EX-10 8 exhibit106.htm Exhibit 10.6

Exhibit 10.6

AMENDED AND RESTATED
PLEDGE AGREEMENT
(Alterra Healthcare Corporation)

      This Amended and Restated Pledge Agreement (this “Agreement”) is made as
of July ___, 2003, between ALTERRA HEALTHCARE CORPORATION, a Delaware
corporation (“Pledgor”), and OMEGA HEALTHCARE INVESTORS, INC., a Maryland
corporation, for itself and as collateral agent for Omega (Kansas), Inc., a
Kansas corporation (for itself and as collateral agent for Omega (Kansas), Inc.,
“Creditor”).

STATEMENT OF FACTS

A.        Pledgor is the owner of 100% of the outstanding equity interests in
AHC Properties, Inc., a Delaware corporation (the “Lessee”).

B.        Lessee and Omega Healthcare Investors, Inc. are parties to a Master
Lease dated as of June 14, 1999, amended by a Forbearance Agreement and
Amendment to Master Leases dated as of January 31, 2002, and a Second Amendment
to Master Lease dated of even date herewith (as amended through and including
the date of this Agreement, and as it may hereafter be amended, the “Master
Lease”), pursuant to which Omega Healthcare Investors, Inc. is leasing certain
assisted living facilities to AHC.

C.        Lessee and Omega (Kansas), Inc. (“Omega-Kansas”), a wholly-owned
subsidiary of Omega Healthcare Investors, Inc., are parties to a Kansas Master
Lease dated as of June 14, 1999, amended by a Forbearance Agreement and
Amendment to Master Leases dated as of January 31, 2002, and a Second Amendment
to Master Lease dated of even date herewith (as amended through and including
the date of this Agreement, and as it may hereafter be amended, the “Kansas
Master Lease”), pursuant to which Omega-Kansas is leasing an assisted living
facility located in Kansas to AHC. The Master Lease and the Kansas Master Lease
are referred to together in this Agreement as the “Master Leases”.

D.        Effective June 14, 1999, Pledgor executed a Lease Guaranty (the
“Original Lease Guaranty”) in favor of Omega Healthcare Investors, Inc. and
Omega-Kansas, pursuant to which, among other things, Pledgor guaranteed the
obligations of AHC under the Master Leases and the other Transaction Documents
(as that term is defined in the Master Leases). The Original Lease Guaranty, and
AHC's obligations under the Master Leases and the other Transaction Documents,
were secured by a Pledge Agreement dated June 14, 1999 (the “Original Pledge
Agreement”).

E.        On January 22, 2003, Pledgor filed a chapter 11 petition for
reorganization relief in the United States Bankruptcy Court, District of
Delaware (the “Court”), bearing Case No. 03-10254 (MFW) (the “Case”). As of the
date of this Agreement, AHC has not filed for bankruptcy.

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F.        On January 24, 2003, the Court entered interim orders (the “Interim
Orders”) granting Pledgor certain rights, to which Creditor filed an Objection
(the “Objection”), together with a Motion for Adequate Protection (the “Motion
for Adequate Protection”).

G.        Omega Healthcare Investors, Inc., Omega-Kansas, AHC, Pledgor and
certain other interested parties agreed to resolve the Objection and the Motion
for Adequate Protection pursuant to the entry of a stipulated order, which was
entered by the Court on March 18, 2003.

H.        Omega Healthcare Investors, Inc., Omega-Kansas, AHC and Pledgor have
resolved certain other disputes among them pursuant to a Settlement Agreement
dated June 4, 2003 (the “Settlement Agreement”). The execution, delivery and
performance of the Settlement Agreement by Pledgor was approved by the Court
pursuant to an order (the “Order”) which was entered by the Court on June 23,
2003, and became a Final Order (as defined in the Settlement Agreement) on or
before July 7, 2003. Pursuant to the Settlement Agreement, Pledgor has on this
day executed and delivered to Omega Healthcare Investors, Inc. and Omega-Kansas
an Amended and Restated Lease Guaranty (the “Guaranty”). The Settlement
Agreement also provides that the Debtor will amend and restate the Original
Pledge Agreement, as set forth herein.

The parties therefore agree as follows:

1.        Pledge; Grant of Security Interest. Pledgor hereby grants to Creditor
a security interest, on the following terms and subject to the following
conditions, in:

(a)     all Pledgor's right, title and interest in the Lessee (the “Pledged
Securities”);

(b)     any equity securities issued by Lessee and any options, warrants or
rights to acquire such securities, owned or acquired by Pledgor, directly or
indirectly, now or at any time in the future;

(c)     any securities or other property issued or distributed to Pledgor with
respect to any securities described in clauses (a) or (b) above as a dividend or
distribution or as a result of any amendment of the certificate of incorporation
or other charter documents, merger, consolidation, re-designation,
reclassification, purchase or sale of assets, dissolution, or plan of
arrangement, compromise or reorganization of the issuer thereof;

(d)     any rights incidental to the ownership of any of the securities
described in clauses (a), (b) or (c) above, such as voting, conversion and
registration rights and rights of recovery for violations of applicable
securities laws; and

(e)     the proceeds of the exercise, redemption, sale or exchange of any of the
foregoing, or any dividend, interest payment or other distribution of cash or
property in respect thereof.

      All of the foregoing may be referred to herein as the “Pledged
Collateral”.

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2.     Secured Obligations. The security interest described in section 1 of this
Agreement secures the (i) prompt and full payment when due (and not merely the
ultimate collectibility) of all sums payable by Lessee to Omega Healthcare
Investors, Inc. and Omega-Kansas pursuant to the Master Leases, (ii) the prompt
and full performance of all obligations of the Lessee and Pledgor under the
Transaction Documents, and (iii) all of Pledgor's obligations under the Guaranty
(collectively, the “Secured Obligations”). Pledgor has entered into this
Agreement subsequent to the commencement of the Case and the obligations of
Pledgor under this Agreement constitute post-petition obligations of Pledgor. 
The Court has approved the entry by Pledgor into this Agreement pursuant to the
Order.

3.       Delivery. (a) Before, or at the same time as the Pledgor has executed
and delivered this Agreement to Creditor, Pledgor has delivered to Creditor a
fully executed Assignment in Blank (substantially in the form of Exhibit A
hereto) and with all necessary transfer tax stamps affixed.

(b)         If, at any time, Pledgor obtains possession of any certificate or
instrument constituting or representing any of the Pledged Collateral (other
than interest and cash dividends), Pledgor shall deliver such certificate or
instrument to Creditor forthwith duly endorsed in blank without restriction or
with a fully executed Assignment in Blank (substantially in the form of Exhibit
A hereto) and with all necessary transfer tax stamps affixed.

(c)         If no Event of Default (as defined in Section 10 below) has occurred
and is continuing, Pledgor may retain for its own use and shall not be required
to deliver to Creditor any interest payments on or any cash dividends or other
cash distributions that are a part of the Pledged Collateral. If an Event of
Default has occurred and is continuing, then all such interest, dividends and
cash distributions shall be delivered to the Creditor for application by
Creditor toward payment of the Secured Obligations as Creditor may determine.

(d)         If any of the Pledged Collateral is uncertificated securities, the
Pledgor shall either (a) procure the issuance of security certificates to
represent such Pledged Collateral and endorse and deliver such certificates as
required by paragraph (b) of this Section 3, or (b) cause the issuer thereof to
register Creditor as the registered owner of such securities, or (c) cause the
issuer thereof to enter into an agreement, in form and substance satisfactory to
Creditor, among Creditor, the registered owner of such security, and the issuer
to the effect that the issuer will comply with instructions originated by
Creditor without further consent by the registered owner.

(e)         Pledgor hereby irrevocably authorizes Creditor, at any time and from
time to time, pursuant to the provisions of this Agreement, to take any and all
actions Creditor may reasonably determine to be necessary to assure that the
security interests granted hereby are and remain perfected, including without
limitation, filing financing statements, continuation statements and amendments
thereto that describe the Pledged Collateral as set forth in this Agreement and
which contain any other information required for the sufficiency or filing
office acceptance of any financing statement, continuation statement or
amendment, including whether that Pledgor is an organization, the type of
organization and any organization identification number(s) issued to the
Pledgor. Pledgor agrees to furnish any such information to Creditor promptly
upon request. Any such financing statements, continuation statements or
amendments may be signed by Creditor on behalf of Pledgor, and may be filed at
any time in any jurisdiction deemed appropriate by Creditor. Without limiting
the forgoing, at Pledgor's expense, Pledgor shall deliver to Creditor such
financing statements, continuation statements, conveyances, certificates, legal
opinions or other instruments as Creditor may at any time request or require to
protect, assure or enforce its interests, rights and remedies under this
Agreement.

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4.       Voting Rights. If no Event of Default has occurred or is continuing,
the Pledged Collateral will be registered in the name of Pledgor, and Pledgor
may exercise any voting or consensual rights that Pledgor may have as the owner
of the Pledged Collateral for any purpose which is not inconsistent with this
Agreement. Pledgor shall deliver to Creditor copies of all notices, proxy
statements, proxies and other information or instruments in its possession
concerning such exercise and advise Creditor of how Pledgor will exercise such
rights at least five (5) days before any meeting or mailing any ballot or
consent and shall not exercise any such right if, in the judgment of Creditor,
such exercise would have a material adverse effect on the value of the Pledged
Collateral or would result in a violation of any of the terms of the Transaction
Documents. If an Event of Default has occurred and is continuing, Creditor may
exercise all voting or consensual rights of the owners of any of the Pledged
Collateral and Pledgor shall deliver to Creditor all notices, proxy statements,
proxies and other information and instruments relating to the exercise of such
rights received by Pledgor from the issuers of any of the Pledged Collateral
promptly upon receipt thereof and shall at the request of Creditor execute and
deliver to Creditor any proxies or other instruments which are, in the judgment
of Creditor, necessary for Creditor to validly exercise such voting and
consensual rights.

5.      Duty of Creditor. The duty of the Creditor with respect to the Pledged
Collateral shall be solely to use reasonable care in the physical custody
thereof, and the Creditor shall not be under any obligation to take any action
with respect to any of the Pledged Collateral or to preserve rights against
prior parties. The powers conferred on Creditor hereunder are solely to protect
its interest in the Pledged Collateral and do not impose any duty upon it to
exercise any such powers. Pledgor is not looking to the Creditor to provide
Pledgor with investment advice. Creditor shall have no duty to ascertain or take
any action with respect to calls, conversions, exchanges, maturities, tenders or
other matters concerning any Pledged Collateral, whether or not Creditor has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve any rights pertaining to any Pledged Collateral.

6.       Subsequent Changes Affecting Pledged Collateral. Pledgor acknowledges
that it has made its own arrangements for keeping informed of changes or
potential changes affecting the Pledged Collateral (including, but not limited
to, conversions, subscriptions, exchanges, reorganizations, dividends, tender
offers, mergers, consolidations and shareholder or other meetings) and Pledgor
agrees that Creditor has no responsibility to inform Pledgor of such matters or
to take any action with respect thereto even if any of the Pledged Collateral
has been registered in the name of Creditor or its agent or nominee.

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7.      Return of Pledged Collateral. The security interest granted to Creditor
hereunder shall not terminate and Creditor shall not be required to return the
Pledged Collateral to Pledgor unless and until (a) the Secured Obligations have
been fully paid or performed, (b) all of Pledgor's obligations hereunder have
been fully paid or performed, and (c) Pledgor has reimbursed Creditor for any
expenses of returning the Pledged Collateral and filing such termination
statements and other instruments as are required to be filed in public offices
under applicable laws.

8.      Representations and Warranties. Pledgor hereby represents and warrants
to Creditor as follows:

(a)      Enforceability. This Agreement has been duly executed and delivered by
Pledgor, constitutes its valid and legally binding obligation and is enforceable
against Pledgor in accordance with its terms. Pledgor has the legal capacity to
enter into and perform all of its obligations and agreements under this
Agreement. No consent or approval for the entry into and performance by Pledgor
of its obligations and agreements under this Agreement is necessary.

(b)     No Conflict. The execution, delivery and performance of this Agreement,
the grant of the security interest in the Pledged Collateral hereunder and the
consummation of the transactions contemplated hereby will not, with or without
the giving of notice or the lapse of time, (a) violate any material law
applicable to Pledgor; (b) violate any judgment, writ, injunction or order of
any court or governmental body or officer applicable to Pledgor; (c) violate or
result in the breach of any material agreement to which Pledgor is a party or by
which any of its properties, including the Pledged Collateral, is bound; nor
(d) violate any restriction on the transfer of any of the Pledged Collateral.
Pledgor has the full and unrestricted right to pledge, assign and create a
security interest in the Pledged Collateral as described in and contemplated by
this Agreement. The execution, delivery and performance of this Agreement by
Pledgor will not affect or in any way impair the Pledged Collateral or Pledgor's
or Creditor's rights or interests therein.

(c)     No Consents. No consent, approval, license, permit or other
authorization of any third party or any governmental body or officer is required
for the valid and lawful execution and delivery of this Agreement, the valid and
lawful creation and perfection of the Creditor's security interest in the
Pledged Collateral or the valid and lawful exercise by Creditor of remedies
available to it under this Agreement or applicable law or of the voting and
other rights granted to it in this Agreement except as may be required for the
offer or sale of those items of Pledged Collateral which are securities under
applicable securities laws.

(d)     Organization. Lessee is duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Pledged Securities are all
of the issued and outstanding securities issued by the Lessee.

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The Pledged Securities have been duly authorized and validly issued by the
Lessee and are fully paid and non-assessable. The certificates which represent
the Pledged Securities are valid and genuine and have not been altered and
Pledgor is the appropriate person to endorse them. Except for this Agreement,
neither Pledgor nor any Lessee is bound by any certificate of incorporation or
organization, bylaw, agreement or instrument (including options, warrants, and
convertible securities) which relates to the voting of; restricts the transfer
of; requires Pledgor or any Lessee to issue or sell; or creates rights in any
person (other than the record owner) with respect to; any securities issued by
Lessee.

(e)     Security Interest. Subject to Creditor's rights under the Original
Pledge Agreement, Pledgor is the sole record and beneficial owner of the Pledged
Securities free and clear of all liens, encumbrances and adverse claims and
Pledgor has the unrestricted right to grant the security interest provided for
herein to the Creditor. Pledgor has duly endorsed and delivered to Creditor all
of the certificates representing the Pledged Securities and has granted to
Creditor a valid and perfected first priority security interest in the Pledged
Securities, free of all liens, encumbrances, transfer restrictions and adverse
claims, other than the Original Pledge Agreement. The certificates, instruments
and other writings delivered by Pledgor to Creditor pursuant to this Agreement
and the Original Pledge Agreement are all of the certificates, instruments and
other writings representing the Pledged Collateral and all rights and interests
with respect thereto. The security interest granted hereby to Creditor does now
and shall at all times during the term of this Agreement continue to constitute
a first and prior lien on the Pledged Collateral, subject only to the Original
Pledge Agreement and such matters as may be specifically agreed to in writing by
Creditor. This representation shall be deemed made with respect to each item of
property that becomes Pledged Collateral after the date hereof.

(f)     Information. None of the information, documents, or financial statements
which has been furnished by Pledgor or its representatives to Creditor or any of
its representatives in connection with the transactions contemplated by this
Agreement or the Transaction Documents contains any untrue statement of material
fact or omits to state any material fact required to be stated hereby or thereby
to make such statements not misleading.

(g)     Name and Address. Pledgor's principal place of business is 10000
Innovation Drive, Milwaukee, Wisconsin 53226.

(h)     Location. Pledgor's (i) chief executive office is located in the state
of Wisconsin, (ii) location (as that term is defined in Section 9.307 of the
Commercial Code) is the State of Delaware (the “Debtor State”), (iii) exact
legal name is as set forth in the first paragraph of this Agreement, (iv)
Taxpayer Identification Number is ____________________, and (v) filing number
with the Debtor State is ______________________.

9.      Agreements. So long as this Agreement is in effect, Pledgor shall:

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(a)     Maintain the Pledged Collateral free from all pledges, liens,
encumbrances and security interests or other claims in favor of others, other
than the security interest in favor of Creditor, and Pledgor will defend the
Pledged Collateral against all claims and demands of all persons.

(b)     Comply with the requirements of all applicable state, local and federal
laws necessary to grant to Creditor a valid lien upon, and a duly perfected
security interest in, the Pledged Collateral in compliance with the requirements
of this Agreement.

(c)     Appear in and defend any action or proceeding arising out of or
connected with this Agreement, and pay all reasonable costs and expenses of
Creditor (including, without limitation, reasonable attorneys' fees) in any such
action or proceeding in which Creditor appears or determines to become involved.

(d)     Not, without the prior written consent of Creditor, sell, assign,
encumber, pledge, hypothecate, transfer or otherwise dispose of the Pledged
Collateral or any part thereof or any interest therein.

(e)     Provide Creditor, and Creditor's agents and attorneys, reasonable access
to the books and records of Pledgor for inspection purposes and permit Creditor
and Creditor's agents and attorneys to make copies hereof.

(f)     Notify the Creditor at least ninety (90) days before Pledgor changes its
name or the address of its principal place of business.

10.       Events of Default. The occurrence of any of the following shall
constitute an “Event of Default” under this Agreement:

(a)      If the Pledgor or the Lessee fails to pay or perform, as the case may
be, any of the Secured Obligations when the same become due and payable or
performable, as the case may be; or

(b)     If an Event of Default occurs under a Transaction Document or any lease,
security agreement, or other agreement between Creditor and Pledgor or Lessee;
or

(c)     If any representation or warranty made by Pledgor in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein not misleading in light of the
circumstances in which they were made; or

(d)     Following the pendency of the Case, if Pledgor at any time while the
Guaranty remains in effect:

(i)      makes an assignment for the benefit of, or enters into any composition
or arrangement with, creditors; or

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(iv)     generally does not pay its debts as such debts become due; or

(v)     onceals, removes, or permits to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its creditors or any of them,
or makes or suffers a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law, or makes any
transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or

(e)     Following the pendency of the Case and at any time while the Guaranty
remains in effect, the filing of a petition by or against Pledgor seeking relief
under the Federal Bankruptcy Code, 11 U.S.C. sec. 101, et seq., and any
amendments thereto, or any similar law or regulation, whether federal, state or
local, not dismissed within 90 days.

(f)     Following the pendency of the Case and at any time while the Guaranty
remains in effect, the commencement of a proceeding by or against Pledgor under
any statute or other law providing for an assignment for the benefit of
creditors, the appointment of a receiver, or any other similar law or
regulation, whether federal, state or local, not dismissed within 90 days.

(g)     Following the pendency of the Case and at any time while the Guaranty
remains in effect, the garnishment, attachment, levy or other similar action
taken by or on behalf of any creditor of the Pledgor, or any of its properties
which could have a material adverse effect on the Pledgor and the same is not
vacated or discharged within thirty (30) days thereafter (unless Pledgor is in
the process of contesting such lien or attachment in good faith in accordance
with Article XII of the Master Leases).

11.       Remedies. (a) Upon and at any time after an Event of Default under
this Agreement, Creditor shall, at its option and without further notice to
Pledgor (except for such further notices, if any, that may be required by law)
be entitled to exercise any or all rights and remedies provided hereunder or by
law, including without limitation the rights and remedies of a Creditor under
the Michigan Uniform Commercial Code. Any requirement under the Michigan Uniform
Commercial Code or otherwise of reasonable notice shall be met if Creditor sends
Pledgor notice of sale and other notices required by law at least ten (10) days
prior to the date of sale, disposition or other event giving rise to the
required notice. Any sale held pursuant to the exercise of Creditor's rights
hereunder may be public or private, and at such sale Creditor shall have the
right, at any time and from time to time, to the extent permitted by law, to
sell, assign and deliver all or any part of the Pledged Collateral, at
Creditor's office or elsewhere, without demand of performance, advertisement of
notice of intention to sell or of the time or place of sale or adjournment
thereof or any other notice (all of which are hereby waived by Pledgor to the
extent permitted by law), except such notice as is required by applicable law
and cannot be waived, for cash, on credit or for other property, for immediate
or future delivery, without any assumption or credit risk, and, provided that
such is not in violation of applicable law,

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for such terms as Creditor in its absolute and uncontrolled discretion may
determine. In furtherance of Creditor's rights hereunder, Creditor shall have
the right, for and in the name, place and stead of Pledgor, to execute
endorsements, assignments or other instruments of conveyance or transfer with
respect to all or any of the Pledged Collateral. All amounts collected by
Creditor as the result of any action taken pursuant to this section 11, and the
liquidation value of any other property received as a result of such action,
shall be applied by Creditor as follows:

(i)      First, to the payment of all fees and costs including, without
limitation, reasonable attorneys' fees, incurred in connection with the
collection of the Secured Obligations or in connection with the exercise or
enforcement of Creditor's rights, powers or remedies under this Agreement.

(ii)        Second, to the payment and satisfaction of all of the Secured
Obligations.

(b)        Creditor shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Creditor may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. If, under the Michigan Uniform
Commercial Code, the Creditor may purchase any part of the Pledged Collateral,
it may, in payment of any part of the purchase price thereof cancel any part of
the Secured Obligations. If any of the Pledged Collateral is sold on credit or
for future delivery, it need not be retained by Creditor until the purchase
price is paid and Creditor shall incur no liability if the purchaser fails to
take up or pay for such collateral. In case of any such failure, such collateral
may be sold again.

(c)         Pledgor shall execute and deliver to the purchasers of the Pledged
Collateral all instruments and other documents necessary or proper to sell,
convey, and transfer title to such Pledged Collateral and, if approval of any
sale of Pledged Collateral by any governmental body or officer is required,
Pledgor shall prepare or cooperate fully in the preparation of and cause to be
filed with such governmental body or officer all necessary or proper
applications, reports, and forms and do all other things necessary or proper to
expeditiously obtain such approval.

(d)        The remedies provided in this Agreement in favor of Creditor shall
not be deemed exclusive, but shall be cumulative, and shall be in addition to
all other remedies in favor of Creditor existing at law or in equity.

12.       Appointment of Creditor as Agent. Pledgor hereby appoints and
constitutes Creditor, its successors and assigns, as its agent and
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action or executing any instrument that Creditor
considers necessary or convenient for such purpose, including the power to
endorse and deliver checks, notes and other instruments for the payment of money
in the name of and on behalf of Pledgor, to endorse and deliver in the name of
and on behalf of Pledgor securities certificates and execute and deliver in the
name of and on behalf of Pledgor instructions to the issuers of uncertificated
securities, and to execute and file in the name of and on behalf of Pledgor
financing statements (which may be photocopies of this Agreement) and
continuations and amendments to financing statements in the State of Alabama,
Iowa or elsewhere and Forms 144

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with the United States Securities and Exchange Commission. This appointment is
coupled with an interest and is irrevocable and will not be affected by the
dissolution or bankruptcy of Pledgor or by the lapse of time. If Pledgor fails
to perform any act required by this Agreement, Creditor may perform such act in
the name of and on behalf of Pledgor and at its expense which shall be
chargeable to Pledgor under this Agreement. Pledgor hereby consents and agrees
that the issuers of or obligors of the Pledged Collateral or any registrar or
transfer agent or trustee for any of the Pledged Collateral shall be entitled to
accept the provisions hereof as conclusive evidence of the rights of Creditor to
effect any transfer pursuant to this Agreement and the authority granted to
Creditor herein, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by Pledgor, or any other person, to any of such
issuers, obligors, registrars, transfer agents, or trustees.

13.      Impact of Regulations. Pledgor acknowledges that compliance with the
Securities Act of 1933 and the rules and regulations thereunder and any relevant
state securities laws and other applicable laws may impose limitations on the
right of Creditor to sell or otherwise dispose of securities included in the
Pledged Collateral. For this reason, Pledgor hereby authorizes Creditor to sell
any securities included in the Pledged Collateral in such manner and to such
persons as would, in the judgment of Creditor, help to ensure that the transfer
of such securities will be given prompt and effective approval by any relevant
regulatory authorities and will not require any of the securities to be
registered or qualified under any applicable securities laws. Pledgor
understands that a sale under the foregoing circumstances may yield a
substantially lower price for such Pledged Collateral than would otherwise be
obtainable if the same were registered and sold in the open market, and Pledgor
shall not attempt to hold Creditor responsible for selling any of the Pledged
Collateral at an inadequate price even if Creditor accepts the first offer
received or if only one possible purchaser appears or bids at any such sale. If
Creditor shall sell any securities included in the Pledged Collateral at such
sale, Creditor shall have the right to rely upon the advice and opinion of any
qualified appraiser or investment banker as to the commercially reasonable price
obtainable on the sale thereof but shall not be obligated to obtain such advice
or opinion. Pledgor hereby assigns to Creditor any registration rights or
similar rights Pledgor may have from time to time with respect to any of the
Pledged Collateral.

14.      Expenses. Pledgor will forthwith upon demand pay to Creditor:

(i)      the amount of any taxes which Creditor may have been required to pay by
reason of holding the Pledged Collateral or to free any of the Pledged
Collateral from any lien encumbrance or adverse claim thereon, and

(ii)      the amount of any and all reasonable out-of-pocket expenses, including
the fees and disbursements of counsel and of any brokers, investment brokers,
appraisers or other experts, that Creditor may incur in connection with (A) the
administration or enforcement of this Agreement, including such expenses as are
incurred to preserve the value of the Pledged Collateral and the validity,
perfection, rank and value of Creditor's security interest therein, (B) the
collection, sale or other disposition of any of the Pledged Collateral, (C) the
exercise by Creditor of any of the rights conferred upon it hereunder, or (D)
any action or proceeding to enforce its rights under this Agreement or in
pursuit of any non-judicial remedy hereunder including the sale of the Pledged
Collateral.

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Any such amount not paid on demand shall bear interest (computed on the basis of
the number of days elapsed over a year of three hundred sixty-five (365) days)
at a rate per annum equal to 10.375%.

15.       Indemnity. The Pledgor shall indemnify the Creditor and its directors,
officers, employees, agents and attorneys against, and hold them harmless from,
any liability, cost or expense, including the fees and disbursements of their
legal counsel, incurred by any of them under the corporate or securities laws
applicable to holding or selling any of the Pledged Collateral, except for
liability, cost or expense arising out of the recklessness or willful misconduct
of the indemnified parties.

16.       Performance by Creditor. If Pledgor fails to duly and punctually
perform, observe or comply with any condition, term or covenant contained in
this Agreement, Creditor, without notice to or demand upon Pledgor and without
waiving or releasing any of the Secured Obligations, may at any time thereafter
perform such condition, term or covenant for the account and at the expense of
Pledgor. All sums paid or advanced in connection with the foregoing and all
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred in connection therewith shall be paid by Pledgor to Creditor on demand,
and shall constitute and become a part of the Secured Obligations and Pledgor
agrees to reimburse Creditor for any payment made or any expense incurred
(including reasonable attorneys' fees to the extent permitted by law) by
Creditor pursuant to this Agreement.

17.      Waivers. Pledgor hereby waives presentment, demand, protest, notice of
any default under the Transaction Documents, unless such notice is specifically
required by the Transaction Document, if any, pursuant to which such notice is
required to be given to the Pledgor. Neither the failure of nor any delay by any
party to this Agreement to enforce any right hereunder or to demand compliance
with its terms is a waiver of any right hereunder. No action taken pursuant to
this Agreement on one or more occasions is a waiver of any right hereunder or
constitutes a course of dealing that modifies this Agreement. No waiver of any
right or remedy under this Agreement shall be binding on any party unless it is
in writing and is signed by the party to be charged. No such waiver of any right
or remedy under any term of this Agreement shall in any event be deemed to apply
to any subsequent default under the same or any other term contained herein.

18.       Entire Agreement. This Agreement, the schedules and exhibits hereto,
the Transaction Documents and the agreements and instruments required to be
executed and delivered hereunder set forth the entire agreement of the parties
with respect to the subject matter hereof and supersede and discharge all prior
agreements (written or oral) and negotiations and all contemporaneous oral
agreements concerning such subject matter and negotiations. There are no oral
conditions precedent to the effectiveness of this Agreement.

19. Amendments. No amendment, modification or termination of this Agreement
shall be binding on any party hereto unless it is in writing and is signed by
the party to be charged.

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20. Severability. If any term or provision set forth in this Agreement shall be
invalid or unenforceable, the remainder of this Agreement, or the application of
such terms or provisions to persons or circumstances, other than those to which
it is held invalid or unenforceable, shall be construed in all respects as if
such invalid or unenforceable term or provision were omitted.

21. Successors. The terms of this Agreement shall be binding upon the Pledgor,
its heirs and personal representatives, and shall inure to the benefit of
Creditor, its corporate successors and any holder, owner or assignee of any
rights in a Transaction Document and will be enforceable by them as their
interest may appear.

22. Third Parties. Nothing herein expressed or implied is intended or shall be
construed to give any person other than the parties hereto any rights or
remedies under this Agreement.

23. Saturdays, Sundays and Holidays. Where this Agreement authorizes or requires
a payment or performance on a Saturday, Sunday or public holiday, such payment
or performance shall be deemed to be timely if made on the next succeeding
business day.

24. Joint Preparation. This Agreement shall be deemed to have been prepared
jointly by the parties hereto. Any ambiguity herein shall not be interpreted
against any party hereto and shall be interpreted as if each of the parties
hereto had prepared this Agreement.

25. Rules of Construction. In this Agreement, words in the singular number
include the plural, and in the plural include the singular; words of the
masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender and the word “or”
is disjunctive but not exclusive. The captions and section numbers appearing in
this Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.

26. Notices. All notices, demands or requests required or permitted to be given
to either party hereto shall be in writing and shall be deemed given if
delivered personally, sent by reputable overnight courier, with acknowledgment
of receipt requested, or mailed by registered, overnight or certified mail, with
full postage paid thereon, return receipt requested (such notice to be effective
on the date such receipt is acknowledged), as follows:

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To Pledgors:
Alterra Healthcare Corporation
10000 Innovation Drive
Milwaukee, Wisconsin 53226
Attention: Ms. Kristin Ferge
Telephone No.: (___) _________
Facsimile No.: (___) __________
With copy to (which shall
not constitute notice):
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attn: Miriam Dent
Telephone No.: (404) 522-4700
Facsimile No.: (404) 525-224
To Creditor:
Omega Healthcare Investors, Inc.
9690 Deerco Road, Suite 100
Timonium, Maryland 21093
Attn: Daniel J. Booth
Telephone No.: 410/427-1700
Facsimile No.: 410/427-8800
With copy to (which shall
not constitute notice): Myers Nelson Dillon & Shierk
125 Ottawa Ave., NW, Suite 370
Grand Rapids, Michigan 49503
Attn: Mark Derwent
Telephone No.: (616) 233-9640
Facsimile No.: (616) 233-9642
or to such place and with such other copies as Pledgor or Creditor may designate
for itself by written notice to the other.

27. Counterparts. This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same instrument, and any party hereto
may execute this Agreement by signing and delivering one or more counterparts.

28. Choice of Law; Jurisdiction, Venue, Service of Process. The parties hereto
agree that certain material events, occurrences and transactions relating to
this Agreement bear a reasonable relationship to the State of Michigan. The
validity, terms, performance and enforcement of this Agreement shall be governed
by those laws of the State of Michigan which are applicable to agreements which
are negotiated, executed, delivered and performed solely in the State of
Michigan. Effective following the pendency of the Case, the State and Federal
District Courts located in the County of Kent, State of Michigan shall have
exclusive jurisdiction and venue of any action or proceeding arising out of or
related to the negotiation, execution, delivery, performance, breach or
enforcement of this Agreement or any other agreement, document or instrument
negotiated, executed, delivered, entered into or performed in connection with
this

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Agreement or any of the transactions contemplated hereby or thereby; any waiver,
modification, amendment or termination hereof or thereof or any action taken or
omission made by the Pledgor or the Creditor or any of their respective
directors, officers, employees, agents or attorneys in connection with the
payment, performance, exercise or enforcement of any right, duty or obligation
created or implied hereby or thereby or arising hereunder or thereunder;
regardless of whether any claim, counterclaim or defense in any such action,
suit or proceeding is characterized as arising out of fraud, negligence,
recklessness, intentional misconduct, a breach of contract or fiduciary duty, or
violation of a statute, law, ordinance, rule or regulation. Effective following
the pendency of the Case, the parties hereto hereby irrevocably consent to the
personal jurisdiction of such courts, to such venue and to the service of
process in the manner provided for the giving of notices in this Agreement. The
parties hereto hereby waive all objections to such jurisdiction and venue
including those which might be based upon inconvenience or the nature of the
forum.

29. Waiver of Jury Trial. The Pledgor hereby voluntarily, knowingly, irrevocably
and unconditionally waives and relinquishes its Right to Trial by Jury under the
Constitution of the United States of America or of the State of Michigan or any
other constitution, statute or law in any civil legal action, suit or proceeding
arising out of or related to the negotiation, execution, delivery, performance,
breach or enforcement of this Agreement or any other agreement, document or
instrument negotiated, executed, delivered, entered into or performed in
connection with this Agreement or any of the transactions contemplated hereby or
thereby; any waiver, modification, amendment or termination hereof or thereof or
any action taken or omission made by the Pledgor or the Creditor or any of their
respective directors, officers, employees, agents or attorneys in connection
with the payment, performance, exercise or enforcement of any right, duty or
obligation created or implied hereby or thereby or arising hereunder or
thereunder; regardless of whether any claim, counterclaim or defense in any such
action, suit or proceeding is characterized as arising out of fraud, negligence,
recklessness, intentional misconduct, a breach of contract or fiduciary duty, or
violation of a statute, law, ordinance, rule or regulation.

Signatures on following page.

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Signature page to Pledge Agreement

      IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as of
the date first above stated.
CREDITOR:
OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation, for itself and
as collateral agent for Omega (Kansas), Inc.
July __, 2003
By:         /s/ Daniel J. Booth
Name:        Daniel J. Booth
Chief Operating Officer

PLEDGOR:
ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation

July __, 2003
By:         /s/ Kristin A. Ferge
Name:        Kristin A. Ferge
Its:        Vice President of Finance

STATE OF MARYLAND               )
                                                        ) ss:
COUNTY OF BALTIMORE         )

      The foregoing instrument was acknowledged before me on July 2, 2003, by
Daniel J. Booth who is the Chief Operating Officer of Omega Healthcare
Investors, Inc., a Maryland corporation, on behalf of the corporation, who
acknowledged the same to be his/her free act and deed and the free act and deed
of the corporation.

        
/s/ Judith Jacobs
Notary Public, Baltimore County, Maryland
My commission expires: 5/15/2004

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STATE OF WISCONSIN       )
                                                ) ss:
COUNTY OF MILWAUKEE)

The foregoing instrument was acknowledged before me on July 2, 2003, by Kristin
A. Ferge who is Vice President of Finance of Alterra Healthcare Corporation, a
Delaware corporation, on behalf of the corporation, who acknowledged the same to
be his free act and deed and the free act and deed of the corporation.
        
/s/ Patricia C. Sauer
Notary Public Milwaukee County, Wisconsin
My commission expires: 2/6/2005

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EXHIBIT A
ASSIGNMENT IN BLANK
AHC PROPERTIES, INC.
     For value received, ALTERRA HEALTHCARE CORPORATION, a Delaware corporation
(“Assignor”), sells, assigns and transfers to
______________________________________ (“Assignee”), __________ shares of Common
Stock in AHC Properties, Inc., a Delaware corporation (the “Company”),
represented by certificate no. ___________ dated ________________ (the
“Shares”), and further irrevocably appoints OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation, as attorney in fact to transfer the Shares on the books of
the Company, with full power of substitution and re-substitution (which power
shall survive the dissolution of Assignor).
ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
July __, 2003 By:         ______________________________
Name:        ______________________________
Its:        ______________________________

STATE OF WISCONSIN       )
                                                ) ss:
COUNTY OF MILWAUKEE)

The foregoing instrument was acknowledged before me on ___________, 2003, by
_____________________________ who is ________________________ of Alterra
Healthcare Corporation, a Delaware corporation, on behalf of the corporation,
who acknowledged the same to be his free act and deed and the free act and deed
of the corporation.
        
___________________________________
Notary Public, _______ County, Wisconsin
My commission expires:_______________

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