Tranche C Lender, as the case may be, elects not to receive any prepayment under this paragraph (d) (a "Tranche B Opt-Out Lender" or "Tranche C Opt-Out Lender", as applicable). Any prepayment which would have been remitted to a Tranche B Opt-Out Lender or Tranche C Opt-Out Lender but for its election to not receive such prepayment, shall be paid ratably to the remaining Lender Parties in the order and as provided in paragraph (c) of this Section 1.5; provided, however, that notwithstanding the foregoing provisions of this paragraph (d), Tranche B Lenders and Tranche C Lenders must accept any prepayment made pursuant to this Section 1.5 on any date on which the Tranche A Term Loans have been paid in full (or are to be concurrently paid in full). (e) Certain Provisions Respecting Prepayments Generally. Prepayments shall be subject to the interest payment provisions, as applicable, set forth in Section 1.8 and the breakage indemnity provisions, as applicable, set forth in Section 2.4 below. 1.6 PAYMENTS BY THE BORROWERS IN GENERAL. (a) Time, Place and Manner. All payments due to the Administrative Agent under the Loan Documents shall be made to the Administrative Agent at the office designated by the Administrative Agent on the signature pages hereto or to such other Person or at such other address as the Administrative Agent may designate by written notice to Multicare on behalf of the Borrowers. All payments due to any Lender under the Loan Documents, whether made to the Administrative Agent or directly to a Lender or the Issuer, shall be made for the account of, in the case of payments in respect of LIBO Rate Loans, such Lender's or Issuer's Eurodollar Lending Office and, in the case of all other payments, such Lender's or Issuer's Domestic Lending Office. Except as otherwise set forth in this Agreement, a payment shall not be deemed to have been made on any day unless such payment has been received by the required Person, at the required place of payment, in Dollars in funds immediately available to such Person, no later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day; provided, however, that the failure of the Borrowers to make any such payment by such time shall not constitute a Default hereunder so long as such payment is received no later than 3:00 p.m. (Philadelphia, Pennsylvania time) on such day, but any such payment received later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day shall be deemed to have been made on the next Business Day for the purpose of calculating interest on the amount paid, provided further, that any such payment made with the proceeds of Loans shall be deemed to have been made on the date of the making of such Loans, so long as such proceeds are immediately so applied and are not otherwise disbursed to the Borrowers. (b) No Reductions. All payments due to the Administrative Agent, the Issuer or any Lender under this Agreement and the other Loan Documents, shall be made by the Borrowers without any reduction or deduction whatsoever, including any reduction or deduction for any charge, set-off, holdback, recoupment or counterclaim (whether sounding in tort, contract or otherwise). (c) Authorization to Charge Accounts. The Borrowers hereby authorize each Lender Party, each participant and each Affiliate of each Lender Party if and to the extent any amount payable by the Borrowers under the Loan Documents (whether payable to such Person or to any other Lender Party) is not otherwise paid when due, to charge such amount -13- against any or all of the demand deposit or other accounts of any Borrower with such Person (whether maintained at a branch or office located within or without the United States), with the Borrowers remaining jointly and severally liable for any deficiency. The Person so charging any such account shall give the relevant Borrower prompt notice thereof, but any failure to give or delay in giving such notice shall not affect such Person's right to effect such charge. Such charging of accounts shall be subject to the provisions of Section 12.19 hereof. (d) Extension of Payment Dates if Not a Business Day. Whenever any payment to the Administrative Agent, the Issuer or any Lender under the Loan Documents would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day unless, in the case of a payment of the principal of LIBO Rate Loans, such extension would cause payment to be due in the next succeeding calendar month, in which case such due date shall be advanced to the next preceding Eurodollar Business Day. If the due date for any payment under the Loan Documents is extended (whether by operation of any Loan Document, applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. (e) Disbursement of Payments to Lenders and Issuer. The Administrative Agent shall promptly distribute to each applicable Lender Party its ratable share of each payment received by the Administrative Agent under the Loan Documents for the account of such Lender Party by crediting an account of such Lender Party at the Administrative Agent's office or by wire transfer to an account of such Lender Party at an office of any other commercial bank located in the United States or at any Federal Reserve Bank designated by such Person. Unless the Administrative Agent shall have received notice from Multicare (on behalf of the Borrowers) prior to the date on which any payment is due to any Lender Parties under the Loan Documents that the Borrowers will not make such payment in full, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date and the Administrative Agent, in its sole discretion may, in reliance upon such assumption, cause to be distributed to each applicable Lender Party on such due date, a corresponding amount with respect to the amount then due to such Person. If and to the extent that the Borrowers shall not have so made such payment in full to the Administrative Agent, and the Administrative Agent shall have so distributed to such Lender or Lenders or the Issuer a corresponding amount, such Lender Parties shall, on demand, repay to the Administrative Agent the amount so distributed together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date the such Person repays such amount to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Prime Rate. Moreover, any Lender Party that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lenders are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Nothing in this Section 1.6 shall relieve the Borrowers from any payment obligations. -14- (f) Breakage Costs on LIBO Rate Loans. Any repayment or prepayment of a LIBO Rate Loan made on a day other than the last day of the applicable Interest Period therefor shall be subject to payments in respect of breakage costs as required to be paid in respect thereof pursuant to Section 2.4 below. 1.7 REDUCTIONS OF RC COMMITMENT. (a) Optional Reductions. The Borrowers may reduce the RC Commitment by giving the Administrative Agent notice (which shall be irrevocable) thereof no later than 11:00 a.m. (Philadelphia, Pennsylvania, time) on the third Business Day before the requested date of such reduction, provided, that each partial reduction thereof shall be in an amount equal to $10,000,000.00 or any integral multiple of $5,000,000.00 in excess thereof and, provided, further, that no reduction shall reduce the RC Commitment to an amount less than the sum of (i) the aggregate of the principal amount of all Swing Loans outstanding on such date (after giving effect to any repayment of Swing Loans made on or prior to such date), (ii) the aggregate of the principal amount of all RC Loans outstanding on such date (after giving effect to any repayment or prepayment of RC Loans made on or prior to such date), (iii) the aggregate amount of the Contingent Reimbursement Obligations and (iv) the aggregate amount of all unreimbursed Drawings. Upon receipt of any such notice, the Administrative Agent shall promptly notify each RC Lender of the contents thereof and the amount (based on a pro rata reduction to each RC Lender's Commitment) to which such RC Lender's RC Commitment is to be reduced. (b) Mandatory Reductions. At the time of any mandatory prepayment of RC Loans pursuant to Section 1.5, the RC Commitment shall be reduced to the extent required by said Section 1.5. (c) No Reinstatement of RC Commitment. All reductions of the RC Commitment are permanent and the RC Commitment cannot be restored without the written consent of all RC Lenders. 1.8 INTEREST. (a) Interest Rates in General. Except for Swing Loans which shall bear the interest rate specified in Section 1.1(c) above, subject to the terms and conditions of this Agreement, each Loan shall, at the option of the Borrowers, bear interest on the outstanding principal amount thereof until paid in full at a rate per annum equal to (i) the Prime Rate as in effect from time to time or (ii) the applicable LIBO Rate for a specified Interest Period plus in the case of both (i) and (ii) the Applicable Margin, if any. (b) Election of LIBO Rate. Unless otherwise designated by the Borrowers as a LIBO Rate Loan in accordance with this paragraph (b), each Loan (other than a Swing Loan which is subject to Section 1.1(c) above) shall be deemed to be a Prime Rate Loan as more fully set forth below. (i) Prime Rate Unless Otherwise Designated. Prime Rate Loans shall continue as Prime Rate Loans unless and until such Loans are converted into Loans of -15- another Type. LIBO Rate Loans for any Interest Period shall continue as Loans of such Type until the end of the then current Interest Period therefor, at which time they shall be automatically converted into Prime Rate Loans unless Multicare (on behalf of the Borrowers) shall have given the Administrative Agent notice in accordance with clause (ii) below requesting that such Loans continue as LIBO Rate Loans for another Interest Period of a specified duration. (ii) Election of LIBO Rate. To elect a LIBO Rate, Multicare (on behalf of the Borrowers) shall give the Administrative Agent notice (which shall be irrevocable) no later than 11:00 a.m. (Philadelphia, Pennsylvania, time) three (3) Eurodollar Business Days before the requested date of the funding, conversion or continuation which date shall be a Eurodollar Business Day. Each such notice shall be in the form of Exhibit D hereto and shall specify (A) the requested date of such funding, conversion or continuation, (B) whether the subject Loan is a new advance or an existing Loan that is to be converted or continued, (C) in the case of any LIBO Rate Loan being continued, the last day of the current Interest Period, (D) whether such Loan is to be a Tranche A Term Loan, Tranche B Term Loan, Tranche C Term Loan or an RC Loan and (E) the amount of, and the desired Interest Period for, the Loan subject to such LIBO Rate election provided that the Borrowers shall not be entitled to select an Interest Period for any Loan which shall end on a date later than the Maturity Date applicable to such Loan. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof. (iii) LIBO Rate Suspended During Event of Default. Notwithstanding anything to the contrary contained in clauses (i) or (ii) of this paragraph (b), so long as an Event of Default shall have occurred and be continuing, the Administrative Agent may (and, at the request of the Required Lenders, shall) notify Multicare (on behalf of the Borrowers) that Loans may only be converted into or continued upon the expiration of the applicable current Interest Period therefor as Prime Rate Loans or Loans of such specified Types as shall be acceptable to the Required Lenders. Thereafter, until no Event of Default shall continue to exist, Loans may not be converted into or continued as Loans of any Type other than Prime Rate Loans or one or more of such specified Types. (iv) Limitation on Types of Loans. Notwithstanding anything to the contrary contained in this Agreement, the Borrowers shall borrow, prepay, convert and continue Loans in a manner such that (A) unless otherwise agreed to by the Administrative Agent, the aggregate principal amount of LIBO Rate Loans of the same Type shall, at all times, be not less than $10,000,000.00 and (B) there shall be, at any one time, no more than the number of Interest Periods specified below in effect for each Tranche: Maximum No. of Interest Periods Tranche ---------------- ------- five (5) RC Loans three (3) Tranche A three (3) Tranche B three (3) Tranche C (v) Flexibility as to Source. Each Lender may fund LIBO Rate Loans from any source that such Lender deems (in its sole discretion) appropriate without -16- loss of any rights hereunder. (c) Interest Payment Dates. Interest shall be payable, (i) in the case of Prime Rate Loans, quarterly in arrears on each Quarterly Payment Date, (ii) in the case of LIBO Rate Loans, on the last day of each applicable Interest Period (and, in the case of any LIBO Rate Loan having an Interest Period longer than three months, on each three month anniversary of the first day of such Interest Period) and (iii) in the case of any Loan (including Swing Loans), when such Loan shall be due (whether at maturity, upon mandatory prepayment, by reason of notice of prepayment or acceleration or otherwise) or converted, but only to the extent then accrued on the amount then so due or converted. (d) Default Rate. At any time that an Event of Default shall have occurred and shall be continuing, any amount payable hereunder and under each other Loan Document shall bear interest (whether before or after judgment), payable on demand, at a rate per annum equal to the applicable Default Rate. 1.9 FEES. (a) Commitment Fees. The Borrowers shall pay to the Administrative Agent, for the account of each RC Lender, a commitment fee on the daily unused amount of such RC Lender's RC Commitment for each day from and including the Closing Date to but excluding the RC Maturity Date. The rate per annum shall initially be equal to .50% of such unused amount but shall be adjusted five (5) Business Days following delivery of the annual Officer's Compliance Certificate for the year ending December 31, 1997 pursuant to Section 6.1 below and thereafter shall be readjusted on the fifth (5th) Business Day following delivery of such quarterly or annual Officer's Compliance Certificates. At any time that such annual or quarterly Officer's Compliance Certificate to be delivered pursuant to said Section 6.1 and is not so delivered, then the Commitment Fee shall be based on the highest percentage set forth below in this section 1.9(a). The adjustments in the rate shall be based on the Adjusted Total Debt/Cash Flow Ratio as set forth in the chart below. The commitment fee shall be payable in arrears (i) on successive Quarterly Payment Dates beginning with the first Quarterly Payment Date after the Closing Date, (ii) on the date of any reduction of the RC Commitment (to the extent accrued and unpaid on the amount of such reduction) and (iii) on the RC Maturity Date. Adjusted Total Commitment Debt/Cash Flow Ratio Fee -------------------- ---------- less than 3.5 .25% greater than or equal to 3.5 but less than 4.5 .3125% greater than or equal to 4.5 but less than 5.0 .375% greater than or equal to 5.0 .50% -17- (b) Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent, for the respective accounts of the RC Lenders, a letter of credit commission on the daily aggregate amount of the Contingent Reimbursement Obligations under each Letter of Credit at a rate per annum equal to the Applicable Margin that would be applicable to RC Loans that are LIBO Rate Loans at such time. In addition, the Borrowers shall pay to the Administrative Agent, for the sole account of the Issuer, a Letter of Credit fronting fee on the daily aggregate amount of the Contingent Reimbursement Obligations under each Letter of Credit at a rate per annum equal to .10%. Such fees shall be payable in arrears on successive Quarterly Payment Dates and at the expiration or other termination of each Letter of Credit. In addition, the Borrowers shall pay to the Administrative Agent, for the benefit of the Issuer, the Issuer's standard posted charges for such matters as opening, negotiation and transfer. (c) Other Fees. The Borrowers shall pay to the Administrative Agent for the respective accounts of the Administrative Agent, the Issuer, the Lenders and/or the other Agents as the case may be, such other fees as have been or may be agreed to in writing by the Borrowers or by Acquisition Corp. in connection with the commitment to enter into this Agreement (including any facility fees referred to in any commitment letters) and the transactions contemplated by this Agreement. 1.10 COMPUTATION OF INTEREST AND FEES. Interest calculated on the basis of the LIBO Rate or the Federal Funds Rate shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Commitment fees, letter of credit fees and interest calculated on the basis of the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as applicable, and paid for the actual number of days elapsed. Interest, commitment fees and letter of credit fees for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. 1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT. Each Lender's Loans and the Borrowers' joint and several obligations to repay such Loans with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the Register and other records of the Administrative Agent and such Lender and, in the case of Tranche A Term Loans, a single Tranche A Term Note payable to the order of such Lender, in the case of RC Loans, a single RC Note payable to the order of such Lender and, in the case of Swing Loans, a single Swing Loan Note payable to the order of the Swing Loan Lender. The records of each Lender shall be prima facie evidence of such Lender's Loans and, in each case, of accrued interest thereon and all payments made in respect thereto. Each Lender's participation in Letters of Credit shall be evidenced by this Agreement, the records of such Lender and the Issuer and the Letters of Credit. In the event that there is any dispute concerning the amount of any such obligations, the amount of each Lender's Commitment with respect to RC Loans, Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans and the amount of outstanding Loan Obligations of each and every Type shall at all times be ascertained from the records of the Administrative Agent, including without limitation, the Register, all of which shall be conclusive absent manifest error except that the outstanding face amount of any Letters of Credit, the amount of any unpaid Drawings, the amount of unpaid interest accrued thereon and fees relating to Letters of Credit shall at all times be ascertained from the records of the Issuer which shall be -18- conclusive absent manifest error and the outstanding amount of any Swing Loans and the amount of unpaid interest thereon shall at all times be ascertained from the records of the Swing Loan Lender, which shall be conclusive absent manifest error. 1.12 PRO RATA TREATMENT. Except to the extent otherwise provided herein, (a) Tranche A Term Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Tranche A Lenders pro rata in accordance with their respective Tranche A Commitments and interest in Tranche A Loans; (b) Tranche B Term Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Tranche B Lenders pro rata in accordance with their respective Tranche B Commitments and interest in Tranche B Loans; (c) Tranche C Term Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the Tranche C Lenders pro rata in accordance with their respective Tranche C Commitments and interest in Tranche C Loans; and (d) RC Loans shall be made by, and principal, interest and fees in respect thereof shall be paid or repaid to, the RC Lenders pro rata in accordance with their respective RC Commitments and interest in RC Loans. Each participation of obligations in respect to Letters of Credit and Swing Loans shall be allocated among, and each reimbursement of Drawings under Letters of Credit or letter of credit commissions shall be made for the account of, the RC Lenders pro rata in accordance with their respective amounts of RC Commitments. 1.13 TAXES ON PAYMENTS. (a) Taxes Payable by the Borrowers. If any Tax is required to be withheld or deducted from, or is otherwise payable by the Borrowers in connection with, any payment due to the Administrative Agent, the Issuer or any Lender that is not a "United States Person" (as such term is defined in Section 7701(a)(30) of the Code), the Borrowers (i) shall, if required, withhold or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing authority in accordance with applicable Law and (ii) except in the case of any Bank Tax, shall pay the Issuer, to such Lender or the Administrative Agent such additional amounts as may be necessary so that the net amount received by such Person with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable hereunder. If any Tax is withheld or deducted from, or is otherwise payable by the Borrowers in connection with, any payment due to the Issuer, any Lender or the Administrative Agent hereunder, the Borrowers shall furnish to such Person the original or a certified copy of a receipt (if any) for such Tax from the applicable taxing authority or other evidence of payment thereof satisfactory to such Person within 30 days after the date of such payment (or, if such receipt shall not have been made available by such taxing authority within such time, the Borrowers shall use reasonable efforts to promptly obtain and furnish such receipt). If the Borrowers fail to pay any such Taxes when due to the appropriate taxing authority or fail to remit to the Issuer, any Lender or the Administrative Agent the required receipts or other evidence of payment thereof satisfactory to such Person, the Borrowers shall indemnify such person for any Taxes, interest, penalties or additions to Tax that may become payable by such Person as a result of any such failure. (b) Taxes Payable by the Issuer, any Lender or the Administrative Agent. The Borrowers shall, promptly upon request by the Issuer, any Lender or the Administrative -19- Agent that is not a United States Person, pay to such Person an amount equal to (i) all Taxes (other than Bank Taxes and without duplication of amounts paid pursuant to the preceding paragraph (a)) payable by such Person with respect to any payment due to such Person hereunder and (ii) all Taxes (other than Bank Taxes) payable by such Person as a result of payments made by the Borrowers (whether made to a taxing authority or to such Person pursuant to the preceding paragraph (a) or this paragraph (b)). (c) Credits and Deductions. If the Issuer, any Lender or the Administrative Agent is, in its sole opinion, able to apply for any refund, offset, credit, deduction or other reduction in Taxes by reason of any payment made by the Borrowers under the preceding paragraph (a) or (b), the Issuer, such Lender or the Administrative Agent, as the case may be, shall use reasonable efforts to obtain such refund, offset, credit, deduction or other reduction and, upon receipt thereof, will pay to the Borrowers such amount, not exceeding the increased amount paid by the Borrowers, as is equal to the net after-tax value to the Issuer, such Lender or the Administrative Agent, in its sole opinion, of such part of such refund, offset, credit, deduction or other reduction as it considers to be allocable to such payment by the Borrowers, having regard to all of such Person's dealings giving rise to similar refunds, offsets, credits, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that if such Person has made a payment to the Borrowers pursuant to this paragraph (c) and the applicable refund, offset, credit, deduction or other reduction in Tax is subsequently disallowed, the Borrowers shall, promptly upon request by the Issuer, the Administrative Agent or such Lender refund to such Person that portion of such payment determined by such Person, in its sole opinion, relating to such disallowance; and provided, further that (i) the Issuer, the Administrative Agent or such Lender, as the case may be, shall not be obligated to disclose to the Borrowers any information regarding its Tax affairs or computations and (ii) nothing in this paragraph (c) shall interfere with the right of such Person to arrange its Tax affairs as it deems appropriate. (d) Exemption from U.S. Withholding Taxes. Each Lender that is not a United States Person shall submit to the Borrowers and the Administrative Agent, on or before the fifth day prior to the first Quarterly Payment Date occurring after the Closing Date (or, in the case of a Person that is not a United States Person and that became a Lender by assignment, promptly upon such assignment), two duly completed and signed copies of either (A) Form 1001 of the United States Internal Revenue Service entitling such Lender to a complete exemption from withholding on all amounts to be received by such Lender pursuant to this Agreement and the Loans, (B) Form 4224 of the United States Internal Revenue Service relating to all amounts to be received by such Lender pursuant to this Agreement and the Loans or (C) in the case of a Lender Party that is claiming an exemption from United States withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments of "portfolio interest" two accurate and complete signed original Forms W-8 (or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Agreement or the Notes) and, if such Lender Party delivers such Forms W-8 (or successor form), two signed certificates that such Lender Party is not (1) a "bank" for purposes of Section 881(c) of the Internal Revenue Code, (2) is not a 10% shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and (3) is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code), as appropriate, -20- Each such Lender shall, from time to time after submitting either such Form, submit to the Borrowers and the Administrative Agent such additional duly completed and signed copies of one or the other such Forms (or any successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (A) requested in writing by the Borrowers or the Administrative Agent and (B) appropriate under the circumstances and under then current United States law or regulations to avoid or reduce United States withholding taxes on payments in respect of all amounts to be received by such Lender pursuant to this Agreement or the Loans. Upon the request of the Borrowers or the Administrative Agent, each Lender that is a United States Person shall submit to the Borrowers and the Administrative Agent a certificate to the effect that it is a United States Person. (e) Obligations under this Section 1.13 shall survive payment of the Loans. 1.14 REGISTERED NOTES AND LOANS. (a) Request for Registration. Any Lender may request the Borrowers (through the Administrative Agent), and the Borrowers agree thereupon, to register such Loans as provided in Section 1.14(c) and, if such Lender is otherwise entitled to a Note hereunder, to issue such Lender's Note, evidencing such Loans, or to exchange such Note for a new Note, registered as provided in Section 1.14(c) (a "Registered Note"). A Registered Note may not be exchanged for a Note that is not in registered form. A Registered Note shall be deemed to be and shall be a Note for all purposes of this Agreement and the other Loan Documents. (b) Delivery of Tax Forms. Each Non-U.S. Lender that requests or holds a Registered Note pursuant to Section 1.14(a) or registers its Loans pursuant to Section 1.14(a) (a "Registered Lender") (or, if such Registered Lender is not the beneficial owner thereof, such beneficial owner) shall deliver to Multicare (on behalf of the Borrowers) (with a copy to the Administrative Agent) prior to or at the time such Non-U.S. Lender becomes a Registered Lender, the applicable form described in Section 1.13(d) (or such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States) together with an annual certificate stating that such Registered Lender or beneficial owner, as the case may be, is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and is not otherwise described in Section 881(c)(3) of the Code. Each Registered Lender or beneficial owner, as the case may be, shall promptly notify Multicare (on behalf of the Borrowers) (with a copy to the Administrative Agent) if at any time such Registered Lender or beneficial owner, as the case may be, determines that it is no longer in a position to provide such previously delivered certificate to the Borrowers (or any other form of certification adopted by the relevant taxing authorities of the United States for such purposes). (c) Registration of Loans. The Administrative Agent, acting, for this purpose, as agent of the Borrowers, shall, upon request of any Registered Lender, enter in the Register the name, address and taxpayer identification number (if provided) of the Registered Lender or beneficial owner, as the case may be. In addition to the requirements of Section 12.9 (Successors and Assigns), a Registered Note and the Loans evidenced thereby (or such Loans pending delivery of such Registered Note) or any other Loans registered pursuant to Section 1.14(a) above may be assigned or otherwise transferred in -21- whole or in part only by registration of such assignment or transfer of such Registered Note and/or the Loans so registered on the Register (and each such Registered Note shall expressly so provide). Any assignment or transfer of all or part of such Loans and such Registered Note shall be registered on the Register only upon compliance with the provisions of Section 12.9 and, in the case of Registered Notes, surrender for registration of assignment or transfer of the Registered Note evidencing such Loans, duly endorsed by (or accompanied by a written instrument of assignment or transfer fully executed by) the Registered Lender thereof, and thereupon one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s) and, if less than all of such Registered Notes is thereby being assigned or transferred, the assignor or transferor. -22- ARTICLE 2 YIELD PROTECTION AND BREAKAGE INDEMNITY 2.1 MANDATORY SUSPENSION AND CONVERSION OF LIBO RATE LOANS. Any Lender's obligations to make, continue or convert into LIBO Rate Loans of any Type shall be suspended, all such Lender's outstanding Loans of such Type shall be converted into Prime Rate Loans on the last day of their applicable Interest Periods (or, in the case of clause (c) below, on the last day such Lender may lawfully continue to maintain Loans of such Type if earlier, or, in the case of clause (d) below, on the day determined by such Lender to be the last Business Day before the effective date of the applicable restriction), and all pending requests for the making or continuation of or conversion into Loans of such Type by such Lender shall be deemed requests for Prime Rate Loans, if: (a) on or prior to the date required for the determination of a LIBO Rate for any Interest Period, the Administrative Agent determines that for any reason appropriate information is not available to it for purposes of determining the LIBO Rate for such Interest Period; (b) on or prior to the first day of any Interest Period for a LIBO Rate Loan, the Required Lenders have informed the Administrative Agent of their determination that the LIBO Rate as determined by the Administrative Agent for such Interest Period would not accurately reflect the cost to such Lenders of making, continuing or converting into a LIBO Rate Loan for such Interest Period; (c) at any time such Lender determines that any Regulatory Change makes it unlawful or impracticable for such Lender or its applicable Eurodollar Lending Office to make, continue or convert into a LIBO Rate Loan of such Type, or to comply with its obligations hereunder in respect thereof; or (d) such Lender notifies the Administrative Agent of its determination that (i) by reason of any Regulatory Change, such Lender or its applicable Eurodollar Lending Office is restricted, directly or indirectly, in the amount that it may hold of (A) a category of liabilities that includes deposits by reference to which, or on the basis of which, the interest rate applicable to LIBO Rate Loans of such Type is directly or indirectly determined or (B) the category of assets that includes LIBO Rate Loans of such Type and (ii) in connection therewith, such Lender has elected not to make available hereunder LIBO Rate Loans of such Type. If, as a result of this Section 2.1, any Loan of any Lender that would otherwise be made or maintained as or converted into a LIBO Rate Loan for any Interest Period is instead made or maintained as or converted into a Prime Rate Loan, then, unless the corresponding Loan of each of the other Lenders is also to be made or maintained as or converted into a Prime Rate Loan, such Loan shall be treated as being a LIBO Rate Loan of such Type for such Interest Period for all purposes of this Agreement (including the timing, application and proration among the Lenders of interest payments, conversions and prepayments) except for the calculation of the interest rate borne by such Loan. The Administrative Agent shall promptly notify Multicare (on behalf of the Borrowers) and each Lender of the existence or occurrence -23- of any condition or circumstance specified in clause (a) or (b) above, and each Lender shall promptly notify Multicare (on behalf of the Borrowers) and the Administrative Agent of the existence, occurrence or termination of any condition or circumstance specified in clause (c) or (d) above applicable to such Lender's Loans, but the failure by the Administrative Agent or such Lender to give any such notice shall not affect such Lender's rights hereunder. 2.2 REGULATORY CHANGES. If in the determination of any Lender or, in the case of any Letter of Credit or Drawing, the Issuer, (a) any Regulatory Change shall directly or indirectly (i) reduce the amount of any sum received or receivable by (A) such Lender with respect to any LIBO Rate Loan or Letter of Credit Participation or the return to be earned by such Lender on any LIBO Rate Loan or Letter of Credit Participation, or (B) the Issuer with respect to any Letter of Credit or Drawing, (ii) impose a cost on (A) such Lender or any Affiliate of such Lender that is attributable to the making or maintaining of, or such Lender's commitment to make or acquire, any LIBO Rate Loan, or Letter of Credit Participation or (B) the Issuer or any of its Affiliates that is attributable to the issuance or maintaining of, or the commitment to issue, any Letter of Credit or the making or maintaining of any Drawing, (iii) require (A) such Lender or any Affiliate of such Lender to make any payment on or calculated by reference to any amount received by such Lender in respect of its LIBO Rate Loans or its obligations to make LIBO Rate Loans or (B) the Issuer or any of its Affiliates to make any payment on or calculated by reference to any amount received by the Issuer or any of its Affiliates in respect of any Letter of Credit, or its commitment to issue any Letter of Credit or Drawing, or (iv) reduce, or have the effect of reducing, the rate of return on any capital (A) such Lender or any Affiliate of such Lender is required to maintain on account of any LIBO Rate Loan or Letter of Credit Participation or such Lender's commitment to make any LIBO Rate Loan or Letter of Credit Participation, or (B) the Issuer or of any of its Affiliates is required to maintain on account of any Letter of Credit or Drawing or the Issuer's commitment to issue any Letter of Credit. and (b) such reduction, increased cost or payment shall not be fully compensated for by an adjustment in the applicable rates of interest payable under the Loan Documents, then the Borrowers shall pay to such Lender or the Issuer such additional amounts as such Lender or the Issuer determines will fully compensate it for such reduction, increased cost or payment. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request for such payment by such Lender or the Issuer, as the case may be, accompanied by the certificate described in Section 2.5 and, in the case of those applicable to future periods, on the dates specified, or determined in accordance with a method specified, by such Lender or the Issuer, as the case may be, provided that the Borrowers shall not be liable for any amount payable with respect to any period more than 90 days before the date of such request or certificate, or, if earlier the retroactive effective date of the Regulatory Change if such Regulatory Change occurs during such 90-day period. -24- 2.3 CAPITAL AND RESERVE REQUIREMENTS. If, in the determination of any Lender, or the Issuer, such Lender, the Issuer or any Affiliate thereof is required, under applicable Law (including Regulation D), or interpretations, directives, requests and governmental or regulatory guidelines (whether or not having the force of law), to maintain capital or deposit any reserve on account of any Loan, any Letter of Credit (whether drawn or undrawn) or any commitment to make any Loan or issue any Letter of Credit, then, upon request by such Lender or the Issuer, the Borrowers shall pay to such Lender or the Issuer, as the case may be, such additional amounts as such Person determines will fully compensate it for any reduction in the rate of return on the capital that such Lender, the Issuer or such Affiliate thereof is so required to maintain. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request by such Lender or the Issuer, as the case may be, for such payment accompanied by the certificate described in Section 2.5 (provided that the Borrowers shall not be liable for any amount payable with respect to any period more than 90 days before the date of such request or certificate, or, if earlier, the retroactive effective date of such determination if made during such 90-day period), and, in the case of those relating to future periods, on the dates specified, or determined in accordance with a method specified, by such Lender or the Issuer, as the case may be. 2.4 BREAKAGE. The Borrowers shall pay to each Lender, upon request, such amount as such Lender reasonably determines is necessary to compensate it for any loss, cost or expense (excluding loss of the Applicable Margin) incurred by it as a result of (a) any payment, prepayment or conversion of a LIBO Rate Loan on a date other than the last day of an Interest Period for such LIBO Rate Loan or (b) a LIBO Rate Loan for any reason not being made or converted, or any payment of principal thereof or interest thereon not being made, on the date therefor determined in accordance with the applicable provisions of this Agreement. At the election of such Lender, and without limiting the generality of the foregoing, but without duplication, such compensation on account of losses may include an amount equal to the excess of (i) the interest that would have been received from the Borrowers under this Agreement (excluding the Applicable Margin) during the remainder of the applicable Interest Period over (ii) the interest component of the return that such Lender determines it could have obtained had it placed such amount on deposit in the interbank Dollar market for a period equal to such remaining portion of the Interest Period. 2.5 DETERMINATIONS. In making the determinations contemplated by this Article 2, each Lender and the Issuer shall make such estimates, assumptions, allocations and the like that such Person in good faith determines to be appropriate, and such Person's selection thereof in accordance with this Section 2.5, and the determinations made by such Person on the basis thereof, shall be final, binding and conclusive upon the Borrowers, except, in the case of such determinations, for manifest errors. Each Lender and the Issuer shall furnish to the Borrowers, at the time of any request for compensation under Section 2.2 or 2.3, a certificate outlining in reasonable detail the computation of any amounts claimed by it under this Article 2 and the assumptions underlying such computations, which shall include a statement of an officer of such Person certifying that such request for compensation is being made pursuant to a policy adopted by such Person to seek such compensation generally from customers similar to the Borrowers and having similar provisions in agreements with -25- such Person. 2.6 REPLACEMENT OF LENDERS. If any Lender requests compensation pursuant to Sections 1.13 (Taxes on Payments), 2.2 (Regulatory Changes) or 2.3 (Capital and Reserve Requirements), or such Lender's obligation to make or continue Loans as LIBO Rate Loans shall be suspended pursuant to Section 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans) or such Lender has defaulted on its obligations to make or participate in Loans pursuant to Section 1.3 (Manner of Borrowing), Multicare (on behalf of the Borrowers), upon three Business Days' notice, may require that such Lender transfer all of its right, title and interest under this Agreement, such Lender's Notes, if any, and the other Loan Documents to any Eligible Institution identified by Multicare (on behalf of the Borrowers) subject to (a) the consent of the Administrative Agent (which consent shall not be unreasonably withheld), (b) satisfaction of the other conditions specified in Section 12.9 below (Successors and Assigns), (c) the agreement of the proposed transferee to assume all of the obligations of such Lender hereunder and under the other Loan Documents for consideration equal to the outstanding principal amount of such Lender's Loans, unreimbursed Drawings payable to the transferor, interest thereon to the date of such transfer, and all other amounts payable hereunder to such Lender to the date of transfer, (d) such transferor Lender shall have been paid on or prior to the date of such transfer all fees and other amounts payable to such transferor hereunder including those amounts payable under said Sections 1.13, 2.2 or 2.3, as applicable (and including any fees accrued hereunder and any amounts that would be payable under Section 2.4 (Breakage) as if all of such Lender's Loans and share of unreimbursed Drawings were being prepaid in full on such date) or arrangements satisfactory to the transferor Lender shall have been made for such payments, and (e) satisfaction of the condition that if the Lender being replaced has requested compensation pursuant to Sections 1.13, 2.2 or 2.3, the proposed transferee's aggregate requested compensation, if any, pursuant to Sections 1.13, 2.2 or 2.3 with respect to such replaced Lender's Loans is lower than that of the Lender replaced. Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements of the Borrowers contained in Sections 1.13 (Taxes on Payments), 2.2 (Regulatory Changes), 2.3 (Capital and Reserve Requirements), 2.4 (Breakage), 12.12 (Indemnification) and 12.13 (Expenses) (without duplication of any payments made to such Lender by the Borrowers or the proposed transferee) shall survive for the benefit of any Lender replaced under this Section 2.6 with respect to the time prior to such replacement. 2.7 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Sections 1.13 (Taxes on Payments), -26- 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans), 2.2 (Regulatory Changes) or 2.3 (Capital and Reserve Requirements) with respect to such Lender, it will, if requested by the Borrowers, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section. Nothing in this Section 2.7 shall affect or postpone any of the obligations of the Borrowers or the right of any Lender provided in Section 1.13 (Taxes on Payments), 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans), 2.2 (Regulatory Changes) or 2.3 (Capital and Reserve Requirements). -27- ARTICLE 3 LETTERS OF CREDIT 3.1 ISSUANCE OF LETTERS OF CREDIT. (a) In General. Upon the terms and subject to the conditions of this Agreement, the Issuer shall, from time to time, from the Closing Date to the date which is 90 days prior to the RC Maturity Date, issue one or more Letters of Credit for the account of any Borrower, provided that (i) the sum of the Contingent Reimbursement Obligations (after giving effect to the requested Letter of Credit) plus the aggregate unpaid amount of all Drawings under Letters of Credit shall not exceed $15,000,000.00 and provided, further, that the face amount of the Letter of Credit so requested shall not exceed the Available RC Commitment at such time. Each Letter of Credit shall be in a form and shall contain such terms as shall be reasonably satisfactory to the Issuer. Letters of Credit shall be issued only on a Business Day, and shall be used for the general corporate purposes of the Borrowers or for such other purposes as shall be acceptable to the Issuer in its sole discretion. (b) Terms. Each Letter of Credit shall be denominated only in Dollars and shall expire on or before the first anniversary of the issuance thereof and in any event not later than the fifth Business Day preceding the RC Maturity Date. No Letter of Credit shall have an expiration date which is extendable under an "evergreen" or similar provision unless the Issuer expressly agrees to the same in its sole discretion in any particular case. All other extensions and renewals are also at the sole discretion of the Issuer. Any extension of the expiry date of a Letter of Credit to a date beyond the first anniversary of the issuance thereof shall constitute an "issuance" of such Letter of Credit for all purposes hereof. (c) Form of Request. The Borrowers shall request the issuance of a Letter of Credit by furnishing to the Administrative Agent and the Issuer, at least five Business Days before the requested date of such issuance (or at such later time as shall be acceptable to the Issuer), such notice thereof as shall be reasonably satisfactory to the Issuer to which shall be attached a certificate of the chief financial officer or other Responsible Officer of Multicare representing that Multicare is, and after giving effect to the additional Indebtedness will be, in compliance with Section 4.03 of the 1997 Subordinated Note Indenture, that the obligations with respect to such Letter of Credit constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as defined in the 1997 Subordinated Note Indenture, and as to such other matters as required by Section 4.2 below. (d) Participation by RC Lenders. Upon the date of issuance of a Letter of Credit, the Issuer shall be deemed to have granted to each RC Lender (other than the Issuer), and each RC Lender (other than the Issuer) shall be deemed to have acquired from the Issuer without further action by any party hereto, a participation in such Letter of Credit and any Drawings that may at any time be made thereunder, to the extent of such Lender's pro rata share of the RC Commitment. (e) Notice of Drawings. The Issuer shall promptly notify Multicare (on behalf of the Borrowers) of its receipt of each Drawing request with respect to a Letter of Credit, stating the date and amount of the Drawing requested thereby and the date and -28- amount of each Drawing disbursed pursuant to such request. The failure of the Issuer to give, or delay in giving, any such notice shall not release or diminish the obligations hereunder of the Borrowers in respect of such Drawing. (f) Reimbursement of Drawings by Borrowers. If at any time Multicare (on the behalf of the Borrowers) receives notice of a Drawing, the Borrowers shall reimburse such Drawing by paying to the Issuer in immediately available funds the amount of the payment made by the Issuer with respect to such Drawing, together with interest thereon at a rate per annum equal to the Prime Rate from the day that the Drawing is made until the day such reimbursement is made if such Drawing is not reimbursed on the day the Drawing is made. Such reimbursement shall be made by the Borrowers to the Issuer no later than one (1) Business Day following the date that Multicare (on behalf of Borrowers) receives the relevant notice of Drawing if such notice is received on or prior to 10:00 a.m. (Philadelphia, Pennsylvania time) and no later than two (2) Business Days following the date that Multicare receives the relevant notice of Drawing if such notice is received after 10:00 a.m. (Philadelphia, Pennsylvania time). If the Borrowers shall fail to make any payment required by this paragraph (f) at the time specified, and if at such time, there shall be any Available RC Commitment, the Administrative Agent may (but is not obligated to) assume that the Borrowers intend to use the proceeds of RC Loans to make such payment. In reliance on such assumption, the Administrative Agent may (but is not obligated to) notify the RC Lenders (and Multicare (on behalf of the Borrowers)) that notwithstanding the Borrowers' failure to provide notice pursuant to Section 1.3 above, such notice is deemed given pursuant to this paragraph (f) requesting an RC Loan bearing interest at the Prime Rate in an amount sufficient to make the payments required by this paragraph (f). Such notice from the Administrative Agent shall be treated by the Lenders in the same manner as a notice from the Borrowers under Section 1.3 above. The Administrative Agent may, at the direction of the Issuer, apply the proceeds of such Loans to satisfy the requirements of this paragraph (f). (g) Obligations of RC Lenders to Issuer. In the event that the Borrowers shall fail to make any payment when due pursuant to the preceding paragraph (f) and for so long as such failure shall be continuing, the Issuer may give notice of such failure to the Administrative Agent and each RC Lender, which notice shall include, in the case of an RC Lender, the amount of such RC Lender's interest in such Drawing, whereupon each such RC Lender (other than the Issuer) shall promptly remit such amount to the Administrative Agent for the account of the Issuer as provided in this paragraph (g). Each RC Lender (other than the Issuer) shall, in the event it receives such notice from the Issuer at or before 12:00 noon (Philadelphia, Pennsylvania time) on any Business Day, fund its participation in any unreimbursed Drawing by remitting to the Administrative Agent, no later than 2:00 p.m. (Philadelphia, Pennsylvania time) on such day, in immediately available funds its share of the reimbursement obligations in respect of each Drawing. In the event that the Administrative Agent receives such funds from an RC Lender at or before 2:00 p.m. (Philadelphia, Pennsylvania time) on any day, the Administrative Agent shall make available the amount thereof to the Issuer, in immediately available funds no later than 4:00 p.m. (Philadelphia, Pennsylvania time) on that same day. Any amount payable by an RC Lender to the Administrative Agent for the account of the Issuer under this paragraph (g), and any amount payable by the Administrative Agent to the Issuer under this paragraph (g), shall bear interest for each day from the date due (and including such day if paid after 2:00 p.m. (Philadelphia, Pennsylvania time) in the case of any such payment by an RC Lender to the Administrative Agent, or 4:00 p.m. (Philadelphia, Pennsylvania time), in the case of any such payment by -29- the Administrative Agent to the Issuer, on such day) until the date it is received by the Issuer at a rate equal to the Federal Funds Rate until (and including) the third Business Day after the date due and thereafter at the Prime Rate. Moreover, any Lender that shall have failed to make available the required amount shall not be entitled to vote on such matters as Lenders or Required Lender are otherwise entitled to vote on or consent to or approve under this Agreement and the other Loan Documents until such amount with interest is paid in full to the Administrative Agent by such Lender. Each RC Lender shall, upon the demand of the Issuer, reimburse the Issuer, through the Administrative Agent to the extent that the Issuer has not been reimbursed by the Borrowers after demand therefor, for the reasonable costs and expenses (including reasonable legal fees) incurred by it (other than as a result of its willful misconduct or gross negligence as finally determined by a court of competent jurisdiction) in connection with the collection of amounts due under, the administration of, and the preservation and enforcement of any rights conferred by, the Letters of Credit or the performance of the Issuer's obligations under this Agreement in respect thereof on a pro rata basis relative to such RC Lender's pro rata share of the RC Commitment (as of the time such costs and expenses are incurred). The Issuer shall refund through the Administrative Agent any costs and expenses reimbursed by such RC Lender that are subsequently recovered from the Borrowers in an amount equal to such RC Lender's ratable share thereof. (h) Cash Collateral. It is intended that at all times that the Borrowers shall have contingent or other obligations (including obligations in respect of fees) relating to Letters of Credit, there shall be sufficient availability under the RC Commitment to reimburse the Issuer (and the RC Lenders) out of proceeds of RC Loans. Accordingly, in the event that there shall, at any time, be insufficient availability under the RC Commitment (after giving effect to all outstanding Swing Loans and RC Loans) to do so (whether because the amount of the RC Commitment is reduced pursuant to a mandatory reduction or is terminated at maturity, upon acceleration or otherwise or because the amount of outstanding RC Loans, Swing Loans and such Letter of Credit obligations exceeds the amount of the RC Commitment for any other reason), the Borrowers shall forthwith pay to the Administrative Agent an amount equal to the aggregate face value of all outstanding Letters of Credit plus the aggregate amount of all unreimbursed Drawings plus the amount of all fees or other obligations in respect of Letters of Credit to the extent of such excess. Such amount shall be maintained by the Administrative Agent in an interest-bearing cash collateral account in the name of and for the benefit of the Issuer and the RC Lenders to secure such payment obligations of the Borrowers until such time as all outstanding Letters of Credit have expired or been cancelled and all amounts in respect thereof have been paid in full. Upon receipt of a notice from the Issuer that there are unreimbursed Drawings or other amounts due in respect of such Letters of Credit (which notice shall set forth the amount of such unreimbursed Drawings or other obligations) the Administrative Agent shall promptly disburse from the cash collateral account the amount specified in the notice and shall pay such amount to the Issuer and RC Lenders ratably in accordance with the respective amounts owing to each such Person, first, for fees and indemnities until the same are paid in full and, second, for unreimbursed Drawings. The Administrative Agent and the Issuer may rely on their records as to any amounts so owing and shall be fully protected in doing so. Such records shall be conclusive, absent manifest error. At any time that the RC Commitment again becomes available for reimbursement of Drawings under outstanding Letters of Credit such that (i) the sum of the RC Commitment at that time and the amount in the cash collateral account exceeds (ii) the sum of all outstanding RC Loans and Swing Loans, the face amount of all outstanding Letters of Credit and the amount of all unreimbursed -30- Drawings, then, upon written request of Multicare (on behalf of the Borrowers) (which request shall (A) represent that there exists no Default or Event of Default and (B) specify the amount of such excess), the Administrative Agent shall release such excess amount to the Borrowers from the cash collateral account. If all Loan Obligations (other than Loan Obligations constituting contingent obligations under indemnification provisions which survive indefinitely, so long as no unsatisfied claim has been made under any such indemnification provision) have been indefeasibly paid in full in cash, all Commitments have terminated and all Letters of Credit have expired, promptly following demand by Multicare (on behalf of the Borrowers) the Administrative Agent shall release to the Borrowers all remaining funds in the Letter of Credit cash collateral account. (i) Obligations Absolute. The obligation of each Borrower and each RC Lender to make available to the Issuer the amounts set forth in this Article 3 shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever, and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to any qualification or exception and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Issuer, any RC Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between such Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or (v) the occurrence of any Default or Event of Default. (j) Limitations on Liability; Protection of Issuer, Administrative Agent and Lenders. (i) Limitation on Liability of Lender Parties. Without affecting any rights any Lender Party may have under applicable Law, each of the Borrowers agrees that none of the RC Lenders, the Issuer, the Administrative Agent or their respective officers or directors shall be liable or responsible for, and the obligations of the Borrowers to the RC Lenders, the Issuer and the Administrative Agent hereunder shall not in any manner be affected by: (A) the use that may be made of any Letter of Credit or the proceeds thereof by -31- the beneficiary thereof or any other Person or any acts or omissions of such beneficiary or any other Person; (B) the validity, sufficiency or genuineness of documents presented in connection with any Drawing, or of any endorsements thereon, even if such documents should, in fact, prove to be in any or all respects, invalid, insufficient, fraudulent or forged; or (C) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit or any other action taken or omitted to be taken by any Person under or in connection with any Letter of Credit, except that the Borrowers shall have a claim against the Issuer and the Issuer shall be liable to the Borrowers, in each case to the extent and only to the extent of any damages suffered by the Borrowers that they prove are caused by the Issuer's willful misconduct or gross negligence. In furtherance and not in limitation of the foregoing, in determining whether to pay under any Letter of Credit, the Issuer shall not have any obligation relative to the other Lenders other than to determine that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit, regardless of any notice or information to the contrary. Any action taken or omitted to be taken by the Issuer under or in connection with any Letter of Credit (if taken or omitted in the absence of gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction) shall not create for the Issuer any resulting liability to any Borrower or any Lender. (ii) Indemnification and Expenses. In addition to any other amounts payable under this Agreement, the Borrowers agree jointly and severally to protect, indemnify, pay and hold the Issuer and each RC Lender harmless from and against any and all claims, costs, charges and expenses (including reasonable attorneys' fees) which the Issuer may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of, or payment of any drawing under, any Letter of Credit, other than as a result of the gross negligence or willful misconduct of the Issuer as finally determined by a court of competent jurisdiction or (B) the failure of the Issuer to honor a Drawing under any Letter of Credit as a result of any act or omission of any present or future government or Governmental Authority. (iii) Issuer Not Responsible. In furtherance of the foregoing limitations on liability, the Issuer shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the issuance of Letters of Credit; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part; (C) errors, omissions, interruptions, or delays in transmissions or delivery of any messages, by mail, cable, telecopy, telex or otherwise, whether or not in cipher, except for damages proven to be caused by the Issuer's gross negligence or willful misconduct; (D) the misapplication by the beneficiary of any Letter of Credit or the proceeds of any drawing under such Letter of Credit; or (E) any consequence arising from causes beyond the control of the Issuer, including any governmental acts. -32- ARTICLE 4 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS 4.1 CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND INITIAL FUNDING. The effectiveness of this Agreement, the obligation of the Lenders to make the initial Loans hereunder and the obligation of the Issuer to issue Letters of Credit hereunder are subject to the fulfillment of the following conditions on or before that date which is 120 days after the closing with respect to the Tender Offer (unless such date is extended in writing by the Agents in their sole discretion), in each case to the satisfaction of the Agents and, to the extent specified below, to the satisfaction of each Lender (each Lender upon making its initial Loan hereunder being deemed to have waived or found satisfactory all such conditions so specified). (a) Secretary's Certificates. The Borrowers shall have delivered, or caused to be delivered, a certificate of the Secretary or an Assistant Secretary (or general partner, as applicable) of each of the Borrowers and Surety, with specimen signatures of the authorized signatories to the Loan Documents, and to which shall be attached copies of the following, as applicable: articles or certificate of incorporation (each of which shall be certified as of a recent date by the Secretary of State of the state of such Borrower's or Surety's incorporation), certificates of formation (each of which shall be certified as of a recent date by the Secretary of State of the state of such Borrower's or Surety's formation), operating agreements, management agreements, bylaws, partnership agreements, resolutions and shareholder agreements. (b) Good Standing Certificates. The Borrowers shall have delivered, or caused to be delivered, a good standing or subsistence certificate, as the case may be, issued as of a recent date with respect to each Borrower (and each corporate, limited liability company or limited partnership, general partner of Borrowers that are partnerships) and Surety, (i) issued by the Secretary of State or other appropriate official of the jurisdiction of formation of such Person and (ii) issued by the Secretary of State or other appropriate official of each jurisdiction where it is required to qualify to do business and, if any such certificate is dated more than twenty-one (21) days prior to the Closing Date, a confirmation (which may be provided by a reputable corporate service) of the information in such certificate. (c) The Notes. The Borrowers shall have delivered to the Administrative Agent for distribution to each of the RC Lenders, the Tranche A Lenders and the Swing Loan Lender the applicable Notes referred to in Section 1.11. (d) Lien Searches. The Borrowers shall have delivered to the Administrative Agent Uniform Commercial Code, tax, and judgment lien searches of the Borrowers and Surety, in such form, as of such date and with such content as are acceptable to the Administrative Agent. -33- (e) Pledge Agreement. The Borrowers and GENESIS ELDERCARE CORP. (the "Surety") shall each have executed and delivered Pledge Agreements whereby the Administrative Agent shall receive a first priority security interest for the benefit of the Lender Parties in all of the equity interests in each of the direct and indirect Restricted Subsidiaries of Multicare, the stock of Multicare and all inter-Borrower notes (collectively, as such agreements are amended, modified, restated or supplemented from time to time in accordance with the terms hereof and thereof, the "Pledge Agreement") in substantially the form annexed to this Agreement as Exhibit E (together with the stock certificates, assignment powers, Uniform Commercial Code financing statements (in proper form for filing in the appropriate offices to perfect the security interest of the Administrative Agent, for the benefit of the Secured Parties, in the Collateral granted under the Pledge Agreement) and other items required thereunder to the extent that such items were not previously delivered to the Administrative Agent). (f) Guaranty. The Borrowers shall have caused to be delivered to the Administrative Agent for the benefit of the Lender Parties a Guaranty and Suretyship Agreement in substantially the form annexed hereto as Exhibit F (the "Suretyship Agreement") duly executed by the Surety, whereby the Surety guarantees and becomes surety for all of the Borrowers' obligations hereunder and under the other Loan Documents. (g) Multicare Management Agreement. Prior to or substantially contemporaneously with the initial funding hereunder, GENESIS HEALTH VENTURES, INC. ("Genesis") (and/or one or more of its Subsidiaries) shall have entered into a Management Agreement with the Surety (the "Multicare Management Agreement") under which Genesis (and/or such Subsidiaries) will provide management services to the Borrowers (or Surety). The Multicare Management Agreement shall be on terms and conditions satisfactory to the Agents. As a further condition, Genesis, Multicare and the Agents shall enter into the Multicare Management Subordination Agreement. (h) Other Transaction Documents; Tender Offer. (i) The Borrowers shall have delivered to each of the Agents and any Lender that so requests, each of the other Transaction Documents certified by a Responsible Officer of Multicare as being a true and correct copy of such Transaction Document as in full force and effect on the Closing Date. (ii) The Tender Offer shall have closed with the purchase of at least a majority of the common stock of Multicare having been purchased for $28 per share and the other transactions contemplated by the Transaction Documents to have occurred on or before the Closing Date shall have taken place in strict compliance with the terms of said Transaction Documents, subject only to such modifications as are acceptable to the Agents. There shall be no legal impediment to the merger of Acquisition Corp. into Multicare under Section 253 or 251, as the case may be, of the Delaware General Corporation Law on the terms set forth in the Merger Agreement and the restrictions in Section 203 of the Delaware General Corporation Law and any other impediment under Delaware law shall be inapplicable to the acquisition of the shares of Multicare by Acquisition Corp. and the proposed merger pursuant to the terms of the Merger Agreement. (i) Acquisition and Merger. The Borrowers shall have provided the Agents with evidence that simultaneously with the closing hereunder, Acquisition Corp. will merge with Multicare, with Multicare being the surviving entity in accordance with the terms of the Merger Agreement and in compliance with all applicable Laws, and that -34- simultaneously with the closing hereunder, Surety will own 100% of the capital stock of such surviving entity. (j) Opinions of Counsel. (i) The Borrowers shall have delivered favorable opinions of counsel, dated as of the Closing Date, from: (1) Blank, Rome, Comisky & McCauley, counsel to the Borrowers, as to the absence of conflicts with other financing agreements and other material agreements of the Borrowers, the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1997 Subordinated Note Indenture, and compliance with Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, the perfection of security interests under the Pledge Agreement, issuance of capital stock of the Borrowers, the due organization of the Borrowers and Surety, the due authorization of the transactions referred to herein, the enforceability of the Loan Documents, and such other matters as the Agents may reasonably request, in form and substance satisfactory to the Agents; and (2) Local counsel to the Borrowers in the States of Massachusetts, West Virginia, New Jersey, Ohio, Pennsylvania, Wisconsin, Connecticut, Illinois, Rhode Island, Vermont and Virginia as to certain health care matters and such other matters as the Agents may reasonably request, in form and substance satisfactory to the Agents. (ii) Drinker Biddle & Reath LLP, special counsel to the Administrative Agent shall have delivered to the Administrative Agent a favorable opinion of counsel, dated as of the Closing Date, as to such matters as the Administrative Agent shall reasonably request. (k) Solvency Opinion. The Borrowers shall have delivered letters from their chief financial officers and from a nationally recognized appraisal firm, valuation consultant or investment banking firm satisfactory to the Agents each of which shall be in form and substance satisfactory to the Agents, attesting to the solvency of the Borrowers, taken as a whole, after giving effect to the transactions referred to herein (including the making of the initial Loans and the acquisition of Multicare and its Subsidiaries by Acquisition Corp.). (l) Officers Certificate Regarding Senior Subordinated 12-1/2% Notes and Convertible 7% Subordinated Debentures. Multicare, on behalf of Borrowers shall have delivered a certificate dated the Closing Date signed by a Responsible Officer detailing as of the Closing Date the amount of Multicare's Convertible 7% Subordinated Debentures remaining outstanding and the maximum amount necessary to redeem and retire all such Debentures by no later than March 16, 1998; and the amount of Multicare's Senior Subordinated 12-1/2% Notes remaining outstanding and the maximum amount necessary to redeem and retire all such Notes by no later than January 2, 1998. (m) Consents and Approvals. All material corporate, governmental, judicial and third party consents and approvals necessary in connection with this Agreement and the other Loan Documents, the Tender Offer and the related transactions (including consents and approvals required under or referred to in the Merger Agreement) shall have been obtained and, as applicable, become final orders (without imposition of any conditions that are not acceptable to the Lenders) and shall remain in full force and effect and, to the extent -35- requested by any Agent, copies thereof shall have been delivered to the Administrative Agent. Without limiting the generality of the foregoing, all appropriate filings shall have been made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the applicable waiting periods relating thereto shall have expired or been terminated without requests for additional information from the reviewing agencies. (n) Financial Statements; Projections. (i) Financial Statements. The Borrowers shall have delivered, or caused to be delivered, to the Administrative Agent, the Issuer and the Lenders at least three (3) Business Days prior to the Closing Date each of the following: (x) a consolidated income statement of Multicare and its consolidated Subsidiaries for the twelve calendar month period ending on June 30, 1997, adjusted, on a pro forma basis to the beginning of the period (as required for the financial covenants) to reflect the consummation of all of the transactions set forth in the Transaction Documents and all Acquisitions and dispositions which shall have occurred within said twelve month period as if such transactions, Acquisitions and dispositions had occurred on the first day of such period, which statement shall be supplemented by information separating out and explaining all pro forma adjustments made thereto; and (y) a consolidated balance sheet of Multicare and its consolidated Subsidiaries as of June 30, 1997, reflecting, on a pro forma basis, the consummation of all transactions set forth in the Transaction Documents including all borrowings in connection therewith and all borrowings otherwise contemplated hereunder, the application of all proceeds of such borrowings and the amount of all outstanding Indebtedness after giving effect to the foregoing, which balance sheet shall be supplemented by information separating out and explaining all pro forma adjustments made thereto; each of which statements shall be (1) in form acceptable to the Agents, (2) accompanied by explanatory notes acceptable to the Agents and (3) certified by the chief financial officer of Acquisition Corp. to fairly present on a pro forma basis the financial condition and results of operations as at the date, or for the period, indicated. (ii) Projections. Multicare on behalf of the Borrowers shall have delivered to each Lender projections respecting the consolidated financial condition and results of operations of Multicare and its consolidated Subsidiaries for the period commencing on January 1, 1997 and ending on December 31, 2002, which projections shall be in reasonable detail, shall reflect the consummation of the transactions contemplated hereby and the Transaction Documents including the making of the initial Loans and shall be accompanied by a written statement of the assumptions and estimates underlying such projections. -36- (o) Officer's Compliance Certificate. Multicare on behalf of the Borrowers shall have delivered an Officer's Compliance Certificate, dated as of the Closing Date, as to the truth of the representations and warranties herein and in the other Loan Documents and the absence of any Default (in each case, both before and after giving effect to the initial Loans). The Officer's Compliance Certificate shall demonstrate that EBITDA of the Borrowers for the twelve calendar month period ending June 30, 1997 (after making all adjustments referred to in paragraph (n) above) is no less than $118,000,000.00 and Total Funded Indebtedness of the Borrowers is not more than $760,000,000.00. The Officer's Compliance Certificate delivered pursuant to this paragraph (o) shall include a reconciliation of the financial information set forth thereon respecting Multicare and its Restricted Subsidiaries and that set forth on the financial statements for Multicare and its consolidated subsidiaries. (p) Repayment of Predecessor Indebtedness. The Borrowers shall have delivered to the Administrative Agent evidence that, prior to or substantially simultaneously with the making of the initial Loans, (a) all Indebtedness of the Borrowers other than that expressly permitted under Section 8.1 (Indebtedness) below will be repaid, (b) all commitments to lend in respect of such Indebtedness shall have been effectively terminated and (c) all collateral held in connection therewith shall have been released (or undertakings to release such collateral upon receipt of specified funds shall have been duly made) and UCC-3 termination statements and all other documents necessary in the determination of the Administrative Agent to effectively terminate of record all security interests related to such Indebtedness shall have been duly executed by the proper parties and shall have been delivered to the Administrative Agent (or undertakings to do so upon receipt of specified funds shall have been furnished to the Administrative Agent). (q) Insurance. The Borrowers shall have delivered to the Administrative Agent evidence of the insurance required by Section 6.8 below. (r) Fees and Expenses. The Borrowers shall have paid the fees required to be paid to the Agents and the Lenders on or before the Closing Date and the fees and disbursements of counsel for the Agents in connection with the negotiation, preparation, execution and delivery of the Loan Documents and the making of the initial Loans. (s) Closing of Genesis Credit Facilities. All conditions to the initial funding under the Third Amended and Restated Credit Agreement, dated as of the date hereof, among Genesis, certain of its Subsidiaries, Mellon as administrative agent, and certain other agents and lenders referred to therein (the "Genesis Credit Agreement") shall have been satisfied. (t) Investment in Surety. Genesis shall have acquired approximately 44% of the common stock of Surety for a purchase price of at least $325,000,000.00, Cypress, Nazem and TPG, collectively, shall have paid at least $420,000,000.00 for the remainder of the common stock of Surety, and all of the proceeds of the sale of such common stock shall have been contributed by the Surety to Acquisition Corp. (u) Acquisition and Merger. The Borrowers shall have submitted to the Agents evidence satisfactory to the Agents that the total amount paid by Acquisition Corp. to acquire the common stock of Multicare and by Acquisition Corp. or Multicare to complete -37- the merger of Acquisition Corp. into Multicare, including without limitation consulting, severance and other payments to employees of Multicare, non-competition, amounts provided to refinance existing indebtedness of Multicare and all amounts of assumed indebtedness has not and will not exceed $1,533,000,000.00 in the aggregate. (v) 1997 Subordinated Note Indenture. The 1997 Subordinated Note Indenture with terms and conditions satisfactory to the Agents in their sole discretion, shall have been executed by the parties thereto, and Acquisition Corp. shall have received at least $250,000,000.00 in gross proceeds from the sale of the 1997 Subordinated Note and the net proceeds from such issuance shall have been released to the Borrower from the escrow in which they were deposited. (w) Tax Sharing Agreement. The Borrowers shall have delivered a copy of the Tax Sharing Agreement duly executed by the Borrowers, the Surety and the Excluded Subsidiaries (the "Tax Sharing Agreement"), limiting, as between the parties thereto, the tax liabilities of the Borrowers in connection with a consolidated tax filing (which may include as part of the consolidated group for tax purposes the Borrowers, the Surety and the Excluded Subsidiaries), to the amount of tax liabilities that the Borrowers would have incurred had they filed separately. The Tax Sharing Agreement shall be certified as such by a Responsible Officer of Multicare. 4.2 CONDITIONS TO EACH LOAN AND ISSUANCE OF EACH LETTER OF CREDIT. (a) Conditions. The obligation of the Lenders to make any Loans, including the initial Loans and the obligation of the Issuer to issue any Letters of Credit are subject to fulfillment of each of the following conditions, in each case, unless otherwise specified, to the satisfaction of the Administrative Agent: (i) Absence of Default. There shall not, either prior to or after giving effect to each such Loan or Letter of Credit, as the case may be, exist an Event of Default or a Default. (ii) Borrowing Notice/L.C. Request. In connection with any request for Loans (other than Swing Loans), the Administrative Agent shall have received a borrowing notice as required by Section 1.3 above; in connection with any request for the issuance of a Letter of Credit, the Issuer and the Administrative Agent shall have received a Letter of Credit request as required by Section 3.1 above; and in connection with any request for any Swing Loans, the Swing Loan Lender and the Administrative Agent shall have received a Swing Loan request as required by Section 1.3(e). (iii) Truth of Representations. The representations and warranties of the Borrowers and each other Loan Party made in this Agreement and each other Loan Document shall be true and correct in all material respects as of the date each such Loan is made or Letter of Credit issued (both immediately prior to and after giving effect to said Loan or Letter of Credit) as if made on and as of such date. (iv) No Violations of Law. Neither the making of, nor use of -38- proceeds of, such Loans nor the issuance of, or use of the proceeds of, such Letters of Credit shall conflict with, or cause any Borrower to violate any Law. (v) Compliance with Indenture Covenants. Neither the making of such Loans nor the issuance of such Letters of Credit shall violate the terms of the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture, if and when applicable as set forth in Section 5.1(w), or the 1997 Subordinated Note Indenture and Multicare shall deliver a certificate of its chief financial officer or controller representing that, both before and after giving effect to such additional Indebtedness, Multicare is in compliance with the financial covenants set forth in Section 4.03 of the 1997 Subordinated Note Indenture and that such Loans or Letters of Credit as the case may be constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as defined in the 1997 Subordinated Note Indenture and, if applicable as set forth in Section 5.1(w), the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture. (vi) Additional Information. The Lenders shall have received such additional information and documentation as the Lenders may reasonably request. (b) Deemed Representation and Warranty. The request for, and acceptance of, any Loan (including any Swing Loan) or Letter of Credit by any Borrowers shall be deemed a representation and warranty by the Borrowers that the conditions specified in clauses (i), (iii) and (iv) of the preceding paragraph (a) have been satisfied. -39- ARTICLE 5 REPRESENTATIONS AND WARRANTIES 5.1 REPRESENTATIONS. The Borrowers hereby jointly and severally represent and warrant to each Lender Party as follows: (a) Status of Borrowers. Each Borrower is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Borrower has the power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage. Each Borrower is duly qualified to do business as a foreign corporation or foreign partnership and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable, except for any failures to maintain such qualifications which, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 5.1(a) hereto sets forth for each Borrower, as of the Closing Date, (i) whether it is a corporation, limited partnership or general partnership, (ii) the jurisdiction of its organization, and (iii) the jurisdictions in which it is qualified to do business as a foreign corporation or a foreign partnership, as the case may be, except where the failure to maintain such qualification could not, individually or in the aggregate, have a Material Adverse Effect. Each direct and indirect Subsidiary of Multicare, other than the Excluded Subsidiaries, is a Borrower hereunder and is designated as such on the signature pages hereto (or, after the Closing Date, on signature pages of a Joinder Supplement hereto). The states in which any Borrowers operate Health Care Businesses are Massachusetts, West Virginia, New Jersey, Ohio, Pennsylvania, Wisconsin, Connecticut, Illinois, Rhode Island, Vermont and Virginia. (b) Capitalization of Borrowers. Schedule 5.1(b) hereto sets forth (i) for each corporate Borrower, (A) the authorized capitalization, (B) the names of the owners (indicating whether they are Borrowers) of the outstanding capital stock, (C) the number and class of shares issued to each such owner and (D) the percentage of outstanding shares of each class of capital stock owned by each such owner, and (ii) for each Borrower which is a partnership, (A) the names of the owners (indicating whether they are Borrowers) of the outstanding equity thereof and (B) the percentage ownership interest of, and type of equity issued to, each such owner. The outstanding equity of each Borrower has been duly authorized and validly issued. All capital stock is fully paid and nonassessable. Each Borrower owns beneficially and of record and has good title to all equity indicated as being owned by it on said Schedule 5.1(b), free and clear of any Lien, except for Liens in favor of the Administrative Agent, as agent for the benefit of the Secured Parties, as contemplated by the Loan Documents and other Permitted Liens. There are no options, warrants, calls, or similar rights relating to equity of the Borrowers. No Excluded Subsidiary has any equity interest in any Borrower. (c) Authorization, Execution and Binding Effect of Loan Documents. Each Borrower has the power and authority to execute, deliver, perform, and take all actions contemplated by, each Loan Document to which it is a party, and all such action has been duly and validly authorized by all necessary corporate or partnership (as the case may be) proceedings on its part. This Agreement and each other Loan Document has been duly and -40- validly executed and delivered by each Loan Party listed on the signature pages hereto or thereto, as the case may be. This Agreement and each other Loan Document constitutes the legal, valid and binding obligation of each Loan Party purporting to be a party hereto or thereto, as the case may be, enforceable against such Person in accordance with its terms, except as the enforceability hereof of thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. (d) Security. The Pledge Agreement creates in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable Lien on all right, title and interest of each Borrower in the Collateral described therein, and the Administrative Agent has (or, upon the filing of the UCC-1 financing statements delivered by the Borrowers on the Closing Date, will have), for the benefit of the Secured Parties, a fully perfected and continuing first priority Lien on all of the right, title and interest of each Borrower in the Collateral described in the Pledge Agreement, subject to no Liens other than Permitted Liens. (e) Governmental Approvals and Filings; Absence of Conflicts. No approval, order, consent, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with, the execution and delivery of any Loan Document by any Loan Party, or in connection with the performance of the terms hereof or thereof by such Person, other than the filing of Uniform Commercial Code financing and continuation statements as referred to in the Pledge Agreement. No Loan Party is subject to any Law which purports to restrict or regulate its ability to borrow money, obtain credit or provide a guarantee or other form of credit support as a consequence of the nature of the business conducted by such Loan Party. Neither the execution and delivery of this Agreement or any other Loan Document by any Loan Party, nor the performance of or compliance with the terms and conditions hereof or thereof (including the execution, delivery and performance of the Transaction Documents) by any Loan Party does or will (i) violate or conflict with any Law or any judgment, decree, or order of a court or Governmental Authority or any settlement agreement, (ii) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or cause an acceleration of, or result in the creation or imposition of any Lien upon any of property of any Loan Party (except for any Lien in favor of the Administrative Agent pursuant to the Pledge Agreement) under or in connection with, (x) its articles or certificate of incorporation, bylaws, partnership agreement or operating agreement (or other constituent documents), (y) any agreement or instrument creating, evidencing or securing any Indebtedness in the aggregate amount of $250,000.00 or more to which any Loan Party is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, or -41- (z) any other agreement or instrument or arrangement to which it is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, in the case of the foregoing clause (z), for matters that, individually or in the aggregate, could not have a Material Adverse Effect, or (iii) result in a Limitation on any Licenses applicable to the operations or properties of any Borrower, or adversely affect the ability of any Borrower to participate in any Third Party Payor Arrangement. Except to the extent that the failure to obtain the same could not have a Material Adverse Effect, no approval, order, consent of, authorization, exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority or other Person is necessary in connection with the Tender Offer and merger of Acquisition Corp. into Multicare except such consents as are listed on Schedule 5.1(e) hereto all of which have been obtained and are in full force and effect. (f) Financial Statements. Multicare has heretofore furnished to the Administrative Agent and each Lender consolidated balance sheets of Multicare and its consolidated Subsidiaries as of December 31, 1996 and December 31, 1995 and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal years then ended, as examined and reported on by KPMG Peat Marwick, independent certified public accountants for Multicare, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of Multicare and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP. Multicare has heretofore furnished to the Administrative Agent, the Issuer and each Lender interim consolidated balance sheets of Multicare and its consolidated Subsidiaries as of the first two fiscal quarters of the fiscal year beginning January 1, 1997, together with the related consolidated statements of income, cash flows and changes in stockholders' equity for the applicable fiscal periods ending on each such date. Such financial statements (including the notes thereto), as well as those financial statements delivered pursuant to paragraph (n) of Section 4.1 above, present fairly the financial condition of Multicare and its consolidated Subsidiaries as of the date specified and the results of their operations and their cash flows for the fiscal periods specified, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments, except that such financial statements do not contain all of the footnote disclosures required by GAAP. There are no material liabilities of the Borrowers except as disclosed on such financial statements. Schedule 8.1 hereto sets forth, as of the Closing Date, all Indebtedness (and commitments for Indebtedness) of the Borrowers. (g) Projections. The projections delivered pursuant to paragraph (n) of Section 4.1 above and the assumptions and estimates referred to therein are, as of the Closing Date, reasonable, are made in good faith, are consistent with the Loan Documents and represent the Borrowers' best judgment as to such matters. Nothing has come to the attention of any Borrower which would lead such Borrower to believe that such projections will not be attained or exceeded provided, however, that nothing contained in this paragraph (g) shall constitute a representation or warranty that such future financial performance or -42- results of operations will in fact be achieved. (h) Absence of Material Adverse Change. Since December 31, 1996, there has been no material adverse change in the business, operations, condition (financial or otherwise), properties or prospects of the Borrowers taken as a whole or the industry served by the Borrowers. (i) Title to Property. Each Borrower has good and marketable title to all property owned or purported to be owned by it, including but not limited to all property reflected in the most recent balance sheets delivered to the Lenders pursuant to this Agreement (except such property as was sold or otherwise disposed of in accordance with Section 8.5 (Dispositions) below) subject to no Liens except Permitted Liens. Schedule 8.2 hereto sets forth, as of the Closing Date, all Liens on property of the Borrowers. (j) Solvency. The present fair saleable value of the assets of the Borrowers, taken as a whole, after giving effect to all the transactions contemplated by the Loan Documents and the funding of the Loans and the issuance of the Letters of Credit hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of Borrowers, taken as a whole, as they mature. Multicare does not intend to, nor does Multicare believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by Multicare, and of amounts to be payable on or in respect of debt of Multicare). The property of each Borrower does not constitute unreasonably small capital for such Borrower to carry out its business as now conducted and as proposed to be conducted including the capital needs of such Borrower. The cash available to each Borrower after taking into account all other anticipated uses of the cash of such Borrower, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Borrower when such amounts are required to be paid. (k) Accurate and Complete Disclosure. The information heretofore, contemporaneously or hereafter provided in writing by or on behalf of any Borrower to any Lender Party pursuant to or in connection with this Agreement or any other Loan Document is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by such Lender Party) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. (l) Legal and Administrative Proceedings. There is no action, suit, litigation or proceeding pending, or to the knowledge of the Borrowers, threatened nor, to the knowledge of the Borrowers, is there any investigation pending or threatened, in any court or before any arbitrator or Governmental Authority or any payor appeals bodies respecting or relating to any Borrowers (or any officer or director thereof) or any property of any Borrowers that, individually or in the aggregate, (i) could have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrowers taken as a whole or (ii) could materially adversely affect the Lenders' rights and remedies hereunder or under the other Loan Documents, this Agreement or other Loan Documents or the ability of the Borrowers to perform their obligations hereunder or thereunder. -43- (m) Absence of Violations and Conflicts. No Borrower is in violation of, in default under, or is subject to any contingent liability on account of any violation of or conflict with: (i) any Law; (ii) its articles or certificate of incorporation, bylaws, partnership agreement, operating agreement (or other constituent documents); or (iii) any financing agreement or other instrument or arrangement to which it is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clauses (i) or (iii) above for matters that, individually or in the aggregate, could not have a Material Adverse Effect. (n) Operation of Health Care Facilities. (i) Except where the failure to possess the same, either individually or in the aggregate, could not have a Material Adverse Effect, each Borrower possesses all Licenses and Reimbursement Approvals necessary to operate its Health Care Businesses substantially as now operated and as presently proposed to be operated. No Borrower is in material violation of the terms of its Licenses and Reimbursement Approvals. (ii) Except for Limitations which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, there is no threatened or pending Limitation of any material License or Reimbursement Approval relating to the operation of any of Borrowers' Health Care Businesses. (iii) Except where the failure to file the same, either individually or in the aggregate, could not have a Material Adverse Effect, each of the Borrowers has caused there to be accurately prepared and filed (or obtained extensions for) all applicable cost reports with respect to any and all Third Party Payor Arrangements that are material to conduct its Health Care Businesses substantially as now conducted. (iv) No Borrower is subject to any claim (including any claim for overpayment), litigation, proceeding or other action or, to any Borrower's knowledge, investigation relating to a claim or action by any Governmental Authority except matters that, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (v) Each of the Borrowers participates in an internal comprehensive compliance program respecting compliance with all Laws affecting the types of businesses carried on by Borrowers (including health care Laws) and has made such program available for review by any Lender, upon request. (vi) Each of the foregoing statements in this paragraph (n) are also true as applied to Persons managed by any Borrower to the extent that the failure of any such statement to be true (as applied to any Person managed by a Borrower) could have a Material Adverse Effect. (o) Management Agreements. Schedule 5.1(o) sets forth as of the Closing Date, a complete and correct list of all Management Agreements relating to (i) the operation and management by a Person that is not a Borrower of each health care facility owned by a Borrower and (ii) the operation and management by a Borrower of each health care facility owned by a Person that is not a Borrower. As of the Closing Date, each such Management -44- Agreement is in full force and effect subject to no material default. (p) Health Care Business. Schedule 5.1(p) sets forth, as of the Closing Date, a complete and correct list of all Health Care Businesses owned or operated by the Borrowers and the locations thereof indicating which such Health Care Businesses are operated but not owned. (q) Leased Properties. Schedule 5.1(q) identifies all properties leased by any Borrower as of the Closing Date. As of the Closing Date, all leases relating to such leased properties are in full force and effect subject to no material default. Such leases comply with the provisions of Section 8.7 below. (r) Intellectual Property. Each Borrower owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including computer programs and software), processes, data bases and other rights (collectively, "intellectual property"), free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others. No Borrower is in material violation of the rights of others with respect to any intellectual property. (s) Employee Benefits/ERISA. (i) The Borrowers and the members of their Controlled Groups maintain only those Defined Benefit Pension Plans, Defined Contribution Plans and other Plans listed on Schedule 5.1(s) attached hereto and contribute to only those Multiemployer Plans listed on Schedule 5.1(s) attached hereto. (ii) Each Defined Benefit Plan and Defined Contribution Plan, as most recently amended, including amendments to any trust agreement, group annuity, or insurance contracts, or other governing instrument, is the subject of a favorable determination letter by the Internal Revenue Service with respect to its qualification under ss.401(a) of the Code. (iii) All Plans comply, both in form and in operation, with the requirements of the Code and ERISA. (iv) There is not now, and has not been, any material violation of the Code or ERISA with respect to the filing of applicable reports, documents, and notices regarding any Plan with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity or the furnishing of such documents to the participants or beneficiaries of any Plan. Borrowers have furnished to the Lenders copies of the most recent annual report, audited financial statements, and other reports filed with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity with respect to each Plan. (v) All Pension Plans, as of the date hereof, meet the -45- minimum funding standards of ss.412 of the Code and ss.302 of ERISA without regard to any funding waiver. Borrowers and the members of their Controlled Group have, as of the date hereof, made all contributions or payments to or under Pension Plans required by the terms of any such Plan or any contract or agreement. (vi) No Material liability to the PBGC has been, or is expected by any Borrower or any member of its Controlled Group to be, incurred by the Borrower or any member of its Controlled Group. (vii) No Defined Benefit Pension Plan has any Amount of Unfunded Benefit Liabilities except as listed on Schedule 5.1(s) which, in the aggregate, do not exceed $500,000.00. (viii) No trust was established in connection with any Defined Benefit Pension Plan pursuant to ss.4049 of ERISA (as in effect on December 17, 1987) and no liabilities (whether or not such liability is being litigated) have been asserted against any borrower or any member of its Controlled Group in connection with any such Defined Benefit pension Plan by the PBGC or by a trustee appointed pursuant to ss.4042(b) or (c) of ERISA, and no lien has been attached and no person has threatened to attach a lien on any property of any Borrower or any member of its Controlled Group as a result of any failure to comply with the Code or ERISA. (ix) No Prohibited Transaction has occurred with respect to any Plan. (x) No Reportable Event has occurred with respect to any Defined Benefit Plan. (xi) No Borrower or any member of its Controlled Group has any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA). (xii) There is not now, and has not been, any COBRA Violation with respect to any Plan to which such continuation coverage requirements apply which has a material adverse effect, directly or indirectly, on the financial condition of any of the Borrowers. (xiii) Borrowers and the members of their Controlled Group have established only those irrevocable trusts the assets of which remain subject to the general creditors of Borrowers and/or members of their Controlled Group (sometimes referred to as "rabbi trusts") listed on Schedule 5.1(s) attached hereto and have furnished to the Lenders copies of each such "rabbi trust." (xiv) If any Borrower or any member of its Controlled Group were obligated to pay the entire potential Withdrawal Liabilities for which any of them would be liable if each of them were to withdraw from the -46- Multiemployer Plans to which any of them makes contributions, such obligations would not be in excess of $500,000.00. (xv) Borrowers and the members of their Controlled Group have complied with the requirements of ss.515 of ERISA with respect to Multiemployer Plans. (t) Environmental Matters. (i) Each Borrower and each of its respective Environmental Affiliates is and has been, in full compliance with all applicable Environmental Laws, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. There are no circumstances that may prevent or interfere with such full compliance now or in the future. (ii) Each Borrower and each of its respective Environmental Affiliates have all Environmental Approvals necessary or desirable for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated, in the future, except for matters which, individually or in the aggregate, could not have a Material Adverse Effect. (iii) There is no Environmental Claim pending or to the knowledge of any Borrower after due inquiry, threatened, and there are no past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Borrower or any Environmental Affiliates of Borrowers) that could form the basis of any Environmental Claim against any Borrower or any such Environmental Affiliates, except for matters which, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (iv) No facility or property now or previously owned, operated or leased by any Borrower or any of their respective Environmental Affiliates is an Environmental Cleanup Site. No Borrower and none of their respective Environmental Affiliates has directly transported or disposed of or arranged for the transportation or disposal of any Environmental Concern Materials to any Environmental Cleanup Site. No Lien exists, and, to the Borrowers' knowledge after due inquiry, no condition exists which could result in the filing of a Lien, against any property of any Borrower or any Subsidiary of any Borrower or any of their respective Environmental Affiliates, under any Environmental Law. (u) Margin Regulations. No proceeds of any Loan hereunder will be used for the purpose of purchasing or carrying any "margin stock," as such term is used in Regulations G and U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of purchasing or carrying any "margin stock". Neither the making of any Loan or issuance of any Letter of Credit nor any -47- use of proceeds of the foregoing will violate or conflict with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. (v) Regulation O. No director, executive officer or principal shareholder of any Borrower is a "director," "executive officer" or "principal shareholder" of any Lender, as such terms are used in Regulation O of the Board of Governors of the Federal Reserve System, as amended. (w) Subordinated Notes. Multicare hereby confirms that the Loan Obligations are "Senior Indebtedness" and hereby designates the Loan Obligations as "Designated Senior Indebtedness" under the 1997 Subordinated Note Indenture. All of the Loan Obligations constitute and will constitute "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning ascribed to such terms in such indentures. The subordination provisions therein are enforceable against the respective issuers thereunder and the holders, from time to time, of the 1997 Subordinated Notes. The respective issuers are not in default under any such indenture. From the time that the Put/Call Agreement is exercised and Genesis owns 100% of the capital stock of Surety or at any other time that any financial or other covenants of the 1995 Subordinated Note Indenture or the 1996 Subordinated Note Indenture may apply to Multicare and its Subsidiaries, the foregoing statements shall be equally applicable with regard to the 1995 Subordinated Note Indenture and 1996 Subordinated Note Indenture. (x) Certain Documents and Transactions. Each of the Transaction Documents (including the Multicare Management Agreement), and the Tax Sharing Agreement are in full force and effect and no amendments, modifications or supplements have been made to any such documents as the same were delivered to the Agents pursuant to Article 4 above except (i) such amendments, modifications or supplements to Transaction Documents as could not reasonably be expected to have an adverse effect on any Borrower (including the condition (financial or otherwise), properties or prospects of such Borrower), the Loan Documents or any Lender Parties and (ii) supplements or amendments to the Tax Sharing Agreement necessary to join any other Subsidiaries of Multicare which may hereafter be consolidated with Multicare for tax purposes. There exists no default under any such agreements except for immaterial breaches. (y) Labor Matters. There are no existing, or, to the best of Borrowers' knowledge, threatened or contemplated, strikes, slowdowns, picketing or work stoppages by any employees against any Borrower, any lockouts by any Borrower of any of its employees or any labor trouble or other occurrence, event or condition of a similar character which individually or in the aggregate, could have a Material Adverse Effect. 5.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE. The representations and warranties of the Borrowers set forth in this Article 5 are unaffected by any prior or subsequent investigation by, or knowledge of, any Agent, the Issuer, or any Lender. -48- ARTICLE 6 AFFIRMATIVE COVENANTS So long as any Loan Obligation shall remain unpaid or any Lender shall have any Commitment under this Agreement, each of the Borrowers shall comply with the following covenants. 6.1 REPORTING REQUIREMENTS. (a) Annual Financial Statements. As soon as practicable, and in any event within 90 days after the close of each fiscal year of Multicare, Multicare (on behalf of the Borrowers) shall furnish to the Administrative Agent, the Issuer and each Lender, audited (i) consolidated statements of income, cash flows and changes in stockholders' equity of Surety, Multicare and its consolidated Subsidiaries (the "Multicare Group") for such fiscal year and a consolidated balance sheet of such Persons as of the close of such fiscal year. If at any time the Cash Flow of the Excluded Subsidiaries in the aggregate exceeds 3% of the Cash Flow of Multicare and its consolidated Subsidiaries, Multicare on behalf of the Borrowers shall furnish statements of income, cash flows and changes in stockholders equity of the Borrowers on a consolidated basis, for such fiscal year and a balance sheet of such Persons, on a consolidated basis, as of the close of such fiscal year, in lieu of the requirements of the preceding sentence; and (ii) statements of income, cash flows and changes in stockholders equity of Genesis and its Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal year and a balance sheet of Genesis and its Subsidiaries, on a consolidated basis, as of the close of such fiscal year, and with respect to all of the foregoing financial statements referred to above setting forth the appropriate footnotes, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such financial statements shall be accompanied by an unqualified opinion in form and substance satisfactory to the Administrative Agent of independent certified public accountants of recognized national standing selected by the Borrowers and satisfactory to the Administrative Agent. (b) Quarterly Financial Statements. As soon as practicable, and in any event within 45 days after the close of each fiscal quarter of each fiscal year of Multicare, Multicare, on behalf of the Borrowers, shall furnish to the Administrative Agent, the Issuer and each Lender, the following unaudited financial statements: (i) consolidated statements of income, cash flows and changes in stockholders' equity of the Multicare Group for such fiscal quarter and the applicable year to date period, and a consolidated balance sheet of such -49- Persons as of the close of such fiscal quarter. If at any time the Cash Flow of the Excluded Subsidiaries in the aggregate exceeds 3% of the Cash Flow of Surety, Multicare and its Subsidiaries, Multicare, on behalf of the Borrowers shall furnish statements of income, cash flows and changes in stockholders equity of the Borrowers on a consolidated basis, for such fiscal quarter and applicable year-to-date period, in lieu of the requirements of the preceding sentence; and (ii) statement of income, cash flows and changes in stockholders' equity for Genesis and its Subsidiaries (including the Multicare Group), on a consolidated basis, for such fiscal quarter, together with the applicable year to date period and a balance sheet of such Persons on a consolidated basis as of the end of such fiscal quarter. all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the balance sheets, which shall set forth in comparative form the corresponding balance sheets as of the prior fiscal year end). Such financial statements shall be certified by the chief financial officer or other Responsible Officer of Multicare and Surety, as appropriate, as presenting fairly the financial position of the subject entities as of the end of such fiscal quarter and year-to-date period, and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal quarter and year-to-date period, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) Quarterly Compliance Certificates. Surety and Multicare, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, an Officer's Compliance Certificate concurrently with the delivery of the financial statements referred to in paragraph (a) of this Section 6.1 (with respect to the fiscal year) and paragraph (b) of this Section 6.1 (with respect to the first three fiscal quarters). Each such Officer's Compliance Certificate shall include among other things referred to therein the calculations necessary to demonstrate the Borrowers' compliance with the covenants set forth in Article 7 hereof. In addition, the Officers' Compliance Certificate shall show the calculations necessary to confirm compliance with the financial covenants set forth in Section 4.03 of the 1997 Subordinated Note Indenture. The Officer's Compliance Certificate delivered pursuant to this paragraph (c) shall include a reconciliation of the financial information set forth thereon respecting Multicare and its Restricted Subsidiaries and that set forth on the financial statements for Multicare and its consolidated Subsidiaries. (d) Other Information To Be Delivered Annually. Multicare, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, the following: (i) annually, within one hundred twenty (120) days of the end of Multicare's fiscal year, an accountants' management letter respecting Multicare and its consolidated Subsidiaries, provided by independent certified public accountants satisfactory to the Administrative Agent, and (ii) annually, no later than ninety (90) days prior to the commencement of each fiscal year of Multicare's, an annual budget respecting Multicare and its consolidated Subsidiaries, setting forth in reasonable detail, expected sources and uses of funds, for the fiscal year then beginning in form and substance satisfactory to the -50- Administrative Agent. (e) SEC Filings and Other Disclosure. Promptly upon their becoming available to any Borrower or Surety but no later than ten Business Days after the same are filed with the Securities Exchange Commission or any securities exchange, Multicare, on behalf of the Borrowers, shall deliver to the Administrative Agent, the Issuer and each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which any Borrower or any of its Affiliates shall file with the Securities and Exchange Commission or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by any Borrower or any of its Affiliates to its stockholders, bondholders or the financial community generally, (iii) all accountants' management letters (not otherwise delivered pursuant to the preceding paragraph (d)) and all other reports submitted by accountants in connection with any audit of any Borrower or the Surety, and (iv) copies of all compliance certificates and notices delivered to or from the trustees under the 1997 Subordinated Note Indenture. (f) Notice of Certain Events. Promptly upon any Borrower becoming aware of any of the following, such Borrower or Multicare, on behalf of the Borrowers, shall give the Administrative Agent notice thereof, together with a written statement setting forth the details thereof and any action with respect thereto taken or proposed to be taken by any Borrower: (i) Loss of Licenses or Reimbursement Approvals. Any actual Limitation (other than in the ordinary course of business) or any threatened Limitation (to the extent that it individually or in the aggregate with all other actual or threatened Limitations is material) of any License or Reimbursement Approval relating to the operation of a Health Care Business or, if the same individually or in the aggregate could have a Material Adverse Effect, any Limitation of any License or Reimbursement Approval of any Person managed by any Borrower; (ii) Default. Any Event of Default or Default; (iii) Material Adverse Change. Any material adverse change in the business, operations or condition (financial or otherwise), or prospects of any Borrower; (iv) Material Litigation. Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting any Borrower (or any officer or director thereof) or any property of any Borrower, except for matters that if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect; (v) Breach or Termination of Certain Agreements. Any breach, claimed breach, termination or purported or threatened termination (including a copy of any notice of termination) of (A) the Multicare Management Agreement, (B) any other Transaction Document (except a termination in accordance with its terms), (C) any other Management Agreement except in the ordinary course of business, (D) the 1997 Subordinated Note Indenture, if -51- and when applicable as set forth in Section 5.1(w), the 1995 Subordinated Note Indenture and/or, the 1996 Subordinated Note Indenture (including a copy of any notice of default delivered thereunder) or (E) any other agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of Multicare and its Restricted Subsidiaries taken as a whole. (vi) ERISA. (A) any taxes, penalties, interest charges and other financial obligations in excess of $250,000.00 that have been assessed or otherwise imposed, or which any Borrower has reason to believe may be assessed or otherwise imposed in excess of $250,000.00, against any Borrower or any member of its Controlled Group by the Internal Revenue Service, the PBGC, the Department of Labor or any other governmental entity with respect to any Plan or Multiemployer Plan; (B) any application for a waiver by a Borrower or any member of its Controlled Group of the minimum funding standard under ss.412 of the Code with respect to a Pension Plan; (C) the adoption of any Plan, including but not limited to a Defined Benefit Pension Plan, or any obligation to contribute to any Multiemployer Plan by a Borrower or any member of its Controlled Group; (D) any Prohibited Transaction with respect to a Plan. (E) (1) that any Reportable Event has or will occur with respect to any Defined Benefit Pension Plan maintained by any Borrower or any member of its Controlled Group, (2) that any Defined Benefit Pension Plan maintained by any Borrower or any member of its Controlled Group is to be terminated in "distress termination" (within the meaning of ss.4041(c) of ERISA), (3) that the PBGC has instituted or will institute proceedings under Title IV of ERISA to terminate any Defined Benefit Pension Plan maintained by any Borrower or any member of its Controlled Group, (4) that any Borrower has incurred Withdrawal Liability from a Multiemployer Plan maintained by it or any member of its Controlled Group, (5) that any Multiemployer Plan to which any Borrower or any member of its Controlled Group has made contributions is or will be in Reorganization, or (6) that any other condition exists with respect to a Defined Benefit Pension Plan or Multiemployer Plan which presents a material risk of termination of any such Plan, Borrowers will furnish a statement to the Lenders setting forth the details of such Reportable Event, distress termination, termination proceedings, Withdrawal Liability, Reorganization or condition, and the action that Borrowers propose to take with respect thereto, together with a copy of any notice of such Reportable Event or distress termination given to the PBGC, or a copy of any notice of -52- termination proceedings, Withdrawal Liability or Reorganization received by such Borrower or any member of its Controlled Group. (F) any default by Borrower or any member of its Controlled Group (as defined in ss.4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required by reason of its withdrawal (as defined in ss.4203 or ss.4205 of ERISA). (G) any action brought against Borrower or any member of its Controlled Group under ss.502 of ERISA with respect to its failure to comply with ss.519 of ERISA. (vii) Environmental. Any Environmental Claim pending or threatened against any Borrower or any of its Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by any Borrower or any of its Environmental Affiliates) that could form the basis of such Environmental Claim, which Environmental Claim, if adversely resolved, individually or in the aggregate, could have a Material Adverse Effect. (g) Other ERISA Information. The Borrowers shall deliver to the Administrative Agent, copies of the following: (A) Promptly after the filing thereof with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity, copies of each annual report, each audited financial statement and any other report so filed with respect to each Plan. (B) As soon as possible (and in any event within five days) after the receipt by any Borrower or any member of its Controlled Group of a demand letter from the PBGC notifying any Borrower or any member of its Controlled Group of the final decision finding liability and the date by which such liability must be paid, Borrowers will furnish to the Lenders a copy of such letter together with a statement to the Lenders setting forth the action which Borrowers propose to take with respect thereto. (C) Borrowers will furnish to the Lenders as soon as possible after receipt thereof a copy of any notice that any Borrower or any member of its Controlled Group receives from the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity or the sponsor of any Multiemployer Plan that sets forth or proposes any action to be taken or determination made by the PBGC, the Internal Revenue Service, the Department of Labor or any other governmental entity or the sponsor of any Multiemployer Plan with -53- respect to any Plan. (h) Amendments to Transaction Documents. Multicare (on behalf of the Borrowers) shall furnish the Administrative Agent copies or drafts of all proposed amendments, modifications or waivers to any Transaction Documents (1) in the case of any amendments, modifications or waivers requiring the consent of the Required Lenders at least 20 Business Days prior to the effective date thereof and (2) in all other cases, at least 5 Business Days prior to the effective date thereof. (i) Notice of Non-Renewal of Management Agreement. Multicare, on behalf of the Borrowers shall give the Administrative Agent written notice promptly upon receipt of delivery of any notice of non-renewal or termination delivered under or relating to the Multicare Management Agreement. The Administrative Agent shall promptly give each Lender a copy of any notice delivered pursuant to this paragraph (i). (j) Notices under Indenture. Multicare, on behalf of the Borrowers shall furnish to the Administrative Agent copies of all notices, reports, certificates or other material delivered to or by the trustee or any other party under the 1997 Subordinated Note Indenture, promptly upon receipt thereof. (k) Other Information. In addition, the Borrowers will promptly furnish, and cause Surety to furnish, to the Administrative Agent such other information as any Lender Party, through the Administrative Agent, may reasonably request including information submitted by the Borrowers or the Surety to any Governmental Authority and the Administrative Agent will furnish such information to the requesting Lender Party. 6.2 MAINTENANCE OF EXISTENCE. Each Borrower shall preserve and maintain, and shall cause Surety to preserve and maintain, its corporate or partnership existence, as the case may be, and good standing in the jurisdiction of its organization provided, however, upon giving written notice to the Administrative Agent, the Borrowers may dissolve any Subsidiary if (a) such Subsidiary is not (either individually or in the aggregate with all other entities dissolved pursuant to this proviso) a material Borrower (or material Borrowers) and (b) Multicare determines that it is in the best interest of the Borrowers, taken as a whole, that such Subsidiary be dissolved. Multicare and (to the extent that any failure to qualify or remain qualified could have a Material Adverse Effect) each Restricted Subsidiary shall qualify and remain qualified as a foreign corporation or partnership in each jurisdiction in which such qualification is required, provided, however nothing in this Section 6.2 shall prohibit any sales or other dispositions permitted under Section 8.5 or Section 8.13. 6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF LICENSES AND OTHER PROPERTY. (a) Type of Business. Each Borrower shall continue to engage in the business of the same general type as conducted by the Borrowers on the Closing Date and not engage in any other type of business without the consent of the Required Lenders. -54- (b) Healthcare and Regulatory Rights. Except where the failure to take any of the following actions, individually or in the aggregate, could not have a Material Adverse Effect, each Borrower shall (i) maintain in effect all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it owns or operates and (ii) obtain all Licenses and Reimbursement Approvals necessary or appropriate to own and operate all Health Care Businesses which it acquires and (iii) continue its participation in any and all Third Party Payor Arrangements. Except where such failure to so comply (together with all other failures from time to time by the same or other Borrowers), could not reasonably be expected to have a Material Adverse Effect, each Borrower shall comply with any and all rules, regulations, standard procedures and decrees necessary to maintain its participation in any such Third Party Payor Arrangements and prepare and file all applicable cost reports with respect to all Third Party Payors Arrangements to the extent required. Each Borrower shall use its best efforts to cause each Person managed by it to obtain and maintain its Licenses and Reimbursement Approvals necessary for the conduct of its business and to continue its participation in Third Party Payor Arrangements and comply with all rules, regulations, standard procedures and decrees relating thereto to the extent that the failure to do so could have a Material Adverse Effect. (c) Maintenance of Property. Each Borrower shall maintain, keep and preserve all of its property necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted (except for sales and other dispositions of property permitted under Section 8.5 below (Dispositions)). Without limiting the generality of the foregoing, each Borrower shall maintain in full force and effect each lease, Management Agreement and other material agreement used or useful in its business, subject to no material default except where the loss of, or default under, such lease, Management Agreement or other agreement (i) could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect or (ii) is not otherwise prohibited by the terms of this Agreement. 6.4 MAINTENANCE OF RECORDS; FISCAL YEAR. Each Borrower shall keep adequate records and books of account, in which complete entries will be made in accordance with historical practice and GAAP, reflecting all financial transactions of the Borrowers. Each Borrower shall maintain, and shall cause the Surety to maintain, a fiscal year end of December 31. 6.5 COMPLIANCE WITH LAWS. Each Borrower shall comply (and maintain procedures to assure compliance) in all material respects with all applicable Laws (including environmental and health care Laws) and all judgments, decrees or orders of any court or Governmental Authority and all settlement agreements. Without limiting the generality of the foregoing, each of the Borrowers shall maintain in full force and effect an internal compliance program respecting compliance with all Laws affecting the types of businesses carried on by the Borrowers (including healthcare Laws) and make such program available for review by any Lender, upon request. 6.6 ERISA. -55- (a) Each Borrower will, and will cause each member of its Controlled Group, to comply in all material respects with the provisions of ERISA and the Code with respect to any Plan both in form and in operation. (b) Each Borrower will cause to be made all contributions required to avoid any Accumulated Funding Deficiency, whether or not waived, with respect to any Pension Plan. (c) No Borrower will adopt or permit the adoption by any member of its Controlled Group of any Defined Benefit Pension Plan which would result in any Amount of Unfunded Benefit Liabilities in excess of $500,000.00. (d) No Borrower will acquire, or permit the acquisition by any member of its Controlled Group of, any trade or business which has incurred either directly or indirectly any Amount of Unfunded Benefit Liabilities under any Defined Benefit Pension Plan in excess of $500,000.00. (e) The Borrowers will not permit with respect to any Plan, any Prohibited Transaction or Prohibited Transactions under ERISA or the Code resulting in liability of any Borrower or any member of its Controlled Group which together with any other liabilities subject to this paragraph (e) would in the aggregate be in excess of $500,000.00, unless such Borrower or any member of its Controlled Group will be contesting in good faith and by appropriate proceedings any such matter and measures are available and are being taken which have the effect of preventing the seizure of property of such Borrower or any member of its Controlled Group pending the outcome of such contest. (f) No Borrower will withdraw, or permit any member of its Controlled Group to withdraw, from any Multiemployer Plan to which any of them may hereafter contribute if the Withdrawal Liability which would thereupon be incurred would have a material adverse effect, directly or indirectly, on the financial condition of any of the Borrowers. (g) No Borrower will permit any unfunded liabilities of unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1) of ERISA) of any Borrower and of any member of its Controlled Group in excess of $500,000.00 in the aggregate with all other liabilities subject to this paragraph (g). (h) No Borrower will, or will permit any member of its Controlled Group to, cause or suffer to exist a COBRA Violation with respect to any Plan to which such continuation coverage requirements apply if the violation(s) could result in a liability in excess of $500,000.00 in the aggregate. 6.7 RIGHT OF INSPECTION. Each Borrower shall, at any reasonable time and from time to time, and upon reasonable advance notice (but no advance notice shall be required if a Default or an Event of Default shall then exist), permit the Administrative Agent, the Issuer or any Lender or any agent or representative thereof, to examine and make copies and abstracts from the records and books of account of, and visit and inspect the properties of, any Borrower, and to discuss the affairs, finances and accounts of such -56- Borrower with any of its officers, directors and independent accountants. 6.8 INSURANCE. Each Borrower shall maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as are customary in the case of Persons engaged in the same or similar businesses or having similar properties similarly situated, including insurance covering its respective properties, buildings, machinery, equipment, tools, furniture, fixtures and operations, and medical malpractice, professional liability and public liability, as well as business interruption. The Borrowers shall have the Administrative Agent named to receive certificates evidencing such insurance annually at least thirty days prior to the anniversary date of such insurance policies and any other time requested by the Administrative Agent. 6.9 PAYMENT OF TAXES AND OTHER CHARGES. Each Borrower shall (a) on or prior to the date on which penalties attach thereto, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties; and (b) on or prior to the date when due, pay all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons and all other lawful claims which, in each case if unpaid, might result in the creation of a Lien upon any of its properties, provided that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Borrower need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is being contested in good faith and by appropriate proceedings diligently conducted and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. 6.10 SUBSIDIARIES TO BE BORROWERS. (a) Each Borrower shall cause all of its Subsidiaries, other than Excluded Subsidiaries, at all times to be Borrowers hereunder (by signing Joinder Supplements hereto, executing Notes or allonges thereto and taking such other action as the Administrative Agent may reasonably request) and cause all the capital stock or other equity interests in such Subsidiaries owned by Borrowers, other than capital stock or other equity interests in Excluded Subsidiaries, and all notes or other rights to receive payment from another Borrower to be pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge Agreement. Without limiting the generality of the foregoing, when the Borrowers are required, in connection with an Acquisition or otherwise, to cause one or more (direct or indirect) Subsidiaries of Multicare (each, a "Joining Subsidiary") to become Borrowers hereunder, then the Borrowers and each such Joining Subsidiary shall take the actions set forth on Schedule 6.10, in the case of the formation of a new Subsidiary, promptly upon such formation, and in the case of the acquisition of an entity which shall become a Subsidiary, no later than the date of the consummation of the relevant Acquisition. (b) With the prior written consent of the Administrative Agent, Multicare (on behalf of the Borrowers) may from time to time redesignate one or more Subsidiaries -57- which are designated as Excluded Subsidiaries on Schedule 11.1 to be Borrowers and Restricted Subsidiaries hereunder, Pledgors under the Pledge Agreement and comparable parties under the other Loan Documents (and not Excluded Subsidiaries). Thereupon and upon satisfaction of the requirements set forth in paragraph (a) above for Joining Subsidiaries, such redesignated Subsidiaries shall be Borrowers hereunder, Pledgors under the Pledge Agreement and comparable parties to the other Loan Documents. The Administrative Agent shall give the Lenders notice of any such redesignation. 6.11 PRESERVATION OF STATUS AS SENIOR INDEBTEDNESS. The Borrowers shall comply with the terms of the 1997 Subordinated Note Indenture. Each Borrower shall promptly take or cause Genesis to take, as appropriate, all action necessary or requested by the Administrative Agent at any time to protect, preserve and give effect to the status of the Loan Obligations as "Senior Indebtedness" and "Designated Senior Indebtedness" within the meaning of the 1995 Subordinated Note Indenture and the 1996 Subordinated Note Indenture, if and when applicable to Multicare or the other Borrowers as set forth in Section 5.1(w), and the 1997 Subordinated Note Indenture. 6.12 INTEREST RATE HEDGING AGREEMENTS. At all times from and after ninety (90) days after the Closing Date, the Borrowers shall maintain one or more Interest Rate Hedging Agreements to the extent necessary to ensure that at all times at least fifty percent (50%) of the Total Funded Indebtedness of the Borrowers effectively bears, or is capped at, a fixed interest rate provided, however, that no Borrower shall enter into any rate swap, cap or collar agreement which is not an Interest Rate Hedging Agreement. 6.13 CORPORATE SEPARATENESS. Each Borrower shall observe all requirements necessary to cause it to be treated as a separate legal entity for all purposes under applicable corporate law. Without limiting the foregoing requirement, each Borrower specifically shall (i) maintain and cause each Excluded Subsidiary to maintain separate corporate and financial records and observing all corporate formalities; (ii) maintain, and cause each Excluded Subsidiary to maintain, capitalization adequate to meet its business needs; (iii) cause all reports, filings and public information to refer to such Borrower or Excluded Subsidiary, as the case may be, as a separate company (and not a division of each other); and (iv) otherwise conduct and cause each Excluded Subsidiary to conduct, its dealings with third parties in its own name and as a separate and independent entity. Without limiting the generality of the foregoing, except as expressly permitted or required elsewhere by this Agreement or unless specifically agreed to by the Required Lenders, no Borrower may enter into any merger or other combination with or transfer assets to any of the Genesis Group or any Excluded Subsidiary, or make any loan to, advance to, or other investment in any of the Genesis Group or any Excluded Subsidiary, or guarantee any Indebtedness or otherwise be liable for obligations of any of the Genesis Group or any Excluded Subsidiary, provided, nothing in this Section 6.13 shall prohibit the execution and delivery of the Multicare Management Agreement or the Tax Sharing Agreement, or the transactions contemplated thereby. Notwithstanding the foregoing, the Borrowers may make such Investments in, borrow money from, and carry on other transactions with, Excluded Subsidiaries on an arm's length basis to the extent that this Agreement permits the Borrowers to carry on such activities with unrelated third parties. -58- 6.14 TRANSACTIONS WITH AFFILIATES. Each Borrower shall effect all transactions with Affiliates (excluding transactions with other Borrowers) on a basis at least as favorable to such Borrower as would at the time be obtainable for a comparable transaction on an arm's length dealing with an unrelated third party, except that this Section 6.14 shall not apply to (a) the Tax Sharing Agreement, (b) the Transaction Documents, or (c) transaction fees and expenses payable to Genesis, Cypress and TPG within seven days of the Closing Date, to the extent such are permitted by the 1997 Subordinated Note Indenture. 6.15 CASH PROCEEDS OF EQUITY OF SURETY. The Borrowers shall cause the Surety to contribute to Multicare any cash proceeds of equity or other capital contributions raised by Surety. 6.16 CAPITAL STOCK. The Capital Stock of Multicare shall be owned at all times by Surety, subject to no Liens, except those in favor of the Administrative Agent for the benefit of the Secured Parties pursuant to the terms of the Pledge Agreement. At no time shall any equity interest in any Restricted Subsidiary be owned by any Excluded Subsidiary. 6.17 USE OF PROCEEDS. The Borrowers will apply the proceeds of the Loans only (i) to refinance all of the existing Indebtedness of Multicare and its Subsidiaries (including without limitation Indebtedness acquired by Multicare as a result of its merger with Acquisition Corp.) except Indebtedness identified on Schedule 8.1 hereto, (ii) to fund working capital and Capital Expenditure needs, subject to the other limitations set forth in this Agreement, (iii) to fund interest and principal payments on the Loans and other permitted Indebtedness, (iv) to pay (as a result of the merger of Acquisition Corp. into Multicare) the consideration to former shareholders of Multicare who did not tender their shares in the Tender Offer, (v) to pay transaction costs resulting from the Tender Offer and the merger of Acquisition Corp. into Multicare, and (vi) for general corporate purposes. 6.18 CERTAIN DISPOSITIONS. On or before December 31, 1997, the Borrowers shall sell to Genesis and/or one or more of its Subsidiaries (other than Surety or Multicare or any Subsidiary of either of them) their contract therapy business for a cash purchase price of approximately $24,000,000.00 and their institutional pharmacy business for a cash purchase price of approximately $50,000,000.00, each on terms and conditions satisfactory to the Agents. -59- ARTICLE 7 FINANCIAL COVENANTS 7.1 CERTAIN FINANCIAL COVENANTS. So long as any Loan Obligations shall remain unpaid or any Lender has any Commitment under this Agreement, the Borrowers shall comply with the following financial covenants. (a) Fixed Charge Coverage. The Fixed Charge Coverage Ratio shall be at least equal to the ratios set forth below during the periods indicated below: Period Ratio ------ ----- 9/30/97 through 6/30/99 1.20 7/01/99 through 9/30/01 1.25 10/01/01 through 9/30/02 1.30 10/01/02 and thereafter 1.35 (b) Consolidated Net Worth. The total amount of stockholders' equity of Multicare and the Restricted Subsidiaries, on a consolidated basis, at any date of determination after the Agreement Date shall be not less than the sum of (i) Six Hundred Eighty Five Million Dollars ($685,000,000.00) plus (ii) an amount equal to the sum of: (A) an amount equal to the net proceeds of all equity offerings of Surety on a cumulative basis commencing on the Agreement Date through such date of determination, plus (B) 75% of the cumulative amount of Net Income (which shall not be reduced by the amount of any net loss for any fiscal quarter) of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the period commencing on the first day of the fiscal quarter in which the Agreement Date occurs through the last day of the fiscal quarter ending on, or most recently prior to, such date of determination, plus (C) any reduction in the amount of debt of Multicare and its Restricted Subsidiaries as a result of the conversion of convertible debt securities into equity (excluding Multicare's Convertible Subordinated 7% Debentures). (c) Adjusted Total Debt/Cash Flow. The Adjusted Total Debt/Cash Flow Ratio shall be not greater than the ratios set forth below during the periods indicated below: -60- Period Ratio ------ ----- 9/30/97 through 9/30/98 6.50 10/01/98 through 9/30/99 5.75 10/01/99 through 9/30/00 5.25 10/01/00 and thereafter 4.50 (d) Adjusted Senior Debt/Cash Flow. The Adjusted Senior Debt/Cash Flow Ratio shall be not greater than the ratios set forth below during the periods indicated below: Period Ratio ------ ----- 9/30/97 through 9/30/98 4.50 10/01/98 through 9/30/99 4.00 10/01/99 and thereafter 3.50 7.2 CALCULATION OF FINANCIAL COVENANTS. The financial covenants set forth in this Article 7 shall be maintained continuously and shall be tested at the end of each fiscal quarter and at such other times as may be required by the terms of this Agreement. Following the effective date of any Acquisition that is effected by Multicare or any of its Restricted Subsidiaries and that is permitted under Section 8.4 hereof (Acquisitions Etc.) the financial covenants set forth in this Article 7 shall be computed on a pro forma basis as if the effective date of such Acquisition had been the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, such actual date of the Acquisition. For purposes of such computation, the Borrowers may elect to make pro forma income statement adjustments at the time of the effective date of such Acquisition under the following circumstances: (i) adjustments to reflect the elimination of that portion of salary and employee benefit expenses that will no longer be incurred after the Acquisition, to the extent demonstrated by Multicare to the satisfaction of the Administrative Agent, and (ii) adjustments to reflect any other savings in expenses which will be realized by such Person so acquired as a consequence of such Acquisition, to the extent demonstrated by Multicare to the satisfaction of the Administrative Agent. Following the effective date of any disposition that is effected by Multicare or any of its Restricted Subsidiaries and that is permitted under Section 8.5 hereof (Dispositions), the financial covenants set forth in this Article 7 shall be computed on a pro forma basis as if the effective date of such disposition had been the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, such actual date of disposition. Following the Closing Date, the financial covenants set forth in this Article 7 shall be computed on a pro forma basis as if all transactions in connection with the Transaction Documents had been consummated, including as if the Multicare Management Agreement had been in effect since the first day of the earliest of the four fiscal quarters ended on, or most recently prior to, the Closing Date. Unless otherwise agreed to by the Required Lenders, the financial condition and results of operations of the Excluded Subsidiaries shall not be combined with those of the Borrowers for purposes of calculating the financial covenants set forth in this Article 7. -61- ARTICLE 8 NEGATIVE COVENANTS So long as any Loan Obligations shall remain unpaid or any Lender or the Issuer shall have any Commitment under this Agreement, each of the Borrowers shall comply with the following covenants. 8.1 INDEBTEDNESS. No Borrower shall, nor shall any Borrower permit Surety to, at any time, create, incur, assume or suffer to exist any Indebtedness (including any Guaranties, Capitalized Leases or Assumed Indebtedness), except: (a) Indebtedness to the Lender Parties pursuant to this Agreement and the other Loan Documents; (b) Indebtedness constituting intercompany (i.e. inter-Borrower) loans and advances evidenced by promissory notes duly pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the terms of the Pledge Agreement; (c) Obligations of Multicare under Interest Rate Hedging Agreements entered into pursuant to Section 6.12 hereof; (d) Indebtedness (including the indebtedness under the 1997 Subordinated Notes) existing on the Closing Date acceptable to the Agents and described on Schedule 8.1 hereto, which sets forth certain Indebtedness in a principal amount not exceeding $300,000,000.00; and any extensions, renewals, refinancing of the same so long as such extensions, renewals and refinancing (i) are in a principal amount no greater than the amount the Indebtedness so extended, renewed or refinanced, (ii) have maturity dates (and amortization schedules) no earlier than the debt being refinanced, (iii) are incurred pursuant to agreements or instruments which do not prohibit the Indebtedness or Liens created pursuant to the Loan Documents or otherwise conflict with the terms of the Loan Documents or contain terms and conditions which are more onerous than the terms and conditions in the existing agreements and instruments, (iv) are not made at a time that a Default or Event of Default has occurred and is continuing or would be caused thereby, and (v) in the case of any extension, renewal or refinancing of the 1997 Subordinated Notes, or, if and when applicable as set forth in Section 5.1(w), the 1995 Subordinated Notes or the 1996 Subordinated Notes, has subordination provisions at least as favorable to the senior lenders as those set forth in the agreement refinanced or extended and generally be in terms acceptable to the Administrative Agent; (e) With respect to the Borrowers (but not the Surety) other Indebtedness incurred from time to time, in an aggregate outstanding principal amount not to exceed Fifteen Million Dollars ($15,000,000.00) at any time so long as such Indebtedness is incurred pursuant to agreements or instruments which do not cause a Default or Event of Default hereunder, which contain terms and conditions no more onerous than the terms and conditions hereof and which do not mature, or have principal amortization prior to, the Maturity Date; -62- (f) With respect to the Borrowers (but not the Surety), Indebtedness in an aggregate amount not to exceed $20,000,000.00 incurred to finance the construction of the assisted living facilities identified on Schedule 8.1(f) attached hereto, provided that the Borrowers' obligations with respect to such Indebtedness shall be terminated in connection with the disposition of such facilities, as contemplated in Section 8.5 (Disposition) hereto. (g) Provided that the terms of this Agreement and the consummation of the transactions contemplated hereby and by the Transaction Documents are consistent with, and do not cause a default under, Multicare's Convertible Subordinated 7% Debentures or the Indenture under which they were issued, Indebtedness evidenced by Multicare's Convertible Subordinated 7% Debentures in the original principal amount of $86,250,000.00 of which no more than $39,424,000.00 in principal amount shall remain outstanding as of the Closing Date, provided that the Borrowers shall cause all such Indebtedness to be redeemed or converted, and all shares of stock received on conversion or redeemed, by no later than March 16, 1998, at an aggregate cost to the Borrowers (including amounts expended prior to, on and after the Closing Date) not to exceed $122,000,000.00 plus interest to the date of redemption; (h) Provided that the terms of this Agreement and the consummation of the transactions contemplated hereby and by the Transaction Documents are consistent with, and do not cause a default under, Multicare's Senior Subordinated 12-1/2% Notes on the Indenture under which they were issued, Indebtedness evidenced by Multicare's Senior Subordinated 12-1/2% Notes in the original principal amount of $100,000,000.00, of which no more than $75,000.00 in principal amount shall remain outstanding as of the Closing Date provided that the Borrowers shall cause all such Indebtedness to be repaid by no later than January 2, 1998, at an aggregate cost to the Borrowers (including amounts expended prior to, on and after the Closing Date) not to exceed $26,000,000.00 plus interest through the redemption date; provided, however, that all Indebtedness incurred pursuant to paragraph (e) above shall be subject to the following: (i) it shall be incurred on terms which do not prohibit the Indebtedness created pursuant to the Loan Documents, or otherwise conflict with the terms hereof or the other Loan Documents; (ii) at the time such Indebtedness is incurred, no Default or Event of Default shall have occurred and be continuing or shall be caused or created thereby; (iii) prior to the incurrence of such Indebtedness, Multicare (on behalf of the Borrowers) shall deliver to the Administrative Agent a certificate of a Responsible Officer of Multicare (A) stating the amount of such Indebtedness, (B) containing a representation that such Indebtedness was incurred in compliance with the provisions of this Section 8.1 and showing calculations thereof, and (C) containing a representation that such Indebtedness was incurred in compliance with the financial covenants set forth herein, in Section 5.9 of the 1995 Subordinated Note Indenture and in Section 5.9 of the 1996 Subordinated Note Indenture, if and when applicable to Multicare as set forth in Section 5.1(w), and the 1997 Subordinated Note Indenture and showing calculations thereof; (iv) the terms of the instruments and agreements respecting such Indebtedness shall be no more restrictive than the terms of this Agreement; and (v) the instruments and agreements respecting such Indebtedness shall not contain provisions that would violate the terms of Section 8.12 (Limitation on Certain Restrictive Provisions) below. -63- 8.2 LIENS. No Borrower shall, nor shall any Borrower permit Surety to, at any time create, incur, assume or suffer to exist any Lien on any of its assets or assets of the Surety (now owned or hereafter acquired), except for the following ("Permitted Liens"): (a) Liens pursuant to the Loan Documents; (b) Liens acceptable to the Agents and existing on the Closing Date securing obligations existing on the Closing Date, which Liens and obligations are listed on Schedule 8.2 hereto (and any extension, renewal and replacement Liens upon the same property theretofore subject to a listed Lien, provided that (i) the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the corresponding Lien theretofore existing and (ii) such replacement Liens are incurred pursuant to agreements or instruments which do not prohibit the Liens or Indebtedness created pursuant to the Loan Documents or otherwise conflict with the terms of the Loan Documents); (c) Liens arising from taxes, assessments, charges or claims described in Section 6.9 hereof to the extent permitted by said Section 6.9, provided that the aggregate amount secured by all Liens described in this clause (c) shall not at any time exceed $500,000.00; (d) Liens existing on real estate and equipment acquired by any Borrower in an Acquisition permitted under Section 8.4 hereof so long as any such Lien secures only the corresponding Assumed Indebtedness permitted under clause (e) of Section 8.1, above; (e) With respect to the Borrowers (but not the Surety) other (i) purchase money Liens encumbering only the property purchased with the proceeds from the corresponding Indebtedness, and (ii) Capitalized Leases, in each case securing Indebtedness permitted under clause (e) of Section 8.1 above; (f) Other Liens (other than on Collateral) securing Indebtedness incurred pursuant to paragraph (f) of Section 8.1 above in an amount not to exceed $20,000,000.00 in the aggregate; (g) Liens in respect of property or assets of the Borrowers imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrowers taken as a whole or (ii) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such lien and that adequate reserves have been set aside on the applicable Borrower's books to protect against an adverse result; (h) Liens arising from judgments, decrees or attachments and Liens securing appeal bonds arising from judgments, in each case in circumstances not constituting an Event of Default under Section 9.1(g); -64- (i) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); and (j) easements, rights-of-way, restrictions, minor defects or irregularities in title to real property and other similar charges or encumbrances on real property not interfering in any material respect with the ordinary conduct of the business of the Borrowers taken as a whole or the value or salability of the assets so encumbered or affecting their use for their intended purposes; provided, however, that no Lien permitted under clauses (d), (e) or (f) above shall be created at any time, if there shall exist, either before or after giving effect to such transaction, a Default or an Event of Default. "Permitted Liens" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law. 8.3 LOANS, ADVANCES AND INVESTMENTS. No Borrower shall, nor shall any Borrower permit Surety to, at any time (i) make or suffer to exist any loan or advance to, or (ii) purchase, acquire or own (beneficially or of record) any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other interest in, or (iii) make any capital contribution to, or other investment in (collectively, "Investments") any other Person, except: (a) receivables owing to such Borrower arising from provision of services or sales of inventory under usual and customary terms in the ordinary course of business; and loans and advances extended by a Borrower to subcontractors or suppliers under usual and customary terms in the ordinary course of business; (b) (i) loans or advances from Multicare to a wholly-owned Restricted Subsidiary of Multicare or (ii) loans from a wholly-owned Restricted Subsidiary of Multicare to Multicare or another wholly-owned Restricted Subsidiary of Multicare, provided, however, all such loans and advances shall be evidenced by promissory notes duly pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge Agreement; (c) the capital stock or other ownership interests in other Borrowers duly pledged to the Administrative Agent, for the benefit of the Secured Parties; (d) Cash Equivalent Investments; (e) Acquisitions permitted under Section 8.4 (Acquisitions, Etc.) below; (f) the Surety's initial Investment in the capital stock of Acquisition Corp.; -65- (g) the capital stock or other ownership interests in the Excluded Subsidiaries existing on the Closing Date and set forth on Schedule 11.1 hereto; (h) Investments existing on the Closing Date in an amount not greater than $20,050,000.00 which are listed on Schedule 8.3 hereto; and (i) With respect to the Borrowers (but not the Surety) other Investments not covered by clauses (a) through (h) of this Section 8.3 provided, that (1) at the time that any Investment is made, the aggregate amount (which shall include all existing amounts and all new commitments therefor) of all Investments pursuant to this paragraph (i) shall not exceed $15,000,000.00; and (2) no Default or Event of Default shall then exist either before or after giving effect to such transaction. Investments referred to in paragraph (h) which are existing on the Closing Date and the amount of each such Investment are listed on Schedule 8.3 hereto. On or before (if practicable) but in any event within 5 days after any Investment is made pursuant to the preceding paragraph (i), Multicare (on behalf of the Borrowers) shall deliver to the Administrative Agent a supplement to Schedule 8.3 showing the proposed Investment, together with a certificate of a Responsible Officer of Multicare stating that such Investment was made in compliance with this Section 8.3 and in compliance with the provisions of the 1997 Subordinated Note Indenture. The "amount" of any Investment referred to in this Section 8.3 shall mean the sum of the following (without duplication): the amount of cash paid for or contributed to such Investment; the fair market value of any equity or assets constituting consideration for or contributed to such Investment; and any commitment to pay, contribute, incur, or become liable for any of the foregoing. 8.4 ACQUISITIONS, ETC. No Borrower shall engage, or permit the Surety to engage, in any Acquisition (other than an acquisition of assets in the ordinary course of business) except: (a) A Borrower may merge with or into Multicare or any direct or indirect wholly-owned Restricted Subsidiary of Multicare, provided that (i) if Multicare is a party to the merger, it is the surviving entity and (ii) if Multicare is not a party to the merger, a wholly-owned Restricted Subsidiary of Multicare is the surviving entity and provided, further, that no Event of Default or Default shall occur and be continuing before or after giving effect to such transaction; and (b) So long as no Default or Event of Default has occurred or would exist after giving effect to such Acquisition, any Borrower may make an Acquisition not covered by clause (a) of this Section 8.4, provided, however, that (i) the Acquisition Cost of all Acquisitions made pursuant to this paragraph (b) does not exceed $15,000,000.00 in any fiscal year, provided, that if the Adjusted Total Debt/Cash Flow Ratio is, and has been for two consecutive fiscal quarters, less than or equal to 4.5 to 1.0, then the Acquisition Cost of all Acquisitions pursuant to this paragraph (b) -66- shall not exceed $25,000,000.00 in any fiscal year and (ii) the "Acquisition Conditions" set forth on Schedule 8.4 hereto shall have been satisfied. 8.5 DISPOSITIONS. No Borrower shall, or shall permit Surety to, sell, convey, assign, lease as lessor, transfer, abandon or otherwise dispose of (collectively, for purposes of this Section 8.5, "transfer"), voluntarily or involuntarily, any of its assets, except: (a) A Borrower may sell inventory in the ordinary course of business; (b) A Borrower may dispose of equipment which is obsolete or no longer useful in its business; (c) A Borrower may transfer its properties to Multicare or a wholly-owned Restricted Subsidiary of Multicare so long as no Event of Default or Default shall exist either before or after giving effect to such transfer; (d) Subject to mandatory prepayment provisions set forth above, the Borrowers may transfer at any time the facilities identified on Schedule 8.5(d) located in the states of Ohio, Wisconsin or Illinois (i) for a cash price or (ii) in connection with a swap of assets of the same type and generating cash flow at approximately the same level, or greater, than the facilities identified in Schedule 8.5(d) being transferred, as certified by a Responsible Officer of Multicare, on behalf of the Borrowers, in writing prior to such transfer with such detail and supporting financing information as the Administrative Agent may require; provided that in the case of either (i) or (ii) above the Board of Directors of Multicare determines that the fair market value in either case is equal to the fair market value in an arm's length transaction with an unrelated third party and such transfer is on such terms as are (A) reflective of market conditions at the time of sale, (B) consistent with the terms of this Agreement, and (C) satisfactory to the Administrative Agent. (e) The Borrowers may grant Liens permitted under Section 8.2 (Liens); (f) Subject to mandatory prepayment provisions set forth above, the Borrowers shall make the dispositions described in Section 6.18 above; (g) Subject to mandatory prepayment provisions set forth above, the Borrowers may transfer the assisted living facilities described in Schedule 8.1(f) attached hereto to a Person who is not a Borrower for a sales price at least sufficient to repay any Indebtedness associated therewith provided that the Cash Flow for the immediately preceding four fiscal quarters for such facilities (and if such facilities have not been in operation for four fiscal quarters, then such Cash Flow for the period since operations commenced on an annualized basis) does not exceed 15% of the associated Indebtedness; (h) Subject to mandatory prepayment provisions set forth above, so long as no Default or Event of Default has occurred or would exist after giving effect to such transfer, a Borrower may transfer other assets (including ownership interests in Restricted Subsidiaries) provided, however, that (i) the "Disposition Conditions" set -67- forth on Schedule 8.5(h) hereto shall have been satisfied and (ii) both of the following financial tests shall be satisfied: (A) The sum of the aggregate fair market value of the property subject to such proposed transfer plus the aggregate fair market value of all property previously transferred pursuant to this paragraph (h) at any time after the Closing Date (in each case determined as of the date of transfer or proposed transfer, as the case may be) is less than an amount equal to 5% of the total assets of Multicare and its Restricted Subsidiaries, on a consolidated basis, determined as of the fiscal quarter ending on, or most recently prior to, the date of the proposed transfer; and (B) The sum of the amount of Cash Flow attributable to the property subject to such proposed transfer plus the amount of Cash Flow attributable to all property previously transferred pursuant to this paragraph (h) at any time after the Closing Date ( in each case for the four fiscal quarters ended on, or most recently prior to, the date of the transfer or proposed transfer, as the case may be) is less than an amount equal to 5% of the Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, the date of the proposed transfer. (i) Subject to mandatory prepayment provisions set forth above, so long as no Default or Event of Default has occurred or would exist after giving effect to such transfer, any Borrower may transfer its interests in Excluded Subsidiaries. 8.6 ISSUANCE OF SUBSIDIARY STOCK OR OTHER OWNERSHIP INTERESTS. The Borrowers shall not, and shall not permit the Surety to, create, acquire, dispose of, or change any interest in any Restricted Subsidiary except as follows: (a) Restricted Subsidiaries of Borrowers (or any interest therein) may be created or acquired in connection with an Acquisition to the extent permitted under Section 8.4 above (Acquisitions, Etc.); (b) Restricted Subsidiaries of Borrowers (or any interest therein) may be created or acquired in connection with an Investment to the extent permitted under Section 8.3 above (Loans, Advances and Investments); (c) Restricted Subsidiaries of Borrowers may be created as wholly-owned direct or indirect Restricted Subsidiaries of Multicare for other purposes consistent with the terms of this Agreement; and (d) Restricted Subsidiaries (or any interest therein) may be disposed of pursuant to the provisions of Section 8.5 above (Dispositions); -68- provided, however, that with respect to Restricted Subsidiaries created or acquired in accordance with paragraphs (a), (b) or (c) above, they shall become "Borrowers" hereunder and corresponding parties to the other Loan Documents, their equity owned by Borrowers shall be pledged to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the Pledge Agreement (all as more fully set forth in Section 6.10 above) and they shall become parties to the Tax Sharing Agreement. 8.7 LEASES. The Borrowers shall not, and shall not permit the Surety to, at any time, enter into or suffer to remain in effect any lease, as lessee, of any property, except: (a) Leases (including subleases) by Multicare or a wholly-owned Restricted Subsidiary of Multicare as lessor (or sublessor) to Multicare or another wholly-owned Restricted Subsidiary of Multicare as lessee (or sublessee); (b) Capitalized Leases permitted under Section 8.1 above; and (c) Other leases which are not Capitalized Leases or Synthetic Leases but only to the extent that the aggregate Rental Expense of the Surety, the Borrowers with respect to all such other leases does not exceed (i) during the fiscal year ending December 31, 1997, $15,000,000.00 and (ii) during each fiscal year thereafter, an amount equal to the amount permitted in the preceding year plus an additional $2,000,000.00 (e.g., $17,000,000.00 in the fiscal year ending December 31, 1998.) 8.8 DIVIDENDS AND RELATED DISTRIBUTIONS. Except for dividends from Multicare to Surety in an amount necessary to permit Surety to pay its taxes and general corporate operating expenses of the type typically incurred by a corporation whose only assets are the stock of operating companies with no other business activity, Multicare shall not, and the Borrowers shall not permit the Surety to, (a) declare or pay any dividends, (b) purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, or (c) make any distribution of assets to its stockholders as such whether in cash, assets or obligations of Multicare or the Surety, (d) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption or retirement of, any shares of its capital stock, or (e) make any other distribution by return of capital or otherwise in respect of any shares of its capital stock except that Multicare and the Surety may each declare and pay dividends and make distributions payable solely in its common stock, or options, warrants or other rights to purchase common stock, provided that any such stock, warrants, options or other rights (other than such as are issued by Surety to Cypress, Nazem or TPG) are pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge Agreement. 8.9 CONSOLIDATED TAX RETURN. No Borrower shall (a) file or consent to the filing of any consolidated income tax return with any Person other than other Borrowers or other Persons party to the Tax Sharing Agreement or (b) become party to any tax sharing or tax allocation agreement with any other Person other than the Tax Sharing Agreement. From and after the effective date of the Tax Sharing Agreement (which shall be on or about the Closing Date), each of the Borrowers shall cause the Tax Sharing Agreement to remain in full force and effect, subject to no amendments or modifications other than (a) joinder of -69- additional Subsidiaries of Multicare, from time to time, such that at all times all Subsidiaries of Multicare shall be parties thereto, and (b) such amendments or modifications which, individually or in the aggregate, could not reasonably be expected to have an adverse effect on the Borrowers taken as a whole (including the business, operations, condition, financial or otherwise, properties or prospects of the Borrowers), the Loan Documents or any Lender Party. 8.10 LIMITATION ON PAYMENTS, PREPAYMENTS, DEFEASEMENT AND OTHER ACTION WITH RESPECT TO CERTAIN DEBT OBLIGATIONS. No Borrower shall, and no Borrower shall permit Surety to, directly or indirectly, pay, prepay, purchase, defease, redeem, retire, acquire, or otherwise make any payment (on account of principal, interest, premium or otherwise) in respect of any obligation under, or evidenced by the 1997 Subordinated Note Indenture (or cause or allow any event or condition to exist which would require any payment, prepayment, purchase, defeasance, redemption, retirement, acquisition or other payment of any such obligation) except that a Borrower may make cash interest payments on the aforesaid Indebtedness, as and when required to do so by the mandatory terms thereof, all to the extent consistent with the subordination provisions applicable thereto. No Borrower shall, and no Borrower shall permit Surety to, amend, modify or supplement the terms or provisions contained in the aforementioned debt agreements or any agreement or instrument evidencing, relating or applicable thereto. No Borrower shall, and no Borrower shall permit Surety to, take or omit to take any action under or in connection with, any such agreement or instrument, which would violate or impair the subordination provisions thereof. No Borrower will, and no Borrower shall permit Surety to, make or give any notice that it shall make any voluntary or optional payment or prepayment or redemption or acquisition for value of, or will refund, refinance or exchange any Indebtedness (excluding Loan Obligations) if at such time any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof. No Loan Party shall designate any of its Indebtedness as "Designated Senior Indebtedness" for purposes of the 1997 Subordinated Note Indenture except Indebtedness incurred pursuant to this Agreement, the other Loan Documents, or Qualifying Interest Rate Hedging Agreements. 8.11 LIMITATIONS ON MODIFICATION OF CERTAIN DOCUMENTS. (a) Constituent Documents. No Borrower shall, or permit the Surety to, amend, modify or supplement its articles or certificate of incorporation, bylaws, partnership agreement or other constituent documents (i) if a Material Adverse Effect could result from such amendment, modification or supplement or (ii) if such amendment, modification or waiver could reasonably be expected to materially adversely affect the rights or interests of the Agents, the Issuer or the Lenders. (b) Transaction Documents. No Borrower shall or permit the Surety to, amend, modify or supplement any Transaction Document, except for such amendments, modifications or supplements which could not reasonably be expected to have an adverse effect on the Borrowers taken as a whole (including the condition (financial or otherwise), properties or prospects of the Borrowers), the Loan Documents or any Lender Party. -70- 8.12 LIMITATION ON CERTAIN RESTRICTIVE PROVISIONS. No Borrower shall, or shall permit the Surety to, enter into, or remain a party to, any agreement or instrument which would impose any restriction: (a) on the right of such Person from time to time to declare and pay dividends or take similar actions with respect to capital stock owned by such Person or pay any Indebtedness, obligations or liabilities from time to time owed to another Borrower; or (b) that would prohibit the grant of any Lien upon any of its properties (now owned or hereafter acquired) to secure any senior Indebtedness except for restrictions in agreements respecting Permitted Liens to the extent that the prohibition applies only to property subject to the Permitted Lien; or (c) would prohibit, or require the consent of any Person to, any amendment, modification or supplement to any of the Loan Documents except: (i) restrictions set forth in the Loan Documents; (ii) legal restrictions of general applicability; and (iii) restrictions pursuant to the 1997 Subordinated Note Indenture. 8.13 LIMITATIONS ON MERGERS, ETC. No Borrower shall, or permit the Surety to, merge or consolidate with or into any Person, except (a) mergers of any Borrower with Multicare where Multicare is the survivor, (b) mergers of any Restricted Subsidiary of Multicare with any wholly-owned Restricted Subsidiary of Multicare where such wholly-owned Restricted Subsidiary is the survivor, (c) any merger pursuant to an Acquisition permitted under Section 8.4 above (Acquisitions, Etc.) or (d) any merger pursuant to a transfer permitted under Section 8.5 above (Dispositions). 8.14 AVOIDANCE OF OTHER CONFLICTS. No Borrower shall, or permit the Surety to, violate or conflict with, be in default under, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with (a) its articles or certificate of incorporation, bylaws or partnership agreement (or other constituent documents), or (b) any agreement or instrument to which it is party or by which any of its properties (now owned or hereafter acquired) may be subject or bound, except, with respect to clause (b), for matters that could not, individually or in the aggregate, have a Material Adverse Effect. 8.15 CAPITAL EXPENDITURES. No Borrower shall make or commit to make any Capital Expenditure if, after giving effect to such Capital Expenditure, the aggregate amount of all Capital Expenditures of the Borrowers incurred (i) during the fiscal year ending December 31, 1997, would exceed $45,000,000.00, and (ii) during any fiscal year thereafter, would exceed $35,000,000.00. 8.16 MANAGEMENT FEE. The Borrowers shall not pay management fees under the Multicare Management Agreement in any fiscal year in an amount less than $23,900,000.00, or in excess of 6% of the consolidated net revenue of the Borrowers. All such management fees shall be subordinated to the obligations of the Borrowers hereunder in accordance with the terms contained in the Multicare Management Subordination Agreement as in effect on the date hereof. Such management fees may be accrued but not paid except that such fees may be paid to the extent they do not exceed in any fiscal year the greater of (a) 4% of the consolidated net revenue of the Borrowers, and (b) $23,900,000.00. To the -71- extent such management fees in any fiscal year (including the payment in such year of accrued management fees) would exceed the amount specified in the preceding sentence, such excess amount shall be payable only to the extent that, both before and after giving effect to such payment, (i) there exists no Event of Default or Default, (ii) Borrower's Fixed Charge Coverage Ratio shall be not less than 1.4 for the two most recent completed fiscal quarters of the Borrowers, and (iii) the Adjusted Total Debt/Cash Flow Ratio for the two most recently completed fiscal quarters of the Borrowers shall be less than 4.00. No Borrower shall agree, or permit Surety to agree, with any Person (other than the Lender Parties) to withhold, defer or change the amount or timing of payments under the Multicare Management Agreement. -72- ARTICLE 9 DEFAULTS 9.1 "EVENTS OF DEFAULT." An Event of Default means any one of the following events (whatever the reason for such Event of Default, whether it shall be voluntary or involuntary and whether it shall be by action or inaction, by operation of law, pursuant to a court order or any rule or regulation of any Governmental Authority or otherwise): (a) Failure to Pay Principal or Reimburse Drawings. The Borrowers shall fail to make any payment of the principal of any Loan on the date when the same shall become due and payable, whether at stated maturity or at a date fixed for any installment or prepayment thereof or otherwise; or the Borrowers shall fail to make any reimbursement of any Drawing under a Letter of Credit or shall fail to deposit any amount into the cash collateral account, in either case, at the times and in the amounts specified in Article 3 above. (b) Failure to Pay Interest, Fees and Other Amounts. The Borrowers shall fail to make any payment of interest on any Loan or shall fail to pay any fees or any other amounts owing hereunder or under any other Loan Documents (other than as specified in paragraph (a) above) on the dates when such interest, fees or other amounts shall become due and payable and such failure continues for more than three (3) Business Days. (c) Covenant Defaults. (i) There shall occur a default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to any of Sections 6.1(f)(ii), 6.2, 6.3, 6.7, 6.10, 6.11, 6.14 or 6.17 or any Section of Article 7 or any Section of Article 8. (ii) There shall occur any default in the due performance or observance of any term, covenant or agreement to be performed or observed pursuant to the provisions of this Agreement (other than as provided in paragraph (a) or paragraph (b) above or subparagraph (i) of this paragraph (c)) and, if capable of being remedied, such default shall continue unremedied for thirty (30) days after any Borrower becomes aware, or should in the exercise of reasonable diligence have become aware, of such default. (d) Misrepresentation. Any representation or warranty made or deemed made by any Loan Party in or pursuant to or in connection with any Loan Document shall prove to have been false or misleading in any material respect as of the time when made or deemed made. (e) Subordinated Debentures. Any "Event of Default" (or similar term) as defined in the 1997 Subordinated Note Indenture and any other subordinated indentures to which any Borrower may from time to time be party shall have occurred and be continuing; or, any term or provision of the subordination provisions contained in any such indenture shall cease to be in full force and effect in accordance with its respective terms, or any Loan Party or any holder of any 1997 Subordinated Note or other subordinated note or other subordinated obligations (or any trustee or agent on behalf of such holder) shall terminate, -73- repudiate, declare voidable or void or otherwise contest any term or provision of such subordination provisions; or Multicare shall make, or shall be required to make or to offer to make, any defeasance, redemption or purchase of 1997 Subordinated Notes under the 1997 Subordinated Note Indenture or Multicare shall make, or shall be required to make or offer to make, any defeasance, redemption or purchase of subordinated notes under any similar provision, if any, under any such other subordinated indentures or other subordinated obligations. (f) Other Cross-Defaults. (i) Any Loan Party shall fail to pay, in accordance with its terms and when due and payable, any Indebtedness (other than Indebtedness referred in paragraph (a) or (e) above) under, or arising out of any Qualifying Interest Rate Hedging Agreement or an agreement or instrument (or group or series of related agreements or instruments) which evidences outstanding Indebtedness in excess of $5,000,000.00; (ii) the maturity of any such Indebtedness shall, in whole or in part, have been accelerated, or any such Indebtedness shall, in whole or in part, have been required to be prepaid or purchased prior to the stated maturity thereof; (iii) any event shall have occurred and be continuing that permits any holder or holders of such Indebtedness, any trustee or agent acting on behalf of such holder or holders or any other Person to accelerate the maturity thereof or require any prepayment or repurchase thereof; or (iv) a default by any Loan Party shall be continuing under any other instrument or agreement (whether or not relating to Indebtedness) binding upon such Person, except a default that, together with all other such defaults under this clause (iv), could not have a Material Adverse Effect. (g) Judgments and Executions. One or more judgments for the payment of money shall have been entered against any Loan Party or Loan Parties which judgment or judgments, to the extent not paid or fully covered by insurance, exceed $1,000,000.00 in the aggregate, and such judgment or judgments shall have remained undischarged and unstayed for a period of 30 consecutive days; or one or more writs or warrants of attachment, garnishment, execution, distraint or similar process or any attachment (prejudgment or otherwise) of assets exceeding in value the aggregate amount of $1,000,000.00 shall have been issued against any Loan Party or Loan Parties or any of its or their respective properties. (h) Invalidity or Noncompliance With Loan Documents. Any of the Loan Parties shall fail to perform any of its obligations under any of the Loan Documents (after taking into account any applicable cure period set forth in such agreements), or the validity of this Agreement or any of the other Loan Documents, or the subordination provisions of any other instrument or document intended by the parties hereto to benefit the Lender Parties, shall have been challenged or disaffirmed by or on behalf of any of the Loan Parties, or any of the Loan Documents shall cease to be in full force and effect (other than pursuant to its terms) or, other than as a direct result of any action or inaction of a Lender Party, any Liens created or intended to be created by any of the Loan Documents shall at any time cease to be valid and perfected subject to no equal or prior Liens except Permitted Liens. (i) Material Adverse Effect. The Required Lenders shall have determined in good faith that an event or condition has occurred which could have a Material Adverse Effect. -74- (j) Environmental. Any one or more of the events or conditions set forth in the following clauses (i) or (ii) shall have occurred with respect to any Borrower or any Loan Party or any of their respective Environmental Affiliates, and the Required Lenders shall determine in good faith (which determination shall be conclusive) that such event(s) or condition(s), individually or in the aggregate, could have a Material Adverse Effect: (i) any past or present violation of any Environmental Law by such Person which has not been cured to the satisfaction of the Required Lenders, or (ii) the existence of any pending or threatened Environmental Claim against any such Person, or the existence of any past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim against any such Person. (k) Change of Control. A Change of Control shall have occurred; or a "Change in Control" (as defined in the 1997 Subordinated Note Indenture) shall have occurred. (l) Subsidiaries as Loan Parties. Any direct or indirect Subsidiary of Multicare, other than Excluded Subsidiaries, shall fail to be, or shall cease to be, or fail to become, a Borrower hereunder; or the equity of any such Person owned by any Borrower or of Multicare shall cease to be, or fail to be, pledged under the Pledge Agreement. (m) Insolvency, Bankruptcy, Etc. Any Loan Party shall make an assignment for the benefit of creditors or a composition with creditors, shall generally not be paying its debts as they mature, shall admit its inability to pay its debts as they mature, shall file a petition in bankruptcy, shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, custodian, liquidator or trustee of or for it or any substantial part of its property or assets, shall commence any proceeding relating to it under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or there shall be commenced against such Loan Party, any such proceeding and the same shall not be dismissed within thirty (30) days or an order, judgment or decree approving the petition in any such proceeding shall be entered against such Loan Party; or any Loan Party shall by any act or failure to act indicate its consent to, approval of or acquiescence in, any such proceeding or any appointment of any receiver, custodian, liquidator or trustee of or for it or for any substantial part of its property or assets, or shall suffer the appointment of any receiver, liquidator or trustee, or shall take any corporate action for the purpose of effecting any of the foregoing; or any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding and the same shall not be dismissed within thirty (30) days or a receiver or a trustee or other officer or representative of a court or of creditors, or any court, governmental office or agency, shall, under color of legal authority, take and hold possession of any substantial part of the property or assets of such Loan Party and shall not have relinquished possession within thirty (30) days, or such Loan Party shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors, or any of them, or any Loan Party shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint. (n) Termination of Multicare Management Agreement or other Transaction Documents. Except as permitted by the Required Lenders, (i) the Multicare Management Agreement shall cease to be in full force and effect or there shall be any breach by any party -75- thereto or a default thereunder, or an amendment, modification or supplement thereto not permitted by the terms of this Agreement or any notice of non-renewal or termination thereunder shall have been delivered by any party thereto, or (ii) any other Transaction Document shall cease to be in full force and effect (other than by its terms) or there shall be any material breach by any party thereto or a default thereunder or any such document shall be amended, modified, restated or supplemented in a manner not expressly permitted by the terms of this Agreement or (iii) any other Management Agreement of any Borrower shall be terminated or cease to be renewed or extended or shall be amended, modified, restated or supplemented if such termination, failure to renew or extend or amendment, modification, restatement or supplement (either singly or collectively with all other such events relating to other Management Agreements) could have a Material Adverse Effect. (o) Loss of Licenses, Reimbursement Approvals, Etc. There shall be a Limitation of one or more Licenses or Reimbursement Approvals of any Borrower or Borrowers or Persons managed by a Borrower or Borrowers and the Required Lenders shall determine in good faith that such Limitation, individually or collectively all such Limitations could reasonably be expected to have a Material Adverse Effect. 9.2 CONSEQUENCES OF AN EVENT OF DEFAULT. (a) Events of Default in General. If an Event of Default (other than one specified in paragraph (m) of Section 9.1 (Insolvency, Bankruptcy, Etc.) hereof) shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Administrative Agent or any other Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans, the Issuer shall be under no further obligation to issue Letters of Credit hereunder, and the Administrative Agent may, (and upon the written request of the Required Lenders, shall), by notice to Multicare (on behalf of the Borrowers), from time to time do any or all of the following: (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (iii) Direct the Borrowers to pay (and the Borrowers jointly and severally agree that upon receipt of notice they will pay) to the Administrative Agent cash for deposit to the credit of the Letter of Credit collateral account in accordance with Article 3 hereof. (iv) Take (or direct the Collateral Agent to take) any and all actions permitted under the Pledge Agreement or other Loan Documents. -76- (v) Exercise such other remedies as may be available to the Lender Parties under applicable Law. (b) Automatic Acceleration; Certain Bankruptcy-Related Events. If an Event of Default specified in paragraph (m) of Section 9.1 (Insolvency, Bankruptcy, Etc.) hereof shall occur or exist, then, in addition to all other rights and remedies which any Lender Party may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans and the Issuer shall be under no further obligation to issue Letters of Credit hereunder, and the unpaid principal amount of the Loans, interest accrued thereon and all other Loan Obligations including those referred to in clause (iii) of the preceding paragraph (a), shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue, and in addition, the Administrative Agent may, (and upon the written request of the Required Lenders), shall, by notice to Multicare (on behalf of the Borrowers), do one or more of the following: (i) take any and all actions permitted under the Pledge Agreement or any other Loan Document or (ii) exercise such other remedies as may be available to the Lender Parties under applicable Law. (c) Equitable Remedies. It is agreed that, in addition to all other rights hereunder or under Law, the Administrative Agent shall have the right to institute proceedings in equity or other appropriate proceedings for the specific performance of any covenant or agreement made in any of the Loan Documents or for an injunction against the violation of any of the terms of any of the Loan Documents or in aid of the exercise of any power granted in any of the Loan Documents or by Law or otherwise. 9.3 APPLICATION OF PROCEEDS. After the occurrence of an Event of Default and acceleration of the Loans, any amounts received on account of Loan Obligations shall be applied by the Administrative Agent in the following order: First, to payment of that portion of the Loan Obligations constituting fees, indemnities, expenses and other amounts due to the Administrative Agent in its capacity as such; Second, to payment of that portion of the Loan Obligations constituting fees, indemnities (other than those paid pursuant to the preceding clause First) due to the Lender Parties, ratably among them in proportion to the amounts described in this clause Second due to them; Third, to payment of that portion of the Loan Obligations constituting accrued and unpaid interest on Loans and accrued and unpaid interest on Drawings, ratably among the Lender Parties in proportion to the respective amounts described in this clause Third due to them; Fourth, to payment of that portion of the Loan Obligations constituting unpaid principal of the Loans or unreimbursed Drawings ratably among the Lender Parties in proportion to the respective amounts described in this clause Fourth due to them; -77- Fifth, to be deposited in such cash collateral account, if any, as may be required under Article 3 above; Sixth, to payment of all other Loan Obligations, ratably among the Lender Parties in proportion to the respective amounts described in this clause Sixth due to them; and Finally, the balance, if any, after all of the Loan Obligations have been indefeasibly paid in full and all of the Letters of Credit shall have terminated (or funds equal to the amount of any contingent liabilities in respect thereof shall have been deposited in the Letter of Credit cash collateral account), to Multicare (on behalf of the Borrowers) or as otherwise required by Law. -78- ARTICLE 10 - THE ADMINISTRATIVE AGENT 10.1 APPOINTMENT. Subject to the provisions of the second sentence of Section 10.9 below, each Lender Party hereby irrevocably appoints Mellon to act as Administrative Agent for such Lender Party under this Agreement and the other Loan Documents. Each Lender Party hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender Party under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon hereby agrees to act as Administrative Agent on behalf of the Lender Parties on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 10.9 hereof. Each Lender Party hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Administrative Agent. Each Lender Party agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent (or a Person designated by the Administrative Agent), and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent, if any, expressly provided herein or therein. 10.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any other Loan Document or shall otherwise exist. (b) The duties and responsibilities of the Administrative Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship with respect to any Lender Party. (c) The Administrative Agent's relationship with and to the Lender Parties is governed exclusively by the terms of this Agreement and the other Loan Documents. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, any Lender Party or any other Person or (except only as expressly provided in this Agreement and the other Loan Documents) any other duty or responsibility to such Lender Party or other Person. (d) The Administrative Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Administrative Agent believes in good faith that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the -79- Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified. (e) The authority of the Administrative Agent to request information from the Borrowers or take any other voluntary action hereunder shall impose no duty of any kind on the Administrative Agent to make such request or take any such action. (f) The Administrative Agent shall have no duty to inquire whether any Interest Rate Hedging Agreement conforms to the terms and limitations of this Agreement and shall have no duty to inquire as to whether the Borrowers maintain any Interest Rate Hedging Agreements. 10.3 EXERCISE OF POWERS. The Administrative Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Administrative Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or as otherwise provided in the Loan Documents). In the absence of such direction, the Administrative Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent that this Agreement or such other Loan Document expressly requires the direction or consent of the Required Lenders (or all of the Lenders, or some other Person or group of Persons), in which case the Administrative Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on each Lender Party (whether or not it so consented). The Administrative Agent shall not have any liability to any Person as a result of any action or inaction in conformity with this Section 10.3. 10.4 GENERAL EXCULPATORY PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) The Administrative Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, except only for direct (as opposed to consequential or other) damages suffered by a Person and only to the extent that such Person proves that such damages were caused by the Administrative Agent's own gross negligence or willful misconduct. (b) The Administrative Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of any Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, any Loan Document, (iii) any failure of any Loan Party, any Lender or the Issuer to perform any of their respective obligations under any Loan Document, (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any Loan Document or otherwise from time to time, (v) caring for, protecting, insuring, or paying any taxes, charges or assessments with respect to any Collateral, or (vi) the enforceability of any subordination. -80- (c) The Administrative Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of any Loan Party, (ii) the business, operations, condition (financial or otherwise) or prospects of any Loan Party or any other Person (even if the Administrative Agent knows or should know that some event or condition exists or fails to exist), or (iii) except to the extent set forth in Section 10.5(f) below, the existence of any Event of Default or Default. (d) The Administrative Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender Party with any notices, reports or information of any nature, whether in its possession presently or hereafter, whether obtained under or in connection with this Agreement or otherwise, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Administrative Agent to such Lender Party. 10.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) The Administrative Agent may consult with legal counsel (including in-house counsel for the Administrative Agent or in-house or other counsel for any Loan Party), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to any Loan Party or Lender Party, such matter may be established by a certificate of such Loan Party or Lender Party, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) The Administrative Agent may fail or refuse to take any action unless it shall be directed by the Required Lenders (or all of the Lenders, or some other Person or group of Persons, if this Agreement or another Loan Document so expressly requires) to take such action and it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred -81- by or asserted against the Administrative Agent by reason of taking or continuing to take any such action. (e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. (f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Event of Default or Default unless the Administrative Agent has received notice from a Lender Party or a Borrower referring to this Agreement, describing such Event of Default or Default, and stating that such notice is a "notice of default." If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender Party. 10.6 LENDER PARTIES NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS. Each Lender Party acknowledges as follows: (a) neither the Administrative Agent nor any other Lender Party has made any representations or warranties to it, and no act taken hereafter by the Administrative Agent or any other Lender Party shall be deemed to constitute any representation or warranty by the Administrative Agent or such other Lender Party to it; (b) it has, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents; and (c) it will, independently and without reliance upon the Administrative Agent or any other Lender Party, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. 10.7 INDEMNIFICATION. Each Lender agrees to reimburse and indemnify each Agent and its directors, officers, employees and agents (to the extent not reimbursed by a Loan Party and without limitation of the obligations of the Loan Parties to do so), in proportion to the Lenders' respective pro rata share of (without duplication) the Commitment, the Loans and Letter of Credit Participations, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including the fees and disbursements of counsel for such Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against such Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, the Tender Offer, any Acquisition or any other transaction from time to time contemplated hereby or thereby, or any transaction actually or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or Letter of Credit, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that such Lender Party proves were the result of the gross negligence or -82- willful misconduct of such Agent or such other Person. Payments under this Section 10.7 shall be due and payable on demand. 10.8 REGISTER. The Administrative Agent shall maintain at its address referred to in Section 12.1 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans and stated interest thereon owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Multicare on behalf of the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. 10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the other Lender Parties and Multicare on behalf of the Borrowers. The Administrative Agent may be removed by the Required Lenders at any time for cause by such Required Lenders giving 30 days' prior written notice thereof to the Administrative Agent, the other Lender Parties and Multicare on behalf of the Borrowers. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent with (so long as no Default or Event of Default shall have occurred and then be continuing) the consent of Multicare on behalf of the Borrowers whose consent shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent may (but shall not be required to) appoint a successor Administrative Agent. Each successor Administrative Agent shall be a Lender if any Lender shall at the time be willing to become the successor Administrative Agent, and if no Lender shall then be so willing, then such successor Administrative Agent shall be an Eligible Institution. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent in its capacity as such, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, such Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Loan Party or Lender Party for whose account such payment is made. 10.10 ADDITIONAL ADMINISTRATIVE AGENTS; COLLATERAL AGENT. If the Administrative Agent shall from time to time deem it necessary or advisable, for its -83- own protection in the performance of its duties hereunder or in the interest of the Lender Parties, the Administrative Agent and the Borrowers shall (and the Borrowers shall cause the other Loan Parties to) execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable, in the opinion of the Administrative Agent, to constitute one or more other Persons designated by the Administrative Agent, to act as co-Administrative Agent or agent with respect to any part of the Collateral, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such other Person as such co-Agent or separate agent, as the case may be, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. 10.11 CALCULATIONS. The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith and without gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender Party to whom payment was due but not made shall be to recover from the other Lender Parties any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the appropriate Loan Party, to recover such amount from the appropriate Loan Party. 10.12 OTHER AGENTS. (a) In General. The title "Syndication Agent" given to Citicorp USA, Inc. and NationsBank, N.A. in this Agreement and the title "Documentation Agent" given to First Union National Bank in this Agreement are solely for identification purposes and imply no rights in favor of such Person and no responsibility by such Person except such rights or obligations of "Agents" (including the right to make certain determinations) as are expressly stated herein. No such Agent shall be liable for any act or failure to act on its part except for that which the claimant proves constitutes the gross negligence or willful misconduct of such Agent. (b) Successor Agents. Any Syndication Agent and the Documentation Agent may resign at any time and such Agents may be removed at any time for cause by the other Agents and Multicare in which event, Multicare (on behalf of the Borrowers) if no Default or Event of Default shall then exist, and the Administrative Agent may (in their sole discretion) appoint a successor Agent. 10.13 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender", "Holder of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, enter into Interest Rate Hedging Agreements with, serve as "Administrative Agent" for other financing -84- vehicles, issue letters of credit on behalf of, and engage in any other business with, (a) any Loan Party or any stockholder, Subsidiary or Affiliate of any Loan Party or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. -85- ARTICLE 10A SPECIAL INTERCREDITOR PROVISIONS 10A.1 SPECIAL PROVISIONS APPLICABLE TO LENDER PARTIES AS PARTIES TO THE GENESIS CREDIT AGREEMENT. There are certain understandings about the Genesis Credit Agreement which the Lenders have relied upon in entering into this Agreement and wish to confirm in an intercreditor agreement with the parties to the Genesis Credit Agreement. Because each of the Lenders hereunder is also a "Lender" under the Genesis Credit Agreement, this provision (and a corresponding provision in the Genesis Credit Agreement) shall take the place of a separate agreement and shall serve as a intercreditor agreement among the lenders party to this Agreement and the lenders party to the Genesis Credit Agreement. Accordingly, each of the Lenders hereunder, in its capacity as a "Lender" under the Genesis Credit Agreement, agree, so long as it remains a party to the Genesis Credit Agreement, that without the written consent of the Required Lenders, the parties to the Genesis Credit Agreement will not amend, modify, supplement or restate the assignment provisions of the Genesis Credit Agreement (currently set forth in Section 12.9 of the Genesis Credit Agreement ) which require that assignments or participations of any lender's rights and obligations thereunder be made concurrent with a like assignment or participation of such lender's rights and obligations hereunder. -86- ARTICLE 10B SPECIAL INTER-BORROWER PROVISIONS 10B.1 CERTAIN BORROWER ACKNOWLEDGEMENTS. (a) Each Borrower acknowledges that it will enjoy significant benefits from the business conducted by the other Borrowers because of, inter alia, their combined ability to bargain with other Persons including without limitation their ability to receive the credit facilities on favorable terms granted by this Agreement and other Loan Documents which would not have been available to an individual Borrower acting alone. Each Borrower has determined that it is in its best interest to procure credit facilities which each Borrower may utilize directly and which receive the credit support of the other Borrowers as contemplated by this Agreement and the other Loan Documents. (b) The Lenders have advised the Borrowers that they are unwilling to enter into this Agreement and the other Loan Documents and make available the credit facilities extended hereby to any Borrower unless each Borrower agrees, among other things, to be jointly and severally liable for the due and proper payment of the obligations of each other Borrower under this Agreement and other Loan Documents. Each Borrower has determined that it is in its best interest and in pursuit of its purposes that it so induce the Lenders to extend credit pursuant to this Agreement and the other documents executed in connection herewith (i) because of the desirability to each Borrower of the credit facilities, the interest rates and the modes of borrowing available hereunder, (ii) because each Borrower may engage in transactions jointly with other Borrowers and (iii) because each Borrower may require, from time to time, access to funds under this Agreement for the purposes herein set forth. (c) Each Borrower has determined that it has and, after giving effect to the transactions contemplated by this Agreement and the other Loan Documents (including, without limitation, the inter-Borrower arrangement set forth in this Article 10(B) will have, assets having a fair saleable value in excess of the amount required to pay its probable liability on its existing debts as they fall due for payment and that the sum of its debts is not and will not then be greater than all of its property at a fair valuation, that such Borrower has, and will have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection therewith as such debts mature and that the value of the benefits to be derived by such Borrower from the access to funds under this Agreement (including, without limitation, the inter-Borrower arrangement set forth in this Section 10B) is reasonably equivalent to the obligations undertaken pursuant hereto. 10B.2 CERTAIN INTER-BORROWER AGREEMENTS. (a) Subject to paragraph (b) below, each Borrower as indemnitor shall indemnify the other Borrowers as indemnitees for all Loan Obligations incurred by the indemnitee Borrowers for Loans advanced to, or Letters of Credit issued for the account of, the indemnitor Borrower. -87- (b) The rights and obligations of the Borrowers pursuant to paragraph (a) above shall be subordinated in all respects to the rights of the Administrative Agent and the other Lender Parties with respect to the Loan Obligations and, accordingly, each Borrower agrees that it shall not make any payment or receive any payment pursuant to the preceding paragraph (a) at any time a Default has occurred and is continuing or would be caused thereby. Each Borrower agrees that in the event it receives any payment described by or in violation of this paragraph (b), it shall accept such payment as agent of the Administrative Agent, for the benefit of the Lender Parties, and hold the same in trust on behalf of and for the benefit of the Administrative Agent, for the benefit of the Lender Parties. 10B.3 RECORDS. Multicare (on behalf of each Borrower) shall maintain records specifying (a) all Loan Obligations incurred by each Borrower, (b) the date of such incurrence, (c) the date and amount of any payments made in respect of such Loan Obligations and (d) all inter-Borrower obligations pursuant to paragraph 10B.2 above. Multicare shall make copies of such records available to the Administrative Agent, upon request. -88- ARTICLE 11 DEFINITIONS; CONSTRUCTION 11.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the following meanings, (terms defined in the singular to have a correlative meaning when used in the plural) unless the context hereof otherwise clearly requires: "Accumulated Funding Deficiency" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Acquisition" means any acquisition by one or more of the Borrowers, directly or indirectly, whether in one transaction or in a series of related transactions (and whether by merger, consolidation, acquisition of assets or otherwise) of all or any substantial portion of the ownership interests in or assets of any separate business enterprise. "Acquisition Corp." means Genesis Eldercare Acquisition Corp., a Delaware corporation. "Acquisition Cost" means, with respect to any Acquisition, the value in Dollars of the total consideration paid or payable (whether immediate or deferred and whether in cash, equity or other assets) by any of the Borrowers (such consideration including the amount of any Assumed Indebtedness) for or in respect of the ownership interests or assets being acquired in such Acquisition. "Adjusted Senior Debt/Cash Flow Ratio" means as of any date of determination: (a) Adjusted Senior Debt as of such date of determination divided by (b) Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, such date of determination. "Adjusted Senior Debt" means, as of any date of determination, the result of: (a) Adjusted Total Indebtedness, as of such date of determination less (b) the sum of (i) Indebtedness which is evidenced by the 1997 Subordinated Notes, and (ii) any other Indebtedness which is both permitted under the terms of this Agreement and expressly subordinated in right of payment to all Loan Obligations under terms satisfactory to the Administrative Agent. -89- "Adjusted Total Debt/Cash Flow Ratio" means, as of any date of determination, the ratio of: (a) Adjusted Total Indebtedness as of such date of determination divided by (b) Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ended on, or most recently prior to, such date of determination. "Adjusted Total Indebtedness" means, as of any date of determination, the sum of: (a) Total Funded Indebtedness as of such date of determination plus (b) the product of (i) the amount of Rental Expense of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ended on, or most recently prior to, such date of determination multiplied by (ii) eight (8). "Administrative Agent" has the meaning ascribed to such term in the preamble of this Agreement. "Affiliate" of a Person means (a) any other Person which directly or indirectly controls, or is controlled by, or is under common control with, such Person, (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of such Person or of a Person who is an Affiliate of such Person, and (c) any individual related to such Person or Affiliate by consanguinity or adoption within the third degree. For purposes of the preceding sentence, "control" of a Person means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise and (b) in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 5% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person that is not a corporation, 5% or more of any class of equity interest). Excluded Subsidiaries may be "Affiliates" of Multicare. "Agents" means collectively the Administrative Agent, Citicorp USA, Inc., and NationsBank, N.A., each as a Syndication Agent, and First Union National Bank, as Documentation Agent. "Agreement" means this Credit Agreement as the same may be amended, modified, restated or supplemented from time to time in accordance with its terms. "Agreement Date" means the date first-above written. -90- "Amount of Unfunded Benefit Liabilities" has the meaning given to such term in ss.4001(a)(18) of ERISA. "Applicable Margin" means a marginal rate of interest which is added to the LIBO Rate or Prime Rate, as the case may be, to determine the effective rate of interest on Loans and other payments as specified in the Loan Documents. Until the Officer's Compliance Certificate for the fiscal year ended December 31, 1997 is delivered to the Administrative Agent and Lenders pursuant to Section 6.1 above, the Applicable Margin (a) for LIBO Rate Loans shall be the following: 2.5% for any RC Loans or Tranche A Term Loans; 2.75% for any Tranche B Term Loans; and 3.0% for any Tranche C Term Loan, and (b) for Prime Rate Loans shall be .75% for RC Loans and Tranche A Loans, shall be 1.0% for Tranche B Loans and shall be 1.25% for Tranche C Loans. Thereafter, the Applicable Margin shall be determined in the following manner: (a) For any RC Loans or Tranche A Term Loans, the Applicable Margin shall be the percentage amount set forth below under the caption "Applicable Margin for RC Loans and Tranche A Term Loans" opposite the relevant Adjusted Total Debt/Cash Flow Ratio: Adjusted Total Applicable Margin for RC Loans Debt/Cash Flow Ratio and Tranche A Term Loans -------------------- ------------------------------ Prime Rate Loans LIBO Rate Loans ---------------- --------------- below 3.0 0 .75% >= 3.0 < 3.5 0 1.00% >= 3.5 < 4.0 0 1.25% >= 4.0 < 4.5 0 1.50% >= 4.5 < 5.0 0 1.75% >= 5.0 < 5.5 .25% 2.00% >= 5.5 < 6.0 .50% 2.25% >= 6.0 .75% 2.50% (b) For any Tranche B Term Loans, the Applicable Margin for LIBO Rate Loans shall be 2.75%, provided, however, that any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0, the Applicable Margin for Tranche B Term Loans shall be 2.5%. The Applicable Margin for Tranche B Term Loans which are Prime Rate Loans shall be 1.0% provided, however, that at any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0 the Applicable Margin for Tranche B Loans which are Prime Rate Loans shall be .75%. (c) For any Tranche C Term Loans, the Applicable Margin for LIBO Rate Loans shall be 3.0%, provided, however, that any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0, the Applicable Margin for Tranche C Term Loans shall be 2.75%. The Applicable Margin for Tranche C Term Loans which are Prime Rate Loans shall be 1.25% provided, however, that at any time that the Adjusted Total Debt/Cash Flow Ratio is less than 4.5 to 1.0 the Applicable Margin for Tranche C Loans which are Prime Rate Loans shall be 1.00%. (d) The Applicable Margin for Swing Loans at all times shall be zero. -91- The Applicable Margin shall be adjusted five Business Days after receipt of the annual or quarterly Officer's Compliance Certificate, delivered pursuant to Section 6.1. At any time that such annual or quarterly Officer's Compliance Certificate is required to be delivered pursuant to said Section 6.1 and is not so delivered, then the Applicable Margin shall be the highest rate specified for the subject Tranche or Loan until the Officer's Compliance Certificate is so delivered. "Assignment and Acceptance" shall have the meaning ascribed to such term in Section 12.9. "Assumed Indebtedness" means Indebtedness incurred by a Person which is not a Borrower and which (a) is existing at the time such Person (or assets of such Person) is acquired by a Borrower and (b) is assumed by a Borrower in connection with such Acquisition, other than Indebtedness incurred by the original obligor in connection with, or in contemplation of, such Acquisition. "Available RC Commitment" means, as of any date, the difference between (a) and (b) where (a) is the amount of the RC Commitment on such date and (b) is the sum of (i) the aggregate outstanding principal amount of all RC Loans on such date, (ii) the face amount of all outstanding Letters of Credit on such date, (iii) the aggregate unpaid amount of all Drawings under Letters of Credit as of such date, (iv) the aggregate outstanding principal amount of all Swing Loans on such date, (v) the maximum amount necessary to redeem by March 16, 1998, all shares of stock issuable on conversion of Multicare's Convertible Subordinated 7% Debentures outstanding on the date of determination of "Available RC Commitment," and (vi) the maximum amount (including principal, interest, premiums and fees, if any) necessary to repay by January 2, 1998, all of Multicare's Senior Subordinated 12-1/2% Notes outstanding on the date of determination of "Available RC Commitment." For purposes of clauses (v) and (vi) the phrase "outstanding on the date of determination of "Available RC Commitment" shall initially be determined with reference to the Officers Certificate delivered by Multicare pursuant to Section 4.1(l) hereof and thereafter shall be determined with reference to updated Officer's Certificates (in the form and with the same level of detail as the Officer's Certificate delivered pursuant to Section 4.1(l) above) which Multicare may deliver to the Administrative Agent from time to time, provided that Multicare shall deliver not more than four (4) such updated Officer's Certificates hereunder. "Bank Tax" means (i) any Tax based on or measured by net income of a Lender Party, any franchise Tax and any doing business Tax imposed upon any Lender Party by any jurisdiction (or any political subdivision thereof) in which such Lender Party or any lending office of a Lender Party is located and (ii) for the purposes of Section 1.13, any other Tax imposed by a jurisdiction other than the United States or a political subdivision thereof that would not have been imposed but for a present or former connection between such Lender Party or lending office (as the case may be) and such jurisdiction. "Borrowers" has the meaning ascribed to such term in the preamble hereto. It is the intent of the parties (and a covenant of the Borrowers herein) that each Person which is now or hereafter becomes a direct or indirect Subsidiary of Multicare, other than Excluded Subsidiaries, shall at all times after becoming a Subsidiary of Multicare be a "Borrower" pursuant to the terms of this Agreement. -92- "Business Day" means any day other than a Saturday, Sunday, public holiday under the laws of the Commonwealth of Pennsylvania, the State of New York or other day on which banking institutions are authorized or obligated to close in the city in which the Administrative Agent's Domestic Lending Office is located or, as applicable, in the city in which the Issuer's Domestic Lending Office is located, provided, however, that whether or not expressly stated in this Agreement or other Loan Documents, when "Business Day" is used with respect to any LIBO Rate Loan, such Business Day must also be a Eurodollar Business Day. "Capital Expenditures", with respect to any Person, means, for any period, all expenditures (whether paid in cash or accrued as liabilities) of such Person during such period which are, or should be, classified as capital expenditures in accordance with GAAP. "Capitalized Lease" means at any time any lease which is, or should be, capitalized on the balance sheet of the lessee at such time in accordance with GAAP. "Capitalized Lease Obligation" of any Person at any time means the aggregate amount which is, or should be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease in accordance with GAAP. "Cash Equivalent Investments" means any of the following: (i) full faith and credit obligations of the United States of America, or fully guaranteed as to interest and principal by the full faith and credit of the United States of America, maturing in not more than one year from the date such investment is made; (ii) time deposits and certificates of deposit having a final maturity of not more than one year after the date of issuance thereof of any commercial bank incorporated under the laws of the United States of America or any state thereof or the District of Columbia, which bank is a member of the Federal Reserve System and has a combined capital and surplus of not less than $1,000,000,000.00 and with a senior unsecured debt credit rating of at least "A" by Moody's Investors Service, Inc. or "A" by Standard & Poor's Ratings Services; (iii) commercial paper of companies, banks, trust companies or national banking associations (in each case excluding Multicare and its Affiliates) incorporated or doing business under the laws of the United States or one of the States thereof, in each case having a remaining term until maturity of not more than 180 days from the date such investment is made and rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by Standard & Poor's Ratings Services; and (iv) repurchase agreements with any financial institution having combined capital and surplus of not less than $1,000,000,000.00 with a term of not more than seven days for underlying securities of the type referred to in clause (i) above. "Cash Flow", with respect to any Person, for any period, means (a) Net Income of such Person plus (b) each of the following to the extent deducted in determining Net Income: (i) Interest Expense, (ii) Rental Expense, (iii) depreciation expense, (iv) amortization expense and, (v) income taxes, all as adjusted for changes in accrued management fees under the Multicare Management Agreement, in each case for such period. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. -93- "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than a Permitted Holder (as hereinafter defined), in a single transaction or through a series of related transactions, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended except that a Person shall be deemed a "beneficial owner" of all securities that such Person has a right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than, on a fully diluted basis, 35% of the total Voting Stock of the Surety (and all rights and options to purchase such Voting Stock) if such "beneficial ownership" is greater than the amount of voting power of the Voting Stock of the Surety (and all rights and options to purchase such Voting Stock) held by Genesis and its Affiliates on such date; (b) TPG, Cypress, Nazem and Genesis, collectively, shall cease to own beneficially and of record at least 51% of the shares of each class of capital stock of Surety (and all rights and options to purchase such shares of capital stock) subject to no Liens; (c) if Surety at any time fails to own beneficially and of record 100% of the capital stock of Multicare (and all rights and option to purchase such shares of capital stock); (d) if Multicare at any time fails to own beneficially and of record 100% of the capital stock of all the Borrowers (subject to any permitted disposition pursuant to Section 8.5 hereof); (e) if Surety, Multicare or any other Loan Party consolidates or merges with or into another corporation or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates or merges with or into Surety, Multicare or any other Loan Party, in any such event pursuant to a transaction in which the outstanding Voting Stock of Surety, Multicare or any other Loan Party is changed into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of Surety, Multicare or any other Loan Party is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock (as hereinafter defined) or (y) cash, securities or other property in an amount which such party would not be prohibited, under the 1995 Subordinated Note Indenture, or the 1996 Subordinated Note Indenture, to the extent either is applicable as set forth in Section 5.1(w), or the 1997 Subordinated Note Indenture if then in effect from paying as a "restricted payment" (as defined in such indentures), and (ii) the -94- holders of the Voting Stock of Surety, Multicare or any other Loan Party, as the case may be, immediately prior to such transaction own, directly or indirectly, not less than 50% of the Voting Stock of the surviving corporation immediately after such transaction; (f) if during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Surety, Multicare or any other Loan Party (together with any new directors whose election by any such Board of Directors or whose nomination for election by the stockholders of such company was approved by a vote of at least 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office except in the case of a change in the composition of the Board of Directors of Multicare, approved by Genesis in connection with its acquisition of the common stock of Surety held by Cypress, Nazem and TPG); or (g) Surety, Multicare or any other Loan Party is liquidated or dissolved or adopts a plan of liquidation. For purposes of this definition of "Change of Control," (A) "Voting Stock" shall mean stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency); (B) "Redeemable Capital Stock" of a Person shall mean any capital stock or equity interests that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any stated maturity of the principal of the 1995 Subordinated Notes, or the 1996 Subordinated Notes, the extent either is applicable as set forth in Section 5.1(w), or the 1997 Subordinated Notes or is redeemable at the option of the holder thereof at any time prior to any such stated maturity, or is convertible into or exchangeable for debt securities at any time prior to any such stated maturity at the option of the holder thereof; (C) "Board of Directors" of a company shall mean the board of directors of such company or the executive committee of such company; and (D) "Permitted Holder" shall mean (i) Genesis, Cypress and TPG, in the case of Surety, (ii) Surety in the case of Multicare, and (iii) Multicare in the case of its Subsidiaries. "Closing Date" means the date that the initial Loans are made hereunder. "COBRA Violation" means any violation of the "continuation coverage requirements" of "group health plans" of former ss.162(k) of the Code (as in effect for tax years beginning on or before December 31, 1988) and of ss.4980B of the Code (as in effect for tax years beginning on or after January 1, 1989) and Part 6 of Subtitle B of Title I of ERISA. -95- "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time, and the Treasury regulations thereunder. "Collateral" means (a) the cash collateral account, if any, in respect of Letters of Credit from time to time and (b) the collateral subject to, or purported to be subject to, the Liens of the Pledge Agreement, from time to time. "Commitment" means, with respect to any Lender, the obligation of such Lender to make Loans pursuant to the terms of this Agreement and, with respect to the Issuer, to issue Letters of Credit. "Commitment" means, with respect to all Lender Parties, the sum of each Lender Party's Commitment. "Contingent Reimbursement Obligation" means the contingent obligation of the Borrowers to reimburse the Issuer for any Drawings that may be made under an outstanding Letter of Credit, whenever issued. Without limiting the generality of the foregoing, the amount of all Contingent Reimbursement Obligations at any time shall be the aggregate amount available to be drawn under outstanding Letters of Credit at such time. "Controlled Group" means a group of employers, of which any Borrower is a member and which group constitutes: (a) A controlled group of corporations (as defined inss.414(b) of the Code); (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in ss.414(c) of the Code); (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in ss.414(m) of the Code); or (d) Any other entity required to be aggregated with any Borrower pursuant to ss.414(o) of the Code. "Cypress" means The Cypress Group L.L.C., a Delaware limited liability company and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "Cypress" shall include Cypress Associates L.P., Cypress Offshore Partners L.P., Cypress Merchant Banking Partners L.P., and Cypress Advisors Inc. "Default" means any event or condition which with notice, passage of time or both, would constitute an Event of Default. "Default Rate" means, with respect to any amounts payable hereunder or under the other Loan Documents, a rate equal to the sum of (a) two percent (2%) per annum plus (b) the interest rate otherwise in effect with respect to such amounts or, if no such rate is otherwise in effect with respect to such amounts, a rate equal to the sum of (i) the Prime Rate plus (ii) the highest Applicable Margin thereon plus (iii) two percent (2%). -96- "Defined Benefit Pension Plan" means a defined benefit plan (other than a Multiemployer Plan) as defined in ss.3(35) of ERISA which is maintained by any Borrower or any member of its Controlled Group. "Defined Contribution Plan" means an individual account plan (other than a Multiemployer Plan) as defined in ss.3(34) of ERISA which is maintained by any Borrower or any member of its Controlled Group. "Dollar," "Dollars" and the symbol "$" means lawful money of the United States of America. "Domestic Lending Office" means, with respect to any Lender or the Issuer (i) the branch or office of such Lender or the Issuer, as the case may be designated, from time to time, by such Person in a notice to the Administrative Agent and Multicare. "Drawing" means (a) any amount disbursed by the Issuer pursuant to the terms of a Letter of Credit or (b) as the context may require, the obligation of the Borrowers to reimburse the Issuer for such disbursement. "EBITDA" means Net Income before Interest Expense, provision for income taxes, depreciation and amortization, as adjusted on a pro forma basis for the transactions contemplated by the Multicare Management Agreement. "Eligible Institution" means (i) a Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $1,000,000,000.00; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $1,000,000,000.00; (v) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow or under the laws of a political subdivision of any such country, and having a combined capital and surplus of at least $1,000,000,000.00, so long as such bank is acting through a branch or agency located in the United States; and (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having a combined capital and surplus or total assets of at least $500,000,000.00 and (vii) with respect to any Lender that is a fund, any other fund with assets in excess of $100,000,000.00 that invests in bank loans and is managed by the same investment advisor as such Lender; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Institution under this definition. "Environmental Affiliate" means, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" means any approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or -97- filing, recording or registration with, any Governmental Authority pursuant to or required under any Environmental Law. "Environmental Claim" means, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Environmental Concern Materials at any location, whether or not owned by such Person. "Environmental Cleanup Site" means any location which is listed or proposed for listing on the National Priorities List (as established under CERCLA), on CERCLIS or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding or investigation related to or arising from any alleged violation of any Environmental Law. "Environmental Concern Materials" means (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product of any substance specified in or regulated or otherwise affected by any Environmental Law (including but not limited to any "hazardous substance" as defined in CERCLA or any similar state Law), (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polychlorinated biphenyls, radon and urea formaldehyde. "Environmental Law" means any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the manufacture, use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder. "Eurodollar Business Day" means any Business Day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks are open for domestic and international business (include dealings in Dollar deposits) in London, England. -98- "Eurodollar Lending Office" means, with respect to any Lender or the Issuer, the branch or office of such Lender or the Issuer, as the case may be, designated by such Person in a notice to the Administrative Agent and Multicare. "Event of Default" means any of the Events of Default described in Section 9.1 hereof. "Excess Cash Flow" means, for any fiscal year of the Borrowers, the amount, if any, by which Net Cash Provided by Operations for such fiscal year exceeds the sum of (a) the aggregate principal amount of Total Funded Indebtedness incurred consistently with the terms of this Agreement and scheduled to have been repaid or prepaid during such fiscal year, plus (b) the amount of any Investments made pursuant to Section 8.3(i). "Excluded Subsidiaries" means, subject to Section 6.10(b), the entities listed on Schedule 11.1 attached hereto and, after the Closing Date, each Subsidiary of any Excluded Subsidiary. "Federal Funds Rate" for any day means the rate per annum determined by the Administrative Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by federal funds brokers on the previous trading day, or, if such Federal Reserve Bank does not announce such rate on any day, the rate for the last day on which such rate was announced. "Fixed Charge Coverage Ratio" means, as of any date of determination, the result of: (a) Cash Flow of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to, such date of determination divided by (b) the sum of (i) Interest Expense, income taxes and Rental Expense of Multicare and its Restricted Subsidiaries, on a consolidated basis, for the four fiscal quarters ending on, or most recently prior to such date of determination and (ii) principal payments scheduled or required to be made on Total Funded Indebtedness for the four fiscal quarters ending on, or most recently prior to, such date of determination. "GAAP" has the meaning set forth in Section 11.3 hereof. "Genesis" has the meaning ascribed to such term in Section 4.1 hereof. "Genesis Credit Agreement" has the meaning ascribed to such term in Section 4.1 hereof. -99- "Genesis Group" means Genesis and its Subsidiaries other than the Multicare Group. "Governmental Authority" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guaranty" means, with respect to any Person (a "Guarantor"), any contractual or other obligation, contingent or otherwise, of such Person to pay any Indebtedness or other obligation of any other Person or to otherwise protect the holder of any such Indebtedness or other obligation against loss (whether such obligation arises by agreement to pay, to keep well, to purchase assets, goods, securities or services or otherwise) provided, however, that the term "Guaranty" shall not include an endorsement for collection or deposit in the ordinary course of business. The term, "Guaranty," when used as a verb has the correlative meaning. "Health Care Business" means any healthcare related business including any facility, unit, operation, or business supplying health care services, supplies or products, including long-term care, rehabilitation therapy, specialized health care, health care management and pharmacies. "Indebtedness" of any Person means (without duplication): (a) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person for the deferred purchase price of property or services; (d) all obligations secured by a Lien on property owned by such Person (whether or not assumed) provided, however, for purposes of determining the amount of such Indebtedness under this clause (d), the amount of any such non-recourse Indebtedness shall be limited to the lesser of (i) the fair market value of the asset subject to such Lien and (ii) the amount of such Indebtedness; (e) all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (f) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; -100- (g) all obligations of such Person with respect to acceptances or similar obligations issued for the account of such Person; (h) all obligations of such Person under a product financing or similar arrangement described in paragraph 8 of FASB Statement of Accounting Standards No. 49 or any similar requirement of GAAP; (i) all obligations of such Person under any Interest Rate Hedging Agreement or any currency protection agreement, currency future, option or swap or other currency hedge agreement; (j) all Guaranties of such Person; and (k) all obligations of such Person under, or in respect of, any Synthetic Leases. Indebtedness shall not include accounts payable to trade creditors arising out of purchases of goods or services in the ordinary course of business, provided that (i) such accounts payable are payable on usual and customary trade terms, and (ii) such accounts payable are not overdue by more than 60 days according to the original terms of sale except (if no foreclosure, distraint, levy, sale or similar proceeding shall have been commenced) where such payments are being contested in good faith by appropriate proceedings diligently conducted and subject to such reserves or other appropriate provisions as may be required by GAAP. "Indemnified Parties" means, collectively, the Lender Parties and their respective Affiliates and (without duplication) the directors, trustees, officers, employees, attorneys and agents of each of the foregoing. "Interest Expense" means, for any Person, for any period, the sum (without duplication) of (a) all interest accrued (or accreted) on Indebtedness of such Person during such period whether or not actually paid (excluding any obligations under any Synthetic Leases) plus (b) the net amount accrued under any Interest Rate Hedging Agreements (or less the net amount receivable thereunder) during such period. "Interest Period" means with respect to any LIBO Rate Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, and ending one, two, three or six months thereafter as selected by the Borrowers pursuant to Section 1.8 above and (b) thereafter, each period commencing on the day after the last day of the preceding Interest Period and ending one, two, three or six months thereafter, as selected by the Borrower pursuant to Section 1.8 above provided, however, if any such Interest Period would otherwise end on a day which is not a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day and provided, further, if any such Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period (as may be the case with an Interest Period commencing at the end of a calendar month) the Interest Period shall end on the last Eurodollar Business Day of the relevant calendar month. -101- "Interest Rate Hedging Agreement" means any rate swap, cap or collar agreement with a term of at least three years or such shorter term as may be acceptable to the Administrative Agent to which any or all of the Borrowers are party and which is on terms and conditions satisfactory to the Administrative Agent. "Investments" has the meaning set forth in Section 8.3 hereof. "Issuer" has the meaning ascribed to such term in the preamble hereto. "JCAHO" means Joint Commission on Accreditation of Healthcare Organizations. "Joinder Effective Date" means the date that any Joining Subsidiary becomes a Borrower hereunder pursuant to Section 6.10. "Joinder Supplement" has the meaning set forth in Schedule 6.10 hereto. "Joining Subsidiary" has the meaning set forth in Section 6.10 hereof. "Law" means any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lender" has the meaning ascribed to such term in the preamble hereto and shall include the Swing Loan Lender. "Lender Parties" means, collectively, the Lenders, the Issuer and the Agents. "Letter of Credit" means any letter of credit issued by the Issuer pursuant to Article 3 hereof. "Letter of Credit Participation" means, with respect to any RC Lender, the participation interest of such Lender in any Letter of Credit acquired pursuant to Article 3 above. The amount of the Letter of Credit Participation of an RC Lender in any Letter of Credit shall be deemed to be the amount equal to such RC Lender's pro rata share (determined on the basis of the RC Commitments at such time) of the sum of (a) the aggregate unpaid amount of all Drawings thereunder at such time and (b) the amount of any Contingent Reimbursement Obligations with respect thereto at such time. "LIBO Rate" means the rate per annum determined by the Administrative Agent by dividing (the resulting quotient to be rounded upward to the nearest 1/100 of 1%) (a) the rate of interest (which shall be the same for each day in such Interest Period) determined in good faith by the Administrative Agent (which determination shall be conclusive) to be the average of the rates per annum for deposits in Dollars offered to major money center banks in the London interbank market at approximately 11:00 a.m., London time, two Eurodollar Business Days prior to the first day of the applicable Interest Period for delivery on the first day of such Interest Period in similar amounts and maturities as the proposed LIBO Rate Loan by (b) a number equal to 1.0 minus the Reserve Percentage. "Reserve Percentage" for any day means the percentage (expressed as a decimal, rounded -102- upward to the nearest 1/100 of 1%), as determined in good faith by the Administrative Agent (which determination shall be conclusive), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System representing the maximum reserve requirement (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a member bank in such System. The LIBO Rate shall be adjusted automatically as of the effective date of each change in the Reserve Percentage. "LIBO Rate Loan" means a Loan bearing interest at the per annum rate of the LIBO Rate plus Applicable Margin. "Licenses" means any and all licenses, including provisional licenses, certificates of need, JCAHO and/or other accreditations, permits, franchises, rights to conduct business, approvals by a Governmental Authority or otherwise, consents, qualifications, operating authority, and/or any other authorizations. "Lien" means any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Limitation" means a revocation, suspension, termination, impairment, probation, limitation, non-renewal, forfeiture, declaration of ineligibility, loss of status as a participating provider in a Third Party Payor Arrangement and/or loss of any other rights. "Loans" means collectively, the Swing Loans, the Tranche A Term Loans, the Tranche B Term Loans, the Tranche C Term Loans and the RC Loans. "Loan" means any of the Loans. "Loan Documents" means this Agreement, the Notes, the Suretyship Agreement, Letters of Credit, the Pledge Agreement, each Joinder Supplement and all other agreements and instruments executed in connection herewith or therewith, in each case as the same may be amended, modified or supplemented from time to time. "Loan Obligations" means all obligations, from time to time, of any Loan Party to any Lender Party or other Indemnified Party under, or arising out of, this Agreement or any Loan Document whether such obligations are direct or indirect, absolute or contingent, due or to become due, now or hereafter arising, (specifically including obligations arising or accruing after the commencement of any bankruptcy, insolvency, or similar proceeding with respect to any Loan Party, or which would have accrued but for the commencement of such proceeding even if the claim is not allowed in such proceeding under applicable law). "Loan Parties" means the Borrowers, the Surety and any other Person who from time to time grants or purports to grant to the Administrative Agent a Lien on any property pursuant to the Pledge Agreement or is a Guarantor of any Loan Obligations. "Management Agreement" means any agreement pursuant to which a Person (or group of Persons) manages the business of another Person (or group of Persons). -103- "Material Adverse Effect" means (a) a material adverse effect on the business, operations, condition (financial or otherwise), properties or prospects of Multicare or of the Borrowers, taken as a whole, or (b) an adverse effect on the legality, validity, binding effect or enforceability of any Loan Document, or the ability of the Administrative Agent or any Lender Party to enforce any rights or remedies under or in connection with any Loan Document. Without limiting the generality of the foregoing, as used in connection with any provisions respecting the ownership or operation of any Health Care Business, Material Adverse Effect may include, among other things, any loss or suspension of a License or Reimbursement Approval for any material nursing home or other material Health Care Business or material group of nursing homes or other material group of Health Care Businesses of the Borrowers, or any event, occurrence or matter or series thereof giving rise to a reasonable probability of any of the foregoing consequences. "Maturity Date" means the latest of the RC Maturity Date, the Tranche A Maturity Date, the Tranche B Maturity Date or the Tranche C Maturity Date or, as the context may require, the applicable maturity date for a specified Tranche of a Loan. "Mellon" means Mellon Bank, N.A., a national banking association, and any successor or assign thereof. "Merger" means the merger of Acquisition Corp. into Multicare on the terms stated in the Merger Agreement without any change thereto or waiver of any provisions thereof not approved by the Required Lenders. "Merger Agreement" means the Agreement and Plan of Merger dated as of June 16, 1997, among Multicare, Surety and Acquisition Corp. "Multicare" has the meaning ascribed to such term in the preamble of this Agreement. "Multicare Group" has the meaning ascribed to such term in Section 6.1 hereof. "Multicare Management Agreement" has the meaning ascribed to such term in Section 4.1. "Multicare Management Subordination Agreement" means the Subordination Agreement among Genesis, Multicare and the Agents dated of even date herewith whereby Genesis has agreed to subordinate its rights to payments under the Multicare Management Agreement to the extent and on the terms and conditions as set forth in the Multicare Management Subordination Agreement, which such terms and conditions are subject to the Agents' approval. "Multiemployer Plan" means such term in ss.4001(a)(3) of ERISA. "Nazem" means Nazem, Inc., a Delaware corporation and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. -104- Without limiting the generality of the foregoing, "Nazem" includes Genesis ElderCare Portfolio K, L.P. "Net Cash Proceeds" means, with respect to any transaction involving a Borrower, the gross proceeds thereof in the form of cash or cash equivalents, net of the sum of the following (without duplication): (a) payments made to retire obligations (other than to a Borrower) that are attributable to or secured by the properties that are the subject of a sale, assignment or other disposition which is part of the transaction, (b) reasonable brokerage commissions and other reasonable fees and expenses (including reasonable fees and expenses of legal counsel and investment bankers) related to such transaction, and (c) all taxes actually paid or estimated in good faith to be or become payable as a result of such transaction. "Net Cash Provided by Operations" means for any period, the Net Income of the Borrowers on a consolidated basis for such period plus amortization and depreciation expense of the Borrowers for such period plus cash extraordinary gains (other than from a disposition) less Capital Expenditures of the Borrowers for such period (to the extent permitted by the terms of this Agreement), less increases in working capital (or plus decreases in working capital) of the Borrowers during such period. "Net Income" means, with respect to any Person, for any period the net earnings (or loss) after taxes of such Person for such period less extraordinary gains, plus extraordinary non-cash losses. "1995 Subordinated Note Indenture" means the Indenture dated as of June 15, 1995 between Genesis and Delaware Trust Company, as Trustee, relating to the 1995 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1995 Subordinated Notes" means Genesis' 9-3/4% Senior Subordinated Notes issued pursuant to the 1995 Subordinated Note Indenture in the original aggregate principal amount of $120,000,000.00. "1996 Subordinated Note Indenture" means the Indenture, dated as of October 7, 1996, between Genesis and First Union National Bank, as Trustee, relating to the 1996 Subordinated Notes, as such Indenture may be amended, modified, restated or supplemented from time to time in accordance with the terms of this Agreement. "1996 Subordinated Notes" means Genesis' 9 1/4% Senior Subordinated Notes issued pursuant to the 1996 Subordinated Note Indenture, in the original aggregate principal amount of $125,000,000.00. "1997 Subordinated Note Indenture" means the Indenture, dated as of August 11, 1997 between Acquisition Corp., PNC Bank, National Association as trustee, and Banque Internationale a Luxembourg, S.A. as paying agent, relating to the 1997 Subordinated Notes, as such Indenture may be amended, modified or supplemented from time to time in accordance with the terms of this Agreement. -105- "1997 Subordinated Notes" means Acquisition Corp.'s 9% Senior Subordinated Note issued pursuant to the 1997 Subordinated Note Indenture, in the original principal amount of $250,000,000.00. "Non-U.S. Lender" means any Lender that is not a United States Person. "Notes" means, collectively, the Swing Loan Note, the Tranche A Term Notes, and the RC Notes. A "Note" means any of the Notes. "Officer's Compliance Certificate" means a certificate, as of a specified date, of the chief financial officer or controller of Multicare in substantially the form of Exhibit G hereto as to each of the following: (a) the absence of any Event of Default or Default on such date, (b) the truth of the representations and warranties herein and in the other Loan Documents as of such date, and (c) compliance (or if required by the terms of this Agreement respecting the delivery of any such Officer's Compliance Certificate, pro forma compliance after taking account of such acquisitions, dispositions, indebtedness or other events as this Agreement shall direct for such pro forma compliance statement) with the financial covenants set forth in Article 7 and the financial limitations set forth in Sections 8.1(e), 8.2(e), 8.3(i), 8.4(b), 8.5(h), and 8.7(c). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a pension plan (as defined in ss.3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA or subject to ss.412 of the Code and maintained by any Borrower or any member of its Controlled Group. "Permitted Liens" has the meaning set forth in Section 8.2 above. "Person" means an individual, corporation, partnership, trust, unincorporated association, limited liability company, joint venture, joint-stock company, Governmental Authority or any other entity. "Plan" means an employee benefit plan (other than a Multiemployer Plan) as defined in ss.3(3) of ERISA which is either (1) maintained by any Borrower or any member of its Controlled Group, or (2) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which any Borrower or any member of its Controlled Group is then making or accruing an obligation to make contributions or has ever been obligated to make contributions. "Pledge Agreement" has the meaning ascribed to such term in Section 4.1 hereof. "Premises" has the meaning set forth in Section 12.12 hereof. "Prime Rate" means the greater of (A) the interest rate per annum announced from time to time by the Administrative Agent as its prime rate or (B) the Federal Funds Rate plus .50%. The Prime Rate may be greater or less than other interest rates charged by the Administrative Agent to other borrowers. -106- "Prime Rate Loan" means any Loan bearing interest at the Prime Rate plus the Applicable Margin. "Prohibited Transaction" has the meaning given to such term in ss.406 of ERISA or ss.4975(c) of the Code. "Qualifying Interest Rate Hedging Agreements" means such Interest Rate Hedging Agreements as may be entered into from time to time pursuant to Section 6.12 above between any or all of the Borrowers, on the one hand, and any Lender Party, on the other hand. "Quarterly Payment Date" means the last Business Day of each December, March, June and September. "RC Commitment" means, with respect to any RC Lender, (i) the amount set forth opposite such Lender's name under the heading "RC Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's RC Commitment assigned to such Lender, in either case as the same may be reduced from time to time pursuant to Section 1.7 above or increased or reduced from time to time pursuant to assignments in accordance with Section 12.9 below or (ii) as the context may require, the obligation of such Lender to make RC Loans in an aggregate unpaid principal amount not exceeding such amount; and "RC Commitment" means with respect to all RC Lenders, the sum of each RC Lender's RC Commitment. "RC Lender" means (i) any Lender with an "RC Commitment" designated on Schedule 1.1 hereto and (ii) any Person that is assigned any or all of the rights or obligations of an RC Lender with respect to its RC Commitment or RC Loans, from time to time, pursuant to Section 12.9. "RC Loans" has the meaning ascribed to such term in Section 1.1 of this Agreement. "RC Maturity Date" means September 30, 2003. "RC Note" means each promissory note of the Borrowers issued to an RC Lender relating to such Lender's RC Loans and RC Commitments substantially in the form of Exhibit A-1 hereto, together with any allonges thereto, from time to time, and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Register" has the meaning ascribed to such term in Section 10.8 hereof. "Registered Lender" has the meaning ascribed to such term in Section 1.14 hereof. "Registered Noteholder" has the meaning ascribed to such term in Section 1.14 hereof. -107- "Regulatory Change" means any applicable law, interpretation, directive, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that becomes effective or is implemented or first required or expected to be complied with after the Agreement Date (including any applicable law that shall have become such as the result of any act of omission of the Borrowers or any of their Affiliates, without regard to when such applicable law shall have been enacted or implemented), whether the same is (i) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority or otherwise or (ii) enacted, adopted, issued or proposed before or after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. "Reimbursement Approvals" means, with respect to all Third Party Payor Arrangements, any and all certifications, provider numbers, provider agreements, participation agreements, accreditations (including JCAHO accreditation) and/or any other agreements with or approvals by organizations and Governmental Authorities. "Rental Expense" means, with respect to any Person for any period, the aggregate rental obligations of such Person, payable in respect of any leases (including Synthetic Leases but excluding Capitalized Leases) during such period, but in any case including obligations for taxes, insurance, maintenance and similar costs which the lessee is obligated to pay under the terms of such leases and which are attributable to the leases for such period (whether such amounts are accrued or paid during such period). "Required Lenders" means, as of any date, Lenders otherwise eligible to vote pursuant to the terms of this Agreement holding, in the aggregate, at least 51% of the aggregate outstanding Loans, participations in Letters of Credit and available Commitments so eligible to vote. "Responsible Officer" of a Person means the President, the Secretary, the Chief Executive Officer, any Vice President, the Controller, the Treasurer or the Chief Financial Officer of such Person. "Restricted Subsidiaries" means all direct and indirect Subsidiaries of Multicare at any time, other than Excluded Subsidiaries. "Secured Parties" has the meaning ascribed to such term in the Pledge Agreement. "Subsidiary" of a Person at any time means: (a) any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; -108- (b) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; (c) any partnership, limited liability company, joint venture or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person; or (d) any entity which is consolidated with such Person for financial reporting purposes. "Surety" has the meaning ascribed to such term in Section 4.1 hereof. "Suretyship Agreement" has the meaning ascribed to such term in Section 4.1 hereof. "Swing Loan" means an amount advanced by the Swing Loan Lender pursuant to Section 1.1(c) hereof. "Swing Loan Lender" means Mellon, in its capacity as such. "Swing Loan Note" means the promissory note of the Borrowers issued to the Swing Loan Lender in substantially the form of Exhibit A-3 hereto, together with any allonges thereto from time to time and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or in part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Synthetic Lease" means any lease (other than a Capitalized Lease) wherein the lessee is treated (or purported to be treated) as the owner of the leased property for income tax purposes. "Tax" means any federal, state, local or foreign tax assessment or other governmental charge or levy (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "Tax Sharing Agreement" has the meaning ascribed to such term in Section 4.1 hereof. "Tender Offer" means Acquisition Corp.'s offer to purchase the outstanding common shares of Multicare as contained in its "Offer to Purchase for Cash All Outstanding Shares of Common Stock of Multicare Companies" dated June 20, 1997, as extended from time to time. -109- "Term Loans" means collectively the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans. "Third Party Claims" has the meaning set forth in Section 12.12 hereof. "Third Party Payor Arrangements" means any and all arrangements with Medicare, Medicaid, CHAMPUS, and any other Governmental Authority, or quasi-public agency, Blue Cross, Blue Shield, any and all managed care plans and organizations, including but not limited to HMOs and preferred provider organizations, private commercial insurance companies, employee assistance programs and/or any other third party arrangements, plans or programs for payment or reimbursement in connection with health care services, products or supplies. "Total Funded Indebtedness" means the aggregate amount of consolidated Indebtedness (including the current portion thereof), of Multicare and its Restricted Subsidiaries (including all Indebtedness consisting of Capitalized Lease Obligations, Synthetic Leases, Guaranties and letter of credit reimbursement obligations). "TPG" means TPG Partners II, L.P., a Delaware limited partnership and (a) any Subsidiary thereof and (b) any other Affiliate thereof reasonably acceptable to the Administrative Agent. Without limiting the generality of the foregoing, "TPG" includes TPG Parallel II, L.P., TPG Investors II, L.P. and TPG MC Coinvestment, L.P. "Tranche" means the designation of a Loan as an RC Loan, a Tranche A Term Loan, a Tranche B Term Loan or a Tranche C Term Loan and the designation of the related Commitment as an RC Commitment, a Tranche A Commitment, a Tranche B Commitment or a Tranche C Commitment as applicable. "Tranche A Commitment" means, (1) with respect to any Tranche A Lender, (a) at any time prior to the Closing Date, (i) the amount set forth opposite such Lender's name under the heading "Tranche A Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Tranche A Commitment assigned to such Lender, in either case as the same may be increased or reduced from time to time pursuant to assignments in accordance with Section 12.9 or (ii) as the context may require, the obligation of such Lender to make Tranche A Loans in an aggregate unpaid principal amount not exceeding such amount, and (b) thereafter, zero; and (2) with respect to all Tranche A Lenders, the sum of each Lender's Tranche A Commitment. "Tranche A Lender" means (a) any Lender with a "Tranche A Commitment" designated on Schedule 1.1 hereto and (b) any Person that is assigned any or all of the rights or obligations of a Tranche A Lender with respect to its Tranche A Commitment or Tranche A Term Loans, from time to time, pursuant to Section 12.9. "Tranche A Maturity Date" means September 30, 2003. "Tranche A Term Loan" has the meaning ascribed to that term in Section 1.1 of this Agreement. -110- "Tranche A Term Note" means each promissory note of the Borrowers issued to a Tranche A Lender relating to such Lender's Tranche A Loans and Tranche A Commitment substantially in the form of Exhibit A-2 hereto, together with any allonges thereto from time to time and any promissory note issued in substitution therefor pursuant to the terms hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part, in each case as the same may be amended, modified, restated or supplemented from time to time. "Tranche B Commitment" means, (1) with respect to any Tranche B Lender, (a) at any time prior to the Closing Date, (i) the amount set forth opposite such Lender's name under the heading "Tranche B Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Tranche B Commitment assigned to such Lender, in either case as the same may be increased or reduced from time to time pursuant to assignments in accordance with Section 12.9, or (ii) as the context may require, the obligation of such Lender to make Tranche B Term Loans in an aggregate unpaid principal amount not exceeding such amount, and (b) thereafter, zero; and (2) with respect to all Tranche B Lenders, the sum of each Lender's Tranche B Commitment. "Tranche B Lender" means (i) any Lender with a "Tranche B Commitment" designated on Schedule 1.1 hereto and (ii) any Person that is assigned any or all of the rights or obligations of a Tranche B Lender with respect to its Tranche B Commitment or Tranche B Term Loans, from time to time, pursuant to Section 12.9. "Tranche B Maturity Date" means September 30, 2004. "Tranche B Opt-Out Lender" has the meaning ascribed to such term in Section 1.5 hereof. "Tranche B Term Loan" has the meaning ascribed to that term in Section 1.1 of this Agreement. "Tranche C Commitment" means (1) with respect to any Tranche C Lender, (a) at any time on or prior to the Closing Date, (i) the amount set forth opposite such Lender's name under the heading "Tranche C Commitment" on Schedule 1.1 hereto or, in the case of a Lender that becomes a Lender pursuant to an assignment, the amount of the assignor's Tranche C Commitment assigned to such Lender, in either case as the same may be increased or reduced from time to time pursuant to assignments in accordance with Section 12.9, (ii) as the context may require, the obligation of such Lender to make Tranche C Term Loans in an aggregate unpaid principal amount not exceeding such amount, and (b) thereafter, zero; and (2) with respect to all Tranche C Lenders, the sum of each Lender's Tranche C Commitment. "Tranche C Lender" means (i) any Lender with a "Tranche C Commitment" designated on Schedule 1.1 hereto and (ii) any Person that is assigned any or all of the rights or obligations of a Tranche C Lender with respect to its Tranche C Commitment or Tranche C Term Loans, from time to time, pursuant to Section 12.9. "Tranche C Maturity Date" means June 1, 2005. -111- "Tranche C Opt-Out Lender" has the meaning ascribed to such term in Section 1.5 hereof. "Tranche C Term Loan" has the meaning ascribed to that term in Section 1.1 of this Agreement. "Transaction Documents" means each of the material documents as may exist on the date that the Tender Offer is consummated with such changes thereto as are permitted by the terms of this Agreement respecting (i) the Tender Offer, (ii) the proposed merger between the Acquisition Corp. and Multicare, (iii) the relationship between Genesis, Cypress, Nazem and TPG and the rights and obligations relating thereto and (iv) related matters including the Put/Call Agreement and the Stockholders Agreement respecting Surety, the Merger Agreement and the Multicare Management Agreement. "Type" means with respect to Loans, any of the following, each of which shall be deemed to be a different "Type" of Loan: Prime Rate Loans, LIBO Rate Loans having a one-month Interest Period commencing on a specified date, LIBO Rate Loans having a two-month Interest Period commencing on a specified date, LIBO Rate Loans having a three-month Interest Period and LIBO Rate Loans having a six-month Interest Period commencing on a specified date. "United States Person" has the meaning ascribed to such term in Section 1.13 hereof. "Withdrawal Liability" has the meaning given to such term in ss.4201 of ERISA. 11.2 CONSTRUCTION. In this Agreement and each other Loan Document, unless the context otherwise clearly requires, (a) references to the plural include the singular, the singular the plural and the part the whole; (b) "or" has the inclusive meaning represented by the phrase "and/or;" (c) the terms "property" and "assets" each include all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed, now existing or hereafter acquired; (d) the words "hereof," "herein" and "hereunder" (and similar terms) in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document; (e) the words "includes" and "including" (and similar terms) in this Agreement or any other Loan Document mean "includes, without limitation" and "including, without limitation," respectively whether or not stated; and -112- (f) references to "determination" (and similar terms) by any Lender Party include good faith estimates by such Lender Party (in the case of quantitative determinations) and good faith beliefs by such Lender Party (in the case of qualitative determinations). No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting thereof shall apply to this Agreement or any other Loan Document. The section and other headings contained in this Agreement and in each other Loan Document, and any tables of contents contained herein or therein, are for reference purposes only and shall not affect the construction or interpretation of this Agreement or such other Loan Document in any respect. Whenever this Agreement requires the delivery of financial projections, it is understood that the projections shall be made in good faith, consistent with the Loan Documents and based on Multicare's reasonable judgment as to the anticipated financial performance and results of operations. However, any such financial projections shall not constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. 11.3 ACCOUNTING PRINCIPLES. (a) As used herein, "GAAP" shall mean generally accepted accounting principles (other than as set forth herein as to consolidation) in the United States, applied on a basis consistent with the principles used in preparing the financial statements of Multicare and its consolidated Subsidiaries as of December 31, 1996 and for the fiscal year then ended. When the word "consolidated" is used in this Agreement, it shall be used in a manner consistent with generally accepted accounting principles in the United States except that such principles relating to what entities shall be consolidated shall be superseded by any terms of this Agreement which designate what entities shall be consolidated for purposes relating hereto. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. -113- ARTICLE 12 MISCELLANEOUS 12.1 NOTICES. Unless otherwise expressly provided under this Agreement all notices, requests, demands, directions and other communications (collectively "notices") given to or made upon any party under the provisions of this Agreement (and unless otherwise specified, in each other Loan Document) shall be by telephone (immediately confirmed in writing) or in writing (including facsimile communication) and if in writing shall be delivered by hand, nationally recognized overnight courier or U.S. mail or sent by facsimile to the respective parties at the addresses and numbers set forth under their respective names on the signature pages of this Agreement or in accordance with any subsequent unrevoked written direction from any party to the others. All notices shall, except as otherwise expressly provided in this Agreement, be effective (a) in the case of facsimile, when received, (b) in the case of hand-delivered notice, when hand delivered, (c) in the case of telephone, when telephoned, provided, however, that in order to be effective unless otherwise expressly provided, telephonic notices must be confirmed in writing no later than the next day by letter or facsimile, (d) if given by U.S. mail, the day after such communication is deposited in the mails with overnight first class postage prepaid, return receipt requested, and (e) if given by any other means (including by air courier), when delivered; provided, further, that notices to the Administrative Agent shall not be effective until received. Any Lender giving any notice to the Borrowers shall simultaneously send a copy of such notice to the Administrative Agent, and the Administrative Agent shall promptly notify the other Lenders of the receipt by it of any such notice. Except as otherwise provided in this Agreement, in the event of a discrepancy between any telephonic or written notice, the written notice shall control. 12.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein except as expressly provided otherwise (e.g., certain fee agreements and fee arrangements set forth in the commitment letter relating hereto). This Agreement and the other Loan Documents represent the entire agreement between the parties to this Agreement with respect to the transactions contemplated hereby or thereby and, except as expressly provided herein or in the other Loan Documents, shall not be affected by reference to any other documents. 12.3 SEVERABILITY. Every provision of this Agreement and each of the other Loan Documents is intended to be severable, and if any term or provision of this Agreement or any of the other Loan Documents shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, be deemed amended to modify or delete, as necessary, the offending provision or provisions and to alter -114- the bounds thereof in order to render it or them valid and enforceable to the maximum extent permitted by applicable Law, without in any manner affecting the validity or enforceability of such provision or provisions in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 12.4 DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not affect the meaning or construction of any of the provisions of this Agreement. 12.5 GOVERNING LAW. This Agreement and the rights and obligations of the parties under this Agreement and under the other Loan Documents shall be construed in accordance with and shall be governed by the laws of the Commonwealth of Pennsylvania. 12.6 NON-MERGER OF REMEDIES. The covenants and obligations of the Borrowers and the rights and remedies of the Administrative Agent and other Lender Parties hereunder and under the other Loan Documents shall not merge with or be extinguished by the entry of a judgment hereunder or thereunder, and such covenants, obligations, rights and remedies shall survive any entry of a judgment until payment in full of the Loan Obligations and termination of the Commitment. All obligations under the Loan Documents shall continue to apply with respect to and during the collection of amounts due under the Loan Documents or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms of this Agreement or of any rights under this Agreement or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings. Without limiting the generality of the foregoing, post-judgment interest rate shall be the interest rate provided in paragraph (d) of Section 1.8 (Default Rate) above. 12.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and no delay or failure of the Administrative Agent or any other Lender Party in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent and the other Lender Parties under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any other Lender Party would otherwise have hereunder or thereunder, at law, in equity or otherwise. Any waiver of a specific default made in accordance with Section 12.8 below shall be effective only as to such specific default and shall not apply to any subsequent default. -115- 12.8 AMENDMENTS; WAIVERS. Any term, covenant, agreement or condition of any Loan Document to which the Lenders (or the Administrative Agent) are party may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver is in writing and is signed by the Required Lenders (or by the Administrative Agent at the direction of the Required Lenders); provided, however, if the rights and duties of the Administrative Agent are affected thereby, such amendment or waiver must be executed by the Administrative Agent; and provided, further, that any amendment or waiver of the terms of Article 3 hereof or any other amendment or waiver that relates to Letters of Credit or rights or obligations relating thereto or the rights or obligations of the Issuer must also be executed by the Issuer; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by each Lender referred to below, if it would (a) increase such Lender's Commitment or the outstanding amount of such Lender's Loans or Letters of Credit Participations, or (b) extend the maturity of any Loan held by such Lender, or the time of any scheduled principal payment of any Loan of such Lender; (c) decrease the rate of interest or amount of fees due to such Lender or decrease the principal amount in respect of any Loan of such Lender or extend the time of payment of interest or fees due to such Lender, provided that the written consent of the Required Lenders, rather than the consent of all Lenders, shall be sufficient to waive imposition of the Default Rate, (d) reduce or waive any payment owing to such Lender in respect to any unreimbursed Drawings; or (e) change the number of Lenders which are required to consent to any proposed action under this Agreement before such action may be taken under this Agreement if such change could cause such Lender to lose its right to participate in such consent; and provided, further, that no such amendment or waiver shall be effective unless in writing and signed by all the Lenders if it would (i) amend the definition of "Required Lenders" or (ii) release any Borrower of its Obligations or release any guaranty or collateral security granted pursuant to the Loan Documents; provided, however, the Administrative Agent may, without the consent of any Person, release any Borrower, guarantor or collateral security granted pursuant to the Loan Documents, (A) as a court of competent jurisdiction may direct, or (B) in connection with a disposition permitted under Section 8.5 above (other than a disposition to another Borrower) or as may be otherwise provided under the Loan Documents and provided further that for purposes of determining whether" all Lenders", "the Required Lenders" or "any Lender" has consented to any amendment or waiver, no effect shall be given to the determination of any Lender who has lost its right to vote pursuant to Sections 1.3(c), 1.3(e)(ii), or 1.6(e). -116- Without limiting the generality of the foregoing, the Administrative Agent is authorized and directed to take such action as it deems necessary or desirable (including, without limitation, the execution and filing of UCC-3 termination statements or the giving of direction to another Person to do the same) to release any security interest referred to in the proviso to this clause (ii). Further, the Administrative Agent and the Lenders may amend or modify the provisions of Article 10 hereof (except for Section 10.9 (Successor Administrative Agent) and paragraph (b) of Section 10.12 (Other Agents) and Article 10A hereof) without the need for any consent or approval from the Borrowers, it being acknowledged that the Borrowers are not third party beneficiaries of the provisions of said Article 10 (except for Section 10.9 (Successor Administrative Agent) and paragraph (b) of Section 10.12 (Successor Agent)) and (y) without the consent of any Lenders, the Administrative Agent may enter into amendments and modifications to this Agreement and the other Loan Documents as necessary or desirable to cure any ambiguities herein or therein or to add additional Borrowers or add additional Collateral. Reference is made to Article 10A of the Genesis Credit Agreement which affects the right of the parties hereto to amend certain provisions set forth in Section 12.9 below without the consent of certain Lenders party thereto; accordingly, when amending Section 12.9 below, consideration shall be given to the provisions of said Section 10A of the Genesis Credit Agreement. 12.9 SUCCESSORS AND ASSIGNS (a) Assignments by the Borrowers. Without the prior written consent of all of the Lenders, no Borrower may assign any of its rights or delegate any of its duties or obligations under this Agreement or any other Loan Document. (b) Participations. Any Lender or the Issuer may sell participations to one or more Eligible Institutions of all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment); provided, however, that, with respect to any Lender, (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties to this Agreement for the performance of such obligations, (iii) all amounts payable by the Borrowers under this Agreement shall be determined as if such transferor Lender had not sold such participation and no participant shall be entitled to receive any greater amount pursuant to this Agreement than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred, (iv) such participant shall agree to be bound by the provisions of this Agreement and the other Loan Documents, (v) with respect to any sale of a participation in any Tranche hereunder, such Lender shall contemporaneously sell to the same participant a proportionately equal amount of its interest in the same Tranche under the Genesis Credit Agreement, and (vi) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such transferor Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole rights and responsibility vis-a-vis the Borrowers to enforce the obligations of the Borrowers relating to the Loans and Letters of Credit including the right to approve any amendment, modification or waiver of any provision of this Agreement (except that such Lender may give its participants the right to -117- direct such Lender to approve or disapprove any amendment, modification or waiver which would require such Lender's consent under clause (a) (b), (c), of the preceding Section 12.8). (c) Assignments by Lenders. Each Lender and the Issuer may assign to one or more Eligible Institutions all or a portion of its interest, rights and obligations under this Agreement (including all or a portion of its Commitment) and the other Loan Documents; provided, however, that with respect to any assignment, (i) unless the assignee is (prior to the effective time of the assignment) an existing Lender or the Issuer or an Affiliate of an existing Lender or the Issuer, the Administrative Agent and, if no Event of Default has occurred and is continuing, Multicare (on behalf of the Borrowers) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent and, unless an Event of Default has occurred and is continuing, Multicare (on behalf of the Borrowers), for their acceptance, an Assignment and Acceptance Agreement in substantially the form attached hereto as Exhibit H (an "Assignment and Acceptance"), together with (A) any Note subject to such assignment, and (B) a processing and recordation fee of $3,500.00, (or such lesser amount as is required for the Administrative Agent to receive an aggregate amount equal to $3,500.00 under this Agreement and the Genesis Credit Agreement in respect of such transfer), (iii) no Lender may make a partial assignment if the amount of its portion of the Commitment and (without duplication) the outstanding Loans and Letter of Credit Participations, together with the amount of its interest under the Genesis Credit Agreement assigned in accordance with clause (v) below, is, or after giving effect to the proposed assignment would be, less than Ten Million Dollars ($10,000,000.00), (iv) unless the assignee is (prior to the effective time of the assignment) the Issuer or a Lender hereunder, the aggregate amount of any interest so sold to any assignee pursuant to any partial assignment hereunder, together with the aggregate amount so sold to such assignee in accordance with clause (v) below, may not be less than Ten Million Dollars ($10,000,000.00), and (v) with respect to any assignment of an interest in any Tranche hereunder, the assignor shall contemporaneously assign to the same assignee a proportionately equal amount of its interest in the same Tranche under the Genesis Credit Agreement. The requirements set forth in paragraphs (iii) and (iv) above and the requirements as to an assignee being an Eligible Institution shall not apply to certain assignments approved by the Administrative Agent and Genesis (on behalf of the Borrowers) prior to the Agreement Date. "Partial assignment" as used in clauses (iii) and (iv) above means any assignment of a Lender's rights and obligations hereunder except an assignment of all of such Lender's rights and obligations such that after the assignment such Lender shall have no Commitment and no interest in any Loans or Letters of Credit hereunder. Upon compliance with clauses (i) through (v) above, from and after the effective date specified in the relevant Assignment and Acceptance, (1) the assignee shall be a party to this Agreement and the other Loan Documents and to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and under the other Loan Documents and (2) the assigning Lender shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents. -118- (d) Procedures Respecting Assignment. Upon their receipt of an Assignment and Acceptance executed by the assignor and the assignee, subject to the conditions set forth in the preceding paragraph (c), the Administrative Agent and (unless an Event of Default shall have occurred and be continuing) Multicare (on behalf of the Borrowers) shall accept such Assignment and Acceptance. If the subject assignment is of an interest in the Tranche A Commitment and Tranche A Term Loan and/or RC Commitment and RC Loans, within thirty (30) days after such Assignment and Acceptance is signed and accepted by all parties and made effective, the Borrowers, at their own expense, shall execute and deliver to the Administrative Agent new Notes in exchange for the surrendered Notes, each to the order of such assignee in an amount equal to its portion of the Commitment and Loans, assigned to it pursuant to such Assignment and Acceptance and new Notes to the order of the assigning Lender in an amount equal to the Commitment and Loans retained by it. Such Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the date of such surrendered Notes (each assignee shall confirm in the Assignment and Acceptance that, notwithstanding the date of the new Notes made in favor of such assignee, such assignee shall have no right to, or interest in, any fees or interest which shall have accrued on the Loans prior to the effective date of the Assignment and Acceptance). Cancelled or replaced Notes shall be returned to the Borrowers upon the execution of such new Notes. (e) Assignments to Federal Reserve Bank. Notwithstanding any of the terms of this Section 12.9, without the consent of the Administrative Agent and the Borrowers, (i) any Lender may assign all or any portion of its rights to payments in connection with this Agreement to a Federal Reserve Bank as collateral in accordance with Regulation A of the Board of Governors of the Federal Reserve System and (ii) in the case of any Lender that is a fund, any such Lender may collaterally assign or pledge any portion of its Loans (other than RC Loans) and its Notes (other than RC Notes) to its trustee (if such trustee is an Eligible Institution) in support of its obligations to such trustee, provided, however, that before any other transfer may be made to such trustee (whether as a result of such collateral assignment or pledge or otherwise) the conditions of paragraphs (c) and (d) above must be satisfied. Such assignment shall not affect any other rights or any obligations of the assigning Lender 12.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES. Any Loan Document may be executed in one or more counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument. Delivery of a photocopy or telecopy of an executed counterpart of a signature page to any Loan Document shall be as effective as delivery of a manually executed counterpart of such Loan Document. 12.11 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision contained in this Agreement or the Notes or any other Loan Document, the total liability of the Borrowers for payment of interest pursuant to this Agreement and the Notes shall not exceed the maximum amount of such interest permitted by Law to be charged, collected, or received from the Borrowers, and if any payment by the Borrowers includes interest in excess of such a maximum amount, each Lender shall apply such excess to the reduction of the unpaid principal amount due pursuant to this Agreement and the Notes, or if none is due, -119- to the other Loan Obligations, if any, and then such excess shall be refunded to Multicare (on behalf of the Borrowers). 12.12 INDEMNIFICATION. (a) Whether or not any fundings are made under this Agreement, the Borrowers jointly and severally shall unconditionally upon demand, pay or reimburse the Administrative Agent and other Lender Parties for, and indemnify and save the Administrative Agent, the other Lender Parties and their respective Affiliates, officers, directors, employees, agents, attorneys, shareholders and consultants (collectively, "Indemnitees") harmless from and against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnitee as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any Acquisition or transaction from time to time contemplated hereby or by any other Loan Document, or any transaction actually or proposed to be financed in whole or in part or directly or indirectly with the proceeds of any Loan or Letter of Credit, any transaction contemplated by the Transaction Documents but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements that the Borrower proves were the result solely of the gross negligence or willful misconduct of such Indemnitee, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrowers under this paragraph (a), or any other indemnification obligation of the Borrowers hereunder or under any other Loan Document are unenforceable for any reason, the Borrowers hereby agree, jointly and severally, to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. (b) Without limiting the generality of the foregoing, the Borrowers jointly and severally hereby indemnify and agree to defend and hold harmless each Indemnitee, from and against any and all claims, actions, causes of action, liabilities, penalties, fines, damages, judgments, losses, suits, expenses, legal or administrative proceedings, interest, costs and expenses (including court costs and attorneys', consultants' and experts' fees) arising out of or in any way relating to: (i) the use, handling, management, production, treatment, processing, storage, transfer, transportation, disposal, release or threat of release of any Environmental Concern Material by or on behalf of, any Borrower or any of its Environmental Affiliates; (ii) the presence of Environmental Concern Materials on, about, beneath or arising from any premises owned or occupied by any Borrower or any of its Environmental Affiliates (herein collectively, the "Premises"); (iii) the failure of any Borrower or Environmental Affiliate of a Borrower or any occupant of any Premises to comply with the Environmental Laws; (iv) any Borrower's breach of any of the representations, warranties and covenants contained herein or in any Loan Documents; (v) Regulatory Actions (as hereinafter defined) and Third Party Claims (as hereinafter defined); or (vi) the imposition or recording of a Lien against any Premises in connection with any release at, on or from any Premises or any activities undertaken on or occurring at any Premises, or arising from such Premises or pursuant to any Environmental Law. The -120- Borrowers' indemnity and defense obligations under this section shall include, whether foreseeable or unforeseeable, any and all costs related to any remedial action. "Regulatory Action" means any notice of violation, citation, complaint, request for information, order, directive, compliance schedule, notice of claim, consent decree, action, litigation or proceeding brought or instituted by any governmental authority under or in connection with any Environmental Law involving any Borrower or any occupant of any of the Premises or involving any of the Premises or any activities undertaken on or occurring at any Premises. "Third Party Claims" means claims by a party (other than a party to this Agreement and other than Regulatory Actions) based on negligence, trespass, strict liability, nuisance, toxic tort or detriment to human health or welfare due to Environmental Concern Materials on, about, beneath or arising from any Premises or in any way related to any alleged violation of any Environmental Laws or any activities undertaken on or occurring at any Premises. (c) The indemnities contained herein shall survive repayment of the Loan Obligations, termination of the Commitment and satisfaction, release, and discharge of the Loan Documents, whether through full payment of the Loans, foreclosure, deed in lieu of foreclosure or otherwise. (d) The foregoing amounts are in addition to any other amounts which may be due and payable to the Administrative Agent and/or the Lenders under this Agreement. A certification by the Administrative Agent or a Lender hereunder of the amount of liabilities, losses, costs, expenses, claims and/or charges shall be conclusive, absent manifest error. 12.13 EXPENSES Whether or not there shall be any funding hereunder, the Borrowers agree, jointly and severally, to pay promptly or cause to be paid promptly and to hold harmless (i) with respect to matters relating to clause (1) of this paragraph (i), the Agents, and, with respect to clauses (2) and (3) of this paragraph (i), the Administrative Agent (and after an Event of Default, and for the period in which the same shall continue, each Lender Party) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to (1) the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents, (2) the administration and performance of this Agreement and the other Loan Documents, and (3) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any other Loan Document; (ii) the Administrative Agent (and, with respect to clause (4) of this paragraph (ii) after an Event of Default, and for the period in which the same shall continue, each Lender Party) against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, -121- consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by it from time to time arising from or relating to the enforcement or preservation of rights under, or administration of, this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (1) the creation, perfection or protection of any Lien on any Collateral, (2) the protection, collection, lease, sale, taking possession of, preservation of, or realization on, any Collateral, including advances for storage, insurance premiums, transportation charges, taxes, filing fees and the like, (3) collection or enforcement of an outstanding Loan, Obligation, and (4) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the other Loan Documents); and (iii) each Lender Party against liability for all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by any Lender Party to be payable in connection with this Agreement or any other Loan Documents. 12.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY. To the extent that applicable Law otherwise would render the full amount of the joint and several obligations of any Subsidiary of Multicare hereunder and under the other Loan Documents invalid or unenforceable, such Borrower's obligations hereunder and under the other Loan Documents shall be limited to the maximum amount which does not result in such invalidity or unenforceability, provided, however, that each Borrower's obligations hereunder and under the other Loan Documents shall be presumptively valid and enforceable to their fullest extent in accordance with the terms hereof or thereof, as if this Section 12.14 were not a part of this Agreement. 12.15 AUTHORIZATION OF MULTICARE BY OTHER BORROWERS. (a) Each of the Borrowers hereby irrevocably authorizes Multicare to give notices, make requests, make payments, receive payments and notices, give receipts and execute agreements, make agreements or take any other action whatever on behalf of such Borrower under and with respect to any Loan Document and each Borrower shall be bound thereby. This authorization is coupled with an interest and shall be irrevocable, and the Administrative Agent and each Lender Party may rely on any notice, request, information supplied by Multicare and every document executed by Multicare, agreement made by Multicare or other action taken by Multicare in respect of the Borrowers or any thereof as if the same were supplied, made or taken by any or all Borrowers. Without limiting the generality of the foregoing, the failure of one or more Borrowers to join in the execution of any writing in connection herewith shall not, unless the context clearly requires, relieve any such Borrower from obligations in respect of such writing. (b) The Borrowers acknowledge that the credit provided hereunder is on terms more favorable than any Borrower acting alone would receive and that each Borrower benefits indirectly from all Loans and Letters of Credit hereunder. Multicare and, subject only to the terms of the preceding paragraph (a), each of the other Borrowers, shall be -122- jointly and severally liable for all Loan Obligations, regardless of, inter alia, which Borrower requested (or received the proceeds of) a particular Loan or Letter of Credit. 12.16 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment hereunder and the Loan Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender," "Issuer," "Holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its Affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, enter into Interest Rate Hedging Agreements with, serve as "Administrative Agent" for other financing vehicles, issue letters of credit on behalf of, and engage in any other business with, (a) any Loan Party or any stockholder, Subsidiary or Affiliate of any Loan Party or (b) any other Person, whether such other Person may be engaged in any conflict or dispute with any Loan Party or any Lender Party or otherwise, as though the Administrative Agent were not the Administrative Agent hereunder. 12.17 CERTAIN WAIVERS BY BORROWERS. Each Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Loan Obligations and any requirement that any Lender Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any other Borrower or any other Person or any collateral or other direct or indirect security for any of the Loan Obligations. Without limiting the generality of the foregoing, each Borrower acknowledges and agrees that the Administrative Agent or other Lender Party may commence an action against such Borrower whether or not any action is brought against any other Borrower or against any collateral and it shall be no defense to any action brought against any Borrower that the Lender Parties have failed to bring an action against any other Loan Party or any Collateral. 12.18 SET-OFF. The Borrowers hereby agree that, to the fullest extent permitted by Law, if any Loan Obligation shall be due and payable (by acceleration or otherwise), each Lender Party shall have the right, without notice to any Borrower, to set-off against and to appropriate and apply to such Loan Obligation any indebtedness, liability or obligation of any nature owing to any Borrower by such Lender Party, including but not limited to all deposits now or hereafter maintained by any Borrower with such Lender Party. Such right shall exist whether or not such Lender Party or any other Person shall have given notice or made any demand to any Borrower or any other Person. The Borrowers hereby agree that, to the fullest extent permitted by Law, any participant and any Affiliate of any Lender Party or any participant shall have the same rights of set-off as a Lender Party as provided in this Section 12.18. The rights provided by this Section 12.18 are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender Party (or any such participant, or Affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise. -123- 12.19 SHARING OF COLLECTIONS. The Lender Parties hereby agree among themselves that if any Lender Party shall receive (by voluntary payment, realization upon security, charging of accounts, set-off or from any other source) any amount on account of the Loan Obligations in greater proportion than any such amount received by any other Lender Party (based on the relative amount of each such Lender Party's interest in the Loan Obligations), then the Lender Party receiving such proportionately greater payment shall notify each other Lender Party and the Administrative Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section 12.19 so that, in effect, all such excess amounts will be shared ratably among all of the Lender Parties. The Lender Party receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lender Parties a participation in the applicable Loan Obligations owed to such other Lender Parties in such amount as shall result in a ratable sharing by all Lender Parties of such excess amount (and to such extent the receiving Lender Party shall be a participant). If all or any portion of such excess amount is thereafter recovered from the Lender Party making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender Party making such purchase. The Borrowers hereby consent to and confirm the foregoing arrangements. Each participant shall be bound by this Section 12.19 as fully as if it were a Lender hereunder. 12.20 OTHER LOAN DOCUMENTS. Each Lender acknowledges that on signing this Agreement it is bound by the terms of the Loan Documents. Without limiting the generality of the foregoing, each Lender party to a Qualifying Interest Rate Hedging Agreement acknowledges that it is familiar with the provisions set forth in Section 2 of the Pledge Agreement. 12.21 CERTAIN BORROWER ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges that neither the Administrative Agent nor any other Lender Party has any fiduciary relationship with, or any fiduciary duty to any Borrower arising out of or in connection with this Agreement or any of the other Loan Documents and the relationship between the Administrative Agent and the other Lender Parties, on the one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. 12.22 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL. (a) Consent to Jurisdiction. For the purpose of enforcing payment and performance of the Loan Documents, including, any payment under the Notes and performance of other obligations under the Loan Documents, or in any other matter relating to, or arising out of, the Loan Documents, each of the Borrowers hereby consents to the jurisdiction and venue of the courts of the Commonwealth of Pennsylvania or of any federal court located in such state, waive personal service of any and all process upon it and consents that all such service of process be made by certified or registered mail directed to Multicare (on behalf of the applicable Borrowers) at the address provided for in Section 12.1 and service so made shall be deemed to be completed upon actual receipt or execution of a receipt by any Person at such address. Each of the Borrowers hereby waives the right to contest the jurisdiction and venue of the courts located in the Commonwealth of Pennsylvania -124- on the ground of inconvenience or otherwise and, further, waives any right to bring any action or proceeding against (a) the Administrative Agent in any court outside the Commonwealth of Pennsylvania, or (b) any other Lender other than in a state within the United States designated by such Lender. The provisions of this Section 12.22 shall not limit or otherwise affect the right of the Administrative Agent or any other Lender Party to institute and conduct an action in any other appropriate manner, jurisdiction or court. (b) WAIVER OF JURY TRIAL; DAMAGES. NEITHER ANY LENDER PARTY NOR ANY LOAN PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF THE FOREGOING SHALL SEEK A JURY TRIAL IN ANY PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, OR INVOLVING ANY COLLATERAL OR ANY GUARANTY RELATING TO THE INDEBTEDNESS HEREUNDER OR THE RELATIONSHIP BETWEEN OR AMONG SUCH PERSONS OR ANY OF THEM. NO SUCH PERSON WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT WAIVES ANY RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION 12.22 ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS AGREEMENT (i) CERTIFIES THAT NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER PARTY NOR ANY REPRESENTATIVE, OR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR SUCH LENDER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH (b) OF SECTION 12.22. THE PROVISIONS OF THIS SECTION 12.22 HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND THE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 12.22 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. -125- IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. BORROWERS: THE MULTICARE COMPANIES, INC., a Delaware corporation By /s/ James V. McKeon _________________________ Name: James V. McKeon Title: Vice President, Controller and Assistant Secretary Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 ADS APPLE VALLEY LIMITED PARTNERSHIP, a Massachusetts limited partnership, by: ADS Apple Valley, Inc. its General Partner ADS DARTMOUTH GENERAL PARTNERSHIP, a Massachusetts general partnership, by ADS Dartmouth ALF, Inc. and ADS Senior Housing, Inc., its General Partners ADS HINGHAM LIMITED PARTNERSHIP, a Massachusetts limited partnership, by ADS Hingham Nursing Facility, Inc., its General Partner ADS RECUPERATIVE CENTER LIMITED PARTNERSHIP, a Massachusetts limited partnership, by ADS Recuperative Center, Inc., its General Partner CARE 4, L.P., a Delaware limited partnership, by Institutional Health Care Services, Inc., its General Partner CARE HAVEN ASSOCIATES LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc. and GMA Partnership Holding Company, Inc., its General Partners /s/ JVM --------------------- Initials of Signor -126- CUMBERLAND ASSOCIATES OF RHODE ISLAND, L.P., a Delaware limited partnership, by Health Resources of Cumberland, Inc., its General Partner GLENMARK PROPERTIES I, LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc. and GMA Partnership Holding Company, Inc., its General Partners GROTON ASSOCIATES OF CONNECTICUT, L.P., a Delaware limited partnership, by Health Resources of Groton, Inc., its General Partner MIDDLETOWN (RI) ASSOCIATES OF RHODE ISLAND, L.P., a Delaware limited partnership, by Health Resources of Middletown (R.I.), Inc., its General Partner POINT PLEASANT HAVEN LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner RALEIGH MANOR LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner ROMNEY HEALTH CARE CENTER LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner SISTERVILLE HAVEN LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner TEAYS VALLEY HAVEN LIMITED PARTNERSHIP, a West Virginia limited partnership, by Glenmark Associates, Inc., its General Partner THE STRAUS GROUP - HOPKINS HOUSE, L.P., a New Jersey limited partnership, by Encare of Wyncote, Inc., its General Partner THE STRAUS GROUP - QUAKERTOWN MANOR, L.P., a New Jersey limited partnership, by Encare of Quakertown, Inc., its General Partner WALLINGFORD ASSOCIATES OF CONNECTICUT, L.P., a Delaware limited partnership, by Health Resources of Wallingford, Inc., its General Partner WARWICK ASSOCIATES OF RHODE ISLAND, L.P., a Delaware limited partnership, by Health Resources of Warwick, Inc., its General Partner By: /s/ James V. McKeon __________________________ On behalf of each of the foregoing as Vice President, Controller and Assistant Secretary of the General Partner Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -127- HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P., a Delaware limited partnership, by Encare of Mendham, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P., a Delaware limited partnership, by Breyut Convalescent Center, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager POMPTON ASSOCIATES, L.P., a New Jersey limited partnership, by Pompton Corp., L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager THE STRAUS GROUP - OLD BRIDGE, L.P., a New Jersey limited partnership, by Health Resources of Emery, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager THE STRAUS GROUP - RIDGEWOOD, L.P., a New Jersey limited partnership, by Health Resources of Ridgewood, L.L.C., its General Partner, by Century Care Management, Inc., its authorized manager By: /s/ James V. McKeon __________________________ On behalf of each of the foregoing as Vice President, Controller and Assistant Secretary of the manager Address for notices: 149 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -128- ACADEMY NURSING HOME, INC., a Massachusetts corporation ADS APPLE VALLEY, INC., a Massachusetts corporation ADS CONSULTING, INC., a Massachusetts corporation ADS DANVERS ALF, INC., a Delaware corporation ADS DARTMOUTH ALF, INC., a Delaware corporation ADS HINGHAM ALF, INC., a Delaware Corporation ADS HINGHAM NURSING FACILITY, INC., a Massachusetts corporation ADS HOME HEALTH, INC., a Delaware corporation ADS MANAGEMENT, INC., a Massachusetts corporation ADS/MULTICARE, INC., a Delaware corporation ADS RECUPERATIVE CENTER, INC., a Massachusetts corporation ADS SENIOR HOUSING, INC., a Massachusetts corporation ADS VILLAGE MANOR, INC., a Massachusetts corporation ANR, INC., a Delaware corporation APPLEWOOD HEALTH RESOURCES, INC., a Delaware corporation AUTOMATED PROFESSIONAL ACCOUNTS, INC., a West Virginia corporation BERKS NURSING HOMES, INC., a Pennsylvania corporation BETHEL HEALTH RESOURCES, INC., a Delaware corporation BRIGHTWOOD PROPERTY, INC., a West Virginia corporation CENTURY CARE CONSTRUCTION, INC., a New Jersey corporation CENTURY CARE MANAGEMENT, INC., a Delaware corporation CHATEAU VILLAGE HEALTH RESOURCES, INC., a Delaware corporation CHG INVESTMENT CORP., INC., a Delaware corporation CHNR-1, INC., a Delaware corporation COLONIAL HALL HEALTH RESOURCES, INC., a Delaware corporation COLONIAL HOUSE HEALTH RESOURCES, INC., a Delaware corporation COMPASS HEALTH SERVICES, INC., a West Virginia corporation CONCORD HEALTH GROUP, INC., a Delaware corporation /s/ JVM -------------------- Initials of Signor -129- CONCORD HOME HEALTH, INC., a Pennsylvania corporation CONCORD PHARMACY SERVICES, INC., a Pennsylvania corporation CONCORD REHAB, INC., a Pennsylvania corporation CONCORD SERVICE CORPORATION, a Pennsylvania corporation CVNR, INC., a Delaware corporation DELM NURSING, INC., a Pennsylvania corporation ELMWOOD HEALTH RESOURCES, INC., a Delaware corporation ENCARE OF MASSACHUSETTS, INC., a Delaware corporation ENCARE OF PENNYPACK, INC., a Pennsylvania corporation ENCARE OF QUAKERTOWN, INC., a Pennsylvania corporation ENCARE OF WYNCOTE, INC., a Pennsylvania corporation ENR, INC., a Delaware corporation GLENMARK ASSOCIATES, INC., a West Virginia corporation GMA - BRIGHTWOOD, INC., a West Virginia corporation GMA CONSTRUCTION, INC., a West Virginia corporation GMA - MADISON, INC., a West Virginia corporation GMA PARTNERSHIP HOLDING COMPANY, INC., a West Virginia corporation GMA - UNIONTOWN, INC., a Pennsylvania corporation HEALTH RESOURCES OF BROADMAN, INC., a Delaware corporation HEALTH RESOURCES OF CEDAR GROVE, INC., a New Jersey corporation HEALTH RESOURCES OF COLCHESTER, INC., a Connecticut corporation HEALTH RESOURCES OF COLUMBUS, INC., a Delaware corporation HEALTH RESOURCES OF CUMBERLAND, INC., a Delaware corporation HEALTH RESOURCES OF EATONTOWN, INC., a New Jersey corporation HEALTH RESOURCES OF FARMINGTON, INC., a Delaware corporation HEALTH RESOURCES OF GARDNER, INC., a Delaware corporation /s/ JVM -------------------- Initials of Signor -130- HEALTH RESOURCES OF GLASTONBURY, INC., a Connecticut corporation HEALTH RESOURCES OF GROTON, INC., a Delaware corporation HEALTH RESOURCES OF LAKEVIEW, INC., a New Jersey corporation HEALTH RESOURCES OF LEMONT, INC., a Delaware corporation HEALTH RESOURCES OF LYNN, INC., a New Jersey corporation HEALTH RESOURCES OF KARMENTA AND MADISON, INC., a Delaware corporation HEALTH RESOURCES OF MARCELLA, INC., a Delaware corporation HEALTH RESOURCES OF MIDDLETOWN (R.I.), INC., a Delaware corporation HEALTH RESOURCES OF MORRISTOWN, INC., a New Jersey corporation HEALTH RESOURCES OF NORFOLK, INC., a Delaware corporation HEALTH RESOURCES OF NORWALK, INC., a Connecticut corporation HEALTH RESOURCES OF PENNINGTON, INC., a New Jersey corporation HEALTH RESOURCES OF ROCKVILLE, INC., a Delaware corporation HEALTH RESOURCES OF SOUTH BRUNSWICK, INC., a New Jersey corporation HEALTH RESOURCES OF TROY HILLS, INC., a New Jersey corporation HEALTH RESOURCES OF WALLINGFORD, INC., a Delaware corporation HEALTH RESOURCES OF WARWICK, INC., a Delaware corporation HEALTHCARE REHAB SYSTEMS, INC., a Pennsylvania corporation HORIZON ASSOCIATES, INC., a West Virginia corporation HORIZON MEDICAL EQUIPMENT AND SUPPLY, INC., a West Virginia corporation HORIZON MOBILE, INC., a West Virginia corporation HORIZON REHABILITATION, INC., a West Virginia corporation HR OF CHARLESTON, INC., a West Virginia corporation HRWV Huntington, Inc., a West Virginia corporation /s/ JVM -------------------- Initials of Signor -131- INSTITUTIONAL HEALTH CARE SERVICES, INC., a New Jersey corporation LAKEWOOD HEALTH RESOURCES, INC., a Delaware corporation LAUREL HEALTH RESOURCES, INC., a Delaware corporation LEHIGH NURSING HOMES, INC., a Pennsylvania corporation LWNR, INC., a Delaware corporation MABRI CONVALESCENT CENTER, INC., a Connecticut corporation MARKGLEN, INC., a West Virginia corporation MARSHFIELD HEALTH RESOURCES, INC., a Delaware corporation MONTGOMERY NURSING HOMES, INC., a Pennsylvania corporation MULTICARE AMC, INC., a Delaware Corporation MULTICARE HOME HEALTH OF ILLINOIS, INC., a Delaware corporation NATIONAL PHARMACY SERVICE, INC., a Pennsylvania corporation NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC., a Massachusetts corporation PHC OPERATING CORP., a Delaware corporation POCAHONTAS CONTINUOUS CARE CENTER, INC., a West Virginia corporation PRESCOTT NURSING HOME, INC., a Massachusetts corporation PROGRESSIVE REHABILITATION CENTERS, INC., a Delaware corporation PROVIDENCE HEALTH CARE, INC., a Delaware corporation REST HAVEN NURSING HOME, INC, a West Virginia corporation RIDGELAND HEALTH RESOURCES, INC., a Delaware corporation RIVER PINES HEALTH RESOURCES, INC., a Delaware corporation RIVERSHORES HEALTH RESOURCES, INC., a Delaware corporation RLNR, INC., a Delaware corporation ROSE HEALTHCARE, INC., a New Jersey corporation ROSE VIEW MANOR, INC., a Pennsylvania corporation RSNR, INC., a Delaware corporation RVNR, INC., a Delaware corporation SENIOR LIVING VENTURES, INC., a Pennsylvania corporation /s/ JVM ------------------ Initials of Signor -132- SCHUYLKILL NURSING HOMES, INC., a Pennsylvania corporation SCHUYLKILL PARTNERSHIP ACQUISITION CORP., a Pennsylvania corporation SENIOR SOURCE, INC., a Massachusetts corporation SNOW VALLEY HEALTH RESOURCES, INC., a Delaware corporation SOLOMONT FAMILY FALL RIVER VENTURE, INC., a Massachusetts corporation SOLOMONT FAMILY MEDFORD VENTURE, INC., a Massachusetts corporation STAFFORD CONVALESCENT CENTER, INC., a Delaware corporation S.T.B. INVESTORS, LTD., a New York corporation SVNR, INC., a Delaware corporation THE ADS GROUP, INC., a Massachusetts corporation TRI-STATE MOBILE MEDICAL SERVICES, INC., a West Virginia corporation WESTFORD NURSING AND RETIREMENT CENTER, INC., a Massachusetts corporation WILLOW MANOR NURSING HOME, INC., a Massachusetts corporation By: /s/ James V. McKeon _______________________ On behalf of each of the foregoing as Vice President, Controller and Assistant Secretary Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -133- BREYUT CONVALESCENT CENTER, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager ENCARE OF MENDHAM, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF BRIDGETON, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF CINNAMINSON, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF CRANBURY, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF EMERY, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF ENGLEWOOD, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF EWING, L.L.C., a New Jersey limited liability company. by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF FAIR LAWN, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF JACKSON, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF RIDGEWOOD, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager HEALTH RESOURCES OF WEST ORANGE, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager POMPTON CARE, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager ROEPHEL CONVALESCENT CENTER, L.L.C., a New Jersey limited liability company, by Century Care Management, Inc., its authorized manager /s/ JVM ------------------ Initials of Signor -134- TOTAL REHABILITATION CENTER, L.L.C., a New Jersey limited liability corporation, by Century Care Management, Inc., its authorized manager By: /s/ James V. McKeon _______________________ On behalf of each of the foregoing Vice President, Controller and Assistant Secretary of the manager Address for notices: 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telephone: (610) 444-6350 Facsimile: (610) 444-3365 -135- The Surety hereby joins this Credit Agreement for the purposes of (1) acknowledging the terms and conditions and receipt of a true, correct and complete copy hereof, (2) representing and warranting to the Lender Parties that the representations and warranties contained herein are true and correct, and (3) agreeing with the Lender Parties to comply with the affirmative, financial and negative covenants contained herein to the extent they apply, by their terms, to the Surety. GENESIS ELDERCARE CORP. By /s/ James V. McKeon _______________________ Title: -136- [PAGES 137-177 INTENTIONALLY OMITTED] -137- AGENTS, ISSUER AND LENDERS: MELLON BANK, N.A., as a Lender, as Issuer and as Administrative Agent By /s/ Barbara J. Bauswald ________________________________ Name: Barbara J. Bauswald Title: Vice President Address for notices: street address: AIM 199-5220 Mellon Independence Center 701 Market Street Philadelphia, Pennsylvania 19106 mailing address: AIM 199-5220 P.O. Box 7899 Philadelphia, Pennsylvania 19101-7899 Attention: Linda Sigler, Loan Administration Telephone: 215-553-4583 Facsimile: 215-553-4789 -178- With a copy to Plymouth Meeting Executive Campus 610 W. Germantown Pike, Suite 200 Plymouth Meeting, Pennsylvania 19462 Attention: Barbara J. Hauswald Vice President Telephone: 610-941-8412 Facsimile: 610-941-4136 With a copy for notices respecting assignments to: MELLON BANK, N.A. One Mellon Bank Center 45th Floor Pittsburgh, PA 15258-0001 Attention: Dean Hazelton Telephone: 412-236-0316 Facsimile: 412-234-4612 -179- CITICORP USA INC., as a Lender and as Syndication Agent By /s/ Margaret A. Brown _______________________________ Name: Margaret A. Brown Title: Managing Director Address for notices: 399 Park Avenue 8th Floor, Zone 6 New York, NY 10043 Attention: Margaret A. Brown Telephone: 212-559-0501 Facsimile: 212-793-0289 -180- FIRST UNION NATIONAL BANK, as a Lender and as Documentation Agent By /s/ Joseph H. Towell ________________________________ Name: Joseph H. Towell Title: Senior Vice President Address for notices: One First Union Center TW-5 Charlotte, NC 28288-0735 Attention: Mr. Joseph H. Towell Telephone: 704-383-3844 Facsimile: 704-374-4092 -181- NATIONSBANK, N.A., as a Lender and as a Syndication Agent By /s/ Scott S. Ward _______________________________ Name: Scott S. Ward Title: Senior Vice President Address for notices: 101 North Tryon Street 15th Floor Charlotte, NC 28255 NC1-001-15-11 Attention: Jacquetta Banks Telephone: 704-388-1111 Facsimile: 704-386-8694 With a copy to 100 North Tryon Street 8th Floor Charlotte, NC 28255 NC1-007-0813 Attention: Scott Ward Telephone: 704-388-7839 Facsimile: 704-388-6002 -182- CORESTATES BANK, N.A. By /s/ Jennifer W. Leibowitz ________________________________ Name: Jennifer W. Leibowitz Title: Vice President Address for notices: CoreStates Bank, N.A. 1339 Chestnut Street F.C. 1-8-3-22 P.O. Box 7618 Philadelphia, PA 19101-7618 Attention: Jennifer Leibowitz Telephone: (215) 786-3972 Facsimile: (215) 973-2738 -183- CREDIT LYONNAIS NEW YORK BRANCH By /s/ Farboud Tavangar ________________________________ Name: Farboud Tavangar Title: First Vice President Address for notices: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Attention: Evan S. Wasser Telephone: (212) 261-7685 Facsimile: (212) 261-3440 -184- FLEET NATIONAL BANK By /s/ Ginger Stolzenthaler ________________________________ Name: Ginger Stolzenthaler Title: Senior Vice President Address for notices: Fleet National Bank 75 State Street MA BO F04A Boston, MA 02109 Attention: Ginger Stolzenthaler Telephone: (617) 346-1647 Facsimile: (617) 346-1634 -185- THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ Takuya Honjo ________________________________ Name: Takuya Honjo Title: Senior Vice President Address for notices: The Industrial Bank of Japan, Limited 1251 Avenue of the Americas New York, NY 10020 Attention: Ken Takehisa Telephone: (212) 282-3321 Facsimile: (212) 282-4490 -186- NATIONAL WESTMINSTER BANK Plc By /s/ Andrew S. Weinberg ________________________________ Name: Andrew S. Weinberg Title: Vice President Address for notices: National Westminster Bank Plc 175 Water Street, 26th Floor New York, NY 10038 Attention: Andrew Weinberg Phone: (212) 602-4438 Facsimile: (212) 602-4506 with a copy to: Gleacher NatWest Inc. 660 Madison Avenue, 17th Floor New York, NY 10021 Attention: Field Smith Telephone: (212) 418-4525 Facsimile: (212) 418-4598 -187- THE SAKURA BANK, LIMITED By /s/ Yoshikazu Nagura ________________________________ Name: Yoshikazu Nagura Title: Vice President Address for notices: The Sakura Bank, Limited 277 Park Avenue, 45th Floor New York, NY 10172 Attention: Philip Schubert Telephone: (212) 756-6945 Facsimile: (212) 888-7651 -188- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Edward S. Han ________________________________ Name: Edward S. Han Title: Vice President Address for notices: Bank of America National Trust & Savings Associations 555 S. Flower Street, 11th Floor Los Angeles, CA 90071 Attention: Lucy Nixon Telephone: (213) 228-9716 Facsimile: (213) 228-2756 -189- BANQUE PARIBAS By /s/ David R. Laffey ________________________________ Name: David R. Laffey Title: Director By /s/ Brett I. Mehlman ________________________________ Name: Brett I. Mehlman Title: Director Address for notices: Banque Paribas 787 Seventh Avenue New York, NY 10019 Attention: David R. Laffey Telephone: (212) 841-2116 Facsimile: (212) 841-2292 -190- BANK OF MONTREAL By /s/ Peter Konigsmann ________________________________ Name: Peter Konigsmann Title: Director Address for notices: Bank of Montreal 115 South LaSalle Street Chicago, IL 60603 Attention: Peter Konigsmann Telephone: (312) 750-8704 Facsimile: (312) 750-3834 -191- BANKBOSTON, N.A. By /s/ Charles C. Woodard ________________________________ Name: Charles C. Woodard Title: Managing Director Address for notices: BankBoston, N.A. 100 Federal Street, 01-19-03 Boston, MA 02110 Attention: Marilyn Fenollosa Telephone: (617) 434-7684 Facsimile: (617) 434-7980 -192- THE BANK OF NEW YORK By /s/ Peter H. Abdill ________________________________ Name: Peter H. Abdill Title: Vice President Address for notices: The Bank of New York One Wall Street, 21st Floor New York, NY 10286 Attention: Walter C. Parelli Telephone: (212) 635-6820 Facsimile: (212) 635-7978 -193- BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /s/ J. Beckwith ________________________________ Name: J. Beckwith Title: Vice President Address for notices: Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, NY 10020-1104 Attention: Ned Komar Telephone: (212) 782-4584 Facsimile: (212) 782-4935 -194- CRESTAR BANK By /s/ Leesa McShane ________________________________ Name: Leesa McShane Title: Vice President Address for Notices: Crestar Bank 120 E. Baltimore Street, 25th Floor Baltimore, MD 21202 Attention: Leesa McShane Telephone: (410) 986-1672 Facsimile: (410) 986-1670 -195- DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By /s/ Andrew P. Nesi _______________________________ Name: Andrew P. Nesi Title: Vice President By /s/ Felix K. Camacho ________________________________ Name: Felix K. Camacho Title: Assistant Treasurer Address for notices: Dresdner Bank AG, New York 75 Wall Street, 25th Floor New York, NY 10005-2889 Attention: Felix K. Camacho Telephone: (212) 429-3007 Facsimile: (212) 429-2129 -196- FINOVA CAPITAL CORPORATION By /s/ Dan Scanlan ________________________________ Name: Dan Scanlan Title: Address for notices: Finova Capital Corporation 311 S. Wacker, Suite 4400 Chicago, IL 60606 Attention: Dan Scanlan Telephone: (312) 322-3539 Facsimile: (312) 322-3553 -197- THE FUJI BANK, LIMITED, NEW YORK BRANCH By /s/ Teiji Teramoto ________________________________ Name: Teiji Teramoto Title: Vice President and Manager Address for notices: The Fuji Bank, Limited, New York Branch Two World Trade Center New York, NY 10048 Attention: Anh Nguyen Telephone: (212) 898-2088 Facsimile: (212) 898-2399 -198- KEY CORPORATE CAPITAL INC. By /s/ Angela Mago ________________________________ Name: Angela Mago Title: Vice President Address for notices: Key Corporate Capital Inc. c/o Key Bank, N.A. 127 Public Square Cleveland, OH 44114 Attention: Angela Mago OH-01-27-0605 Telephone: (216) 689-3247 Facsimile: (216) 689-5970 -199- KREDIETBANK N.V. By Armen Karozichian ________________________________ Name: Armen Karozichian Title: Vice President By /s/ Robert Snauffer ________________________________ Name: Robert Snauffer Title: Vice President Address for notices: Kredietbank N.V. 125 W. 55th Street New York, NY 10021 Attention: Armen Karozichian Telephone: (212) 541-0717 Facsimile: (212) 541-0793 -200- FIRST NATIONAL BANK OF MARYLAND By /s/ Robert H. Hauver ________________________________ Name: Robert H. Hauver Title: Vice President Address for notices: First National Bank of Maryland 25 S. Charles Street, 18th Floor Baltimore, MD 21201 Attention: Robert H. Hauver Telephone: (410) 244-4246 Facsimile: (410) 244-4388 -201- NATEXIS BANQUE BFCE By /s/ Kevin Dooley ________________________________ Name: Kevin Dooley Title: Vice President By /s/ William C. Maier ________________________________ Name: William C. Maier Title: VP - Group Manager Address for notices: Natexis Banque BFCE 645 Fifth Avenue, 20th Floor New York, NY 10022 Attention: Frank Madden Telephone: (212) 872-5180 Facsimile: (212) 872-5045 -202- ROYAL BANK OF CANADA By /s/ Marion A. Patterson ________________________________ Name: Marion A. Patterson Title: Senior Manager Address for notices: Royal Bank of Canada Financial Square, 23rd Floor New York, NY 10005-3531 Attention: Jim Rankin, Manager Telephone: (212) 428-6204 Facsimile: (212) 428-2372 -203- NATIONAL CITY BANK OF PENNSYLVANIA By /s/ D. W. Riefner ________________________________ Name: D. W. Riefner Title: Vice President Address for notices: National City Bank of Pennsylvania 20 Stanwix Street Pittsburgh, PA 15222 Loc. 46-25-191 Attention: Debra W. Riefner Telephone: (412) 644-8880 Facsimile: (412) 471-4883 -204- THE MITSUBISHI TRUST AND BANKING CORPORATION By /s/ Toshihiro Hayashi ________________________________ Name: Toshihiro Hayashi Title: Senior Vice President Address for notices: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 26th Floor New York, NY 10022 Attention: Clifford A. Teller Telephone: (212) 891-8269 Facsimile: (212) 644-6825 or (212) 593-4691 -205- THE SANWA BANK, LIMITED By /s/ Christian Kambour ________________________________ Name: Christian Kambour Title: Vice President Address for notices: The Sanwa Bank, Limited 55 E. 52nd Street New York, NY 10055 Attention: Christian Kambour Telephone: (212) 339-6232 Facsimile: (212) 754-1304 -206- THE SUMITOMO BANK, LIMITED By /s/ J. Wade Bell ________________________________ Name: J. Wade Bell Title: Vice President By /s/ Michael J. Fox ________________________________ Name: Michael J. Fox Title: Vice President and Manager Address for notices: The Sumitomo Bank, Limited One Liberty Place 1650 Market Street, Suite 2860 Philadelphia, PA 19103 Attention: J. Wade Bell Telephone: (215) 636-4440 Facsimile: (215) 636-4446 -207- TORONTO DOMINION (NEW YORK), INC. By /s/ Jorge A. Garcia ________________________________ Name: Jorge A. Garcia Title: Mgr. Cr. Admin. Address for notices: The Toronto-Dominion Bank 909 Fannin, Suite 1700 Houston, Texas 77010 Attention: Jorge A. Garcia Telephone: (713) 653-8242 Facsimile: (713) 951-9921 -208- THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By /s/ Noboru Kubora ________________________________ Name: Noboru Kubora Title: Deputy General Manager Address for notices: The Long-Term Credit Bank of Japan, Ltd. 165 Broadway New York, NY 10006 Attention: Junicchi Ebihara Telephone: (212) 335-4477 Facsimile: (212) 608-2371 -209- SUMMIT BANK By /s/ James P. Andersen ________________________________ Name: James P. Andersen Title: Vice President and Regional Manager Address for notices: Summit Bank 250 Moore Street, 2nd Floor Hackensack, NJ 07601 Attention: James P. Andersen Telephone: (201) 646-6317 Facsimile: (201) 646-9497 -210- THE DAI-ICHI KANGYO BANK, LTD. By /s/ Ronald Wolinsky ________________________________ Name: Ronald Wolinsky Title: Vice President and Group Leader Address for notices: The Dai-Ichi Kangyo Bank, Ltd. One World Trade Center, 48th Floor New York, NY 10048 Attention: Takayuki Kumagai Telephone: (212) 432-6651 Facsimile: (212) 488-8955 -211- CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Clifford L. Wells ________________________________ Name: Clifford L. Wells Title: Vice President By /s/ Fiona McKone _______________________________ Name: Fiona McKone Title: Senior Associate Address for notices: Creditanstalt Corporate Finance, Inc. Two Greenwich Plaza Greenwich, CT 06830 Attention: Fiona McKone Telephone: (203) 861-6590 Facsimile: (203) 861-0297 -212- CREDIT SUISSE FIRST BOSTON By /s/ Robert B. Potter ________________________________ Name: Robert B. Potter Title: Vice President By /s/ Christian Bourqui ________________________________ Name: Christian Bourqui Title: Associate Address for notices: Credit Suisse First Boston 11 Madison Avenue New York, NY 10010 Attention: Robert B. Potter Telephone: (212) 325-9154 Facsimile: (212) 325-8319 -213- FIRST NATIONAL BANK OF CHICAGO By /s/ Patricia S. Carpen ________________________________ Name: Patricia S. Carpen Title: Assistant Vice President Address for notices: First National Bank of Chicago 1 First National Plaza Chicago, IL 60670 Attention: Tom Harkless Telephone: (312) 732-2478 Facsimile: (312) 732-2016 -214- SCOTIABANC, INC. By /s/ Dana Maloney ________________________________ Name: Dana Maloney Title: Relationship Manager Address for notices: ScotiaBanc, Inc. 600 Peachtree Street NE Suite 2700 Atlanta, GA 30308 Attention: Dana Maloney Telephone: (404) 877-1524 Facsimile: (404) 888-8998 -215- COMMERZBANK AG, NEW YORK BRANCH By /s/ Mary F. Harold ________________________________ Name: Mary F. Harold Title: Vice President By /s/ G. Rod McWa -------------------------------- Name: G. Rod McWa Title: Vice President Address for notices: Commerzbank AG, New York Branch 2 World Financial Center New York, NY 10281-1050 Attention: Mary Harold Telephone: (212) 266-7509 Facsimile: (212) 266-7374 -216- CIBC INC. By /s/ Timothy E. Doyle _________________________________ Name: Timothy E. Doyle Title: Manager Director, CIBC Wood Gundy Securities Corp., as Agent Address for notices: CIBC Inc. 425 Lexington Avenue, 8th Floor New York, NY 10025 Attention: Tim Doyle Telephone: (212) 856-3650 Facsimile: (212) 856-3558 -217- AMSOUTH BANK By /s/ Ken DiFatta ________________________________ Name: Ken DiFatta Title: Commercial Banking Officer Address for notices: AmSouth Bank 1900 5th Ave. N. AST7FL Birmingham, AL 35203 Attention: Ken DiFatta Telephone: (205) 801-0358 Facsimile: (205) 326-4790 -218- PFL LIFE INSURANCE COMPANY By /s/ Gregory W. Theodaid ________________________________ Name: Gregory W. Theodaid Title: VP and Asst. Secretary Address for notices: PFL Life Insurance Company c/o Aegon USA Investment Management, Inc. 4333 Edgewood Road, NE Cedar Rapids, IA 52499 Attention: John Bailey, Securities Analyst Telephone: (319) 369-2811 Facsimile: (319) 369-2666 -219- PEOPLES INTERNAL BOND FUND By /s/ Kirk W. Buese ________________________________ Name: Kirk W. Buese Title: Second Vice President--Investments Address for notices: Peoples Internal Bond Fund c/o Aegon USA Investment Management, Inc. 4333 Edgewood Road, NE Cedar Rapids, IA 52499 Attention: John Bailey, Securities Analyst Telephone: (319) 369-2811 Facsimile: (319) 369-2666 -220- ALLSTATE INSURANCE COMPANY By________________________________ Name: By________________________________ Name: Its Authorized Signatories Address for notices: Allstate Insurance Company 3075 Sanders Road, STE G3A Northbrook, IL 60062-3092 Attention: Jane Nelson Telephone: (847) 402-8383 Facsimile: (847) 402-3092 -221- [THIS PAGE INTENTIONALLY OMITTED] -222- [THIS PAGE INTENTIONALLY OMITTED] -223- FLOATING RATE PORTFOLIO By: Chancellor LGT Senior Secured Management, Inc., as attorney in fact By /s/ Christopher A. Bondy ________________________________ Christopher A. Bondy, Vice President Address for notices: Floating Rate Portfolio c/o Chancellor LGT Senior Secured Management, Inc. 1166 Avenue of the Americas, 27th Floor New York, NY 10036 Attention: Christopher A. Bondy Telephone: (212) 278-9673 Facsimile: (212) 278-9619 -224- [THIS PAGE INTENTIONALLY OMITTED] -225- PRIME INCOME TRUST By /s/ Rafael Scolari ________________________________ Name: Rafael Scolari Title: Senior Vice President Address for notices: Prime Income Trust c/o Dean Witter Intercapital, Inc. 72nd Floor Two World Trade Center New York, NY 10048 Attention: Louis A. Pistecchia Telephone: (212) 392-5845 Facsimile: (212) 392-5345 -226- [THIS PAGE INTENTIONALLY OMITTED] -227- DEEPROCK & COMPANY By: Eaton Vance Management as Investment Advisor By /s/ Payson Swaffield ________________________________ Name: Payson Swaffield Title: Vice President and Portfolio Manager Address for notices: Deeprock & Company c/o State Street Bank & Trust Company Corporate Trust Division One Enterprise Drive North Quincy, MA 02171 Attention: Patrick McEnroe Telephone: (617) 664-5367 Facsimile: (617) 664-5366 -228- ING HIGH INCOME PRINCIPAL PRESERVATION OFFERING, L.P. By /s/ Kathleen A. Lenarcic ________________________________ Name: Kathleen A. Lenarcic Title: Vice President & Portfolio Manager Address for notices: Ing High Income Principal Preservation Offering, L.P. c/o Ing Capital Advisors, Inc. 333 S. Grand Avenue, Suite 4250 Los Angeles, CA 90071 Attention: Kathleen Lenarcic Telephone: (213) 346-3971 Facsimile: (213) 346-3995 -229- KZH-ING-1 CORPORATION By /s/ Virginia R. Conway ________________________________ Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH-ING-1 Corporation c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -230- MASSACHUSETTS MUTUAL LIFE INSURANCE CO. By /s/ Kathleen Lynch ________________________________ Name: Kathleen Lynch Title: Managing Director Address for notices: Massachusetts Mutual Life Insurance Co. 1295 State Street Springfield, MA 01111 Attention: John Wheeler, Managing Director Telephone: (413) 744-6228 Facsimile: (413) 744-6127 -231- MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: Merrill Lynch Asset Management, L.P., as Investment Advisor By /s/ R. Douglas Henderson ________________________________ Name: R. Douglas Henderson Title: Authorized Signatory Address for notices: Merrill Lynch Senior Floating Rate Fund, Inc. c/o Merrill Lynch Asset Management 800 Scudders Mill Road - Area 1B Plainsboro, NJ 08536 Attention: Jill Montanye Telephone: (609) 282-3102 Facsimile: (609) 282-3542 -232- METROPOLITAN LIFE INSURANCE COMPANY By /s/ James R. Dingler ________________________________ Name: James R. Dingler Title: Assistant Vice President Address for notices: Metropolitan Life Insurance Company 334 Madison Avenue Convent Station, NJ 07961-0633 Attention: James Dingler Asst. Vice President Telephone: (201) 254-3206 Facsimile: (201) 254-3050 -233- THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By /s/ Richard A. Strait ________________________________ Name: Richard A. Strait Title: Vice President Address for notices: The Northwestern Mutual Life Insurance Company 720 E. Wisconsin Avenue Milwaukee, WI 53202 Attention: David A. Barras Associate Director Telephone: (414) 299-1618 Facsimile: (414) 299-7124 -234- NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: New York Life Insurance Company By /s/ Steven M. Benevento ________________________________ Name: Steven M. Benevento Title: Investment Manager Address for notices: New York Life Insurance and Annuity Corporation c/o New York Life Insurance Company 51 Madison Avenue, Room 206 New York, NY 10010 Attention: Elise Chowdhry Telephone: (212) 576-7830 Facsimile: (212) 447-4122 -235- OAK HILL SECURITIES FUND, L.P. By: Oak Hill Securities GenPar, L.P., Its General Partner By: Oak Hill Securities MGP, Inc., Its General Partner By /s/ Glenn R. August ________________________________ Name: Glenn R. August Title: President Address for notices: Oak Hill Securities Fund, L.P. c/o Oak Hill Partners, Inc. 65 East 55th Street - 32nd Floor New York, NY 10022 Attention: Scott Krase, Vice President Telephone: (212) 326-1551 Facsimile: (212) 593-3596 -236- OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (A Unit of The Chase Manhattan Bank) By /s/ Andrew D. Gordon ________________________________ Name: Andrew D. Gordon Title: Managing Director Address for notices: Octagon Credit Investors Loan Portfolio (A Unit of The Chase Manhattan Bank) c/o Octagon Credit Investors 380 Madison Avenue, 12th Floor New York, NY 10017 Attention: James P. Ferguson Managing Director Telephone: (212) 622-3070 Facsimile: (212) 622-3797 -237- PARIBAS CAPITAL FUNDING LLC By /s/ Eric Green ________________________________ Name: Eric Green Title: Director Address for notices: Paribas Capital Funding LLC 787 Seventh Avenue, 32nd Floor New York, NY 10019 Attention: Michael Weinberg Telephone: (212) 841-2544 Facsimile: (212) 841-2144 with a copy to: State Street Bank & Trust Co. Corporate Trust Dept. Attn: Richard Wagman Amy Molisse Phone: (617) 664-5410 Fax: (617) 664-5366(67)(68) -238- PILGRIM AMERICA PRIME RATE TRUST By /s/ Michael J. Bachevich ________________________________ Name: Michael J. Bachevich Title: Vice President [/R] Address for notices: Pilgrim America Prime Rate Trust c/o Pilgrim America Investments, Inc. Two Renaissance Square 40 North Central Avenue, Suite 1200 Phoenix, AZ 85004-3444 Attention: Michael Bacevich, Vice President Telephone: (602) 417-8258 Facsimile: (602) 417-8327 -239- ROYALTON COMPANY By: Pacific Investment Management Company, as its Investment Advisor By /s/ Raymond Kennedy ________________________________ Name: Raymond Kennedy Title: Vice President Address for notices: Royalton Company c/o Pacific Investment Management Co. 840 Newport Center Drive Newport Beach, CA 92658 Attention: Richard Weil/Raymond Kennedy Telephone: (714) 717-7213 (Richard) (714) 717-7363 (Raymond) Facsimile: (714) 640-3419 -240- [THIS PAGE INTENTIONALLY OMITTED] -241- NORTHERN LIFE INSURANCE COMPANY By /s/ James V. Wittich ________________________________ Name: James V. Wittich Title: Assistant Treasurer Address for notices: Northern Life Insurance Company c/o Reliastar Investment Research, Inc. 100 Washington Avenue South, Suite 800 Minneapolis, MN 55401-2121 Attention: Tim Warrick, Vice President Telephone: (612) 372-5258 Facsimile: (612) 372-5368 -242- KZH - SOLEIL CORPORATION By /s/ Virginia R. Conway ________________________________ Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH - Soleil Corporation c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -243- KZH HOLDING CORPORATION III By /s/ Virginia R. Conway ________________________________ Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH Holding Corporation III c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -244- KZH-CRESCENT CORPORATION By /s/ Virginia R. Conway ________________________________ Name: Virginia R. Conway Title: Authorized Agent Address for notices: KZH-Crescent Corporation c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Facsimile: (212) 946-7776 -245- VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By /s/ Jeffrey W. Maillet ________________________________ Name: Jeffrey W. Maillet Title: Senior Vice President & Director Address for notices: Van Kampen American Capital One Parkview Plaza Oakbrook Terrace, IL 60181 Attention: Jeffrey Maillet Telephone: (630) 684-6438 Facsimile: (630) 684-6740 or 6741 -246- [THIS PAGE INTENTIONALLY OMITTED] -247- CONTINENTAL ASSURANCE COMPANY Separate Account (E) By: TCW Asset Management Company as attorney-in-fact By /s/ Mark L. Gold ________________________________ Name: Mark L. Gold Title: Managing Director By /s/ Justin L. Driscoll ________________________________ Name: Justin L. Driscoll Title: Senior Vice President Address for notices: Continental Assurance Company c/o TCW Asset Management Company 200 Park Avenue, Suite 2200 New York, NY 10166-0228 Attention: Mark L. Gold/Justin L. Driscoll Telephone: (212) 297-4137 Facsimile: (212) 297-4159 -248- CIBC INC. By /s/ Elizabeth S. Schreiber ________________________________ Name: Elizabeth S. Schreiber Title: CIBC Wood Gundy Securities Corp., as Agent Address for notices: CIBC Inc. c/o Canadian Imperial Bank of Commerce 425 Lexington Avenue, 7th Floor New York, NY 10025 Attention: William Swenson Telephone: (212) 856-3935 Facsimile: (212) 856-3799 -249- MORGAN STANLEY SENIOR FUNDING, INC. By________________________________ Name: Title: Address for notices: MORGAN STANLEY SENIOR FUNDING, INC. 1585 Broadway, 10th Floor New York, New York 10036 Attention: James Morgan Telephone: (212) 761-4866 Facsimile: (212) 761-0592 -250- CRESCENT/MACH I PARTNERS, L.P. by: TCW Asset Management Company, its Investment Manager By /s/ Justin L. Driscoll ________________________________ Name: Justin L. Driscoll Title: Senior Vice President Address for notices: Crescent/Mach I Partners L.P. c/o State Street Bank & Trust Co. Two International Place Boston, MA 02110 Attention: Jackie Kilroy Telephone: (617) 664-5477 Facsimile: (617) 664-5366 Please Copy Rate Set Notices To: Mark L. Gold/Justin L. Driscoll Trust Company of the West 200 Park Avenue New York, NY 10166 Telephone: 212-297-4137 Facsimile: 212-297-4159 -251- NEW YORK LIFE INSURANCE COMPANY By /s/ Steven M. Benevento ________________________________ Name: Steven M. Benevento Title: Investment Manager Address for notices: New York Life Insurance and Annuity Corporation c/o New York Life Insurance Company 51 Madison Avenue Room 206 New York, New York 10010 Attention: Elise Chowdhry Telephone: (212) 576-7830 Facsimile: (212) 447-4122 LIST OF SCHEDULES 1.1 Lenders' Commitments 4.1(l) Certificate re: Senior Subordinated Notes and Convertible Debentures 5.1(a) Corporate/Partnership Status of Borrowers 5.1(b) Capitalization of Borrowers 5.1(e) Required Consents 5.1(o) Management Agreements 5.1(p) Health Care Businesses 5.1(q) Leased Properties 5.1(s) Defined Contribution Plans, other Plans and Multiemployer Plans 6.10 Adding Borrowers 8.1 Existing Indebtedness 8.1(f) Assisted Living Facilities 8.2 Permitted Liens 8.3 Investments 8.4 Acquisition Conditions 8.5(d) Ohio, Illinois and Wisconsin Operations 8.5(h) Disposition Conditions 11.1 Capital Stock or other Ownership Interests in Excluded Subsidiaries LIST OF EXHIBITS A-1 Form of RC Note A-2 Form of Tranche A Note A-3 Form of Swing Loan Note B Form of Advance Request C Form of Prepayment Notice D Form of LIBO Loan Notice E Form of Pledge Agreement F Form of Suretyship Agreement G Form of Officer's Compliance Certificate H Form of Assignment and Acceptance I Form of Joinder Supplement J Form of Multicare Management Subordination Agreement SCHEDULE 6.10 JOINDER OF BORROWERS 1. Joinder Supplement. Multicare (on behalf of itself and the other Borrowers) and each Joining Subsidiary shall execute and deliver to the Administrative Agent, with an executed counterpart for each Lender Party, an agreement in substantially the form attached to this Agreement as Exhibit I (a "Joinder Supplement") as to becoming a party hereto and to the relevant Loan Documents. 2. Notes. Each Joining Subsidiary and each existing Borrower shall execute and deliver to the Administrative Agent a replacement Note or Allonge for each Tranche A Lender and each RC Lender, as necessary. 3. Collateral. Each applicable Borrower and each applicable Joining Subsidiary shall deliver to the Administrative Agent (1) certificates and instruments representing the stock certificates and other instruments to be pledged pursuant to the Pledge Agreement accompanied by duly executed instruments of transfer or assignments in blank to the extent required by the Pledge Agreement and (2) evidence of the completion of all recordings and filings (including Uniform Commercial Code financing statements) as may be necessary or, in the opinion of the Administrative Agent, desirable to create or perfect the Liens granted and created or purported to be granted and created by each Joining Subsidiary (or by each existing Borrower in the collateral comprised of equity of any Joining Subsidiaries) under and pursuant to the Pledge Agreement. 4. Lien Searches. For each Joining Subsidiary which is acquired by a Borrower pursuant to an Acquisition, each Joining Subsidiary shall deliver to the Administrative Agent such evidence of recent searches of Uniform Commercial Code, tax, judgment records and other appropriate registers as the Administrative Agent shall request. 5. Corporate or Partnership Proceedings. Each Joining Subsidiary shall deliver to the Administrative Agent, with an executed counterpart for each Lender Party, certificates by the Secretary or Assistant Secretary of each Joining Subsidiary (or general partner thereof), dated as of the Joinder Effective Date (as defined below) as to the incumbency and signatures of the respective officers of such Joining Subsidiary who are authorized to sign Loan Documents, together with (i) true copies of the articles of incorporation and bylaws or partnership agreement (or other constituent documents) of such Joining Subsidiary in effect on such date, (ii) true copies of all corporate or partnership action taken by such Joining Subsidiary relative to this Agreement, the Joinder Supplement and the other Loan Documents. Each Joining Subsidiary shall also deliver certificates from the appropriate Secretaries of State or other applicable Governmental Authorities dated not more than 30 days before the relevant Joinder Effective Date showing the good standing of such Joining Subsidiary in its state of incorporation or organization and each state in which such Joining Subsidiary does business. 6. Legal Opinions of Counsel. The Borrowers and each Joining Subsidiary collectively shall cause to be delivered to the Administrative Agent, with an executed counterpart for each Lender Party, an opinion or opinions addressed to each Lender Party, dated the relevant Joinder Effective Date, of counsel to such Joining Subsidiary, Genesis and each of the other Borrowers as to such matters as may be requested by the Administrative Agent, all in form and substance satisfactory to the Administrative Agent. 7. Fees, Expenses, Etc. The Borrowers and each Joining Subsidiary shall pay or cause to be paid all fees and other compensation required to be paid to the Lender Parties pursuant hereto or pursuant to any other written agreement on or prior to the Joinder Effective Date. 8. Additional Matters. The Borrowers and each Joining Subsidiary shall deliver, or cause to be delivered, to the Administrative Agent such other revised schedules, certificates, opinions, instruments and other documents (including those relating to licensing) as may be requested by the Administrative Agent. All such schedules, certificates, opinions, instruments and other documents shall be satisfactory in form and substance to the Administrative Agent. SCHEDULE 8.4 ACQUISITION CONDITIONS 1. Notice. Not later than 15 Business Days before the consummation of a proposed Acquisition, Multicare (on behalf of the Borrowers) shall have delivered to each Lender Party a notice of the proposed Acquisition, together with the following: (1) copies of audited financial statements of the entity to be acquired (the "Target") for its last three fiscal years (to the extent that such audited statements are available, or, to the extent such audited statements are not so available, unaudited statements for as much of such period as is available); (2) copies of the interim financial statements of the Target for the latest fiscal quarter; (3) a pro forma projected balance sheet of Multicare and its Restricted Subsidiaries as of the date of, and after giving effect to, the proposed Acquisition and a pro forma income statement of Multicare and its Restricted Subsidiaries for the four fiscal quarters ended on, or most recently prior to, the date of such proposed Acquisition after giving effect thereto; (4) an Officer's Compliance Certificate showing pro forma compliance with the covenants referred to therein after giving effect to the proposed Acquisition (which certificate may be delivered after the other items referred to in this paragraph (1) but no later than five (5) Business Days prior to the date of the proposed Acquisition); and (5) revisions to the most recent financial projections delivered to the Lender Parties by Multicare, which revisions shall take into account the projected financial condition and results of operations of the Target for the period covered by such projections. 2. Other Information. In addition, Multicare (on behalf of the Borrowers) shall have delivered to the Administrative Agent (and with respect to the information referred to in paragraph (2) below, the requesting Lender Party) the following: (1) copies of any agreements entered into or proposed to be entered into by such Borrower in connection with such Acquisition; and (2) such other information about the Target or such Acquisition as any Lender Party may reasonably request. 3. Board Approval. The board of directors (or equivalent governing body) of the Target shall have approved such Acquisition. 4. Line of Business. Not less than 75% of the Target's revenues during its most recently completed fiscal year shall have been derived from lines of business which are, at the time of the Acquisition, among the principal lines of business of any of the Borrowers. 5. No Default. No Event of Default or Default shall have occurred and be continuing before, or after giving effect to, the consummation of the Acquisition. 6. Limitations on Mergers and Consolidations. If any merger is effected in connection with the Acquisition, a Borrower (including an entity that becomes a Borrower consistent with the provisions of this Agreement) shall be the surviving entity in the merger. No consolidation shall be permitted in connection with any Acquisition. 7. Joinder to Loan Documents. The Borrowers shall cause any new (direct or indirect) Subsidiary of Multicare which is created or acquired as a direct or indirect result of, or in connection with, such Acquisition, to become a Borrower hereunder pursuant to and in accordance with the terms of Section 6.10 of this Agreement and shall cause the ownership interests therein to be pledged under the Pledge Agreement. 8. Arm's Length. The Acquisition shall be made in good faith in an arm's-length transaction to a Person which is not an Affiliate of any Borrower, except as otherwise agreed to by the Required Lenders. Without limiting the generality of the foregoing, the total consideration paid for the Acquisition shall be no greater than the fair market value of the subject assets (including intangible assets). SCHEDULE 8.5(h) DISPOSITION CONDITIONS 1. Notice. Multicare (on behalf of the Borrowers) shall have given each Lender Party at least 5 days prior written notice of any transfer (as defined in Section 8.5 of this Agreement), together with an Officer's Compliance Certificate showing pro forma compliance with the financial covenants referred to therein (including the financial tests set forth in paragraph (h) of Section 8.5) after giving effect to such transfer. 2. Arm's Length. The transfer shall be made in good faith in an arm's-length transaction to a Person which is not an Affiliate of any Borrower, except as otherwise agreed to by the Required Lenders. Without limiting the generality of the foregoing, the total consideration for the transfer shall be at least equal to the fair market value of the subject assets (including intangible assets). 3. Transfer of Equity of a Borrower. In the event that any shares of capital stock, partnership interests or other ownership interests of a Borrower are to be disposed of or otherwise transferred in such transaction each of the following additional conditions shall be met: (a) All Loans made to such Borrower and all intercompany obligations of such Borrower shall have been repaid in full and such Borrower shall sign an acknowledgement that all obligations of the Lender Parties to it are terminated; and (b) The Administrative Agent shall have received such replacement Notes, certificates, opinions, documents and/or instruments it shall reasonably request. 4. 1997 Subordinated Debt Indenture. The disposition shall not be prohibited by, result in a default or breach under, or trigger a mandatory prepayment requirement under the terms of the 1997 Subordinated Debt Indenture. EX-99 8 EX (C)(8) PUT/CALL AGREEMENT - -------------------------------------------------------------------------------- PUT/CALL AGREEMENT Among The Cypress Group L.L.C., TPG Partners II, L.P., Nazem, Inc. And Genesis Health Ventures, Inc. Dated October 9, 1997 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS.............................. 1 1.1 Certain Defined Terms........................................... 1 ARTICLE II CALL AND PUT OPTIONS.......................... 13 2.1 Call Option..................................................... 13 2.2 Put Option...................................................... 14 2.3 Call Option Exercise Price...................................... 14 2.4 Put Option Exercise Price....................................... 15 2.5 Additional Amounts.............................................. 15 ARTICLE III DETERMINATION OF OPTION CONSIDERATION; CERTAIN CONDITIONS....... 16 3.1 Option Consideration............................................ 16 3.2 Conditions to Issuance of Genesis Common Stock.................. 18 ARTICLE IV REGISTRATION RIGHTS.......................... 20 4.1 Incidental Registration......................................... 20 4.2 Registration on Request......................................... 22 4.3 Registration Procedures......................................... 24 4.4 Indemnification................................................. 27 ARTICLE V REPRESENTATIONS AND WARRANTIES..................... 31 5.1 Representations and Warranties of the Parties................... 31 5.2 Representations and Warranties of Genesis....................... 31 5.3 Representations and Warranties of the Sponsors.................. 33 ARTICLE VI ADDITIONAL AGREEMENTS......................... 33 6.1 Further Assurances.............................................. 33 6.2 Transfer of Restricted Securities............................... 33 6.3 Calculation of Parent EBITDAR for the Exit Relevant Period............................................... 34 6.4 Election of Directors........................................... 36 i Page 6.5 Certain Negative Covenants...................................... 36 6.6 Pharmacy........................................................ 37 6.7 Pharmacy Dispositions........................................... 37 6.8 Calculation of EBITDAR.......................................... 38 6.9 Post-Put Exit................................................... 39 ARTICLE VII CLOSINGS................................ 44 7.1 Payment of the Option Price..................................... 44 7.2 Time and Place of Closing....................................... 44 ARTICLE VIII MISCELLANEOUS............................. 44 8.1 Notices......................................................... 44 8.2 Severability.................................................... 46 8.3 Entire Agreement................................................ 46 8.4 Amendment and Modification...................................... 46 8.5 Assignment; Binding on Transferees.............................. 46 8.6 Governing Law................................................... 47 8.7 Headings........................................................ 47 8.8 Counterparts.................................................... 47 8.9 Specific Performance; Remedies.................................. 47 8.10 Submission to Jurisdiction; Waivers............................. 50 8.11 Subordination Agreement......................................... 50 8.12 Waivers of Jury Trial........................................... 1 ii PUT/CALL AGREEMENT PUT/CALL AGREEMENT, dated as of October 9, 1997 (this "Agreement"), among The Cypress Group L.L.C., a Delaware limited liability company ("Cypress"), TPG Partners II, L.P., a Delaware limited partnership ("TPG"), Nazem, Inc., a Delaware corporation ("Nazem" and, together with Cypress and TPG, the "Sponsors"), and Genesis Health Ventures, Inc., a Pennsylvania corporation ("Genesis"). WITNESSETH WHEREAS, pursuant to letter agreements, dated June 15, 1997, Cypress, TPG and Genesis have agreed to acquire or cause affiliates to acquire Common Stock, par value $.01 per share (the "Common Stock"), of Genesis ElderCare Corp. (formerly known as Waltz Corp.), a Delaware corporation (the "Parent"); WHEREAS, pursuant to a letter agreement, dated August 27, 1997, Nazem has agreed to cause an affiliate to acquire Common Stock, which, together with the Common Stock acquired by Cypress, TPG and Genesis, shall, upon the acquisition thereof, constitute all of the issued and outstanding capital stock of Parent; WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of June 16, 1997 (the "Merger Agreement"), by and among Parent, Genesis ElderCare Acquisition Corp. (formerly known as Waltz Acquisition Corp.), a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and The Multicare Companies, Inc., a Delaware corporation (the "Company"), Merger Sub shall be merged with and into the Company, following which the Company shall be the surviving corporation and a wholly owned subsidiary of Parent; and WHEREAS, the parties hereto desire to enter into this Agreement for the purpose of setting forth certain agreements regarding rights and obligations of the parties. NOW, THEREFORE, in consideration of the mutual covenants and conditions as hereinafter set forth, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the following meanings: 2 "Additional Genesis Contribution" means the amount in U.S. dollars of each purchase of Common Stock made by Genesis or any of its Affiliates from Parent following the Closing. "Additional Sponsor Contribution" means the amount in U.S. dollars of each purchase of Common Stock made by Sponsors or any of their Affiliates from Parent following the Closing. "Adjusted Total Contribution" means Total Contribution less $25 million. "Affiliate" of any Person means any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. "Agreement" is defined in the preamble hereto. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to close. "Call Debt Adjustment" means $31.0 million less the product of $27,397 and the number of days elapsed between the Exercise Date and the fourth anniversary of this Agreement. "Call Option" is defined in Section 2.1. "Call Option Exercise Price" is defined in Section 2.3. "Change of Control" shall be deemed to have occurred at such time as either of the following events shall occur: (i) Genesis consolidates with or merges into any other corporation, or conveys, transfers or leases all or substantially all of its assets to any Person, or any other corporation merges into Genesis, other than, in any case, a transaction in which the shareholders of Genesis immediately prior to such transaction own, directly or indirectly, immediately following such transaction, at least 51% of the combined voting power of the outstanding voting stock of the corporation resulting from such transaction in substantially the same proportion as their ownership of the voting stock of Genesis immediately prior to such transaction; or (ii) There is a report filed by any Person, including its Affiliates, other than Genesis or its subsidiaries or employee stock ownership plans or employee benefit plans of Genesis or its subsidiaries, on Schedule 13D or 14D-1 (or any successor schedule, form or report) pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that such Person (for the purposes of this definition only, the term "person" shall include a "person" within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision to either of 3 the foregoing) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the voting power of Genesis' voting stock then outstanding; provided, however, that a Person shall not be deemed beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates until such tendered securities are accepted for purchase or exchange thereunder or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule, form or report) under the Exchange Act. "Closing" means the consummation of the first acquisition by Sponsors of shares of Common Stock. "Closing Date" means the date on which the Closing occurs. "Common Stock" is defined in the recitals hereto. "Company" is defined in the recitals hereto. "Consolidated Interest Expense" means, for any period for any Person, the amount of interest expense of such entity and its subsidiaries, including, without limitation, (i) amortization of debt discount, (ii) the interest portion of any deferred payment obligation and (iii) accrued interest, determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income (or Loss)" means, for any period for any Person, the net income (or loss) of such entity and its subsidiaries for such period on a consolidated basis, all determined in accordance with GAAP. "Consolidated Rent Expense" means, for any period for any Person, the rent expense of such entity and its subsidiaries, including expensed but excluding capitalized rent expense and amortization of gains from the sale of properties to ElderTrust, Inc., for such period determined on a consolidated basis in accordance with GAAP. "Consolidated SG&A Expense" means, for any period for any Person, the non-extraordinary sales, general and administrative expenses of such entity and its subsidiaries determined in accordance with GAAP. "Consolidated Tax Expense" means, for any period for any Person, the aggregate of the federal, state, local and 4 foreign income tax expense of such entity and its subsidiaries for such period (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets), determined on a consolidated basis in accordance with GAAP. "Cypress" is defined in the preamble hereto. "EBITDAR" means, for any period for any Person other than Parent or the Pharmacy, the sum of Consolidated Net Income (or Loss) of such Person plus, to the extent deducted in computing Consolidated Net Income (or Loss) of such Person, Consolidated Interest Expense of such Person, Consolidated Tax Expense of such Person, Consolidated Rent Expense of such Person, Consolidated SG&A Expense of such Person, all depreciation and, without duplication, amortization and all extraordinary expenses and non-recurring charges of such Person, and minus 2.75% of the consolidated net revenues of such Person and, to the extent included in computing Consolidated Net Income (or Loss) of such Person, all extraordinary income and non-recurring gains of such Person, in each case, for such period, all as determined in accordance with GAAP. For purposes of calculating EBITDAR for any Person, to the extent such Person acquires an interest of less than 100% in another Person (such percentage, the "percentage investment") after the date hereof, the contribution to EBITDAR of such investment shall be calculated as the product of the percentage investment and the EBITDAR of the Person in which the investment is made. Genesis, on the one hand, and Cypress and TPG, acting jointly on behalf of Sponsors on the other hand, shall agree to appropriate adjustments to the definition of EBITDAR in respect of any such future investments to reflect the foregoing. "Event of Acceleration" means (a) a court having jurisdiction in the premises shall have entered a decree or order for relief in respect of Genesis or any of its significant subsidiaries (as defined in Rule 1-02 under Regulation S-X) in an involuntary case under any applicable bankruptcy, insolvency or other law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Genesis or such significant subsidiary or for all or any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and such decree or order shall have remained unstayed and in effect for a period of 90 consecutive days; or (b) Genesis or any of its significant subsidiaries (as defined in Rule 1-02 under Regulation S-X) shall have commenced a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall have consented to the entry of an order for relief in an involuntary case under any such law, or shall have consented to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) 5 of Genesis or such subsidiary or for all or any substantial part of its property, or shall have made an assignment for the benefit of creditors, or shall have failed generally to pay its debts as they become due or shall have taken any corporate action in furtherance of any of the foregoing; or (c) a Change of Control shall have occurred; or (d) the payment, declaration or making of an Extraordinary Dividend or Distribution; Leveraged Recapitalization. "Excess Value" means the greater of (i) zero or (ii) Total Equity Value, less Total Hurdle Value, less Total Genesis Contribution. "Exercise Date" means the date specified for the closing of the exercise of either of the Options, as set forth in a notice given pursuant to Section 2.1(b) or 2.2(b), as applicable; provided, that unless the context otherwise requires, if the Put Option has not been exercised by the date which is the first day after the sixth anniversary of the Closing Date, Exercise Date shall mean such date. "Exit Relevant Period" means the period of twelve full calendar months ending immediately prior to or coincident with the Notification Date. "Extraordinary Dividend or Distribution; Leveraged Recapitalization" means (a) any cash dividend or distribution with respect to Genesis Common Stock the amount of which, (i) together with the fair market value of all dividends or other distributions on or with respect to Genesis Common Stock with ex-dividend dates occurring in the 90 consecutive day period ending on the day immediately prior to the ex-dividend date with respect to the dividend to which this definition is being applied and the fair market value of all property used by Genesis, directly or indirectly, in such 90-day period to repurchase shares of any class of its capital stock, equals or exceeds on a per share basis 12.5% of the average of the closing prices of the Genesis Common Stock for the period beginning on the day immediately following the first such ex-dividend date in such period and ending on the day immediately prior to the ex-dividend date with respect to the dividend as to which this definition is being applied (with closing prices determined as provided in the definition of Market Value and except that if no other dividend has had an ex-dividend date occurring in such period, the period for calculating the average of the closing prices of the Genesis Common Stock shall be the 90 day period ending on the day immediately prior to the ex-dividend date with respect to the cash dividend as to which this definition is being applied) or (ii) together with the fair market value of all dividends or other distributions on or with respect to Genesis Common Stock with ex-dividend dates occurring in the 365 consecutive day 6 period ending on the day immediately prior to the ex-dividend date with respect to the dividend to which this definition is being applied and the fair market value of all property used by Genesis, directly or indirectly, in such 365-day period to repurchase shares of any class of its capital stock, equals or exceeds on a per share basis 25% of the average of the closing prices of the Genesis Common Stock for the period beginning on the day immediately following the first such ex-dividend date in such period and ending on the day immediately prior to the ex-dividend date with respect to the dividend as to which this definition is being applied (with closing prices determined as provided in the definition of Market Value and except that if no other dividend has had an ex-dividend date occurring in such period, the period for calculating the average of the closing prices of the Genesis Common Stock shall be the 360 day period ending on the day immediately prior to the ex-dividend date with respect to the cash dividend as to which this definition is being applied); or (b) any dividend or distribution of assets, other than cash, with respect to Genesis Common Stock (including, without limitation, by way of exchange offer) the fair market value of which, together with the fair market value of all dividends or distributions on Genesis Common Stock with ex-dividend dates occurring in the 365 consecutive day period ending on the day immediately prior to the ex-dividend date with respect to the dividend or distribution to which this definition is being applied and the fair market value of all property used by Genesis, directly or indirectly, in such 365 day period to repurchase shares of any class of its capital stock, equals or exceeds 12.5% of Genesis' common equity market capitalization at the time of such dividend or distribution; provided, that the percentage contained in this paragraph (b) shall be reduced to 0% (y) at any time when Genesis' common equity market capitalization does not exceed $2 billion or (z) if Genesis' Adjusted Total Debt/Cash Flow Ratio (as defined in Genesis' credit agreement among Genesis and Mellon Bank, N.A., Citicorp USA, Inc., First Union National Bank and NationsBank, N.A. and the lenders identified therein, in the form first executed) on a pro forma basis after giving effect to the dividend or distribution would be greater than 5.00:1.00. For purposes of this definition, fair market value shall be determined and set forth in writing in good faith by the board of directors of Genesis. "GAAP" means generally accepted accounting principles, as in effect in the United States of America on the date hereof and applied on a basis consistent with the manner in which such principles were applied in the preparation of the historical financial statements of Genesis. "Genesis" is defined in the preamble hereto. "Genesis A Contribution" means the sum of $275 million and the aggregate amount of any Additional Genesis Contributions, 7 less an amount ("Genesis Contribution Adjustment") which, if invested at a compound annual rate of 15.0% on the Closing Date, would equal the amount of Genesis Returned Capital on the date or dates paid to Genesis or its Affiliates. "Genesis C Contribution" means $50 million. "Genesis Common Stock" means the common stock, par value $.02 per share, of Genesis and shall also include (i) capital stock of Genesis of any other class (regardless of how denominated) issued to the holders of shares of Genesis Common Stock upon any reclassification thereof in which the shares of Genesis Common Stock are converted into a new class of capital stock and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Genesis Common Stock. "Genesis Contribution Adjustment" is defined in the definition of Genesis A Contribution. "Genesis Returned Capital" is defined in Section 6.7(b). "Holder" shall mean any Person who owns Registrable Securities. "HSR Act" is defined in Section 6.1(b). "Hurdle Profit" means the amount in excess of the Total Sponsor Contribution necessary to provide a 25% compound annual return on the Total Sponsor Contribution from and including the Closing Date (or, with respect to Additional Sponsor Contributions, measured from and including the date on which each such Additional Sponsor Contribution was made) to but excluding the Exercise Date. Notwithstanding the foregoing, the required return in respect of any portion of the measurement period comprising less than an entire year shall be determined as the product of (i) 0.06849% and (ii) the number of calendar days in such period. "Management Agreement" means the Management Agreement, dated as of October 9, 1997, between Genesis ElderCare Network Services, Inc. and Genesis ElderCare Corp. "Management Fee" means the fee payable to Genesis or one of its affiliates under the Management Agreement. "Market Value" means the average of the daily closing prices of the Genesis Common Stock for the 20 trading day period ending on the calendar day prior to the Exercise Date or such other relevant date of determination, as the case may be. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices 8 regular way, in either case on the New York Stock Exchange, or, if the Genesis Common Stock is not listed or admitted to trading on the New York Stock Exchange, on the American Stock Exchange, or, if the Genesis Common Stock is not listed or admitted to trading on the American Stock Exchange, the average of the closing bid and asked prices of the Genesis Common Stock in the over-the-counter market as reported on the NASDAQ system of the National Association of Securities Dealers, Inc. or if the Genesis Common Stock is not so quoted, the average of the closing bid and asked price of the Genesis Common Stock in the over-the-counter market as furnished by any nationally recognized New York Stock Exchange member firm selected by Genesis for such purpose. "Merger Agreement" is defined in the recitals hereto. "Merger Sub" is defined in the recitals hereto. "Nazem" is defined in the preamble hereto. "Notification Date" means the date notification is given by an exercising party under either of the Options in accordance with Section 2.1(b) or 2.2(b), as applicable; provided, that unless the context otherwise requires, if the Put Option has not been exercised by the date which is the first day after the sixth anniversary of the Closing Date, Notification Date shall mean such date. "Option" means the Call Option or the Put Option, as applicable. "Option Price" means the Call Option Exercise Price or the Put Option Exercise Price, as applicable and as determined in accordance with this Agreement. "Option Shares" means shares of Genesis Common Stock, if any, issuable in connection with the exercise of an Option and shares of Genesis Common Stock, if any, issued pursuant to Section 6.9. "Parent" is defined in the recitals hereto. "Parent EBITDAR" means, for any period, the sum of Consolidated Net Income (or Loss) of Parent plus (i) 2.0% of Net Revenues (as defined in the Management Agreement), whether paid in cash or accrued (provided that the management fee under the Management Agreement has been paid or accrued), (ii) to the extent deducted in computing Consolidated Net Income (or Loss) of Parent, Consolidated Interest Expense of Parent, Consolidated Tax Expense of Parent, Consolidated Rent Expense of Parent, all depreciation and, without duplication, amortization and all extraordinary expenses and non-recurring charges of Parent and (iii) the product of Pharmacy Percentage Interest multiplied by Pharmacy EBITDAR and minus, to the extent included in computing Consolidated Net Income (or Loss) of Parent, all extraordinary 9 income and non-recurring gains of Parent, in each case, for such period, all as determined in accordance with GAAP. In the event Parent, directly or indirectly, has made one or more acquisitions or dispositions (other than dispositions pursuant to Section 6.1(b)) of stock or assets or investments in any Person during any period for which Parent EBITDAR is calculated, Parent EBITDAR shall be calculated for such period on a pro forma basis giving effect to such acquisition or disposition or investment as if it occurred at the beginning of such period. For purposes of calculating Parent EBITDAR for any Person, to the extent such Person acquires an interest of less than 100% in another Person (such percentage, the "percentage investment") after the date hereof, the contribution to Parent EBITDAR of such investment shall be calculated as the product of the percentage investment and the EBITDAR of the Person in which the investment is made. Genesis, on the one hand, and Cypress and TPG, acting jointly on behalf of Sponsors on the other hand, shall agree to appropriate adjustments to the definition of Parent EBITDAR in respect of any such future investments to reflect the foregoing. "Person" means any individual, corporation, partnership, joint venture, trust, business, unincorporated organization or other entity. "Pharmacy" means the collective reference to the lines of business described on Annex A hereto as from time to time conducted, directly or indirectly, by Genesis. "Pharmacy EBITDAR" means, for any period, the sum of Consolidated Net Income (or Loss) of the Pharmacy plus, to the extent deducted in computing Consolidated Net Income (or Loss) of the Pharmacy, Consolidated Interest Expense of the Pharmacy, Consolidated Tax Expense of the Pharmacy, Consolidated Rent Expense of the Pharmacy, Consolidated SG&A Expense of the Pharmacy, all depreciation and, without duplication, amortization and all extraordinary expenses and non-recurring charges (including, without limitation, start-up losses) of the Pharmacy, and minus 2.75% of the consolidated net revenues of the Pharmacy and, to the extent included in computing Consolidated Net Income (or Loss) of the Pharmacy, all extraordinary income and non-recurring gains of the Pharmacy, in each case, for such period, all as determined in accordance with GAAP. In the event that Genesis, directly or indirectly, makes any acquisition of stock or assets or any investment in any Person that, following such acquisition or investment, comprises part of the Pharmacy during any period for which Pharmacy EBITDAR is calculated, Pharmacy EBITDAR shall be calculated for such period on a pro forma basis giving effect to such acquisition or investment as if it occurred at the beginning of such period. For purposes of calculating Pharmacy EBITDAR for any Person, to the extent such Person acquires an interest of less than 100% in another Person (such percentage, the "percentage investment") after the date hereof, the contribution to Pharmacy EBITDAR of such investment shall be calculated as the product of the percentage investment and the 10 EBITDAR of the Person in which the investment is made. Genesis, on the one hand, and Cypress and TPG, acting jointly on behalf of Sponsors on the other hand, shall agree to appropriate adjustments to the definition of Pharmacy EBITDAR in respect of any such future investments to reflect the foregoing. "Pharmacy Percentage Interest" means 24.0%, provided, that in the event that Genesis, directly or indirectly, makes any acquisition of stock or assets or any investment in any Person that, following such acquisition or investment, comprises part of the Pharmacy, Pharmacy Percentage Interest shall equal (i) the product of (a) the then Pharmacy Percentage Interest and (b) Pharmacy EBITDAR for the twelve full calendar months ending immediately prior to or coincident with such acquisition (determined for purposes of this clause (b) only without giving pro forma effect to the acquisition or investment giving rise to such recalculation of Pharmacy Percentage Interest), divided by (ii) the sum of (c) Pharmacy EBITDAR for the twelve full calendar months ending immediately prior to or coincident with such acquisition, and (d) the EBITDAR for the twelve calendar months ending immediately prior to or coincident with such acquisition attributable to the stock or assets acquired or the investment made, calculated giving pro forma effect to the acquisition or investment; provided that any such pro forma adjustments shall comply as to form in all material respects with the accounting requirements of Rule 11-02 of Regulation S-X and shall be properly applied to the applicable historical amounts. "Put Debt Adjustment" means $19.8 million less the product of $35,616 and the number of days elapsed between the Exercise Date and the fifth anniversary of this Agreement. "Put Option" is defined in Section 2.2. "Put Option Exercise Price" is defined in Section 2.4. "Registrable Securities" means (i) any Genesis Common Stock issued pursuant to Section 3.1 or Section 6.9 and (ii) any securities issued or distributed in respect of such Genesis Common Stock by way of transfer, substitution, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, liquidation or other reorganization. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (w) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (x) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (y) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by Genesis and subsequent disposition of them shall not require registration or qualification of them under the 11 Securities Act or any state securities or blue sky law then in force or (z) they shall have ceased to be outstanding. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance with Sections 3.1, 4.1, 4.2 and 4.3 of this Agreement, including, without limitation, (i) all SEC and securities exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses of complying with securities or blue sky laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange pursuant to Section 4.3(h), (v) the fees and disbursements of counsel for Genesis and of its independent public accountants, including the expenses of any special audits and/or "cold comfort" letters required by or incident to such performance and compliance, (vi) the reasonable fees and disbursements of one counsel, other than Genesis' counsel, selected by the holders of a majority of the Registrable Securities being registered to represent all holders of the Registrable Securities being registered in connection with each such registration (it being understood that any such holder may, at its own expense, retain separate counsel to represent it in connection with such registration), (vii) any fees and disbursements of underwriters customarily paid by the issuers or sellers of securities, and the reasonable fees and expenses of any special experts retained in connection with the requested registration, but excluding underwriting discounts and commissions and transfer taxes, if any, and (viii) subject to Sections 4.1(b) and 4.2(b), all underwriting discounts and commissions or other brokers' commissions charged in connection with the sale of Registrable Securities. "Restricted Securities" means (i) Genesis Common Stock issued pursuant to Section 3.1 or Section 6.9 and (ii) any securities issued or distributed in respect of any such Genesis Common Stock by way of transfer, substitutions stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, liquidation or other reorganization. As to any particular Restricted Securities, such securities will cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale by the holder thereof pursuant to Rule 144 or (c) been otherwise transferred and new certificates for them not bearing any restrictive legend have been delivered by Genesis and subsequent disposition of them shall not require registration or qualification under the Securities Act or any state securities or blue sky law then in force. Whenever any particular securities cease to be Restricted Securities, the holder thereof will be entitled to receive from 12 Genesis, without expense, new securities of like tenor not bearing any restrictive legend. "SEC" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act. "Securities Act" shall mean the Securities Act of 1933, and the rules and regulations promulgated thereunder, as the same may be amended from time to time. "Sponsor A Contribution" means the sum of $270 million and the aggregate amount of Additional Sponsor Contributions, less an amount ("Sponsor Contribution Adjustment") which, if invested at a compound annual rate of 32.0% on the Closing Date, would equal the amount of Sponsor Returned Capital on the date or dates paid to Sponsors. "Sponsor B Contribution" means $110 million. "Sponsor Contribution Adjustment" is defined in the definition of Sponsor A Contribution. "Sponsor D Contribution" means $40 million. "Sponsor Liquidity Right" is defined in Section 3.1. "Sponsor Liquidity Right Sale" is defined in Section 3.1. "Sponsor Returned Capital" is defined in Section 6.7(b). "Sponsors" is defined in the preamble hereto. "Stockholders Agreement" means the Stockholders Agreement, dated October 9, 1997, among Cypress, Genesis, Merger Sub, Nazem, Parent, and TPG. "Total A Contribution" means the sum of (a) Sponsor A Contribution and (b) Genesis A Contribution. "Total Call Enterprise Value" means the product of (a) 12 multiplied by (b) Parent EBITDAR for the Exit Relevant Period. "Total Contribution" means the sum of Total Sponsor Contribution and Total Genesis Contribution. "Total Equity Value" as of the Exercise Date (each of the following shall be determined as of the Exercise Date except for Total Call Enterprise Value and Total Put Enterprise Value, which shall be determined in accordance with the definition thereof) means the excess, if any, of (i) Total Call Enterprise Value, if the calculation is being made in respect of the 13 exercise of the Call Option, or Total Put Enterprise Value, if the calculation is being made in respect of the exercise of the Put Option, over (ii) the sum of (a) the aggregate outstanding principal amount (including accrued but unpaid interest thereon) of Parent's consolidated total indebtedness, plus the accrued but unpaid portion of the Management Fee, less (b) the aggregate amount of Parent's consolidated total cash, cash equivalents, any other marketable securities, plus (c) the product of (y) 8 and (z) Consolidated Rent Expense for the Exit Relevant Period, plus (d) Call Debt Adjustment, if the calculation is being made in respect of the exercise of the Call Option, or Put Debt Adjustment, if the calculation is being made in respect of the exercise of the Put Option. "Total Genesis Contribution" means the sum of Genesis A Contribution and Genesis C Contribution. "Total Hurdle Value" means the sum of Total Sponsor Contribution and Hurdle Profit. "Total Put Enterprise Value" means the product of (a) 13 multiplied by (b) Parent EBITDAR for the Exit Relevant Period. "Total Sponsor Contribution" means the sum of Sponsor A Contribution, Sponsor B Contribution and Sponsor D Contribution. "TPG" is defined in the preamble hereto. ARTICLE II CALL AND PUT OPTIONS Section 2.1 Call Option. (a) On the terms and subject to the conditions set forth herein, Sponsors, on behalf of themselves and their Affiliates owning Common Stock, hereby grant to Genesis an irrevocable option (the "Call Option") exercisable beginning on the first day after the fourth anniversary of the Closing Date and ending on the 270th day after the fourth anniversary of the Closing Date, to purchase (and, upon exercise of such Call Option in accordance herewith, Sponsors irrevocably agree to sell to Genesis or cause the sale to Genesis of) all, but not less than all, of the Common Stock owned by them and their Affiliates; provided, that the Call Option shall not be exercisable at any time while the Put Option is exercisable or following any exercise of the Put Option. The aggregate purchase price with respect to all the shares of Common Stock being purchased pursuant to the Call Option shall be equal to the Call Option Exercise Price. The consideration to be paid for each share of Common Stock shall equal the Call Option Exercise Price divided by the aggregate number of shares of Common Stock being purchased; provided, that Sponsors may reallocate the Call Option Exercise Price among themselves and their Affiliates to the extent necessary to take into account 14 differences among them, if any, in making Additional Sponsor Contributions. (b) Genesis shall give Sponsors written notice of exercise of the Call Option no less than 120 days prior to the Business Day specified in such notice for exercise of the Call Option. A notice of exercise of the Call Option shall irrevocably commit Genesis and Sponsors and their Affiliates owning Common Stock to the purchase and sale of the Common Stock in accordance with the Call Option. The closing of the Call Option shall take place as provided in Article VII. Section 2.2 Put Option. (a) On the terms and subject to the conditions set forth herein, Genesis hereby grants to Sponsors and their Affiliates owning Common Stock an irrevocable option (the "Put Option"), exercisable beginning on the earlier of (i) the occurrence of an Event of Acceleration and (ii) the first day after the fifth anniversary of the Closing Date and ending in either case on the first day after the sixth anniversary of the Closing Date, to require Genesis to purchase (and, upon exercise of such Put Option in accordance herewith, Genesis irrevocably agrees to purchase from Sponsors or their affiliates) all, but not less than all, of the Common Stock owned by Sponsors or their affiliates; provided, that, Cypress and TPG, acting jointly on behalf of Sponsors, shall deliver notice of such exercise to Genesis, it being understood that neither Nazem nor its Affiliates owning Common Stock shall have any right to participate in the election to exercise the Put Option. The aggregate purchase price with respect to all the shares of Common Stock being purchased shall be equal to the Put Option Exercise Price. The consideration to be paid for each share of Common Stock shall equal the Put Option Exercise Price divided by the aggregate number of shares of Common Stock being purchased; provided, that Sponsors may reallocate the Put Option Exercise Price among themselves and their Affiliates to the extent necessary to take into account differences among them, if any, in making Additional Sponsor Contributions. (b) Cypress and TPG, acting jointly on behalf of Sponsors, shall give Genesis written notice of exercise of the Put Option no less than 120 days prior to the Business Day specified in such notice for exercise of the Put Option. A notice of exercise of the Put Option shall irrevocably commit Genesis and Sponsors and their Affiliates owning Common Stock to the purchase and sale of the Common Stock in accordance with the Put Option. The closing of the Put Option shall take place as provided in Article VII. Section 2.3 Call Option Exercise Price. The Call Option Exercise Price shall be determined as of the Exercise Date and shall be equal to: 15 (i) Total Hurdle Value, if Total Equity Value is equal to or less than the sum of (a) Total Contribution and (b) Hurdle Profit; or (ii) the sum of (a) Total Hurdle Value and (b) the product of (i) Excess Value and (ii) the ratio of the sum of (A) Total Sponsor Contribution and (B) Sponsor Contribution Adjustment to the sum of (A) Adjusted Total Contribution, (B) Sponsor Contribution Adjustment and (C) Genesis Contribution Adjustment, if Total Equity Value is greater than the sum of (y) Total Contribution and (z) Hurdle Profit. Section 2.4 Put Option Exercise Price. The Put Option Exercise Price shall be determined as of the Exercise Date and shall be equal to: (i) the product of (a) Total Equity Value and (b) the ratio of Sponsor A Contribution to Total A Contribution, if Total Equity Value is equal to or less than Total A Contribution; (ii) Total Equity Value less Genesis A Contribution, if Total Equity Value is greater than Total A Contribution, but less than or equal to the sum of (a) Total A Contribution and (b) Sponsor B Contribution; (iii) the sum of (a) Sponsor A Contribution and (b) Sponsor B Contribution, if Total Equity Value is greater than the sum of (v) Total A Contribution and (w) Sponsor B Contribution, but less than or equal to the sum of (x) Total A Contribution, (y) Sponsor B Contribution and (z) Genesis C Contribution; (iv) Total Equity Value less Total Genesis Contribution, if Total Equity Value is greater than the sum of (a) Total A Contribution, (b) Sponsor B Contribution and (c) Genesis C Contribution, but less than or equal to the sum of (d) Total Contribution and (e) Hurdle Profit; or (v) the sum of (a) Total Hurdle Value and (b) the product of (i) Excess Value and (ii) the ratio of the sum of (A) Total Sponsor Contribution and (B) Sponsor Contribution Adjustment to the sum of (A) Adjusted Total Contribution, (B) Sponsor Contribution Adjustment and (C) Genesis Contribution Adjustment, if Total Equity Value is greater than the sum of (y) Total Contribution and (z) Hurdle Profit. Section 2.5 Additional Amounts. In the event that the Call Option or the Put Option is exercised as provided above and the closing thereof does not take place as provided in Section 7.1 (without giving effect to the reference in Section 7.1 to Section 3.2(i)) other than as a result of the failure of Sponsors to deliver the Common Stock, duly endorsed for transfer, against payment of the purchase price therefor, then an amount in addition to the Option Price shall accrue and be payable to Sponsors equal to the product of (i) that portion of the Option 16 Price not paid as of the time and date specified therefor in Section 7.1 (without giving effect to the reference in Section 7.1 to Section 3.2(i)) (until such amount is paid) and (ii) the greater of (a) a 25% compound annual rate (or, in respect of any period less than an entire year, the product of (y) 0.06849% and (z) the number of calendar days elapsed in such period) and (b) the compound annual rate of return provided by the Option Price on Total Sponsor Contribution calculated from and including the Closing Date (or, with respect to Additional Sponsor Contributions, measured from and including the date on which each such Additional Sponsor Contribution was made) to but excluding the Exercise Date (or, in respect of any period less than an entire year, the product of (y) such rate divided by 365 and (z) the number of calendar days elapsed in such period). Such amount, if any, shall be payable to Sponsors pro rata based on the number of shares of Common Stock owned by each Sponsor or its Affiliates. ARTICLE III DETERMINATION OF OPTION CONSIDERATION; CERTAIN CONDITIONS Section 3.1 Option Consideration. (a) (i) Subject to Section 3.2, Genesis may use for payment of the Option Price (either in whole or in part) payable under the Call Option or the Put Option either cash or Genesis Common Stock. If Genesis Common Stock is to be issued, Genesis shall notify Sponsors within 7 days of the Notification Date of the percentage of the Option Price to be paid in Genesis Common Stock. The number of shares of Genesis Common Stock so issuable on the Exercise Date will be calculated as follows. (ii) If Cypress and TPG, acting jointly on behalf of Sponsors, notify Genesis within 21 days of the Notification Date of Sponsors' desire to receive cash (either in whole or in part) for payment of the Option Price in lieu of shares of Genesis Common Stock, then Genesis will use its reasonable best efforts to effectuate the underwritten sale (the "Sponsor Liquidity Right Sale") of such number of shares of Genesis Common Stock as would, upon consummation of such sale, yield net cash proceeds to Sponsors equal to the portion of the Option Price that would have otherwise been paid in cash if Genesis had not elected to use Genesis Common Stock for payment of such portion of the Option Price (such notification together with the sale of Genesis Common Stock for such purpose being referred to as the "Sponsor Liquidity Right"); it being understood that Nazem shall not have any right to participate in the invocation of the Sponsor Liquidity Right. In the Sponsor Liquidity Right Sale, if any, Cypress and TPG, acting jointly on behalf of Sponsors, shall have the right to select the managing underwriter (and sole book runner) to manage and administer the offering, and Genesis shall have the right to select an additional underwriter. The allocation of underwriting compensation shall favor the managing 17 underwriter. In the Sponsor Liquidity Right Sale, if any, Genesis shall only be obligated, in the exercise of its reasonable best efforts, to sell the largest number of shares of Genesis Common Stock which can be sold at a price of not less than 90% of the Market Value of the Genesis Common Stock determined at the time of the pricing of the Sponsor Liquidity Right Sale. Genesis shall use its reasonable best efforts to cause the Sponsor Liquidity Right Sale, if any, to be consummated by such time so that the proceeds therefrom shall be available for the closing of the Put Option or the Call Option, as the case may be, in accordance with the provisions of Article VII hereof (without giving effect to the reference in Section 7.1 to Section 3.2(i)). In the event that the net cash proceeds from the Sponsor Liquidity Right Sale, if any, are insufficient or, solely because Genesis has been unable in the exercise of its reasonable best efforts to consummate timely a Sponsor Liquidity Right Sale, unavailable to pay the portion of the Option Price that would have otherwise been paid in cash to Sponsors or their Affiliates, Genesis will issue to Sponsors or their Affiliates shares of Genesis Common Stock in payment of the balance or all of the Option Price, as the case may be. The number of shares so issuable in respect of the non-cash portion of the Option Price will be equal to the dollar amount of the non-cash portion of the Option Price divided by the lesser of (a) the average of the daily closing prices of the Genesis Common Stock for the 10 trading day period commencing 5 trading days prior to the closing of the Sponsor Liquidity Right Sale (with closing prices determined as provided in the definition of Market Value) and (b) the public offering price of the Genesis Common Stock in the Sponsor Liquidity Right Sale or, if there is no Sponsor Liquidity Right Sale, divided by the Market Value of the Genesis Common Stock. (iii) Genesis shall bear all Registration Expenses in connection with such issuance and sale (including the entire amount of any and all underwriters' discounts and commissions) and provide customary and appropriate undertakings (including indemnification of Sponsors and their Affiliates to the same extent provided in Section 4.4) in connection with such issuance and sale. (b) If Cypress and TPG, on behalf of Sponsors, do not invoke the Sponsor Liquidity Right as described in paragraph (a) above with respect to the entire portion of the Option Price payable in Genesis Common Stock, the number of shares issuable in respect of the non-cash portion of the Option Price will be equal to the dollar amount of the non-cash portion of the Option Price divided by the Market Value of the Genesis Common Stock. (c) Genesis agrees (i) to make an appropriate public announcement no later than 5 trading days prior to the 20 trading day periods referred to in the definition of Market Value with regard to the pending issuance of Genesis Common Stock in the Sponsor Liquidity Right Sale, if any, and/or the issuance of 18 Genesis Common Stock issuable in respect of the non-cash portion of the Option Price, if any, and (ii) during the period commencing at the beginning of such 20 trading day period and through the later of the date of issuance of the Genesis Common Stock in the Sponsor Liquidity Right Sale and the date of issuance of the Genesis Common Stock issuable in respect of the non-cash portion of the Option Price, not to take any corporate action (other than the declaration or payment of a regular dividend, consistent with past practice) in respect of (A) combining or splitting the outstanding shares of Genesis Common Stock, including combining its outstanding shares into a smaller number of shares or issuing rights, warrants or dividends payable in additional shares of Genesis Common Stock to stockholders of record on a date prior to the date of issuance or (B) directly or indirectly, through the use of derivative securities or otherwise, purchasing shares of Genesis Common Stock. Section 3.2 Conditions to Issuance of Genesis Common Stock. The ability of Genesis to issue Genesis Common Stock in lieu of paying the Option Price in cash is subject to the satisfaction of each of the following conditions, which conditions may be waived by Cypress and TPG, acting jointly on behalf of Sponsors, in their sole discretion: (a) The Option Shares shall have been or shall be, prior to issuance, duly authorized and, when the Option Shares are issued, delivered and paid for, such shares, shall be validly issued and outstanding, fully paid and nonassessable shares of capital stock of Genesis, with no personal liability attached to the ownership thereof; and the holders of the outstanding stock shall not be entitled to preemptive or other rights to subscribe for such shares. (b) The issuance of the Option Shares shall not conflict with the terms of the certificate of incorporation or bylaws of Genesis. (c) No consent, approval or authorization of, or filing, registration or qualification with, any court, governmental, administrative or judicial authority or regulatory body shall be, as of the date of issuance thereof, required on the part of Genesis for the valid authorization, issuance, sale and delivery of the Option Shares. (d) Genesis shall have used its reasonable best efforts to cause the Option Shares, on or prior to the issuance thereof, to be eligible for trading on the principal United States securities exchange on which the Genesis Common Stock is then traded or on the NASDAQ National Market System, as the case may be. (e) The issuance of Option Shares shall not cause any rights under any rights plan (poison pill) of Genesis or any 19 of its subsidiaries to issue or become exercisable or result in any other adverse consequence to Sponsors or their Affiliates owning Common Stock under any rights plan of Genesis. (f) Sponsors shall have received a certificate, dated the applicable issue date and signed by an executive officer of Genesis, certifying that the conditions set forth in Sections 3.2(a) and 3.2(b) are satisfied on and as of such date. (g) Genesis shall have provided Sponsors with a legal opinion, dated the date of the issuance of the Option Shares, from counsel reasonably satisfactory to Cypress and TPG with respect to matters customarily covered in connection with the issuance of shares to a private investor, and such opinion shall be reasonably satisfactory in form and substance to Cypress and TPG. (h) The receipt of the Option Shares by Sponsors or their Affiliates shall not have been enjoined (temporarily or permanently) as of the date of the issuance thereof or be prohibited by any applicable law or governmental regulation. (i) None of the Events of Acceleration described in clause (a), (b) or (c) of the definition thereof shall have occurred as of the Notification Date or the date of the Issuance of the Option Shares. Notwithstanding anything to the contrary, the parties acknowledge and agree that in the event that (i) the Option Price is not payable by issuance of Genesis Common Stock solely as a result of the occurrence of an Event of Acceleration described in clause (c) of the definition thereof, (ii) the payment of the Option Price in cash would cause a default under any indebtedness of Genesis existing or contemplated by an executed commitment letter on the date of this Agreement and (iii) there shall not have been any full or partial waiver under such indebtedness of any provision restricting, or requiring prepayment as a result of, a Change of Control or any amendment of any such provision having the effect of a full or partial waiver thereof, then the closing of the Option shall be postponed with respect to the minimum number of whole shares of Common Stock such that the payment of the Option Price in cash for the balance of the shares of Common Stock would not cause such a default. Thereafter and from time to time, the closing with respect to the shares of Common Stock not then purchased shall take place as promptly as possible to the extent that the purchase thereof for cash will not cause a default under any such indebtedness. Genesis agrees to use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary to permit the closing under the Option to take place as promptly as possible with respect to all of the shares of Common Stock. The parties acknowledge and agree 20 that from time to time Cypress and TPG, acting jointly on behalf of Sponsors, may waive the condition contained in this paragraph (i) with respect to the purchase of all or a portion of the share of Common Stock not then purchased. ARTICLE IV REGISTRATION RIGHTS Section 4.1 Incidental Registration. (a) Right to Include Registrable Securities. Each time Genesis proposes to register Genesis Common Stock under the Securities Act (other than a registration on Form S-4 or S-8, or any successor or other forms promulgated for similar purposes), whether or not for sale for its own account, pursuant to a registration statement on which it is permissible to register Registrable Securities for sale to the public under the Securities Act, it will give prompt written notice to all Holders, if any, of its intention to do so and of the Holders' rights under this Section 4.1(a). Upon the written request of any Holder made within 15 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder), Genesis will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which Genesis has been so requested to register by the Holders thereof; provided, that (i) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, Genesis shall determine for any reason not to proceed with the proposed registration, Genesis may, at its election, give written notice of such determination to each Holder and thereupon shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), and (ii) if such registration involves an underwritten offering by Genesis (underwritten, at least in part, by Persons who are not Affiliates of Genesis), all Holders requesting to have Registrable Securities included in Genesis' registration must sell their Registrable Securities to such underwriters who shall have been selected by Genesis on the same terms and conditions as apply to Genesis, with such differences, including any with respect to indemnification and contribution, as may be customary or appropriate in combined primary and secondary offerings. If a proposed registration pursuant to this Section 4.1(a) involves such an underwritten public offering, any Holder making a request under this Section 4.1(a) in connection with such registration may elect in writing, prior to the effective date of the registration statement filed in connection with such registration, to withdraw such request and not to have such securities registered in connection with such registration. 21 (b) Expenses. Genesis will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to Section 4.1(a), regardless of whether such registration statement becomes effective; provided, that each holder of Genesis Common Stock issued pursuant to Section 3.1 as to which there is no attempt to exercise the Sponsor Liquidity Right shall pay all underwriting discounts and commissions relating to the sale or disposition of such Holder's Registrable Securities pursuant to a registration statement effected pursuant to this Section 4.1(a). (c) Priority in Incidental Registrations. If a registration pursuant to this Section 4.1 involves an underwritten offering by Genesis (as described in Section 4.1(a)(ii)) and the managing underwriter with respect to such offering advises Genesis in writing that, in its opinion, the number of securities (including all Registrable Securities) which Genesis, the Holders and any other persons intend to include in such registration exceeds the largest number of securities which can be sold in such offering without having an adverse effect on the offering of securities as contemplated by Genesis (including the price at which Genesis proposes to sell such securities), then Genesis will include in such registration (i) first, all the securities Genesis proposes to sell for its own account and (ii) second, (A) the number of shares of Registrable Securities which the Holders have requested to be included in such registration and (B) the number of shares of securities as to which the holders thereof have, as of the date of this Agreement, the right to include in such registration and which the holders thereof have requested to be included in such registration, in each case which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above. If the number of shares of Registrable Securities which the Holders have requested to be included in such registration and the number of shares of such other securities which the holders thereof have requested to be included in such registration are accordingly reduced, such reduced number of Registrable Securities and such other securities shall be allocated pro rata among the holders thereof on the basis of the relative number of shares of Registrable Securities or such other securities then held by each such holder; provided, that any shares thereby allocated to any such holder that exceed such holder's request will be reallocated among the remaining requesting holders in like manner. (d) Custody Agreement and Power of Attorney. Upon Genesis' request, any Holder will execute and deliver a custody agreement and power of attorney in form and substance reasonably satisfactory to Genesis with respect to the shares of Genesis Common Stock to be registered pursuant to this Section 4.1 (a "Custody Agreement and Power of Attorney"). The Custody Agreement and Power of Attorney will provide, among other things, that the Holder will deliver to and deposit in custody with the custodian and attorney-in-fact named therein a certificate or certificates representing such shares of Genesis Common Stock 22 (duly endorsed in blank by the registered owner or owners thereof or accompanied by duly executed stock powers in blank) and irrevocably appoint said custodian and attorney-in-fact as the Holder's agent and attorney-in-fact with full power and authority to act under the Custody Agreement and Power of Attorney on the Holder's behalf with respect to the matters specified therein. (e) Other Agreements. Each Holder shall execute such other agreements as Genesis may reasonably request to further accomplish the purposes of this Section 4.1. Section 4.2 Registration on Request. (a) Request by Holders. Upon the written request of Cypress and TPG, acting jointly (or in the event that only one of Cypress and TPG then owns Registrable Securities, then such Person), or the written request of any Holder or Holders of outstanding Registrable Securities designated for such purpose in writing by Cypress and TPG, acting jointly, requesting that Genesis effect the registration under the Securities Act of all or part of such Holders' or Holder's Registrable Securities (which Registrable Securities requested to be registered have an aggregate Market Value as of the date of such request of not less than $10 million), and specifying the intended method of disposition thereof, Genesis will promptly give written notice of such requested registration to all other Holders, and thereupon will, as expeditiously as possible, use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which Genesis has been so requested to register by such Holders or Holder; and (ii) all other Registrable Securities which Genesis has been requested to register by any other Holder thereof by written request given to Genesis within 30 days after the giving of such written notice by Genesis (which request shall specify the intended method of disposition of such Registrable Securities), so as to permit the disposition (in accordance with the Holders' intended method thereof) of the Registrable Securities so to be registered; provided, that Genesis shall not be obligated to file a registration statement relating to any registration request under this Section 4.2(a) (i) within a period of six months after the effective date of any other registration statement relating to (A) any registration request under this Section 4.2(a) or (B) any registration of Registrable Securities effected under Section 4.1, or (ii) if three registration statements relating to registration requests under this Section 4.2(a) have previously been filed and declared effective by the SEC. (b) Expenses. Genesis will pay all Registration Expenses in connection with the first three registrations of Registrable Securities pursuant to this Section 4.2 upon the written request of any of the Holders; provided, that each Holder 23 of Genesis Common Stock issued pursuant to Section 3.1 as to which there is no attempt to exercise the Sponsor Liquidity Right shall pay the underwriting discounts and commissions relating to the sale or disposition of such Holder's Registrable Securities pursuant to a registration statement effected pursuant to this Section 4.2. All expenses for any subsequent registrations of Registrable Securities pursuant to this Section 4.2 shall be paid pro rata by all Persons (including the Holders and Genesis) participating in such registration on the basis of the relative number of shares of Genesis Common Stock of each such Person included in such registration. (c) Effective Registration Statement. A registration requested pursuant to this Section 4.2 will not be deemed to have been effected unless it has become effective; provided, that if, within the period ending on the earlier to occur of (i) 180 days after the applicable registration statement has become effective, or (ii) the date on which the distribution of the Registrable Securities covered thereby has been completed, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, such registration will be deemed not to have been effected. (d) Selection of Underwriters. If a requested registration pursuant to this Section 4.2 involves an underwritten offering, Cypress and TPG, acting jointly (or in the event that only one of Cypress and TPG then intends to sell Registrable Securities in such underwritten offering, then such Person) shall have the right to select the investment banker or bankers and managers to administer the offering; provided, however, that in the event that neither Cypress nor TPG then owns Registrable securities, the Holders of a majority of the Registrable securities requested to be involved in such registration shall have the right to select the investment banker or bankers and managers to administer the offering; and, provided, further, that such investment banker or bankers and managers shall be reasonably satisfactory to Genesis. (e) Priority in Requested Registrations. If a requested registration pursuant to this Section 4.2 involves an underwritten offering and the managing underwriter advises Genesis in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of Genesis which are not Registrable Securities) exceeds the largest number of securities which can be sold in such offering, Genesis will include in such registration only the Registrable Securities requested to be included in such registration. In the event that the number of Registrable Securities requested to be included in such registration exceeds the number which, in the opinion of such managing underwriter, can be sold, the number of such Registrable Securities to be included in such registration shall be allocated pro rata among all requesting Holders on the basis of the relative number of 24 shares of Registrable Securities then held by each such Holder; provided, that any shares thereby allocated to any such Holder that exceed such Holder's request shall be reallocated among the remaining requesting Holders in like manner. In the event that the number of Registrable Securities requested to be included in such registration is less than the number which, in the opinion of the managing underwriter, can be sold, Genesis may include in such registration the securities Genesis or other Persons propose to sell up to the number of securities that, in the opinion of the managing underwriter, can be sold. Section 4.3 Registration Procedures. If and whenever, Genesis is required to use its best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, Genesis will, as expeditiously as possible: (a) prepare and, if the registration is pursuant to notice given under Section 4.2(a), in any event within 45 days after the giving of notice pursuant to Section 4.2(a), file with the SEC a registration statement with respect to such Registrable Securities on any form for which Genesis then qualifies or which counsel for Genesis shall deem appropriate, and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its best efforts to cause such registration statement to become and remain effective; provided, however, that Genesis may discontinue any registration of its securities which is being effected pursuant to Section 4.2 at any time prior to the effective date of the registration statement relating thereto; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of 180 days or such lesser period of time as Genesis or any Holder may be required under the Securities Act to deliver a prospectus in connection with any sale of Registrable Securities, and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the Holder or Holders thereof set forth in such registration statement; provided, that before filing a registration statement or prospectus, or any amendments or supplements thereto, Genesis will furnish to the Holders and their counsel copies of all documents proposed to be filed, which documents will be subject to the review of such counsel and will not be filed if such counsel reasonably objects; 25 (c) furnish to each Holder of such Registrable Securities such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus and prospectus supplement, as applicable), in conformity with the requirements of the Securities Act, and such other documents as such Holder may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder; (d) use its best efforts to register or qualify such Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each Holder shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder, except that Genesis shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 4.3(d), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; (e) use its best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holder or Holders thereof to consummate the disposition of such Registrable Securities; (f) notify each Holder of any such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 4.3(b), of Genesis' becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such Holder, prepare and furnish to such Holder a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 26 (g) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable (but not more than eighteen months) after the effective date of the registration statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder; (h) (A) use its best efforts to cause all such Registrable Securities to be listed on any securities exchange on which the Genesis Common Stock is then listed, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange and (B) provide a transfer agent and registrar for such Registrable Securities covered by such registration statement no later than the effective date of such registration statement; (i) enter into such customary agreements (including an underwriting agreement in customary form) and take such other actions as sellers of a majority of shares of such Registrable Securities or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including making appropriate members of senior management of Genesis available for customary participation in a "road show" presentation to potential investors; (j) obtain a "cold comfort" letter or letters from Genesis' independent public accountants in customary form and covering matters of the type customarily covered by "cold comfort" letters as the Holder or Holders of a majority of the shares of such Registrable Securities shall reasonably request (provided that Registrable Securities constitute at least 25% of the securities covered by such registration statement); and (k) make available for inspection by representatives of the Holders of the Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by such Holders or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of Genesis, and cause all of Genesis' officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. Genesis may require each Holder of Registrable Securities as to which any registration is being effected to furnish Genesis with such information regarding such Holder and 27 pertinent to the disclosure requirements relating to the registration and the distribution of such securities as Genesis may from time to time reasonably request in writing. Each Holder of Registrable Securities, upon receipt of any notice from Genesis of the happening of any event of the kind described in Section 4.3(f), shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.3(f), and, if so directed by Genesis, such Holder shall deliver to Genesis (at Genesis' expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event Genesis shall give any such notice, the period mentioned in Section 4.3(b) shall be extended by the number of days during the period from the date of the giving of such notice pursuant to Section 4.3(f) and through the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 4.3(f). Section 4.4 Indemnification. (a) Indemnification by Genesis. In the event of any registration of any securities of Genesis under the Securities Act pursuant to Section 4.1 or 4.2, Genesis hereby indemnifies and agrees to hold harmless, to the extent permitted by law, each Holder of Registrable Securities covered by such registration statement, each affiliate of such Holder and their respective directors and officers or general and limited partners (and the directors, officers, affiliates and controlling Persons thereof), each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such Holder or any such underwriter within the meaning of the Securities Act (collectively, the "Indemnified Parties"), against any and all losses, claims, damages or liabilities, joint or several, and expenses to which such Indemnified Party may become subject under the Securities Act, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof, whether or not such Indemnified Party is a party thereto) arise out of or are based upon (a) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or (b) any omission or alleged omission to state therein a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, and Genesis will reimburse such Indemnified Party for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, that 28 Genesis shall not be liable to any Indemnified Party in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, in any such preliminary, final or summary prospectus, or any amendment or supplement thereto in reliance upon and in conformity with written information with respect to such Indemnified Party furnished to Genesis by such Indemnified Party for use in the preparation thereof; and provided, further, that Genesis will not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, under the indemnity agreement in this Section 4.4(a) with respect to any preliminary prospectus or the final prospectus or the final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such underwriter or controlling Person results from the fact that such underwriter sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus (including any documents incorporated by reference therein) or of the final prospectus as then amended or supplemented (including any documents incorporated by reference therein), whichever is most recent, if Genesis has previously furnished copies thereof to such underwriter. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any Indemnified Party and shall survive the transfer of such securities by such Holder. (b) Indemnification by the Holders and Underwriters. Genesis may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 4.1 or 4.2 herein, that Genesis shall have received an undertaking reasonably satisfactory to it from the Holder of such Registrable Securities or any underwriter to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 4.4(a)) Genesis, all other prospective Holders or any underwriter, as the case may be, and any of their respective affiliates, directors, officers and controlling Persons, with respect to any statement in or omission or alleged omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement, if such statement or omission or alleged omission was made in reliance upon and in conformity with written information with respect to such Holder or underwriter furnished to Genesis by such Holder or underwriter expressly for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement, or a document incorporated by reference into any of the foregoing. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Genesis or any of the Holders, or any of their respective affiliates, directors, officers or controlling 29 Persons and shall survive the transfer of such securities by such Holder. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 4.4, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, that the failure of the indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Sections 4.4(a) or 4.4(b), except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. If, the indemnified party has been advised by counsel that having common counsel would result in a conflict of interest between the interests of such indemnified and indemnifying parties, then such indemnified party may employ separate counsel reasonably acceptable to the indemnifying party to represent or defend such indemnified party in such action, it being understood, however, that the indemnifying party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such indemnified parties (and not more than one separate firm of local counsel at any time for all such indemnified parties) in such action. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in this Section 4.4 (with appropriate modifications) shall be given by Genesis and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act. 30 (e) Contribution. If recovery is not available under the foregoing indemnification provisions of this Section 4 for any reason other than as expressly specified therein, the parties entitled to indemnification by the terms thereof shall be entitled to contribution to liabilities and expenses except to the extent that contribution is not permitted under Section 11(f) of the Securities Act. In determining the amount of contribution to which the respective parties are entitled, there shall be considered the relative benefits received by each party from the offering of the Registrable Securities (taking into account the portion of the proceeds realized by each), the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any misstatement or omission and any other equitable considerations appropriate under the circumstances. The amount paid or payable by a party under this Section 4.4 as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) Non-Exclusivity. The obligations of the parties under this Section 4 shall be in addition to any liability which any party may otherwise have to any other party. (g) Rule 144. Genesis covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if Genesis is not required to file such reports, it will, upon the request of any Holder of Registrable Securities, make publicly available such information), and it will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, Genesis will deliver to such Holder a written statement as to whether it has complied with such requirements. 31 ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties of the Parties. Each of Cypress, TPG, Nazem and Genesis represents and warrants as follows: (a) This Agreement has been duly executed and delivered by such Person and constitutes the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with the terms hereof except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general principles of equity and indemnification may be limited under federal and state securities laws; and (b) The execution and delivery of this Agreement by such Person does not, and the performance by it and its Affiliates of its and their obligations under this Agreement will not, violate, conflict with or constitute a breach of, or a default under, any material agreement, indenture or instrument to which such Person is a party or which is binding on such Person, and will not result in the creation of any lien on, or security interest in, any of the assets of such Person. Section 5.2 Representations and Warranties of Genesis. Genesis represents and warrants to the Sponsors as follows: (a) The Option Shares have been or will be, prior to issuance, duly authorized and, when the Option Shares are issued, delivered and paid for, such shares, will be validly issued and outstanding, fully paid and nonassessable shares of capital stock of Genesis, free and clear of all liens, claims and restrictions other than those created by the recipient, with no personal liability attached to the ownership thereof; and the holders of the outstanding stock are not entitled to preemptive or other rights to subscribe for such shares. (b) Neither the issuance of the Option Shares nor the sale of the Option Shares in connection with the exercise of the Sponsor Liquidity Right or the Exit Deficit Liquidity Right nor the consummation of any other of the transactions contemplated in this Agreement, nor the fulfillment of the terms of this Agreement, will conflict with, result in a breach of or constitute a default under the terms of the certificate of incorporation or bylaws of Genesis or of any material agreement, indenture or instrument to which Genesis is a party or is bound, or any order or regulation applicable to Genesis of any court, regulatory body, administrative agency or governmental body having jurisdiction over Genesis. 32 (c) No consent, approval or authorization of, or filing, registration or qualification with, any court, governmental, administrative or judicial authority or regulatory body (i) is required on the part of Genesis for the execution, delivery and performance of this Agreement, other than those which have been duly obtained or made or will be required in connection with Article IV hereof (which will be timely obtained or made) or (ii) will be (as of the Exercise Date) required on the part of Genesis for the valid authorization, issuance, sale and delivery of the Option Shares. (d) As of the Exercise Date and as of each subsequent date on which shares of Common Stock are acquired by Genesis from Sponsors or their Affiliates, there will be no action or proceeding or investigation pending or, to the best knowledge of Genesis, threatened against Genesis or any of its subsidiaries which, if determined adversely could adversely affect the consummation of the transactions contemplated by this Agreement. There are no actions or proceedings challenging or seeking to restrain, materially limit or prohibit the consummation of the transactions contemplated hereby. (e) The Option Shares, on the date of the issuance thereof, will be eligible for trading on the principal United States securities exchange on which the Genesis Common Stock is then traded or on the NASDAQ National Market System, as the case may be. (f) None of the execution and delivery of this Agreement or transactions contemplated by this Agreement, including, without limitation, the receipt of Option Shares by Sponsors or their Affiliates and the issuance of Option Shares by Genesis, shall cause any rights under any rights plan (poison pill) of Genesis or any of its subsidiaries to issue or become exercisable or result in any other adverse consequence to Sponsors or their Affiliates owning Common Stock under any rights plan of Genesis. (g) No state takeover statute or similar statute or regulation applies, purports to apply or will, following the occurrence of any event contemplated hereby or otherwise, apply to the transactions contemplated by this Agreement, including, without limitation, the receipt of Option Shares by Sponsors or their Affiliates and the issuance of Option Shares by Genesis, and no provision of the certificate of incorporation, by-laws or other governing documents of Genesis will, following the occurrence of any event contemplated hereby or otherwise, restrict or impair the ability of Sponsors or their Affiliates or any subsequent transferee to vote or otherwise exercise the rights of a stockholder with respect to Option Shares or otherwise obtain the benefits of this Agreement. 33 Section 5.3 Representations and Warranties of the Sponsors. Each of the Sponsors represents and warrants to Genesis as follows: (a) On the Exercise Date, such Person and its Affiliates, if any, owing Common Stock will have good and valid title to the shares of Common Stock owned by it, free and clear of all liens, encumbrances, equities and claims. (b) No consent, approval or authorization of, or filing, registration or qualification with, any court, governmental, administrative or judicial authority or regulatory body will be, as of the Exercise Date, required on the part of such Person or any of its Affiliates owning Common Stock for the valid sale and delivery of the Common Stock to Genesis as contemplated herein. ARTICLE VI ADDITIONAL AGREEMENTS Section 6.1 Further Assurances. (a) Subject to the terms and conditions hereof, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, reasonably promptly the transactions contemplated by this Agreement. (b) Promptly following the Notification Date, each of the parties hereto shall prepare and file all applications and other notices required in connection with, and use their best efforts to obtain promptly and comply with all conditions contained in, all necessary regulatory approvals and any other consent, approval or other actions by, or notice to or registration or filing with, any governmental or administrative agency or authority required or necessary to be made, obtained or complied with, as the case may be, by any party hereto in connection with the performance of the transactions contemplated by this Agreement, including without limitation any premerger notifications pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). Genesis agrees (i) to enter into with the Federal Trade Commission and/or the Department of Justice such decrees, consent orders and/or hold separate undertakings and (ii) to effectuate any divestitures, in each case involving assets or operations of either the Company or Genesis or its Affiliates or both, as may be necessary in order to enable Genesis to purchase, as soon as practicable following the Notification Date and in any event no later than the Exercise Date, the Common Stock. Section 6.2 Transfer of Restricted Securities. Restricted Securities are transferable pursuant to (i) public 34 offerings registered under the Securities Act, (ii) Rule 144 and (iii) subject to the conditions specified below in this Section 6.2, any other legally available means of transfer. In connection with the transfer of any Restricted Securities (other than a transfer described in clause (i) or (ii) above), the transferor will deliver written notice to Genesis describing in reasonable detail the transfer or proposed transfer, together with an opinion of counsel reasonably satisfactory to Genesis to the effect that such transfer of Restricted Securities may be effected without registration of such Restricted Shares under the Securities Act. In addition, if the transferor of the Restricted Securities delivers to Genesis an opinion of such counsel that no subsequent transfer of such Restricted Securities will require registration under the Securities Act, Genesis will promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear any restrictive legend. If Genesis is not required to deliver new certificates for such Restricted Securities not bearing such a legend, the holder thereof will not transfer the same until the prospective transferee has confirmed to the Company in writing its agreement to be bound by the conditions contained in this Section 6.2. Section 6.3 Calculation of Parent EBITDAR for the Exit Relevant Period; Confirmation of Total Equity Value; Access to Information; Resolution of Disputes. (a) As promptly as practicable following the Notification Date, the parties shall cause the chief financial officer of Parent to calculate Parent EBITDAR for the Exit Relevant Period and provide to the parties, no later than 30 days after the Notification Date, his written certification of his calculation of such amount in reasonable detail. Unless the amount so calculated is disputed by written notice within 30 days of its being so certified, it shall be final and binding on the parties in calculating Total Call Enterprise Value or Total Put Enterprise Value, as the case may be. If such amount is so disputed by written notice as aforesaid, such dispute shall be resolved in accordance with paragraph (e) below, and the resolution process thereby provided shall determine Parent EBITDAR for the Exit Relevant Period, which amount shall be final and binding on the parties in calculating Total Call Enterprise Value or Total Put Enterprise Value, as the case may be. (b) Each of Cypress and TPG shall have 30 days following the Exercise Date to provide written notice of a dispute over the calculation of Total Equity Value (including, without limitation, the calculation of any component thereof) used in determining the Option Price. If such amount is disputed by written notice as aforesaid, such dispute shall be resolved in accordance with paragraph (e) below, and the resolution process thereby provided shall determine Total Equity Value, which amount shall be final and binding on the parties in calculating the Option price. Cypress and TPG shall not initiate a dispute of the calculation of Total Equity Value after such 30-day period. 35 (c) In the event that the calculation of Total Equity Value as determined through the resolution process provided in paragraph (e) below is different from the calculation of Total Equity Value used in determining the Option Price, the parties shall cause the chief financial officer of Parent to recalculate the Option Price accordingly. In the event that the Option Price as so recalculated is greater that the amount of the Option Price previously calculated, Genesis shall as promptly as practicable, but in any event within 5 Business Days, pay to Sponsors the difference. In the event that all of the Option Price paid was paid in cash, such adjustment shall be made in cash in immediately available funds. In the event that any portion of the Option Price paid was paid in shares of Genesis Common Stock, such adjustment shall be made in shares of Genesis Common Stock; provided, that Genesis in making a payment to Sponsors pursuant to this paragraph (c), shall be required to use cash to the extent that the conditions set forth in Section 3.2 are not satisfied with respect to such issuance of Genesis Common Stock. The number of shares of Genesis Common Stock to be transferred in respect of an adjustment pursuant to this paragraph (c), if any, shall equal the dollar amount of the adjustment to be paid in shares of Genesis Common Stock divided by the lesser of (i) the Market Value of the Genesis Common Stock, (ii) the average daily closing prices of the Genesis Common Stock for the 10 trading day period commencing 5 trading days prior to the closing of the Sponsor Liquidity Right Sale, if any (with closing prices determined as provided in the definition of market Value), and (iii) the public offering price of the Genesis Common Stock in the Sponsor Liquidity Right Sale, if any. (d) Each of Cypress, TPG and Genesis and their respective representatives shall have full access to the books and records of Parent and its subsidiaries in connection with any calculation of Parent EBITDAR (including, without limitation, any component thereof) for the Exit Relevant Period and Total Equity Value. The parties hereby agree to cause Parent to instruct all auditors to make their work papers available for review in this regard, and hereby waive any objection with respect thereto. The fees and expenses of the parties' representatives shall be paid by Parent. (e) In the event Cypress or TPG disputes any amount calculated by the chief financial officer of Parent (including, without limitation, any component of Parent EBITDAR, Pharmacy EBITDAR or the calculation of Total Equity Value) and gives timely notice of such dispute as described above, the parties shall negotiate in good faith as promptly as practicable. In the event such dispute is not resolved within 14 days of the giving of notice of such dispute, Cypress, TPG and Genesis shall promptly engage as "Arbitrator" a "big five" accounting firm (which shall not be the then principal auditors of The Cypress Group L.L.C., TPG GenPar II, L.P. or Genesis) to reach a final determination of the amount whose calculation is in dispute. The Arbitrator shall render its decision within 21 days of its 36 engagement for such purpose. The fees and expenses of the Arbitrator shall be paid by Parent. (f) By way of illustration, the "Illustrative Scenarios" attached to this Agreement as Annex B reflect the distribution order in a call or put scenario pursuant to the formula described herein. Section 6.4 Election of Directors. If, as a result of the issuance of shares of Genesis Common Stock to Sponsors or their Affiliates pursuant to this Agreement Sponsors or their Affiliates obtain beneficial ownership of at least 20% of the outstanding shares of Genesis Common Stock, and for so long thereafter as Sponsors or their Affiliates hold beneficial ownership of at least 20% of the outstanding shares of Genesis Common Stock, then Cypress and TPG, acting jointly on behalf of Sponsors, shall be entitled to designate such number of directors on the Board of Directors of Genesis as shall represent a percentage of the outstanding shares of Genesis Common Stock owned by Sponsors and their Affiliates. To the extent legally practicable, such new directorships shall be created in classes which most recently have been elected. Genesis and its Board of Directors shall take all actions necessary to cause such designees to be elected or appointed to the Board of Directors of Genesis (including, without limitation, increasing the size of the Board of Directors of Genesis and/or removing directors). Section 6.5 Certain Negative Covenants. Until the earlier to occur of (i) the closing with respect to all of the shares of Common Stock under either of the Options and (ii) the disposition by Sponsors and their Affiliates owning Common Stock of all Common Stock held by them and (iii), with respect to paragraphs (a) and (c) below only, the second day after the sixth anniversary of the Closing Date, without the prior written consent of Cypress and TPG, neither Genesis nor any of its Subsidiaries will: (a) Merge or consolidate or otherwise combine with or into any other person (other than a merger, consolidation or combination between Subsidiaries of Genesis or between any Subsidiary and Genesis where Genesis is the surviving entity), unless the surviving entity agrees to comply with the obligations of Genesis under this Agreement. (b) Amend, modify, supplement or otherwise change any of the terms of Genesis' certificate of incorporation, shareholder rights agreement, or other constituent document in a manner that would be adverse to Sponsors (other than an amendment, modification or supplement or other change which would affect Sponsors the same as other shareholders of Genesis). 37 (c) Enter into any agreement or take any action that would materially impair Genesis' ability to perform its obligations under this Agreement. Section 6.6 Pharmacy. Until the earlier to occur of (i) the closing with respect to all of the shares of Common Stock under either of the Options and (ii) the second day after the sixth anniversary of the Closing Date without exercise of either Option, (a) Genesis shall as soon as reasonably practicable after they are prepared, provide to Sponsors such budgets and financial reports relating to the Pharmacy as Genesis provides to its management; Genesis shall also furnish or arrange for the preparation of such other reports and information regarding the Pharmacy as Sponsors may from time to time reasonably request. (b) neither Genesis nor any of its Subsidiaries shall enter into any transaction relating to the Pharmacy with an Affiliate of Genesis other than on competitive, arm's-length terms. Section 6.7 Pharmacy Dispositions. (a) Without the prior written consent of Cypress and TPG, acting jointly, Genesis may not, at any time prior to the second day after the sixth anniversary of the Closing Date, sell, transfer, dispose of or otherwise transfer any interest in the Pharmacy unless: (i) Genesis shall not be prohibited or restricted in any manner whatsoever from complying with its obligations under paragraph (b) below (including, without limitation, by any agreement, indenture or instrument to which Genesis or any of its Subsidiaries is a party or which is binding on Genesis or any of its Subsidiaries); (ii) the aggregate of the EBITDAR attributable to the interest being sold, transferred or disposed of and the EBITDAR attributable to any interest previously sold, transferred or disposed of pursuant to this Section 6.7, in each case for the twelve full calendar months ending immediately prior to or coincident with the applicable sale, transfer or disposition, would be less than 15% of Pharmacy EBITDAR for the twelve full calendar months ending immediately prior to or coincident with the sale, transfer or disposition as to which the calculation is being performed; (iii) the aggregate of the fair equity market value of the interest being sold, transferred or disposed of and the fair equity market value of any interest previously sold, transferred or disposed of pursuant to this Section 6.7 would be less than 15% of the fair equity market value of 38 the Pharmacy determined immediately prior to the sale, transfer or disposition as to which the calculation is being performed (for purposes of this clause (iii), fair equity market value shall be determined and set forth in writing in good faith by the board directors of Genesis); and (iv) the sale, transfer or disposition is to a Person other than an Affiliate of Genesis in an arm's-length transaction. (b) If Genesis shall sell, transfer or dispose of any interest in the Pharmacy, it shall, concurrently with such sale, transfer or disposition, pay to Sponsors in cash in immediately available funds an amount equal to the product of (x) the ratio of Total Sponsor Contribution plus Sponsor Contribution Adjustment to the sum of Adjusted Total Contribution plus Sponsor Contribution Adjustment plus Genesis Contribution Adjustment and (y) the greater of (i) the product of (A) Pharmacy Percentage Interest and (B) the fair market value (as determined and set forth in writing in good faith by the board of directors of Genesis) of the consideration received by Genesis (including, without limitation, by the relief of indebtedness) in such sale, transfer or disposition and (ii) the product of (A) Pharmacy Percentage Interest, (B) 12.5 and (C) the EBITDAR attributable to the interest in the Pharmacy being sold, transferred or disposed of for the twelve full calendar months ending immediately prior to or coincident with such sale, transfer or disposition. Any amounts payable to Sponsors pursuant to this paragraph (b) shall be paid to Sponsors pro rata based on the number of shares of Common Stock held by each Sponsor or its Affiliates. The aggregate of all amounts paid to Sponsors pursuant to this paragraph (b) is referred to herein as "Sponsor Returned Capital". As used herein, "Genesis Returned Capital" means (i) the greater of (a) the product of (A) Pharmacy Percentage Interest and (B) the fair market value of the consideration received by Genesis (including, without limitation, by the relief of Indebtedness) in any sale, transfer or disposition referred to above and (b) the product of (A) Pharmacy Percentage Interest, (B) 12.5 and (C) the EBITDAR attributable to the interest in the Pharmacy being sold, transferred or disposed of for the twelve full calendar months ending immediately prior to or coincident with such sale, transfer or disposition, less (ii) Sponsor Returned Capital. Section 6.8 Calculation of EBITDAR. Any time EBITDAR of any Person other than Parent or the Pharmacy is required to be calculated for purposes of this Agreement (including, without limitation, in connection with any calculation of Parent EBITDAR), Genesis shall provide to Cypress and TPG a written calculation thereof in reasonable detail, which written calculation shall be certified by Genesis' Chief Financial Officer as being a correct calculation of EBITDAR of such Person in all material respects. In connection with any such calculation relating to any Affiliate of Genesis, Cypress and 39 TPG, at Sponsors' expense (which Sponsors shall share among themselves pro rata based upon their holdings of Common Stock), may engage any individuals of their choice from Genesis' then-current independent auditing firm or KPMG Peat Marwick to confirm such calculation. In this regard, Genesis shall not object to such auditors having full access to the books and records of Genesis or to such auditors' use of such firm's work papers for such purpose. In connection with any such calculation relating to a Person which is not an Affiliate of Genesis, Genesis shall use its reasonable best efforts to provide Cypress and TPG and their representatives with such access to the books and records of the Person for which the calculation of EBITDAR is being made as Cypress and TPG may request to confirm such calculation. Unless the amount so calculated is disputed by written notice within 30 days of its being certified, it shall be final and binding on the parties. If such amount is so disputed by written notice as aforesaid, such dispute shall be resolved in accordance with Section 6.3(e), and the resolution process thereby provided shall determine such calculation. Section 6.9 Post-Put Exit. (a) If, at any time on or after the first day after the sixth anniversary of the Closing Date, the Put Option has not been exercised, and Cypress and TPG or their Affiliates owning Common Stock desire to sell any or all of the shares of Common Stock owned by them (the "Post-Put Exit Stock"), Cypress and TPG or their Affiliates owning Common Stock may do so subject to the terms and conditions of this Section 6.9. If the Put Option has not been exercised by the first day after the sixth anniversary of the Closing Date and no Event of Acceleration has occurred, Cypress and TPG agree, on behalf of themselves and their Affiliates owning Common Stock, to use their reasonable best efforts to sell all of the Common Stock owned by them as promptly as practicable; provided, that Cypress and TPG shall not be obligated to sell any Common Stock at a price less than that which Cypress and TPG reasonably believe to be the fair market value thereof. (b) Prior to any sale referred to in paragraph (a) above, Cypress and TPG shall reduce to writing the terms pursuant to which they desire to sell such shares of Common Stock (the "Transfer Offer"). Cypress and TPG shall provide the Transfer Offer to Genesis and Nazem. The Transfer Offer shall identify the Post-Put Exit Stock, the amount and type (which shall be cash or stock of the buyer but not a combination thereof) of consideration sought for the Post-Put Exit Stock and all other material terms and conditions of the Transfer Offer. The Transfer Offer shall contain an irrevocable offer to sell the Transfer Stock to Genesis for the amount and type of consideration and upon the same terms and conditions as those set forth in the Transfer Offer. Upon receipt of the Transfer Offer, Genesis shall have the irrevocable right and option (the "Right of First Offer"), exercisable as provided below, to accept the Transfer Offer for all shares of the Transfer Stock; provided, that Genesis may not purchase less than all of the Transfer Stock 40 unless Cypress and TPG shall have consented thereto; and, provided, further, that if Genesis shall exercise its right to purchase the Transfer Stock, it shall be obligated to purchase from the Affiliate of Nazem owning Common Stock, and the Affiliate of Nazem owning Common Stock shall be required to sell to Genesis, upon the terms and conditions contained in the Transfer Offer, the same proportion of its shares of Common Stock as Genesis has agreed to acquire from Cypress and TPG. If Genesis desires to exercise its Right of First Offer, it shall provide Sponsors with an irrevocable written notice of acceptance which shall be binding on Sponsors and their Affiliates owning Common Stock and Genesis. The notice of acceptance must be provided to Sponsors within thirty (30) days after the date the Transfer Notice is given (the "Notice Period"). (c) The closing of the purchase of the Transfer Stock pursuant to the Right of First Offer, if exercised, shall take place at the principal office of Cypress within thirty (30) days after the expiration of the Notice Period (or as soon thereafter as practicable in the event any required governmental consents shall not have been obtained). At such closing, Genesis shall deliver the amount and type of consideration specified in the Transfer Offer against delivery of certificates representing the shares of Common Stock being purchased, duly endorsed in blank or accompanied by duly executed stock powers. (d) If Genesis has not elected to exercise the Right of First Offer within the Notice Period, Cypress and TPG shall have ninety (90) days from the end of the Notice Period to enter into an agreement (subject to customary conditions) (the "Third Party Agreement") to sell any or all of the Transfer Stock to any third party on terms not materially more favorable to such third party than were contained in the Transfer Offer. Cypress, TPG and Genesis agree that in the event that the Transfer Offer specifies cash as the type of consideration sought and Genesis elects not to exercise its Right of First Offer, Cypress and TPG and their Affiliates owning Common Stock shall be entitled to sell the Post-Put Exit Stock to a third party for cash or a combination of cash and stock of such third party, provided, that (i) in either case, the amount of cash shall be at least equal to the amount of cash specified in the Transfer Offer, (ii) any consideration in the form of stock shall be stock listed and admitted to trading on a national securities exchange or traded on a publicly reported over-the-counter market and (iii) if any part of such consideration shall be stock, Genesis would not, if participating in such sale pursuant to the last sentence of this paragraph, be obligated to accept less cash than it would have received if the sale were made solely in cash in the amount specified in the Transfer Offer. Cypress, TPG and Genesis further agree that in the event that the Transfer Offer specifies stock of the buyer as the type of consideration sought and Genesis elects not to exercise its Right of First Offer, Cypress and TPG and their Affiliates owning Common Stock shall be entitled to sell the Post-Put Exit Stock to a third party for 41 cash, stock of such third party or a combination thereof; provided, that (i) in the case of a combination, either the amount of cash or the value of the stock of the third party as of the date of the Third Party Agreement shall be at least equal to the value of the amount of stock specified in the Transfer Offer as of the date of the Transfer Offer and (ii) any consideration in the form of stock shall be stock listed and admitted to trading on a national securities exchange or traded on a publicly reported over-the-counter market. In respect of any transaction pursuant to this paragraph (d), Cypress and TPG shall have with respect to Genesis and Nazem's Affiliate owning Common Stock the drag-along rights set forth in Section 8.9(c) and (d), and Genesis and Nazem's Affiliate owning Common Stock shall have the tag-along rights set forth in Sections 8.9(e) and (f). (e) Notwithstanding the provisions of this Section 6.9, in any sale of Common Stock pursuant to this Section 6.9 which includes the transfer of Common Stock owned by Genesis, the aggregate proceeds shall be distributed among Sponsors, on the one hand, and Genesis, on the other hand, as contemplated by the formula for the Put Option Exercise Price calculated as if the Notification Date and the Exercise Date occurred on the first day after the sixth anniversary of the Closing Date, adjusted for the percentage of the stock of Parent sold. Following any sale by Sponsors or their Affiliates of shares of Common Stock pursuant to this Section 6.9 (regardless of whether any such sale includes the transfer of Common Stock owned by Genesis), Genesis shall pay to the selling Sponsors, as provided below, the excess, if any, of (i) the Put Option Exercise Price calculated as if the Notification Date and the Exercise date occurred the first day after the sixth anniversary of the Closing Date, adjusted for the percentage of the stock of Parent sold over (ii) the proceeds to such Sponsors or their Affiliates (the "Exit Deficit"). (f) Genesis may use for payment of the Exit Deficit (either in whole or in part) either cash in immediately available funds or Genesis Common Stock. Notwithstanding the foregoing, Genesis in making a payment to Sponsors of the Exit Deficit shall be required to use cash in immediately available funds to the extent that the conditions set forth in Section 3.2 are not satisfied with respect to any such issuance of Genesis Common Stock; provided, that the condition set forth in Section 3.2(i) by reference to clause (c) of the definition of Events of Acceleration (and no other condition) shall cease to be a condition to the use by Genesis of Genesis Common Stock to make payment of the Exit Deficit on the day after the seventh anniversary of the Closing Date; provided, that such condition shall continue to apply until the Exit Deficit has been satisfied in full in accordance with the terms hereof unless the transaction giving rise to the Exit Deficit shall not have been consummated by the date which is 6 months after the day after the seventh anniversary of the Closing Date, in which case, such condition shall cease to be a condition at such time. If Genesis Common Stock is to be issued, Genesis shall notify Sponsors 42 within 7 days of the sale of Common Stock giving rise to the Exit Deficit. If Genesis elects to pay any part of the Exit Deficit in cash in immediately available funds, such payment shall be made on the last day of the 7 day period referred to above. If Genesis elects to issue shares of Genesis Common Stock to pay any part of the Exit Deficit, such shares shall be issuable as set forth below. (g) If Cypress and TPG, acting jointly on behalf of Sponsors, notify Genesis within 21 days of the sale of the Common Stock giving rise to the Exit Deficit of Sponsors' desire to receive cash (either in whole or in part) for payment of the Exit Deficit in lieu of shares of Genesis Common Stock, then Genesis will use its reasonable best efforts to effectuate the underwritten sale (the "Exit Deficit Liquidity Right Sale") of such number of shares of Genesis Common Stock as would, upon consummation of such sale, yield net cash proceeds to Sponsors equal to the portion of the Exit Deficit that would have otherwise been paid in cash if Genesis had not elected to use Genesis Common Stock for payment of such portion of the Exit Deficit (such notification together with the sale of Genesis Common Stock for such purpose being referred to as the "Exit Deficit Liquidity Right"); it being understood that Nazem shall not have any right to participate in the invocation of the Exit Deficit Liquidity Right. In the Exit Deficit Liquidity Right Sale, if any, Cypress and TPG, acting jointly on behalf of Sponsors, shall have the right to select the managing underwriter (and sole book runner) to manage and administer the offering, and Genesis shall have the right to select an additional underwriter. The allocation of underwriting compensation shall favor the managing underwriter. In the Exit Deficit Liquidity Right Sale, if any, Genesis shall only be obligated, in the exercise of its reasonable best efforts, to sell the largest number of shares of Genesis Common Stock which can be sold at a price of not less than 90% of the Market Value of the Genesis Common Stock determined at the time of the pricing of the Exit Deficit Liquidity Right Sale. Genesis shall use its reasonable best efforts to cause the Exit Deficit Liquidity Right Sale, if any, to be consummated within 120 days of the Sponsors' exercise of the Exit Deficit Liquidity Right. In the event that the net cash proceeds from the Exit Deficit Liquidity Right Sale, if any, are insufficient or, solely because Genesis has been unable in the exercise of its reasonable best efforts to consummate timely a Exit Deficit Liquidity Right Sale, unavailable to pay the portion of the Exit Deficit that would have otherwise been paid in cash to Sponsors or their Affiliates, Genesis will issue to Sponsors or their Affiliates shares of Genesis Common Stock in payment of the balance or all of the Exit Deficit, as the case may be. The number of shares so issuable in respect of the non-cash portion of the Exit Deficit will be equal to the dollar amount of the non-cash portion of the Exit Deficit divided by the lesser of (a) the average of the daily closing prices of the Genesis Common Stock for the 10 trading day period commencing 5 trading days prior to the closing of the Exit Deficit Liquidity Right Sale 43 (with closing prices determined as provided in the definition of Market Value) and (b) the public offering price of the Genesis Common Stock in the Exit Deficit Liquidity Right Sale or, if there is no Exit Deficit Liquidity Sale, the average of the daily closing prices of the Genesis Common Stock for the 10 trading day period ending on the last day of the 120 day period referred to above. (h) Genesis shall bear all Registration Expenses in connection with such issuance and sale (including the entire amount of any and all underwriters' discounts and commissions) and provide customary and appropriate undertakings (including indemnification of Sponsors and their Affiliates to the same extent provided in Section 4.4) in connection with such issuance and sale. (i) If Cypress and TPG, on behalf of Sponsors, do not invoke the Exit Deficit Liquidity Right with respect to the entire portion of the Exit Deficit payable in Genesis Common Stock, the number of shares issuable in respect of the non-cash portion of the Exit Deficit will be equal to the dollar amount of the non-cash portion of the Exit Deficit divided by the Market Value of the Genesis Common Stock determined as of the date of the issuance thereof, and such shares shall be issued 30 days following the sale of the Common Stock giving rise to the Exit Deficit. (j) Genesis agrees (i) to make an appropriate public announcement no later than 5 trading days prior to the 20 trading day periods referred to in the definition of Market Value with regard to the pending issuance of Genesis Common Stock in the Exit Deficit Liquidity Right Sale, if any, and/or the issuance of Genesis Common Stock issuable in respect of the non-cash portion of the Exit Deficit, if any, and (ii) during the period commencing at the beginning of such 20 trading day period and through the later of the date of issuance of the Genesis Common Stock in the Exit Deficit Liquidity Right Sale and the date of issuance of the Genesis Common Stock issuable in respect of the non-cash portion of the Exit Deficit, not to take any corporate action (other than the declaration or payment of a regular dividend, consistent with past practice) in respect of (A) combining or splitting the outstanding shares of Genesis Common Stock, including combining its outstanding shares into a smaller number of shares or issuing rights, warrants or dividends payable in additional shares of Genesis Common Stock to stockholders of record on a date prior to the date of issuance or (B) directly or indirectly, through the use of derivative securities or otherwise, purchasing shares of Genesis Common Stock. 44 ARTICLE VII CLOSINGS Section 7.1 Payment of the Option Price. Subject to Section 3.2(i), the closing of the purchase of Common Stock pursuant to the exercise of an Option as provided in Sections 2.1 and 2.2 shall take place on the Exercise Date. At the closing, Genesis shall deliver cash in immediately available funds and/or shares of Genesis Common Stock registered in such names and denominations as Cypress and TPG, acting on behalf of Sponsors, shall have requested, as the case may be, against delivery of certificates representing the shares of Common Stock sold by Sponsors and their Affiliates, duly endorsed in blank or accompanied by duly executed stock powers. Section 7.2 Time and Place of Closing. The closing of the purchase of the Common Stock shall be held at the principal office of Cypress at 10:00 A.M. local time on the date determined pursuant to this Article VII. ARTICLE VIII MISCELLANEOUS Section 8.1 Notices. (a) Except as provided in Section 8.3(b), all notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person or by telecopier (with a confirmed receipt thereof), and on the next business day when sent by overnight courier service, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Cypress, to: The Cypress Group L.L.C. 65 East 55th Street, 19th Floor New York, NY 10022 Attention: William L. Spiegel Telecopier: (212) 705-0199 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: William E. Curbow, Esq. Telecopier: 212-455-2502 45 (b) if to TPG, to: TPG Partners II, L.P. 201 Main Street, Suite 2420 Forth Worth, TX 76102 Attention: Karl I. Peterson Telecopier: 817-871-4010 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attention: Paul Shim, Esq. Telecopier: 212-225-3999 (c) if to Genesis, to: Genesis Health Ventures, Inc. 148 West State Street Kennett Square, PA 19348 Attention: Ira C. Gubernick, Esq. Telecopier: 610-444-3365 with a copy to: Blank Rome Comisky & McCauley 1200 Four Penn Center Plaza Philadelphia, PA 19103 Attention: Stephen Luongo, Esq. Telecopier: 215-569-5555 (c) if to Nazem, to: Nazem, Inc. 645 Madison Avenue New York, New York 10022 Attention: Fred Nazem telecopy: 212-371-2150 with a copy to: Bartoma Corporation, N.V. Fokkerweg 26 Suite 12 Curacao, Netherlands Antilles Attention: Marleen Janssen telecopy: 5999-465-39-07 (b) All notices and other communications to be given to any other Person hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, on the next Business Day when sent by overnight courier service and on 46 the third Business Day when sent registered or certified mail, return receipt requested, postage prepaid to such Person at its last known address appearing on the books of Genesis maintained for such purpose. Section 8.2 Severability. In the event any provision hereof is held void or unenforceable by any court, then such provision shall be severable and shall not affect the remaining provisions hereof. Section 8.3 Entire Agreement. This Agreement (including the exhibits, documents or instruments referred to herein) embody the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, among the parties, or between any of them, with respect to the subject matter hereof and thereof. Section 8.4 Amendment and Modification. This Agreement may be amended, modified or supplemented only by a written agreement signed by each of Cypress, TPG and Genesis; provided, however, that neither Cypress nor TPG shall enter into any amendment of this Agreement that would be materially more adverse to the rights hereunder of Nazem and its Affiliate owning Common Stock than it would be to the rights of Cypress and TPG and their respective Affiliates owning Common Stock; and, provided, further, that Nazem shall have received prior written notice of any amendment hereto, including a draft of the proposed form of the amendment a reasonable amount of time under the circumstances prior to the execution thereof, and a copy of any executed amendment promptly following the execution thereof. Any failure by a party hereto to comply with any obligation, agreement or condition herein may be expressly waived in writing by Cypress, TPG and Genesis, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any such subsequent or other failure. Section 8.5 Assignment; Binding on Transferees. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and transferees of Common Stock permitted under the Stockholders Agreement from and after the effective date hereof. Cypress and TPG may assign any of their rights and obligations hereunder to any of their respective Affiliates and, following (i) any failure by Genesis to satisfy its obligations in respect of the Put Option or (ii) any Event of Acceleration, to any other Person. Neither Genesis nor Nazem may assign any of its rights and obligations hereunder to any Person without the written consent of Cypress and TPG, acting jointly. Nothing in this Agreement other than Section 6.2 shall restrict or otherwise impair the transfer by Sponsors or any subsequent holder thereof of (i) Genesis Common Stock issued pursuant to Sections 3.1 or 6.9 or (ii) securities which are issued or distributed in respect 47 thereof by way of transfer, substitution, stock dividend or stock split or other distribution, recapitalization or reclassification, and any such subsequent holder shall not be a "permitted transferee" for the purposes of the first sentence of this Section 8.5 but shall be a "Holder" for purposes of this Agreement. Section 8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF. Section 8.7 Headings. This article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. Section 8.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 8.9 Specific Performance; Remedies. (a) The parties hereto each acknowledge that, in view of the uniqueness of the transactions contemplated hereby, the other parties and, in the case of Genesis, any subsequent holder of (i) Genesis Common Stock issued pursuant to Section 3.1 or (ii) securities which are issued or distributed in respect thereof by way of transfer, substitution, stock dividend or stock split or other distribution, recapitalization or reclassification, would not have an adequate remedy at law for money damages if this Agreement has not been performed in accordance with its terms. Each party therefore agrees that the other parties and, in the case of Genesis, any such subsequent holders, shall be entitled to specific performance of the terms hereof. Any such remedy shall be in addition to any other remedy that may be available at law or in equity. (b) The parties acknowledge that upon the earlier of (y) an Event of Acceleration occurring prior to the second day after the sixth anniversary of the Closing date and (z) the failure by Genesis to honor its obligations under the Put Option, (i) the Call Option shall not be exercisable as provided in Section 2.1 of this Agreement, (ii) Cypress and TPG may assign any of their rights hereunder without any restriction whatsoever as provided in Section 8.5 of this Agreement, (iii) the Stockholders Agreement shall be terminable by Cypress and TPG in accordance with Section 6.9 thereof and, accordingly, among other things, all restrictions on transfer of the Common Stock by Cypress and TPG or their Affiliates shall lapse to the fullest extent permitted by law, (iv) the Management Agreement shall be terminable by Parent in accordance with Section 11 thereof and, 48 upon any such termination, no amounts shall be owing thereunder except amounts accrued and unpaid at the time of such termination, (v) except as provided in Sections 8.9(e) and (f) Genesis and Nazem and their Affiliates, if any, who own Common Stock shall be prohibited from transferring any Common Stock owned by them without the prior written consent of Cypress and TPG, acting jointly, notwithstanding the termination of the Stockholders Agreement in accordance with Section 6.9 thereof, provided, that the restrictions set forth in this clause (v) shall apply to Nazem and its Affiliate only while Cypress, TPG or their Affiliates own Common Stock, and (vi) Cypress and TPG, acting jointly, shall have the right to cause and control the sale or liquidation of Parent. (c) If, in exercising their rights under clause (vi) in the preceding paragraph (b), Cypress and TPG receive a bona fide offer from a Person other than Cypress or TPG or any of their Affiliates (a "Third Party") to purchase in an arms'-length transaction all or part of the outstanding shares of common stock of Parent and such offer is accepted by Cypress and TPG, acting jointly, then Genesis and Nazem agree that they will at the request of Cypress and TPG transfer or cause the transfer of all or part of the shares of common stock of Parent owned by them or their Affiliates to such Third Party on the terms of the offer so accepted by Cypress and TPG, including, without limitation, the same per share consideration. In any such transaction where less than all of the outstanding shares of common stock of Parent are to be sold, such shares to be sold shall be sold by Sponsors or their Affiliates and Genesis pro rata in proportion to their respective holdings of Common Stock. (d) Cypress and TPG, acting jointly, shall give notice (the "Drag-Along Notice") to Genesis and/or Nazem of any proposed transfer as to which Cypress and TPG propose to exercise their rights set forth in paragraph (c) above as soon as practicable following the acceptance of the offer referred to in such paragraph. Genesis and Nazem and Nazem's Affiliate owning Common Stock shall only have rights and obligations under the preceding paragraph (c) and this paragraph (d) following their receipt of the Drag-Along Notice. The Drag-Along Notice shall set forth the number of shares of common stock of Parent proposed to be so transferred, the name of the proposed transferee, the proposed amount and form of consideration (and if such consideration consists in part or in whole of property other than cash, shall provide such information, to the extent reasonably available to it, relating to such consideration as Genesis and Nazem and Nazem's Affiliate owning Common Stock may reasonably request) and the other terms and conditions of the offer. Cypress and TPG, acting jointly, shall notify Genesis and Nazem at least 20 days in advance of entering into a definitive agreement in connection with such offer if Genesis and Nazem or their Affiliates will be required to sign any agreement containing representations, warranties or indemnities. In any such agreement, Genesis and Nazem and their Affiliates owning Common Stock will be required 49 to make the same representations, warranties and indemnities as Cypress and TPG or their Affiliates owning Common Stock so long as they are made severally and not jointly. Parent shall pay the fees and expenses of counsel for Sponsors and Genesis in connection with any transaction referred to in this paragraph. (e) If, after the earlier to occur of (y) an Event of Acceleration and (z) the failure by Genesis to honor its obligations under the Put Option, Cypress and TPG or their Affiliates owning Common Stock propose to transfer shares of Common Stock owned by them, and Cypress and TPG do not exercise their rights in the preceding paragraphs (c) and (d), then Nazem's Affiliate owning Common Stock shall have the right to participate in such transfer on the same terms and conditions as Cypress and TPG, including, without limitation, the same per share consideration, and, in connection therewith, to require the proposed transferee to purchase from it shares of Common Stock. In any such transaction where less than all of the shares of Common Stock held by Sponsors or their Affiliates are to be sold, such shares to be sold shall be sold by Sponsors or their Affiliates pro rata in proportion to their respective holdings of Common Stock. (f) Cypress and TPG, acting jointly, shall give notice (the "Tag-Along Notice") to Nazem of any proposed transfer giving rise to the rights of Nazem set forth in paragraph (e) above as soon as practicable following their agreement to enter into such transfer. The Tag-Along Notice shall set forth the number of shares of common stock of Parent proposed to be so transferred, the name of the proposed transferee, the proposed amount and form of consideration (and if such consideration consists in part or in whole of property other than cash, shall provide such information, to the extent reasonably available to it, relating to such consideration as Nazem and Nazem's Affiliate owning Common Stock may reasonably request in order to evaluate such non-cash consideration) and the other terms and conditions of the offer. If Nazem's Affiliate owning Common Stock elects to exercise its rights set forth in the preceding paragraph (e), Nazem's affiliate owning Common Stock shall deliver a notice to Cypress and TPG to such effect within 20 days of its receipt of the Tag-Along Notice stating the number of shares of Common Stock that its Affiliate proposes to include in the transfer. Cypress and TPG, acting jointly, shall notify Nazem at least 20 days in advance of entering into a definitive agreement in connection with such offer if Nazem or its Affiliate will be required to sign any agreement containing representations, warranties or indemnities. In any such agreement Nazem and its Affiliate owning Common Stock will be required to make the same representations, warranties and indemnities as Cypress and TPG or their Affiliates owning Common Stock so long as they are made severally and not jointly. Parent shall pay the fees and expenses of counsel for Sponsors in connection with any transaction referred to in this paragraph. 50 (g) Notwithstanding the provisions of Section 8.9(c) and (e), in any sale or liquidation of all or part of the stock or assets of Parent pursuant to Section 8.9(b)(vi) which includes the transfer of all or a part of Genesis' interest in Parent, the aggregate proceeds shall be distributed among Sponsors, on the one hand, and Genesis, on the other hand, as contemplated by the formula for the Put Option Exercise Price calculated as if the Notification Date and the Exercise Date occurred as of the date of the sale, adjusted for the percentage of the stock or assets of Parent being sold. Following any sale or liquidation of Sponsors' or their Affiliates' interest in Parent pursuant to this Section 8.9 (regardless of whether any such sale includes the transfer of all or a part of Genesis' interest in Parent), Genesis shall pay to the selling Sponsors in cash in immediately available funds upon demand the excess, if any, of (i) the Put Option Exercise Price calculated as if the Notification Date and the Exercise Date occurred as of the date of the sale, adjusted for the percentage of the stock or assets of Parent being sold over (ii) the amount distributed to Sponsors and their Affiliates. Section 8.10 Submission to Jurisdiction; Waivers. Each of the parties hereto hereby irrevocably submits in any legal action or proceeding relating to or arising out of this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the jurisdiction of the United States District Court for the Southern District of New York, and appellate courts thereof. Each of the parties hereto further (i) consents that any such action or proceeding may be brought in such court and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (ii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address set forth in Section 8.2 or at such other address of which such party shall have given notice pursuant thereto; and (iii) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. Section 8.11 Subordination Agreement. THE RIGHTS OF THE SPONSORS HEREUNDER ARE SUBORDINATED AND LIMITED AS PROVIDED IN THAT CERTAIN SUBORDINATION AGREEMENT DATED OCTOBER 9, 1997, EXECUTED BY CYPRESS, TPG, NAZEM AND GENESIS IN FAVOR OF THE SENIOR CREDITORS DESCRIBED THEREIN, WHICH SUBORDINATION AGREEMENT IS AND SHALL BE BINDING UPON EACH OF THE SPONSORS HEREUNDER, INCLUDING EACH AFFILIATE OF THE SPONSORS EXECUTING THIS AGREEMENT, AND EACH ASSIGNEE OF ANY OF THE RIGHTS OF THE SPONSORS OR SUCH AFFILIATES HEREUNDER. 51 [The next page is numbered S-1.] S-1 Section 8.12 WAIVERS OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written. THE CYPRESS GROUP L.L.C. By: /s/ James L. Singleton ______________________________ Name: James L. Singleton Title: Vice President TPG PARTNERS II, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ______________________________ Name: Karl I. Peterson Title: Vice President NAZEM, INC. By: /s/ Fred Nazem ______________________________ Name: Fred Nazem Title: Managing Member GENESIS HEALTH VENTURES, INC. By: /s/ George V. Hager, Jr. ______________________________ Name: George V. Hager, Jr. Title: Senior Vice President & CFO S-2 The foregoing provisions of this Agreement applicable to Affiliates of Sponsors owning Common Stock shall be binding upon and inure to the benefit of the undersigned. Affiliates of The Cypress Group L.L.C. CYPRESS MERCHANT BANKING PARTNERS L.P. By: Cypress Associates L.P. By: The Cypress Group L.L.C. By: /s/ James L. Singleton ________________________ Name: James L. Singleton Title: Vice Chairman CYPRESS OFFSHORE PARTNERS L.P. By: Cypress Associates L.P. By: The Cypress Group L.L.C. By: /s/ David P. Spalding ________________________ Name: David P. Spalding Title: Vice Chairman Affiliates of TPG Partners II, L.P. TPG PARALLEL II, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ________________________ Name: Karl I. Peterson Title: Vice President TPG INVESTORS II, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ________________________ Name: Karl I. Peterson Title: Vice President TPG MC COINVESTMENT, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ________________________ Name: Karl I. Peterson Title: Vice President S-3 Affiliate of Nazem Genesis ElderCare Portfolio K, LP By: Healthworth Associates I, L.L.C. By: /s/ Fred Nazem ________________________ Name: Fred Nazem Title: Managing Member EX-99 9 EX C(9) STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS............................................................1 Section 1.1 Certain Defined Terms......................................1 ARTICLE II BOARD OF DIRECTORS AND OFFICERS........................................4 Section 2.1 Board of Directors.........................................4 Section 2.2 Officers...................................................4 Section 2.3 Operating Committee........................................4 ARTICLE III RESTRICTIONS ON TRANSFERS OF STOCK.....................................4 Section 3.1 Restrictions on Transfer...................................4 Section 3.2 Offer......................................................4 Section 3.3 Option to Non-Selling Initial Stockholders.................4 Section 3.4 Delivery after Exercise....................................5 Section 3.5 Right to Transfer..........................................5 Section 3.6 Certain Transfers..........................................5 ARTICLE IV SUPERMAJORITY PROVISIONS...............................................6 Section 4.1 Sale of Stock..............................................6 Section 4.2 Mergers; Dissolution.......................................6 Section 4.3 Acquisitions; Creation of Subsidiaries.....................6 Section 4.4 Transactions With Affiliates or Subsidiaries...............6 Section 4.5 Dividends and Redemptions..................................6 Section 4.6 Loans and Investments......................................7 Section 4.7 Certificate of Incorporation, Bylaws, Stock Agreements.....7 Section 4.8 Material Agreements........................................7 Section 4.9 Business Conducted.........................................7 Section 4.10 Indebtedness..............................................7 Section 4.11 Restrictions on Fundamental Changes; Asset Sales..........7 Section 4.12 Capital Stock of Subsidiaries.............................7 Section 4.13 Subordinated Notes and Senior Loan........................7 Section 4.14 Contracts.................................................7 Section 4.15 Accounting Policies.......................................8 ARTICLE V OTHER ARRANGEMENTS.....................................................8 Section 5.1 Additional Capital for Cure Event Purposes.................8 Section 5.2 Pre-emptive Rights.........................................8 Section 5.3 Irrevocable Proxy..........................................9 Section 5.4 Access to Information......................................9 -i- Page ---- ARTICLE VI MISCELLANEOUS..........................................................9 Section 6.1 Legend. ..................................................9 Section 6.2 Notices...................................................10 Section 6.3 Severability. ...........................................12 Section 6.4 Entire Agreement..........................................12 Section 6.5 Amendment and Waiver......................................12 Section 6.6 Consent to Specific Performance...........................12 Section 6.7 Assignment; Responsibility for Affiliates.................13 Section 6.8 Variations in Pronouns....................................13 Section 6.9 Term......................................................13 Section 6.10 Governing Law............................................13 Section 6.11 Further Assurances.......................................13 Section 6.12 Headings.................................................13 Section 6.13 Counterparts.............................................13 -ii- STOCKHOLDERS AGREEMENT This Stockholders Agreement ("Agreement") is made and dated this 9th day of October, 1997 by and among Genesis ElderCare Corp.(formerly known as Waltz Corp.), a Delaware corporation ("Corporation"), The Cypress Group L.L.C., a Delaware limited liability company ("Cypress"), TPG Partners II, L.P., a Delaware limited partnership ("TPG"), Genesis Health Ventures, Inc. a Pennsylvania corporation ("Genesis"), and Nazem, Inc., a Delaware corporation ("Nazem"). Cypress, TPG and Genesis, and/or, to the extent applicable, their Affiliates owning Common Stock (as defined below) are sometimes referred to individually as an "Initial Stockholder" and collectively as the "Initial Stockholders," and the Initial Stockholders and affiliates of Nazem owning Common Stock are sometimes referred to individually as a "Stockholder" and collectively as the "Stockholders." WITNESSETH Cypress, TPG, Genesis and Nazem have agreed to acquire or cause their Affiliates (as defined below) to acquire shares of Common Stock, par value $.01 per share (the "Common Stock"), of Corporation, which Common Stock shall, upon the issuance thereof, constitute all of the issued and outstanding capital stock of Corporation. Pursuant to the Agreement and Plan of Merger, dated as of June 16, 1997 (the "Merger Agreement"), by and among Corporation, Genesis ElderCare Acquisition Corp. (formerly known as Waltz Acquisition Corp.), a Delaware corporation, and a wholly owned subsidiary of Corporation ("Acquisition Corp."), Genesis and The Multicare Companies, Inc., a Delaware corporation ("Multicare"), Acquisition Corp. shall be merged with and into Multicare, following which Multicare shall be the surviving corporation and a wholly owned subsidiary of Corporation (the "Merger"). The parties desire to enter into an agreement which imposes certain restrictions and obligations on themselves and/or their Affiliates, as applicable, and on the shares of capital stock of Corporation in order to promote their mutual interests. NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound hereby, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the following meanings: "Affiliate" of any Person means any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. "Asset Sale" means the sale, transfer or other disposition by Corporation to any Person or by any Subsidiary of Corporation to any Person of (a) any of the existing or future capital stock of, or partnership or other equity interest in, any Subsidiary of Corporation or (b) any other Property of -1- Corporation or any of its Subsidiaries, now owned or hereafter acquired, of any nature whatsoever in any transaction or series of related transactions (including any or all assets and business of any division or line of business and further including intangible assets), excluding sales, transfers or other dispositions of inventory or other Property in the ordinary course of business of Corporation or any of its Subsidiaries or the trade-in or replacement of assets in the ordinary course of business of Corporation or any of its Subsidiaries. "Board of Directors" means the Board of Directors of Corporation. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are required or permitted by law to close. "Closing Date" means the date on which the Merger pursuant to the Merger Agreement occurs. "GAAP" means generally accepted accounting principles under United States accounting rules and regulations, consistently applied. "Indebtedness" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) the deferred purchase price of assets or services which in accordance with GAAP would be shown as a liability on the balance sheet of such Person, (c) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder, (d) all Indebtedness of a second Person secured by any lien on any Property owned by such first Person, whether or not such Indebtedness has been assumed by such first Person, (e) all capitalized lease obligations of such Person, (f) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (g) all obligations of such Person under interest rate agreements, (h) all contingent obligations of such Person required to be reflected on such Person's balance sheet prepared in accordance with GAAP, (i) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (j) all obligations of such Person upon which interest charges are customarily paid and (k) current obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock (with redeemable preferred stock being valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends); provided, however, that Indebtedness shall not include trade payables, accrued expenses, accrued dividends, deferred compensation and accrued income taxes, in each case arising in the ordinary course of business. "Investments" means (i) any direct or indirect purchase or other acquisition of any share of capital stock, evidence of Indebtedness or other security issued by any other Person (including, without limitation, any interest in any partnership or joint venture), (ii) any loan, advance (other than advances to employees for travel expenses, drawing accounts and similar expenditures extended in the ordinary course and consistent with past practice) or extension of credit (other than accounts receivable created in the ordinary course) to, or contribution to the capital of, any other Person, including any guarantee of Indebtedness of any other Person and (iii) any capital contribution to any other Person; and any of the foregoing shall be considered an Investment whether such investment -2- is acquired by purchase, exchange, issuance of stock or other securities, merger, reorganization or any other method. "Management Agreement" means the Management Agreement dated October 9, 1997 by and between Genesis ElderCare Network Services, Inc. and Corporation. "Person" means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or other entity or a country or government or any agency or political subdivision or instrumentality thereof or of such subdivision. "Property" means any existing or future interest in any existing or future property or asset of any kind or nature, whether real, personal or mixed, or tangible or intangible, now owned or hereafter acquired or created (including without limitation the capital stock of any Subsidiary). "Put/Call Agreement" means the "Put/Call Agreement dated October 9, 1997 by and among the Stockholders. "Securities Act" means the Securities Act of 1933, as amended. "Senior Loan" means, collectively, all obligations of the Corporation, Acquisition Corp. or any of their respective affiliates or co-borrowers under or in respect of any or all of (in each case, as amended, modified, restated or supplemented) (1) the Credit Agreement, dated as of October 9, 1997, by and among Acquisition Corp., as Borrower, the financial institutions identified therein as Lenders, Mellon Bank, N.A., as Administrative Agent, and the other Agents identified therein, (2) the Credit Agreement, dated as of October 9, 1997, by and among The Multicare Companies, Inc. and certain of its direct and indirect Subsidiaries, as Borrowers, the financial institutions identified therein as Lenders, Mellon Bank, N.A., as Administrative Agent, Citicorp U.S.A., Inc. and NationsBank, N.A., each as a Syndication Agent, and First Union National Bank, as Documentation Agent; (3) the Credit Agreement, dated as of October 9, 1997, by and among The Multicare Companies, Inc., certain Subsidiaries of Multicare, the Lenders referred to therein, Mellon Bank, N.A. as Issuer of Letters of Credit, Mellon Bank, N.A. as Administrative Agent, Citibank, N.A. as Syndication Agent, First Union National Bank as Documentation Agent and Nationsbank N.A. as Syndication Agent; or (4) any other loan or other agreement in respect of indebtedness issued to replace any of the foregoing. "Stock" means all shares of all classes of the capital stock of Corporation now or hereafter owned or held by the Stockholders or any other Person including, without limitation, the Common Stock. "Subsidiary" means with respect to any Person at any time, (a) any corporation more than fifty (50%) percent of whose voting stock is legally and beneficially owned by such Person or owned by a corporation more than fifty (50%) percent of whose voting stock is legally and beneficially owned by such Person; (b) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; and (c) any partnership, joint venture or other entity of which ownership interests -3- having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person. "Subordinated Notes" means the 9% Senior Subordinated Notes due 2007 issued pursuant to the Indenture dated August 11, 1997 by and between Acquisition Corp., PNC Bank, National Association, as trustee, and Banque Internationale a Luxembourg S.A., as paying agent. "Transfer" means to sell, give, transfer, assign, pledge, hypothecate or otherwise dispose of all or a portion of an interest (legal or equitable) by any means, direct or indirect, absolute or conditional, voluntary or involuntary, including, but not limited to, by court order, operation of law, settlement, exchange, waiver, abandonment, gift, alienation, bequest or disposal, or to contract or agree to do any of the foregoing. ARTICLE II BOARD OF DIRECTORS AND OFFICERS Section 2.1 Board of Directors. The Board of Directors shall consist of nine directors. During the term of this Agreement, the Stockholders shall vote all of their Stock so as always to elect and maintain as directors three persons nominated by Cypress, three persons nominated by TPG and three persons nominated by Genesis. In the event of any vacancy on the Board of Directors, the Stockholders shall vote all of the shares of their Stock for the person nominated by the Initial Stockholder who was entitled to nominate the director for whom the vacancy exists. Section 2.2 Officers. The officers of Corporation shall consist of a President and Chief Executive Officer, two Vice Presidents, a Treasurer and a Secretary and such other officers as the President of Corporation may from time to time establish. The Stockholders agree to adopt, and not change during the term of this Agreement, an amendment to Corporation's Bylaws providing that during the term of this Agreement and so long as the Management Agreement is in effect, one person nominated by Cypress and one person nominated by TPG shall be elected as such Vice Presidents of the Corporation and such persons nominated by Genesis shall be elected as all such other officers of Corporation. Section 2.3 Operating Committee. The Stockholders agree to adopt an amendment to Corporation's Bylaws providing that the Board of Directors shall maintain an Operating Committee of the Board of Directors which shall at all times consist of one nominee of each of Cypress, TPG and Genesis and which shall perform the functions contemplated by the Management Agreement. ARTICLE III RESTRICTIONS ON TRANSFERS OF STOCK Section 3.1 Restrictions on Transfer. No Stockholder may Transfer Stock except as provided in the Put/Call Agreement and except a Stockholder may sell its Stock in strict accordance with the terms and conditions of this Article III. Any Transfer of Stock in violation of this -4- Agreement shall be void ab initio. No Stockholder may do indirectly, through a sale of its Stock or other equity interest or otherwise, that which is not permitted by this Section 3.1. Section 3.2 Offer. If a Stockholder ("Selling Stockholder") determines to sell all or any part of its Stock ("Offered Stock"), the Selling Stockholder must first offer (the "Offer") to sell the Offered Stock to the other Initial Stockholders ("Non-Selling Initial Stockholders"), in accordance with Section 3.3 herein, by giving written notice ("Notice") to Corporation and the Non-Selling Initial Stockholders setting forth the proposed terms of such sale (the "Offer Terms"). Section 3.3 Option to Non-Selling Initial Stockholders. The Non-Selling Initial Stockholders shall have the option to purchase all, or any part, of the Offered Stock on the Offer Terms and may exercise their options by giving written notice of exercise to the Selling Stockholder and the other Non-Selling Initial Stockholders, within thirty (30) days after the date of the Notice of the Offer. The notice given by each Non-Selling Initial Stockholder shall state the maximum number of shares of the Offered Stock which it is willing to purchase. Each Non-Selling Initial Stockholder shall have the option to purchase that proportion, rounded to the nearest whole number to eliminate fractional shares, of the Offered Stock which the number of shares of Stock held by such Non-Selling Initial Stockholder bears to the number of shares of Stock then held by all Non-Selling Initial Stockholders; provided however that if Nazem is the Selling Stockholder, Cypress and TPG shall initially have the right, pro rata as provided above, to acquire the Offered Stock pursuant to this Section 3.3 and Genesis will have the right to purchase such Offered Stock not purchased by Cypress or TPG. If a Non-Selling Initial Stockholder does not exercise its option to purchase its full proportionate share of the Offered Stock, the Non-Selling Initial Stockholders who have exercised their options may purchase the Stock not purchased by such Non-Selling Initial Stockholder in such proportions as they shall agree upon or, failing such agreement, pro rata as provided above, by giving written notice of the exercise of their options to the Selling Stockholder within forty (40) days after the date of the Notice of the Offer. Section 3.4 Delivery after Exercise. If the Non-Selling Initial Stockholders shall have exercised their options to purchase all or any part of the Offered Stock, closing on the sale of such Offered Stock shall occur, and all certificates for such Offered Stock (or, if such Offered Stock is subject to pledge, hypothecation or other encumbrance, evidence of the Selling Stockholder's rights therein) shall be delivered to the purchaser(s) thereof, duly endorsed for transfer, at the earlier of fifty (50) days after the date of the Notice of the Offer or ten (10) days after the exercise of the option to purchase the Offered Stock (the "Transfer Date") at the then principal office of Corporation. Section 3.5 Right to Transfer. If all the Offered Stock is not purchased, the Selling Stockholder may, for a period of forty-five (45) days following the final date for acceptance under Section 3.4 herein, enter into a binding agreement (subject to customary conditions) to sell any balance of the Offered Stock to a third party ("Third Party Purchaser"); provided, however, that (a) the proposed sale to the Third Party Purchaser must be unanimously approved by the Non-Selling Initial Stockholders prior to any offer of the Offered Stock to a Third Party Purchaser, (b) such Stock is sold to the Third Party Purchaser upon terms not more favorable to the Third Party Purchaser than the Offer Terms and (c) the Third Party Purchaser agrees in writing to assume performance of and to be bound by the terms and conditions of this Agreement as a Stockholder hereunder and agrees to be bound by the Selling Stockholder's obligations under the Put/Call Agreement. If the Selling -5- Stockholder wishes to sell its Stock on other than the Offer Terms or has not sold such Stock on the Offer Terms within that thirty (30) day period, it shall be obligated to make new offers and re-offers to the Non-Selling Initial Stockholders, in accordance with subsections 3.3 and 3.4 herein, and to comply with the provisions of this Section 3.6, before it shall be permitted to offer to Transfer its Stock, or any part thereof, to any Person. Section 3.6 Certain Transfers. Notwithstanding any provision of this Agreement to the contrary: (a) an Initial Stockholder may at any time and from time to time Transfer all or a portion of its Stock to an Affiliate of such Initial Stockholder if such Affiliate agrees in writing to assume performance of and be bound by the terms and conditions of this Agreement and the Put/Call Agreement to the same extent as the Transferor hereunder and thereunder; (b) TPG and Cypress (or their Affiliates owning Common Stock) may Transfer Stock to the other (or Affiliates of the other) if the transferee agrees in writing to assume performance of and be bound by the terms and conditions of this Agreement and the Put/Call Agreement to the same extent as the transferor; (c) the limited partners of TPG and Cypress (or their Affiliates owning Common Stock) may transfer their limited partnership interests in TPG and Cypress (or their Affiliates owning Common Stock); (d) Stockholders may Transfer Common Stock as contemplated by Sections 6.9 and 8.9 of the Put/Call Agreement; (e) the parties hereto consent to the pledge existing on the date hereof by the limited partner of the Affiliate of Nazem owning Common Stock of its limited partnership interest in such Affiliate and agree that such limited partner may transfer such limited partnership interest to such pledgee or any assignee of such pledgee; and (f) except as provided in Section 3.5 or this Section 3.6, no Stockholder may Transfer Stock to another Person without the prior approval of the other Initial Stockholders. Section 3.7 Pledge of Common Stock by Genesis. Notwithstanding any of the provisions of this Agreement to the contrary, nothing in this Agreement shall restrict or prohibit Genesis, or any Affiliate of Genesis acquiring Common Stock as herein permitted, (1) from pledging all of its Common Stock to secure any indebtedness of Genesis or any such Affiliate, or (2) from transferring any such Common Stock to any such pledgee or any assignee of such pledgee as a result of such pledge (a "Pledge Transferee"); but each Pledge Transferee (i) shall be bound by the terms, and shall be entitled to the benefits, of this Agreement to the same extent as Genesis, (ii) except as hereinafter provided, shall be bound by the terms and shall be entitled to the benefit of subsections (a) through (d) and the first sentence of subsection (e) of subsection 6.9 of the Put/Call Agreement and Section 8.9 of the Put/Call Agreement other than subsection (a) or the last sentence of subsection (g) of such Section 8.9 to the same extent as Genesis, and (iii) except as specifically provided in clause (ii) shall have no obligation or liability with respect to the obligations of Genesis under the Put/Call Agreement. In connection with the assumption of obligations of Genesis under the Put/Call Agreement as provided in clause (ii) of the preceding sentence: (A) each Pledge Transferee shall be bound by the drag-along provisions of subsections (c) and (d) of Section 8.9 of the Put/Call Agreement, including such provisions as incorporated by reference in Section 6.9(d) of the Put/Call Agreement, only if (x) the Board of Directors of Corporation receives a fairness opinion by a nationally recognized investment banking firm selected by Corporation stating that the transaction giving rise to such drag-along rights is fair to the stockholders of Corporation and (y) the consideration to be received by the Pledge Transferee is paid in cash; (B) each Pledge Transferee shall be entitled to the tag-along rights granted in favor of Nazem in Section 6.9(d) of the Put/Call Agreement, but only in respect of any sale of Common Stock solely for cash; and (C) no Pledge -6- Transferee shall have any right of first offer pursuant to Section 6.9 of the Put/Call Agreement. In connection with any sale of Common Stock to a Third Party, no Pledge Transferee shall be required to make any representations or warranties to the Third Party other than customary and reasonable representations and warranties as to (i) its ownership of Common Stock, (ii) its authority to transfer such Common Stock, (iii) the absence of conflicts arising under such Pledge Transferee's constituent documents as a result of such transfer of Common Stock, (iv) the absence of liens on such Common Stock created by such Pledge Transferee, and (v) the absence of any requirement on the part of such Pledge Transferee to obtain any third party consents (other than those which have been obtained) in connection with such transfer. ARTICLE IV SUPERMAJORITY PROVISIONS The Corporation shall not take any of the following actions without first obtaining the approval of at least one designee of each of Cypress, TPG and Genesis to the Board of Directors; provided that such necessary approval shall not relieve any such director from his or her fiduciary duties to Corporation or Corporation's Stockholders. Section 4.1 Sale of Stock. Corporation shall not sell or issue any Stock except as provided in Section 5.1. Section 4.2 Mergers; Dissolution. Corporation shall not merge, consolidate or divide or otherwise combine with or into any other Person, commence a dissolution or liquidation or commence any bankruptcy, insolvency, or other similar proceeding. Section 4.3 Acquisitions; Creation of Subsidiaries. Neither Corporation nor any of its Subsidiaries shall acquire any or all of the stock, securities or other Property of any Person in any transaction, other than (i) immaterial acquisitions in the ordinary course of business consistent with past practice and (ii) acquisitions of any management or consulting businesses or operations as contemplated by Section 3.2 of the Management Agreement. Section 4.4 Transactions With Affiliates or Subsidiaries. Except as permitted in the Management Agreement or the Senior Loan, neither Corporation nor any of its Subsidiaries shall enter into any transaction of any kind or nature with any Affiliate, including, without limitation, the purchase, sale or exchange of Property, or the loaning or giving of funds to any Affiliate. Section 4.5 Dividends and Redemptions. Corporation shall not, nor shall it cause or permit any of its Subsidiaries to, directly or indirectly: (a) declare, pay, authorize or make any form of dividend or distribution on or with respect to its capital stock or return any capital, in cash or Property, to its stockholders, their successors or assigns (except dividends payable to Corporation by any of its Subsidiaries), (b) redeem, retire, purchase or otherwise acquire or retire, for any consideration, any of the capital stock of Corporation or any of its Subsidiaries now or hereafter outstanding or (c) set aside any funds for any of the purposes set forth in clauses (a) or (b) hereof. Section 4.6 Loans and Investments. Neither Corporation nor any of its Subsidiaries shall make or have outstanding Investments in any Person, other than (i) Investments of Multicare -7- and its subsidiaries existing on the Closing Date (ii) Investments permitted under the Senior Loan and Subordinated Notes and (iii) acquisitions of any management or consulting businesses or operations as contemplated by Section 3.2 of the Management Agreement. Section 4.7 Certificate of Incorporation, Bylaws, Stock Agreements. Neither Corporation nor any of its Subsidiaries shall amend, modify, supplement or otherwise change the terms of its certificate of incorporation or bylaws or any agreement entered into by Corporation or any Subsidiary with respect to its capital stock or other equity interests. Section 4.8 Material Agreements. Neither Corporation nor any of its Subsidiaries shall amend, modify, supplement or otherwise change, or waive compliance with or consent to a departure from, any of the terms or provisions of the Senior Loan, the Indenture relating to the Subordinated Notes or any other Indebtedness of Corporation or such Subsidiaries or any other material agreement of Corporation or such Subsidiaries except for the termination of the Management Agreement in accordance with its terms. Section 4.9 Business Conducted. Neither Corporation nor any of its Subsidiaries shall engage, directly or indirectly, in any line of business substantially different from the business con ducted by it or them immediately prior to the Closing Date, or engage in business or lines of business which are not reasonably and substantially related thereto. Section 4.10 Indebtedness. Neither Corporation nor any of its Subsidiaries shall make any prepayments of any nature whatsoever (or deposit money or other property for the purpose thereof) on any existing or future long-term Indebtedness to any Person, except payment on the Senior Loan. Neither Corporation nor any of its Subsidiaries shall incur any Indebtedness for borrowed money provided that nothing hereunder will prevent the Corporation from drawing on lines of credit, revolving credit facilities or other unfunded portions of Indebtedness approved in accordance with the provisions of this Agreement and the Management Agreement, including, without limitation, the Senior Loan. Section 4.11 Restrictions on Fundamental Changes; Asset Sales. Corporation shall not, nor shall it cause or permit any of its Subsidiaries to, (a) alter its or their, as the case may be, corporate, partnership, capital or legal structure or (b) make or effect any Asset Sale. Section 4.12 Capital Stock of Subsidiaries. Corporation shall not permit any of its direct or indirect subsidiaries directly or indirectly to issue any shares of capital stock to any Person other than Corporation. Section 4.13 Subordinated Notes and Senior Loan. Corporation shall not, nor shall it permit any of its Subsidiaries to, take any action or fail to take any action which constitutes a default under the Subordinated Notes, the Senior Loan or any other material Indebtedness of Corporation or any of its Subsidiaries. Section 4.14 Contracts. Neither Corporation nor any of its Subsidiaries shall become or be a party to any contract or agreement which materially impairs such party's ability to perform -8- under or comply with this Agreement, or under any other instrument, agreement or document to which Corporation or such Subsidiary is a party or by which it is or may be bound. Section 4.15 Accounting Policies. Corporation shall not change any accounting policies (including, without limitation, policies relating to the maintenance of reserve accounts). ARTICLE V OTHER ARRANGEMENTS Section 5.1 Additional Capital for Cure Event Purposes. (a) If an additional capital contribution by Corporation to Acquisition Corp. (or, following the Merger, Multicare) is necessary to either cure or prevent an event of default under, or breach of any financial covenant contained in, the Senior Loan or the Subordinated Notes or any other material Indebtedness of Corporation or any of its Subsidiaries, Corporation, by action of a majority of the Board of Directors, may sell additional shares of capital stock of Corporation (with such rights and privileges as the Board of Directors shall determine) (the "Additional Capital") to provide funds to enable Corporation to make a capital contribution to Acquisition Corp. (or, following the Merger, Multicare) to cure such default or breach. (b) In the event the sale of Additional Capital is approved pursuant to subparagraph (a) of this Section 5.1, each Stockholder agrees to vote the shares of Stock of Corporation held by each of them to authorize the filing of an amendment to Corporation's Articles of Incorporation and to take all such other actions required in order to authorize and consummate the issuance of additional shares of capital stock of the Corporation in connection with such Additional Capital. Section 5.2 Pre-emptive Rights. (a) Each Initial Stockholder shall have a pro rata right, based upon the number of shares of capital stock of Corporation held by them, to participate in purchases of shares of capital stock sold by Corporation. Corporation shall give each Initial Stockholder written notice (the "Additional Capital Notice") to such effect which notice shall contain the terms and preferences of any shares of capital stock and the terms upon which such shares are being offered, and each Initial Stockholder shall have the right, exercisable by written notice to Corporation within ten business days from receipt of the Additional Capital Notice to purchase such shares. If such Initial Shareholder elects not to make such a contribution, it shall give Corporation written notice to such effect and Corporation shall have the right to sell such Additional Capital, on the terms described in the Additional Capital Notice, to third parties (provided that such third parties agree in writing to assume performance of and to be bound by the terms and conditions of this Agreement as a Stockholder hereunder) or other Initial Stockholders. (b) Each Initial Stockholder electing to purchase additional shares pursuant to paragraph (a) of this Section 5.2 shall purchase such shares simultaneously with the purchase by the -9- other parties electing to purchase such shares and in any event not earlier than twenty business days from the date the Additional Capital Notice was given (the "Additional Capital Closing Date"). Section 5.3 Irrevocable Proxy. Nazem hereby agrees to cause its Affiliate owning Common Stock to grant to Cypress and TPG an irrevocable proxy and power of attorney substantially in the form of Exhibit A attached hereto. Section 5.4 Access to Information. Each Stockholder agrees to cause Corporation to make available to each of the Initial Stockholders and their representatives full access to the books and records of Corporation and its subsidiaries and to instruct all outside auditors engaged by Corporation to make their work papers available to each of the Initial Stockholders and their representatives. ARTICLE VI MISCELLANEOUS Section 6.1 Legend. Each certificate representing shares of Common Stock now held or hereafter acquired shall bear the following legend (until such time as subsequent transfers thereof are no longer restricted in accordance with the Securities Act or this Agreement): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT (THE "STOCKHOLDERS AGREEMENT") AND PUT/CALL AGREEMENT ("PUT/CALL AGREEMENT") BOTH DATED AS OF OCTOBER 9, 1997, AMONG, INTER ALIA, GENESIS ELDERCARE CORP. (THE "COMPANY"), THE CYPRESS GROUP L.L.C., TPG PARTNERS II, L.P., NAZEM, INC. AND GENESIS HEALTH VENTURES, INC. A COPY OF THE SHAREHOLDERS AGREEMENT AND PUT/CALL AGREEMENT ARE ON FILE WITH THE SECRETARY OF THE COMPANY. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE GIVEN, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF UNLESS SUCH GIFT, SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE STOCKHOLDERS AGREEMENT AND THE PUT/CALL AGREEMENT, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND NO SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF -10- COUNSEL WHICH SHALL BE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS NOT IN VIOLATION OF THE ACT OR APPLICABLE STATE SECURITIES LAWS." Section 6.2 Notices. Notices hereunder shall be given only by personal delivery, registered or certified mail, return receipt requested, overnight courier service, or by telecopy (and subsequently confirmed by any other permitted means hereunder) and shall be deemed transmitted when personally delivered or deposited in the mail or delivered to a courier service or sent by telecopy (as the case may be), postage or charges prepaid, and addressed to the particular party to whom the notice is to be sent as follows: (a) in the case of Corporation: Genesis ElderCare Corp. 148 West State Street Kennett Square, PA 19348 Telecopier No.: 610-444-3365 Attention: Ira C. Gubernick, Esquire with a copy to: Blank Rome Comisky & McCauley One Logan Square Philadelphia, PA 19103 Telecopier No.: (215) 569-5555 Attention: Stephen E. Luongo, Esquire (b) in the case of Cypress: The Cypress Group L.L.C. 65 East 55th Street, 19th Floor New York, NY 10022 Telecopier No.: (212) 705-0199 Attention: William L. Spiegel with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Telecopier No.: (212) 455-2502 Attention: William E. Curbow, Esquire -11- (c) in the case of TPG: TPG Partners II, L.P. 201 Main Street, Suite 2420 Fort Worth, Texas 76102 Telecopier No.: (817) 871-4010 Attention: Karl I. Peterson with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Telecopier No.: (212) 225-3999 Attention: Paul T. Shim, Esquire (d) in the case of Genesis: Genesis Health Ventures, Inc. 148 West State Street Kennett Square, PA 19348 Telecopier No.: 610-444-3365 Attention: Ira C. Gubernick, Esquire with a copy to: Blank Rome Comisky & McCauley One Logan Square Philadelphia, PA 19103 Telecopier No.: (215) 569-5555 Attention: Stephen E. Luongo, Esquire (e) in the case of Nazem: Nazem, Inc. 645 Madison Avenue New York, NY 10022 Telecopier: (212) 371-2150 Attention: Fred Nazem -12- with a copy to: Bartoma Corporation, N.V. Fokkerweg 26 Suite 12 Curacao, Netherlands Antilles Telecopier: 5999-465-39-07 Attention: Marleen Janssen or to such address as a party may instruct by notice hereunder. Section 6.3 Severability. In the event any provision hereof is held void or unenforceable by any court, then such provision shall be severable and shall not affect the remaining provisions hereof. Section 6.4 Entire Agreement. This Agreement, together with the other agreements referred to herein, is the entire Agreement among the parties, and, when executed by the parties hereto, supersedes all prior agreements and communications, either verbal or in writing between the parties hereto with respect to the subject matter contained herein. Section 6.5 Amendment and Waiver. This Agreement may not be amended, modified or supplemented unless consented to in writing by Cypress, TPG and Genesis. Any failure by a party hereto to comply with any obligation, agreement or condition herein may be expressly waived in writing by each of Cypress, TPG and Genesis, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any such subsequent or other failure. Section 6.6 Consent to Specific Performance. The parties hereto declare that it is impossible to measure in money the damages which would accrue to a party by reason of failure to perform any of the obligations hereunder. Therefore, if any party shall institute any action or proceeding to enforce the provisions hereof, any party against whom such action or proceeding is brought hereby waives any claim or defense therein that the other party has an adequate remedy at law. Section 6.7 Assignment; Responsibility for Affiliates. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. No party may assign to any Person any of its rights hereunder except in connection with Transfers of Stock permitted by Sections 3.6 or 3.7. Each of Cypress, TPG, Genesis and Nazem shall cause their Affiliates who are Stockholders to execute a joinder to, and comply with, the provisions of, this Agreement and shall be liable for any breach of the provisions of this Agreement by any of their respective Affiliates who are Stockholders. Section 6.8 Variations in Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the antecedent person or persons or entity or entities may require. -13- Section 6.9 Term. This Agreement shall terminate upon the earlier to occur of (i) consummation of the exercise of the Put Option or the Call Option pursuant to the Put/Call Agreement, without any default in connection therewith, or (ii) at TPG's and Cypress's option, acting jointly, upon (a) failure by Genesis to comply with its obligations under the Put Option, (b) the occurrence of any Event of Acceleration (as defined in the Put/Call Agreement) occurring prior to the second day after the sixth anniversary of the Closing date (as defined on the Put/Call Agreement) or (c) any sale of Common Stock pursuant to Section 6.9 under the Put/Call Agreement. The transfer restrictions contained in Article III shall not apply to Nazem or its Affiliate owning Common Stock following the sale by Cypress, TPG and their Affiliates of all of the Common Stock owned by them pursuant to Section 6.9. Following any termination of this Agreement pursuant to clause (ii), (a) Genesis and/or, to the extent applicable, Affiliates of Genesis who are Stockholders and Affiliates of Nazem who are Stockholders shall continue to be subject to the provisions contained in Article III, and (b) for such purposes, "Initial Stockholders" and "Non-Selling Initial Stockholders" as used in Article III shall be deemed to refer to Cypress and TPG and/or to the extent applicable, their Affiliates owning Common Stock; provided, that the restrictions set forth in this sentence shall apply to Genesis and Affiliates of Nazem only while Cypress, TPG or their Affiliates own Common Stock. Section 6.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. Section 6.11 Further Assurances. Each of the parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Section 6.12 Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the interpretation of this Agreement. Section 6.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [Remainder of page intentionally left blank] -14- IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written. GENESIS ELDERCARE CORP. By: /s/ James L. Singleton ----------------------------------- THE CYPRESS GROUP L.L.C. By: /s/ James L. Singleton ----------------------------------- TPG PARTNERS II, L.P. BY: TPG GenPar II, L.P. BY: TPG ADVISORS II, INC. By: /s/ Karl I. Peterson ----------------------------------- GENESIS HEALTH VENTURES, INC. By: /s/ George V. Hager, Jr. ----------------------------------- NAZEM, INC. By: /s/ Fred Nazem ----------------------------------- -15- The foregoing provisions of this Agreement applicable to Affiliates of Stockholders owning Common Stock shall be binding upon and inure to the benefit of the undersigned. Affiliates of The Cypress Group L.L.C. CYPRESS MERCHANT BANKING PARTNERS, L.P. By: Cypress Associates L.P. By: The Cypress Group L.L.C. By: /s/ James L. Singleton ------------------------------------ Name: James L. Singleton Title: Vice Chairman CYPRESS OFFSHORE PARTNERS, L.P. By: Cypress Associates L.P. By: The Cypress Group L.L.C. By: /s/ David P. Spalding ------------------------------------ Name: David P. Spalding Title: Vice Chairman Affiliates of TPG PARTNERS II, L.P. TPG PARALLEL II, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ------------------------------------ Name: Karl I. Peterson Title: Vice President TPG INVESTORS II, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ------------------------------------ Name: Karl I. Peterson Title: Vice President [Signatures continued on following page] -16- TPG MC COINVESTMENT, L.P. By: TPG GenPar II, L.P. By: TPG Advisors II, Inc. By: /s/ Karl I. Peterson ------------------------------------ Name: Karl I. Peterson Title: Vice President Affiliate of Nazem GENESIS ELDERCARE PORTFOLIO K. LP By: Healthworth Associates I, L.L.C. By: /s/ Fred Nazem ------------------------------------ Name: Fred Nazem Title: Managing Member -17- -----END PRIVACY-ENHANCED MESSAGE-----