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EXHIBIT 10.1
 
CREDIT AND SECURITY AGREEMENT
 
dated as of February 28, 2006
 
among
 
CYPRESS DALLS , L.P. and FT. WORTH, L.P.
 
collectively, as Borrowers
 
and
 
MERRILL LYNCH CAPITAL,
 
a Division of Merrill Lynch Business Financial Services Inc.,
 
as Administrative Agent and as a Lender
 
and
 
THE ADDITIONAL LENDERS
 
FROM TIME TO TIME PARTY HERETO
 

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TABLE OF CONTENTS
 

 
Page
ARTICLE 1 DEFINITIONS
1
Section 1.1
Certain Defined Terms
1
Section 1.2
Accounting Terms and Determinations
18
Section 1.3
Other Definitional Provisions
19
Section 1.4
Funding and Settlement Currency
19
Section 1.5
Borrowers as Licensed Operators
19
Section 1.6
Certain References to Credit Parties
19
   
ARTICLE 2 LOANS
19
Section 2.1
Term Loan
19
Section 2.2
[Reserved.]
21
Section 2.3
Interest; Interest Calculations and Certain Fees
21
Section 2.4
Notes
23
Section 2.5
Reserves and Escrows
23
Section 2.6
General Provisions Regarding Payment; Loan Account
25
Section 2.7
Maximum Interest
26
Section 2.8
Taxes
26
Section 2.9
Capital Adequacy
27
Section 2.10
Mitigation Obligations
28
Section 2.11
Appointment of Borrower Representative
28
   
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
29
Section 3.1
Existence and Power
29
Section 3.2
Organization and Governmental Authorization; No Contravention
29
Section 3.3
Binding Effect
30
Section 3.4
Capitalization
30
Section 3.5
Financial Information
30
Section 3.6
Litigation
31
Section 3.7
Ownership of Property Generally
31
Section 3.8
No Default
31
Section 3.9
Labor Matters
31
Section 3.10
Regulated Entities
31
Section 3.11
Margin Regulations
32
Section 3.12
Compliance With Laws; Anti-Terrorism Laws
32
Section 3.13
Taxes
32
Section 3.14
Compliance with ERISA
33
Section 3.15
Consummation of Financing Documents; Brokers
33
Section 3.16
Related Transactions
34
Section 3.17
Material Contracts
34
Section 3.18
Compliance with Environmental Requirements; No Hazardous Materials
34

 
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Section 3.19
Intellectual Property
36
Section 3.20
Solvency
36
Section 3.21
Full Disclosure
36
Section 3.22
Interest Rate
36
Section 3.23
Representations and Warranties Incorporated from Financing Documents
37
Section 3.24
Subsidiaries. There are no Subsidiaries of Borrowers
37
   
ARTICLE 4 AFFIRMATIVE COVENANTS
37
Section 4.1
Financial Statements and Other Reports
37
Section 4.2
Payment and Performance of Obligations
39
Section 4.3
Maintenance of Existence; Single Purpose Entity Requirements
40
Section 4.4
Maintenance of Property; Payment of Taxes; Insurance
40
Section 4.5
Compliance with Laws
42
Section 4.6
Inspection of Property, Books and Records
42
Section 4.7
Use of Proceeds
43
Section 4.8
[Reserved.]
43
Section 4.9
[Reserved.]
43
Section 4.10
Environmental Covenants
43
Section 4.11
Syndication
45
Section 4.12
Further Assurances
45
Section 4.13
Litigation
46
Section 4.14
Deferred Maintenance
46
Section 4.15
Power of Attorney
46
Section 4.16
Estoppel Certificates
46
   
ARTICLE 5 NEGATIVE COVENANTS
46
Section 5.1
Debt
47
Section 5.2
Liens
47
Section 5.3
Contingent Obligations
47
Section 5.4
Restricted Distributions
47
Section 5.5
Restrictive Agreements
47
Section 5.6
Payments and Modifications of Subordinated Debt
48
Section 5.7
Consolidations, Mergers and Sales of Assets
48
Section 5.8
Purchase of Assets
49
Section 5.9
Transactions with Affiliates
49
Section 5.10
Modification of Organizational Documents
49
Section 5.11
Modification of Certain Agreements
49
Section 5.12
Fiscal Year
50
Section 5.13
Conduct of Business
50
Section 5.14
Operating Leases
50
Section 5.15
Lease Payments
50
Section 5.16
Limitation on Sale and Leaseback Transactions
50
Section 5.17
Compliance with Anti-Terrorism Laws
50

 
 
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ARTICLE 6 FINANCIAL COVENANTS
51
Section 6.1
Definitions
51
Section 6.2
[Reserved.]
52
Section 6.3
[Reserved.]
52
Section 6.4
[Reserved.]
53
Section 6.5
Financial Covenant
53
Section 6.6
Evidence of Compliance
53
Section 6.7
Financial Covenant Default
53
   
ARTICLE 7 CONDITIONS
54
Section 7.1
Conditions to Closing
54
Section 7.2
Searches
55
Section 7.3
Certain Post-Closing Obligations
56
   
ARTICLE 8 REGULATORY MATTERS
56
Section 8.1
Representations and Warranties Pertaining to Licensed Locations
56
Section 8.2
Representations and Warranties Pertaining to Licensed Operators
57
Section 8.3
Covenants Pertaining to Licensed Locations
60
Section 8.4
Covenants Pertaining to Licensed Operators
61
Section 8.5
Special Notices to Administrative Agent
65
Section 8.6
Cure of Healthcare Laws Violations
66
Section 8.7
Licensed Operator; Manager
67
Section 8.8
Transfer of Healthcare Permits and Operations
68
   
ARTICLE 9 REAL PROPERTY MATTERS
69
Section 9.1
Leases; Resident Agreements
69
Section 9.2
Project Use and Operation
70
Section 9.3
Casualty Proceeds
71
Section 9.4
Borrowers' Obligation to Rebuild and Use of Casualty Proceeds Therefor
73
Section 9.5
Tax Reduction Proceedings
74
Section 9.6
Commingling; FIRPTA
74
Section 9.7
Representations and Warranties
74
   
ARTICLE 10 SECURITY AGREEMENT
76
Section 10.1
Generally
76
Section 10.2
Covenants Relating to Collateral
77
Section 10.3
UCC Remedies
78
   
ARTICLE 11 EVENTS OF DEFAULT
80
Section 11.1
Events of Default
80
Section 11.2
Acceleration
82
Section 11.3
[Reserved.]
83
Section 11.4
Default Rate of Interest
83
Section 11.5
Setoff Rights
83

 
 
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Section 11.6
Application of Proceeds
83
Section 11.7
Waivers
84
Section 11.8
Injunctive Relief
86
Section 11.9
Marshalling
86
   
ARTICLE 12 EXPENSES AND INDEMNITY
87
Section 12.1
Expenses
87
Section 12.2
Indemnity
87
   
ARTICLE 13 ADMINISTRATIVE AGENT
88
Section 13.1
Appointment and Authorization
88
Section 13.2
Administrative Agent and Affiliates
89
Section 13.3
Action by Administrative Agent
89
Section 13.4
Consultation with Experts
89
Section 13.5
Liability of Administrative Agent
89
Section 13.6
Indemnification
90
Section 13.7
Right to Request and Act on Instructions
90
Section 13.8
Credit Decision
90
Section 13.9
Collateral Matters
91
Section 13.10
Agency for Perfection
91
Section 13.11
Notice of Default
91
Section 13.12
Successor Administrative Agent
92
Section 13.13
Payment and Sharing of Payment
93
Section 13.14
Right to Perform, Preserve and Protect
94
Section 13.15
Additional Titled Agents
94
Section 13.16
Amendments and Waivers
95
Section 13.17
Assignments and Participations
95
Section 13.18
Definitions
98
   
ARTICLE 14 MISCELLANEOUS
99
Section 14.1
Survival
99
Section 14.2
No Waivers
99
Section 14.3
Notices
99
Section 14.4
Severability
100
Section 14.5
Amendments and Waivers
101
Section 14.6
Credit Party Assignments
101
Section 14.7
Headings
101
Section 14.8
Confidentiality
101
Section 14.9
Waiver of Consequential and Other Damages
102
Section 14.10
GOVERNING LAW; SUBMISSION TO JURISDICTION
102
Section 14.11
WAIVER OF JURY TRIAL
103
Section 14.12
Publication; Advertisement
103
Section 14.13
Counterparts; Integration
104
Section 14.14
No Strict Construction
104
Section 14.15
Time
104
Section 14.16
Lender Approvals
104

 
 
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Section 14.17
[Reserved.]
104
Section 14.18
WAIVERS
104
Section 14.19
Release of Administrative Agent and Lenders
104
   
ARTICLE 15 JOINT AND SEVERAL LIABILITY; GUARANTOR PROVISIONS
105
Section 15.1
Joint and Several Obligations
105
Section 15.2
Guarantor Provisions.
109

 
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CREDIT AND SECURITY AGREEMENT
 
THIS CREDIT AND SECURITY AGREEMENT is dated as of February 28, 2006 by and among
CYPRESS DALLAS, L.P., a Delaware limited partnership, CYPRESS FT. WORTH, L.P., a
Delaware limited partnership (each, individually as a Borrower, and
collectively, as Borrowers), the financial institutions or other entities from
time to time parties hereto, each as a Lender, and MERRILL LYNCH CAPITAL, a
division of Merrill Lynch Business Financial Services Inc., individually as a
Lender and as Administrative Agent.
 
RECITALS:
 
R-1. Borrowers have requested that Lenders make available to Borrowers term
financing facilities as described herein.
 
R-2. Lenders are willing to extend such credit to Borrowers under the terms and
conditions herein set forth.
 
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrowers, Lenders and Administrative Agent
agree as follows:
 
ARTICLE 1
DEFINITIONS
 
Section 1.1 Certain Defined Terms. 
 
The following terms have the following meanings:
 
"Account" means "account", as defined in Article 9 of the UCC.
 
"Additional Titled Agents" has the meaning given in Section 13.15.
 
"Administrative Agent" means Merrill Lynch, in its capacity as administrative
agent for the Lenders hereunder, as such capacity is established in, and subject
to the provisions of, Article 10, and the successors of Merrill Lynch in such
capacity.
 
"Affected Lender" has the meaning given in Section 13.17(f).
 
"Affiliate" means with respect to any Person (a) any Person that directly or
indirectly controls such Person, (b) any Person which is controlled by or is
under common control with such controlling Person, and (c) each of such Person's
(other than, with respect to any Lender, any Lender's) officers or directors (or
Persons functioning in substantially similar roles) and the spouses, parents,
descendants and siblings of such officers, directors or other Persons. As used
in this definition, the term "control" of a Person means the possession,
directly or indirectly, of the power to vote five percent (5%) or more of any
class of voting securities of such Person or to direct or cause the direction of
the management or
 
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policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
 
"Affiliated Financing Documents" means any credit, loan, letter of credit or
related documents which are, by their terms and by the terms of this Agreement,
cross-defaulted with the Financing Documents, and for which a Credit Party
hereunder is liable or contingently liable for payment or as security for which
a Credit Party hereunder has pledged, assigned or subjected any assets.
 
"Agreement" means this Credit and Security Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
 
"Allocable Amount" has the meaning given in Section 15.1(g).
 
"Anti-Terrorism Laws" means any Laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the
Laws administered by OFAC.
 
"Asset Disposition" means any sale, lease, license, transfer, assignment or
other consensual disposition by any Borrower of any asset, but excluding
dispositions of Inventory in the Ordinary Course of Business.
 
"Assignment Agreement" means an agreement substantially in the form of Exhibit A
hereto. 
 
"ARC" means American Retirement Corporation, a Tennessee corporation.
 
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as the same may be amended, modified or supplemented from time to
time, and any successor statute thereto.
 
"Base Rate" means a rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) equal to (a) the rate of interest which is identified and
normally published by Bloomberg Professional Service Page BBAM 1 as the offered
rate for loans in United States dollars for the period of one (1) month under
the caption British Bankers Association LIBOR Rates as of 11:00 a.m. (London
time) as adjusted on a daily basis and effective on the second full Business Day
after each such day (unless such date is not a Business Day, in which event the
next succeeding Business Day will be used); divided by (b) the sum of one minus
the daily average during the preceding month of the aggregate maximum reserve
requirement (expressed as a decimal) then imposed under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor thereto) for
"Eurocurrency Liabilities" (as defined therein). If Bloomberg Professional
Service (or another nationally-recognized rate reporting source acceptable to
Administrative Agent) no longer reports the LIBOR or Administrative Agent
determines in good faith that the rate so reported no longer accurately reflects
the rate available to Administrative Agent in the London Interbank Market or if
such index no longer exists or if Page BBAM 1 no longer
 
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exists or accurately reflects the rate available to Administrative Agent in the
London Interbank Market, Administrative Agent may select a replacement index or
replacement page, as the case may be.
 
"Base Rate Margin" means two and one tenth percent (2.10%).
 
"Blocked Person" means any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports "terrorism" as
defined in Executive Order No. 13224, or (e) a Person that is named a "specially
designated national" or "blocked person" on the most current list published by
OFAC or other similar list.
 
"Borrower" and "Borrowers" mean the entities described in the first paragraph of
this Agreement and each of their respective successors and permitted assigns.
 
"Borrower Representative" means ARC, in its capacity as Borrower Representative
pursuant to the provisions of Section 2.11, or any successor Borrower
Representative selected by Borrowers and approved by Agent.
 
"Business Day" means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
Chicago and New York City are authorized by law to close.
 
"Capital Lease" of any Person means any lease of any property by such Person as
lessee which would, in accordance with GAAP, be required to be accounted for as
a capital lease on the balance sheet of such Person.
 
"Capital Replacement Reserve" has the meaning given in Section 2.5(d).
 
"Casualty Proceeds" has the meaning given in Section 9.3(b).
 
"CCP" has the meaning given in Section 8.4b(xi).
 
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended
from time to time.
 
"Closed Period" means the period from the Closing Date through the twelfth
(12th) full calendar month following the Closing Date.
 
"Closing Date" means the date of this Agreement.
 
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"CMS" means the federal Centers for Medicare and Medicaid Services (formerly the
federal Health Care Financing Administration), or any successor Governmental
Authority.
 
"CNL" means CNL Financial Group, Inc., a Florida corporation.
 
"Code" means the Internal Revenue Code of 1986.
 
"Collateral" means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of,
Administrative Agent, for the benefit of Administrative Agent and Lenders,
pursuant to this Agreement and the Security Documents.
 
"Commitment Annex" means Annex A to this Agreement.
 
"Commitment Expiry Date" means February 28, 2009.
 
"Compliance Certificate" means a certificate, duly executed by a Responsible
Officer of Borrower Representative, appropriately completed and substantially in
the form of Exhibit C hereto.
 
"CON" means any certificate of need or similar license which determines that
there is a need for a healthcare facility at a particular location or within a
certain geographic region and entitles the holder to use a Licensed Location for
a purpose permitted under Healthcare Laws.
 
"Contingent Obligation" means, with respect to any Person, any direct or
indirect liability of such Person: (a) with respect to any debt, lease, dividend
or other obligation of another Person (a "Third Party Obligation") if the
purpose or intent of such Person incurring such liability, or the effect
thereof, is to provide assurance to the obligee of such Third Party Obligation
that such Third Party Obligation will be paid or discharged, or that any
agreement relating thereto will be complied with, or that any holder of such
Third Party Obligation will be protected, in whole or in part, against loss with
respect thereto; (b) with respect to any undrawn portion of any letter of credit
issued for the account of such Person or as to which such Person is otherwise
liable for the reimbursement of any drawing; (c) under any Swap Contract or
other derivative obligation; (d) to make take-or-pay or similar payments if
required regardless of nonperformance by any other party or parties to an
agreement; or (e) for any obligations of another Person pursuant to any
Guarantee or pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to preserve the
solvency, financial condition or level of income of another Person. The amount
of any Contingent Obligation shall be equal to the amount of the obligation so
Guaranteed or otherwise supported or, if not a fixed and determinable amount,
the maximum amount so Guaranteed or otherwise supported.
 
"Controlled Group" means all members of a group of corporations and all members
of a group of trades or businesses (whether or not incorporated) under common
 
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control which, together with any Borrower, are treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
 
"Covenant Prepayment" has the meaning given in Section 6.7.
 
"Credit Exposure" means any period of time during which any Loan or other
Obligation remains unpaid or outstanding; provided, however, that no Credit
Exposure shall be deemed to exist solely due to the existence of contingent
indemnification liability (other than liability in respect of the Affiliated
Financing Documents), absent the assertion of a claim with respect thereto.
 
"Credit Party" means subject to Section 1.6, any Guarantor under a Financing
Document Guarantee, Cypress JV, General Partner, each Borrower and any
Subsidiary of any Borrower, whether now existing or hereafter acquired or
formed; and "Credit Parties" means all such Persons, collectively.
 
"Cypress JV" means Cypress Dallas & Ft. Worth JV, LLC, a Delaware limited
liability company, the sole member or limited partner, as applicable, of such
Borrower.
 
"Debt" of a Person means at any date, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable arising and paid on a timely basis and in the Ordinary
Course of Business, (d) all Capital Leases of such Person, (e) all
non-contingent obligations of such Person to reimburse any bank or other Person
in respect of amounts paid under a letter of credit, banker's acceptance or
similar instrument, (f) all equity securities of such Person subject to
repurchase or redemption otherwise than at the sole option of such Person,
(g) all obligations secured by a Lien on any asset of such Person, whether or
not such obligation is otherwise an obligation of such Person, (h) "earnouts",
purchase price adjustments, profit sharing arrangements, deferred purchase money
amounts and similar payment obligations or continuing obligations of any nature
of such Person arising out of purchase and sale contracts; (i) all Debt of
others Guaranteed by such Person; (j) off-balance sheet liabilities and/or
pension plan liabilities; (k) obligations arising under non-compete agreements;
and (l) obligations arising under bonus, deferred compensation, incentive
compensation or similar arrangements, other than those arising in the Ordinary
Course of Business.
 
"Debt Service" has the meaning given in Section 6.1(a).
 
"Debt Service Coverage Ratio" has the meaning given in Section 6.1(a).
 
"Debt Yield Ratio" has the meaning given in Section 6.1(a).
 
"Default" means any condition or event which with the giving of notice or lapse
of time or both would, unless cured or waived, become an Event of Default.
 
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"Default Rate" has the meaning given in Section 11.4.
 
"Eligible Swap Counterparty" means Administrative Agent or any Affiliate of
Administrative Agent that from time to time enters into a Swap Contract with a
Borrower or Borrowers.
 
"Environmental Laws" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
governmental directives or requirements, as well as common law, pertaining to
the environment, natural resources, pollution, health (including any
environmental clean up statutes and all regulations adopted by any local, state,
federal or other Governmental Authority, and any statute, ordinance, code,
order, decree, law rule or regulation all of which pertain to or impose
liability or standards of conduct concerning medical waste or medical products,
equipment or supplies), safety or clean-up that apply to any Borrower or the
Project and relate to Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42
U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
§ 1251 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 5101 et
seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency Planning
and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Occupational
Safety and Health Act (29 U.S.C. § 651 et seq.), the Residential Lead-Based
Paint Hazard Reduction Act (42 U.S.C. § 4851 et seq.), any analogous state or
local laws, any amendments thereto, and the regulations promulgated pursuant to
said laws, together with all amendments from time to time to any of the
foregoing and judicial interpretations thereof.
 
"Environmental Liens" means all Liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of Borrower or any
other Person.
 
"ERISA" means the Employee Retirement Income Security Act of 1974, as the same
may be amended, modified or supplemented from time to time, and any successor
statute thereto, and any and all rules or regulations promulgated from time to
time thereunder.
 
"ERISA Plan" means any "employee benefit plan", as such term is defined in
Section 3(3) of ERISA (other than a Multiemployer Plan), which any Borrower
maintains, sponsors or contributes to, or, in the case of an employee benefit
plan which is subject to Section 412 of the Code or Title IV of ERISA, to which
any Borrower or any member of the Controlled Group may have any liability,
including any liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA at any time during the preceding five
(5) years, or by reason of being deemed to be a contributing sponsor under
Section 4069 of ERISA.
 
"Event of Default" has the meaning given in Section 11.1.
 
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"Exit Fee" has the meaning given in Section 2.3(d).
 
"FF&E" has the meaning given in Section 9.2(d).
 
"Financial Covenants" has the meaning given in Section 6.5.
 
"Financing Documents" means this Agreement, any Notes, the Security Documents,
any fee letter among Merrill Lynch and any of the Borrowers relating to the
transactions contemplated hereby, any subordination or intercreditor agreement
pursuant to which any Debt (other than any Subordinated Debt) and/or any Liens
securing such Debt is subordinated to all or any portion of the Obligations and
all other documents, instruments and agreements contemplated herein or thereby
and heretofore executed, executed concurrently herewith or executed at any time
and from time to time hereafter, as any or all of the same may be amended,
supplemented, restated or otherwise modified from time to time, provided that
the term "Financing Documents" does not include the documents evidencing or
securing the Mezzanine Loan.
 
"Financing Document Guarantee" means that certain Guaranty of Non-Recourse
Carveouts Agreement and that certain Debt Service Guaranty, each executed by ARC
of even date herewith, as well as any agreement that may exist from time to time
pursuant to which any third party other than a Borrower shall Guarantee the
Obligations of the Borrowers under this Agreement and/or the other Financing
Documents.
 
"Fiscal Year" means the fiscal year of Borrowers ending on December 31 of each
calendar year.
 
"GAAP" means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the date
of determination.
 
"General Partner" means, collectively, Cypress Dallas GP, LLC and Cypress Ft.
Worth GP, LLC, each a Delaware limited liability company.
 
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any agency, department or Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation or other Person owned or controlled
(through stock or capital ownership or otherwise) by any of the foregoing,
whether domestic or foreign.
 
"Governmental Payor" means Medicare, Medicaid, TRICARE, and other state or
federal health care programs, but specifically excluding Third Party Payors.
 
"Guarantee" by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other
 
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Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or
other obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), or
(b) entered into for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided, however, 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.
 
"Guarantor" means ARC and any other Person that has executed or delivered, or
shall in the future execute or deliver, any Financing Document Guarantee of any
portion of the Obligations.
 
"Hazardous Materials" means petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which on the Project is
prohibited by any Environmental Laws; toxic mold, or any similar substance that
requires special handling due to environmental concerns; and any other material
or substance now defined as a "hazardous substance," "hazardous material,"
"hazardous waste," "toxic substance," "toxic pollutant," "contaminant,"
"pollutant" or other words of similar import within the meaning of any
Environmental Law, including: (a) any "hazardous substance" defined as such in
(or for purposes of) CERCLA, or any so-called "superfund" or "superlien" Law;
(b) any "pollutant or contaminant" as defined in 42 U.S.C.A. § 9601(33); (c) any
material now defined as "hazardous waste" pursuant to 40 C.F.R. Part 260;
(d) any petroleum or petroleum by-products, including crude oil or any fraction
thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel; (f) any "hazardous chemical" as defined pursuant
to 29 C.F.R. Part 1910; (g) any toxic substances, wastes, materials, pollutants
or contaminants (including, without limitation, asbestos, polychlorinated
biphenyls ("PCB's"), flammable explosives, radioactive materials, infectious
substances, materials containing lead-based paint or raw materials which include
hazardous constituents); and (h) any other toxic substance or contaminant that
is subject to any Environmental Laws or other past or present requirement of any
Governmental Authority.
 
"Hazardous Materials Contamination" means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.
 
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"Healthcare Laws" means all applicable Laws relating to the possession, control,
warehousing, marketing, sale and distribution of pharmaceuticals, the operation
of medical or senior housing facilities (such as, but not limited to, nursing
homes, skilled nursing facilities, rehabilitation hospitals, intermediate care
facilities and adult care facilities), patient healthcare, patient healthcare
information, patient abuse, the quality and adequacy of medical care, rate
setting, equipment, personnel, operating policies, fee splitting, including
without limitation, (a) all federal and state fraud and abuse laws, including,
without limitation, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(6)),
the Stark Law (42 U.S.C. § 395n), the civil False Claims Act (31 U.S.C. § 729 et
seq.), (b) TRICARE; (c) HIPAA, (d) Medicare; (e) Medicaid; (f) quality, safety
and accreditation standards and requirements of all applicable state laws or
regulatory bodies; (g) all laws, policies, procedures, requirements and
regulations pursuant to which Healthcare Permits are issued; and (h) any and all
other applicable health care laws, regulations, manual provisions, policies and
administrative guidance, each of (a) through (h) as may be amended from time to
time.
 
"Healthcare Permit" means a Permit (a) issued or required under Healthcare Laws
applicable to the business of any Borrower or any of its Subsidiaries or
necessary in the possession, ownership, warehousing, marketing, promoting, sale,
labeling, furnishing, distribution or delivery of goods or services by a
Borrower or a Licensed Operator under Healthcare Laws, and/or (b) issued or
required under Healthcare Laws applicable to the ownership of a Licensed
Location.
 
"HIPAA" means the Health Insurance Portability and Accountability Act of 1996,
as the same may be amended, modified or supplemented from time to time, and any
successor statute thereto, and any and all rules or regulations promulgated from
time to time thereunder.
 
"HIPAA Compliant" means that the applicable Person is in compliance in all
material respects with each of the applicable requirements of the so-called
"Administrative Simplification" provisions of HIPAA, and is not and could not
reasonably be expected to become the subject of any civil or criminal penalty,
process, claim, action or proceeding, or any administrative or other regulatory
review, survey, process or proceeding (other than routine surveys or reviews
conducted by any government health plan or other accreditation entity) that
could result in any of the foregoing or that could reasonably be expected to
adversely affect such Person's business, operations, assets, properties or
condition (financial or otherwise), in connection with any actual or potential
violation by such Person of the provisions of HIPAA.
 
"Indemnitees" has the meaning given in Section 12.2.
 
"Insurance Premiums" has the meaning given in Section 2.5(c).
 
"Intercompany Loans" has the meaning given in Section 2.11.
 
"Inventory" means "inventory", as defined in Article 9 of the UCC.
 
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"JCAHO" means the Joint Commission on Accreditation of Healthcare Organizations.
 
"Joint Liability Payment" has the meaning given in Section 15.1(g).
 
"Laws" means any and all federal, state, local and foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
codes, plans, injunctions, permits and governmental restrictions (whether now or
hereafter in effect), which are applicable to any Credit Party in any particular
circumstance. "Laws" includes, without limitation, Healthcare Laws.
 
"Leases" means the singular or collective reference to leases, subleases or
other arrangements for occupancy of space within any Project or any part thereof
now existing or hereafter executed; provided, however, that the term "Leases" as
used herein shall not include Resident Agreements; and provided, further, that
use of the term "Leases" in any Security Document shall include Resident
Agreements even if Resident Agreements are, under applicable Laws, not governed
as creating a landlord-tenant relationship (the intent being that Administrative
Agent shall have, as part of the Security Documents, a lien upon and collateral
assignment of all Leases and Resident Agreements).
 
"Lender" means each of (a) Merrill Lynch, (b) each other Person party hereto in
its capacity as a lender, (c) each other Person that becomes a party hereto as
Lender pursuant to Section 14.6, and (d) the respective successors of all of the
foregoing, and "Lenders" means all of the foregoing. In addition to the
foregoing, for the purpose of identifying the Persons entitled to share in the
Collateral and the proceeds thereof under, and in accordance with the provisions
of, this Agreement and the Security Documents, the term "Lender" shall include
each Eligible Swap Counterparty.
 
"Licensed Location" means any Project from which a Borrower or a Person with
whom a Borrower has contracted provides or furnishes goods or services governed
by Healthcare Laws, and includes, without limitation, any business location of a
Borrower which is subject to any Healthcare Permit.
 
"Licensed Operator" means the singular or collective (as the context
requires) reference to the following Persons: (a) any Borrower or any Subsidiary
that is licensed under Healthcare Laws to operate a Licensed Location, or is
otherwise providing or furnishing goods or services governed by Healthcare Laws,
or is otherwise providing or furnishing goods or services (other than the mere
leasing of a Licensed Location as a lessor and the collection of rentals in
connection therewith) from a Licensed Location, (b) any Person with whom a
Borrower has contracted to provide such goods or services governed by Healthcare
Laws.
 
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset. For the purposes of this Agreement and the other
Financing Documents, any Borrower or any
 
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Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
 
"Litigation" means any action, suit or proceeding before any court, mediator,
arbitrator or Governmental Authority.
 
"Loan Account" has the meaning given in Section 2.6(b).
 
"Loan" or "Loans" means the Term Loan or Term Loans provided for herein.
 
"Management Agreement" has the meaning given in Section 8.7(b).
 
"Manager" has the meaning given in Section 8.7(b).
 
"Material Adverse Effect" means, with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related (a) a material
adverse change in, or a material adverse effect upon, any of (i) the condition
(financial or otherwise), operations, business or properties of the Credit
Parties taken as a whole, (ii) the rights and remedies of Administrative Agent
or Lenders under any Financing Document, or the ability of any Credit Party to
perform any of its obligations under any Financing Document to which it is a
party, (iii) the legality, validity or enforceability of any Financing Document,
(iv) the existence, perfection or priority of any security interest granted in
any Financing Document; or (v) any Credit Party's or Licensed Operator's ability
to accept, admit and/or retain patients or residents or to own or operate any
Licensed Location, (b) an impairment to the likelihood that revenues in general
will be collected and paid in the normal course of a Licensed Operator's or
Borrowers' business and upon the same schedule and with the same frequency as
such Licensed Operator's or Borrowers' recent collections history; (c) the
imposition of a fine against or the creation of any liability of any Credit
Party or Licensed Operator to any Governmental Authority under any Healthcare
Law in excess of $50,000.00; (d) a termination, suspension or material
limitation of any Healthcare Permits, (e) the failure to satisfy any demand by
any Governmental Authority to comply with Law or remediate any condition, or
(f) termination by any third party of any third party agreement required for the
operation of any Project in the manner contemplated by this Agreement which
agreement is not promptly replaced by Borrower on terms which are at least as
favorable to the applicable Borrower or Borrowers in all material respects.
 
"Material Contracts" has the meaning given in Section 3.17.
 
"Material Lease" means any Lease other than a Permitted Lease.
 
"Maximum Lawful Rate" has the meaning given in Section 2.7(b).
 
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"Medicaid" means the medical assistance programs administered by state agencies
and approved by CMS pursuant to the terms of Title XIX of the Social Security
Act, codified at 42 U.S.C. 1396 et seq.
 
"Medicare" means the program of health benefits for the aged and disabled
administered by CMS pursuant to the terms of Title XVIII of the Social Security
Act, codified at 42 U.S.C. 1395 et seq.
 
"Merrill Lynch" means Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., and its successors.
 
"Mezzanine Loan" means the loan in the amount of $24,174,00 made by Merrill
Lynch to Dallas & Fort Worth Senior Housing, LLC, the holder of the 80%
membership interest in Cypress JV.
 
"Multiemployer Plan" means a multiemployer plan, that is intended to meet the
definition set forth in Section 4001(a)(3) of ERISA, to which any Borrower or
any member of the Controlled Group may have any liability.
 
"Net Operating Income" has the meaning given in Section 6.1.
 
"Notes" means the Term Note or Term Notes provided for herein.
 
"Obligations" means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, whether or not allowed) or otherwise) of each
Credit Party under this Agreement or any other Financing Document, in each case
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due. In addition to,
but without duplication of, the foregoing, the Obligations shall include,
without limitation, all obligations, liabilities and indebtedness arising from
or in connection with all Swap Contracts entered into with any Eligible Swap
Counterparty.
 
"OFAC" means the U.S. Department of Treasury Office of Foreign Assets Control.
 
"OFAC Lists" means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.
 
"Operating Expenses" has the meaning given in Section 6.1a(vi).
 
"Operating Lease" means any lease of any Licensed Location to an Operating
Lessee, and all amendments thereto and extensions thereof.
 
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"Operating Lessee" means any Person to whom any Borrower or any Subsidiary has
leased a Licensed Location.
 
"Operating Revenue" has the meaning given in Section 6.1(a).
 
"Ordinary Course of Business" means, in respect of any transaction involving any
Credit Party, the ordinary course of such Credit Party's business, as conducted
by such Credit Party in accordance with past practices.
 
"Organizational Documents" means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability or members agreement).
 
"Participation Agreements" has the meaning given in Section 8.4(b)(x).
 
"Payment Account" means the account specified on the signature pages hereof into
which all payments by or on behalf of each Borrower to Administrative Agent
under the Financing Documents shall be made, or such other account as
Administrative Agent shall from time to time specify by notice to Borrower
Representative.
 
"Payment Notification" means a written notification substantially in the form of
Exhibit D hereto.
 
"PBGC" means the Pension Benefit Guaranty Corporation and any Person succeeding
to any or all of its functions under ERISA.
 
"Pension Plan" means any ERISA Plan that is subject to Section 412 of the Code
or Title IV of ERISA.
 
"Permits" means all governmental licenses, authorizations, provider numbers,
supplier numbers, registrations, permits, certificates, franchises,
qualifications, accreditations, consents and approvals required under all
applicable Laws and required in order to carry on its business as now conducted,
including, without limitation, Healthcare Permits.
 
"Permitted Contest" means, with respect to any tax obligation or other
obligation allegedly or potentially owing from any Borrower to any governmental
tax authority or other third party, a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made on the books and
records and financial statements of the applicable Borrower(s); provided,
however, that (a) compliance with the obligation that is the subject of such
contest is effectively stayed during such challenge; (b) Borrowers' title to,
and its right to use, the Collateral is not adversely affected thereby and
Administrative Agent's Lien and priority on
 
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the Collateral are not adversely affected, altered or impaired thereby;
(c) Borrowers have given prior written notice to Administrative Agent of
Borrowers' intent to so contest the obligation; (d) in the case of real estate
taxes or assessments or mechanic's, workmen's, materialmen's or other like
Liens, Borrowers have obtained an endorsement, in form and substance
satisfactory to Administrative Agent, to the loan policy of title insurance
issued to Administrative Agent insuring over any Lien created by such
obligation, or Borrowers have deposited with Administrative Agent a bond or
other security satisfactory to Administrative Agent, in its reasonable
discretion, against loss or injury by reason of such contest or the non-payment
of such obligation or charge (and if such security is cash, Administrative Agent
may, but shall not be obligated to, deposit the same in an interest-bearing
account and interest accrued thereon, if any, shall be deemed to constitute a
part of such security for purposes of this Agreement, but Administrative Agent
(i) makes no representation or warranty as to the rate or amount of interest, if
any, which may accrue thereon and shall have no liability in connection
therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect
to its receipt of any such security and any such security may be commingled with
other monies of Administrative Agent); (e) the Collateral or any part thereof or
any interest therein shall not be in any danger of being sold, forfeited or lost
by reason of such contest by Borrowers; (f) Borrowers have given Administrative
Agent notice of the commencement of such contest and upon request by
Administrative Agent, from time to time, notice of the status of such contest by
Borrowers and/or confirmation of the continuing satisfaction of this definition;
and (g) upon a final determination of such contest, Borrowers shall promptly
comply with the requirements thereof.
 
"Permitted Leases" means each Lease listed on Schedule 1 and any Lease (other
than any Resident Agreement) for any portion of any Project that (a) is for
demised space of no more than 900 square feet, (b) is for a beauty parlor,
barber shop, rehabilitation center or other lawful use that is necessary or
consistent with, and ancillary to, the operation of a senior housing facility,
and (c) is terminable by Borrower upon not more than sixty (60) days' notice.
 
"Permitted Liens" means: (a) deposits or pledges of cash to secure obligations
under workmen's compensation, social security or similar laws, or under
unemployment insurance (but excluding Liens arising under ERISA); (b) deposits
or pledges of cash to secure bids, tenders, contracts (other than contracts for
the payment of money or the deferred purchase price of property or services),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the Ordinary Course of Business; (c) mechanic's,
workmen's, materialmen's or other like Liens arising in the Ordinary Course of
Business with respect to obligations which are not due, or which are being
contested pursuant to a Permitted Contest; (d) Liens on Collateral, for taxes or
other governmental charges not at the time delinquent or thereafter payable
without penalty or the subject of a Permitted Contest; (e) attachments, appeal
bonds, judgments and other similar Liens on Collateral other than Accounts, for
sums not exceeding $25,000 in the aggregate arising in connection with court
proceedings; provided, however, that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are the subject of a
Permitted Contest; (f) those matters which are set forth as exceptions to or
 
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subordinate matters in the loan title insurance policy accepted by
Administrative Agent insuring the lien of the Security Documents; (g) Liens and
encumbrances in favor of Administrative Agent under the Financing Documents; and
(h) Liens and encumbrances in favor of the holders of the Affiliated Financing
Documents.
 
"Person" means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.
 
"Project" means the singular reference to each respective portion of the
Collateral consisting of the land, improvements and all other real and personal
property encumbered by the lien of each respective mortgage, deed of trust, deed
to secure debt or similar Security Document constituting a part of the Financing
Documents. "Projects" means all such Projects collectively.
 
"Pro Rata Share" means (a) with respect to a Lender's right to receive payments
of principal and interest with respect to the Term Loans, the Term
Loan Commitment Percentage of such Lender, and (b) for all other purposes
(including without limitation the indemnification obligations arising under
Section 13.6) with respect to any Lender, the percentage obtained by dividing
(i) such Lender's then outstanding principal amount of the Term Loans, by
(ii) the then outstanding principal amount of the Term Loans of all Lenders.
 
"Release" has the meaning given in 42 U.S.C § 9601 (22).
 
"Released Parties" has the meaning given in Section 14.19.
 
"Releasing Parties" has the meaning given in Section 14.19.
 
"Replacement Lender" has the meaning given in Section 13.17(f).
 
"Required Lenders" means, subject to the provisions of Section 13.13(d), at any
time Lenders holding sixty-six and two thirds percent (66 2/3%) or more of the
outstanding principal balance of the Term Loans (taken as a whole).
 
"Resident Agreements" means the singular or collective reference to all patient
and resident care agreements, admission agreements and service agreements which
include an occupancy agreement and all amendments, modifications or supplements
thereto.
 
"Responsible Officer" means any of the Chief Executive Officer, Chief Financial
Officer or Managing Member of Cypress JV or the General Partner.
 
"Restricted Distribution" means as to any Person (a) any dividend or other
distribution (whether in cash, securities or other property) on any equity
interest in such Person (except those payable solely in such Person's equity
interests of the same class), (b) any payment on account of (i) the purchase,
redemption, retirement, defeasance,
 
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surrender, cancellation, termination or acquisition of any equity interests in
such Person or any claim respecting the purchase or sale of any equity interest
in such Person, or (ii) any option, warrant or other right to acquire any equity
interests in such Person, (c) any management fees, salaries or other fees or
compensation to an Affiliate of Borrower, (d) any lease or rental payments to an
Affiliate or Subsidiary of Borrower, or (e) repayments of or debt service on
loans or other indebtedness held by an Affiliate of Borrower.
 
"Sale" has the meaning given in Section 2.12.
 
"Securitization" has the meaning given in Section 14.8.
 
"Security Documents" means any agreement, document or instrument executed
concurrently herewith or at any time hereafter pursuant to which one or more
Credit Parties or any other Person either (a) Guarantees payment or performance
of all or any portion of the Obligations (including, without limitation, any
Financing Documents Guarantee), and/or (b) provides, as security for all or any
portion of the Obligations, a Lien on any of its assets in favor of
Administrative Agent for its own benefit and the benefit of the Lenders, as any
or all of the same may be amended, supplemented, restated or otherwise modified
from time to time.
 
"Sellers" means, collectively, Town Village Fort Worth, LP, Town Village Dallas,
LP, Town Village Arlington, LP, each a Delaware limited partnership, and Town
Village Leawood, LLC a Delaware limited liability company.
 
"Service Agreement" has the meaning given in Section 9.1(h).
 
"Settlement Service" has the meaning given in Section 13.17(d).
 
"Solvent" means, with respect to any Person, that such Person (a) owns and will
own assets the fair saleable value of which are (i) greater than the total
amount of its liabilities (including Contingent Obligations), and (ii) greater
than the amount that will be required to pay the probable liabilities of its
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it;
(b) has capital that is not unreasonably small in relation to its business as
presently conducted or after giving effect to any contemplated transaction; and
(c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.
 
"Stated Rate" has the meaning given in Section 2.7(b).
 
"Subordinated Debt" means any Debt of Borrowers incurred pursuant to the terms
of Subordinated Debt Documents.
 
"Subordinated Debt Documents" means any documents evidencing and/or securing
Debt governed by a Subordination Agreement.
 
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"Subordination Agreement" means any agreement between Administrative Agent and
another creditor of Borrowers, as the same may be amended, supplemented,
restated or otherwise modified from time to time in accordance with the terms
thereof, pursuant to which the Debt owing from any Borrower(s) and/or the Liens
securing such Debt granted by any Borrower(s) to such creditor are subordinated
in any way to the Obligations and the Liens created under the Security
Documents, the terms and provisions of which such Subordination Agreements have
been agreed to by and are acceptable to Administrative Agent in the exercise of
its sole discretion.
 
"Subsidiary" means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, capital stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such capital stock whether by proxy,
agreement, operation of law or otherwise, and (b) any partnership or limited
liability company in which such Person and/or one or more Subsidiaries of such
Person shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner. Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of a Borrower.
 
"Swap Contract" means any "swap agreement", as defined in Section 101 of the
Bankruptcy Code, that is intended to provide protection against fluctuations in
interest rates.
 
"Taking" shall mean a condemnation or taking pursuant to the lawful exercise of
the power of eminent domain.
 
"Taxes" has the meaning given in Section 2.5(b) and 2.8.
 
"Term Loan" has the meaning given in Section 2.1.
 
"Term Loan Commitment" means $55,765,000.
 
"Term Loan Commitment Percentage" means, as to any Lender, (a) on the Closing
Date, the percentage set forth opposite such Lender's name on the Commitment
Annex under the column "Term Loan Commitment Percentage" (if such Lender's name
is not so set forth thereon, then, on the Closing Date, such percentage for such
Lender shall be deemed to be zero), and (b) on any date following the Closing
Date, the percentage equal to the principal amount of the Term Loan held by such
Lender on such date divided by the aggregate principal amount of the Term Loan
on such date.
 
"Term Loan Note" has the meaning given in Section 2.4.
 
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"Termination Date" means the earlier to occur of (a) the Commitment Expiry Date,
or (b) any date on which Administrative Agent accelerates the maturity of the
Loans pursuant to Section 11.2.
 
"Third Party Payor" means Blue Cross and/or Blue Shield, private insurers,
managed care plans and any other Person or entity which presently or in the
future maintains Third Party Payor Programs, but specifically excluding
Governmental Payors.
 
"Third Party Payor Programs" means all payment and reimbursement programs,
sponsored by a Third Party Payor, in which a Licensed Operator participates.
 
"Transfer Date" has the meaning given in Section 3.4(b).
 
"TRICARE" means the program administered pursuant to 10 U.S.C. Section 1071 et
seq.), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and
the regulations promulgated pursuant to such statutes.
 
"UCC" means the Uniform Commercial Code of the State of Illinois or of any other
state the laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.
 
"United States" means the United States of America.
 
Section 1.2 Accounting Terms and Determinations. 
 
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder (including without
limitation determinations made pursuant to the exhibits hereto) shall be made,
and all financial statements required to be delivered hereunder shall be
prepared on a consolidated basis in accordance with GAAP applied on a basis
consistent with the most recent audited consolidated financial statements of
each Borrower delivered to Administrative Agent and each of the Lenders on or
prior to the Closing Date. If at any time any change in GAAP would affect the
computation of any financial ratio or financial requirement set forth in any
Financing Document, and Administrative Agent or Borrowers shall so request, the
Administrative Agent, in its sole discretion on behalf of Lenders, and Borrowers
shall negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP; provided, however,
that, until so amended, (a) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein, and (b) Borrowers
shall provide to the Administrative Agent and the Lenders financial statements
and other documents required under this Agreement which include a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP. All amounts used for purposes of financial
calculations required to be made herein shall be without duplication.
 
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Section 1.3 Other Definitional Provisions.
 
References in this Agreement to "Articles", "Sections", "Annexes", "Exhibits" or
"Schedules" shall be to Articles, Sections, Annexes, Exhibits or Schedules of or
to this Agreement unless otherwise specifically provided. Any term defined
herein may be used in the singular or plural. "Include", "includes" and
"including" shall be deemed to be followed by "without limitation". Except as
otherwise specified or limited herein, references to any Person include the
successors and assigns of such Person. References "from" or "through" any date
mean, unless otherwise specified, "from and including" or "through and
including", respectively. References to any statute or act shall include all
related current regulations and all amendments and any successor statutes, acts
and regulations. References to any statute or act, without additional reference,
shall be deemed to refer to federal statutes and acts of the United States.
References to any agreement, instrument or document shall include all schedules,
exhibits, annexes and other attachments thereto. As used in this Agreement, the
meaning of the term "material" or the phrase "in all material respects" is
intended to refer to an act, omission, violation or condition which reflects or
could reasonably be expected to result in a Material Adverse Effect.
 
Section 1.4 Funding and Settlement Currency.
 
Unless otherwise specified herein, the settlement of all payments and fundings
hereunder between or among the parties hereto shall be made in lawful money of
the United States and in immediately available funds.
 
Section 1.5 Borrowers as Licensed Operators.
 
As of the Closing Date it is contemplated and intended that each Borrower shall
be the Licensed Operator of the Project (which shall be a Licensed
Location) owned by such Borrower. Therefore, all references to "Licensed
Operators" shall be deemed to refer to the applicable Borrower, and all
covenants, representations and warranties applicable to a Licensed Operator
shall nonetheless be deemed to be direct covenants, representations and
warranties of the applicable Borrower, even if such covenants, representations
and warranties are, under the terms of this Agreement, contemplated to be
undertaken or made indirectly through an Operating Lease.
 
Section 1.6 Certain References to Credit Parties.
 
References to each "Credit Party" or "Credit Parties" in Sections 3.4, 3.6, 3.9,
3.13, 3.14, 3.15, 3.17, 4.1(e) and 8.5(k) shall not include ARC.
 
ARTICLE 2
LOANS
 
Section 2.1 Term Loan.
 
(a)    Term Loan Amounts. On the terms and subject to the conditions set forth
herein, the Lenders hereby agree to make to Borrowers on the Closing Date a term
loan
 
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("Term Loan") in an original principal amount equal to Fifty-Five Million Seven
Hundred Sixty-Five Thousand Dollars ($55,765,000). Each Lender's obligation to
fund the Term Loan shall be limited to such Lender's Term Loan Commitment
Percentage, and no Lender shall have any obligation to fund any portion of any
Term Loan required to be funded by any other Lender, but not so funded. No
Borrower shall have any right to reborrow any portion of the Term Loan that is
repaid or prepaid from time to time.
 
(b)    [Reserved.]
 
(c)    Mandatory Prepayments. There shall become due and payable and Borrowers
shall prepay the Term Loan in an amount equal to the following on the following
dates:
 
(i)    An amount equal to any Casualty Proceeds that Administrative Agent elects
to apply to the Obligations in accordance with Section 9.3, plus any Casualty
Proceeds that Administrative Agent elects to not apply to the Obligations in
accordance with Section 9.3, but only if Borrowers fail to reinvest such
Casualty Proceeds in replacement assets comparable to the assets giving rise to
such Casualty Proceeds if such reinvestment is permitted pursuant to the terms
of Section 9.3; and
 
(ii)    An amount equal to any Covenant Prepayment required under Section 6.7,
on the date provided for in Section 6.7.
 
(d)    Optional Prepayments. Other than mandatory prepayments under Sections
2.1(c)(i) and 2.1(c)(ii), the Term Loan may not be prepaid during the Closed
Period. The Term Loan may be prepaid in full, but not in part, at any time
following the expiration of the Closed Period, provided, however, that Borrowers
shall have given Administrative Agent at least thirty (30) days prior written
notice of the date of such prepayment together with an appropriately completed
Payment Notification.
 
(e)    All Prepayments. Except as this Agreement may specifically provide
otherwise, all prepayments of the Term Loan shall be applied by Administrative
Agent to the Obligations in such order and manner as Administrative Agent may
elect.
 
(f)    Extension Option. Borrowers may extend the Commitment Expiry Date two (2)
times for a period of twelve (12) months each (each, an "Extension Option") upon
Borrowers' satisfaction of the following conditions:
 
(i)    Borrowers shall have delivered to Administrative Agent written notice of
each such election (an "Extension Notice") no earlier than ninety (90) days and
no later than forty-five (45) days prior to the applicable Commitment Expiry
Date;
 
(ii)    no Default shall have occurred and be continuing and no Event of Default
shall have occurred;
 
(iii)    Administrative Agent shall have received each Borrower's and
Guarantor's current financial statements, certified as correct by each Borrower
and
 
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Guarantor, and no material adverse change with respect to any Project, any
Borrower or Guarantor shall have occurred; and
 
(iv)    the principal balance of the Mezzanine Loan shall be $4,200,000 or less.
 
Section 2.2 [Reserved.]
 
Section 2.3 Interest; Interest Calculations and Certain Fees.
 
(a)    Interest. From and following the Closing Date, the Loans and the other
Obligations shall bear interest at the sum of the Base Rate plus the applicable
Base Rate Margin. Interest on all Loans is payable in arrears on the first (1st)
day of each month and on the maturity of such Loans, whether by acceleration or
otherwise.
 
(b)    Commitment Fee. Prior to or contemporaneous with Borrowers' execution of
this Agreement, Borrowers have or shall pay Administrative Agent, for its own
account and not for the benefit of any other Lenders, a fee in an amount equal
to Five Hundred Fifty-Seven Thousand Six Hundred Fifty Dollars ($557,650).
 
(c)    Exit Fee. On the Termination Date or upon any voluntary prepayment of the
Term Loan as permitted hereunder or upon any mandatory prepayment of the Term
Loan, Borrowers shall pay to Administrative Agent for the benefit of Lenders a
fee (the "Exit Fee") equal to the Term Loan Commitment multiplied by the
Applicable Exit Fee Percentage. If any such prepayments are made, then upon such
prepayment, Borrower shall pay to Administrative Agent the proportionate amount
of the Exit Fee attributable to such prepayment; provided, however, that in the
event of a casualty or Taking and the application of any Casualty Proceeds
therefrom to a prepayment of a portion of the Obligations is required by
Administrative Agent, payment of the Exit Fee allocable to such prepayment shall
not be required. The term "Applicable Exit Fee Percentage" means: one percent
(1.0%) if the payment is made on or before the twenty-fourth (24th) full
calendar month following the Closing Date; and one half of one percent (.50%) if
the payment is made during or after the twenty-fifth (25th) full calendar month
following the Closing Date; provided, however, that if the Termination Date
occurs during the Closed Period, the Exit Fee shall be an amount equal to the
sum of one percent (1.0%) multiplied by the Term Loan Commitment plus the amount
of interest which would have been due and payable from the Termination Date
through the end of the Closed Period, assuming a Base Rate equal to the Base
Rate as of the Termination Date. Notwithstanding the foregoing, if (i) the Term
Loan is repaid with the proceeds of an acquisition or refinancing mortgage loan
facility provided by Merrill Lynch with respect to both Projects or (ii) Merrill
Lynch fails to deliver a term sheet with respect to providing such mortgage loan
facility within thirty (30) days after receipt from Borrowers of a written
request for a term sheet, the Exit Fee will be waived.
 
(d)    Audit Fees. Borrowers shall pay to Administrative Agent, for its own
account and not for the benefit of any other Lenders, all reasonable fees and
expenses in connection with audits of Borrowers' books and records, audits,
valuations or appraisals of
 
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the Collateral, audits of Borrowers' compliance with applicable Laws and such
other matters as Administrative Agent shall deem appropriate, which shall be due
and payable on the first Business Day of the month following the date of
issuance by Administrative Agent of a written request for payment thereof to
Borrowers. Notwithstanding the foregoing, provided that no Event of Default has
occurred and remains outstanding, Administrative Agent shall not charge audit
fees in respect of any inspections or related actions unless such audit shows
discrepancies exceeding 10%. Unless an Event of Default has occurred and is then
continuing audits by Lender shall not be undertaken more frequently than
annually.
 
(e)    Wire Fees. Borrowers shall pay to Administrative Agent, for its own
account and not for the account of any other Lenders, on written demand, any and
all reasonable fees, costs or expenses which Administrative Agent pays to a bank
or other similar institution (including, without limitation, any fees paid by
Administrative Agent to any other Lender) arising out of or in connection with
(i) the forwarding to Borrowers or any other Person on behalf of Borrowers, by
Administrative Agent, of proceeds of the Loans made by any Lender to Borrowers
pursuant to this Agreement, and (ii) the depositing for collection, by
Administrative Agent, of any check or item of payment received or delivered to
Administrative Agent on account of Obligations.
 
(f)    Real Property Inspection Fee. Borrowers shall pay to Administrative
Agent, for its own account and not for the benefit of any other Lenders, on the
Closing Date, and on each anniversary of the Closing Date thereafter, a real
property inspection fee of Two Thousand Dollars ($2,000) per Project per year.
 
(g)    Late Charges. If payments of principal (other than a final installment of
principal upon the Termination Date), interest due on the Obligations, or any
other amounts due hereunder or under the other Financing Documents are not
timely made and remain overdue for a period of five (5) days, Borrowers, without
notice or demand by Administrative Agent, promptly shall pay to Administrative
Agent, for its own account and not for the benefit of any other Lenders, as
additional compensation to Administrative Agent in administering the
Obligations, an amount equal to five percent (5%) of each delinquent payment.
 
(h)    Computation of Interest and Related Fees. All interest and fees under
each Financing Document shall be calculated on the basis of a three hundred
sixty (360)-day year for the actual number of days elapsed. The date of funding
of Loan shall be included in the calculation of interest. The date of payment of
a Loan shall be excluded from the calculation of interest. If a Loan is repaid
on the same day that it is made, one (1) day's interest shall be charged.
Interest on all Loans is payable in arrears on the first (1st) day of each month
and on the maturity of such Loans, whether by acceleration or otherwise.
 
(i)    Automated Clearing House Payments. If an Event of Default has occurred
and Administrative Agent so elects, monthly payments of interest and
amortization shall be paid to Administrative Agent by Automated Clearing House
debit of immediately available funds from the financial institution account
designated by Borrower Representative
 
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in the Automated Clearing House debit authorization executed by Borrowers or
Borrower Representative in connection with this Agreement, and shall be
effective upon receipt. Borrowers shall execute any and all forms and
documentation necessary from time to time to effectuate such automatic debiting.
In no event shall any such payments be refunded to Borrowers.
 
Section 2.4 Notes.
 
The portion of the Term Loan made by each Lender shall be evidenced, if so
requested by such Lender, by a promissory note executed by Borrowers on a joint
and several basis (a "Term Loan Note") in an original principal amount equal to
such Lender's Pro Rata Share of the Term Loan Commitment.
 
Section 2.5 Reserves and Escrows.
 
(a)    Requirements. Borrowers agree to establish and maintain all of the
reserves and escrows required in this Section 2.5. All sums so reserved or
escrowed may be commingled with the general funds of Administrative Agent and no
such sums shall be deemed to be held in trust for the benefit of Borrowers.
Interest at the rates available to Lender for escrow depository accounts shall
accrue and be added to the funds held by Lender pursuant to Sections 2.5(b) and
2.5(c) hereunder. No interest shall be payable on any other funds reserved or
escrowed hereunder. All sums so reserved or escrowed shall be part of the
Collateral and shall stand as additional security for all of the Obligations. If
Administrative Agent at any time reasonably determines that the amount on
deposit in any reserve or escrow is insufficient for its intended purposes,
Borrowers shall, within ten (10) days following notice from Administrative
Agent, deposit such additional sums as may reasonably be required by
Administrative Agent. In the event of any default by Borrowers under the terms
of this Agreement or any other Financing Document, Administrative Agent may, at
its discretion, apply amounts on hand in the reserves or escrows to cure such
default. Upon demand of Administrative Agent, Borrowers shall replenish the
applicable reserve or escrow to restore any sums so applied by Administrative
Agent. Upon the occurrence of an Event of Default and/or the maturity of any
portion of the Obligations, the moneys then remaining on deposit with
Administrative Agent shall, at Administrative Agent's option, be applied against
the Obligations in such order and manner as Administrative Agent may elect or as
may otherwise be required under this Agreement.
 
(b)    Real Property Taxes. At the time of and in addition to the monthly
installments of principal and/or interest due under the Notes, Borrowers shall
pay to Administrative Agent a sum equal to one-twelfth (1/12) of the amount
estimated by Administrative Agent to be sufficient (when aggregated with an
initial deposit to be designated by Administrative Agent and paid by Borrowers
to Administrative Agent on the Closing Date or otherwise upon demand of
Administrative Agent) to pay at least thirty (30) days before they become due
and payable, all taxes, assessments and other similar charges levied against any
portion of the Collateral constituting real property (collectively, the
"Taxes"). In the event such real property or any portion thereof is part of a
larger tract for purposes of taxation and assessments, Administrative Agent may
require the Borrowers
 
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to have the real property taxed and assessed as a separate parcel or separate
parcels, or, in the alternative, to make the deposits required under this
section based upon the taxation and assessment of the larger tract. So long as
no Event of Default exists hereunder, Administrative Agent shall apply the
escrows sums to pay the Taxes. Except as provided in the preceding sentence, the
obligation of Borrowers to pay the Taxes is not affected or modified by the
provisions of this paragraph.
 
(c)    Insurance Premiums. If an Event of Default or failure to timely pay
insurance premiums occurs, then Borrowers shall pay to Administrative Agent an
initial deposit amount which is sufficient when aggregated with the monthly
payment described below to pay the Insurance Premiums next becoming due and on
the first (1st) day of each calendar month thereafter a sum equal to one-twelfth
(1/12) of the amount estimated by Administrative Agent to be sufficient to pay
at least thirty (30) days before they become due and payable all insurance
premiums and other similar charges in connection with the insurance required to
be carried by Borrowers pursuant to this Agreement or the other Financing
Documents (collectively, the "Insurance Premiums"). So long as no Event of
Default exists hereunder, Administrative Agent shall apply the sums to pay the
Insurance Premiums. Except as provided in the preceding sentence, the obligation
of Borrowers to pay the Insurance Premiums is not affected or modified by the
provisions of this section. Notwithstanding the foregoing, if the insurance
premiums are paid via a premium financing arrangement to which Administrative
Agent has given its written consent, which consent shall not be unreasonably
withheld, then (i) the amount to be escrowed with Administrative Agent at any
given time in respect of such Insurance Premiums shall be three (3) months of
payments under the premium finance arrangement, (ii) Borrowers shall tender to
Administrative Agent each month (on such schedule as Administrative Agent shall
reasonably request) evidence that Borrowers (or the owner of the policy if the
Borrowers share in a blanket policy) has paid the applicable premium finance
amount due for the preceding month, and (iii) Administrative Agent shall have no
obligation to remit such escrowed sums in payment of the premium finance
amounts.
 
(d)    Capital Replacement Reserve. At the time of and in addition to the
monthly installments of principal and/or interest due under any of the Notes,
Borrowers shall pay to Administrative Agent monthly deposits in the amount of
$25 per residential unit at each Project (the "Replacement Minimum") to be held
by Administrative Agent in a capital replacement reserve ("Capital Replacement
Reserve"). So long as no Event of Default has occurred and is then continuing,
the funds contained in the Capital Replacement Reserve shall be utilized to pay
directly or to reimburse Borrowers solely for capital improvements approved in
advance by Administrative Agent in writing. Subject to the foregoing,
Administrative Agent shall release funds from the Capital Replacement Reserve
for the actual cost of such approved capital improvements upon Borrowers'
providing Administrative Agent with paid receipts, lien waivers and other
documentation deemed reasonably necessary by Administrative Agent with minimum
draws of $25,000.00 which shall occur no more frequently than once per month.
Notwithstanding the foregoing, Borrowers' obligation to make deposits shall be
suspended so long as no Event of Default has occurred and is then continuing and
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satisfactory evidence, on an annual basis beginning January 1, 2007, that
Borrowers have expended during the preceding calendar year for approved capital
improvements at each Licensed Location an amount equal or greater than $300 per
residential unit at each Project; provided that if Borrowers do not satisfy said
$300 per residential unit at each Project requirement, then, no later than
January 31 of the applicable year, Borrowers shall pay to Administrative Agent
an amount equal to the amount by which $300 per residential unit at each Project
exceeds the amount actually spent during such year at such Project which amount
shall be held by Administrative Agent in the Capital Replacement Reserve.
 
Section 2.6 General Provisions Regarding Payment; Loan Account.
 
(a)    All payments to be made by each Borrower under any Financing Document,
including payments of principal and interest made hereunder and pursuant to any
other Financing Document, and all fees, expenses, indemnities and
reimbursements, shall be made without set-off, recoupment or counterclaim, in
lawful money of the United States and in immediately available funds. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension (it being understood and agreed that,
solely for purposes of calculating financial covenants and computations
contained herein and determining compliance therewith, if payment is made, in
full, on any such extended due date, such payment shall be deemed to have been
paid on the original due date without giving effect to any extension thereto).
Any payments received in the Payment Account before noon (Chicago time) on any
date shall be deemed received by Administrative Agent on such date, and any
payments received in the Payment Account after noon (Chicago time) on any date
shall be deemed received by Administrative Agent on the next succeeding Business
Day. Any optional or mandatory prepayment of a Term Loan shall be accompanied by
timely delivery to Administrative Agent of an appropriately completed Payment
Notification, as provided in Section 2.1.
 
(b)    Administrative Agent shall maintain a loan account (the "Loan
Account") on its books to record Loans and other extensions of credit made by
the Lenders hereunder or under any other Financing Document, and all payments
thereon made by each Borrower. All entries in the Loan Account shall be made in
accordance with Administrative Agent's customary accounting practices as in
effect from time to time. The balance in the Loan Account, as recorded in
Administrative Agent's books and records at any time shall be conclusive and
binding evidence of the amounts due and owing to Administrative Agent by each
Borrower absent clear and convincing evidence to the contrary; provided,
however, that any failure to so record or any error in so recording shall not
limit or otherwise affect any Borrower's duty to pay all amounts owing hereunder
or under any other Financing Document. Administrative Agent shall endeavor to
provide Borrowers with a monthly statement regarding the Loan Account (but
neither Administrative Agent nor any Lender shall have any liability if
Administrative Agent shall fail to provide any such statement). Unless any
Borrower notifies Administrative Agent of any objection to any such statement
(specifically describing the basis for such objection) within thirty (30) days
after the date of
 
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receipt thereof, it shall be deemed final, binding and conclusive upon Borrowers
in all respects as to all matters reflected therein.
 
Section 2.7 Maximum Interest.
 
(a)    In no event shall the interest charged with respect to the Notes (if
any) or any other obligations of any Borrower under any Financing Document
exceed the maximum amount permitted under the laws of the State of Illinois or
of any other applicable jurisdiction.
 
(b)    Notwithstanding anything to the contrary herein or elsewhere, if at any
time the rate of interest payable hereunder or under any Note or other Financing
Document (the "Stated Rate") would exceed the highest rate of interest permitted
under any applicable law to be charged (the "Maximum Lawful Rate"), then for so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable shall be equal to the Maximum Lawful Rate; provided, however, that if at
any time thereafter the Stated Rate is less than the Maximum Lawful Rate, each
Borrower shall, to the extent permitted by law, continue to pay interest at the
Maximum Lawful Rate until such time as the total interest received is equal to
the total interest which would have been received had the Stated Rate been (but
for the operation of this provision) the interest rate payable. Thereafter, the
interest rate payable shall be the Stated Rate unless and until the Stated Rate
again would exceed the Maximum Lawful Rate, in which event this provision shall
again apply.
 
(c)    In no event shall the total interest received by any Lender exceed the
amount which it could lawfully have received had the interest been calculated
for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the
prior sentence, any Lender has received interest hereunder in excess of the
Maximum Lawful Rate, such excess amount shall be applied to the reduction of the
principal balance of the Loans or to other amounts (other than interest) payable
hereunder, and if no such principal or other amounts are then outstanding, such
excess or part thereof remaining shall be paid to Borrowers.
 
(d)    In computing interest payable with reference to the Maximum Lawful Rate
applicable to any Lender, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made.
 
Section 2.8 Taxes.
 
(a)    All payments of principal and interest on the Loans and all other amounts
payable hereunder shall be made free and clear of and without deduction for any
present or future income, excise, stamp, documentary, payroll, employment,
property or franchise taxes and other taxes, fees, duties, levies, assessments,
withholdings or other charges of any nature whatsoever (including interest and
penalties thereon) imposed by any taxing authority, excluding taxes imposed on
or measured by Administrative Agent's or any Lender's net income by the
jurisdiction under which Administrative Agent or such Lender is organized or
conducts business (other than solely as the result of entering into any of the
 
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Financing Documents or taking any action thereunder) (all non-excluded items
being called "Taxes"). If any withholding or deduction from any payment to be
made by any Borrower hereunder is required in respect of any Taxes pursuant to
any applicable Law, then Borrowers will: (i) pay directly to the relevant
authority the full amount required to be so withheld or deducted; (ii) promptly
forward to Administrative Agent an official receipt or other documentation
satisfactory to Administrative Agent evidencing such payment to such authority;
and (iii) pay to Administrative Agent for the account of Administrative Agent
and Lenders such additional amount or amounts as is necessary to ensure that the
net amount actually received by Administrative Agent and each Lender will equal
the full amount Administrative Agent and such Lender would have received had no
such withholding or deduction been required. If any Taxes are directly asserted
against Administrative Agent or any Lender with respect to any payment received
by Administrative Agent or such Lender hereunder, Administrative Agent or such
Lender may pay such Taxes and Borrowers will promptly pay such additional
amounts (including any penalty, interest or expense) as is necessary in order
that the net amount received by such Person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
Person would have received had such Taxes not been asserted so long as such
amounts have accrued on or after the day which is two hundred seventy (270) days
prior to the date on which Administrative Agent or such Lender first made
written demand therefor.
 
(b)    If any Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Administrative Agent, for the account of
Administrative Agent and the respective Lenders, the required receipts or other
required documentary evidence, Borrowers shall indemnify Administrative Agent
and Lenders for any incremental Taxes, interest or penalties that may become
payable by Administrative Agent or any Lender as a result of any such failure.
 
(c)    Each Lender that (i) is organized under the laws of a jurisdiction other
than the United States, and (ii)(A) is a party hereto on the Closing Date or
(B) purports to become an assignee of an interest as a Lender under this
Agreement after the Closing Date (unless such Lender was already a Lender
hereunder immediately prior to such assignment) (each such Lender a "Foreign
Lender") shall execute and deliver to each of Borrowers and Administrative Agent
one or more (as Borrowers or Administrative Agent may reasonably request) United
States Internal Revenue Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and
other applicable forms, certificates or documents prescribed by the United
States Internal Revenue Service or reasonably requested by Administrative Agent
certifying as to such Lender's entitlement to a complete exemption from
withholding or deduction of Taxes. Borrowers shall not be required to pay
additional amounts to any Lender pursuant to this Section 2.8 with respect to
United States withholding and income Taxes to the extent that the obligation to
pay such additional amounts would not have arisen but for the failure of such
Lender to comply with this paragraph other than as a result of a change in law.
 
Section 2.9 Capital Adequacy.
 
If any Lender shall reasonably determine that the adoption or taking effect of,
or any change in, any applicable Law regarding capital adequacy, in each
instance, after the
 
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Closing Date, or any change after the Closing Date in the interpretation,
administration or application thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation, administration or
application thereof, or the compliance by any Lender or any Person controlling
such Lender with any request, guideline or directive regarding capital adequacy
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency adopted or otherwise taking effect after the
Closing Date, has or would have the effect of reducing the rate of return on
such Lender's or such controlling Person's capital as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or such
controlling Person could have achieved but for such adoption, taking effect,
change, interpretation, administration, application or compliance (taking into
consideration such Lender's or such controlling Person's policies with respect
to capital adequacy) then from time to time, upon written demand by such Lender
(which demand shall be accompanied by a statement setting forth the basis for
such demand and a calculation of the amount thereof in reasonable detail, a copy
of which shall be furnished to Administrative Agent), Borrowers shall promptly
pay to such Lender such additional amount as will compensate such Lender or such
controlling Person for such reduction, so long as such amounts have accrued on
or after the day which is two hundred seventy (270) days prior to the date on
which such Lender first made demand therefor. 
 
Section 2.10 Mitigation Obligations.
 
If any Lender requires compensation under Section 2.9, or requires any Borrower
to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.8, then, upon the written request of
Borrower Representative, such Lender shall use reasonable efforts to designate a
different lending office for funding or booking its Loans hereunder or to assign
its rights and obligations hereunder (subject to the terms of this Agreement) to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (a) would eliminate or materially reduce
amounts payable pursuant to any such Section, as the case may be, in the future,
and (b) would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender (as determined in its sole
discretion). Without limitation of the provisions of Section 12.1, Borrowers
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
 
Section 2.11 Appointment of Borrower Representative.
 
Each Borrower hereby designates Borrower Representative as its representative
and agent on its behalf for the purposes of giving instructions with respect to
the disbursement of the proceeds of the Loans, giving and receiving all other
notices and consents hereunder or under any of the other Financing Documents and
taking all other actions (including in respect of compliance with covenants) on
behalf of any Borrower or Borrowers under the Financing Documents. Borrower
Representative hereby accepts such appointment. Notwithstanding anything to the
contrary contained in this Agreement, no Borrower other than Borrower
Representative shall be entitled to take any of the foregoing
 
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actions. The proceeds of each Loan made hereunder shall be advanced to or at the
direction of Borrower Representative and if not used by Borrower Representative
for the purposes provided in this Agreement shall be deemed to be immediately
advanced by Borrower Representative to the appropriate other Borrower hereunder
as an intercompany loan (collectively, "Intercompany Loans"). Administrative
Agent and each Lender may regard any notice or other communication pursuant to
any Financing Document from Borrower Representative as a notice or communication
from all Borrowers, and may give any notice or communication required or
permitted to be given to any Borrower or all Borrowers hereunder to Borrower
Representative on behalf of such Borrower or all Borrowers. Each Borrower agrees
that each notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as if the same had been
made directly by such Borrower.
 
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
 
To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, each
Borrower hereby represents and warrants to Administrative Agent and each Lender
that:
 
Section 3.1 Existence and Power.
 
Each Credit Party is an entity as specified on Schedule 3.1, is duly organized,
validly existing and in good standing under the laws of the jurisdiction
specified on Schedule 3.1, has the same legal name as it appears in such Credit
Party's Organizational Documents and an organizational identification number (if
any), in each case as specified on Schedule 3.1, and has all powers and all
Permits necessary or desirable in the operation of its business as presently
conducted or as proposed to be conducted, except where the failure to have such
Permits could not reasonably be expected to have a Material Adverse Effect. Each
Credit Party is qualified to do business as a foreign entity in each
jurisdiction in which it is required to be so qualified, which jurisdictions, in
the case of the Borrowers, Cypress JV and the General Partner, as of the Closing
Date are specified on Schedule 3.1, except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect. None of
Borrowers, Cypress JV or the General Partner (a) has had, over the five (5) year
period preceding the Closing Date, any name other than its current name, or
(b) was incorporated or organized under the laws of any jurisdiction other than
its current jurisdiction of incorporation or organization.
 
Section 3.2 Organization and Governmental Authorization; No Contravention.
 
The execution, delivery and performance by each Credit Party of the Financing
Documents to which it is a party are within its powers, have been duly
authorized by all necessary action pursuant to its Organizational Documents,
require no further action
 
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by or in respect of, or filing with, any Governmental Authority and do not
violate, conflict with or cause a breach or a default under (a) any Law
applicable to any Credit Party or any of the Organizational Documents of any
Credit Party, or (b) any agreement or instrument binding upon it, except for
such violations, conflicts, breaches or defaults as could not, with respect to
this clause (b), reasonably be expected to have a Material Adverse Effect.
 
Section 3.3 Binding Effect.
 
Each of the Financing Documents to which any Credit Party is a party constitutes
a valid and binding agreement or instrument of such Credit Party, enforceable
against such Credit Party in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws relating to the enforcement of creditors' rights generally and by general
equitable principles.
 
Section 3.4 Capitalization.
 
The authorized equity securities of each of the Credit Parties as of the Closing
Date is as set forth on Schedule 3.4. All issued and outstanding equity
securities of each of the Credit Parties are duly authorized and validly issued,
fully paid, nonassessable, free and clear of all Liens other than those in favor
of Administrative Agent for the benefit of Administrative Agent and Lenders, and
such equity securities were issued in compliance with all applicable Laws. The
identity of the holders of the equity securities of each of the Credit Parties
and the percentage of their fully-diluted ownership of the equity securities of
each of the Credit Parties as of the Closing Date is set forth on Schedule 3.4.
No shares of the capital stock or other equity securities of any Credit Party,
other than those described above, are issued and outstanding as of the Closing
Date. Except as set forth on Schedule 3.4 or in the Organizational Documents of
Cypress JV, as of the Closing Date there are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any Credit Party of any
equity securities of any such entity.
 
Section 3.5 Financial Information. 
 
(a)    The income statement of the Sellers as of November 30, 2005, copies of
which have been delivered to Administrative Agent, fairly presents the results
of operations for the Projects for the period covered thereby.
 
(b)    [Reserved].
 
(c)    [Reserved].
 
(d)    Since December 31, 2005, there has been no material adverse change in the
business, operations, properties or condition (financial or otherwise) of ARC,
taken as a whole. Since November 30, 2005, there has been no material adverse
change in the business, operations, properties or condition (financial or
otherwise) of any business, assets or entities being purchased by Borrowers
pursuant to the Financing Documents.
 
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Section 3.6 Litigation.
 
Except as set forth on Schedule 3.6 as of the Closing Date, and except as
hereafter disclosed to Administrative Agent in writing, (a) there is no
Litigation pending against, or to Borrowers' knowledge threatened against or
affecting, any Credit Party or any Project and (b) there is no material
Litigation pending, or, to such Borrowers' knowledge, threatened against
Guarantor. There is no Litigation pending in which an adverse decision could
reasonably be expected to have a Material Adverse Effect or which in any manner
draws into question the validity of any of the Financing Documents.
 
Section 3.7 Ownership of Property Generally.
 
Each Borrower is the lawful owner of, has good and marketable title to and is in
lawful possession of, or has valid leasehold interests in, all properties and
other assets (real or personal, tangible, intangible or mixed) purported or
reported to be owned or leased (as the case may be) by such Person, subject to
Permitted Liens.
 
Section 3.8 No Default.
 
No Default or Event of Default has occurred and is continuing. No Credit Party
is in breach or default under or with respect to any contract, agreement, lease
or other instrument to which it is a party or by which its property is bound or
affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.
 
Section 3.9 Labor Matters.
 
As of the Closing Date, there are no strikes or other labor disputes pending or,
to such Borrower's knowledge, threatened against any Credit Party. Hours worked
and payments made to any employees of the Credit Parties have not been in
violation of the Fair Labor Standards Act or any other applicable Law dealing
with such matters. All payments due from any Credit Party, or for which any
claim may be made against any of them, on account of wages and employee and
retiree health and welfare insurance and other benefits have been paid or
accrued as a liability on their books, as the case may be. The consummation of
the transactions contemplated by the Financing Documents will not give rise to a
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which it is a party or by which it is
bound.
 
Section 3.10 Regulated Entities.
 
No Credit Party is an "investment company" or a company "controlled" by an
"investment company" or a "subsidiary" of an "investment company," all within
the meaning of the Investment Company Act of 1940. No Credit Party is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935.
 
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Section 3.11 Margin Regulations.
 
None of the proceeds from the Loans have been or will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin stock" (as
defined in Regulation U of the Federal Reserve Board), for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any "margin stock" or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation
T, U or X of the Federal Reserve Board.
 
Section 3.12 Compliance With Laws; Anti-Terrorism Laws.
 
(a) Each Credit Party is in compliance with the requirements of all applicable
Laws, except for such Laws the noncompliance with which could not reasonably be
expected to have a Material Adverse Effect.
 
(b) None of the Credit Parties, or any of the entities shown in Schedule 3.4 or
any of their respective agents acting or benefiting in any capacity in
connection with the transactions contemplated by this Agreement is (i) in
violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in
any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law, or (iii) is a Blocked Person. No Credit Party nor, to the
knowledge of any Credit Party, any of its Affiliates or agents acting or
benefiting in any capacity in connection with the transactions contemplated by
this Agreement, (x) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (y) deals in, or otherwise engages in any transaction relating to,
any property or interest in property blocked pursuant to Executive Order
No. 13224, any similar executive order or other Anti-Terrorism Law.
 
Section 3.13 Taxes.
 
All Federal, state and local tax returns, reports and statements required to be
filed by or on behalf of each Credit Party have been filed with the appropriate
Governmental Authorities in all jurisdictions in which such returns, reports and
statements are required to be filed and, except to the extent subject to a
Permitted Contest, all Taxes (including real property Taxes) and other charges
shown to be due and payable in respect thereof have been timely paid prior to
the date on which any fine, penalty, interest, late charge or loss may be added
thereto for nonpayment thereof. Except to the extent subject to a Permitted
Contest, all state and local sales and use Taxes required to be paid by each
Credit Party have been paid. All Federal and state returns have been filed by
each Credit Party for all periods for which returns were due with respect to
employee income tax withholding, social security and unemployment taxes, and,
except to the extent subject to a Permitted Contest, the amounts shown thereon
to be due and payable have been paid in full or adequate provisions therefor
have been made.
 
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Section 3.14 Compliance with ERISA.
 
(a)    Each ERISA Plan (and the related trusts and funding agreements) complies
in form and in operation with, has been administered in compliance with, and the
terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the
Code in all material respects. Each ERISA Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified, and the United States Internal
Revenue Service has issued a favorable determination letter with respect to each
such ERISA Plan which may be relied on currently. No Credit Party has incurred
liability for any material excise tax under any of Sections 4971 through 5000 of
the Code.
 
(b)    During the thirty-six (36) month period prior to the Closing Date or the
making of any Loan, (i) no steps have been taken to terminate any Pension Plan,
and (ii) no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition
exists or event or transaction has occurred with respect to any Pension Plan
which could result in the incurrence by any Credit Party of any material
liability, fine or penalty. No Credit Party has incurred liability to the PBGC
(other than for current premiums) with respect to any employee Pension Plan. All
contributions (if any) have been made on a timely basis to any Multiemployer
Plan that are required to be made by any Credit Party or any other member of the
Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable Law; no Credit Party nor any member of the Controlled
Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred
any withdrawal liability with respect to any such plan or received notice of any
claim or demand for withdrawal liability or partial withdrawal liability from
any such plan, and no condition has occurred which, if continued, could result
in a withdrawal or partial withdrawal from any such plan, and no Credit Party
nor any member of the Controlled Group has received any notice that any
Multiemployer Plan is in reorganization, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of any excise
tax, that any such plan is or has been funded at a rate less than that required
under Section 412 of the Code, that any such plan is or may be terminated, or
that any such plan is or may become insolvent
 
Section 3.15 Consummation of Financing Documents; Brokers.
 
Except for fees payable to Administrative Agent and/or Lenders, no broker,
finder or other intermediary has brought about the obtaining, making or closing
of the transactions contemplated by the Financing Documents, and no Credit Party
has or will have any obligation to any Person in respect of any finder's or
brokerage fees, commissions or other expenses in connection herewith or
therewith. All brokerage and finder's fees, commissions and other expenses
payable in connection with the transactions contemplated by the Financing
Documents have been paid in full by Borrowers contemporaneously with the
execution of the Financing Documents and the initial funding of the Loans. No
broker, finder or other intermediary has brought about the obtaining, making or
closing of the transactions contemplated by the Financing Documents, and no
Credit Party has or will have any obligation to any Person in respect of any
finder's or brokerage fee in connection herewith or therewith.
 
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Section 3.16 Related Transactions.
 
All transactions contemplated by the Financing Documents to be consummated on or
prior to the date hereof have been so consummated (including without limitation
the disbursement and transfer of all funds in connection therewith) in all
material respects pursuant to the provisions of the applicable Financing
Documents, true and complete copies of which have been delivered to
Administrative Agent, and in compliance with all applicable Law, except for such
Laws the noncompliance with which would not reasonably be expected to have a
Material Adverse Effect.
 
Section 3.17 Material Contracts.
 
Except for the Financing Documents and the other agreements set forth on
Schedule 3.17 (collectively with the Financing Documents, the "Material
Contracts"), as of the Closing Date there are no (a) employment agreements
covering the management of any Credit Party, (b) collective bargaining
agreements or other labor agreements covering any employees of any Credit Party,
(c) agreements for managerial, consulting or similar services to which any
Credit Party is a party or by which it is bound, (d) agreements regarding any
Credit Party, its assets or operations or any investment therein to which any of
its equityholders is a party or by which it is bound, (e) real estate leases,
intellectual property licenses or other lease or license agreements to which any
Credit Party is a party, either as lessor or lessee, or as licensor or licensee,
or (f) customer, distribution, marketing or supply agreements to which any
Credit Party is a party, in each case with respect to the preceding clauses (a),
(c), (d), (e), and (f) requiring payment of more than $100,000 in any year,
(g) partnership agreements to which any Credit Party is a general partner or
joint venture agreements to which any Credit Party is a party, (h) third party
billing arrangements to which any Credit Party is a party, or (i) any other
agreements or instruments to which any Credit Party is a party, and the breach,
nonperformance or cancellation of which, or the failure of which to renew, could
reasonably be expected to have a Material Adverse Effect. Schedule 3.17 sets
forth, with respect to each real estate lease agreement to which any Credit
Party is a party (as a lessee) and which is a Material Contract as of the
Closing Date, the address of the subject property and the annual rental (or,
where applicable, a general description of the method of computing the annual
rental). The consummation of the transactions contemplated by the Financing
Documents and the other Financing Documents will not give rise to a right of
termination in favor of any party to any Material Contract (other than any
Credit Party), except for such Material Contracts the noncompliance with which
would not reasonably be expected to have a Material Adverse Effect.
 
Section 3.18 Compliance with Environmental Requirements; No Hazardous
Materials. 
 
Except in each case as set forth on Schedule 3.18:
 
(a)    no Hazardous Materials are located on any of the Projects except those
that are both (i) in compliance with Environmental Laws and with permits issued
pursuant thereto (if such permits are required), if any, and (ii) either (A) in
amounts not in excess of
 
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that necessary to operate the applicable Project for the purposes set forth
herein or in amounts used in the ordinary course of business, or (B) fully
disclosed to and approved by Administrative Agent; to each Borrower's knowledge,
Hazardous Materials have not been Released or threatened to be Released into the
environment, at, on, under or near any of the Projects in a manner that would
require the taking of any action under any Environmental Law and that have given
rise to, or could reasonably be expected to give rise to, remediation costs and
expenses on the part of any Borrower in excess of $250,000; and no portion of
any Project is being used, or has been used at any previous time, for the
disposal, storage, treatment, processing or other handling of Hazardous
Materials in violation of any Environmental Law in any material respect nor, to
each Borrower's knowledge, is any such property affected by any Hazardous
Materials Contamination;
 
(b)    no Borrower knows of, nor has received, any written notice from any
Person relating to Hazardous Materials in, on, under or from any Project and no
notice, notification, demand, request for information, citation, summons,
complaint or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending, or to each Borrower's
knowledge, threatened by any Governmental Authority or other Person with respect
to any (i) alleged violation by any Borrower of any Environmental Law,
(ii) alleged failure by any Borrower to have any Permits required in connection
with the conduct of its business or to comply with the terms and conditions
thereof, (iii) any generation, treatment, storage, recycling, transportation or
disposal of any Hazardous Materials, or (iv) Release of Hazardous Materials;
 
(c)    to the best knowledge of each Borrower, all oral or written notifications
of a Release of Hazardous Materials required to be filed by or on behalf of any
Borrower under any applicable Environmental Law have been filed or are in the
process of being timely filed by or on behalf of the applicable Borrower;
 
(d)    to each Credit Party's best knowledge, no property now owned by any
Borrower and no such property previously owned by any Borrower, to which any
Borrower has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Materials, is listed or proposed for listing, on
the National Priorities List promulgated pursuant to CERCLA, or CERCLIS (as
defined in CERCLA) or any similar state list or is the subject of Federal, state
or local enforcement actions or, to the knowledge of such Borrower, other
investigations which may lead to claims against any Credit Party for clean-up
costs, remedial work, damage to natural resources or personal injury claims,
including, without limitation, claims under CERCLA;
 
(e)    to each Credit Party's best knowledge, after reasonable investigation,
there are no underground storage tanks located on any property owned or to be
owned or leased by any Borrower that are not properly registered or permitted
under applicable Environmental Laws or that are leaking or disposing of
Hazardous Materials;
 
(f)    to each Credit Party's best knowledge, after reasonable investigation,
there are no Liens under or pursuant to any applicable Environmental Laws on any
real property or other assets owned or leased by any Borrower, and no actions by
any
 
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Governmental Authority have been taken or, to the knowledge of such Borrower,
are in process which could subject any of such properties or assets to such
Liens; and
 
(g)    to each Credit Party's best knowledge, after reasonable investigation,
each Borrower has truthfully and fully provided to Administrative Agent, in
writing, any and all information relating to environmental conditions in, on,
under or from the Projects, known to each Borrower or contained in each
Borrower's files and records, including but not limited to any reports relating
to Hazardous Materials in, on, under or migrating to or from the Projects and/or
to the environmental condition of the Projects.
 
Section 3.19 Intellectual Property.
 
Each Borrower owns, is licensed to use or otherwise has the right to use, all
intellectual property that is material to the condition (financial or other),
business or operations of such Borrower. To such Borrower's knowledge, each
Borrower conducts its business without infringement or claim of infringement of
any intellectual property rights of others and there is no infringement or claim
of infringement by others of any intellectual property rights of any Borrower,
which infringement or claim of infringement could reasonably be expected to have
a Material Adverse Effect.
 
Section 3.20 Solvency.
 
Each Borrower and Guarantor is Solvent.
 
Section 3.21 Full Disclosure.
 
None of the information (financial or otherwise) furnished by or on behalf of
any Credit Party to Administrative Agent or any Lender in connection with the
consummation of the transactions contemplated by the Financing Documents,
contains (with respect to information provided by third parties on behalf of any
Credit Party, to the best knowledge of the Credit Parties) any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which such statements were made. All financial projections
delivered to Administrative Agent and the Lenders have been prepared on the
basis of the assumptions stated therein. Such projections represent each
Borrower's best estimate of such Borrower's future financial performance and
such assumptions are believed by such Borrower to be fair and reasonable in
light of current business conditions; provided, however, that Borrowers can give
no assurance that such projections will be attained.
 
Section 3.22 Interest Rate.
 
The rate of interest paid under the Notes and the method and manner of the
calculation thereof do not violate any usury or other law or applicable Laws,
any of the Organizational Documents or any of the Financing Documents.
 
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Section 3.23 Representations and Warranties Incorporated from Financing
Documents.
 
As of the Closing Date, each of the representations and warranties made in the
Financing Documents by each of the parties thereto is true and correct in all
material respects, and such representations and warranties are hereby
incorporated herein by reference with the same effect as though set forth in
their entirety herein, as qualified therein, except to the extent that such
representation or warranty relates to a specific date, in which case such
representation and warranty shall be true as of such earlier date.
 
Section 3.24 Subsidiaries. There are no Subsidiaries of Borrowers.
 
ARTICLE 4
AFFIRMATIVE COVENANTS
 
Each Borrower agrees that, so long as any Credit Exposure exists:
 
Section 4.1 Financial Statements and Other Reports.
 
(a)    Each Borrower will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with GAAP and to provide the information
required to be delivered to Administrative Agent and the Lenders hereunder.
 
(b)    Each Borrower will furnish to Administrative Agent (or cause to be
furnished to Administrative Agent) the following financial information and
reports with respect to each Borrower and each Licensed Operator, in each case
in form and format and providing information satisfactory to Administrative
Agent in its discretion:
 
(i)    if applicable, for the Licensed Operator only, a sales and collections
report and accounts receivable and payable aging schedule on a form reasonably
acceptable to Lender within twenty-five (25) days after the end of each calendar
month, which shall include, without limitation, a report of sales, credits
issued, and collections received;
 
(ii)    within twenty-five (25) days of the end of each calendar month,
internally prepared monthly financial statements prepared for Borrowers on a
consolidated and consolidating basis in accordance with GAAP (including income
statements and balance sheets for each Project and a consolidated operating cash
flow statement, accompanied by management analysis and actual vs. budget
variance reports for each Project;
 
(iii)    Reserved;
 
(iv)    within twenty-five (25) days of the end of each calendar month, (A) a
current rent roll (including, a monthly schedule of delinquency receipts and
payments), and (B) a summary of all leasing activity then taking place with
respect to each Project;
 
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(v)    within twenty-five (25) days after the end of each measurement period
applicable to any financial covenant hereunder, such financial reports and
information as Administrative Agent shall require evidencing compliance with the
applicable financial covenants, which reports and information shall include, at
a minimum, delivery to Administrative Agent of a Compliance Certificate, and, if
requested by Administrative Agent, back-up documentation (including, without
limitation, invoices, receipts and other evidence of costs incurred during such
quarter as Administrative Agent shall reasonably require) evidencing the
propriety of the deductions from revenues in determining such compliance;
 
(vi)    annual projected profit and loss statements (prepared on a monthly
basis) for the succeeding fiscal year within forty-five (45) days before the end
of each fiscal year;
 
(vii)    internally prepared annual financial statements prepared for Borrowers
on a consolidated and consolidating basis in accordance with GAAP within sixty
(60) days after the end of each fiscal year;
 
(viii)    annual consolidated and consolidating audited financial statements
prepared for Borrowers in accordance with GAAP and prepared by a firm of
independent public accountants reasonably satisfactory to Administrative Agent,
within one hundred twenty (120) days after the end of each fiscal year;
 
(ix)    promptly upon receipt thereof, copies of any reports by the independent
accountants in connection with any interim audit and copies of each management
control letter provided by independent accountants;
 
(x)    for each Borrower, as requested by Administrative Agent, evidence
satisfactory to Administrative Agent that all federal and state taxes,
including, without limitation payroll taxes, that are due have been paid in
full;
 
(xi)    for Licensed Operator only, as requested, copies of all cost reports
filed with Medicare or Medicaid or any other Third Party Payor;
 
(xii)    within ten (10) days after Administrative Agent request, a written
statement, duly acknowledged by Borrowers, setting forth any right of set-off,
claims, counterclaims, withholdings or other defenses to which any of the
Collateral or Administrative Agent's rights with respect to the Collateral are
subject or that exist against such sums and Borrowers' obligations under the
Financing Documents;
 
(xiii)    within ten (10) days after Administrative Agent request, a written
statement, duly acknowledged by Licensed Operator, setting forth any right of
set-off, counterclaim or other defense that exists against such sums and
Licensed Operator's obligations under any Leases; and
 
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(xiv)    such additional information, reports or statements regarding the
Borrowers, the Projects or Licensed Operator as Administrative Agent may from
time to time reasonably request.
 
All financial statements shall include a balance sheet and statement of earnings
and shall be prepared in accordance with GAAP.
 
(c)    From time to time, if Administrative Agent determines that obtaining
appraisals is necessary in order for a Lender to comply with applicable Laws,
each Borrower shall furnish to Administrative Agent appraisal reports in form
and substance and from appraisers reasonably satisfactory to Administrative
Agent stating the then current fair market values of all or any portion of the
real estate owned by each Borrower. In addition to the foregoing, from time to
time, but in the absence of a Default or Event of Default not more than once
during each calendar year, Administrative Agent may require Borrowers to obtain
and deliver to Administrative Agent appraisal reports in form and substance and
from appraisers reasonably satisfactory to Administrative Agent stating the then
current fair market values of all or any portion of the real estate and personal
property owned by each Borrower.
 
(d)    Promptly upon receipt or filing thereof, each Borrower shall deliver to
Administrative Agent copies of any reports or notices related to any material
taxes and any other material reports or notices received by any Credit Party
from, or filed by any Credit Party with, any Governmental Authority.
 
(e)    Promptly upon their becoming available, Borrower shall deliver to
Administrative Agent copies of all Swap Contracts.
 
Section 4.2 Payment and Performance of Obligations.
 
Each Borrower (a) will pay and discharge, at or before maturity, all of their
respective obligations and liabilities, including tax liabilities, except for
such obligations and/or liabilities (i) that may be the subject of a Permitted
Contest, or (ii) the nonpayment or nondischarge of which could not reasonably be
expected to have a Material Adverse Effect or result in a Lien against any
Collateral, except for Permitted Liens, (b) will maintain, in accordance with
GAAP, appropriate reserves for the accrual of all of their respective
obligations and liabilities, (c) will not breach, or permit to exist any default
under, the terms of any commitment, contract, instrument or obligation (other
than Leases) to which it is a party, or by which its properties or assets are
bound, except for such breaches or defaults which could not reasonably be
expected to have a Material Adverse Effect, and (d) will not breach, or permit
to exist any default under, the terms of any Material Lease to which it is a
party as a lessor.
 
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Section 4.3 Maintenance of Existence; Single Purpose Entity Requirements.
 
(a)    Each Borrower will preserve, renew and keep in full force and effect
their respective existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.
 
(b)    Each Borrower will preserve, renew and keep in full force and effect
their respective existence and their respective rights, privileges and
franchises necessary or desirable to, at all times, comply with all single
purpose entity requirements set forth on Exhibit B. If any of the Term Loans are
placed in a securitization, then Borrowers shall promptly upon notice from
Administrative Agent, amend their respective Organizational Documents to
incorporate the single purpose entity requirements set forth on Exhibit B, at
Borrowers' sole cost and expense. Neither Borrower's election to provide home
healthcare services nor Borrower's compliance with Section 8.3(e) shall be a
violation of this Section 4.3(b) or Exhibit B.
 
(c)    At all times, ARC or a wholly-owned Affiliate of ARC shall own twenty
percent (20%) or more of the membership interests in Cypress JV.
 
Section 4.4 Maintenance of Property; Payment of Taxes; Insurance.
 
(a)    Each Borrower will keep all property useful and necessary in its business
in good working order and condition, ordinary wear and tear excepted. If all or
any part of the Collateral becomes damaged or destroyed, each Borrower will
promptly and completely repair and/or restore the affected Collateral in a good
and workmanlike manner, provided that such Borrower shall only be obligated to
repair or restore the affected Collateral if Administrative Agent agrees to
disburse insurance proceeds or other sums to pay costs of the work of repair or
reconstruction. Borrowers will not commit or allow waste or permit impairment or
deterioration of the Collateral or abandon all or any part of the Collateral.
Borrowers will perform such acts to preserve the value of Collateral. Each
Borrower will (i) preserve its or their interest in and title to the Collateral
and will forever warrant and defend the same to Administrative Agent and Lenders
against any and all claims made by, through or under Borrowers, and (ii) except
in respect of Permitted Liens, forever warrant and defend the validity and
priority of the lien and security interest created in the Security Documents
against the claims of all Persons whomsoever claiming by, through or under
Borrowers. The foregoing warranty of title shall survive the foreclosure of the
Security Documents and shall inure to the benefit of and be enforceable by
Administrative Agent in the event Administrative Agent acquires title to any
Collateral pursuant to any foreclosure.
 
(b)    Borrowers will pay or cause to be paid all Taxes prior to the date upon
which any fine, penalty, interest or cost for nonpayment is imposed, and furnish
to Administrative Agent, upon request, receipted bills of the appropriate taxing
authority or other documentation reasonably satisfactory to Administrative Agent
evidencing the payment thereof. If Borrowers shall fail to pay any Taxes in
accordance with this Section and is not contesting or causing a contesting of
such Taxes pursuant to a Permitted Contest,
 
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or if there are insufficient funds in the applicable reserves or escrows under
Article 2 to pay any such Taxes, Administrative Agent shall have the right, but
shall not be obligated, to (for the account of all Lenders) pay such Taxes, and
Borrowers shall repay to Administrative Agent, on written demand, any amount
paid by Administrative Agent, with interest thereon from the date of the advance
thereof to the date of repayment, at the rate applicable during periods of
Default hereunder, and such amount shall constitute a portion of the
Obligations. Borrowers shall not pay any Taxes or other obligations in
installments unless permitted by applicable Laws, and shall, upon the request of
Administrative Agent, deliver copies of all notices and bills relating to any
Taxes or other charge covered by this Section to Administrative Agent.
 
(c)    Upon completion of any Permitted Contest, Borrowers shall promptly pay
the amount due, if any, and deliver to Administrative Agent proof of the
completion of the contest and payment of the amount due, if any, following which
Administrative Agent Lender shall return the security, if any, deposited with
Lender pursuant to the definition of Permitted Contest. 
 
(d)    Each Borrower will maintain (i) casualty insurance on all real and
personal property on an all risks basis (including the perils of flood and
quake), covering the repair and replacement cost of all such property and
coverage for business interruption and rent loss and professional liability and
public liability insurance (including products/completed operations liability
coverage) in the amounts and on such terms as attached hereto as Schedule 4.4,
and (ii) such other insurance coverage in such amounts and with respect to such
risks as Administrative Agent may reasonably request. All such insurance shall
be provided by insurers having an A.M. Best policyholders rating reasonably
acceptable to Administrative Agent. Borrowers will not bring or keep any article
on any business location of any Credit Party, or cause or allow any condition to
exist, if the presence of such article or the occurrence of such condition could
reasonably cause the invalidation of any insurance required by this Section
4.4(d), or would otherwise be prohibited by the terms thereof.
 
(e)    On or prior to the Closing Date, and at all times thereafter, each
Borrower will cause Administrative Agent to be named as an additional insured,
assignee and loss payee (which shall include, as applicable, identification as
mortgagee), as applicable, on each insurance policy required to be maintained
pursuant to this Section 4.4 pursuant to endorsements in form and content
acceptable to Administrative Agent. Borrowers will deliver to Administrative
Agent and the Lenders (i) on the Closing Date, a certificate from Borrowers'
insurance broker dated such date showing the amount of coverage as of such date,
and that such policies will include effective waivers (whether under the terms
of any such policy or otherwise) by the insurer of all claims for insurance
premiums against all loss payees and additional insureds and all rights of
subrogation against all loss payees and additional insureds, and that if all or
any part of such policy is canceled, terminated or expires, the insurer will
forthwith give notice thereof to each additional insured, assignee and loss
payee and that no cancellation, reduction in amount or material change in
coverage thereof shall be effective until at least thirty (30) days after
receipt by each additional insured, assignee and loss payee of written notice
thereof, (ii) upon the
 
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request of any Lender through Administrative Agent from time to time full
information as to the insurance carried, (iii) within five (5) days of receipt
of notice from any insurer, a copy of any notice of cancellation, nonrenewal or
material change in coverage from that existing on the date of this Agreement,
and (iv) forthwith, notice of any cancellation or nonrenewal of coverage by any
Borrower.
 
(f)    In the event any Borrower fails to provide Administrative Agent with
evidence of the insurance coverage required by this Agreement, Administrative
Agent may purchase insurance at Borrowers' expense to protect Administrative
Agent's interests in the Collateral. This insurance may, but need not, protect
any Borrower's interests. The coverage purchased by Administrative Agent may not
pay any claim made by any Borrower or any claim that is made against any
Borrower in connection with the Collateral. The applicable Borrower may later
cancel any insurance purchased by Administrative Agent, but only after providing
Administrative Agent with evidence that such Borrower has obtained insurance as
required by this Agreement. If Administrative Agent purchases insurance for the
Collateral, to the fullest extent provided by law Borrowers will be responsible
for the costs of that insurance, including interest and other charges imposed by
Administrative Agent in connection with the placement of the insurance, until
the effective date of the cancellation or expiration of the insurance. The costs
of the insurance may be added to the Obligations. The costs of the insurance may
be more than the cost of insurance each Borrower is able to obtain on its own.
 
(g)    Borrowers shall not carry separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section.
 
Section 4.5 Compliance with Laws.
 
Each Borrower will comply with the requirements of all applicable Laws, except
to the extent that failure to so comply could not reasonably be expected to
(a) have a Material Adverse Effect, or (b) result in any Lien upon either (i) a
material portion of the assets of any such Person in favor of any Governmental
Authority, or (ii) any portion of the Collateral.
 
Section 4.6 Inspection of Property, Books and Records.
 
Each Borrower will keep proper books of record and account in accordance with
GAAP in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit at the
sole cost of the applicable Borrower, representatives of Administrative Agent
and of any Lender (but at such Lender's expense unless such visit or inspection
is made concurrently with Administrative Agent) to visit and inspect any of
their respective properties, to examine and make abstracts or copies from any of
their respective books and records, to conduct a collateral audit and analysis
of their respective operations and the Collateral and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants as often as may reasonably be
desired. In the absence of an Event of Default, Administrative Agent or any
Lender exercising any rights pursuant to this Section
 
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4.6 shall give the applicable Borrower commercially reasonable prior notice of
such exercise, and shall not (except for and in addition to the annual
inspection fee) require Borrower to reimburse the costs and expenses incurred in
connection with such visit or inspection for more than one (1) visit per year.
No notice shall be required during the existence and continuance of any Event of
Default.
 
Section 4.7 Use of Proceeds.
 
Borrowers will use the proceeds of the Term Loans solely for payment of amounts
due in respect of an acquisition of equity interests or assets contemplated by
the Financing Documents, transaction fees incurred in connection with the
Financing Documents and the refinancing on the Closing Date of Debt. No portion
of the proceeds of the Loans will be used for family, personal, agricultural or
household use.
 
Section 4.8 [Reserved.]
 
Section 4.9 [Reserved.]
 
Section 4.10 Environmental Covenants.
 
(a)    Each Borrower covenants and agrees that so long as such Borrower owns,
manages, is in possession of, or otherwise controls the operation of the
Projects: (i) all uses and operations on or of the Projects, whether by such
Borrower or any other Person, shall be in compliance with all Environmental Laws
and permits issued pursuant thereto in all material respects; (ii) there shall
be no material Releases of Hazardous Materials in, on, under or from the
Projects; (iii) there shall be no Hazardous Materials in, on, or under the
Projects, except those that are both (A) in compliance with all Environmental
Laws in all material respects and with permits issued pursuant thereto, if and
to the extent required, and (B) (I) in amounts not in excess of that necessary
to operate the Projects for the purposes set forth herein or (II) fully
disclosed to and approved by Administrative Agent in writing; (iv) each Borrower
shall keep the Projects free and clear of all Environmental Liens; (v) each
Borrower shall, at its sole cost and expense, fully and expeditiously cooperate
in all activities pursuant to Subsection 4.10(c) below, including but not
limited to providing all relevant information and making knowledgeable persons
available for interviews; (vi) each Borrower shall, at its sole cost and
expense, perform any environmental site assessment or other investigation of
environmental conditions in connection with the Projects, pursuant to any
reasonable written request of Administrative Agent, upon Administrative Agent's
reasonable belief that any Project is not in compliance with all Environmental
Laws in all material respects, and share with Administrative Agent the reports
and other results thereof, and Administrative Agent and Lenders shall be
entitled to rely on such reports and other results thereof; (vii) each Borrower
shall, at its sole cost and expense, comply with all reasonable written requests
of Administrative Agent to (A) reasonably effectuate remediation of any
Hazardous Materials in, on, under or from the Projects as required by
Environmental Laws; and (B) comply in all material respects with any
Environmental Law; (viii) Borrower shall not allow any Operating Lessee or other
user of the Projects to violate any Environmental Law; and (ix) each Borrower
shall immediately notify Administrative Agent in writing after
 
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it has become aware of (A) any material Release or threatened Release of
Hazardous Materials in, on, under, from or migrating towards the Projects;
(B) any non-compliance with any Environmental Laws related in any way to the
Projects in any material respects; (C) any actual or potential Environmental
Lien against the Projects; (D) any required or proposed remediation of
environmental conditions relating to the Projects; and (E) any written or other
communication of which any Borrower becomes aware from any source whatsoever
(including but not limited to a Governmental Authority) effecting or relating in
any way to Hazardous Materials and the Borrowers or any Project.
 
(b)    Administrative Agent and any other Person designated by Administrative
Agent, including but not limited to any representative of a Governmental
Authority, and any environmental consultant, and any receiver appointed by any
court of competent jurisdiction, shall have the right, but not the obligation,
to enter upon the Projects at all reasonable times to assess any and all aspects
of the environmental condition of the Projects and its use, including but not
limited to conducting any environmental assessment or audit (the scope of which
shall be determined in Administrative Agent's sole discretion) and taking
samples of soil, groundwater or other water, air, or building materials, and
conducting other invasive testing, provided, however, that so long as no Default
has occurred and is continuing, Borrower shall have the right to approve any
sampling or other invasive testing, such approval not to be unreasonably
withheld. Each Borrower shall cooperate with and provide access to
Administrative Agent and any such person or entity designated by Administrative
Agent.
 
(c)    Each Borrower shall establish and comply with that any operations and
maintenance program if recommended by Administrative Agent's environmental
consultant with respect to the Projects, in form and substance reasonably
acceptable to Administrative Agent, and prepared by an environmental consultant
reasonably acceptable to Administrative Agent, which program may address any
asbestos-containing material or lead based paint that may now or in the future
be detected at or on the Projects. Without limiting the generality of the
preceding sentence, Administrative Agent may require to the extent reasonable
under the circumstances (i) periodic notices or reports to Administrative Agent
in form, substance and at such intervals as Administrative Agent may specify,
(ii) an amendment to such operations and maintenance program to address changing
circumstances, laws or other matters, (iii) at each Borrower's sole expense,
supplemental examination of the Projects by consultants specified by
Administrative Agent, (iv) access to the Projects by Administrative Agent, its
agents or servicer, to review and assess the environmental condition of the
Projects and each Borrower's compliance with any operations and maintenance
program, and (v) variation of the operations and maintenance program in response
to the reports provided by any such consultants.
 
(d)    If any Release or disposal of Hazardous Materials shall occur or shall
have occurred on any real property or any other assets of any Borrower, such
Borrower will cause the prompt containment and removal of such Hazardous
Materials and the remediation of such real property or other assets as is
necessary to comply in all material respects with all Environmental Laws and to
preserve the value of such real property or other assets. Without limiting the
generality of the foregoing, each Borrower shall comply with each
 
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Environmental Law requiring the performance at any Project by any Borrower or
any other Credit Party of activities in response to the Release or threatened
Release of a Hazardous Material.
 
(e)    If requested by Administrative Agent, Borrowers will provide
Administrative Agent within thirty (30) days after written demand therefor with
a bond, letter of credit or similar financial assurance evidencing to the
reasonable satisfaction of Administrative Agent that sufficient funds are
available to pay the cost of removing, treating and disposing of any Hazardous
Materials or Hazardous Materials Contamination and discharging any assessment
which may be established on any property as a result thereof, such demand to be
made, if at all, upon Administrative Agent's reasonable business determination
that the failure to remove, treat or dispose of any Hazardous Materials or
Hazardous Materials Contamination, or the failure to discharge any such
assessment, could reasonably be expected to have a Material Adverse Effect.
 
Section 4.11 Syndication. 
 
Borrower will enter into such non-material modifications (which shall in no
event adversely change or effect the rights or obligations of Borrowers) to the
Financing Documents as Administrative Agent may reasonably request in order to
complete a successful syndication of the Loans and the Loan commitments as
determined by Administrative Agent in the exercise of its reasonable discretion.
Such modifications shall include, without limitation, reallocation of the Term
Loan Commitment.
 
Section 4.12 Further Assurances.
 
(a)    Each Borrower will at its own cost and expense, cause to be promptly and
duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as may from time to time be necessary or as
Administrative Agent or the Required Lenders may from time to time reasonably
request in order to carry out the intent and purposes of the Financing Documents
and the transactions contemplated thereby, including all such actions to
establish, create, preserve, protect and perfect a first priority Lien (subject
only to Permitted Liens) in favor of Administrative Agent for the benefit of the
Lenders on the Collateral (including Collateral acquired after the date hereof),
including on any and all assets of each Credit Party, whether now owned or
hereafter acquired.
 
(b)    Upon receipt of an affidavit of an officer of Administrative Agent or a
Lender as to the loss, theft, destruction or mutilation of any Note or any other
Financing Document which is not of public record, and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other applicable
Financing Document, Borrowers will issue, in lieu thereof, a replacement Note or
other applicable Financing Document, dated the date of such lost, stolen,
destroyed or mutilated Note or other Financing Document in the same principal
amount thereof and otherwise of like tenor.
 
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Section 4.13 Litigation. 
 
Borrowers will give prompt written notice to Administrative Agent of any
litigation or governmental proceedings pending or threatened (in writing)
against any Credit Party which might have a Material Adverse Effect with respect
to Borrowers, any other Credit Party or any Project.
 
Section 4.14 Deferred Maintenance. 
 
During the 12 month period following the Closing Date, Borrowers shall spend at
least $375,000 (over and above the expenditures required by Section 2.5(d)) for
one or more of the deferred maintenance items reflected on and as required by
Schedule 4.14.
 
Section 4.15 Power of Attorney.
 
Each of the officers of Administrative Agent is hereby irrevocably made,
constituted and appointed the true and lawful attorney for Borrowers (without
requiring any of them to act as such) with full power of substitution to do the
following, all during the existence of an Event of Default: (a) endorse the name
of Borrowers upon any and all checks, drafts, money orders, and other
instruments for the payment of money that are payable to Borrowers and
constitute collections on Borrowers' Accounts; (b) execute in the name of
Borrowers any schedules, assignments, instruments, documents, and statements
that Borrowers are obligated to give Administrative Agent under this Agreement;
(c) take any action Borrowers are required to take under this Agreement; and
(d) do such other and further acts and deeds in the name of Borrowers that
Administrative Agent reasonably may deem necessary or desirable to enforce any
Account or other Collateral or perfect Administrative Agent's security interest
or Lien in any Collateral. This power of attorney shall be irrevocable and
coupled with an interest.
 
Section 4.16 Estoppel Certificates. 
 
After written request by Administrative Agent, Borrowers, within fifteen
(15) days and at their expense, will furnish Administrative Agent with a
statement, duly acknowledged and certified, setting forth (a) the amount of the
original principal amount of the Notes, and the unpaid principal amount of the
Notes, (b) the rate of interest of the Notes, (c) the date payments of interest
and/or principal were last paid, (d) any offsets or defenses to the payment of
the Obligations, and if any are alleged, the nature thereof, (e) that the Notes
and this Agreement have not been modified or if modified, giving particulars of
such modification, and (f) that there has occurred and is then continuing no
Default or if such Default exists, the nature thereof, the period of time it has
existed, and the action being taken to remedy such Default.
 
ARTICLE 5
NEGATIVE COVENANTS
 
Each Borrower agrees that, so long as any Credit Exposure exists:
 
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Section 5.1 Debt. 
 
No Borrower will, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except for: (a) Debt under the Financing Documents; (b) unsecured Debt in
the form of trade payables aged in a manner consistent with ARC's past business
practices; but in no event more than ninety (90) days; (c) Debt incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
any equipment used by a Borrower in the operation of a Project in the Ordinary
Course of Business (including through Capital Leases), in an aggregate principal
amount at any time outstanding not greater than $100,000 per Project; (d) Debt,
if any, arising under Swap Contracts; and (e) other Debt approved by
Administrative Agent from time to time in its sole discretion.
 
Section 5.2 Liens.
 
No Borrower will, directly or indirectly, create, assume or suffer to exist any
Lien on any asset now owned or hereafter acquired by it, except for Permitted
Liens.
 
Section 5.3 Contingent Obligations.
 
No Borrower will, directly or indirectly, create, assume, incur or suffer to
exist any Contingent Obligations, except for:
 
(a)    Contingent Obligations arising in respect of the Debt under the Financing
Documents;
 
(b)    Contingent Obligations resulting from endorsements for collection or
deposit in the Ordinary Course of Business; and
 
(c)    Contingent Obligations arising under indemnity agreements with title
insurers to cause such title insurers to issue to Administrative Agent mortgagee
title insurance policies.
 
Section 5.4 Restricted Distributions. 
 
No Borrower will, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Distribution at any time during which any Default or
Event of Default has occurred and is then continuing, or if such Restricted
Distribution is reasonably likely to result in a monetary Default or Event of
Default (including, without limitation, any violation of any financial covenant
on a pro forma basis).
 
Section 5.5 Restrictive Agreements.
 
No Borrower will, directly or indirectly enter into or assume any agreement
(other than the Financing Documents) prohibiting the creation or assumption of
any Lien upon its properties or assets, whether now owned or hereafter acquired.
 
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Section 5.6 Payments and Modifications of Subordinated Debt.
 
No Borrower will, directly or indirectly declare, pay, make or set aside any
amount for payment in respect of any Subordinated Debt except as may be
permitted by the applicable Subordination Agreement.
 
Section 5.7 Consolidations, Mergers and Sales of Assets.
 
No Borrower will, directly or indirectly (a) consolidate or merge with or into
any other Person, or (b) consummate any Asset Dispositions other than
dispositions of personal property assets for cash and fair value that the
applicable Borrower determines in good faith is no longer used or useful in the
business of such Borrower if all of the following conditions are met: (i) after
giving effect to any such disposition, Borrowers are in compliance on a pro
forma basis with the covenants set forth in Article 6 recomputed for the most
recently ended month and quarter for which information is available as though
such disposition and repayment had occurred during such month and quarter and is
in compliance with all other terms and conditions of this Agreement; and (ii) no
Default or Event of Default then exists or would result from any such
disposition.
 
(b)    Borrower shall not assign or attempt to assign its rights under this
Agreement and any purported assignment shall be void. Borrower shall not suffer
or permit any sale, transfer, lease (other than a Lease permitted by this
Agreement), conveyance, alienation, pledge, assignment, mortgage, encumbrance
hypothecation (other than Permitted Liens) or other disposition of (i) all or
any portion of the Project or any portion of any other security for the Loan,
(ii) all or any portion of the Borrower's right, title and interest (legal or
equitable) in and to the Project or any portion of any other security for the
Loan, or (iii) any interest in Borrower or any interest in Cypress JV (except
that ARC or its wholly owned Affiliate may acquire the interest from CNL or an
Affiliate of CNL so long as the Mezzanine Loan indebtedness is repaid in full)
or General Partner (any of the foregoing, a "Transfer"). In addition, if ARC
fails to continue to exercise (A) control over the day to day management and
operation of Borrower's business or the Projects pursuant to the Management
Agreements, and (B) the power to appoint two members of the committee which
manages Cypress JV during the term of the Loan, then Lender may, at
Administrative Agent's option, declare the Loan to be immediately due and
payable, and Administrative Agent may invoke any remedies permitted by the
Financing Documents.
 
(c)    In addition to the prohibitions set forth in Section 5.7(b) above,
Borrower shall not engage in or permit a Transfer that would constitute or
result in the occurrence of one or more non-exempt prohibited transactions under
ERISA or the Internal Revenue Code. Borrower agrees to unwind any such Transfer
upon notice from Lender or, at Lender's option, to assist Lender in obtaining
such prohibited transaction exemption(s) from the United States Pension and
Welfare Benefits Administration with respect to such Transfer as are necessary
to remedy such prohibited transactions.
 
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Section 5.8 Purchase of Assets.
 
(a)    No Borrower will, directly or indirectly (a) acquire or enter into any
agreement to acquire any assets other than in the Ordinary Course of Business;
(b) create, acquire or enter into any agreement to create or acquire any
Subsidiary; (c) engage or enter into any agreement to engage in any joint
venture or partnership with any other Person; or (d) acquire or own or enter
into any agreement to acquire or own any investment in any Person.
 
Section 5.9 Transactions with Affiliates.
 
Except as otherwise disclosed on Schedule 5.9, and except for transactions that
are disclosed to Administrative Agent in advance of being entered into and which
contain terms that are no less favorable to the applicable Borrower than those
which might be obtained from a third party not an Affiliate of any Credit Party,
no Borrower will, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of any Borrower.
 
Section 5.10 Modification of Organizational Documents.
 
No Borrower or Cypress JV will, directly or indirectly, amend or otherwise
modify any Organizational Documents of such Person, except for such amendments
or other modifications required under this Agreement, or by applicable Law and
fully disclosed to Administrative Agent, or amendments which are not material,
provided that such amendments are submitted to Lender no later than five
(5) Business Days before becoming effective.
 
Section 5.11 Modification of Certain Agreements.
 
Without Administrative Agent's prior written consent, not to be unreasonably
withheld, no Borrower will, directly or indirectly, amend or otherwise modify
any Material Contract, which amendment or modification in any case:
 
(a)    is contrary to the terms of this Agreement or any other Financing
Document;
 
(b)    could reasonably be expected to be adverse to the rights, interests or
privileges of the Administrative Agent or the Lenders or their ability to
enforce the same;
 
(c)    results in the imposition or expansion in any material respect of any
restriction or burden on any Borrower; or
 
(d)    reduces in any material respect any rights or benefits of any Borrower
(it being understood and agreed that any such determination shall be in the
reasonable discretion of the Administrative Agent).
 
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Without Administrative Agent's prior written consent which may be granted or
withheld in Administrative Agent's sole and absolute discretion, no Borrower
will amend any Management Agreement. Each Borrower shall, prior to entering into
any amendment or other modification of any of the foregoing documents, deliver
to Administrative Agent reasonably in advance of the execution thereof, any
final or execution form copy of amendments or other modifications to such
documents.
 
Section 5.12 Fiscal Year.
 
No Borrower will change its Fiscal Year without the prior written consent of
Administrative Agent.
 
Section 5.13 Conduct of Business.
 
No Borrower will, directly or indirectly, engage in any line of business other
than those businesses engaged in on the Closing Date and businesses reasonably
related thereto.
 
Section 5.14 Operating Leases.
 
No Borrower will lease any Licensed Location under any Operating Lease without
Administrative Agent's consent, which may be withheld in Administrative Agent's
sole discretion.
 
Section 5.15 Lease Payments.
 
No Borrower will, directly or indirectly, incur or assume (whether pursuant to a
Guarantee or otherwise) any liability for rental payments under a lease if,
after giving effect thereto, the aggregate amount of minimum lease payments that
Borrowers have so incurred or assumed will exceed, $50,000 per Project for any
calendar year under all such leases (excluding Capital Leases).
 
Section 5.16 Limitation on Sale and Leaseback Transactions.
 
No Borrower will, directly or indirectly, enter into any arrangement with any
Person whereby in a substantially contemporaneous transaction any Borrower sells
or transfers all or substantially all of its right, title and interest in an
asset and, in connection therewith, acquires or leases back the right to use
such asset.
 
Section 5.17 Compliance with Anti-Terrorism Laws.
 
Administrative Agent hereby notifies Borrowers that pursuant to the requirements
of Anti-Terrorism Laws, and Administrative Agent's policies and practices,
Administrative Agent is required to obtain, verify and record certain
information and documentation that identifies Borrowers and its principals,
which information includes the name and address of each Borrower and its
principals and such other information that will allow Administrative Agent to
identify such party in accordance with Anti-Terrorism Laws.
 
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No Borrower will, directly or indirectly, knowingly enter into any Financing
Documents or Material Contracts with any Person listed on the OFAC Lists. Each
Borrower shall immediately notify Administrative Agent if such Borrower has
knowledge that any Borrower or any additional Credit Party is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering. No Borrower will, directly or indirectly,
(i) conduct any business or engage in any transaction or dealing with any
Blocked Person, including, without limitation, the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.
 
ARTICLE 6
FINANCIAL COVENANTS
 
Borrowers agree that, so long as any Credit Exposure exists:
 
Section 6.1 Definitions.
 
(a)    As used in this Article 6, the following terms have the following
meanings:
 
(i)    "Debt Yield Ratio" means the ratio (expressed as a percentage) of Net
Operating Income (measured for the trailing six (6) months and on an annualized
basis) to the average outstanding balance of the Loans at the time of
determination.
 
(ii)    "Debt Service" means all debt service (principal, if any, interest and
recurring charges and fees payable under this Agreement).
 
(iii)    "Debt Service Coverage Ratio" means the ratio of Net Operating Income
(measured for the trailing six (6) months and on an annualized basis) to Debt
Service (measured for the trailing six (6) months on an annualized basis).
 
(iv)    "Net Operating Income" means "Operating Revenue" for the applicable
period annualized minus "Operating Expenses" for the applicable period.
 
(v)    "Operating Revenue" means the sum of the following, based on customary
industry accounting practices and reasonable adjustments made by Administrative
Agent, and adjusted, however, to reflect a vacancy factor equal to the greater
of actual vacancy or five percent (5%):
 
(A)    all amounts collected by or on behalf of Borrowers (including payments
from Licensed Operators) from residents of the Project
 
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(including, without limitation, rent, patient day charges, assisted living
services, rehabilitation service charges, non-refundable deposits, entrance fees
and property fees), as recognized revenue under GAAP, excluding:
(1) nonrecurring income, extraordinary items, revenues items of the type
described in subpart (C) below and other non-property related income (each as
reasonably determined by Administrative Agent); and (2) income from residents
(i) that are thirty (30) or more days delinquent, (ii) that have been thirty
(30) or more days delinquent two (2) or more times during the immediately prior
twelve (12) month period, plus
 
(B)    without duplication, all revenues of Licensed Operator in the form of
reimbursements under Third Party Payor Programs for services rendered during the
preceding three (3) months (and specifically excluding any cost report
settlements or other payments received in respect of services rendered prior to
the preceding three (3) months), plus
 
(C)    without duplication, other operating revenues of Borrowers not to exceed
$1,000.00 per month for vending, catering and special events, food and beverage,
parking, subleases and other occupancy payments (other than late fees and
interest income) based upon collections and that are a normal, recurring
operating revenue, minus
 
(D)    rebates, free rent and other concessions made by Borrowers (or
Manager) to induce residents to enter into Resident Agreements.
 
(vi)    "Operating Expenses" means the sum of the following for any period: the
expenses incurred by Borrowers and Manager in connection with operating the
Projects (including any amounts of corporate overhead expense of ARC actually
allocated by ARC and/or CNL to Borrowers and/or the Projects, if any),
determined on a stabilized accrual basis for such period (as determined in
accordance with GAAP, and as reasonably adjusted by Administrative Agent),
including, without limitation: (1) recurring expenses (e.g., real estate tax and
insurance expenses or deposits, tenant improvements, leasing commissions,
carpeting replacement, appliance and drapery replacement and such others as
determined by Lender) which are not paid out of the replacement reserve,
(2) management fees (whether paid or not) in an amount equal to the greater of
actual fees accrued or five percent (5%) of effective gross income for the
Projects, (3) a replacement reserve (whether reserved or not) of not less than
$300 per residential unit per annum, and (4) all interest and fee obligations
accruing under any Debt (other than scheduled payments due and owing under the
Loan). Insurance expenses shall be calculated at the greater of (1) actual
annual insurance premiums plus claims paid or accrued (without duplication) for
which no insurance coverage is available, or (2) $400 per residential unit, per
year. "Operating Expenses" shall specifically exclude income taxes,
depreciation, and amortization.
 
Section 6.2 [Reserved.]
 
Section 6.3 [Reserved.]
 
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Section 6.4 [Reserved.]
 
Section 6.5 Financial Covenant.
 
Borrowers covenant and agree to maintain the following minimum Debt Yield Ratio
and minimum Debt Service Coverage Ratio for the applicable period shown below
throughout the term of the Loan:
 
Testing Period
 
Minimum Debt
Yield Ratio
 
Minimum Debt
Service Coverage
Ratio
Each six (6) month period ending December 31, 2006 and March 31, 2007
 
6.00%
 
none
Each six (6) month period ending June 30, 2007, September 30, 2007, December 31,
2007 and March 31, 2008
 
8.00%
 
1.10 to 1.00
Each six (6) month period ending June 30, 2008, September 30, 2008 and
December 31, 2008
 
9.00%
 
1.20 to 1.00
Each six (6) month period thereafter
 
10.00%
 
1.20 to 1.00
         

Determinations of compliance with the covenants in this Section 6.5
(collectively, the "Financial Covenants") shall be calculated as of the first
(1st) day of each calendar quarter (commencing with a calculation as of
January 1, 2007).
 
Section 6.6 Evidence of Compliance.
 
Borrowers shall furnish to Lender, concurrently with the financial reports and
documentation required by Section 4.1(b)(v), evidence (in form and content
satisfactory to Lender) of Borrowers' compliance with the covenants in this
Article and evidence that no Event of Default specified in this Article has
occurred. Such evidence shall include, without limitation, (a) a statement and
report, on a form approved by Administrative Agent, detailing Borrowers'
calculations, and (b) if requested by Administrative Agent, back-up
documentation (including, without limitation, invoices, receipts and other
evidence of costs incurred during such quarter as Administrative Agent shall
reasonably require) evidencing the propriety of the calculations.
 
Section 6.7 Financial Covenant Default.
 
(a)    In the event that Borrowers fail to satisfy either of the Financial
Covenants as of any calculation date (i.e., the date as of which covenant
compliance is
 
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calculated; not the date on which the determination of compliance or
non-compliance is made), Borrowers shall, within ten (10) calendar days after
the date the financial reports and compliance certificates required by Sections
4.1(b)(v) and 6.6 are due, pay to Administrative Agent, as a mandatory
prepayment, an amount (a "Covenant Prepayment") which, if such amount were
applied against the outstanding principal balance of the Loans, would be
sufficient to satisfy each of the Financial Covenants as of such calculation
date, calculating the outstanding principal balance of the Loans after giving
proforma effect to such Covenant Prepayment. Failure to satisfy one or both of
the Financial Covenants shall be deemed an Event of Default under Section 11.1
only if Borrowers fail to make the Covenant Prepayment, together with the
proportionate amount of the Exit Fee owing with respect thereto, within said ten
(10) day period.
 
(b) Notwithstanding the provisions of Section 6.7(a), if Borrowers fail to
satisfy one or both of the Financial Covenants for the first or second time
during the term of the Loans and no monetary Default or Event of Default has
occurred and is continuing, then, instead of applying the required Covenant
Prepayment to the Loans, Administrative Agent shall hold such Covenant
Prepayment as a cash collateral deposit ("Covenant Deposit") without interest,
and the proportionate amount of the Exit Fee otherwise payable with respect
thereto will not be payable except as and until provided below. If at any time
after Administrative Agent receives a Covenant Deposit, Borrowers satisfy the
Financial Covenants (without having to make a Covenant Prepayment and without
taking into account the Covenant Deposit) for two (2) consecutive calendar
quarters and provided that the Covenant Deposit has not theretofore been applied
to the Indebtedness as a result of the occurrence of an Event of Default or the
occurrence of a third failure to satisfy either or both of the Financial
Covenants, the Covenant Deposit shall be returned to Borrowers. The Covenant
Deposit, if any, shall be given proforma application to principal balance of the
Loans solely for purposes of determining whether an additional amount should be
paid to Administrative Agent and added to the Covenant Deposit if the Financial
Covenants is not satisfied for a second time. If the Financial Covenants is not
satisfied (whether or not a Covenant Prepayment is made) for a third time, then
(i) Administrative Agent shall no longer be required to hold any Covenant
Prepayments as a Covenant Deposit and all subsequent Covenant Prepayments shall
be applied to the principal balance of the Loans and (ii) the Covenant Deposit,
if any, shall be applied to the principal balance of the Loans and the
proportionate amount of the Exit Fee with respect thereto shall be due and
payable within ten (10) calendar days after the date of determination of
non-compliance. The Covenant Deposit shall be Collateral. If an Event of Default
occurs at any time, the Covenant Deposit may be immediately applied to the
Indebtedness in such order as Administrative Agent determines and the Exit Fee
shall be due with respect thereto.
 
ARTICLE 7
CONDITIONS
 
Section 7.1 Conditions to Closing. 
 
The obligation of each Lender to make the initial Loans shall be subject to the
receipt or waiver by Administrative Agent of each agreement, document and
instrument set
 
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forth on the closing checklist prepared by Administrative Agent or its counsel
and provided to Borrower in anticipation of Closing, each in form and substance
satisfactory to Administrative Agent, and to the satisfaction of the following
conditions precedent, each to the satisfaction of Administrative Agent in its
sole discretion:
 
(a)    evidence of the consummation of the transactions (other than the funding
of the Loans and the closing of any acquisition for which the proceeds of the
Loans are purchase money) contemplated by the Financing Documents;
 
(b)    the payment of all fees, expenses and other amounts due and payable under
each Financing Document;
 
(c)    the absence, since December 31, 2005, of any material adverse change in
any aspect of the business, operations, properties, prospects or condition
(financial or otherwise) of any Credit Party, or any event or condition which
could reasonably be expected to result in such a material adverse change;
 
(d)    evidence that ARC and CNL have invested a minimum of $7,649,850 of cash
equity in Borrowers, of which CNL has invested a minimum of $1,459,750 of cash
equity, in addition to CNL's equity contributions from the proceeds of the
Mezzanine Loan, and such equity infusion has been used by Borrowers to fund the
transactions under the Financing Documents and otherwise for working capital
purposes, and all portions of such cash equity infusion which are not used on
the Closing Date to fund the transactions under the Financing Documents shall
remain available to Borrowers for working capital purposes and shall be
unencumbered (other than by any Lien of Administrative Agent); and
 
(e)    all conditions to funding of the Mezzanine Loan are satisfied.
 
Section 7.2 Searches.
 
Before Closing, and thereafter (as and when determined by Administrative Agent
in its discretion), Administrative Agent shall have the right to perform, all at
Borrowers' expense, the searches described in clauses (a), (b) and (c) below
against Borrowers and any other Credit Party, the results of which are to be
consistent with Borrowers' representations and warranties and covenants under
this Agreement:
 
(a)    UCC searches with the Secretary of State and local filing offices of each
jurisdiction where the applicable Person maintains its executive offices, a
place of business, or assets and the jurisdiction in which the applicable Person
is organized;
 
(b)    Judgment, pending litigation, federal tax lien, personal property tax
lien, and corporate and partnership tax lien searches, in each jurisdiction
searched under clause (a) above;
 
(c)    Real property title and lien searches in each jurisdiction in which any
real property Collateral is located; and
 
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(d)    Searches of applicable corporate, limited liability company, partnership
and related records to confirm the continued existence, organization and good
standing of the applicable Person and the exact legal name under which such
Person is organized.
 
Section 7.3 Certain Post-Closing Obligations.
 
Borrowers shall complete and/or satisfy the obligations described on Schedule
7.3 within the time periods set forth therein.
 
ARTICLE 8
REGULATORY MATTERS
 
Each Borrower agrees that, so long as any Credit Exposure exists (for the
avoidance of doubt, any provisions relating to any CON with respect to any
Licensed Location shall be applicable only to the extent CON is required or may
hereafter be required under applicable Law with respect to such Licensed
Location):
 
Section 8.1 Representations and Warranties Pertaining to Licensed Locations.
 
To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, each
Borrower hereby represents and warrants to Administrative Agent and each Lender
that:
 
(a)    Each of the Projects is an independent living facility with respect to
which no Healthcare Permit is required for the operation thereof. None of the
Licensed Locations are in violation of any Health Care Laws, except where any
such violation would not have a Material Adverse Effect.
 
(b)    To the extent healthcare goods or services are provided at a Project, the
Borrower that is the owner of such Project has (i) or is in the process of
obtaining or causing the Licensed Operator to obtain each Healthcare Permit and
other rights from, and has made all declarations and filings with, all
applicable Governmental Authorities, all self regulatory authorities and all
courts and other tribunals necessary, if any, to engage in the provision of such
goods and/or services and (ii) no knowledge that any Governmental Authority is
considering limiting, suspending or revoking any such Healthcare Permit. All
Healthcare Permits which have been issued, if any, are valid and in full force
and effect. Each Borrower who is the owner of a Licensed Location is or, when
the applicable Healthcare Permit is issued, will be in material compliance with
the terms and conditions of all such Healthcare Permits except where failure to
be in such compliance or for a Healthcare Permit to be valid and in full force
and effect would not have a Material Adverse Effect.
 
(c)    If applicable, each Licensed Location has received and maintains
accreditation in good standing and without impairment by all applicable
accrediting organizations, to the extent required by law (including any
equivalent regulation) or the terms of any Lease pertaining to the Licensed
Location.
 
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(d)    No Borrower is a participant in any federal program whereby any federal,
state or local government or quasi-governmental body, agency, board or other
authority may have the right to recover funds by reason of the advance of
federal funds, including, without limitation, those authorized under the
Hill-Burton Act (42 U.S.C. 291, et seq.). No Borrower has received notice, and
no Borrower is aware of any violation of applicable anti-trust laws of any
federal, state or local government or quasi-governmental body, agency, board or
other authority pertaining to the Licensed Locations.
 
(e)    Each Borrower that is the owner of a Licensed Location is the owner of
record of any CON pertaining to such Licensed Location. If under applicable
Healthcare Laws, the CON for a Licensed Location operated by a Borrower merges
into a state-issued license to operate the Licensed Location, then each such
Borrower is the owner of record of any CON pertaining to such Licensed Location.
 
(f)    Each Project located in a state where licensing as an independent living
facility is not required under the applicable laws of the state where the
Project is located.
 
(g)    The Licensed Locations and Licensed Operators do not have any uncorrected
licensure deficiencies.
 
(h)    Each of the representations and warranties of the Licensed Operators set
forth in Section 8.2 below are true, complete and correct.
 
(i)    If (i) any Borrower or is or becomes a "covered entity" within the
meaning of HIPAA, or (ii) any Borrower is or becomes subject to the
"Administrative Simplification" provisions of HIPAA, such Borrower is HIPAA
Compliant.
 
Section 8.2 Representations and Warranties Pertaining to Licensed Operators.
 
To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, Borrowers
hereby represent and warrant the following to Administrative Agent:
 
(a)    Each of the representations and warranties of Borrowers set forth in
Sections 8.1(a) through 8.1(f) above are true, complete and correct.
 
(b)    No Licensed Operator is in violation of any of the Health Care Laws,
except where any such violation would not have a Material Adverse Effect.
 
(c)    To the extent goods or services are being provided at a Project which
require a Healthcare Permit, each Licensed Operator has (i) or is in the process
of obtaining each Healthcare Permit and other rights from, and has made all
declarations and filings with, all applicable Governmental Authorities, all self
regulatory authorities and all courts and other tribunals necessary to engage in
the business conducted by it except for such Healthcare Permits with respect to
which the failure to obtain would not have a Material Adverse Effect and (ii) no
knowledge that any Governmental Authority is considering
 
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limiting, suspending or revoking any such Healthcare Permit. All Healthcare
Permits which have been issued, if any, are valid and in full force and effect.
Each Licensed Operator is or upon issuance of the applicable Healthcare Permits,
will be in material compliance with the terms and conditions of all such
Healthcare Permits except where failure to be in such compliance or for a
Healthcare Permit to be valid and in full force and effect would not have a
Material Adverse Effect.
 
(d)    To the extent a Licensed Operator submits claims to Governmental Payors,
the Licensed Operator has the requisite provider number and, if required,
Healthcare Permits, to bill Governmental Payors, except where the failure to
have such provider number or Healthcare Permits would not have a Material
Adverse Effect. To the extent a Licensed Operator submits claims to Third Party
Payors, the Licensed Operator has any Healthcare Permit necessary to bill Third
Party Payors except where the failure to have such Healthcare Permit would not
have a Material Adverse Effect. There is no investigation, audit, claim review,
or other action pending or, to the knowledge of any Licensed Operator,
threatened which could result in a revocation, suspension, termination,
probation, restriction, limitation, or non-renewal of any provider number or
other Healthcare Permit or result in a Licensed Operator's or Licensed
Location's exclusion from any Governmental Payor program or Third Party Payor
Program, nor has any Third Party Payor Program made any decision not to renew
any provider agreement related to the Licensed Locations, nor have the Licensed
Locations or Licensed Operators made any decision not to renew any provider
agreement, nor is there any action pending or threatened to impose material
intermediate or alternative sanctions with respect to the Licensed Locations.
 
(e)    All Medicare, Medicaid, and private insurance cost reports and financial
reports submitted by the Licensed Operator will be when submitted materially
accurate and complete and will not be misleading in any material respects. No
cost reports for the Licensed Locations remain "open" or unsettled, except as
otherwise disclosed to Administrative Agent.
 
(f)    If applicable, each Licensed Operator has received and maintains
accreditation in good standing and without impairment by all applicable
accrediting organizations, to the extent required by law (including any
equivalent regulation) or the terms of any Lease pertaining to the Licensed
Location.
 
(g)    No Licensed Operator has been, or to its knowledge has been threatened to
be, (i) excluded from U.S. health care programs pursuant to 42 U.S.C. §1320a7
and related regulations, (ii) "suspended" or "debarred" from selling products to
the U.S. government or its agencies pursuant to the Federal Acquisition
Regulation, relating to debarment and suspension applicable to federal
government agencies generally (48 C.F.R. Subpart 9.4), or other applicable laws
or regulations, or (iii) made a party to any other action by any governmental
authority that may prohibit it from selling products to any governmental or
other purchaser pursuant to any Law.
 
(h)    No statement of charges or deficiencies has been made or penalty
enforcement action has been undertaken against the Licensed Locations or any
Licensed
 
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Operator (or any officer, director or stockholder of any of the
foregoing) during the last three (3) calendar years, and there have been no
violations over the past three (3) calendar years which have threatened any
certification of the Licensed Locations or any Licensed Operator for
participation in Medicare, Medicaid or other Third Party Payor Programs. There
are no current, pending or outstanding Medicare, Medicaid or Third Party Payor
Program reimbursement audits or appeals pending at the Licensed Locations.
 
(i)    Neither Licensed Operators nor the Licensed Locations are subject to any
proceeding, suit or investigation by any federal, state or local government or
quasi-governmental body, agency, board or authority or any other administrative
or investigative body which may result in the imposition of a fine, alternative,
interim or final sanction, a lower reimbursement rate for services rendered to
eligible patients which has not been provided for on their respective financial
statements, or which would have a material adverse effect on any Licensed
Operator or the operation of the Licensed Locations, or which would result in
the revocation, transfer, surrender, suspension or other impairment of the
operating certificate or provider agreement of the Licensed Locations, nor any
Healthcare Permit.
 
(j)    There are no Resident Agreements with patients or residents of the
Licensed Locations or with any other persons or organizations which deviate in
any material adverse respect from the standard form customarily used at an
independent living facility or which conflict with any statutory or regulatory
requirements. All resident records at the Licensed Locations and in the
possession of or created by the Licensed Operators, including resident trust
fund accounts, are true and correct in all material respects.
 
(k)    Neither the execution nor performance by Licensed Operator of any
Financing Documents nor the exercise of any remedies by any party thereunder,
will adversely affect Licensed Operator's right to receive payments and
reimbursements from Governmental Payors with respect to the Licensed Locations,
nor materially reduce the payments and reimbursements from Governmental Payors
which Licensed Operator is receiving as of the date hereof.
 
(l)    Licensed Operator is not a participant in any federal program whereby any
federal, state or local government or quasi-governmental body, agency, board or
other authority may have the right to recover funds by reason of the advance of
federal funds, including, without limitation, those authorized under the
Hill-Burton Act (42 U.S.C. 291, et seq.).
 
(m)    Licensed Operator has received no notice, and is not aware of any
violation in any material respect of applicable antitrust laws, employment or
landlord-tenant Laws of any federal, state or local government or
quasi-governmental body, agency, board or other authority with respect to the
Licensed Locations or Licensed Operator.
 
(n)    No Licensed Operator, or any of its respective officers, directors,
shareholders or members has ever been charged with or investigated for
committing any violation of any state or federal statute or regulation involving
fraudulent and abusive
 
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practices relating to its or his participation in state or federally sponsored
reimbursement programs, including, without limitation, fraudulent billing
practices. The Licensed Locations and, to the knowledge of the Licensed
Operator, their contractors, have properly and legally billed all intermediaries
and Third Party Payors for services rendered with respect to the Licensed
Locations and have maintained their records to reflect such billing practices.
No funds relating to the Licensed Operators are now, or, to the knowledge of the
Licensed Operators will be, withheld by any Medicare intermediary or other Third
Party Payor. Neither the Licensed Locations nor any other healthcare facilities
managed by the Licensed Operator, nor any officer, director, shareholder or
member of the Licensed Operator has engaged in any of the following:
(i) knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment
under any Healthcare Laws; (ii) knowingly and willfully making or causing to be
made any false statement or representation of a material fact for use in
determining rights to any benefit or payment under any Healthcare Laws;
(iii) failing to disclose knowledge by a claimant of the occurrence of any event
affecting the initial or continued right to any benefit or payment under any
Healthcare Laws on its own behalf or on behalf of another, with intent to secure
such benefit or payment fraudulently; (iv) knowingly and willfully soliciting or
receiving any remuneration (including any kickback, bribe or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay such
remuneration (A) in return for referring an individual to a Person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by any Healthcare Laws, or (B) in return
for purchasing, leasing or ordering or arranging for or recommending the
purchasing, leasing or ordering of any good, facility, service, or item for
which payment may be made in whole or in part by any Healthcare Laws;
(v) presenting or causing to be presented a claim for reimbursement for services
that is for an item or services that was known or should have been known to be
(A) not provided as claimed, or (B) false or fraudulent; or (vi) knowingly and
willfully making or causing to be made or inducing or seeking to induce the
making of any false statement or representation (or omitting to state a fact
required to be stated therein or necessary to make the statements contained
therein not misleading) of a material fact with respect to (A) a facility in
order that the facility may qualify for Governmental Authority certification, or
(B) information required to be provided under 42 U.S.C. § 1320a-3.
 
(o)    If applicable, Licensed Operator is HIPAA Compliant.
 
Section 8.3 Covenants Pertaining to Licensed Locations.
 
To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, each
Borrower hereby covenants and agrees with Administrative Agent and each Lender
that:
 
(a)    If required under applicable Healthcare Laws, each Borrower has and shall
maintain in full force and effect a valid CON for no less than the number of
units in the Licensed Locations as of the date of this Agreement.
 
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(b)    Each Borrower shall maintain any applicable CON free from restrictions or
known conflicts which would materially impair the use or operation of each
Licensed Location for its current use, and shall not permit any CON to become
provisional, probationary or restricted in any way.
 
(c)    No Borrower shall do (or suffer to be done by a Borrower or any Affiliate
of a Borrower) any of the following without Administrative Agent's prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed:
 
(i)    Replace or transfer all or any part of any Licensed Location's units to
another site or location;
 
(ii)    Transfer or demise (other than a demised under an Operating Lease
approved by Administrative Agent in writing) any CON or other Healthcare Permit
or rights thereunder to any Person (other than Administrative Agent) or to any
location other than the Licensed Location to which such CON or Governmental
Approval pertains; or
 
(iii)    Pledge or hypothecate any CON or other Healthcare Permit as collateral
security for any indebtedness other than indebtedness to Lender.
 
(d)    If any Licensed Location is currently accredited by JCAHO, Borrowers
shall use diligent efforts to do the following except to the extent that a
Licensed Operator is otherwise obligated to do the following pursuant to any
Lease: (i) maintain such accreditation in good standing and without limitation
or impairment, (ii) promptly submit to JCAHO a plan of correction for any
deficiencies listed on any JCAHO accreditation survey report, and (iii) cure all
such deficiencies within such time frame as is necessary to preserve and
maintain in good standing and without limitation or impairment such JCAHO
accreditation.
 
(e)    Within twelve (12) months after the Closing Date, Borrowers will cause
clinical therapy and rehabilitation services and companion programs to be
offered and provided at the Projects and obtain all Healthcare Permits required
to offer and provide such services and programs. All revenue from such services
shall be payable to a Borrower and not a third party provider.
 
Section 8.4 Covenants Pertaining to Licensed Operators.
 
To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, Borrowers
hereby covenant and agree to the following:
 
(a)    Licensed Operators shall do nothing to cause Borrower to breach any of
the provisions of Section 8.3.
 
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(b)    Licensed Operators will:
 
(i)    timely file or caused to be timely filed (after giving effect to any
extension duly obtained), all notifications, reports, submissions, Permit
renewals, cost reports and other reports of every kind whatsoever required by
Healthcare Laws (which reports will be materially accurate and complete in all
respects and not misleading in any material respect and shall not remain open or
unsettled);
 
(ii)    if not issued as of the Closing Date, use diligent efforts to obtain all
Healthcare Permits necessary under Healthcare Laws to carry on the business at
the Licensed Locations as it is conducted on the Closing Date or as necessary to
provide the services and programs described in Section 8.3(e); and once any
Healthcare Permit is issued, maintain in full force and effect, and free from
restrictions, probations, conditions or known conflicts which would materially
impair the use or operation of any Licensed Location for its current use, all
such Healthcare Permits necessary under Healthcare Laws (A) to carry on the
business of Licensed Operator as it is conducted on the Closing Date, and (B) if
Licensed Operator receives or has applied for Medicaid or Medicare
reimbursements as part of its business, to continue to receive reimbursement
under Medicare and Medicaid in full compliance with all requirements for
participation in, and for the licensure required to provide the services that
are reimbursable under, Medicare and Medicaid, including, without limitation,
the Medicare and Medicaid Patient Protection Act of 1987, as the same may be
amended, and such other Third Party Payor Programs as to which any Licensed
Operator receives or has applied for reimbursement as part of its business;
 
(iii)    not suffer or permit to occur any of the following:
 
(A)    any transfer of a Healthcare Permit or rights thereunder to any Person
(other than a Borrower or Administrative Agent) or to any location other than a
Licensed Location approved by Administrative Agent in advance in writing;
 
(B)    any pledge or hypothecation of any Healthcare Permit as collateral
security for any indebtedness other than indebtedness to Administrative Agent;
 
(C)    any rescission, withdrawal, revocation, amendment or modification of or
other alteration to the nature, tenor or scope of any Healthcare Permit without
Administrative Agent's prior written consent, including, without limitation,
(I) any change to the authorized units/beds capacity of any Licensed Location
and/or the number of units/beds approved by the applicable Governmental
Authority, and (II) any transfer all or any part of any Licensed Location's
authorized units or beds to another site or location;
 
(D)    any voluntary transfer of any resident of any Licensed Location to any
other facility, unless such transfer is at the request of the resident (without
economic incentives being given to the resident by an Affiliate of Licensed
 
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Operator) or its payor or is for reasons relating to non-payment or the health,
required level of medical care or safety of the resident to be transferred;
 
(E)    without Administrative Agent's prior written consent, the provision by
Licensed Operator of additional regulated services at any Licensed Location,
including, without limitation, medical services; or
 
(F)    any fact, event or circumstance for which notice to Administrative Agent
is required under Section 8.5;
 
(iv)    operate or cause the Licensed Locations to be operated in a manner such
that the Healthcare Permits remain in full force and effect;
 
(v)    maintain or cause to be maintained the standard of care for the patients
of the Licensed Locations at all times at a level necessary to insure a level of
quality care for the patients of the Licensed Locations comparable to that
existing on the date of this Agreement;
 
(vi)    maintain or cause to be maintained a standard of care in the storage,
use, transportation and disposal of all medical equipment, medical supplies,
medical products and medical waste, of any kind and in any form, that is in
accordance at least, that of the highest prudent industry standard and in
conformity with all applicable regulations and laws;
 
(vii)    operate or cause to be operated the Licensed Location in a prudent
manner in compliance in all material respects with applicable Healthcare Laws
and cause all Healthcare Permits and any other agreements necessary for the use
and operation of the Licensed Location or as may be necessary for participation
in Third Party Payor Programs to remain in effect without reduction in the
number of licensed beds or beds authorized for use in applicable Third Party
Payor Programs;
 
(viii)    maintain or cause to be maintained sufficient inventory and equipment
of types and quantities at the Licensed Location to enable Licensed Operator to
adequately to perform operation of the Licensed Location;
 
(ix)    to the extent required by applicable law, maintain or cause to be
maintained all deposits, including, without limitation, deposits relating to
patients or Resident Agreements if such deposits are in cash such deposits are
to be deposited and held by Licensed Operator (or the Manager under the
Management Agreement), as the case may be, at such commercial or savings bank or
banks as may be reasonably satisfactory to Administrative Agent, if such
deposits are in any other form, such deposits are to be maintained as
Administrative Agent may expressly permit. Any bond or other instrument which
Licensed Operator (or the Manager under the Management Agreement), as the case
may be, is permitted to hold in lieu of cash deposits under any applicable legal
requirements shall be maintained in full force and effect unless replaced by
cash deposits as hereinabove described, shall be issued by an institution
reasonably satisfactory to Administrative Agent,
 
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shall, if permitted pursuant to any legal requirements, name Administrative
Agent as payee or mortgagee thereunder (or at Administrative Agent's option, be
fully assignable to Administrative Agent) and shall, in all respects, comply
with any applicable in legal requirements and otherwise be reasonably
satisfactory to Administrative Agent. Licensed Operator shall, upon request,
provide Administrative Agent with evidence reasonably satisfactory to
Administrative Agent of Licensed Operator's compliance with the foregoing.
Following the occurrence and during the continuance of any Event of Default,
Licensed Operator shall, upon Administrative Agent's request, if permitted by
any applicable legal requirements, turn over to Administrative Agent the
deposits (and any interest theretofore earned thereon) with respect to the
Licensed Locations, to be held by Administrative Agent subject to the terms of
their related agreements;
 
(x)    provide to Administrative Agent no later than two (2) Business Days after
request, to the extent applicable, an accurate, complete and current list of all
participation agreements with Third Party Payors with respect to the business of
Licensed Operators (collectively, "Participation Agreements"). Licensed
Operators shall at all times comply in all material respects with all
requirements, contracts, conditions and stipulations applicable to Licensed
Operators in order to maintain in good standing and without default or
limitation all such Participation Agreements; and
 
(xi)    maintain a corporate health care regulatory compliance program
("CCP") which includes at a minimum, the elements of an effective compliance
program, as published in the Federal Register from time to time, by the
Department of Health and Human Services, Office of Inspector General (or any
successor Governmental Authority), without regard to whether such program is
specifically applicable to the operations at the Licensed Locations.
 
(c)    No Licensed Operator, shall, other than in the normal course of business,
change the terms of any of the Medicaid, Medicare or other Third Party Payor
Programs or its normal billing payment and reimbursement policies and procedures
with respect thereto (including without limitation the amount and timing of
finance charges, fees and write-offs).
 
(d)    No Licensed Operator or any manager of the Licensed Locations shall
rescind, withdraw, revoke, amend, modify, supplement, or otherwise alter the
nature, tenor or scope of the Healthcare Permits for the Licensed Locations.
 
(e)    If any Licensed Location is currently accredited by JCAHO, Licensed
Operators shall (i) maintain such accreditation in good standing and without
limitation or impairment, (ii) promptly submit to JCAHO a plan of correction for
any deficiencies listed on any JCAHO accreditation survey report, and (iii) cure
all such deficiencies within such time frame as is necessary to preserve and
maintain in good standing and without limitation or impairment such JCAHO
accreditation.
 
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Section 8.5 Special Notices to Administrative Agent.
 
Borrowers shall notify Administrative Agent within three (3) Business Days of
Borrower's becoming aware of (but in any event prior to Borrowers submitting any
requests for advances of reserves or escrows), and shall contractually obligate
(via written agreement acceptable to Administrative Agent) the Licensed
Operators to notify Administrative Agent of the occurrence of, any of the
following facts, events or circumstances, whether existing or pending, together
with such supporting data and information as shall be necessary to fully explain
to Administrative Agent the scope and nature of the fact, event or circumstance,
and shall provide to Administrative Agent within two (2) Business Days of
Administrative Agent's request, such additional information as Administrative
Agent shall request regarding such disclosure:
 
(a)    a Licensed Operator or any Credit Party, has become subject to any
federal, state, local governmental or private payor civil or criminal
investigations, inquiries, validation review, program integrity review or
reimbursement audits or statement of deficiencies involving and/or related to
its compliance with Healthcare Laws (including, without limitation, an inquiry
or investigation of any Person having "ownership, financial or control interest"
in any Borrowers (as that phrase is defined in 42 C.F.R. § 420.201 et seq.))
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect, but excluding, where such certification is not existent as of
the Closing Date, issues related to initial Medicare or Medicaid certification ;
 
(b)    that an owner, officer, manager, employee or Person with a "direct or
indirect ownership interest" (as that phrase is defined in 42 C.F.R. § 420.201)
in a Licensed Operator or a Credit Party: (A) has had a civil monetary penalty
assessed against him or her pursuant to 42 U.S.C. § 1320a-7a or is the subject
of a proceeding seeking to assess such penalty; (B) has been excluded from
participation in a Federal Health Care Program (as that term is defined in 42
U.S.C. § 1320a-7b) or is the subject of a proceeding seeking to assess such
penalty; (C) has been convicted (as that term is defined in 42 C.F.R.
§ 1001.2) of any of those offenses described in 42 U.S.C. § 1320a-7b or 18
U.S.C. §§ 669, 1035, 1347, 1518 or is the subject of a proceeding seeking to
assess such penalty; or (D) has been involved or named in a U.S. Attorney
complaint made or any other action taken pursuant to the False Claims Act under
31 U.S.C. §§ 3729-3731 or qui tam action brought pursuant to 31 U.S.C. § 3729 et
seq.;
 
(c)    any claims, actions or appeals before any commission, board or agency
charged with administering Healthcare Laws or programs operated under Healthcare
Laws (including without limitation any intermediary or carrier, the Provider
Reimbursement Review Board or the Administrator of the Center for Medicare
Services) with respect to any state or federal Medicare or Medicaid cost reports
or claims filed by any Licensed Operator, or any disallowance by any commission,
board or agency in connection with any audit of such cost reports, to the extent
such audits are not routine;
 
(d)    [Reserved];
 
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(e)    [Reserved];
 
(f)    any liability in respect of amounts received by Borrowers or any Licensed
Operator for the purchase or improvement of any real property under restricted
or conditioned grants or donations, including, without limitation, monies
received under the Public Health Service Act, 42 U.S.C. Section 291 et seq.;
 
(g)    the voluntary disclosure by any Credit Party or Licensed Operator to the
Office of the Inspector General of the United States Department of Health and
Human Services, a Medicare fiscal intermediary or any state's Medicaid program
of a potential material overpayment matter involving the submission of claims to
such payor by any Licensed Operator;
 
(h)    receipt by any Credit Party or Licensed Operator of any notice or
communication from the Joint Commission on Accreditation of Healthcare
Organizations that a Licensed Location is (A) subject to or is required to file
a plan of correction with respect to any accreditation survey, or (B) in danger
of losing its accreditation due to a failure to comply with a plan of
correction;
 
(i)    any charges of resident abuse which are made in any legal or regulatory
proceedings or material licensing violations involving the Licensed Operator at
the Licensed Locations;
 
(j)    if applicable, any health care survey report related to licensure or
certification (including, without limitation, an annual or biannual Medicare or
Medicaid certification survey report) which includes any statement of material
deficiencies pertaining to any Licensed Operator or any of the Licensed
Locations (whether via CMS 2567 form or otherwise);
 
(k)    without duplication, any failure of any Credit Party or Licensed Operator
to comply with any covenants or conditions in this Article 8;
 
(l)    any revocation, suspension, termination, probation, restriction,
limitation, denial, or nonrenewal affecting any Licensed Operator with respect
to any Medicare and/or Medicaid participation or provider agreement,
certification, billing number, assignment (via CMS 855 forms or otherwise),
billing agent or electronic funds transfer instruction, including, without
limitation, any denial of payment for new admissions; and/or
 
(m)    any revocation, suspension, termination, probation, restriction,
limitation, denial or nonrenewal affecting any Licensed Operator with respect to
any participation or provider agreement with any Third Party Payor.
 
Section 8.6 Cure of Healthcare Laws Violations.
 
If there shall occur any fact, event or circumstance for which Borrowers or
Licensed Operators are required to give Administrative Agent notice under
Section 8.5 above, or if there shall occur any breach of this Article 8 (or the
corresponding provisions of
 
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any Financing Document), Borrowers shall take, and shall cause the Licensed
Operators to take (subject to the terms of any Financing Documents and the terms
of any Lease to the Licensed Operator), such action as is necessary to validly
challenge or otherwise appropriately respond to such fact, event or circumstance
within any timeframe required by applicable Healthcare Laws, and shall
thereafter diligently pursue the same to a favorable conclusion, all to the
effect that the fact, event or circumstance giving rise to Borrowers' or
Licensed Operators' notice obligation under Section 8.5 or the breach of this
Article 8 (or the corresponding provisions of any Financing Documents), shall be
dismissed, rescinded, eliminated and otherwise cease to exist on that date which
is the earlier to occur of (a) sixty (60) days after the date any Borrower
became aware of such fact, event or circumstance, or (b) the expiration of any
cure period given under applicable Healthcare Laws to cure any such breach.
Provided that Borrowers are at all times in compliance with the foregoing
covenants and diligently pursue and obtain the cure described above within the
timeframe described above, the existence of any fact, event or circumstance for
which Borrowers or Licensed Operators are required to give Administrative Agent
notice under Section 8.5, or the existence of a breach of this Article 8 (or the
corresponding provisions of any Financing Documents), shall not, in and of
itself, constitute a breach of Borrowers' or Licensed Operators obligations
hereunder or thereunder unless the same shall (y) have a Material Adverse
Effect, or (z) have occurred as a result of any Credit Parties' or any Licensed
Operators' negligence, willful misconduct, willful breach of this Agreement or
Healthcare Laws or failure to adhere to commercial reasonable standards of
operations.
 
Section 8.7 Licensed Operator; Manager.
 
(a)    Without in any way limiting the other provisions of this Agreement,
Borrowers shall not change the Licensed Operator of any Licensed Location.
Borrowers shall cause the Licensed Locations at all times to be operated by the
Licensed Operators identified on Schedule 8.7. If the Licensed Operator for a
Licensed Location is a Person separate and distinct from Borrowers as of the
date of this Agreement, then, without Administrative Agent's prior written
consent, no Borrower shall become the Licensed Operator for such Licensed
Location, nor shall Borrowers or any Affiliate of any Borrower render any
regulated healthcare service at any Licensed Location in connection with or in
the furtherance of the operation of the Licensed Location.
 
(b)    Borrowers shall not change or permit any Licensed Operator to change the
manager of any Licensed Location or make any modification, amendment,
termination or cancellation of any management contract for any Licensed Location
or agreements with brokers, without the prior written consent of Administrative
Agent in its sole and absolute discretion. Any substitute property manager shall
be required to enter into an assignment and subordination of management or
operating agreement in form and substance reasonably satisfactory to
Administrative Agent. Borrowers shall, and shall cause the Projects initially
and at all times until a substitute property manager is approved by
Administrative Agent to be managed by ARC or an Affiliate or Affiliates of ARC
approved by Administrative Agent (collectively in the singular, the
"Manager") pursuant to management/operating agreements approved by
Administrative Agent in writing (the "Management Agreements"). Such restrictions
and approval rights are solely for the purposes of assuring that the Projects
are
 
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managed and operated in a first-class manner consistent with Healthcare Laws and
the preservation and protection of the Licensed Locations as security for the
Obligations and shall not place responsibility for the control, care, management
or repair of the Licensed Locations upon Administrative Agent, or make
Administrative Agent responsible or liable for any negligence in the management,
operation, upkeep, repair or control of the Licensed Locations.
 
Section 8.8 Transfer of Healthcare Permits and Operations.
 
Upon written notice from Administrative Agent to Borrowers following the
occurrence of an Event of Default that is continuing hereunder, or immediately
if, at any time during the term hereof, a Licensed Operator vacates any Licensed
Location, the following provisions shall be effective:
 
(a)    Borrowers shall, or shall cause Licensed Operator to, cooperate with the
Administrative Agent to effectuate a change of ownership of the Healthcare
Permits for any Licensed Location to a replacement operator designated by
Administrative Agent ("Replacement Operator"), subject to required approval of
any Governmental Authority, and in connection therewith, cooperate to
effectuate, if requested, the assignment of any Third Party Payor or
Governmental Payor contracts (to the extent assignable). Borrowers further shall
provide to Administrative Agent all information and records requested by
Administrative Agent in connection with the change of ownership of the
Healthcare Permits; and
 
(b)    In order to facilitate an efficient transfer of the operations of any
Licensed Location, Borrowers shall, if and to the extent requested by
Administrative Agent, (i) deliver to Administrative Agent copies of all
Healthcare Permits and the most recent reports and notices pertaining to such
Licensed Location required to be delivered under Section 8.5; (ii) continue and
maintain, and cause Licensed Operator to continue and maintain, the operation of
such Licensed Location in the ordinary course of business, including, without
limitation, the retention of all residents at the Licensed Location to the
fullest extent possible until the transfer of the operations of such Licensed
Location to the Replacement Operator is completed; (iii) enter into such
operation transfer agreements, management agreements, and other agreements as
may be requested by Administrative Agent until the transfer of the operations of
such Licensed Location to the Replacement Operator is completed; and
(iv) provide continued access to Administrative Agent and its agents to show
such Licensed Location to potential replacement operators. Subject to all laws
governing the privacy and confidentiality of individually identifiable health
information, Borrowers hereby consents to the disclosure by Administrative Agent
to potential replacement operators of Borrowers' financial statements, licensure
reports and surveys, financial and property due diligence materials and other
documents, materials and information relating to the Licensed Locations.
 
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ARTICLE 9
REAL PROPERTY MATTERS
 
Each Borrower agrees that, so long as any Credit Exposure exists:
 
Section 9.1 Leases; Resident Agreements.
 
(a)    Without the prior written consent of Administrative Agent, Borrowers
shall not: (i) enter into any Leases, other than Permitted Leases; (ii) modify,
amend, renew, surrender, terminate, consent to a sublease of, consent to a
transfer of, abate rent or other payments due under or otherwise grant any
financial or other concession under any Material Lease or any Permitted Lease if
the effect thereof would cause the Permitted Lease to become a Material Lease;
(iii) accept any rental payment under any Leases more than one (1) month in
advance of its due date or in violation of the cash management or lockbox
provisions of this Agreement; or (iv) enter into any ground lease or master
operating lease of any Project.
 
(b)    Without the prior written consent of Administrative Agent, Borrowers
shall not, and shall not permit the Manager to: (i) modify in any material
respect the form of Resident Agreement previously approved by Administrative
Agent; provided that Borrowers will submit all proposed form modifications to
Administrative Agent prior to the use thereof, (ii) accept any payment under any
Resident Agreement more than one (1) month in advance of its due date or in
violation of the cash management or lockbox provisions of this Agreement;
(iii) enter into any subleases with respect to any Project except for Permitted
Leases; (iv) modify, amend, renew, surrender, terminate, consent to a sublease
of, consent to a transfer of, abate rent or other payments due under or
otherwise grant any financial or other concession under any sublease (except for
Permitted Leases) with respect to any Project; or (v) enter into any Resident
Agreement for a term of more than one (1) year, or upon rates other than market
rates or upon a form that fails to comply in all material respects with
applicable Laws.
 
(c)    Borrowers shall, and shall cause Licensed Operator to, provide
Administrative Agent with a copy of all Material Leases no less than ten
(10) days prior to execution of such Leases and such Leases shall be on the form
of lease previously approved by Administrative Agent (which form shall include
an automatic attornment provision whereby, in the event of a foreclosure, the
tenant automatically shall recognize the successor owner as landlord and such
tenant shall have no right to terminate its lease in the event of such
foreclosure). If Administrative Agent consents to any new Material Lease or the
modification or renewal of any existing Material Lease, at Administrative
Agent's request, Borrowers or Licensed Operator, as applicable, shall cause the
tenant thereunder to execute a subordination and attornment agreement in form
and substance satisfactory to Administrative Agent.
 
(d)    Any Operating Lease (or, at Administrative Agent's option, any
subordination agreement between Administrative Agent and the Operating Lessee
pertaining
 
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to such Operating Lease) shall at all times be in form and substance
satisfactory to Administrative Agent.
 
(e)    Borrowers shall not suffer or permit any breach or default to occur in
any of Borrowers' obligations under any of the Material Leases nor suffer or
permit the same to terminate by reason of any failure of Borrowers to meet any
requirement of any Material Lease.
 
(f)    Borrowers shall not suffer or permit any breach or default by a Licensed
Operator to occur in any of the Licensed Operator's obligations under any
Resident Agreement nor suffer or permit the same to terminate by reason of any
failure of the Licensed Operator to meet any requirement of any Resident
Agreement.
 
(g)    If any Borrower has authorized or permitted an Operating Lessee to apply
for or maintain the CON, or if the CON for a Licensed Location operated by an
Operating Lessee merges into a state-issued license to operate the Licensed
Location, Borrower shall not, at any time, pledge, transfer, hypothecate or
otherwise alienate the CON.
 
(h)    If the Licensed Operator (other than ARC) for a Licensed Location is a
Person separate and distinct from the Borrowers, then the Licensed Operator's
use or occupancy of the Licensed Location shall at all times be pursuant to a
management or service agreement (each, a "Service Agreement") approved by
Administrative Agent. The term Service Agreement shall not include the
Management Agreement. Any Service Agreements existing as of the Closing Date are
identified on Schedule 9.1(h). Each Service Agreement shall provide
Administrative Agent the right to terminate the rights of the Licensed Operator
upon Administrative Agent (or its designee) or any receiver taking possession of
the applicable Project or acquisition of the applicable Project through
foreclosure, a deed in lieu of foreclosure UCC sale or otherwise. In the event a
Licensed Operator loses its license to provide the goods or services covered by
a Service Agreement, Borrowers shall act in good faith to promptly replace such
Service Agreement or assist such Licensed Operator to reinstate such license in
accordance with the terms of the applicable Service Agreement.
 
Section 9.2 Project Use and Operation.
 
(a)    Without the prior written consent of Administrative Agent in each
instance, which consent shall not be unreasonably withheld or delayed, Borrowers
shall not demolish, remove, construct, or, except as otherwise expressly
provided herein, restore, or alter the Projects or any portion thereof in any
material respect; nor consent to or permit any such demolition, removal,
construction, restoration, addition or alteration which would diminish in any
material respect the value of the Projects. No excavation, construction, earth
work, site work or any other mechanic's lienable work shall be done to or for
the benefit of a Project, without Administrative Agent's approval, except for
normal repair and maintenance in the ordinary course of business. Borrowers
shall, at their expense, (i) take good care of the Projects including grounds
generally, and utility systems and sidewalks, roads, alleys, and curbs therein,
and shall keep the same in good, safe and insurable condition and in compliance
with all applicable Laws in all material respects, (ii) promptly make all
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the Projects, above grade and below grade, interior and exterior, structural and
nonstructural, ordinary and extraordinary, unforeseen and foreseen, which are
necessary in order to maintain the Projects in a manner consistent with their
quality and use as required hereby, and (iii) not commit or suffer to be
committed any waste of the Projects or do or suffer to be done anything which
will increase the risk of fire or other hazard to the Projects or impair the
value thereof. Borrowers shall keep the sidewalks, vaults, gutters and curbs
comprising, or adjacent to, the Projects, clean and free from dirt, snow, ice,
rubbish and obstructions.
 
(b)    Unless required by applicable Law, Borrowers shall not permit or engage
in changes in the use of any Project (including any change from residential to
non-residential use, or from non-residential use to residential use) from the
use at the time this Agreement was executed without Administrative Agent's prior
written consent. Borrowers shall not request and shall not initiate or acquiesce
in a change in the plat of subdivision, or zoning classification or use of any
Project, or grant any encumbrances or easements burdening any Project, without
in each case obtaining Administrative Agent's prior written consent, not to be
unreasonably withheld. Borrowers shall not desert or abandon the Projects or
cause or permit the use or occupancy of any part of the Projects to be
discontinued if such discontinuance or use change would violate in any material
respect any zoning or other law, ordinance or regulation.
 
(c)    Borrowers shall not, and neither shall permit, the Projects or any
portion thereof to be converted or take any preliminary actions which could lead
to a conversion to condominium or cooperative form or ownership.
 
(d)    All of Borrowers' personal property delivered upon, attached to, used or
required to be used in connection with the operation of any Project
(collectively, the "FF&E") shall always be located at such Project and except as
otherwise permitted herein shall be kept free and clear of all Liens other than
the Permitted Liens. Borrowers shall not, without the prior written consent of
Administrative Agent, remove or permit to be removed from any Project any of the
FF&E except to repair or replace the same except as otherwise permitted herein.
 
(e)    Borrowers shall not consent to or initiate the joint assessment of any
Project (i) with any other real property constituting a separate tax lot and
Borrowers represent and covenant that each Project is are and shall remain a
separate tax lot, or (ii) with any portion of the Projects which may be deemed
to constitute personal property, or any other procedure whereby the lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to the Project as a single lien.
 
Section 9.3 Casualty Proceeds.
 
(a)    Borrowers shall notify Administrative Agent promptly of the commencement
or threat of any Taking of the Projects or any portion thereof or of the
occurrence of any casualty with respect to any Project.
 
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(b)    Subject to the provisions of Section 9.4 below, Administrative Agent may
elect to collect, retain and apply against the Obligations of Borrowers under
this Agreement or any of the other Financing Documents all proceeds of insurance
resulting from any loss at any Project or of any Taking of all or any portion of
a Project (individually and collectively referred to as "Casualty
Proceeds") after deduction of all expenses of collection and settlement,
including attorneys' and adjusters' fees and charges. If any insurance proceeds
are paid by check, draft or other instrument payable to any Borrower and
Administrative Agent jointly, such Borrower authorizes Administrative Agent to
endorse such Borrower's name thereon and do such other things as Administrative
Agent may deem advisable to reduce the same to cash. Administrative Agent is
authorized and empowered, and each Borrower hereby irrevocably appoints
Administrative Agent as its (or their) attorney-in-fact (such appointment is
coupled with an interest), at Administrative Agent's option, to make or file
proofs of loss or damage and to settle and adjust any claim under insurance
policies which insure against such risks, or to direct Borrowers, in writing, to
agree with the insurance carrier(s) on the amount to be paid in regard to such
loss. Any Casualty Proceeds remaining after repayment of the Obligations shall
be paid by Administrative Agent to Borrowers.
 
(c)    Notwithstanding anything in Section 9.3(b) to the contrary, in the event
of any casualty to any Project or any Taking of part of any Project,
Administrative Agent agrees to make available the Casualty Proceeds to
restoration of the Project if (i) no Event of Default exists, (ii) all Casualty
Proceeds are deposited with Administrative Agent, (iii) in Administrative
Agent's reasonable judgment, the amount of Casualty Proceeds, together with
additional amounts, if any, deposited by Borrower with Administrative Agent,
available for restoration of the Project is sufficient to pay the full and
complete costs of such restoration, (iv) the casualty or Taking will not require
residential units at the affected Project comprising in the aggregate more than
fifteen percent (15%) of the occupancy space at the Project to become vacant
during the restoration, (v) the income to Borrowers from such affected Project
(excluding the effect of business interruption or rent loss insurance) will not
decrease more than fifteen percent (15%) as a result of such casualty or Taking,
(vi) in Administrative Agent's sole determination, the Obligations will not
exceed seventy-five percent (75%) of the fair market value of the Project (based
upon Administrative Agent's allocation of the Loan to such Project) after
completion of restoration but prior to any re-tenanting, (vii) in Administrative
Agent's reasonable determination, the affected Project can be restored to an
architecturally and economically viable project in compliance with applicable
Laws, and (viii) in Administrative Agent's reasonable determination, such
restoration is likely to be completed not later than six (6) months prior to the
Termination Date.
 
(d)    Notwithstanding the foregoing, if the damage to the Project does not
exceed $1,250,000, and so long as no Default has occurred and is continuing,
Borrowers shall be entitled to receive the Casualty Proceeds attributable
thereto, provided, however, that Borrowers shall use the Casualty Proceeds to
restore or rebuild the Project in all material respects to its condition prior
to such casualty or Taking.
 
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Section 9.4 Borrowers' Obligation to Rebuild and Use of Casualty Proceeds
Therefor.
 
(a)    In case Administrative Agent does not elect to apply or does not have the
right to apply the Casualty Proceeds to the Obligations, as provided in Section
9.3 above, Borrowers shall:
 
(i)    Proceed with diligence to make settlement with insurers or the
appropriate governmental authorities and except as provided in Section
9.3(d) above, cause the Casualty Proceeds to be deposited with Administrative
Agent;
 
(ii)    In the event of any delay in making settlement with insurers or the
appropriate governmental authorities or effecting collection of the Casualty
Proceeds, deposit with Administrative Agent the full amount required to complete
construction as aforesaid;
 
(iii)    If the damage exceeds $1,250,000, in the event the Casualty Proceeds
are insufficient to assure Administrative Agent that the all contemplated
repairs or construction will be completed, promptly deposit with Administrative
Agent any amount necessary to assure that such contemplated repairs or
construction will be completed; and
 
(iv)    Promptly proceed with the assumption of construction of the applicable
Project, including the repair of all damage resulting from such fire, Taking or
other cause and restoration to its former or reasonably equivalent condition in
all material respects.
 
(b)    Any request by Borrowers for a disbursement by Administrative Agent of
Casualty Proceeds and funds deposited by Borrowers shall be subject to
reasonable construction loan type draw requirements as determined by
Administrative Agent.
 
(c)    Notwithstanding anything to the contrary, if the damage to the applicable
Project does not exceed $1,250,000 and so long as no Default has occurred and is
continuing, Borrowers may settle and adjust any claim without the consent of
Administrative Agent and agree with the insurance company or companies (or
Governmental Authority, in the case of a Taking) on the amount to be paid upon
the loss, provided, however, that such adjustment is carried out in a competent
and timely manner. Any monies collected under this subsection (c) shall be
applied in accordance with Section 9.3(d) below.
 
(d)    If the damage to the applicable Project exceeds $1,250,000, then
Administrative Agent may elect to file the respective proof of loss, settle and
adjust any claim without the consent of Borrowers and agree with the insurance
company on the amount of the Casualty Proceeds in the place and stead of
Borrowers and without the consent of Borrowers; provided, however, that so long
as no Event of Default exists, Administrative Agent agrees to work with
Borrowers and to keep Borrowers fully apprised of any and all action
Administrative Agent takes to settle or adjust any claim. Borrowers hereby
release
 
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Administrative Agent from any and all liability with respect to the settlement
and adjustment by Administrative Agent of any claims in respect of any
casualty. 
 
Section 9.5 Tax Reduction Proceedings. 
 
After and during the continuance of an Event of Default, Borrowers shall be
deemed to have appointed Administrative Agent as their attorney-in-fact to seek
a reduction or reductions in the assessed valuation of the Projects for real
property tax purposes or for any other purpose and to prosecute any action or
proceeding in connection therewith. This power, being coupled with an interest,
shall be irrevocable for so long as any part of the Obligations remains unpaid
and any Event of Default shall be continuing. 
 
Section 9.6 Commingling; FIRPTA. 
 
No Borrower has commingled the funds related to the Projects with funds from any
other property. Neither Borrowers nor any partner, stockholder, member or other
principal in Borrowers is or will be, and no legal or beneficial interest of a
partner, stockholder, member or other principal in Borrowers is or will be held,
directly or indirectly, by a "foreign corporation", "foreign partnership",
"foreign trust", "foreign estate", "foreign person", "affiliate" of a "foreign
person" or a "United States intermediary" of a "foreign person" within the
meaning of the Internal Revenue Code Sections 897, 1445 or 7701, the Foreign
Investments in Real Property Tax Act of 1980, the International Foreign
Investment Survey Act of 1976, the Agricultural Foreign Investment Disclosure
Act of 1978, or the regulations promulgated pursuant to such Acts or any
amendments to such Acts.
 
Section 9.7 Representations and Warranties.
 
To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, each
Borrower hereby represents and warrants to Administrative Agent and each Lender
the following with respect to each individual Project, standing alone and
without reliance upon any other Project:
 
(a)    Except as disclosed to Administrative Agent in writing, (i) no
condemnation of any portion of any Project, has commenced or, to any Borrower's
knowledge, is contemplated by any Governmental Authority, (ii) except as
disclosed to Administrative Agent in writing, no condemnation or relocation of
any roadways abutting any Project has commenced or, to any Borrower's knowledge,
is contemplated by any Governmental Authority, and (iii) no proceeding to deny
access to any Project from any point or planned point of access to any Project,
has commenced or, to any Borrower's knowledge, is contemplated by any
Governmental Authority.
 
(b)    Except as disclosed to Administrative Agent in writing the contemplated
use of any Project as an independent living facility and the contemplated
accessory uses do not violate, in any material respects, (i) any Laws (including
subdivision, zoning and building Laws and Environmental Laws), or (ii) any
building permits, covenants,
 
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conditions and restrictions of record, or agreements affecting any Project or
any part thereof. Neither the zoning authorizations, subdivision approvals or
variances nor any other right to construct or to use any Project is to any
extent dependent upon or related to any real estate other than the real property
constituting the Collateral. Except as disclosed to Administrative Agent on the
land title surveys delivered to Administrative Agent prior to the Closing Date,
no building or other improvement encroaches upon any property line, building
line, set back line, side yard line or any recorded or visible easement (or
other easement of which Borrowers are aware or has reason to believe may
exist) with respect to any Project. Except as disclosed on such surveys, no
Project is situated in an area designated as having special flood hazards as
defined by the Flood Disaster Protection Act of 1973, as amended, or designated
as a wetland by any governmental entity having jurisdiction over the Project.
All Permits required for the use and occupancy of the Project have been
obtained. All Laws relating to the construction of and operation of the
Improvements have been complied with in all material respects and all permits
and licenses required for the construction of and operation of the Project have
been obtained. The Project is accessible through fully improved and dedicated
roads, accepted for maintenance and public use by public authority having
jurisdiction. The Project has adequate water, gas and electrical supply, storm
and sanitary sewerage facilities, telephone facilities, other required public
utilities, fire and police protection, and means of access between the Project
and public highways; none of the foregoing will be foreseeably delayed or
impeded by virtue of any requirements under any applicable Laws. The Project
includes all property and rights that may be reasonably necessary or desirable
to promote the present uses and enjoyment thereof. To the best of each
Borrower's knowledge, there are no, nor are there any alleged or asserted,
violations of law, regulations, ordinances, codes, permits, licenses,
declarations, covenants, conditions or restrictions of record, or other
agreements relating to any Project, or the improvements thereto, or any part
thereof. Final certificates of occupancy or non-residential use permits have
been obtained for all improvements on the Project. The parcels of land
comprising the Project are contiguous, subdivided parcels and are in full
compliance with applicable subdivision ordinances. No subdivision or
resubdivision of such parcels is required to: (y) convey, transfer, assign or
lease such parcels, either individually or as a whole; or (z) rebuild after a
casualty all or any portion of the improvements on the Project to current size
and configuration.
 
(c)    The Project is taxed separately without regard to any other property and
for all purposes the Project may be mortgaged, conveyed and otherwise dealt with
as an independent parcel. There are no unpaid or outstanding real estate or
other taxes or assessments on or against any Project or any part thereof, except
general real estate taxes for fiscal year 2006 not yet due or payable. To each
Credit Party's knowledge, there is no pending or contemplated action pursuant to
which any special assessment may be levied against any portion of any Project.
 
(d)    There has been no damage or destruction of any part of any Project by
fire or other casualty that has not been repaired. Except for the deferred
maintenance items, if any, reflected on Schedule 4.14 or as part of routine
maintenance or capital improvements required to be made by Borrowers under this
Agreement, there are presently no material
 
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existing defects in any Project and no material repairs or alterations thereof
are reasonably necessary or appropriate.
 
(e)    No Borrower has entered into any Material Leases that are currently in
effect other than as set forth on the rent roll delivered by Borrower to
Administrative Agent prior to the closing of the Loans, which Borrower certifies
is true and correct in all material respects. True, correct and complete copies
of the form of Lease, Resident Agreement and other lease or care documents and
all non-residential Leases, as amended, as in effect with respect to Borrower's
or Operator's operation of the Project, have been delivered to Administrative
Agent. All Material Leases are in full force and effect. Neither Borrower nor
any tenant is in material default under any Material Lease. Borrower has
disclosed to Administrative Agent in writing any material default by any tenant
under any Material Lease and no notice of termination has been issued under any
Lease. All rents or other payments required of the tenant under the Material
Lease due to date have been collected and have been collected no more than one
(1) month in advance, and no tenant has been granted any rent concession or
inducement whatsoever except as reflected on the rent roll previously delivered
to Administrative Agent.
 
(f)    The Resident Agreements comply with all applicable Laws in all material
respects, including Healthcare Laws.
 
ARTICLE 10
SECURITY AGREEMENT
 
Section 10.1 Generally.
 
(a)    As security for the payment and performance of the Obligations, and the
payment and performance of all obligations, and without limiting any other grant
of a Lien and security interest in any Security Document, Borrowers hereby
assign and grant to Administrative Agent a continuing first priority Lien on and
security interest in, upon, and to all right, title and interest in and to any
and all property and interests in property of Borrowers whether now owned or
hereafter created, acquired or arising including all of the following properties
and interests in properties (the "Personal Property"; unless otherwise defined
in this Agreement, all terms used in this Article 10 shall have the meanings
given them in Article 9 of the Uniform Commercial Code):
 
(i)    All of Borrowers' Accounts, and all of Borrowers' money, contract rights,
chattel paper, documents, deposit accounts, securities, investment property and
instruments with respect thereto, and all of Borrowers' rights, remedies,
security, Liens and supporting obligations, in, to and in respect of the
foregoing;
 
(ii)    To the extent not listed above, all of Borrowers' money, securities,
investment property, deposit accounts, instruments, general intangibles,
healthcare insurance receivables, inventory and other property and the proceeds
thereof;
 
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(iii)    All of Borrowers' letter-of-credit rights and commercial tort claims;
 
(iv)    All of Borrowers' now owned or hereafter acquired machinery, equipment,
computer equipment, tools, tooling, furniture, fixtures, goods, supplies,
materials, work in process, whether now owned or hereafter acquired, together
with all additions, parts, fittings, accessories, special tools, attachments,
and accessions now and hereafter affixed thereto and/or used in connection
therewith, all replacements thereof and substitutions therefor, and all cash and
non-cash proceeds and products thereof and all present and future warranties,
manuals and other written materials relating thereto;
 
(v)    All of Borrowers' now owned or hereafter acquired goods of any kind and
any and all tangible and intangible books and records of Borrowers relating to
Borrowers, their businesses, their financial condition, records and statements,
the Licensed Locations and/or the Collateral; and
 
(vi)    To the extent not listed above as original collateral, the proceeds
(including, without limitation, insurance proceeds) and products of any or all
of the foregoing, and all accessions to, substitutions for or replacements of
and rents and profits from any or all of the foregoing.
 
(b)    Pursuant to the Liens created pursuant to Section 10.1 and pursuant to
all of the other Security Documents (if any) (including, without limitation, any
and all UCC financing statements being filed by Administrative Agent against any
Credit Party), and assuming that any such Security Document that is intended to
be filed with any governmental public recording office has been so filed,
Administrative Agent has been granted and has a valid and perfected first
priority security interest and Lien in the Collateral, including the Personal
Property (subject only to any Permitted Liens permitted under the terms of this
Agreement and the other Financing Documents) securing the payment of the
Obligations, and such security interests and Liens are entitled to all of the
rights, priorities and benefits afforded by the UCC or other applicable Laws as
enacted in any relevant jurisdiction which relate to perfected security
interests. No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or consent of any other Person is
required for (i) the grant by each Borrower to Administrative Agent of the
security interests and Liens in the Collateral, including the Personal Property,
provided for under this Agreement and the other Security Documents (if any), or
(ii) the exercise by Administrative Agent of its rights and remedies with
respect to the Collateral, including the Personal Property, provided for under
this Agreement and the other Security Documents or under any applicable Law,
including the UCC.
 
Section 10.2  Covenants Relating to Collateral.
 
(a)    Borrowers shall not take any of the following actions or make any of the
following changes unless Borrowers have given at least thirty (30) days prior
written notice to Administrative Agent of Borrowers' intention to take any such
action and have executed any and all documents, instruments and agreements and
taken any other actions
 
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with Administrative Agent may request after receiving such written notice in
order to protect and preserve the Liens, rights and remedies of Administrative
Agent with respect to the Collateral: (i) change the legal name or
organizational identification number of any Borrower, or (ii) change the
jurisdiction of incorporation or formation of any Borrower or allow any Borrower
to designate any jurisdiction as an additional jurisdiction of incorporation for
such Borrower.
 
(b)    Borrowers shall cause all equipment and other tangible personal property
other than inventory to be maintained and preserved in the same condition,
repair and in working order as when new, ordinary wear and tear excepted, and
shall promptly make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end.
 
(c)    Each Borrower hereby authorizes Administrative Agent to file without the
signature of such Borrower one or more UCC financing statements relating to all
or any part of the Collateral, which financing statements may list
Administrative Agent as the "secured party" and such Borrower as the "debtor"
and which describe and indicate the collateral covered thereby as all or any
part of the Collateral under the Financing Documents (including an indication of
the collateral covered by any such financing statement as "all assets" of such
Borrower now owned or hereafter acquired), in such jurisdictions as
Administrative Agent from time to time determine are appropriate, and to file
without the signature of such Borrower any continuations of or amendments to any
such financing statements, in any such case in order for Administrative Agent to
perfect, preserve or protect the Liens, rights and remedies of Administrative
Agent with respect to the Collateral.
 
(d)    Without limiting or contradicting any of the provisions of Sections 4.1,
10.3(b) 10.3(c) or any other provisions of the Financing Documents requiring the
delivery by Borrowers to Administrative Agent and/or the Lenders of any reports,
certificates, information or schedules, Borrowers shall furnish to
Administrative Agent from time to time any statements and schedules further
identifying or describing the Collateral and any other information, reports or
evidence concerning the Collateral as Lender may reasonably request from time to
time.
 
Section 10.3 UCC Remedies.
 
(a)    Upon the occurrence of and during the continuance of an Event of Default
under this Agreement or the other Financing Documents, Administrative Agent, in
addition to all other rights, options, and remedies granted to Administrative
Agent under this Agreement or at law or in equity, may exercise, either directly
or through one or more assignees or designees, all rights and remedies granted
to it under all Financing Documents and under the UCC in effect in the
applicable jurisdiction(s) and under any other applicable law; including,
without limitation:
 
(i)    The right to take possession of, send notices regarding, and collect
directly the Collateral, with or without judicial process;
 
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(ii)    The right to (by its own means or with judicial assistance) enter any of
Borrowers' premises and take possession of the Collateral, or render it
unusable, or to render it usable or saleable, or dispose of the Collateral on
such premises in compliance with subsection (iii) below and to take possession
of Borrowers' original books and records, to obtain access to Borrowers' data
processing equipment, computer hardware and software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner Administrative Agent deems appropriate, without any liability for rent,
storage, utilities, or other sums, and Borrowers shall not resist or interfere
with such action (if Borrowers' books and records are prepared or maintained by
an accounting service, contractor or other third party agent, Borrowers hereby
irrevocably authorize such service, contractor or other agent, upon notice by
Administrative Agent to such Person that an Event of Default has occurred and is
continuing, to deliver to Administrative Agent or its designees such books and
records, and to follow Administrative Agent's instructions with respect to
further services to be rendered);
 
(iii)    The right to require Borrowers at Borrowers' expense to assemble all or
any part of the Collateral and make it available to Administrative Agent at any
place designated by Lender;
 
(iv)    The right to notify postal authorities to change the address for
delivery of Borrowers' mail to an address designated by Administrative Agent and
to receive, open and dispose of all mail addressed to any Borrower; and
 
(v)    The right to enforce Borrowers' rights against Account Debtors and other
obligors, including, without limitation, the right to collect Accounts directly
in Administrative Agent's own name (as agent for Lenders) and to charge the
collection costs and expenses, including attorneys' fees, to Borrowers.
 
(b)    Without restricting the generality of the foregoing and for the purposes
aforesaid, each Borrower hereby appoints and constitutes Administrative Agent
its lawful attorney-in-fact with full power of substitution in the Collateral to
use unadvanced funds remaining under this Agreement or which may be reserved,
escrowed or set aside for any purposes hereunder at any time, or to advance
funds in excess of the face amount of the Notes, to pay, settle or compromise
all existing bills and claims, which may be liens or security interests, or to
avoid such bills and claims becoming liens against the Collateral; to execute
all applications and certificates in the name of such Borrower and to prosecute
and defend all actions or proceedings in connection with the Collateral; and to
do any and every act which such Borrower might do in its own behalf; it being
understood and agreed that this power of attorney shall be a power coupled with
an interest and cannot be revoked.
 
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ARTICLE 11
EVENTS OF DEFAULT
 
Section 11.1 Events of Default.
 
For purposes of the Financing Documents, the occurrence of any of the following
conditions and/or events, whether voluntary or involuntary, by operation of law
or otherwise, shall constitute an "Event of Default":
 
(a)    Borrowers shall fail to pay all amounts due under the Financing Documents
on the Termination Date or any Borrower shall fail to pay within five (5) days
of when due any principal, interest, premium or fee under any Financing Document
or any other amount payable under any Financing Document;
 
(b)    any Borrower shall fail to observe or perform any covenant contained in
Section 2.12, Section 4.4(b), Section 4.4(d), Section 4.7, Section 4.10,
Article 5, Article 6 (subject to the provisions of Section 6.7), Section 8.3(c),
clauses (iii), (iv) or (x) of Section 8.4(b), Section 8.4(c), Section 8.4(e) or
Section 8.5 or Borrowers shall fail to deliver any financial reports or
statements when due under Section 4.1 and such default is not remedied or waived
within five (5) Business Days after receipt by Borrower Representative of notice
from Administrative Agent of such default, or Borrowers shall fail to permit any
visit or inspection required by Section 4.6 within two (2) Business Days after
notice;
 
(c)    any Event of Default under and as defined in any other Financing Document
occurs or any Credit Party defaults in the performance of or compliance with any
term contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 11.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied or waived within thirty (30) days after the earlier of
(i) receipt by Borrower Representative of notice from Administrative Agent or
Required Lenders of such default or (ii) actual knowledge of any Borrower or any
other Credit Party of such default, provided, however, if such default cannot by
its nature be cured within thirty (30) days, but such Credit Party commences
cure within said thirty (30) day period and diligently pursues such cure
thereafter, such Credit Party shall have an additional reasonable time to
complete such cure up to a maximum of ninety (90) days or any Event of Default
under and as defined in any other Financing Document occurs;
 
(d)    any representation, warranty, certification or statement made by any
Credit Party or to Borrowers' knowledge any other Person in any Financing
Document or in any certificate, financial statement or other document delivered
pursuant to any Financing Document is incorrect in any respect (or in any
material respect if such representation, warranty, certification or statement is
not by its terms already qualified as to materiality) when made;
 
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(e)    (i) failure of any Borrower to pay when due or within any applicable
grace period any principal, interest or other amount on Debt (other than the
Loans) or in respect of any Swap Contract, or the occurrence of any breach,
default, condition or event with respect to any Debt (other than the Loans) or
in respect of any Swap Contract, if the effect of such failure or occurrence is
to cause, or to permit the holder or holders of any such Debt, or the
counterparty under any such Swap Contract, to cause, Debt or other liabilities
having an individual principal amount in excess of $100,000 or having an
aggregate principal amount in excess of $100,000 to become or be declared due
prior to its stated maturity; or (ii) the occurrence of any breach or default
under any terms or provisions of any Subordinated Debt Document or under any
agreement subordinating the Subordinated Debt to all or any portion of the
Obligations or the occurrence of any event requiring the prepayment of any
Subordinated Debt;
 
(f)    any Credit Party shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
 
(g)    an involuntary case or other proceeding shall be commenced against any
Credit Party seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or an order for relief
shall be entered against any Credit Party under the federal bankruptcy laws as
now or hereafter in effect;
 
(h)    (i) institution of any steps by any Person to terminate a Pension Plan if
as a result of such termination any Borrower or any member of the Controlled
Group could be required to make a contribution to such Pension Plan, or could
incur a liability or obligation to such Pension Plan, in excess of $100,000,
(ii) a contribution failure occurs with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA, or (iii) there shall occur
any withdrawal or partial withdrawal from a Multiemployer Plan and the
withdrawal liability (without unaccrued interest) to Multiemployer Plans as a
result of such withdrawal (including any outstanding withdrawal liability that
any Borrower or any member of the Controlled Group have incurred on the date of
such withdrawal) exceeds $100,000;
 
(i)    one or more judgments or orders for the payment of money (not paid or
fully covered by insurance maintained in accordance with the requirements of
this Agreement and as to which the relevant insurance company has acknowledged
 
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coverage) aggregating in excess of $1,000,000 shall be rendered against any or
all Borrowers and either (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgments or orders or (ii) there shall be any
period of twenty (20) consecutive days during which a stay of enforcement of any
such judgments or orders, by reason of a pending appeal, bond or otherwise,
shall not be in effect;
 
(j)    ARC shall cease to, directly or indirectly, own and control at least
(i) 20% of the outstanding equity interests of Cypress JV, or (ii) Cypress JV
ceases to own all of the membership interests in General Partner;
 
(k)    any Lien created by any of the Security Documents shall at any time fail
to constitute a valid and perfected Lien on all of the Collateral purported to
be secured thereby, subject to no prior or equal Lien except Permitted Liens, or
any Borrower shall so assert;
 
(l)    any Borrower shall be prohibited or otherwise materially restrained from
conducting the business theretofore conducted by it by virtue of any casualty,
any labor strike, any determination, ruling, decision, decree or order of any
court or regulatory authority of competent jurisdiction or any other event and
such casualty, labor strike, determination, ruling, decision, decree, order or
other event remains unstayed and in effect for any period of ten (10) days;
 
(m)    the institution by any Governmental Authority of criminal proceedings
against any Credit Party; or
 
(n)    Borrowers shall fail to perform any of the post-closing obligations as
required by Section 7.3 and Schedule 7.3; or
 
(o)    ARC breaches any financial covenant contained in a Financing Document
Guaranty.
 
All cure periods provided for in this Section shall run concurrently with any
cure period provided for in any applicable Financing Documents under which the
default occurred.
 
Section 11.2 Acceleration.
 
Upon the occurrence and during the continuance of an Event of Default,
Administrative Agent may, and shall if requested by Required Lenders, by notice
to Borrower Representative declare the Obligations to be, and the Obligations
shall thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Borrower and Borrowers will pay the same; provided, however, that in the case of
any of the Events of Default specified in Section 11.1(f) or 11.1(g) above,
without any notice to any Borrower or any other act by Administrative Agent or
the Lenders, all of the Obligations shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower and Borrowers will pay the same.
 
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Section 11.3 [Reserved.]
 
Section 11.4 Default Rate of Interest.
 
At the election of Administrative Agent or Required Lenders, after the
occurrence of an Event of Default and for so long as it continues, the Loans and
other Obligations shall bear interest at rates that are five percent (5.0%) per
annum in excess of the rates otherwise payable under this Agreement (each, the
"Default Rate").
 
Section 11.5 Setoff Rights.
 
During the continuance of any Event of Default, each Lender is hereby authorized
by each Borrower at any time or from time to time, with reasonably prompt
subsequent notice to such Borrower (any prior or contemporaneous notice being
hereby expressly waived) to set off and to appropriate and to apply any and all
(a) balances held by such Lender or any of such Lender's Affiliates at any of
its offices for the account of such Borrower (regardless of whether such
balances are then due to such Borrower), and (b) other property at any time held
or owing by such Lender to or for the credit or for the account of such
Borrower, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of
Administrative Agent. Any Lender exercising a right to set off shall purchase
for cash (and the other Lenders shall sell) interests in each of such other
Lender's Pro Rata Share of the Obligations as would be necessary to cause all
Lenders to share the amount so set off with each other Lender in accordance with
their respective Pro Rata Share of the Obligations. Each Borrower agrees, to the
fullest extent permitted by law, that any Lender and any of such Lender's
Affiliates may exercise its right to set off with respect to the Obligations as
provided in this Section 11.5.
 
Section 11.6 Application of Proceeds.
 
Notwithstanding anything to the contrary contained in this Agreement, upon the
occurrence and during the continuance of an Event of Default, (a) each Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times thereafter received by Administrative Agent from or on
behalf of such Borrower or any Guarantor of all or any part of the Obligations,
and, as between Borrowers on the one hand and Administrative Agent and Lenders
on the other, Administrative Agent shall have the continuing and exclusive right
to apply and to reapply any and all payments received against the Obligations in
such manner as Administrative Agent may deem advisable notwithstanding any
previous application by Administrative Agent and (b) the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all reasonable fees, costs, indemnities, liabilities,
obligations and expenses incurred by or owing to Administrative Agent with
respect to this Agreement, the other Financing Documents or the Collateral;
second, to all reasonable fees, costs, indemnities, liabilities, obligations and
expenses incurred by or owing to any Lender with respect to this Agreement, the
other Financing Documents or the Collateral; third, to accrued and unpaid
interest on the Obligations (including any interest which, but for the
provisions of the Bankruptcy Code,
 
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would have accrued on such amounts); fourth, to the principal amount of the
Obligations outstanding (excluding any Obligations in respect of any Swap
Contract); fifth, to the Obligations owing to any Eligible Swap Counterparty in
respect of any Swap Contracts permitted by the terms of this Agreement; and
fifth, to any other indebtedness or obligations of Borrowers owing to
Administrative Agent or any Lender under the Financing Documents. Any balance
remaining shall be delivered to Borrowers or to whoever may be lawfully entitled
to receive such balance (including any holder of the indebtedness evidenced by
the Affiliated Financing Documents) or as a court of competent jurisdiction may
direct. In carrying out the foregoing, (y) amounts received shall be applied in
the numerical order provided until exhausted prior to the application to the
next succeeding category, and (z) each of the Persons entitled to receive a
payment in any particular category shall receive an amount equal to its pro rata
share of amounts available to be applied pursuant thereto for such category.
 
Section 11.7 Waivers. 
 
(a)    Except as otherwise provided for in this Agreement and to the fullest
extent permitted by applicable law, each Borrower waives: (i) presentment,
demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Financing Documents, the Notes or
any other notes, commercial paper, accounts, contracts, documents, instruments,
chattel paper and Guarantees at any time held by Lenders on which any Borrower
may in any way be liable, and hereby ratifies and confirms whatever Lenders may
do in this regard; (ii) all rights to notice and a hearing prior to
Administrative Agent's or any Lender's taking possession or control of, or to
Administrative Agent's or any Lender's replevy, attachment or levy upon, any
Collateral or any bond or security which might be required by any court prior to
allowing Administrative Agent or any Lender to exercise any of its remedies; and
(iii) the benefit of all valuation, appraisal and exemption Laws. Each Borrower
acknowledges that it has been advised by counsel of its choices and decisions
with respect to this Agreement, the other Financing Documents and the
transactions evidenced hereby and thereby.
 
(b)    Each Borrower for itself and all endorsers, guarantors and sureties and
their heirs, legal representatives, successors and assigns, (i) agrees that its
liability shall not be in any manner affected by any indulgence, extension of
time, renewal, waiver, or modification granted or consented to by Lender;
(ii) consents to any indulgences and all extensions of time, renewals, waivers,
or modifications that may be granted by Administrative Agent or any Lender with
respect to the payment or other provisions of the Financing Documents, and to
any substitution, exchange or release of the Collateral, or any part thereof,
with or without substitution, and agrees to the addition or release of any
Borrower, endorsers, guarantors, or sureties, or whether primarily or
secondarily liable, without notice to any other Borrower and without affecting
its liability hereunder; (iii) agrees that its liability shall be unconditional
and without regard to the liability of any other Borrower, Administrative Agent
or any Lender for any tax on the indebtedness; and (iv) to the fullest extent
permitted by law, expressly waives the benefit of any statute or rule of law
 
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or equity now provided, or which may hereafter be provided, which would produce
a result contrary to or in conflict with the foregoing.
 
(c)    To the extent that Administrative Agent or any Lender may have acquiesced
in any noncompliance with any requirements or conditions precedent to the
closing of the Loans or to any subsequent disbursement of Loan proceeds, such
acquiescence shall not be deemed to constitute a waiver by Administrative Agent
or any Lender of such requirements with respect to any future disbursements of
Loan proceeds and Administrative Agent may at any time after such acquiescence
require Borrowers to comply with all such requirements. Any forbearance by
Administrative Agent or Lender in exercising any right or remedy under any of
the Financing Documents, or otherwise afforded by applicable law, including any
failure to accelerate the maturity date of the Loans, shall not be a waiver of
or preclude the exercise of any right or remedy nor shall it serve as a novation
of the Notes or as a reinstatement of the Loans or a waiver of such right of
acceleration or the right to insist upon strict compliance of the terms of the
Financing Documents. Administrative Agent's or any Lender's acceptance of
payment of any sum secured by any of the Financing Documents after the due date
of such payment shall not be a waiver of Administrative Agent's and such
Lender's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by
Administrative Agent as the result of an Event of Default shall not be a waiver
of Administrative Agent's right to accelerate the maturity of the Loans, nor
shall Administrative Agent's receipt of any condemnation awards, insurance
proceeds, or damages under this Agreement operate to cure or waive any Credit
Party's default in payment of sums secured by any of the Financing Documents.
 
(d)    Without limiting the generality of anything contained in this Agreement
or the other Financing Documents, each Borrower agrees that if an Event of
Default is continuing (i) Administrative Agent and Lenders are not subject to
any "one action" or "election of remedies" law or rule, and (ii) all Liens and
other rights, remedies or privileges provided to Administrative Agent or Lenders
shall remain in full force and effect until Administrative Agent or Lenders have
exhausted all remedies against the Collateral and any other properties owned by
Borrowers and the Financing Documents and other security instruments or
agreements securing the Loans have been foreclosed, sold and/or otherwise
realized upon in satisfaction of Borrowers' obligations under the Financing
Documents.
 
(e)    Nothing contained herein or in any other Financing Document shall be
construed as requiring Administrative Agent or any Lender to resort to any part
of the Collateral for the satisfaction of any of Borrowers' obligations under
the Financing Documents in preference or priority to any other Collateral, and
Administrative Agent may seek satisfaction out of all of the Collateral or any
part thereof, in its absolute discretion in respect of Borrowers' obligations
under the Financing Documents. In addition, Administrative Agent shall have the
right from time to time to partially foreclose upon any Collateral in any manner
and for any amounts secured by the Financing Documents then due and payable as
determined by Administrative Agent in its sole discretion, including, without
limitation, the following circumstances: (i) in the event any Borrower defaults
beyond any applicable grace period in the payment of one or more scheduled
payments of principal
 
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and/or interest, Administrative Agent may foreclose upon all or any part of the
Collateral to recover such delinquent payments, or (ii) in the event
Administrative Agent elects to accelerate less than the entire outstanding
principal balance of the Loans, Administrative Agent may foreclose all or any
part of the Collateral to recover so much of the principal balance of the Loans
as Lender may accelerate and such other sums secured by one or more of the
Financing Documents as Administrative Agent may elect. Notwithstanding one or
more partial foreclosures, any unforeclosed Collateral shall remain subject to
the Financing Documents to secure payment of sums secured by the Financing
Documents and not previously recovered.
 
(f)    To the fullest extent permitted by law, each Borrower, for itself and its
successors and assigns, waives in the event of foreclosure of any or all of the
Collateral any equitable right otherwise available to any Credit Party which
would require the separate sale of the any of the Collateral or require
Administrative Agent or Lenders to exhaust their remedies against any part of
the Collateral before proceeding against any other part of the Collateral; and
further in the event of such foreclosure each Borrower does hereby expressly
consent to and authorize, at the option of Lender, the foreclosure and sale
either separately or together of each part of the Collateral.
 
Section 11.8 Injunctive Relief.
 
The parties acknowledge and agree that, for certain Events of Default,
Administrative Agent and Lenders may have no adequate remedy in money damages
and, accordingly, shall be entitled to an injunction (including without
limitation, a temporary restraining order, preliminary injunction, writ of
attachment, or order compelling an audit) against such Events of Default.
However, no specification in this Agreement of a specific legal or equitable
remedy shall be construed as a waiver or prohibition against any other legal or
equitable remedies in the event of a breach or threatened breach of any
provision of this Agreement. Each Credit Party waives, to the fullest extent
permitted by law, the requirement of the posting of any bond in connection with
such injunctive relief. By joining in the Financing Documents as a Credit Party,
each Credit Party specifically joins in this Section as if this Section were a
part of each Financing Documents executed by the Credit Party.
 
Section 11.9 Marshalling.
 
Administrative Agent and Lenders shall have no obligation to marshal any assets
in favor of any Credit Party, or against or in payment of any of the other
Obligations or any other obligation owed to Administrative Agent or Lenders by
any Credit Party.
 
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ARTICLE 12
EXPENSES AND INDEMNITY
 
Section 12.1 Expenses.
 
Each Borrower hereby agrees to promptly pay (a) all reasonable costs and
expenses of Administrative Agent (including without limitation the reasonable
fees, costs and expenses of counsel to, and independent appraisers and
consultants retained by Administrative Agent) in connection with the
examination, review, due diligence investigation, documentation, negotiation and
closing of the transactions contemplated by the Financing Documents, in
connection with the performance by Administrative Agent of its rights and
remedies under the Financing Documents and in connection with the continued
administration of the Financing Documents, including (i) any amendments,
modifications, consents and waivers to and/or under any and all Financing
Documents and (ii) any periodic public record searches conducted by or at the
request of Administrative Agent (including, without limitation, title
investigations, UCC searches, fixture filing searches, judgment, pending
litigation and tax lien searches and searches of applicable corporate, limited
liability, partnership and related records concerning the continued existence,
organization and good standing of certain Persons), (b) without limitation of
the preceding clause (a), all costs and expenses of Administrative Agent
(including recordation and transfer taxes) in connection with the creation,
perfection and maintenance of Liens pursuant to the Financing Documents,
(c) without limitation of the preceding clause (a), all costs and expenses of
Administrative Agent in connection with (i) protecting, storing, insuring,
handling, maintaining or selling any Collateral; (ii) any litigation, dispute,
suit or proceeding relating to any Financing Document; and (iii) any workout,
collection, bankruptcy, insolvency and other enforcement proceedings under any
and all of the Financing Documents, and (d) all costs and expenses incurred by
Lenders in connection with any litigation, dispute, suit or proceeding relating
to any Financing Document and in connection with any workout, collection,
bankruptcy, insolvency and other enforcement proceedings under any and all
Financing Documents, provided, however, that to the extent that the costs and
expenses referred to in this clause (d) consist of fees, costs and expenses of
counsel, Borrowers shall be obligated to pay such fees, costs and expenses for
counsel to Administrative Agent and for only one counsel acting for all Lenders
(other than Administrative Agent).
 
Section 12.2 Indemnity.
 
Each Borrower hereby agrees to indemnify, pay and hold harmless Administrative
Agent and Lenders and the officers, directors, employees, trustees, agents,
investment advisors, collateral managers, servicers, and counsel of
Administrative Agent and Lenders (collectively called the "Indemnitees") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the fees and disbursements of counsel for such
Indemnitee) in connection with any investigative, response, remedial,
administrative or judicial matter or proceeding, whether or not such Indemnitee
shall be designated a party thereto and including any such proceeding initiated
by or on behalf of a Credit Party, and the reasonable expenses of investigation
by engineers, environmental
 
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consultants and similar technical personnel and any commission, fee or
compensation claimed by any broker (other than any broker retained by
Administrative Agent or Lenders) asserting any right to payment for the
transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Financing Documents (including
(a)(i) as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission or release from, any property
now or previously owned, leased or operated by any Borrower, or any other Person
of any Hazardous Materials or any Hazardous Materials Contamination,
(ii) arising out of or relating to the offsite disposal of any materials
generated or present on any such property or (iii) arising out of or resulting
from the environmental condition of any such property or the applicability of
any governmental requirements relating to Hazardous Materials, whether or not
occasioned wholly or in part by any condition, accident or event caused by any
act or omission of any Borrower, (b) proposed and actual extensions of credit
under this Agreement) and the use or intended use of the proceeds of the Loans
and (c) any brokerage claims in connection with the sale or any leasing of any
Project, except that no Borrower shall have any obligation hereunder to an
Indemnitee with respect to any liability resulting from the gross negligence or
willful misconduct of such Indemnitee, as determined by a final non-appealable
judgment of a court of competent jurisdiction or for any liability with respect
to clauses (a) or (c) first occurring after transfer of title of a Project
following a foreclosure or pursuant to a conveyance in lieu of foreclosure
provided that the applicable Borrower is no longer in possession of the
applicable Project. To the extent that the undertaking set forth in the
immediately preceding sentence may be unenforceable, each Borrower shall
contribute the maximum portion which it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all such indemnified
liabilities incurred by the Indemnitees or any of them.
 
ARTICLE 13
ADMINISTRATIVE AGENT
 
Section 13.1 Appointment and Authorization.
 
Each Lender hereby irrevocably appoints and authorizes Administrative Agent to
enter into each of the Financing Documents to which it is a party (other than
this Agreement) on its behalf and to take such actions as Administrative Agent
on its behalf and to exercise such powers under the Financing Documents as are
delegated to Administrative Agent by the terms thereof, together with all such
powers as are reasonably incidental thereto. Subject to the terms of Section
13.16 and to the terms of the other Financing Documents, Administrative Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Financing Documents on behalf of Lenders. The provisions
of this Article 13 are solely for the benefit of Administrative Agent and
Lenders and neither any Borrower nor any other Credit Party shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, Administrative Agent
shall act solely as agent of Lenders and does not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency or trust with or
for any Borrower or any other Credit Party. Administrative Agent
 
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may perform any of its duties hereunder, or under the Financing Documents, by or
through its agents or employees.
 
Section 13.2 Administrative Agent and Affiliates.
 
Administrative Agent shall have the same rights and powers under the Financing
Documents as any other Lender and may exercise or refrain from exercising the
same as though it were not Administrative Agent, and Administrative Agent and
its Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Administrative Agent hereunder.
 
Section 13.3 Action by Administrative Agent.
 
The duties of Administrative Agent shall be mechanical and administrative in
nature. Administrative Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Financing Documents is intended to or shall be construed to impose
upon Administrative Agent any obligations in respect of this Agreement or any of
the Financing Documents except as expressly set forth herein or therein.
 
Section 13.4 Consultation with Experts.
 
Administrative Agent may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
 
Section 13.5 Liability of Administrative Agent.
 
Neither Administrative Agent nor any of its directors, officers, agents or
employees shall be liable to any Lender for any action taken or not taken by it
in connection with the Financing Documents, except that Administrative Agent
shall be liable with respect to its specific duties set forth hereunder but only
to the extent of its own gross negligence or willful misconduct in the discharge
thereof as determined by a final non-appealable judgment of a court of competent
jurisdiction. Neither Administrative Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (a) any statement, warranty or representation made in
connection with any Financing Document or any borrowing hereunder; (b) the
performance or observance of any of the covenants or agreements specified in any
Financing Document; (c) the satisfaction of any condition specified in any
Financing Document; (d) the validity, effectiveness, sufficiency or genuineness
of any Financing Document, any Lien purported to be created or perfected thereby
or any other instrument or writing furnished in connection therewith; (e) the
existence or non-existence of any Default or Event of Default; or (f) the
financial condition of any Credit Party. Administrative Agent shall not incur
any liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile or
electronic transmission or similar writing) believed by it to be
 
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genuine or to be signed by the proper party or parties. Administrative Agent
shall not be liable for any apportionment or distribution of payments made by it
in good faith and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Lender to whom
payment was due but not made, shall be to recover from other Lenders any payment
in excess of the amount to which they are determined to be entitled (and such
other Lenders hereby agree to return to such Lender any such erroneous payments
received by them).
 
Section 13.6 Indemnification.
 
Each Lender shall, in accordance with its Pro Rata Share, indemnify
Administrative Agent (to the extent not reimbursed by Borrowers) upon demand
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from Administrative
Agent's gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction) that
Administrative Agent may suffer or incur in connection with the Financing
Documents or any action taken or omitted by Administrative Agent hereunder or
thereunder. If any indemnity furnished to Administrative Agent for any purpose
shall, in the opinion of Administrative Agent, be insufficient or become
impaired, Administrative Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against even if so directed by Required
Lenders until such additional indemnity is furnished.
 
Section 13.7 Right to Request and Act on Instructions.
 
Administrative Agent may at any time request instructions from Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Financing Documents Administrative Agent is permitted or desires to
take or to grant, and if such instructions are promptly requested,
Administrative Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Financing Documents until it shall have received such
instructions from Required Lenders or all or such other portion of the Lenders
as shall be prescribed by this Agreement. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Administrative Agent as
a result of Administrative Agent acting or refraining from acting under this
Agreement or any of the other Financing Documents in accordance with the
instructions of Required Lenders (or all or such other portion of the Lenders as
shall be prescribed by this Agreement) and, notwithstanding the instructions of
Required Lenders (or such other applicable portion of the Lenders),
Administrative Agent shall have no obligation to take any action if it believes,
in good faith, that such action would violate applicable Law or exposes
Administrative Agent to any liability for which it has not received satisfactory
indemnification in accordance with the provisions of Section 13.6.
 
Section 13.8 Credit Decision.
 
Each Lender acknowledges that it has, independently and without reliance upon
Administrative Agent or any other Lender, and based on such documents and
 
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information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under the Financing Documents.
 
Section 13.9 Collateral Matters. 
 
Lenders irrevocably authorize Administrative Agent, at its option and in its
discretion, to (a) release any Lien granted to or held by Administrative Agent
under any Security Document (i) upon payment in full of all Obligations or
(ii) constituting property sold or disposed of as part of or in connection with
any disposition permitted under any Financing Document (it being understood and
agreed that Administrative Agent may conclusively rely without further inquiry
on a certificate of a Responsible Officer as to the sale or other disposition of
property being made in full compliance with the provisions of the Financing
Documents); and (b) release or subordinate any Lien granted to or held by
Administrative Agent under any Security Document constituting property described
in Section 5.7(b) (it being understood and agreed that Administrative Agent may
conclusively rely without further inquiry on a certificate of a Responsible
Officer as to the identification of any property described in Section 5.7(b)).
Upon request by Administrative Agent at any time, Lenders will confirm
Administrative Agent's authority to release and/or subordinate particular types
or items of Collateral pursuant to this Section 13.9.
 
Section 13.10 Agency for Perfection.
 
Administrative Agent and each Lender hereby appoint each other Lender as agent
for the purpose of perfecting Administrative Agent's security interest in assets
which, in accordance with the Uniform Commercial Code in any applicable
jurisdiction, can be perfected by possession or control. Should any Lender
(other than Administrative Agent) obtain possession or control of any such
assets, such Lender shall notify Administrative Agent thereof, and, promptly
upon Administrative Agent's request therefor, shall deliver such assets to
Administrative Agent or in accordance with Administrative Agent's instructions
or transfer control to Administrative Agent in accordance with Administrative
Agent's instructions. Each Lender agrees that it will not have any right
individually to enforce or seek to enforce any Security Document or to realize
upon any Collateral for the Loans unless instructed to do so by Administrative
Agent (or consented to by Administrative Agent, as provided in Section 11.5), it
being understood and agreed that such rights and remedies may be exercised only
by Administrative Agent.
 
Section 13.11 Notice of Default.
 
Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default except with respect to defaults in
the payment of principal, interest and fees required to be paid to
Administrative Agent for the account of Lenders, unless Administrative Agent
shall have received written notice from a Lender or a
 
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Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". Administrative
Agent will notify each Lender of its receipt of any such notice. Administrative
Agent shall take such action with respect to such Default or Event of Default as
may be requested by Required Lenders (or all or such other portion of the
Lenders as shall be prescribed by this Agreement) in accordance with the terms
hereof. Unless and until Administrative Agent has received any such request,
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interests of Lenders.
 
Section 13.12 Successor Administrative Agent.
 
Administrative Agent may at any time give notice of its resignation to the
Lenders and Borrowers. Upon receipt of any such notice of resignation, Required
Lenders shall have the right, in consultation with Borrowers, to appoint a
successor Administrative Agent, and provided that, if no Default or Event of
Default has occurred and is outstanding, Borrowers shall have the right to
consent to any such successor Administrative Agent, which consent shall not be
unreasonably withheld, conditioned or delayed. Upon the acceptance of a
successor's appointment as Administrative Agent hereunder and notice of such
acceptance to the retiring Administrative Agent, such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Administrative Agent, the retiring Administrative Agent's
resignation shall become immediately effective and the retiring Administrative
Agent shall be discharged from all of its duties and obligations hereunder and
under the other Financing Documents (if such resignation was not already
effective and such duties and obligations not already discharged, as provided
below in this paragraph). The fees payable by Borrowers to a successor
Administrative Agent under this Agreement shall be the same as those payable to
its predecessor unless otherwise agreed among Borrowers and such successor. If
no such successor shall have been so appointed by Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may on behalf of the Lenders (but without any
obligation) appoint a successor Administrative Agent, and provided that, if no
Default or Event of Default has occurred and is outstanding, Borrowers shall
have the right to consent to any such successor Administrative Agent, which
consent shall not be unreasonably, withheld, conditioned or delayed. From and
following the expiration of such thirty (30) day period, Administrative Agent
shall have the exclusive right, upon one (1) Business Days' notice to Borrower
Representative and the Lenders, to make its resignation effective immediately.
From and following the effectiveness of such notice, (a) the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Financing Documents, and (b) all payments,
communications and determinations provided to be made by, to or through
Administrative Agent shall instead be made by or to each Lender directly, until
such time as Required Lenders appoint a successor Administrative Agent as
provided for above in this paragraph. The provisions of this Agreement shall
continue in effect for the benefit of any retiring Administrative Agent and its
sub-agents after the effectiveness of its resignation hereunder and under the
other
 
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Financing Documents in respect of any actions taken or omitted to be taken by
any of them while the retiring Administrative Agent was acting or was continuing
to act as Administrative Agent.
 
Section 13.13 Payment and Sharing of Payment.
 
(a)    Term Loan Payments. Payments of principal, interest and fees in respect
of the Term Loans will be settled on the date of receipt if received by
Administrative Agent on the last Business Day of a month or on the Business Day
immediately following the date of receipt if received on any day other than the
last Business Day of a month.
 
(b)    Return of Payments.
 
(i)    If Administrative Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Administrative Agent from a Borrower and such related payment is not received
by Administrative Agent, then Administrative Agent will be entitled to recover
such amount from such Lender on demand without setoff, counterclaim or deduction
of any kind, together with interest accruing on a daily basis at the Federal
Funds Rate.
 
(ii)    If Administrative Agent determines at any time that any amount received
by Administrative Agent under this Agreement must be returned to any Borrower or
paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Financing Document, Administrative Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to
Administrative Agent on demand any portion of such amount that Administrative
Agent has distributed to such Lender, together with interest at such rate, if
any, as Administrative Agent is required to pay to any Borrower or such other
Person, without setoff, counterclaim or deduction of any kind.
 
(c)    Defaulted Lenders. The failure of any Defaulted Lender to make any
payment required by it hereunder shall not relieve any other Lender of its
obligations to make payment, but neither any other Lender nor Administrative
Agent shall be responsible for the failure of any Defaulted Lender to make any
payment required hereunder. Notwithstanding anything set forth herein to the
contrary, a Defaulted Lender shall not have any voting or consent rights under
or with respect to any Financing Document or constitute a "Lender" (or be
included in the calculation of "Required Lenders" hereunder) for any voting or
consent rights under or with respect to any Financing Document.
 
(d)    Sharing of Payments. If any Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Section
2.9) in excess of its pro rata share of payments entitled pursuant to the other
provisions of this Section 13.13, such Lender shall purchase from the other
Lenders such participations in extensions of credit made by such other Lenders
(without recourse, representation or warranty) as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of
 
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them; provided, however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and each Lender which has sold a participation to the
purchasing Lender shall repay to the purchasing Lender the purchase price to the
ratable extent of such recovery, without interest. Each Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this clause
(d) may, to the fullest extent permitted by law, exercise all its rights of
payment (including pursuant to Section 11.5) with respect to such participation
as fully as if such Lender were the direct creditor of Borrowers in the amount
of such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this clause (d) applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this clause (d) to share in the benefits of
any recovery on such secured claim.
 
Section 13.14 Right to Perform, Preserve and Protect.
 
Upon and during the continuance of any Default or Event of Default,
Administrative Agent itself may, but shall not be obligated to, cause any
obligation of any Credit Party hereunder or under any other Financing Document
to be performed at Borrowers' expense. Upon and during the continuance of any
Default or Event of Default, Administrative Agent is further authorized by
Borrowers and the Lenders to make expenditures from time to time which
Administrative Agent, in its reasonable business judgment, deems necessary or
desirable to (a) preserve or protect the business conducted by Borrowers, the
Collateral, or any portion thereof, and/or (b) enhance the likelihood of, or
maximize the amount of, repayment of the Loans and other Obligations. Each
Borrower hereby agrees to reimburse Administrative Agent on demand for any and
all costs (which costs shall be reasonable), liabilities and obligations
incurred by Administrative Agent pursuant to this Section 13.14. Each Lender
hereby agrees to indemnify Administrative Agent upon demand for any and all
costs, liabilities and obligations incurred by Administrative Agent pursuant to
this Section 13.14, in accordance with the provisions of Section 13.6.
 
Section 13.15 Additional Titled Agents.
 
Except for rights and powers, if any, expressly reserved under this Agreement to
any bookrunner, arranger or to any titled agent named on the cover page of this
Agreement, other than Administrative Agent (collectively, the "Additional Titled
Agents"), and except for obligations, liabilities, duties and responsibilities,
if any, expressly assumed under this Agreement by any Additional Titled Agent,
no Additional Titled Agent, in such capacity, has any rights, powers,
liabilities, duties or responsibilities hereunder or under any of the other
Financing Documents. Without limiting the foregoing, no Additional Titled Agent
shall have nor be deemed to have a fiduciary relationship with any Lender. At
any time that any Lender serving as an Additional Titled Agent shall have
transferred to any other Person (other than any Affiliates) all of its interests
in the Loans, such Lender shall be deemed to have concurrently resigned as such
Additional Titled Agent.
 
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Section 13.16 Amendments and Waivers.
 
In addition to the required signatures under Section 14.5, no provision of this
Agreement or any other Financing Document may be amended, waived or otherwise
modified unless such amendment, waiver or other modification is in writing and
is signed or otherwise approved by the following Persons:
 
(a)    if any amendment, waiver or other modification would increase a Lender's
funding obligations in respect of any Term Loan, by such Lender; and/or
 
(b)    if the rights or duties of Administrative Agent are affected thereby, by
Administrative Agent;
 
Provided that, in each of (a) and (b) above, no such amendment, waiver or other
modification shall, unless signed by all the Lenders directly affected thereby,
(i) reduce the principal of, rate of interest on or any fees with respect to any
Loan or forgive any principal, interest (other than default interest) or fees
(other than late charges) with respect to any Loan; (ii) postpone the date fixed
for, or waive, any payment (other than a payment pursuant to Section 2.1(c) or
Section 6.7) of principal of any Loan, or of interest on any Loan (other than
default interest) or any fees provided for hereunder (other than late
charges) or for any termination of any commitment; (iii) change the definition
of the term Required Lenders or the percentage of Lenders which shall be
required for Lenders to take any action hereunder; (iv) release all or
substantially all of the Collateral, authorize any Borrower to sell or otherwise
dispose of all or substantially all of the Collateral or release any Guarantor
of all or any portion of the Obligations of its Guarantee obligations with
respect thereto, except, in each case with respect to this clause (iv), as
otherwise may be provided in this Agreement or the other Financing Documents
(including in connection with any disposition permitted hereunder); (v) amend,
waive or otherwise modify this Section 13.16 or the definitions of the terms
used in this Section 13.16 insofar as the definitions affect the substance of
this Section 13.16; or (vi) consent to the assignment, delegation or other
transfer by any Credit Party of any of its rights and obligations under any
Financing Document or release any Borrower of its payment obligations under any
Financing Document, except, in each case with respect to this clause (vi),
pursuant to a merger or consolidation permitted pursuant to this Agreement. It
is hereby understood and agreed that all Lenders shall be deemed directly
affected by an amendment, waiver or other modification of the type described in
the preceding clauses (iii), (iv), (v) and (vi) of the preceding sentence.
 
Section 13.17 Assignments and Participations.
 
(a)    Any Lender may at any time assign to one or more Eligible Assignees all
or any portion of such Lender's Loans together with all related obligations of
such Lender hereunder. Except as Administrative Agent may otherwise agree, the
amount of any such assignment (determined as of the date of the applicable
Assignment Agreement or, if a "Trade Date" is specified in such Assignment
Agreement, as of such Trade Date) shall be in a minimum aggregate amount equal
to $1,000,000 or, if less, the assignor's entire interests in the outstanding
Loans; provided, however, that, in connection with simultaneous
 
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assignments to two or more related Approved Funds, such Approved Funds shall be
treated as one assignee for purposes of determining compliance with the minimum
assignment size referred to above. Borrowers and Administrative Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned to an Eligible Assignee until Administrative
Agent shall have received and accepted an effective Assignment Agreement
executed, delivered and fully completed by the applicable parties thereto and a
processing fee of $3,500; provided, however, that only one processing fee shall
be payable in connection with simultaneous assignments to two or more related
Approved Funds.
 
(b)    From and after the date on which the conditions described above have been
met, (i) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and (ii) the assigning Lender, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination pursuant to Section 14.1).
Upon the request of the Eligible Assignee (and, as applicable, the assigning
Lender) pursuant to an effective Assignment Agreement, each Borrower shall
execute and deliver to Administrative Agent for delivery to the Eligible
Assignee (and, as applicable, the assigning Lender) Notes in the aggregate
principal amount of the Eligible Assignee's Term Loans (and, as applicable,
Notes in the principal amount of that portion of the principal amount of the
Term Loans retained by the assigning Lender). Upon receipt by the assigning
Lender of such Note, the assigning Lender shall return to Borrower
Representative any prior Note held by it.
 
(c)    Notwithstanding the foregoing provisions of this Section 13.17 or any
other provision of this Agreement, any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided, however, that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
 
(d)    Notwithstanding the foregoing provisions of this Section 13.17 or any
other provision of this Agreement, Administrative Agent has the right, but not
the obligation, to effectuate assignments of Loans via an electronic settlement
system acceptable to Administrative Agent as designated in writing from time to
time to the Lenders by Administrative Agent (the "Settlement Service"). At any
time when the Administrative Agent elects, in its sole discretion, to implement
such Settlement Service, each such assignment shall be effected by the assigning
Lender and proposed assignee pursuant to the procedures then in effect under the
Settlement Service, which procedures shall be consistent with the other
provisions of this Section 13.17. Each assigning Lender and proposed Eligible
Assignee shall comply with the requirements of the Settlement Service in
connection with effecting any assignment of Loans pursuant to the Settlement
Service. If so elected by each of Administrative Agent and the Borrowers,
Administrative Agent's and the Borrowers' approval of such Eligible Assignee
shall be deemed to have been automatically granted with
 
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respect to any transfer effected through the Settlement Service. Assignments and
assumptions of the Loans shall be effected by the provisions otherwise set forth
herein until Administrative Agent notifies Lenders of the Settlement Service as
set forth herein.
 
(e)    Any Lender may at any time, without the consent of, or notice to, any
Borrower or Administrative Agent, sell to one or more Persons participating
interests in its Loans, commitments or other interests hereunder (any such
Person, a "Participant"). In the event of a sale by a Lender of a participating
interest to a Participant, (i) such Lender's obligations hereunder shall remain
unchanged for all purposes, (ii) Borrowers and Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations hereunder, and (iii) all amounts payable by each
Borrower shall be determined as if such Lender had not sold such participation
and shall be paid directly to such Lender. No Participant shall have any direct
or indirect voting rights hereunder except with respect to (x) any event
described in Section 13.16 expressly requiring the unanimous vote of all Lenders
or, as applicable, all affected Lenders, and (y) the institution or commencement
of enforcement remedies. Each Lender agrees to incorporate the requirements of
the preceding sentence into each participation agreement which such Lender
enters into with any Participant. Each Borrower agrees that if amounts
outstanding under this Agreement are due and payable (as a result of
acceleration or otherwise), each Participant shall be deemed to have the right
of set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement; provided, however, that
such right of set-off shall be subject to the obligation of each Participant to
share with Lenders, and Lenders agree to share with each Participant, as
provided in Section 11.5.
 
(f)    Within thirty (30) days after: (i) receipt by Administrative Agent of
notice and demand from any Lender for payment of additional costs as provided in
Section 2.9, which demand shall not have been revoked, (ii) any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.8, (iii) any
Lender is a Defaulted Lender, and the circumstances causing such status shall
not have been cured or waived; or (iv) any failure by any Lender to consent to a
requested amendment, waiver or modification to any Financing Document in which
Required Lenders have already consented to such amendment, waiver or
modification but the consent of each Lender, or each Lender affected thereby, is
required with respect thereto, (each relevant Lender in the foregoing
clauses (i) through (iv) being an "Affected Lender") each of Borrower
Representative and Administrative Agent may, at its option, notify such Affected
Lender and, in the case of Borrowers' election, the Administrative Agent, of
such Person's intention to obtain, at Borrowers' expense, a replacement Lender
("Replacement Lender") for such Lender, which Replacement Lender shall be an
Eligible Assignee and, in the event the Replacement Lender is to replace an
Affected Lender described in the preceding clause (iv), such Replacement Lender
consents to the requested amendment, waiver or modification making the replaced
Lender an Affected Lender. In the event Borrowers or Administrative Agent, as
applicable, obtains a Replacement Lender within ninety (90) days following
notice of its intention to do so, the Affected Lender shall
 
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sell, at par, and assign all of its Loans and funding commitments hereunder to
such Replacement Lender in accordance with the procedures set forth in Section
14.6(a); provided, however, that (i) Borrowers shall have reimbursed such Lender
for its increased costs and additional payments for which it is entitled to
reimbursement under Section 2.8 or Section 2.9, as applicable, of this Agreement
through the date of such sale and assignment and (ii) Borrowers shall pay to
Administrative Agent the $3,500 processing fee in respect of such assignment. In
the event that a replaced Lender does not execute an Assignment Agreement
pursuant to Section 13.17(a) within five (5) Business Days after receipt by such
replaced Lender of notice of replacement pursuant to this Section 13.17(f) and
presentation to such replaced Lender of an Assignment Agreement evidencing an
assignment pursuant to this Section 13.17(f), such replaced Lender shall be
deemed to have consented to the terms of such Assignment Agreement, and any such
Assignment Agreement executed by Administrative Agent, the Replacement Lender
and, to the extent required pursuant to Section 13.17(a), Borrowers, shall be
effective for purposes of this Section 13.17(f) and Section 13.17(a). Upon any
such assignment and payment, such replaced Lender shall no longer constitute a
"Lender" for purposes hereof, other than with respect to such rights and
obligations that survive termination as set forth in Section 14.1.
 
Section 13.18 Definitions.
 
As used in this Article 13, the following terms have the following meanings:
 
"Approved Fund" means any (a) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (b) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (a) and that, with respect to each of the
preceding clauses (a) and (b), is administered or managed by (i) a Lender,
(ii) an Affiliate of a Lender or (iii) a Person (other than a natural person) or
an Affiliate of a Person (other than a natural person) that administers or
manages a Lender.
 
"Assignment Agreement" means an agreement substantially in the form of Exhibit A
hereto.
 
"Defaulted Lender" means, so long as such failure shall remain in existence and
uncured, any Lender which shall have failed to make any Loan or other credit
accommodation, disbursement or reimbursement required pursuant to the terms of
any Financing Document.
 
"Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by (i) Administrative Agent, and (ii) unless an Event of Default has occurred
and is continuing, Borrower Representative (such approval of Borrower
Representative not to be unreasonably withheld or delayed, and shall be deemed
provided unless expressly withheld by Borrower Representative within three
(3) Business Days of request therefor); provided, however, that
 
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notwithstanding the foregoing, "Eligible Assignee" shall not include any
Borrower or any of a Borrower's Affiliates.
 
"Federal Funds Rate" means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided, however, that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day, and (b) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Administrative Agent on such day on such
transactions as determined by Administrative Agent.
 
ARTICLE 14
MISCELLANEOUS
 
Section 14.1 Survival.
 
All agreements, representations and warranties made herein and in every other
Financing Document shall survive the execution and delivery of this Agreement
and the other Financing Documents. The provisions of Sections 2.8 and 2.9 and
Article 12 and 13 shall survive the payment of the Obligations (both with
respect to any Lender and all Lenders collectively), any termination of this
Agreement, and any judgment with respect to any Obligations, including any final
foreclosure judgment with respect to any Security Document, and no unpaid or
unperformed, current or future, Obligations will merge into any such judgment.
 
Section 14.2 No Waivers.
 
No failure or delay by Administrative Agent or any Lender in exercising any
right, power or privilege under any Financing Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein and therein provided shall be cumulative and not
exclusive of any rights or remedies provided by law. Any reference in any
Financing Document to the "continuing" nature of any Event of Default shall not
be construed as establishing or otherwise indicating that any Borrower or any
other Credit Party has the independent right to cure any such Event of Default,
but is rather presented merely for convenience should such Event of Default be
waived in accordance with the terms of the applicable Financing Documents.
 
Section 14.3 Notices.
 
(a)    All notices, requests and other communications to any party hereunder
shall be in writing (including prepaid overnight courier, facsimile transmission
or similar writing) and shall be given to such party at its address, facsimile
number or e-mail address
 
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set forth on the signature pages hereof (or, in the case of any such Lender who
becomes a Lender after the date hereof, in an Assignment Agreement or in a
notice delivered to Borrower Representative and Administrative Agent by the
assignee Lender forthwith upon such assignment) or at such other address,
facsimile number or e-mail address as such party may hereafter specify for the
purpose by notice to Administrative Agent and Borrower Representative; provided,
however, that notices, requests or other communications shall be permitted by
electronic means only in accordance with the provisions of Section 14.3(b). Each
such notice, request or other communication shall be effective (i) if given by
facsimile, when such notice is transmitted to the facsimile number specified by
this Section and the sender receives a confirmation of transmission from the
sending facsimile machine, or (ii) if given by mail, prepaid overnight courier
or any other means, when received or when receipt is refused at the applicable
address specified by this Section.
 
(b)    Notices and other communications to the parties hereto may be delivered
or furnished by electronic communication (including facsimile transmission,
e-mail and Internet or intranet websites) pursuant to procedures approved from
time to time by Administrative Agent, provided, however, that the foregoing
shall not apply to default notices or any notice of the exercise of remedies to
any Credit Party unless such electronic communication is confirmed within one
(1) Business Day by overnight courier or notices sent directly to any Lender if
such Lender has notified the Administrative Agent that it is incapable of
receiving notices by electronic communication. The Administrative Agent or
Borrower Representative may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided, however, that approval of such procedures
may be limited to particular notices or communications.
 
(c)    Unless the parties otherwise agree, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender's receipt of
an acknowledgment from the intended recipient (such as by the "return receipt
requested" function, as available, return e-mail or other written
acknowledgment), and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(i) of notification that such notice or communication is available and
identifying the website address therefor, provided, however, that if any such
notice or other communication is not sent or posted during normal business
hours, such notice or communication shall be deemed to have been sent at the
opening of business on the next Business Day.
 
Section 14.4 Severability.
 
In case any provision of or obligation under this Agreement or any other
Financing Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
 
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Section 14.5 Amendments and Waivers.
 
No provision of this Agreement or any other Financing Document may be materially
amended, waived or otherwise modified unless such amendment, waiver or other
modification is in writing and is signed or otherwise approved by Borrowers, the
Required Lenders and any other Lender to the extent required under Section
13.16; provided, however, that Administrative Agent shall be entitled, in its
sole but commercially reasonable discretion and without the consent of any other
Lender, to waive any financial covenant of any Credit Party.
 
Section 14.6 Credit Party Assignments.
 
No Credit Party may assign, delegate or otherwise transfer any of its rights or
other obligations hereunder or under any other Financing Document without the
prior written consent of Administrative Agent and each Lender.
 
Section 14.7 Headings.
 
Headings and captions used in the Financing Documents (including the Exhibits,
Schedules and Annexes hereto and thereto) are included for convenience of
reference only and shall not be given any substantive effect.
 
Section 14.8 Confidentiality.
 
Administrative Agent and each Lender shall hold all non-public information
regarding the Credit Parties, their Affiliates and their respective businesses
identified as such by Borrowers and obtained by Administrative Agent or any
Lender pursuant to the requirements hereof in accordance with such Person's
customary procedures for handling information of such nature, except that
disclosure of such information may be made (a) to their respective agents,
employees, Subsidiaries, Affiliates, attorneys, auditors, professional
consultants, rating agencies, insurance industry associations and portfolio
management services, (b) to prospective transferees or purchasers of any
interest in the Loans and to prospective contractual counterparties (or the
professional advisors thereto) in Swap Contracts, provided, however, that any
such Persons shall have agreed to be bound by the provisions of this Section
14.8, (c) as required by Law, subpoena, judicial order or similar order and in
connection with any litigation, (d) as may be required in connection with the
examination, audit or similar investigation of such Person and (e) to a Person
that is a trustee, investment advisor, collateral manager, servicer, noteholder
or secured party in a Securitization (as hereinafter defined) in connection with
the administration, servicing and reporting on the assets serving as collateral
for such Securitization. For the purposes of this Section, "Securitization"
shall mean a public or private offering by a Lender or any of its Affiliates or
their respective successors and assigns, of securities which represent an
interest in, or which are collateralized, in whole or in party, by the Loans.
Confidential information shall include only such information identified as such
at the time provided to Administrative Agent and shall not include information
that either: (i) is in the public domain, or becomes part of the public domain
after disclosure to such Person through no fault of such Person, or
 
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(ii)    is disclosed to such Person by a Person other than a Credit Party,
provided, however, Administrative Agent does not have actual knowledge that such
Person is prohibited from disclosing such information. The obligations of
Administrative Agent and Lenders under this Section 14.8 shall supersede and
replace the obligations of Administrative Agent and Lenders under any
confidentiality agreement in respect of this financing executed and delivered by
Administrative Agent or any Lender prior to the date hereof.
 
Section 14.9 Waiver of Consequential and Other Damages.
 
To the fullest extent permitted by applicable law, no Borrower shall assert, and
each Borrower hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of this Agreement, any other Financing Document or any agreement or instrument
contemplated hereby or thereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Financing Documents or the transactions contemplated hereby or thereby.
 
Section 14.10 GOVERNING LAW; SUBMISSION TO JURISDICTION.
 
THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS
RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT
LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES. EACH BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN CHICAGO, STATE OF
ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH BORROWER
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET
FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS
AFTER THE SAME HAS BEEN POSTED.
 
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Section 14.11 WAIVER OF JURY TRIAL.
 
EACH OF EACH BORROWER, ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH OF EACH BORROWER,
ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND
THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
EACH OF EACH BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER WARRANTS AND
REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.
 
Section 14.12 Publication; Advertisement.
 
(a)    Publication. No Credit Party will directly or indirectly publish,
disclose or otherwise use in any public disclosure, advertising material,
promotional material, press release or interview, any reference to the name,
logo or any trademark of Merrill Lynch or any of its Affiliates or any reference
to this Agreement or the financing evidenced hereby, in any case except (i) as
required by Law, subpoena or judicial or similar order, in which case the
applicable Credit Party shall give Administrative Agent prior written notice of
such publication or other disclosure, or (ii) with Merrill Lynch's prior written
consent.
 
(b)    Advertisement. Each Lender and each Credit Party hereby authorizes
Merrill Lynch to publish the name of such Lender and Credit Party, the existence
of the financing arrangements referenced under this Agreement, the primary
purpose and/or structure of those arrangements, the amount of credit extended
under each facility, the title and role of each party to this Agreement, and the
total amount of the financing evidenced hereby in any "tombstone", comparable
advertisement or press release which Merrill Lynch elects to submit for
publication. In addition, each Lender and each Credit Party agrees that Merrill
Lynch may provide lending industry trade organizations with information
necessary and customary for inclusion in league table measurements after the
Closing Date. With respect to any of the foregoing, Merrill Lynch shall provide
Borrowers with an opportunity to review and confer with Merrill Lynch regarding
the contents of any such tombstone, advertisement or information, as applicable,
prior to its submission for publication and, following such review period,
Merrill Lynch may, from time to time, publish such information in any media form
desired by Merrill Lynch, until such time that Borrowers shall have requested
Merrill Lynch cease any such further publication.
 
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Section 14.13 Counterparts; Integration.
 
This Agreement and the other Financing Documents may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. Signatures by
facsimile shall bind the parties hereto. This Agreement and the other Financing
Documents constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
 
Section 14.14 No Strict Construction.
 
The parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
 
Section 14.15 Time.
 
Time is of the essence in each Borrower's and each other Credit Party's
performance under this Agreement and all other Financing Documents.
 
Section 14.16 Lender Approvals.
 
Unless expressly provided herein to the contrary, any approval, consent, waiver
or satisfaction of Administrative Agent or Lenders with respect to any matter
that is the subject of this Agreement, the other Financing Documents may be
granted or withheld by Administrative Agent and Lenders in their sole and
absolute discretion and credit judgment.
 
Section 14.17 [Reserved.]
 
Section 14.18 WAIVERS.
 
EACH BORROWER WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON SUCH BORROWER ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT.
 
Section 14.19 Release of Administrative Agent and Lenders. 
 
Each Borrower, voluntarily, knowingly, unconditionally, and irrevocably, with
specific and express intent, for and on behalf of itself and its agents,
attorneys, heirs, successors, and assigns (collectively the "Releasing
Parties") does hereby fully and completely release, acquit and forever discharge
each Indemnitee, and any other person,
 
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firm, business, corporation, insurer, or association which may be responsible or
liable for the acts or omissions of any Indemnitee, or who may be liable for the
injury or damage resulting therefrom (collectively the "Released Parties"), of
and from any and all actions, causes of action, suits, debts, disputes, damages,
claims, obligations, liabilities, costs, expenses and demands of any kind
whatsoever, at law or in equity, whether matured or unmatured, liquidated or
unliquidated, vested or contingent, choate or inchoate, known or unknown that
the Releasing Parties (or any of them) has against the Released Parties or any
of them (whether directly or indirectly). The foregoing release shall be deemed
renewed and reaffirmed as of the date of each advance of proceeds under any
Loans and each other accommodation made or granted to any Borrower by any
Released Party under any Financing Document. Each Borrower acknowledges that the
foregoing release is a material inducement to Administrative Agent's and each
Lender's decision to extend to Borrower the financial accommodations hereunder
and has been relied upon by Administrative Agent and each Lender in agreeing to
extend the credit herein contemplated and in making each advance or other
accommodation hereunder.
 
ARTICLE 15
JOINT AND SEVERAL LIABILITY; GUARANTOR PROVISIONS
 
Section 15.1 Joint and Several Obligations.
 
(a)    Borrowers is defined collectively to include all Persons constituting the
Borrowers; provided, however, that any references herein to "any Borrower",
"each Borrower" or similar references, shall be construed as a reference to each
individual Person comprising the Borrowers. Each Person comprising Borrowers
shall be jointly and severally liable for all of the obligations of Borrowers
under this Agreement and the Borrowers under the Affiliated Financing Documents
(the "Affiliated Borrowers"), regardless of which of the Borrowers or the
Affiliated Borrowers actually receives the proceeds of the indebtedness governed
hereby or the benefit of any other extensions of credit hereunder or the benefit
of any other extension of credit under the Affiliated Financing Documents, or
the manner in which the Borrowers, the Affiliated Borrowers, the Administrative
Agent or the Lenders account therefor in their respective books and records. In
addition, each entity comprising Borrowers hereby acknowledges and agrees that
all of the representations, warranties, covenants, obligations, conditions,
agreements and other terms contained in this Agreement shall be applicable to
and shall be binding upon and measured and enforceable individually against each
Person comprising Borrowers as well as all such Persons when taken together. By
way of illustration, but without limiting the generality of the foregoing, the
terms of Section 11.1 of this Agreement are to be applied to each individual
Person comprising the Borrowers (as well as to all such Persons taken as a
whole), such that the occurrence of any of the events described in Section 11.1
of this Agreement as to any Person comprising the Borrowers shall constitute an
Event of Default even if such event has not occurred as to any other Persons
comprising the Borrowers or as to all such Persons taken as a whole (except as
otherwise expressly provided therein).
 
(b)    Each Borrower acknowledges that it will enjoy significant benefits from
the business conducted by the other Borrowers and the Affiliated Borrowers
because of,
 
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inter alia, their combined ability to bargain with other Persons including
without limitation their ability to receive the credit extensions under this
Agreement and the other Financing Documents and the Affiliated Financing
Documents on favorable terms granted by this Agreement and other Financing
Documents and the Affiliated Financing 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 the credit facilities contemplated
hereunder, with the credit support of the other Borrowers as contemplated by
this Agreement and the other Financing Documents and the credit support of the
Affiliated Borrowers as contemplated by the Affiliated Financing Documents.
 
(c)    Administrative Agent and Lenders have advised the Borrowers that each of
them is unwilling to enter into this Agreement, the other Financing Documents
and the Affiliated Financing Documents and make available the credit facilities
extended hereby or thereby to any Borrower or Affiliated 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 Financing Documents and of each Affiliated Borrower under
the Affiliated Financing Documents. Each Borrower has determined that it is in
its best interest and in pursuit of its purposes that it so induce the
Administrative Agent and Lender 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 hereunder and to each
Affiliated Borrower of the credit facilities under the Affiliated Financing
Documents and the interest rates and the modes of borrowing available hereunder
and thereunder, (ii) because each Borrower may engage in transactions jointly
with other Borrowers or Affiliated Borrowers, and (iii) because each Borrower
may require, from time to time, access to funds under this Agreement for the
purposes herein set forth. Each Borrower, individually, expressly understands,
agrees and acknowledges, that the credit facilities contemplated hereunder would
not be made available on the terms herein in the absence of the collective
credit of all of the Persons constituting the Borrowers and the Affiliated
Borrowers, the joint and several liability of all such Persons, and the
cross-collateralization of the collateral of all such Persons hereunder and
under the Affiliated Financing Documents. Accordingly, each Borrower,
individually acknowledges that the benefit to each of the Persons comprising the
Borrowers as a whole constitutes reasonably equivalent value, regardless of the
amount of the indebtedness actually borrowed by, advanced to, or the amount of
credit provided to, or the amount of collateral provided by, any individual
Borrower.
 
(d)    Each Borrower has determined that it is and, after giving effect to the
transactions contemplated by this Agreement, the other Financing Documents and
the Affiliated Financing Documents (including, without limitation, the
inter-Borrower arrangement set forth in this Section) will be Solvent and has
and will have the ability to pay its debts from time to time incurred in
connection with the conduct of its business 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) is reasonably equivalent to the
obligations undertaken pursuant hereto.
 
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(e)    The Borrower Representative (on behalf of each Borrower) shall maintain
records specifying (i) all Obligations incurred by each Borrower, (ii) the date
of such incurrence, (iii) the date and amount of any payments made in respect of
such Obligations, and (iv) all inter-Borrower obligations pursuant to this
Section. The Borrower Representative shall make copies of such records available
to the Administrative Agent, upon request.
 
(f)    To the extent that applicable law otherwise would render the full amount
of the joint and several obligations of any Borrower hereunder, under the other
Financing Documents and under the Affiliated Financing Documents invalid or
unenforceable, such Borrower's obligations hereunder and under the other
Financing Documents and Affiliated Financing 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 Financing Documents and Affiliated Financing Documents shall be
presumptively valid and enforceable to their fullest extent in accordance with
the terms hereof or thereof, as if this Section were not a part of this
Agreement.
 
(g)    To the extent that any Borrower shall make a payment under this
Section of all or any of the Obligations (other than credit facilities made to
that Borrower for which it is primarily liable) (a "Joint Liability
Payment") which, taking into account all other Joint Liability Payments then
previously or concurrently made by any other Borrower, exceeds the amount which
such Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Joint Liability Payments in the same proportion
that such Borrower's Allocable Amount (as defined below) (as determined
immediately prior to such Joint Liability Payments) bore to the aggregate
Allocable Amounts of each of the Borrowers as determined immediately prior to
the making of such Joint Liability Payments, then, following indefeasible
payment in full in cash of the Obligations and termination of the Commitments,
such Borrower shall be entitled to receive contribution and indemnification
payments from, and be reimbursed by, each other Borrower for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Joint Liability Payments. As of any date of
determination, the "Allocable Amount" of any Borrower shall be equal to the
maximum amount of the claim which could then be recovered from such Borrower
under this Section without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law.
 
(h)    Except as specifically provided in this Agreement or any of the other
Financing Documents, Administrative Agent shall have the exclusive right to
determine the time and manner of application of any payments or credits, whether
received from any Borrower or any other source, and such determination shall be
binding on all Borrowers. All such payments and credits may be applied, reversed
and reapplied, in whole or in part, to any of the Obligations as Administrative
Agent shall determine in its sole discretion without affecting the validity or
enforceability of the Obligations of any other Borrower or Affiliated Borrower.
 
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(i)    Each Borrower hereby agrees that, except as hereinafter provided, its
obligations hereunder shall be unconditional, irrespective of (i) the absence of
any attempt to collect the Obligations from any obligor or other action to
enforce the same; (ii) the waiver or consent by Administrative Agent and/or any
applicable Lender(s) with respect to any provision of any instrument evidencing
the Obligations, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower or Affiliated Borrower and delivered to
Administrative Agent and/or any Lender; (iii) failure by Administrative Agent to
take any steps to perfect and maintain its security interest in, or to preserve
its rights to, any security or collateral for the Obligations; (iv) the
institution of any proceeding under the United States Bankruptcy Code, or any
similar proceeding, by or against a Borrower or Affiliated Borrower or
Administrative Agent's or any Lender's election in any such proceeding of the
application of Section 1111(b)(2) of the United States Bankruptcy Code; (v) any
borrowing or grant of a security interest by a Borrower or Affiliated Borrower
as debtor-in-possession, under Section 364 of the United States Bankruptcy Code;
(vi) the disallowance, under Section 502 of the United States Bankruptcy Code,
of all or any portion of Administrative Agent's or any Lender's claim(s) for
repayment of any of the Obligations; or (vii) any other circumstance other than
payment in full of the Obligations which might otherwise constitute a legal or
equitable discharge or defense of a guarantor or surety.
 
(j)    Until all Obligations have been paid and satisfied in full, no payment
made by or for the account of a Borrower or Affiliated Borrower including,
without limitation, (i) a payment made by such Borrower or Affiliated Borrower
on behalf of the liabilities of any other Borrower or Affiliated Borrower, or
(ii) a payment made by any other person under any Guarantee, shall entitle such
Borrower or Affiliated Borrower, by subrogation or otherwise, to any payment
from any other Borrower or Affiliated Borrower or from or out of any other
Borrower's or Affiliated Borrower's property and such Borrower or Affiliated
Borrower shall not exercise any right or remedy against any other Borrower or
Affiliated Borrower or any property of any other Borrower or Affiliated Borrower
by reason of any performance of such Borrower or Affiliated Borrower of its
joint and several obligations hereunder.
 
(k)    Any notice given by one Borrower hereunder shall constitute and be deemed
to be notice given by all Borrowers and Affiliated Borrowers, jointly and
severally. Notice given by Administrative Agent or any Lender to any one
Borrower or Affiliated Borrower hereunder or pursuant to any Financing Documents
or Affiliated Financing Documents in accordance with the terms hereof or thereof
shall constitute notice to each and every Borrower and Affiliated Borrower. The
knowledge of one Borrower or Affiliated Borrower shall be imputed to all
Borrowers and Affiliated Borrowers and any consent by one Borrower or Affiliated
Borrower shall constitute the consent of and shall bind all Borrowers and
Affiliated Borrower.
 
(l)    This Section is intended only to define the relative rights of Borrowers
and Affiliated Borrowers and nothing set forth in this Section is intended to or
shall impair the obligations of Borrowers, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Agreement or any other Financing Documents. Nothing contained in
this Section shall limit the liability of any
 
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Borrower to pay the credit facilities made directly or indirectly to that
Borrower and accrued interest, Fees and expenses with respect thereto for which
such Borrower shall be primarily liable.
 
(m)    The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of each Borrower to which such
contribution and indemnification is owing. The rights of any indemnifying
Borrower against the other Borrowers or Affiliated Borrowers under this
Section shall be exercisable upon the full and indefeasible payment of the
Obligations and the termination of the credit facilities hereunder and under the
Affiliated Financing Documents.
 
Section 15.2 Guarantor Provisions.
 
(a)    Each Borrower, as joint and several primary obligor of the Obligations
directly incurred by any other Borrower or by any Affiliated Borrower,
authorizes Administrative Agent and Lenders, without giving notice to such
Borrower or to any other Borrower or any Affiliated Borrower (to the extent
permitted hereunder or under any Affiliated Financing Document) or obtaining
such Borrower's consent or any other Borrower's or Affiliated Borrower's consent
(to the extent permitted hereunder or under any Affiliated Financing
Document) and without affecting the liability of such Borrower for the
Obligations directly incurred by the other Borrower or Affiliated Borrower, from
time to time to:
 
(i)    compromise, settle, renew, extend the time for payment, change the manner
or terms of payment, liquidate, discharge the performance of, decline to
enforce, or release all or any of the Obligations; grant other indulgences to
any Borrower in respect thereof; or modify in any manner any documents relating
to the Obligations;
 
(ii)    declare all Obligations due and payable upon the occurrence and during
the continuance of an Event of Default;
 
(iii)    take and hold security for the performance of the Obligations of any
Borrower and exchange, enforce, waive and release any such security;
 
(iv)    release, surrender or exchange any deposits or other property securing
the Obligations or on which Administrative Agent and/or any applicable
Lender(s) at any time may have a Lien; release, substitute or add any one or
more endorsers or guarantors of the Obligations of any other Borrower or
Affiliated Borrower or such Borrower; or compromise, settle, renew, extend the
time for payment, discharge the performance of, decline to enforce, or release
all or any obligations of any such endorser or guarantor or other Person who is
now or may hereafter be liable on any Obligations or release, surrender or
exchange any deposits or other property of any such Person;
 
(v)    accept partial payments, apply payments received by Administrative Agent
and/or any applicable Lender(s) from any Borrower or any Affiliated
 
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Borrower to any Obligations, in such order as Administrative Agent shall
determine, in its sole discretion; and
 
(vi)    subject to the provisions hereof, assign this Agreement in whole or in
part.
 
(b)    Each Borrower, as a primary, joint and several obligor with respect to
the Obligations directly incurred by any other Borrower or any Affiliated
Borrower, waives:
 
(i)    any defense based upon any legal disability or other defense of any other
Borrower or any Affiliated Borrower, or by reason of the cessation or limitation
of the liability of any other Borrower or any Affiliated Borrower from any cause
(other than full payment of all Obligations), including, without limitation,
failure of consideration, breach of warranty, statute of frauds, statute of
limitations, accord and satisfaction, and usury;
 
(ii)    any defense based upon any legal disability or other defense of any
other guarantor or other Person;
 
(iii)    any defense based upon any lack of authority of the officers,
directors, partners or agents acting or purporting to act on behalf of any other
Borrower or Affiliated Borrower or any principal of any other Borrower or
Affiliated Borrower or any defect in the formation of any other Borrower or
Affiliated Borrower or any principal of any other Borrower or Affiliated
Borrower;
 
(iv)    any defense based upon the application by any other Borrower or
Affiliated Borrower of the proceeds of the credit facilities or the loans under
the Affiliated Financing Documents for purposes other than the purposes
represented by such other Borrower or Affiliated Borrower to Administrative
Agent and Lenders or intended or understood by Administrative Agent and Lenders
or such Borrower;
 
(v)    any defense based on such Borrower's rights, under statute or otherwise,
to require Administrative Agent and/or any applicable Lender(s) to sue any other
Borrower or Affiliated Borrower or otherwise to exhaust its rights and remedies
against any other Borrower or Affiliated Borrower or any other Person or against
any collateral before seeking to enforce its right to require such Borrower to
satisfy the Obligations of any other Borrower or Affiliated Borrower;
 
(vi)    any defense based on Administrative Agent's or any Lender's failure at
any time to require strict performance by any Borrower of any provision of the
Financing Documents or by any Affiliated Borrower of any provisions of the
Affiliated Financing Documents. Such Borrower agrees that no such failure shall
waive, alter or diminish any right of Administrative Agent and/or any applicable
Lender(s) thereafter to demand strict compliance and performance therewith.
Nothing contained herein shall prevent Administrative Agent and/or any
applicable Lender(s) from foreclosing on any Lien, or exercising any rights
available to Administrative Agent and/or any applicable
 
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Lender(s) thereunder, and the exercise of any such rights shall not constitute a
legal or equitable discharge of such Borrower;
 
(vii)    any defense arising from any act or omission of Administrative Agent
and/or any applicable Lender(s) which changes the scope of such Borrower's risks
hereunder, but the foregoing shall not limit any Credit Party from asserting
claims based on breaches of this Agreement or willful misconduct by
Administrative Agent and/or any applicable Lender;
 
(viii)    any defense based upon Administrative Agent's or any Lender's election
of any remedy against such Borrower or any other Borrower or Affiliated Borrower
or any of them; any defense based on the order in which Administrative Agent
and/or any Lender(s) enforces its remedies;
 
(ix)    any defense based on (A) Administrative Agent's or any applicable
Lender's surrender, release, exchange, substitution, dealing with or taking any
additional collateral, (B) Administrative Agent's or any applicable Lender's
abstaining from taking advantage of or realizing upon any Lien or other
Guarantee, and (C) any impairment of collateral securing the Obligations,
including, without limitation, Administrative Agent's or any applicable Lender's
failure to perfect or maintain a Lien in such collateral;
 
(x)    any defense based upon Administrative Agent's or any Lender's failure to
disclose to such Borrower any information concerning any other Borrower's or
Affiliated Borrower's financial condition or any other circumstances bearing on
any other Borrower's or Affiliated Borrower's ability to pay the Obligations;
 
(xi)    any defense based upon any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in any other
respects more burdensome than that of a principal;
 
(xii)    any defense based upon Administrative Agent's and/or any Lender's
election, in any proceeding instituted under the Bankruptcy Code, of the
application of Bankruptcy Code §1111(b)(2) or any successor statute;
 
(xiii)    any defense based upon any borrowing or any grant of a security
interest under Bankruptcy Code §364;
 
(xiv)    any defense based on Administrative Agent's and/or any Lender's failure
to be diligent or to satisfy any other standard imposed on a secured party, in
exercising rights with respect to collateral securing the Obligations;
 
(xv)    except as otherwise expressly set forth herein: notice of acceptance
hereof; notice of the existence, creation or acquisition of any Obligation;
notice of any Event of Default; notice of the amount of the Obligations
outstanding from time to time; notice of any other fact which might increase
such Borrower's risk; diligence; presentment; demand of payment; protest; filing
of claims with a court in the event of any other Borrower's receivership or
bankruptcy and all other notices and demands to which such
 
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Borrower might otherwise be entitled (and agrees the same shall not have to be
made on the other Borrower as a condition precedent to such Borrower's
obligations hereunder);
 
(xvi)    any defense based on errors and omissions by Administrative Agent
and/or any Lender in connection with its administration of the credit facilities
or the loans made under the Affiliated Financing Documents, but the foregoing
shall not limit any Credit Party from asserting claims based on breaches of this
Agreement or willful misconduct by Administrative Agent and/or any applicable
Lender;
 
(xvii)    any defense based on application of fraudulent conveyance or transfer
law or shareholder distribution law to any of the Obligations or the security
therefor;
 
(xviii)    any defense based on Administrative Agent's and/or any Lender's
failure to seek relief from stay or adequate protection in any other Borrower's
or Affiliated Borrower's bankruptcy proceeding or any other act or omission by
Administrative Agent and/or any Lender which impairs such Borrower's prospective
subrogation rights;
 
(xix)    any defense based on legal prohibition of Administrative Agent's and/or
any Lender's acceleration of the maturity of the Obligations during the
occurrence of an Event of Default or any other legal prohibition on enforcement
of any other right or remedy of Administrative Agent and/or any Lender with
respect to the Obligations and the security therefor;
 
(xx)    any defense available to a surety under applicable law; and
 
(xxi)    the benefit of any statute of limitations affecting the liability of
such Borrower hereunder or the enforcement hereof.
 
(c)    Each Borrower further agrees that its obligations hereunder shall not be
impaired in any manner whatsoever by any bankruptcy, extensions, moratoria or
other relief granted to any other Borrower or Affiliated Borrower pursuant to
any statute presently in force or hereafter enacted.
 
(d)    Each Borrower authorizes Administrative Agent and each Lender to
exercise, in its sole discretion, any right, remedy or combination thereof which
may then be available to Administrative Agent or such Lender, since it is such
Borrower's intent that the Obligations be absolute, independent and
unconditional obligations of such Borrower under all circumstances.
Notwithstanding any foreclosure of any Lien with respect to any or all of any
property securing the Obligations, whether by the exercise of the power of sale
contained therein, by an action for judicial foreclosure or by an acceptance of
a deed in lieu of foreclosure, each Borrower shall remain bound under such
Borrower's Guarantee of the Obligations directly incurred by any other Borrower
or Affiliated Borrower.
 
(e)    This Agreement is a primary and original obligation of each of the
Borrowers and each of the Borrowers shall be liable for all existing and future
Obligations of
 
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any other Borrower or Affiliated Borrower as fully as if such Obligations were
directly incurred by such Borrower.
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
 
BORROWERS:
 
CYPRESS DALLAS, L.P.,
a Delaware limited partnership
   
By:
Cypress Dallas GP, LLC, its general partners
     
By:_________________________________
Name:_______________________________
Its:_________________________________
 
Address:____________________________
___________________________________
 
Facsimile number:______________________
E-mail Address:_______________________
Taxpayer Identification Number:
___________________________________

 

CYPRESS FT. WORTH, L.P.,
a Delaware limited partnership
   
By:
Cypress Ft. Worth GP, LLC, its general partner
     
By:_________________________________
Name:_______________________________
Its:_________________________________
 
Address:____________________________
___________________________________
 
Facsimile number:______________________
E-mail Address:_______________________
Taxpayer Identification Number:
___________________________________

 
(Signature Page to Credit and Security Agreement (Dallas/Ft. Worth))

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ADMINISTRATIVE AGENT AND LENDERS:
 
MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services
Inc., as Administrative Agent and a Lender
 
By:_________________________________________
Name:_______________________________________
Title:________________________________________
 
Address:   222 N. LaSalle Street, 16th Floor
Chicago, Illinois 60601
Attn:    Account Manager for MLC-HCF
ARC transaction
Facsimile number: (866) 264-3051
E-Mail Address: MLC_HCF_RE1@ml.com

With copies to:
 
Merrill Lynch Capital
222 N. LaSalle Street, 16th Floor
Chicago, Illinois 60601
Attn:   Group Senior Transaction Attorney,
             Healthcare Finance
Facsimile Number: (312) 499-3245

Merrill Lynch Capital
7700 Wisconsin Ave., Suite 400
Bethesda, Maryland 20814
Attn:   Group Senior Transaction Attorney,
            Healthcare Finance
Facsimile Number: (866) 341-9053

And with an additional copy to:
 
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street, Suite 3700
Chicago, Illinois 60603
Attn:  James B. Rosenbloom
Facsimile number: (312) 863-7425
E-mail Address: james.rosenbloom@goldbergkohn.com

Payment Account Designation:
 
ABA No.:____________________________________
Account No.:_________________________________
Account Name:________________________________
Reference:____________________________________

 
 
(Signature Page to Credit and Security Agreement (Dallas/Ft. Worth))

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ANNEXES, EXHIBITS AND SCHEDULES
 

ANNEXES

Annex A - Commitment Annex

EXHIBITS

Exhibit A - Assignment Agreement
Exhibit B - Single Purpose Entity Requirements
Exhibit C - Compliance Certificate
Exhibit D - Payment Notification
Exhibit E - Borrowers' Taxpayer Identification Numbers

SCHEDULES

Schedule 1 - Permitted Leases
Schedule 3.1 - Existence, Organizational Identification Numbers, Foreign
Qualification, Prior Names
Schedule 3.4 - Capitalization
Schedule 3.6 - Litigation
Schedule 3.17 - Material Contracts
Schedule 3.18 - Environmental Compliance
Schedule 4.4 - Insurance Requirements
Schedule 4.14 - Deferred Maintenance Items
Schedule 5.9 - Affiliate Transactions
Schedule 7.3 - Post-Closing Deliveries and Covenants
Schedule 8.7 - Licensed Operators
Schedule 9.1(h) - Service Agreements
 

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Annex A to Credit Agreement (Commitment Annex)

 
 
Lender
Term Loan
Commitment Amount
Term Loan
Commitment Percentage
Merrill Lynch Capital
$55,765,000
100%
TOTALS
$55,765,000
100%

 

 

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Exhibit A to Credit Agreement (Assignment Agreement)

This Assignment Agreement (this "Assignment Agreement") is entered into as of
__________ by and between the Assignor named on the signature page hereto
("Assignor") and the Assignee named on the signature page hereto ("Assignee").
Reference is made to the Credit Agreement dated as of February __, 2006 (as
amended or otherwise modified from time to time, the "Credit Agreement") among
MERRILL LYNCH CAPITAL, as Administrative Agent and Lender and the other Lenders
party thereto from time to time and CYPRESS DALLAS, L.P. and CYPRESS FT. WORTH,
L.P., each a Delaware limited partnership ("Borrowers"), the financial
institutions party thereto from time to time, as Lenders, and Merrill Lynch
Capital, a division of Merrill Lynch Business Financial Services Inc., as
Administrative Agent. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Credit Agreement.
 
Assignor and Assignee hereby agree as follows:
 
1.    Assignor hereby sells and assigns to Assignee, and Assignee hereby
purchases and assumes from Assignor the interests set forth on the schedule
attached hereto (the "Schedule"), in and to Assignor's rights and obligations
under the Credit Agreement as of the effective date set forth on the Schedule
(the "Effective Date"). Such purchase and sale is made without recourse,
representation or warranty except as expressly set forth herein. On the
Effective Date, Assignee shall pay to Assignor an amount equal to the aggregate
amounts assigned pursuant to the Schedule and Assignor shall pay to Assignee a
closing fee in respect of the transactions contemplated hereby in the amount
specified on the Schedule.
 
2.    Assignor (a) represents that as of the Effective Date, that it is the
legal and beneficial owner of the interests assigned hereunder free and clear of
any adverse claim, (b) makes no other representation or warranty and assumes no
responsibility with respect to any statement, warranties or representations made
in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Financing Documents or any other instrument or document
furnished pursuant thereto; and (c) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any other
Credit Party or any other Person or the performance or observance by any Credit
Party of its Obligations under the Credit Agreement or any other Financing
Documents or any other instrument or document furnished pursuant thereto.
 
3.    Assignee (a) confirms that it has received a copy of the Credit Agreement
and the other Financing Documents, together with copies of the most recent
financial statements delivered pursuant thereto and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (b) agrees that it will,
independently and without reliance upon Administrative Agent, Assignor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
 
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decisions in taking or not taking action under the Credit Agreement;
(c) appoints and authorizes Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the Credit
Agreement and the other Financing Documents as are delegated to Administrative
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (d) agrees that it will perform in accordance with their
terms all obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender; (e) represents that on the date of this
Assignment Agreement it is not presently aware of any facts that would cause it
to make a claim under the Credit Agreement; (f) represents and warrants that
Assignee is not a Foreign Lender or, if it is a Foreign Lender, (i) that it has
delivered to Administrative Agent the documentation required to be delivered to
Administrative Agent by Section 13 below and (i) that if it is claiming
exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", (w) it is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, (x) it is not a
10-percent shareholder of any Credit Party within the meaning of Section
881(c)(3)(B) or Section 871(h)(3)(B) of the Code, (y) it is not a controlled
foreign corporation related to any Credit Party within the meaning of
Section 881(c)(3)(C) of the Code, and (z) it is not a conduit entity
participating in a conduit financing arrangement (as defined in Section 1.881-3
of the Code Treasury Regulations); (g) represents and warrants that Assignee is
(or, upon receipt of the required consents hereto by Administrative Agent and
Borrowers will become) an Eligible Assignee, and (h) represents and warrants
that it has experience and expertise in the making or the purchasing of loans
such as the Loans, and that it has acquired the interests described herein for
its own account and without any present intention of selling all or any portion
of such interests.
 
4.    Each of Assignor and Assignee represents and warrants to the other party
hereto that it has full power and authority to enter into this Assignment
Agreement and to perform its obligations hereunder in accordance with the
provisions hereof, that this Assignment Agreement has been duly authorized,
executed and delivered by such party and that this Assignment Agreement
constitutes a legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity.
 
5.    Upon the effectiveness of this Assignment Agreement pursuant to Section 13
below, (a) Administrative Agent shall register Assignee as a Lender, pursuant to
the terms of the Credit Agreement, (b) Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment Agreement, have the
rights and obligations of a Lender thereunder, (c) Assignor shall, to the extent
provided in this Assignment Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement and (d) Administrative Agent
shall thereafter make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other amounts) to Assignee.
Assignor and Assignee shall make all appropriate adjustments in payments for
periods prior to the Effective Date by Administrative Agent or with respect to
the making of this assignment directly between themselves.
 
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6.    Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Assignment Agreement.
 
7.    Neither this Assignment Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Assignment Agreement) against whom enforcement of such
change, waiver, discharge or termination is sought.
 
8.    For the purposes hereof and for purposes of the Credit Agreement, the
notice address of Assignee shall be as set forth on the Schedule. Any notice or
other communication herein required or permitted to be given shall be in writing
and delivered in accordance with the notice provisions of the Credit Agreement.
 
9.    In case any provision in or obligation under this Assignment Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
 
10.    THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
 
11.    This Assignment Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
 
12.    This Assignment Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
hereto were upon the same agreement.
 
13.    This Assignment Agreement shall become effective as of the Effective Date
upon the satisfaction of each of the following conditions: (a) the execution of
a counterpart hereof by each of Assignor and Assignee, (b) the execution of a
counterpart hereof by Administrative Agent and each Borrower as evidence of its
consent hereto to the extent required pursuant to Section 13.17 of the Credit
Agreement, (c) the receipt by Administrative Agent of the administrative fee
referred to in Section 13.17(a) of the Credit Agreement, (d) in the event
Assignee is a Foreign Lender, the receipt by Administrative Agent of United
States Internal Revenue Service Forms W-8ECI, W-8BEN or W-8IMY (as applicable),
and such other forms, certificates or documents, including those prescribed by
the United States Internal Revenue Service, properly completed and executed by
Assignee, certifying as to Assignee's entitlement to exemption from withholding
or deduction of Taxes, and (e) the receipt by Administrative Agent of originals
or facsimiles of the counterparts described above.
 
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The parties hereto have caused this Assignment Agreement to be executed and
delivered as of the date first written above.
 

ASSIGNOR:
___________________________
 
By:_________________________________
Title:________________________________

ASSIGNEE:
___________________________
 
By:_________________________________
Title:________________________________
 

Consented to:
 
Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., as Administrative Agent
 
By:_________________________________
Title:________________________________
 

CYPRESS DALLAS, L.P.,
a Delaware limited partnership
   
By:
Cypress Dallas GP, LLC, its general partners
     
By:__________________________________
Name:________________________________
Its:__________________________________

 

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CYPRESS FT. WORTH, L.P.,
a Delaware limited partnership
   
By:
Cypress Ft. Worth GP, LLC, its general partner
     
By:__________________________________
Name:________________________________
Its:__________________________________

 

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Schedule to Assignment Agreement
 
Assignor: ____________________
 
Assignee: ____________________
 
Effective Date: ____________________
 
Credit Agreement dated as of February __, 2006 among Cypress Dallas, L.P. and
Cypress Ft. Worth, L.P., as Borrowers, the financial institutions party thereto
from time to time, as Lenders, and Merrill Lynch Capital, a division of Merrill
Lynch Business Financial Services Inc., as Administrative Agent
 
Interests Assigned:
 
Commitment/Loan
Term Loan
Assignor Amounts
$__________
Amounts Assigned
$__________
Assignor Amounts
(post-assignment)
 
$__________

Closing Fee:
$__________

Assignee Information:

   
Address for Notices:
___________________________
___________________________
Attention:___________________
Telephone:___________________
Facsimile:____________________
Address for Payments:
 
Bank:__________________________
ABA #:_________________________
Account #:______________________
Reference:______________________

 
 
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Exhibit B to Credit Agreement (SPE Requirements)

1.    The Borrowers' business and purposes are and will continue to be limited
to the following:
 
(a)    to enter into and perform its obligations under this Agreement and the
other Financing Documents;
 
(b)    to acquire, own, hold, lease, maintain, develop and improve the Projects;
 
(c)    to sell, transfer, service, convey, dispose of, pledge, assign, borrow
money against, finance or otherwise deal with the Projects to the extent
permitted under the Financing Documents;
 
(d)    to refinance the Projects in connection with a permitted repayment of the
Loans; and
 
(e)    to engage in any lawful act or activity and to exercise any powers
permitted to entities of the type (e.g., limited partnerships, limited liability
companies, corporations, as applicable to each Borrower) formed under the laws
of the state of organization of such Person as of the date of this Agreement
that are related or incidental to and necessary, convenient or advisable for the
accomplishment of the above mentioned purposes.
 
2.    Borrowers shall do (or cause to be done) all things necessary in order to
preserve their existence to the fullest extent permitted by law. Except as
expressly permitted by the Financing Documents (if at all), Borrowers shall do
(or cause to be done) all of the following:
 
(a)    not own any asset or property other than (i) a fee interest in the
Projects, and (ii) incidental personal property necessary for the ownership or
operation of the Projects;
 
(b)    not enter into any contract or agreement with any Affiliate of the
Borrowers, any constituent party of the Borrowers, any guarantor or indemnitor
under any of the Financing Documents or any Affiliate of any such constituent
party or guarantor or indemnitor, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm's-length basis with third parties other than any such party;
 
(c)    maintain their intention to remain solvent and pay their debts and
liabilities (including, as applicable, shared personnel and overhead
expenses) from their assets, to the extent of their assets, as the same shall
become due;
 
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(d)    do or cause to be done all things necessary to observe organizational
formalities of the Borrowers and preserve their existence, and not terminate or
fail to comply with any of the provisions in this Section.
 
(e)    maintain all of their books, records, financial statements and bank
accounts separate from those of their Affiliates and any other person or entity;
provided, however, that the Borrowers' financial position, assets, results of
operations and cash flows may be included in a consolidated financial statement
of an Affiliate of the Borrowers in accordance with GAAP so long as any such
consolidated financial statement contains a note indicating that the Borrowers
and their Affiliates comprising the consolidated group are separate legal
entities;
 
(f)    hold themselves out to the public as a legal entities separate and
distinct from each other and from any other entity (including any Affiliate of
the Borrowers, any guarantor or any constituent party of the Borrowers), correct
any known misunderstanding regarding their status as a separate entities,
conduct business in their own name, and not identify themselves or any of their
Affiliates as a division or part of the other; provided, however, that all
Borrowers shall be permitted to, and shall at all times, hold themselves out to
the public as entities that operate as a common enterprise;
 
(g)    to the extent of cash flow available from ownership of the Projects and
other business of the Borrowers, intend to maintain adequate capital for the
normal obligations reasonably foreseeable in a business of their size and
character and in light of their contemplated business operations;
 
(h)    not commingle the funds and other assets of the Borrowers with those of
any Affiliate or constituent party, any guarantor or any other person, except
for funds deposited into any lockbox accounts or other cash management
arrangements required under this Agreement;
 
(i)    maintain their assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any Affiliate or constituent party, any guarantor or any other person or
entity;
 
(j)    not permit any Affiliate or constituent party independent access to the
Borrowers' bank accounts, except Borrower Representative in connection with any
lockbox account or other cash management arrangements required hereunder, any
property management agreements entered into by Borrowers and approved by
Administrative Agent, and otherwise in connection with property or cash
management activities consistent with the terms of the Financing Documents;
 
(k)    pay the salaries of their own employees, if any;
 
(l)    compensate each of their consultants and agents, if any;
 
(m)    maintain an arm's-length relationship with their Affiliates;
 
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(n)    allocate fairly and reasonably shared expenses, if any, including shared
office space;
 
(o)    not pledge any of their assets for the benefit of any person or entity
other than Administrative Agent, except as expressly permitted by the Financing
Documents (if at all);
 
(p)    have no obligation to indemnify their equity owners or members (but not
including their respective individual officers, as the case may be, except to
the extent that payment of such obligation is fully subordinated to the payment
of the Obligations; provided, however, the foregoing shall not apply where the
indemnity is paid from third party funds, such as insurance proceeds;
 
(q)    maintain records, books of account and bank accounts separate and apart
from any other person or entity (other than any lockbox account or other cash
management arrangement required hereunder); and file their own tax returns, if
any, as may be required under applicable law, provided, however, that the
Borrowers may file their federal tax return on a consolidated basis); and
maintain their books, records, resolutions and agreements as official records;
and
 
(r)    not make any loans or advances to any third party, and not acquire
obligations or securities of their Affiliates, except, in each case, as
permitted under the Financing Documents.
 
3.    So long as the Loans remain outstanding, the Borrowers shall not do (or
cause to be done) any of the following except to the extent otherwise permitted
under the Financing Documents (if at all):
 
(a)    assume, guarantee, become obligated for, or hold themselves out to be
responsible for the debts or obligations of any other person or entity or the
decisions or actions respecting the daily business or affairs of any other
person;
 
(b)    engage, directly or indirectly, in any business other than the actions
required or permitted to be performed under the Borrower's Organizational
Documents (as the same may be amended or supplemented from time to time with
Administrative Agent's consent);
 
(c)    incur, create or assume any indebtedness other than the Loans except as
otherwise permitted by the Financing Documents;
 
(d)    make or permit to remain outstanding any loan or advance to, or own or
acquire any stock or securities of, any person or entity;
 
(e)    form, acquire or hold any subsidiary (whether corporate, partnership,
limited liability company or other); or
 
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(f)    to the fullest extent permitted by law, engage in any dissolution,
liquidation, consolidation, merger or sale of all or substantially all of their
assets.
 
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Exhibit C to Credit Agreement (Compliance Certificate)

COMPLIANCE CERTIFICATE
 
[BORROWER REPRESENTATIVE]
 
Date: __________, _____
 
This certificate is given by _____________________, a Responsible Officer of
_____________ ("Borrower Representative"), pursuant to that certain Credit
Agreement dated as of February __, 2006 among CYPRESS DALLAS, L.P. and CYPRESS
FT. WORTH, L.P., each a Delaware limited partnership (collectively, "Borrower"),
the Lenders from time to time party thereto and Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services Inc., as Administrative
Agent for Lenders (as such agreement may have been amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.
 
The undersigned Responsible Officer hereby certifies to Administrative Agent and
Lenders that:
 
(a)    the financial statements delivered with this certificate in accordance
with Section 4.1 of the Credit Agreement fairly present in all material respects
the results of operations and financial condition of Borrower and its
Subsidiaries as of the dates and the accounting period covered by such financial
statements;
 
(b)    I have reviewed the terms of the Credit Agreement and have made, or
caused to be made under my supervision, a review in reasonable detail of the
transactions and conditions of Borrower and its Subsidiaries during the
accounting period covered by such financial statements;
 
(c)    such review has not disclosed the existence during or at the end of such
accounting period, and I have no knowledge of the existence as of the date
hereof, of any condition or event that constitutes a material Default or an
Event of Default, except as set forth in Schedule 1 hereto, which includes a
description of the nature and period of existence of such Default or an Event of
Default and what action Borrower has taken, is undertaking and proposes to take
with respect thereto; and
 
(d)    Borrower is in compliance with the covenants contained in Article 6 of
the Credit Agreement, and Guarantor is in compliance with the covenants
contained in the Guarantee constituting a part of the Financing Documents,
except as set forth below.
 
(e)    Except as noted on Schedule 2 attached hereto, the Credit Agreement
contains a complete and accurate list of all business locations of Borrowers and
all names under which each Borrower currently conducts business; Schedule 2
specifically notes any changes in the names under which Borrower conducts
business.
 
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(f)    Except as noted on Schedule 3 attached hereto, the undersigned has no
knowledge of any federal or state tax liens having been filed against the
Borrower or any Collateral or the Guarantor, to the extent that tax liens
against Guarantor would result in a Material Adverse Effect or would adversely
affect the Collateral.
 
(g)    Except as noted on Schedule 3 attached hereto, the undersigned has no
knowledge of any failure of the Borrower or the Guarantor, to the extent that
tax liens against Guarantor would result in a Material Adverse Effect or would
adversely affect the Collateral to make required payments of withholding or
other tax obligations of the Borrower or the Guarantor, to the extent that tax
liens against Guarantor would result in a Material Adverse Effect or would
adversely affect the Collateral during the accounting period to which the
attached statements pertain or any subsequent period.
 
(h)    [Reserved.]
 
(i)    [Reserved.]
 
(j)    Schedule 4 attached hereto contains a complete and accurate statement of
all deposit or investment accounts maintained by Borrower.
 
(k)    Except as described on Schedule 5 attached hereto:
 
(i)    there are no current, pending or threatened proceedings relating to a
condemnation or other public taking of any Project;
 
(ii)    no Project has suffered no casualty or other damage or loss of the type
typically covered by hazard insurance;
 
(iii)    all insurance required to be maintained by Borrowers or ARC for the
benefit of Borrower is in force and premiums therefor have been paid as and when
due and no Borrower has made any claims thereunder;
 
(iv)    the undersigned has no knowledge of any current, pending or threatened
changes to the zoning classification or permitted uses of any Project; and
 
(l)    Except as described in the Credit Agreement or in Schedule 6 attached
hereto, the undersigned has no knowledge of any current, pending or threatened:
 
(i)    material litigation against any Borrower;
 
(ii)    inquiries, investigations or proceedings concerning the business
affairs, practices, licensing or reimbursement entitlements of any Borrower;
 
(iii)    default by Borrower under any material contract to which either of them
is a party, including, without limitation, any Material Leases.
 
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Such calculations and the certifications contained therein are true, correct and
complete;
 
The foregoing certifications and computations are made as of
___________________, _____ (end of month) and delivered this ____ day of
_____________, 20___.
 

Sincerely,
 
By_______________________________________
Name_____________________________________
Title ________________ of Borrower Representative

List of Schedules:

Schedule 1 - Non-Compliance with Covenants
Schedule 2 - Business Locations and Names of Borrower
Schedule 3 - Unpaid Tax or Withholding Obligations
Schedule 4 - List of all Deposit and Investment Accounts of Borrower
Schedule 5 - Events Affecting Real Property (condemnation, insurance, zoning,
taxes)
Schedule 6 - Pending Litigation, Inquiries or Investigations; Defaults under
Material Contracts
 
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Schedules to Compliance Certificate

Schedule 1 - Non-Compliance with Covenants

Schedule 2 - Business Locations and Names of Borrower

Schedule 3 - Unpaid Tax or Withholding Obligations

Schedule 4 - List of all Deposit and Investment Accounts of Borrower

Schedule 5 - Events Affecting Real Property (condemnation, insurance, zoning,
taxes)

Schedule 6 - Pending Litigation, Inquiries or Investigations; Defaults under
Material Contracts

Worksheets for covenant calculations
 
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Exhibit D to Credit Agreement (Payment Notification)

[BORROWER REPRESENTATIVE]
 
Date: ___________, ______
 

Reference is hereby made to the Credit Agreement dated February __, 2006 among
the undersigned, Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., as Administrative Agent and the financial institutions
party thereto. Capitalized terms used here have the meanings ascribed thereto in
the Credit Agreement.
 
Please be advised that funds in the amount of $_____________ will be wire
transferred to Administrative Agent on _________, 200_. Such funds shall
constitute [an optional] [a mandatory] prepayment of the Term Loans, with such
prepayments to be applied in the manner specified in Section 2.1(e). Such
mandatory prepayment is being made pursuant to Section __________ of the Credit
Agreement.
 
Fax to MLC Operations 312-499-3336 no later than noon Chicago time
 
Note:
Funds must be received no later than noon Chicago time for same day application

 
Wire Instructions:
Bank Name:
LaSalle Bank National Association
135 S. LaSalle Street
Chicago, IL 60603
ABA#                                        0710-0050-5
 
Account Name:                        _______________________
 
Account #:                                ______________________
Reference:                                 (Client Name)

Address:
Merrill Lynch Capital
222 N. LaSalle Street, 16th Floor
Chicago, IL 60601

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this ____ day of ___________, ____.
 
By_______________________________________
Name_____________________________________
Title ________________ of Borrower Representative

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Exhibit E to Credit Agreement (Borrowers'
Taxpayer Identification Numbers)

 

See Schedule 3.1
 
 

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Schedule 1 - Permitted Leases

 
 
Lessee
Location
Annual Rent
Universal Health Services
Fort Worth, Texas
$800/month
Reachout Home Care
Dallas, Texas
$857.15

 
 
 

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Schedule 3.1 - Existence, Organizational Identification
Numbers, Foreign Qualification, Prior Names

 

Cypress Ft. Worth, L.P.
 
d/b/a: Town Village Ridgmar (application to be made at closing)
 
Organizational ID No.:
4103300
EIN:
74-3162190
State of Formation:
Delaware
Foreign Qualifications:
Texas

Cypress Dallas, L.P.
 
d/b/a: Town Village North Dallas (application to be made at closing)
 
Organizational ID No.:
4103298
EIN:
74-3162182
State of Formation:
Delaware
Foreign Qualifications:
Texas

Cypress Dallas & Ft. Worth JV, LLC
 
Organizational ID No.:
4100374
EIN:
01-0855700
State of Formation:
Delaware

Cypress Ft. Worth GP, LLC
 
Organizational ID No.:
4100366
EIN:
33-1130740
State of Formation:
Delaware
Foreign Qualifications:
Texas

Cypress Dallas GP, LLC
 
Organizational ID No.:
4100371
EIN:
33-1130741
State of Formation:
Delaware
Foreign Qualifications:
Texas

American Retirement Corporation
 
Organizational ID No.:
0325434
EIN:
62-1674303
State of Formation:
Tennessee

 
 

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Schedule 3.4 - Capitalization

 
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Schedule 3.6 - Litigation

None
 

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Schedule 3.17 - Material Contracts

Management Agreements listed on Schedule 5.9.
 

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Schedule 3.18 - Environmental Compliance

Those matters referenced in the following reports prepared by Property Solutions
Incorporated:

Phase I Environmental Site Assessment dated February 22, 2006 for Town Village
Ridgmar, Fort Worth, Texas

Phase I Environmental Site Assessment dated February 22, 2006 for Town Village
North Dallas, Dallas, Texas
 

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Schedule 4.4 - Insurance Requirements

The following requirements for insurance are effective as of the Closing Date.
Lender reserves the absolute right to modify, amend or supplement these
requirements at any time and from time to time during the term of the Loan and
Borrower will be required to satisfy any such modified, amended or supplemented
requirements after commercially reasonable notice to Borrower from Lender of
such modification, amendment or supplement.
 
Property Insurance for Borrower:  
 
1.    Issued on ACORD 27 form (Evidence of Insurance), signed by authorized
agent.
 
2.    Insurance carrier(s) must be rated A- VII or better (by A.M. Best).
 
3.    ACORD 27 should disclose: (a) annual premium for the coverages should be
shown on the ACORD 27; (b) premiums that remain unpaid for the term of the
policy, if any. Lender has accepted the schedule of estimated 2006 insurance
expense provided by Bette McNamara from the Borrower.
 
4.    Policy should be an all risk/special perils coverage form.
 
5.    Policy must provide replacement cost coverage with waiver of coinsurance
or agreed amount endorsement.
 
6.    Policy must provide waiver of terrorism exclusion (or indicate "no
terrorism exclusion").
 
7.    Deductible shall be no greater than $10,000. Lender has approved the
property deductible of $50,000 ($100,000 with respects to flood and earthquake).
 
Ø If the deductible is subject to an overall aggregate deductible, this must be
disclosed with a copy of the specific aggregate deductible agreement provided.
 
8.    Building coverage must be greater than or equal to replacement cost valued
by Merrill Lynch Capital or its representatives (if the policy is a blanket
policy insuring other properties, and there is any sub-limit on the amount of
coverage for any particular property, such limit should be shown on the evidence
of insurance). Renewal amount and annual agreed amount endorsement shall be
adjusted by Borrower, subject to Lender's approval, to maintain proper insurable
values. Lender has approved the following actual coverage: Building, Business
Personal Property, and Business Income coverages are written on a blanket basis
with total limits of $500,000,000.
 
9.    Loss of Rents coverage must be greater than or equal to twelve (12) months
rental income (if the policy is a blanket policy insuring other properties, and
there is any sublimit on the amount of coverage for any particular property,
such limit should be shown on the evidence of insurance). Lender has approved
the following actual coverage: Building,
 
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Business Personal Property, and Business Income coverages are written on a
blanket basis with total limits of $500,000,000.
 
10.    Policy must provide for Boiler & Machinery coverage.
 
11.    Policy must provide for Building Law and Ordinance coverage.
 
12.    Policy must provide for windstorm coverage, if applicable (For
Florida/Coastal properties).
 
13.    Policy must provide for flood coverage, if applicable (For properties in
FEMA flood zones A, B, V, and X-Shaded). Lender has approved the following
actual coverage: Flood coverage is written at a blanket limit of $50,000,000
with a deductible of $100,000 each occurrence. Lender has confirmed that no
flood coverage is required for any Property in this transaction.
 
14.    Policy must provide for earthquake coverage, if applicable (For
properties located in Seismic Zones 3 and 4). Lender has approved the following
actual coverage: Earthquake coverage is written at a blanket limit of
$50,000,000 with a deductible of $100,000 each occurrence. Lender has confirmed
that no earthquake coverage is required for any Property in this transaction.
 
15.    Merrill Lynch Capital shall be named on the ACORD 27 as Mortgagee and
Loss Payee (as applicable) and Certificate Holder.
 
16.    ACORD 27 must provide for thirty (30) days' notice of cancellation or any
material change in the policy to Merrill Lynch Capital, and if possible,
deleting "endeavor to" and "but failure to mail such notice shall impose no
obligation or liability of any kind upon the company, its agents or
representatives" language. Cancellation notice only-no notice for "material
change". Acord 27 does not contain "endeavor to" wording.
 
17.    Policy must contain waiver of subrogation by insurer with respect to
contractual releases made by insured prior to loss.
 
18.    Higher limits and special coverages in addition to those indicated above
may be required depending upon the property size and nature of operations (if a
joint venture).
 
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Property Insurance for Operator:  
 
1.    Operator must carry business interruption insurance with a coverage of
twelve (12) months. Lender has approved the following actual coverage: Building,
Business Personal Property, and Business Income coverages are written on a
blanket basis with total limits of $500,000,000.
 
2.    Issued on ACORD 27 form (Evidence of Insurance), signed by authorized
agent.
 
3.    Insurance carrier(s) must be rated A- VII or better (by A.M. Best).
 
4.    ACORD 27 should disclose: (a) annual premium for the coverages should be
shown on the Acord 27; (b) premiums that remain unpaid for the term of the
policy, if any. Lender has accepted the schedule of estimated 2006 insurance
expense provided by Bette McNamara from the Borrower.
 
5.    Policy should be an all risk/special perils coverage form.
 
6.    Policy must provide replacement cost coverage with waiver of coinsurance
or agreed amount endorsement. Lender has approved the following actual coverage:
Building, Business Personal Property, and Business Income coverages are written
on a blanket basis with total limits of $500,000,000.
 
7.    Policy must provide waiver of terrorism exclusion (or indicate "no
terrorism exclusion").
 
8.    Deductible shall be no greater than $10,000. Lender has approved the
property deductible of $50,000 ($100,000 with respects to flood and earthquake).
 
9.    ACORD 27 must provide for thirty (30) days' notice of cancellation or any
material change in the policy to Merrill Lynch Capital. Cancellation notice
only-no notice for "material change". Acord 27 does not contain "endeavor to"
wording.
 
10.    Policy must contain waiver of subrogation by insurer with respect to
contractual releases made by insured prior to loss.
 
11.    Merrill Lynch Capital shall be named on the ACORD 27 as Mortgagee and
Loss Payee (as applicable) and Certificate Holder.
 
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General and Professional Liability Insurance:
 
1.    Certificate must be issued on ACORD 25 form (Certificate of Ins.), signed
by authorized agent.
 
2.    Insurance carrier(s) must be rated A- VII or better (by A.M. Best).
 
3.    ACORD 25 should disclose: (a) annual premium for the coverages should be
shown on the ACORD 25; (b) premiums that remain unpaid for the term of the
policy, if any. Lender has accepted the schedule of estimated 2006 insurance
expense provided by Bette McNamara from the Borrower.
 
4.    Policy should include coverage for Contractual Liability.
 
5.    Policy should include waiver of terrorism exclusion (or indicate "no
terrorism exclusion"). All Professional and General Liability policies provide
coverage for claims arising from acts of terrorism. All certificates reflect
this coverage with the exception of the Lexington policy which provides
$4,000,000 General Liability coverage. This policy has been reviewed and
coverage is provided for claims arising from acts of terrorism.
 
6.    Policy must have a deductible not greater than $25,000. Lender has
approved deductibles discussed below in item 7 of this section.
 
Ø If the deductible is subject to an overall aggregate deductible, this must be
disclosed with a copy of the specific aggregate deductible agreement provided.
 
7.    Coverage is required in a minimum $1,000,000 per claim and $3,000,000 in
the aggregate (aggregate may apply to other insureds beyond the other named
insureds listed below only with Lender's prior written consent): [enter names of
named insurance - i.e., the policy owner - and the other named insureds; this
should consist only of borrowers unless MLC otherwise approves].
 
Lender has approved the following coverage: The combined general liability and
professional liability insurance program is written as follows:
 

 
à
The primary general liability coverage is written with a limit of $4,000,000
each occurrence, with a $4,000,000 policy aggregate including a self-insured
retention of $1,000,000. Claims made by "patients" are covered for claims
arising out of specified perils, as identified in the policy, only.

 
à
There is also a $4,000,000 excess of $1,000,000 coverage for general liability
and professional liability claims provided by a captive program that is
currently.

 
 
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à
The two policies described above are designed to transfer some of the liability
of the $5,000,000 self-insured retention which the combined General
Liability/Professional Liability program provided by XL Insurance Ltd. Bermuda
is subject to. The limit provided is $15,000,000 under one policy and a second
covering only General Liability has been written for an additional $10,000,000.

 
à
Total combined primary and excess general liability coverage is $25,000,000 with
a $1,000,000 self-insured retention. Total combined coverage for professional
liability is $15,000,000 with a $1,000,000 self-insured retention.

8.    ACORD 25 should provide for thirty (30) days' notice of cancellation or
any material change in the policy to Merrill Lynch Capital, and if possible,
deleting "endeavor to" and "but failure to mail such notice shall impose no
obligation or liability of any kind upon the company, its agents or
representatives" language. Lender has approved the certificates without the
requested changes to the notice of cancellation.
 
9.    Policy must name Merrill Lynch Capital as additional insured and must name
the following as other named insureds: The entities identified on Schedule 5.9.
 
10.    Policy must include Separation of Insureds/Cross Liability.
 
11.    Policy will be written on a claims-made basis. Lender has approved the
following: The primary general liability insurance program is written on an
Occurrence basis. The two combined Excess General Liability and Professional
Liability insurance programs are written on a Claims-Made basis with the
retroactive date of coverage being the inception date of coverage on October 31,
2005.
 
12.    Insurance shall be noted as being primary without right of contribution
of any other insurance carried by or on behalf of Lessor per each policies terms
and conditions.
 
13.    Higher limits and special coverages in addition to those indicated above
may be required depending upon the property size and nature of operations (if a
joint venture).
 
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Automobile Liability Insurance (must show the following):
 

1.
Issued on Acord 25 form (Certificate of Insurance), signed by authorized agent.

2.
Insurance carrier (s) rated A- VII or better (by A.M. Best).

3.
Current policy term.

4.
Coverage for Owned, Non-Owned, and Hired autos.

5.
Annual premium for the coverages shown. Lender has accepted the schedule of
estimated 2006 insurance expense provided by Bette McNamara from the Borrower.

6.
Premiums that remain unpaid for the policy term, if any.

7.
Waiver of terrorism exclusion (or indicate "no terrorism exclusion").

1.
Liability deductible not greater than $5,000. Lender has approved the automobile
liability deductible of $100,000.

2.
If the deductible is subject to an overall aggregate deductible, this must be
disclosed with a copy of the specific aggregate deductible agreement provided.

3.
Minimum $1,000,000 per occurrence limit (primary and umbrella/excess can be
combined to achieve minimum limit.

4.
Thirty (30) days (ten (10) days for non-payment) notice of cancellation or any
material change in the policy to Merrill Lynch Capital deleting "endeavor to"
and "but failure to mail such notice shall impose no obligation or liability of
any kind upon the company, its agents or representatives" language. Lender has
approved the certificates without the requested changes to the notice of
cancellation.

5.
Merrill Lynch Capital included as Additional Insured (see below).

 
6.
Waiver of Subrogation endorsement in favor of Merrill Lynch Capital (see below).
Lender has accepted the following: The current insurance carrier would not
provide Waiver of Subrogation in favor of Lender. However, the policy does name
Lender as Additional Insured which insures Lender to the extent of Lender's
insurable interest in the automobiles for this transaction.

7.
Separation of Insureds/Cross Liability included. Lender has accepted this as per
the policy terms and conditions.

 
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8.
Insurance shall be noted as being primary without right of contribution of any
other insurance carried by or on behalf of Lessor. This has been accepted by the
Lender.

9.
Higher limits and special coverages in addition to those indicated above may be
required depending upon the property size and nature of operations (if a joint
venture).

 
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Certificate Holder and Entity to be Shown on Required Endorsements:
 
Merrill Lynch Capital, a Division of
Merrill Lynch Business Financial Services Inc.,
and its successors and assigns
222 N. La Salle Street - 16th Floor
Chicago, IL 60601
Attn: Portfolio Management

Insurance Consultant for Merrill Lynch Capital:
 
Lockton Companies, Inc.
5847 San Felipe, Suite 320
Houston, TX 77057
 
Primary Contact:
 
Secondary Contact:
Vicki Wibel, CIC, CRM
 
Nelson Reese, AIS
Account Manager, Commercial Insurance
 
Account Manager, Commercial Insurance
713.458.5200 (Main)
 
713.458.5200 (Main)
713.458.5246 (Direct)
 
713.458.5425 (Direct)
281.793.4449 (Mobile)
 
713.628.5012 (Mobile)
713.458.5299 (Fax(
 
713.458.5299 (Fax)
vwibel@lockton.com (E-mail)
 
nreese@lockton.com (E-mail)

 

 
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Schedule 4.14 - Deferred Maintenance Schedule

 
Dallas
Seal building*
E-call system
Roof repair
Sprinkler head repair
Auto-entry doors
Facilitate site drainage via grading & drains*
   
Fort Worth
Seal building*
E-call system
Expand parking
Auto-entry doors
Facilitate additional site drainage near the building.*

 
 * Required
 

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Schedule 5.9 - Affiliate Transactions

 
Management Agreement for Town Village North Dallas and Town Village Ridgmar
Continuing Care Retirement Community dated February 28, 2006 by and between
Cypress Dallas, L.P., Cypress Ft. Worth, L.P. and ARC Management LLC.

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Schedule 7.3 - Post Closing Deliveries and Covenants

 
 
 

 

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Schedule 8.7 - Licensed Operators

 

None.
 
 

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Schedule 9.1(h) - Service Agreement

 
None
 
 

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