Exhibit 10.4
TERM LOAN AND SECURITY AGREEMENT
dated as of February 28, 2011
by and among
DIVERSICARE AFTON OAKS, LLC, DIVERSICARE BRIARCLIFF, LLC,
DIVERSICARE CHISOLM, LLC, and DIVERSICARE HARTFORD, LLC,
collectively, Borrower
and
THE PRIVATEBANK AND TRUST COMPANY,
as Administrative Agent for the Lenders
and
The Financial Institutions Parties Hereto as the Lenders

 

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TERM LOAN AND SECURITY AGREEMENT
     This TERM LOAN AND SECURITY AGREEMENT (this “Agreement”), dated as of
February 28, 2011, is by and among DIVERICARE AFTON OAKS, LLC, DIVERSICARE
BRIARCLIFF, LLC, DIVERSICARE CHISOLM, LLC and DIVERSICARE HARTFORD, LLC, each a
Delaware limited liability company (individually and collectively, the
“Borrower”), THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation
in its individual capacity (“PrivateBank”), and the other financial institutions
parties hereto (together with PrivateBank, the “Lenders”), and THE PRIVATEBANK
AND TRUST COMPANY, an Illinois banking corporation in its capacity as
administrative agent for the Lenders (together with its successors and assigns,
the “Administrative Agent”).
RECITALS
     WHEREAS, Diversicare Leasing Corp., a Tennessee corporation (“Pledgor”),
legally and beneficially owns or controls all of the issued and outstanding
Stock of each Borrower;
     WHEREAS, the Borrower has requested that the Lenders provide the Borrower
with a certain term loan;
     WHEREAS, in connection with this Agreement, certain Affiliates of the
Borrower are entering into that certain Amended and Restated Revolving Loan and
Security Agreement to be dated of even date herewith by and among such
Affiliates of the Borrower, the Lenders and Administrative Agent (as the same
may be amended, supplemented or modified from time to time, the “Revolving Loan
Agreement”); and
     WHEREAS, the Lenders are willing to make such term loan to the Borrower,
upon the terms and provisions and subject to the conditions set forth herein.
     NOW, THEREFORE, in consideration of the mutual agreements contained herein,
and of the term loan to be made to or for the benefit of the Borrower by the
Lenders, and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto (intending to be legally
bound) hereby agree as follows:
     1. DEFINITIONS.
          1.1 General Terms. When used herein, the following terms shall have
the following meanings:
     “ACH Transactions” means any cash management or related services (including
the Automated Clearing House processing of electronic fund transfers through the
direct Federal Reserve Fedline system) provided by any Lender for the account of
Borrower or its Subsidiaries.
     “Administrative Agent” means The PrivateBank and Trust Company, an Illinois
banking corporation, in its capacity as administrative agent for the Lenders
hereunder and any successor thereto in such capacity.

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     “Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling (including, without limitation, all shareholders,
members, directors, partners, managers, and officers of such Person), controlled
by, or under direct or indirect common control with, such Person. A Person shall
be deemed to control another Person if such first Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through ownership of voting securities,
by contract or otherwise.
     “Affiliated Revolving Borrowers” means each of the entities identified on
Schedule 1 attached hereto.
     “Affiliate Revolving Loan Financing Agreement” means each “Financing
Agreement” as defined in the Revolving Loan Agreement, as any of the same may be
restated, modified, supplemented or amended from time to time.
     “Affiliate Revolving Loan Liabilities” means the “Liabilities” as defined
in the Revolving Loan Agreement.
     “Agreement” means this Term Loan and Security Agreement as the same may be
restated, modified, supplemented or amended from time to time.
     “Allocable Amount” shall have the meaning ascribed to such term in Section
12.21(g) hereof.
     “Applicable Libor Margin” means, with respect to Libor Loans, an amount
equal to four hundred fifty (450) basis points.
     “Appraisal” means a complete, self-contained appraisal of the Property
performed in accordance with FIRREA and the Administrative Agent’s appraisal
requirements by an independent appraiser MAI licensed in the state in which the
Property is located and selected and retained by the Administrative Agent.
     “Assignment Agreement” shall have the meaning ascribed to such term in
Section 12.15 hereof.
     “Assignment of Rents and Leases” means each of those certain Assignment of
Rents and Leases dated of even date herewith made by Borrower in favor of the
Administrative Agent, with respect to each parcel of Property, respectively, in
form and substance reasonably satisfactory to the Administrative Agent, as the
same may be amended, supplemented, and modified from time to time.
     “Bank Product” means (a) any of the following financial accommodations
extended to Borrower or its Subsidiaries by any Lender: (i) ACH Transactions,
(ii) cash and treasury management, including controlled disbursement, accounts
or services, or (iii) any transaction under or pursuant to any Hedging
Agreement, and (b) any other service or facility extended to the Borrower by any
Lender or any Affiliate of such Lender including: (i) credit cards, (ii) credit
card processing services, (iii) debit cards, or (iv) purchase cards; provided
that consistent with

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Section 8.9 hereof the Deposit Accounts specified therein shall be maintained
with PrivateBank and not any other Lender.
     “Bank Product Agreements” means those agreements entered into from time to
time by Borrower or its Subsidiaries with any Lender in connection with the
obtaining of any of the Bank Products.
     “Bank Product Obligations” means all obligations, liabilities,
reimbursement obligations, fees, or expenses owing by Borrower or its
Subsidiaries to Lenders pursuant to or evidenced by a Bank Product Agreement and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising.
     “Base Rate” means, solely with respect to Sections 2.7(b), 3.2, 3.6 and 3.7
hereof, the greater of (a) the corporate base rate of interest per annum
identified from time to time by the Administrative Agent, as its base or prime
rate, which rate shall not necessarily be the lowest rate of interest which the
Administrative Agent charges its customers, and (b) the greater of (i) two
percent (2.0%) per annum, and (ii) the Libor Rate as in effect immediately
before such time as the Libor Base Rate became unavailable. Any change in the
Base Rate shall be effective as of the effective date of such change.
     “Base Rate Loan” means a Loan that bears interest at an interest rate based
upon the Base Rate, solely with respect to Sections 2.7(b), 3.2, 3.6 and 3.7
hereof.
     “Blocked Persons List” shall have the meaning ascribed to such term in
Section 7.29 hereof.
     “Borrower Agent” means Diversicare Management Services Co., a Tennessee
corporation.
     “Borrower Cash Management Program” means the business practice of Guarantor
and Borrowers whereby cash receipts for Guarantor, Borrowers and the Affiliated
Revolving Borrowers are transferred/swept into a central concentration account
and all cash disbursements are funded by transfers from such central
concentration account.
     “Business Day” means (a) with respect to any borrowing, payment or rate
selection of Libor Loans, a day other than Saturday or Sunday on which banks are
open for business in Chicago, Illinois and on which dealings in United States
dollars are carried on in the London interbank market, and (b) for all other
purposes, a day other than Saturday or Sunday on which banks are open for
business in Chicago, Illinois.
     “Capitalized Lease Obligations” means any amount payable with respect to
any lease of any tangible or intangible property (whether real, personal or
mixed), however denoted, which either (a) is required by GAAP to be reflected as
a liability on the face of the balance sheet of the lessee thereunder, or
(b) based on actual circumstances existing and ascertainable, either at the
commencement of the term of such lease or at any subsequent time at which any
property becomes subject thereto, can reasonably be anticipated to impose on
such lessee substantially the same economic risks and burdens, having regard to
such lessee’s obligations and the lessor’s rights thereunder both during and at
the termination of such lease, as would be imposed on such

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lessee by any lease which is required to be so reflected or by the ownership of
the leased property. For avoidance of doubt, prepaid leases shall not be deemed
“Capital Lease Obligations” except to the extent required under GAAP.
     “Capmark” means Capmark Finance Inc., a California corporation.
     “Cash Cost of Self-Insured Professional and General Liability” means the
total cash expenditures associated with professional and general liability
related settlements, legal fees and administration costs for all facilities
owned or leased by the Borrower. For purposes of measuring the Cash Cost of
Self-Insured Professional and General Liability for individual facilities or
groups of facilities, these amounts shall be allocated on the basis of licensed
beds of the facility or group of facilities in relation to the total number of
licensed beds for all facilities owned or leased by the Borrower.
     “CERCLA” means the Comprehensive Environmental Release Compensation and
Liability Act, 42 U.S.C. § 9601 et seq., as amended.
     “Certificates” shall have the meaning ascribed to such term in Section
5.1(e)(7) hereof.
     “CHAMPUS” means the Civilian Health and Medical Program of the Uniformed
Service, a part of TRICARE, a medical benefits program supervised by the U.S.
Department of Defense.
     “Closing Date” means February 28, 2011.
     “Closing Fee” shall have the meaning ascribed to such term in Section 2.16
hereof.
     “CMS” means the Centers for Medicare and Medicaid Services of HHS and any
Person succeeding to the functions thereof.
     “Collateral” shall have the meaning ascribed to such term in Section 6.1
hereof.
     “Commercial Leases” means the collective reference to all Leases other than
admission agreements or residency agreements.
     “Commitment” means the Term Loan Commitment.
     “Compliance Certificate” shall have the meaning ascribed to such term in
Section 8.1(c) hereof.
     “CON” shall have the meaning ascribed to such term in Section 10.2 hereof.
     “Credit Party” means each Borrower, the Guarantor, and each other Person
that is or becomes primarily or secondarily liable for the Liabilities, whether
as a principal, surety, guarantor, endorser or otherwise.
     “Credit Termination Date” means the earlier of (i) the Stated Maturity
Date, (ii) such other date on which the Commitments shall terminate pursuant to
Section 11.2 hereof, or (iii)

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such other date as is mutually agreed in writing between the Borrower and the
Administrative Agent.
     “Default” means an event, circumstance or condition which through the
passage of time or the service of notice or both would (assuming no action is
taken to cure the same) mature into an Event of Default.
     “Default Rate” shall have the meaning ascribed to such term in
Section 2.7(a) hereof.
     “Defaulting Lender” means any Lender that (a) has failed to fund its
portion of the Loan required to be funded by it hereunder at Closing, (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender any
other amount required to be paid by it hereunder within one Business Day of the
date when due, unless the subject of a good faith dispute or unless such failure
has been cured, or (c) has been deemed insolvent or become the subject of a
bankruptcy or insolvency proceeding.
     “Deposit Accounts” means any deposit, securities, operating, lockbox,
blocked or cash collateral account, together with any funds, instruments or
other items credited to any such account from time to time, and all interest
earned thereon.
     “Duly Authorized Officer” means the Chief Executive Officer, the President,
the Chief Operating Officer, the Chief Financial Officer and the Assistant
Secretary of the Borrower.
     “Environmental Indemnity Agreement” means that certain Environmental
Indemnity Agreement of even date herewith made by the Borrower in favor of the
Administrative Agent, in form and substance acceptable to the Administrative
Agent, as the same may be amended or modified from time to time.
     “Environmental Laws” means all federal, state, local, and foreign statutes,
regulations, ordinances, and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations, and all common
law concerning public health and safety, worker health and safety, pollution, or
protection of the environment, including all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances,
or wastes, chemical substances, or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, or radiation, including, without limitation,
the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., as
amended; CERCLA; the Toxic Substance Act, 15 U.S.C. § 2601 et seq., as amended;
the Clean Water Act, 33 U.S.C. § 466 et seq., as amended; the Clean Air Act, 42
U.S.C. § 7401 et seq., as amended; state and federal superlien and environmental
cleanup programs; and U. S. Department of Transportation regulations.
     “Environmental Notice” means any summons, citation, directive, information
request, notice of potential responsibility, notice of violation or deficiency,
order, claim, complaint, investigation, proceeding, judgment, letters or other
communication, written or oral to the Borrower or any officer thereof, actual or
threatened, from the United States Environmental Protection Agency or other
federal, state or local agency or authority, or any other entity or

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individual, public or private, concerning any intentional or unintentional act
or omission which involves Management of Hazardous Substances on or off the
property of the Borrower which could result in the Borrower incurring a material
liability or which could have a Material Adverse Effect, or the imposition of
any Lien on property, or any alleged violation of or responsibility under
Environmental Laws which could result in the Borrower incurring a material
liability or which could have a Material Adverse Effect, and, after due inquiry
and investigation, any knowledge of any facts which could give rise to any of
the foregoing.
     “Equipment” means “equipment” as defined in the Code, including, without
limitation, any and all of the Borrower’s machinery, equipment, vehicles,
fixtures, furniture, computers, appliances, tools, and other tangible personal
property (other than Inventory), whether located on the Borrower’s premises or
located elsewhere, together with any and all accessions, parts and appurtenances
thereto, whether presently owned or hereafter acquired by the Borrower.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, together with the regulations thereunder.
     “ERISA Affiliate” means any corporation, trade or business, which together
with the Borrower would be treated as a single employer under Section 4001 of
ERISA.
     “Event of Default” shall have the meaning ascribed to such term in Section
11.1 hereof.
     “Existing Lender Refinancing” means the refinancing of all Indebtedness
owed to Capmark from the proceeds of the Term Loan.
     “Facility” or “Facilities” shall mean any one or more of the skilled
nursing homes or facilities located on the Property as further identified on
Schedule 1.1(a).
     “Fee Letter” means that certain letter agreement dated February 28, 2011 by
and between PrivateBank and Borrower, pursuant to which, among other things, the
arrangement relating to compensation for certain services rendered by the
Administrative Agent is set forth (together with any similar letter from
Administrative Agent to the Lenders regarding their respective share of any
particular fee payable by Borrower).
     “Financing Agreements” means any and all agreements, instruments,
certificates and documents, including, without limitation, security agreements,
loan agreements, notes, guarantees, keep well agreements, landlord waivers,
mortgages, deeds of trust, subordination agreements, intercreditor agreements,
pledges, powers of attorney, consents, assignments, collateral assignments,
interest rate protection agreements, reimbursement agreements, contracts,
notices, leases, subordination and attornment agreement, collateral assignments
of key man life insurance policies, financing statements and all other written
matter (including, without limitation, this Agreement, the Term Loan Notes, the
Mortgages, the Assignment of Rents and Leases, the Environmental Indemnity
Agreement, the Subordination of Management Agreements, the Guaranty, the Pledge
Agreement, the Certificates, the Fee Letter, each Hedging Agreement and any
other Bank Product Agreement), in each case evidencing, securing or relating to
the Loan and the Liabilities, whether heretofore, now, or hereafter executed by
or on behalf of the Borrower, any Affiliate, or any other Person, and delivered
to or in favor of the Administrative Agent or any Lender, together with all
agreements and documents referred to

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therein or contemplated thereby, as each may be amended, modified or
supplemented from time to time.
     “FIRREA” means the Financial Institutions Reform, Recovery And Enforcement
Act of 1989, as amended from time to time.
     “Fiscal Quarter” means the three (3) month period ending on March 31,
June 30, September 30 and December 31 of each calendar year.
     “Fiscal Year” means the twelve (12) month period commencing on January 1
and ending on December 31 of each calendar year.
     “GAAP” means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or any successor authority) that are
applicable to the circumstances as of the date of determination.
     “General Intangibles” means “general intangibles” as defined in the Code,
including, without limitation, any and all general intangibles, choses in
action, causes of action, rights to the payment of money (other than Accounts),
and all other intangible personal property of the Borrower of every kind and
nature wherever located and whether currently owned or hereafter acquired by the
Borrower (other than Accounts), including, without limitation, corporate or
other business records, inventions, designs, patents, patent applications,
service marks, service mark applications, trademark applications, brand names,
trade names, trademarks and all goodwill symbolized thereby and relating
thereto, trade styles, trade secrets, registrations, domain names, websites,
computer software, advertising materials, distributions on certificated and
uncertificated securities, investment property, securities entitlements,
goodwill, operational manuals, product formulas for industrial processes,
blueprints, drawings, copyrights, copyright applications, rights and benefits
under contracts, licenses, license agreements, permits, approvals,
authorizations which are associated with the operation of the Borrower’s
business and granted by any Person, franchises, customer lists, deposit
accounts, tax refunds, tax refund claims, and any letters of credit, guarantee
claims, security interests or other security held by or granted to the Borrower
to secure payment by an Account Debtor of any of Borrower’s Accounts, and, to
the maximum extent permitted by applicable Law, any recoveries or amounts
received in connection with any litigation or settlement of any litigation.
     “Governing Documents” shall have the meaning ascribed to such term in
Section 9.14 hereof.
     “Governmental Approvals” means, collectively, all consents, licenses, and
permits and all other authorizations or approvals required from any Governmental
Authority to operate the Locations.
     “Governmental Authority” means and includes any federal, state, District of
Columbia, county, municipal, or other government and any political subdivision,
department, commission, board, bureau, agency or instrumentality thereof,
whether domestic or foreign.

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     “Guarantor” means Advocat Inc., a Delaware corporation in its capacity as
the guarantor pursuant to the Guaranty or as otherwise provided in this
Agreement.
     “Guaranty” means that certain Guaranty of even date herewith by Guarantor
in favor of the Administrative Agent, as the same may be amended, restated,
reaffirmed, modified or supplemented from time to time.
     “Hazardous Substances” means hazardous substances, materials, wastes, and
waste constituents and reaction by-products, pesticides, oil and other petroleum
products, and toxic substances, including, without limitation, asbestos and
PCBs, as those terms are defined pursuant to Environmental Laws.
     “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, assisted living 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, but not limited to the federal
Anti-Kickback Statute (42 U.S.C. §1320a-7b(6)), the Stark Law (42 U.S.C.
§1395nn), the civil False Claims Act (31 U.S.C. §3729 et seq.); (b) TRICARE;
(c) CHAMPUS, (d) Medicare; (e) Medicaid; (f) HIPAA; (g) quality, safety and
accreditation standards and requirements of all applicable state laws or
regulatory bodies; (h) all laws, policies, procedures, permits, requirements,
certifications, and regulations pursuant to which licenses, approvals and
accreditation certificates are issued in order to operate medical, senior
housing facilities, assisted living facilities, or skilled nursing facilities;
and (i) any and all other applicable health care laws, regulations, manual
provisions, policies and administrative guidance, each of (a) through (i) as may
be amended from time to time.
     “Hedging Agreement” means any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices, in each case in form and substance
satisfactory to the Administrative Agent, as the same may be amended or modified
from time to time; provided, Borrower will only enter into any such Hedging
Agreement with PrivateBank and no other bank or financial institution.
     “HHS” means the United States Department of Health and Human Services and
any Person succeeding to the functions thereof.
     “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.
     “HUD” means the United States Department of Housing and Urban Development
and any successor thereto.
     “HUD Financing” means an Indebtedness of a Borrower or Borrowers that is
insured by HUD under one of its programs for HUD insured loans for long term
care facilities, including a

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HUD insured loan under Section 223(f) for senior housing facilities and
Section 232 for nursing home and assisted living facilities of the National
Housing Act, and any refinancing, refunding, extension or renewal thereof, and
which Indebtedness is to be secured by the assets and properties owned or held
by such Borrower or Borrowers, including the Facility or Facilities owned and
operated by such Borrower or Borrowers.
     “Indebtedness” with respect to any Person means, as of the date of
determination thereof, (a) all of such Person’s indebtedness for borrowed money,
(b) all indebtedness of such Person or any other Person secured by any Lien with
respect to any property or asset owned or held by such Person, regardless
whether the indebtedness secured thereby shall have been assumed by such Person
or such Person has become liable for the payment thereof, (c) all Capitalized
Lease Obligations of such Person and obligations or liabilities created or
arising under conditional sale or other title retention agreement with respect
to property used and/or acquired by Borrower even though the rights and remedies
of the lessor, seller and/or lender thereunder are limited to repossession of
such property, (d) all unfunded pension fund obligations and liabilities,
(e) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (f) all obligations in respect of letters of credit,
whether or not drawn, and bankers’ acceptances issued for the account of such
Person, (g) deferred and/or accrued taxes and all unfunded pension fund
obligations and liabilities, (h) all guarantees by such Person, or any
undertaking by such Person to be liable for, the debts or obligations of any
other Person, described in clauses (a) through (h), and (i) all Bank Product
Obligations of such Person.
     “Indemnified Parties” shall have the meaning ascribed to such term in
Section 12.16 hereof.
     “Intellectual Property” means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all material advertising and
promotional materials, (h) all other proprietary rights, and (i) all copies and
tangible embodiments thereof (in whatever form or medium).
     “Inventory” means “inventory” as defined in the Code, including, without
limitation, any and all inventory and goods of the Borrower, wheresoever
located, whether now owned or hereafter acquired by the Borrower, which are held
for sale or lease, furnished under any contract of service or held as raw
materials, work-in-process or supplies, and all materials used or

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consumed in the Borrower’s business, and shall include such property the sale or
other disposition of which has given rise to Accounts and which has been
returned to or repossessed or stopped in transit by the Borrower.
     “Joint Liability Payment” shall have the meaning ascribed to such term in
Section 12.21(g) hereof.
     “Laws” means, collectively, all federal, state and local laws, statutes,
codes, ordinances, orders, rules and regulations, including judicial opinions or
presidential authority in the applicable jurisdiction and Healthcare Laws and
Environmental Laws, now or hereafter in effect, and in each case as amended or
supplemented from time to time.
     “Leases” means all leases, subleases, licenses, concessions and other
agreements (written or oral), including all amendments, extensions, renewals,
guaranties, and other agreements with respect thereto, pursuant to which the
Borrower holds any leased real property (including, without limitation, the
Commercial Leases and Operating Leases).
     “Lender Parties” shall have the meaning ascribed to such term in
Section 12.24 hereof.
     “Liabilities” means any and all of each of the Borrower’s liabilities,
obligations and Indebtedness to the Lenders and the Administrative Agent of any
and every kind and nature, whether heretofore, now or hereafter owing, arising,
due or payable and howsoever evidenced, created, incurred, acquired, or owing,
whether primary, secondary, direct, indirect, contingent, absolute, fixed or
otherwise (including, without limitation, payments of or for principal,
interest, default interest, reimbursement obligations, interest rate hedging
obligations fees, costs, expenses, and/or indemnification, and obligations of
performance, and the Closing Fee, the Prepayment Premium, and all Bank Product
Obligations, and any interest that accrues after commencement of any insolvency
or bankruptcy proceeding regardless of whether allowed or allowable in whole or
in part as a claim in any such insolvency or bankruptcy proceeding) and whether
arising or existing under written agreement, oral agreement, or by operation of
law, including, without limitation, all of each Borrower’s Indebtedness,
liabilities and obligations to the Lenders and the Administrative Agent under
this Agreement (whether relating to the Loan or otherwise and including, without
limitation, all of each Borrower’s Bank Product Obligations) or each Hedging
Agreement and any and all other Financing Agreements to which Borrower is a
party, and any refinancings, substitutions, extensions, renewals, replacements
and modifications for or of any or all of the foregoing.
     “Libor Base Rate” means a rate of interest equal to (a) the per annum rate
of interest at which United States dollar deposits in an amount comparable to
the amount of the relevant Libor Loan and for a period equal to the Libor
Interest Period are offered in the London Interbank Eurodollar market at
11:00 A.M. (London time) two (2) Business Days prior to the commencement of such
Libor Interest Period (or three (3) Business Days prior to the commencement of
such Libor Interest Period if banks in London, England were not open and dealing
in offshore United States dollars on such second preceding Business Day), as
displayed in the Bloomberg Financial Markets system (or other authoritative
source selected by the Administrative Agent in its sole discretion) or, if the
Bloomberg Financial Markets system or another authoritative source is not
available, as the Libor Base Rate is otherwise determined by

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the Administrative Agent in its sole and absolute discretion, divided by (b) a
number determined by subtracting from 1.00 the then stated maximum reserve
percentage for determining reserves to be maintained by member banks of the
Federal Reserve System for Eurocurrency funding or liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D), such
rate to remain fixed for such Libor Interest Period. The Administrative Agent’s
determination of the Libor Base Rate shall be conclusive, absent manifest error.
     “Libor Interest Period” means, with respect to any Libor Loan, successive
one (1) month periods, provided, however, that: (a) each Libor Interest Period
occurring after the initial Libor Interest Period of any Libor Loan shall
commence on the day on which the preceding Libor Interest Period for such Libor
Loan expires, with interest for such day to be calculated at the Libor Rate in
effect for the new Libor Interest Period; (b) whenever the last day of any Libor
Interest Period would otherwise occur on a day other than a Business Day, the
last day of such Libor Interest Period shall be extended to occur on the next
succeeding Business Day; (c) whenever the first day of any Libor Interest Period
occurs on a date for which there is no numerically corresponding date in the
month in which such Libor Interest Period terminates, such Libor Interest Period
shall end on the last day of such month, unless such day is not a Business Day,
in which case the Libor Interest Period shall terminate on the first Business
Day of the following month, provided, further, that so long as the Libor
Rollover remains in effect, all subsequent Libor Interest Periods shall
terminate on the date of the month numerically corresponding to the date on
which the initial Libor Interest Period commenced; and (D) if at any time the
Libor Interest Period for a Libor Loan expires less than one month before the
Stated Maturity Date, such Libor Loan shall automatically renew at the then
current Libor Rate for a Libor Interest Period terminating on the Stated
Maturity Date.
     “Libor Loan” means a Loan which bears interest at a Libor Rate.
     “Libor Rate” means, with respect to a Libor Loan for the relevant Libor
Interest Period, the sum of the Libor Base Rate applicable to that Libor
Interest Period, plus the Applicable Libor Margin.
     “Libor Rollover” means that each Libor Loan shall automatically renew for
the Libor Interest Period specified in this Agreement at the then current Libor
Rate, except that a Libor Interest Period for a Libor Loan shall not
automatically renew with respect to any principal amount which is scheduled to
be repaid before the last day of the applicable Libor Interest Period, and any
such amounts shall bear interest at the Base Rate, until repaid.
     “Licenses” shall have the meaning ascribed to such term in Section 10.2
hereof
     “Lien” means any lien, security interest, mortgage, pledge, hypothecation,
collateral assignment, or other charge, encumbrance or preferential arrangement,
including, without limitation, the retained security title of a conditional
vendor or lessor.
     “Loan Account” shall have the meaning ascribed to such term in Section 2.5
hereof.
     “Loan” means the Term Loan, and, if applicable, any and all other advances
made by the Lenders (or, if applicable, the Administrative Agent) to the
Borrower pursuant to the terms of this Agreement or any other Financing
Agreement.

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     “Location” or “Locations” mean one or more of the healthcare or other
facilities owned by the Borrower on the Property as identified on
Schedule 1.1(a) hereto.
     “Manage” or “Management” means to generate, handle, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or burn for energy
recovery, incinerate, accumulate speculatively, transport, transfer, dispose of,
release, threaten to release or abandon Hazardous Substances.
     “Management Agreements” means, collectively, those certain Management
Agreements between (i) Manager and each Borrower for the operation and
management of the Facilities and (ii) Manager and Diversicare Therapy Services,
LLC, for bookkeeping, accounting, payroll, billing and management of its
contract therapy services.
     “Manager” means Diversicare Management Services Co.
     “Material Adverse Change” or “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, any of the following: (a) a material
adverse change in, or a material adverse effect upon, the financial condition,
operations, business or properties of the Credit Parties, taken as a whole,
(b) a material adverse change in, or a material adverse effect upon, the rights
and remedies of the Administrative Agent or the Lenders under any Financing
Agreement or the ability of the Credit Parties, taken as a whole, to perform
their payment or other obligations under any Financing Agreement to which they
are parties, (c) a material adverse change in, or a material adverse effect
upon, the legality, validity or enforceability of any Financing Agreement, (d) a
material adverse change in, or a material adverse effect upon, the existence,
perfection or priority of any security interest granted in any Financing
Agreement or the value of any material Collateral not resulting from any action
or inaction by the Administrative Agent, or (e) any liability of the Credit
Parties, or any one or more of them, in excess of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate as a result the final adjudication
of one or more violations of any Healthcare Law which remains unpaid for a
period of thirty (30) days, unless such liability is being contested or appealed
by appropriate proceedings and Borrower has established appropriate reserves
adequate for payment in the event such appeal or contest is ultimately
unsuccessful, provided further that in the event such contest or appeal is
ultimately unsuccessful, the Borrower shall pay the assessment no later than the
deadline set forth by the applicable agency.
     “Maximum Term Facility” means an amount equal to Twenty-Three Million and
No/100 Dollars ($23,000,000.00).
     “Medicaid” mean collectively all federal statutes (whether set forth in
Title XIX of the Social Security Act or elsewhere) affecting the health
insurance program established by Title XIX of the Social Security Act (42 U.S.C.
§§ 1396, et seq.), together with all applicable provisions of all rules,
regulations, manuals, final orders and administrative, reimbursement and other
applicable guidelines of all governmental authorities, including HHS, CMS or the
Office of

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the Inspector General of HHS, or any Person succeeding to the functions of any
of the foregoing (whether or not having the force of law).
     “Medicare” mean collectively all federal statutes (whether set forth in
Title XVIII of the Social Security Act or elsewhere) affecting the health
insurance program for the aged and disabled established by Title XVIII of the
Social Security Act (42 U.S.C. § 1395, et seq.), together with all applicable
provisions of all rules, regulations, manuals, final orders and administrative,
reimbursement and other applicable guidelines of all governmental authorities,
including HHS, CMS or the Office of the Inspector General of HHS, or any Person
succeeding to the functions of any of the foregoing (whether or not having the
force of law).
     “Mortgages” means, collectively, each of those certain Mortgage, Deed of
Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing
dated of even date herewith made by the Borrower, respectively, granting and
conveying to the Administrative Agent for the ratable benefit of the Lenders a
first mortgage Lien on that certain Property as identified on Schedule 1.1(b),
as the same may be amended, restated, supplemented or modified from time to time
     “Multiemployer Plan” shall have the meaning ascribed to such term in
Section 7.19 hereof.
     “Non-U.S. Participant” shall have the meaning ascribed to such term in
Section 3.3 hereof.
     “OFAC Lists” means, collectively, the Specially Designated Nationals and
Blocked Persons List maintained by the Office of Foreign Asset Control, the
Department of the Treasury pursuant to Executive Order No. 13224, 66 Fed. Reg.
49079 (Sept. 25, 2001) and/or any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of or by
the Office of Foreign Asset Control, the Department of the Treasury or pursuant
to any other applicable Executive Orders.
     “Operating Lease” means the collective reference to any Commercial Leases
between the Borrower and any Operators, respectively, pursuant to which such
Operators lease and operate each Location.
     “Operators” or “Operator” means the respective operators of the Locations,
all of which are licensed under all applicable Healthcare Laws.
     “Participant” shall have the meaning ascribed to such term in
Section 12.15(d) hereof.
     “Patriot Act” shall have the meaning ascribed to such term in Section 8.16
hereof.
     “PBGC” shall have the meaning ascribed to such term in Section 7.19 hereof.
     “Permitted Liens” shall have the meaning ascribed to such term in
Section 9.1 hereof.
     “Person” means any individual, sole proprietorship, partnership, joint
venture, trust, limited liability company, unincorporated organization,
association, corporation, institution,

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entity, party, or government (whether national, federal, state, provincial,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
     “Plan” shall have the meaning ascribed to such term in Section 7.19 hereof.
     “Pledge Agreement” means that certain Pledge Agreement of even date
herewith made by Pledgor in favor of the Administrative Agent, in form and
substance reasonable satisfactory to the Administrative Agent, as the same may
be modified, restated, supplemented or amended from time to time in accordance
with the terms thereof.
     “Pledgor” means Diversicare Leasing Corp., a Tennessee corporation.
     “Prepayment Premium” means, with respect to prepayment of the Loan, three
percent (3%) of the amount of the outstanding principal balance of the Loan
prepaid if such prepayment occurs on or prior to the first (1st) year
anniversary of the Closing Date; two percent (2%) of the amount of the
outstanding principal balance of the Loan prepaid if such prepayment occurs
after the first anniversary hereof and on or prior to the second (2nd) year
anniversary of the Closing Date; and one percent (1%) of the amount of the
outstanding principal balance of the Loan prepaid if such prepayment occurs
after the second anniversary hereof and on or prior to the third (3rd)
anniversary of the Closing Date; provided, for the avoidance of doubt, there
will be no Prepayment Premium if any such prepayment occurs after the third
(3rd) year anniversary of the Closing Date.
     “Pro Rata Share” means (a) with respect to a Lender’s obligation to make a
portion of the Loan hereunder and right to receive payments of principal,
interest and fees with respect to the Term Loan, the Term Loan Commitment
Percentage of such Lender, and (b) for all other purposes to any Lender, the
percentage obtained by dividing (i) such Lender’s then outstanding principal
amount of the Loan, by (ii) the then aggregate outstanding principal amount of
the Loan of all Lenders.
     “Prohibited Transaction” shall have the meaning ascribed to such term in
ERISA.
     “Property” means any and all real property owned, leased, sub-leased or
used at any time by Borrower, including the real estate identified on
Schedule 1.1(b).
     “Register” shall have the meaning ascribed to such term in Section 12.15(d)
hereof.
     “Release” means any actual or threatened spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of Hazardous Substances into the environment, as “environment” is
defined in CERCLA.
     “Released Parties” shall have the meaning ascribed to such term in Section
12.24 hereof.
     “Releasing Parties” shall have the meaning ascribed to such term in Section
12.24 hereof.
     “Required Lenders” means, as of any date of determination, (a) if there are
three (3) or fewer Lenders, Lenders holding one hundred percent (100%) of the
sum of the outstanding

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principal balance of the Loan (and the Term Loan Commitment), or (b) if there
are more than three (3) Lenders, Lenders holding sixty-six and two-thirds
percent (66-2/3%) or more of the sum of the outstanding principal balance of the
Loan (and the Term Loan Commitment), provided, that the commitments of, and the
portion of the Liabilities held or deemed held by, any Defaulting Lender shall
be excluded for purposes of making a determination of Required Lenders.
     “Respond” or “Response” means any action taken pursuant to Environmental
Laws to correct, remove, remediate, cleanup, prevent, mitigate, monitor,
evaluate, investigate or assess the Release of a Hazardous Substance.
     “Restricted Agreements” means, collectively, each Management Agreement,
Commercial Lease, agreement, document or instrument entered into in connection
with (directly or indirectly) the Cash Management Program, any other agreement,
document or instrument between or among the Credit Parties and any agreement,
document or instrument pertaining to (directly or indirectly) any of the
foregoing.
     “Restrictions” shall have the meaning ascribed to such term in Section 10.3
hereof.
     “Revolving Loan Agreement” means that certain Amended and Restated
Revolving Loan and Security Agreement dated of even date herewith by and among
the Affiliated Revolving Borrowers, the Lenders and the Administrative Agent, as
the same may be restated, modified, supplemented or amended from time to time.
     “Service Fee” shall have the meaning ascribed to such term in Section 8.9
hereof.
     “Solvent” means, with respect to any Person on a particular date, that on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including contingent liabilities, of such Person;
(b) the present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person’s property would constitute
an unreasonably small capital. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability, but shall not include incurred but not
reported professional liability claims.
     “Stated Maturity Date” means February 28, 2016.
     “Stock” shall mean all certificated and uncertificated shares, options,
warrants, general or limited partnership interests, membership interests or
units, limited liability company interests, participation or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity whether voting or nonvoting, including
common stock, preferred stock, or any other “equity security” (as such term is
defined

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in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934).
     “Subordinated Debt” means any and all Indebtedness owing by the Borrower to
a third party that has been subordinated to the Liabilities in writing on terms
and conditions satisfactory to the Administrative Agent in its sole and absolute
discretion.
     “Subordination Agreement” means, collectively, any subordination agreements
entered into from time to time by holders of Subordinated Debt and the
Administrative Agent, each in form and substance satisfactory to the
Administrative Agent in its sole and absolute discretion, each as the same may
be modified, supplemented, amended or restated from time to time.
     “Subordination of Management Agreements” means that certain Subordination
of Management Agreements of even date herewith made by the Manager in favor of
the Administrative Agent, in form and substance reasonable satisfactory to the
Administrative Agent, as the same may be modified, restated, supplemented or
amended from time to time in accordance with the terms thereof.
     “Subsidiary” means, with respect to any Person, (i) any corporation of
which an aggregate of more than fifty percent (50%) of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, 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 and/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 fifty percent (50%) or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (ii) any partnership or
limited liability company in which such Person or one or more Subsidiaries of
such Person has an equity interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%) or of which any such Person is a general partner, managing member or
manager or may exercise the powers of a general partner, managing member or
manager.
     “Tax Code” shall have the meaning ascribed to such term in Section 7.19
hereof.
     “Taxes” shall have the meaning ascribed to such term in Section 3.3 hereof.
     “Tenant” means any tenant, resident or occupant under any Lease.
     “Term Loan” shall have the meaning ascribed to such term in Section 2.1
hereof.
     “Term Note(s)” shall have the meaning ascribed to such term in Section 2.1
hereof.
     “Term Loan Commitment” shall have the meaning ascribed to such term in
Section 2.1 hereof.
     “Term Loan Commitment Percentage” means, as to any Lender, the percentage
set forth opposite such Lender’s name on Annex A hereto under the column “Term
Loan Commitment

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Percentage”, or, if different, in the most recent Assignment Agreement to which
such Lender is a party.
     “TRICARE” means the medical program for active duty members, qualified
family members, CHAMPUS eligible retirees and their family members and
survivors, of all uniformed services.
     “Uniform Commercial Code” or “UCC” or “Code” means the Uniform Commercial
Code as the same may, from to time, be in effect in the State of Illinois;
provided, however, that if, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of, or remedies with respect to,
Administrative Agent’s Lien on the Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of Illinois,
the term “Uniform Commercial Code” or “UCC” or “Code” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions of this Agreement or the other Financing Agreements relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions; provided further that, to the extent that the
Uniform Commercial Code of a particular jurisdiction is used to define a term
herein or in any Financing Agreement and such term is defined differently in
different Articles or Divisions of such Uniform Commercial Code, then the
definition of such term contained in Article or Division 9 of such Uniform
Commercial Code shall control.
     “Withholding Certificate” shall have the meaning ascribed to such term in
Section 3.3 hereof.
          1.2 Interpretation.
               (1) All accounting terms used in this Agreement or the other
Financing Agreements shall have, unless otherwise specifically provided herein
or therein, the meaning customarily given such term in accordance with GAAP, and
all financial computations thereunder shall be computed, unless otherwise
specifically provided therein, in accordance with GAAP consistently applied;
provided, however, that all financial covenants and calculations in the
Financing Agreements shall be made in accordance with GAAP as in effect on the
Closing Date unless Borrower and Administrative Agent shall otherwise
specifically agree in writing. That certain items or computations are explicitly
modified by the phrase “in accordance with GAAP” shall in no way be construed to
limit the foregoing. Unless otherwise specified, references in this Agreement or
any of the attachments hereto or appendices hereof to a Section, subsection or
clause refer to such Section, subsection or clause as contained in this
Agreement. The words “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole, including all annexes,
exhibits and schedules attached hereto, as the same may from time to time be
amended, restated, modified or supplemented, and not to any particular section,
subsection or clause contained in this Agreement or any such annex, exhibit or
schedule.
               (2) Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders. The words “including”,
“includes” and “include” shall be deemed to be followed by the words “without
limitation”; the word “or” is not exclusive; references to Persons include

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their respective successors and assigns (to the extent and only to the extent
permitted by the Financing Agreements) or, in the case of governmental Persons,
Persons succeeding to the relevant functions of such Persons; and all references
to statutes and related regulations shall include any amendments of the same and
any successor statutes and regulations. Whenever any provision in any Financing
Agreement refers to the knowledge (or an analogous phrase) of Borrower, except
as otherwise expressly provided for herein, such words are intended to signify
that a Duly Authorized Officer of Borrower has actual knowledge or awareness of
a particular fact or circumstance or that a prudent individual in the position
of such Duly Authorized Officer of Borrower, would reasonably be expected to
have known or been aware of such fact or circumstance in the course of
performing his or her duties.
     2. COMMITMENT; INTEREST; FEES.
          2.1 Term Loan. On the terms and subject to the conditions set forth in
this Agreement, and provided there does not then exist a Default or an Event of
Default, each Lender, severally and for itself alone, agrees to make such
Lender’s Pro Rata Share of a term loan (the “Term Loan”) in one advance to the
Borrower on the Closing Date in the aggregate amount of the Maximum Term
Facility. Any amounts paid or applied to the principal balance of the Term Loan
(whether by mandatory prepayment or otherwise) may not be reborrowed hereunder.
The Lenders’ commitment hereunder to make the Term Loan is hereinafter called
the “Term Loan Commitment.” The payment obligations of the Borrower to the
Lenders hereunder are and shall be joint and several as provided in
Section 12.21 hereof. Each Lender’s obligation to fund the Term Loan shall be
limited to such Lender’s Term Loan Commitment Percentage of the Term Loan
Commitment.
               (1) The advance to the Borrower under this Section 2.1 shall be
deposited, in immediately available funds, in the Borrower’s demand deposit
account with the Administrative Agent, or in such other account as the Borrower
Agent designates in writing with the Administrative Agent’s approval.
               (2) The principal balance of the Term Loan shall be amortized
over twenty-five (25) years and shall be jointly and severally repaid by
Borrower in consecutive equal monthly installments as follows:

         
Year 1:
  $380,000 ($31,667/month)
Year 2:
  $410,000 ($34,167/month)
Year 3:
  $430,000 ($35,834/month)
Year 4:
  $460,000 ($38,334/month)
Year 5:
  $490,000 ($40,834/month)

     , together with interest accrued thereon, each payable on the first day of
each calendar month, commencing on April 1, 2011, and otherwise in accordance
with Section 2.7 hereof, with a final installment of the aggregate unpaid
principal balance of the Term Loan, together with interest accrued thereon,
payable on the Credit Termination Date.

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               (3) The Term Loan shall be evidenced by a separate promissory
note (hereinafter, as the same may be amended, restated, modified or
supplemented from time to time, and together with any renewals or extensions
thereof or exchanges or substitutions therefor, called the “Term Loan Note(s)”),
duly executed and delivered by the Borrower, substantially in the form set forth
in Exhibit A attached hereto, with appropriate insertions, dated the Closing
Date, jointly and severally payable to the order of each Lender, respectively,
in the principal amount equal to such Lender’s Pro Rata Share of the Maximum
Term Facility. THE PROVISIONS OF THE TERM LOAN NOTES NOTWITHSTANDING, THE TERM
LOAN THEN OUTSTANDING SHALL BECOME IMMEDIATELY DUE AND PAYABLE ON A JOINT AND
SEVERAL BASIS UPON THE EARLIEST TO OCCUR OF (X) STATED MATURITY DATE; (Y) THE
ACCELERATION OF THE LIABILITIES PURSUANT TO SECTION 11.2 HEREOF; AND
(Z) TERMINATION OF THIS AGREEMENT (WHETHER BY PREPAYMENT OR OTHERWISE) IN
ACCORDANCE WITH ITS TERMS.
               (4) Accrued interest on the Term Loan shall be due and payable
and shall be made by the Borrower to the Administrative Agent in accordance with
Section 2.7 hereof. Monthly interest payments on the Term Loan shall be computed
using the interest rate then in effect and based on the outstanding principal
balance of the Term Loan. Upon maturity, the outstanding principal balance of
the Term Loan shall be immediately due and payable, together with any remaining
accrued interest thereon.
          2.2 [Intentionally Omitted.].
          2.3 [Intentionally Omitted.].
          2.4 [Intentionally Omitted.]
          2.5 The Borrower’s Loan Account. The Administrative Agent, on behalf
of each Lender, shall maintain a loan account (the “Loan Account”) on its books
for the Borrower in which shall be recorded (a) the Loan made by the Lenders
(including Administrative Agent) to the Borrower pursuant to this Agreement,
(b) all payments made by the Borrower on the Loan, and (c) all other appropriate
debits and credits as provided in this Agreement, including, without limitation,
all fees, charges, expenses and interest. All entries in the Loan Account shall
be made in accordance with the Administrative Agent’s customary accounting
practices as in effect from time to time. The Borrower promises to pay the
amount reflected as owing by Borrower under its Loan Account and all of its
other obligations hereunder as such amounts become due or are declared due
pursuant to the terms of this Agreement. Notwithstanding the foregoing, the
failure so to record any such amount or any error in so recording any such
amount shall not limit or otherwise affect the Borrower’s obligations under this
Agreement or under the Term Loan Note to repay the outstanding principal amount
of the Loan together with all interest accruing thereon.
          2.6 Statements. The Loan to the Borrower, and all other debits and
credits provided for in this Agreement, shall be evidenced by entries made by
the Administrative Agent in its internal data control systems showing the date,
amount and reason for each such debit or

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credit. Until such time as the Administrative Agent shall have rendered to the
Borrower Agent written statements of account as provided herein, the balance in
the Loan Account, as set forth on the Administrative Agent’s most recent
computer printout, shall be rebuttably presumptive evidence of the amounts due
and owing the Lenders by the Borrower. From time to time the Administrative
Agent shall render to the Borrower Agent a statement setting forth the balance
of the Loan Account, including principal, interest, expenses and fees. Each such
statement shall be subject to subsequent adjustment by the Administrative Agent
but shall, absent manifest errors or omissions, be presumed correct and binding
upon the Borrower.
          2.7 Interest. (a) The Borrower agrees to jointly and severally pay to
the Administrative Agent on behalf of the Lenders interest on the daily
outstanding principal balance of the Term Loan at the Libor Rate; provided,
however, that immediately following the occurrence and during the continuance of
an Event of Default, and notwithstanding any other provisions of this Agreement
to the contrary, the Borrower agrees to pay to the Administrative Agent on
behalf of the Lenders interest on the outstanding principal balance of the Loan
at the per annum rate of three percent (3%) plus the rate otherwise payable
hereunder with respect to such Loan (the “Default Rate”).
          (b) Accrued interest on each Libor Loan shall be payable on the last
day of the Libor Interest Period relating to such Libor Loan and at maturity,
commencing with the first such last day of the initial Libor Interest Period. If
at any time applicable in accordance with Sections 3.2, 3.6 or 3.7 hereof,
accrued interest on each Base Rate Loan shall be payable on the first calendar
day of each month and at maturity. Notwithstanding the foregoing in this
Section 2.7(b), the first interest payment hereunder shall be due and payable on
April 1, 2011. Monthly interest payments on the Loan shall be computed using the
interest rate then in effect and based on the outstanding principal balance of
the Loan. Upon maturity, the outstanding principal balance of the Loan shall be
immediately due and payable, together with any remaining accrued interest
thereon. Interest shall be computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). If any
payment of principal of, or interest on, the Term Loan Note falls due on a day
that is not a Business Day, then such due date shall be extended to the next
following Business Day, and additional interest shall accrue and be payable for
the period of such extension.
          2.8 Method for Making Payments. All payments that the Borrower is
required to make to the Administrative Agent on behalf of the Lenders under this
Agreement or under any of the other Financing Agreements shall be made in
immediately available funds not later than 1:00 p.m. (Chicago time) on the date
of payment at the Administrative Agent’s office at 120 South LaSalle Street,
Chicago, Illinois 60603, or at such other place as the Administrative Agent
directs in writing from time to time, or, in the Administrative Agent’s sole and
absolute discretion after the occurrence and during the continuance of any
Default, by appropriate debits to the Loan Account. Borrower hereby irrevocably
authorizes and instructs the Administrative Agent after the occurrence and
during the continuance of any Default to direct debit any of Borrower’s
operating accounts with Administrative Agent or any Lender for all principal,
interest, fees and expenses due hereunder with respect to the Loan and the other
Liabilities. Payments made after 1:00 p.m. (Chicago time) shall be deemed to
have been made on the next succeeding Business Day. Administrative Agent shall
promptly remit to each Lender its Pro

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Rata Share of all such payments received in collected funds by Administrative
Agent for the account of such Lender; provided, however, all payments due by
Borrower under Section 3, as applicable, shall be made by Borrower directly to
Lender entitled thereto without setoff, counterclaim or other defense.
          2.9 Term of this Agreement. The Borrower shall have the right to
terminate this Agreement following prepayment of all of the Liabilities as
provided under Section 2.10 hereof; provided, however, that (a) all of the
Administrative Agent’s and each Lender’s rights and remedies under this
Agreement, and (b) the Liens created under Section 6.1 hereof and under any of
the other Financing Agreements, shall survive such termination until all of the
Liabilities under this Agreement and the other Financing Agreements have been
indefeasibly paid in full in cash. In addition, the Liabilities may be
accelerated as set forth in Section 11.2 hereof. Upon the effective date of
termination, all of the Liabilities shall become immediately due and payable on
a joint and several basis without notice or demand. Notwithstanding any
termination, until all of the Liabilities hereunder shall have been indefeasibly
paid and satisfied in full in cash, the Administrative Agent shall be entitled
to retain its Liens (for the ratable benefit of the Lenders and the
Administrative Agent) in and to all existing and future Collateral.
          2.10 Optional Prepayment of Loan. The Borrower may, at its option,
permanently prepay, at any time during the term of this Agreement the Loan or
any portion thereof but in minimum amounts of no less than One Hundred Thousand
Dollars ($100,000), subject to the following conditions: (i) not less than ten
(10) days prior to the date upon which the Borrower desires to make any such
prepayment, Borrower shall deliver to the Administrative Agent a written notice
of its intention to prepay all or such portion of the Loan, which notice shall
be revocable (provided, that any and all costs or expenses incurred or suffered
by the Administrative Agent and the Lenders as a result of the revocation of
notice by the Borrower shall be borne solely by the Borrower) and state the
amount of the prepayment and the prepayment date, (ii) the Borrower shall pay
(A) the Prepayment Premium (in view of the impracticality and extreme difficulty
of ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of each Lender’s lost profits as a result of such
prepayment), (B) any amount due pursuant to Section 3.4 hereof, (C) any amounts
due in connection with such prepayment under any Hedging Agreement, and (D) all
liabilities, including any applicable swap or hedging breakage or termination
fee, if any, in connection with any Hedging Agreement; provided, however, no
Prepayment Premium shall be required or due in the event of a prepayment of the
Loan or any portion thereof with the proceeds of a HUD Financing. Any such
Prepayment Premium shall constitute a part of the Liabilities and be secured by
the Collateral. Prepayments of the Loan shall be applied against installments
payable under the Term Loan Notes in the inverse order of maturity. The parties
agree that the Prepayment Premium is not a penalty. BORROWER HEREBY EXPRESSLY
ACKNOWLEDGES THAT SUCH PREPAYMENT PREMIUM IS REASONABLE AND WILL FAIRLY
COMPENSATE THE LENDERS FOR ANY COSTS AND CHARGES INCURRED BY LENDERS AS A RESULT
OF THE PREPAYMENT OF ALL OR ANY PORTION OF THE LOAN. BORROWER ACKNOWLEDGES THAT
THE INCLUSION OF THIS AGREEMENT TO PAY THE PREPAYMENT PREMIUM FOR THE RIGHT TO
PREPAY ALL OR ANY PORTION OF THE LOAN WAS SEPARATELY NEGOTIATED WITH
ADMINISTRATIVE AGENT AND LENDERS, THAT THE ECONOMIC VALUE OF THE VARIOUS
ELEMENTS OF THIS AGREEMENT WERE DISCUSSED, THAT THE

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CONSIDERATION GIVEN BY BORROWER FOR THE LOAN WAS ADJUSTED TO REFLECT THE
SPECIFIC AGREEMENT NEGOTIATED AMONG BORROWER, ADMINISTRATIVE AGENT AND LENDERS
AND CONTAINED IN THIS SECTION.
          2.11 Limitation on Charges. It being the intent of the parties that
the rate of interest and all other charges to the Borrower be lawful, if for any
reason the payment of a portion of the interest or other charges otherwise
required to be paid under this Agreement would exceed the limit which the
Lenders may lawfully charge the Borrower, then the obligation to pay interest or
other charges shall automatically be reduced to such limit and, if any amounts
in excess of such limit shall have been paid, then such amounts shall at the
sole option of the Administrative Agent (or otherwise at the direction of the
Required Lenders) either be refunded to the Borrowers or credited to the
principal amount of the Liabilities (or any combination of the foregoing) so
that under no circumstances shall the interest or other charges required to be
paid by the Borrowers hereunder exceed the maximum rate allowed by applicable
Laws, and Borrowers shall not have any action against any Lender or the
Administrative Agent for any damages arising out of the payment or collection of
any such excess interest.
          2.12 [Intentionally Omitted.].
          2.13 Setoff. (a) Borrower agrees that the Administrative Agent and
each Lender has all rights of setoff and banker’s liens provided by applicable
law. The Borrower agrees that, if at any time (i) any amount owing by it under
this Agreement or any Financing Agreement is then due and payable to the
Administrative Agent or Lenders, or (ii) or an Event of Default shall have
occurred and be continuing, then the Administrative Agent or Lenders, in their
sole discretion, may set off against and apply to the payment of any and all
Liabilities, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter with the Administrative Agent or such Lender.
          (b) Without limitation of Section 2.13(a) hereof, the Borrower agrees
that, upon and after the occurrence of any Event of Default, the Administrative
Agent and each Lender is hereby authorized, at any time and from time to time,
without prior notice to the Borrower (provided, however, prior to an Event of
Default the Administrative Agent and such Lender shall use reasonable efforts to
provide notice of any such action within a reasonable time thereafter but the
Administrative Agent and such Lender shall not be liable for any failure to
provide such notice), (i) to set off against and to appropriate and apply to the
payment of any and all Liabilities any and all amounts which the Administrative
Agent or Lender is obligated to pay over to the Borrower (whether matured or
unmatured, and, in the case of deposits, whether general or special, time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to deposit such amounts with the Administrative Agent as Collateral
to secure such Liabilities and to dishonor any and all checks and other items
drawn against any deposits so held as the Administrative Agent in its sole
discretion may elect.
          (c) The rights of the Administrative Agent and Lenders under this
Section 2.13 are in addition to all other rights and remedies which the
Administrative Agent and Lenders may otherwise have in equity or at law.

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          (d) If any Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise), on account of
(a) principal of or interest on the Term Loan, but excluding (i) any payment
pursuant to Section 3.8 or Section 12.15 and (ii) payments of interest on any
Base Rate Loan that but for Sections 3.2, 3.6 and 3.7 would be a Libor Loan, or
(b) other recoveries obtained by all Lenders on account of principal of and
interest on the Loan (or such participation) then held by them, then such Lender
shall purchase from the other Lenders such participations in the Loan held by
them as shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided 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 the purchase price
restored to the extent of such recovery.
          2.14 Termination of Commitment. On the date on which the Commitment
terminates pursuant to Section 11.2 hereof, the Loan and other Liabilities shall
become immediately due and payable, without presentment, demand or notice of any
kind.
          2.15 [Intentionally Omitted.].
          2.16 Closing Fee. On the Closing Date, the Borrower shall pay to the
Administrative Agent a one-time closing fee pursuant to the Fee Letter in
immediately available funds, which fee shall be nonrefundable and deemed fully
earned as of such date (“Closing Fee”).
          2.17 Late Charge. If any installment of principal or interest due
hereunder shall become overdue for five (5) days after the date when due, the
Borrower shall pay to the Administrative Agent (for the ratable benefit of the
Lenders) on demand a “late charge” of five cents ($.05) for each dollar so
overdue in order to defray part of the increased cost of collection occasioned
by any such late payment, as liquidated damages and not as a penalty.
     3. CHANGE IN CIRCUMSTANCES.
          3.1 Yield Protection. If, after the date of this Agreement (for
purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all guidelines and regulations adopted in connection
therewith are deemed to have been adopted after the date hereof), the adoption
of any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any change
therein, or any change in the interpretation or administration thereof, or the
compliance of any Lender therewith, or Regulation D of the Board of Governors of
the Federal Reserve System,
               (1) subjects any Lender to any tax, duty, charge or withholding
on or from payments due from the Borrower (excluding taxation of the overall net
income or receipts of such Lender or any branch profits taxes), or changes the
basis of taxation of payments to such Lender in respect of its portion of the
Loan or other amounts due it hereunder, or
                (2) imposes, modifies, or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or similar requirement
against assets of,

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deposits with or for the account of, or credit extended by, any Lender (other
than reserves and assessments taken into account in determining the interest
rate applicable to Libor Loans), or
               (3) imposes any other condition the result of which is to
increase the cost to any Lender of making, funding or maintaining advances or
reduces any amount receivable by such Lender in connection with advances, or
requires any Lender to make any payment calculated by reference to the amount of
advances held or interest received by it, by an amount deemed material by such
Lender, or
               (4) affects the amount of capital required or expected to be
maintained by any Lender or any corporation controlling such Lender and such
Lender determines the amount of capital required is increased by or based upon
the existence of this Agreement or its obligation to make the Loan hereunder or
of commitments of this type, then, within three (3) Business Days of demand by
such Lender, the Borrower agrees to pay such Lender that portion of such
increased expense incurred (including, in the case of clause (d), any reduction
in the rate of return on capital to an amount below that which it could have
achieved but for such law, rule, regulation, policy, guideline or directive and
after taking into account such Lender’s policies as to capital adequacy) or
reduction in an amount received which such Lender determines is attributable to
making, funding and maintaining the Loan.
          3.2 Availability of Rate Options. If Administrative Agent determines
(or Required Lenders advise Administrative Agent in writing) that maintenance of
any Libor Loans would violate any applicable law, rule, regulation or directive
of any government or any division, agency, body or department thereof, whether
or not having the force of law, the Lenders shall suspend the availability of
the Libor Rate option and the Administrative Agent shall require any Libor Loans
outstanding to be promptly converted to a Base Rate Loan subject to the
Borrower’s compliance with Section 3.4 hereof; or if Administrative Agent
determines (or Required Lenders advise Administrative Agent in writing) that
(i) deposits of a type or maturity appropriate to match fund Libor Loans are not
available, the Lenders shall suspend the availability of the Libor Rate after
the date of any such determination, or (ii) the Libor Rate does not accurately
reflect the cost of making a Libor Loan, then, if for any reason whatsoever the
provisions of Section 3.1 hereof are inapplicable, the Lenders shall, at their
option, suspend the availability of the Libor Rate after the date of any such
determination or permit (solely in the case of clause (ii)) the Borrower to pay
the Lenders for any increased cost the Lenders may incur.
          3.3 Taxes. All payments by the Borrower under this Agreement shall be
made free and clear of, and without deduction for, any present or future income,
excise, stamp or other taxes, fees, levies, duties, withholdings or other
charges of any nature whatsoever, now or hereafter imposed by any taxing
authority, other than franchise taxes and taxes imposed on or measured by any
Lender’s net income or receipts or branch profits taxes (such non-excluded items
being called “Taxes”). If any withholding or deduction from any payment to be
made by the Borrower hereunder is required in respect of any Taxes pursuant to
any applicable law, rule or regulation, then the Borrower shall:
               (1) pay directly to the relevant authority the full amount
required to be so withheld or deducted;

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               (2) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment to such authority; and
               (3) pay to the Lenders such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Lenders will
equal the full amount the Lenders would have received had no such withholding or
deduction been required.
          Moreover, if any Taxes are directly asserted against any Lender with
respect to any payment received by such Lender hereunder, such Lender may pay
such Taxes and the Borrower agrees to promptly pay such additional amounts
(including, without limitation, any penalties, interest or expenses) as is
necessary in order that the net amount received by the Lenders after the payment
of such Taxes (including, without limitation, any Taxes on such additional
amount) shall equal the amount the Lenders would have received had not such
Taxes been asserted.
          To the extent permitted by applicable law, each Lender that is not a
United States person within the meaning of Code Section 7701(a)(30) (a “Non-U.S.
Participant”) shall deliver to Borrower and Administrative Agent on or prior to
the Closing Date (or in the case of a Lender that is an Assignee, on the date of
such assignment to such Lender) two accurate and complete original signed copies
of IRS Form W-8BEN, W-8ECI, or W-8IMY (or any successor or other applicable form
prescribed by the IRS) certifying to such Lender’s entitlement to a complete
exemption from United States withholding tax on interest payments to be made
hereunder or on the Loan. If a Lender that is a Non-U.S. Participant is claiming
a complete exemption from withholding on interest pursuant to Code Sections
871(h) or 881(c), such Lender shall deliver (along with two accurate and
complete original signed copies of IRS Form W-8BEN) a certificate in form and
substance reasonably acceptable to Administrative Agent (any such certificate, a
“Withholding Certificate”). In addition, each Lender that is a Non-U.S.
Participant agrees that from time to time after the Closing Date (or in the case
of a Lender that is an Assignee, after the date of the assignment to such
Lender), when a lapse in time (or change in circumstances occurs) renders the
prior certificates hereunder obsolete or inaccurate in any material respect,
such Lender shall, to the extent permitted under applicable law, deliver to
Borrower and Administrative Agent two new and accurate and complete original
signed copies of an IRS Form W-8BEN, W-8ECI, or W-8IMY (or any successor or
other applicable forms prescribed by the IRS), and if applicable, a new
Withholding Certificate, to confirm or establish the entitlement of such Lender
or Administrative Agent to an exemption from United States withholding tax on
interest payments to be made hereunder or on the Loan.
          Each Lender that is not a Non-U.S. Participant (other than any such
Lender which is taxed as a corporation for U.S. federal income tax purposes)
shall provide two properly completed and duly executed copies of IRS Form W-9
(or any successor or other applicable form) to Borrower and Administrative Agent
certifying that such Lender is exempt from United States backup withholding tax.
To the extent that a form provided pursuant to this Section is rendered obsolete
or inaccurate in any material respects as result of change in circumstances with
respect to the status of a Lender, such Lender shall, to the extent permitted by
applicable law, deliver to Borrower and Administrative Agent revised forms
necessary to confirm or establish the entitlement to such Lender’s or
Administrative Agent’s exemption from United States

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backup withholding tax. Borrower shall not be required to pay additional amounts
to a Lender, or indemnify any Lender, under this Section to the extent that such
obligations would not have arisen but for the failure of such Lender to comply
with this Section.
          Each Lender agrees to and shall indemnify Administrative Agent and
hold Administrative Agent harmless for the full amount of any and all present or
future Taxes and related liabilities (including penalties, interest, additions
to tax and expenses, and any Taxes imposed by any jurisdiction on amounts
payable to Administrative Agent under this Section 3.3) which are imposed on or
with respect to principal, interest or fees payable to such Lender hereunder as
a result of the failure by such Lender to deliver, or as a result of the
inaccuracy, inadequacy or deficiency of, any documentation required to be
delivered by such Lender to the Administrative Agent as set forth above. Such
indemnification shall be made within thirty (30) days from the date
Administrative Agent makes written demand therefor.
          3.4 Funding Indemnification. If any payment of a Libor Loan occurs on
a date that is not the last day of the applicable Libor Interest Period, whether
because of acceleration, prepayment or otherwise, or a Libor Loan is not made on
the date specified by the Borrower, the Borrower shall indemnify the Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Libor Loan.
          3.5 Lender Statements. Each affected Lender shall deliver a written
statement to the Borrower and Administrative Agent as to the amount due, if any,
under Sections 3.1, 3.3 or 3.4 hereof. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such amount
and shall be final, conclusive and binding on the Borrower in the absence of
demonstrable error. Unless otherwise provided herein, the amount specified in
the written statement shall be payable on demand after receipt by the Borrower
of the written statement.
          3.6 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Libor Interest Period: (a) Administrative Agent reasonably
determines (or Required Lenders advise Administrative Agent in writing), which
determination shall be binding and conclusive on the Borrower, that by reason of
circumstances affecting the interlender Libor Base market adequate and
reasonable means do not exist for ascertaining the applicable Libor Base Rate;
or (b) Administrative Agent reasonably determines (or Required Lenders advise
Administrative Agent in writing) that the Libor Base Rate will not adequately
and fairly reflect the cost to Lenders of maintaining or funding the Loan or any
portion thereof for such Libor Interest Period, or that the making or funding of
Libor Loans has become impracticable as a result of an event occurring after the
date of this Agreement which in the opinion of Administrative Agent (or Required
Lenders) adversely affects such Loan, then, in either case, so long as such
circumstances shall continue: (i) Lenders shall not be under any obligation to
make, maintain, convert into or continue Libor Loans and (ii) on the last day of
the then current Libor Interest Period for each Libor Loan, each such Loan
shall, unless then repaid in full, automatically convert to a Base Rate Loan.
Each affected Lender shall promptly give the Borrower written notice of any
determination made by it under this Section accompanied by a statement setting
forth in reasonable detail the basis of such determination.

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          3.7 Illegality. If any applicable law or regulation, or any
interpretation thereof by any court or any governmental or other regulatory body
charged with the administration thereof, should make it unlawful for any Lender
or its lending office to make, maintain or fund any Libor Loan, then the
obligation of such Lender to make, convert into or continue such Libor Loan
shall, upon the effectiveness of such event, be suspended for the duration of
such unlawfulness, and on the last day of the current Libor Interest Period for
such Libor Loan (or, in any event, if Administrative Agent or Required Lenders
so request, on such earlier date as may be required by the relevant law,
regulation or interpretation), the Libor Loans shall, unless then repaid in
full, automatically convert to Base Rate Loans.
          3.8 Right of Lenders to Fund through Other Offices. Each Lender may,
if it so elects, fulfill its commitment as to any Libor Loan by causing a
foreign branch or Affiliate of such Lender to make such Loan; provided that such
election shall not increase the costs to Borrower hereunder and that in such
event for the purposes of this Agreement such Loan shall be deemed to have been
made by such Lender and the obligation of Borrower to repay such Loan shall
nevertheless be to such Lender and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or Affiliate.
          3.9 Discretion of Lenders as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Lender shall be entitled to
fund and maintain its funding of its portion of the Loan in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Lender had actually funded and
maintained each Libor Loan during each Libor Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such Libor
Interest Period and bearing an interest rate equal to the Libor Rate for such
Libor Interest Period.
     4. ATTORNEY-IN-FACT.
          4.1 Appointment of the Administrative Agent as the Borrower’s
Attorney-in-Fact. The Borrower hereby irrevocably designates, makes, constitutes
and appoints the Administrative Agent (and all Persons designated by the
Administrative Agent in writing to the Borrower) as the Borrower’s true and
lawful attorney-in-fact, and authorizes the Administrative Agent, in the
Borrower’s or the Administrative Agent’s name, after an Event of Default has
occurred and is continuing to do the following: (a) at any time, (i) endorse the
Borrower’s name upon any items of payment or proceeds thereof and deposit the
same in the Administrative Agent’s account on account of the Borrower’s
Liabilities, and (ii) do all other acts and things which are necessary, in the
Administrative Agent’s reasonable discretion, to fulfill the Borrower’s
obligations under this Agreement. The Borrower hereby ratifies and approves all
acts under such power of attorney and neither Administrative Agent nor any other
Person acting as Borrower’s attorney hereunder will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law made in good
faith except as result of its gross negligence, willful misconduct or illegal
activity. The appointment of Administrative Agent (and any of the Administrative
Agent’s officers, employees or agents designated by the Administrative Agent) as
Borrower’s attorney, and each and every one of Administrative Agent’s rights and
powers, being coupled with an interest, are irrevocable until all of the
Liabilities have been fully repaid and this Agreement shall have expired or been
terminated in accordance with the terms hereunder.

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Without restricting the generality of the foregoing, after an Event of Default
has occurred and is continuing, Borrower hereby appoints and constitutes the
Administrative Agent its lawful attorney-in-fact with full power of substitution
in the Property to advance funds in excess of the face amount of the Term Loan
Note, 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 Borrower prosecute and defend all actions or proceedings in connection with
the Collateral (including any Leases pertaining to Property); and to do any and
every act which the 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.
     5. CONDITIONS OF LOAN.
          5.1 Conditions to Loan. Notwithstanding any other term or provision
contained in this Agreement, the Administrative Agent’s and Lenders’ obligation
to make the Term Loan hereunder is subject to the satisfaction of each of the
following conditions precedent:
               (1) The Borrower’s Request. The Administrative Agent shall have
received a borrowing notice from Borrower, signed by a Duly Authorized Officer
of the Borrower, irrevocably electing the Loan to be made on the Closing Date.
If at any time applicable, if at all, the Administrative Agent and Lenders shall
have no liability to the Borrower or any other Person as a result of acting on
any telephonic request that the Administrative Agent believes in good faith to
have been made by any Person authorized by Borrower to make a borrowing request
on behalf of Borrower. Promptly upon receipt of such borrowing request,
Administrative Agent will advise each Lender thereof. Not later than 1:00 p.m.
(Chicago time), on the date of the proposed borrowing of the Loan, each Lender
shall provide Administrative Agent at the office specified by Administrative
Agent with immediately available funds covering such Lender’s Pro Rata Share of
such borrowing and, so long as Administrative Agent has not received written
notice that the conditions precedent set forth in Section 5 with respect to such
borrowing have not been satisfied, Administrative Agent shall pay over the funds
received by Administrative Agent to Borrower on the requested borrowing date.
               (2) No Default. Neither a Default nor an Event of Default shall
have occurred or be in existence.
               (3) Representations and Warranties. All of the representations
and warranties contained in the Financing Agreements to which the Borrower is a
party and in this Agreement (including, without limitation, those set forth in
Section 7 hereof), are true and correct.
               (4) Fees and Expenses. The Borrower shall have paid all fees owed
to the Administrative Agent and Lenders and reimbursed Administrative Agent and
the Lenders for all costs, disbursements, fees and expenses due and payable
hereunder on or before the Closing Date, including, without limitation, all fees
and costs identified in Section 12.2(a) hereof.

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               (5) Documents. The Administrative Agent shall have received all
of the following, each duly executed and delivered and dated the Closing Date,
or such earlier date as shall be satisfactory to the Administrative Agent, each
in form and substance reasonably satisfactory to the Administrative Agent in its
sole determination:
               (1) Financing Agreements. This Agreement, the Term Loan Notes,
the Guaranty, the Pledge Agreement, the Mortgage, the Assignment of Rents and
Leases, the Environmental Indemnity Agreement, the Subordination of Management
Agreements, and such other Financing Agreements as the Administrative Agent may
require (provided each Lender shall also receive a fully-executed original of
this Agreement and such Lender’s respective Term Loan Note).
               (2) Resolutions; Incumbency and Signatures. Copies of resolutions
of the Board of Directors of the Borrower, and, if required, the shareholder of
the Borrower, authorizing or ratifying the execution, delivery and performance
by the Borrower of this Agreement, the Financing Agreements to which the
Borrower is a party and any other document provided for herein or therein to be
executed by Borrower, certified by a Duly Authorized Officer. A certificate of a
Duly Authorized Officer certifying the names of the officers of the Borrower
authorized to make a borrowing request and sign this Agreement and the Financing
Agreements to which the Borrower is a party, together with a sample of the true
signature of each such officer; the Lender may conclusively rely on each such
certificate until formally advised by a like certificate of any changes therein.
A copy of resolutions of the Board of Directors of Guarantor and Pledgor
authorizing or ratifying the execution, delivery and performance by Guarantor
and Pledgor, respectively, of the Guaranty and its Pledge Agreement.
               (3) Consents. Certified copies of all documents evidencing any
necessary consents and governmental approvals, if any, with respect to this
Agreement, the Financing Agreements, and any other documents provided for herein
or therein to be executed by Borrower.
               (4) Opinions of Counsel. An opinion of Harwell Howard Hyne
Gabbert & Manner, the legal counsel to the Borrower, Guarantor and Pledgor, and
local counsel opinions in the jurisdictions where the Facilities are located
with respect to the Mortgages, each in form and substance reasonably
satisfactory to Administrative Agent.
               (5) Certain Restricted Agreements Correct and complete copies of
the fully executed Commercial Leases, Management Agreements, the nursing home
licenses of each Borrower, and any other Restricted Agreement, together with all
applicable amendments thereto.
               (6) Financial Condition Certificate. A Financial Condition
Certificate, in form and substance reasonably satisfactory to the Administrative
Agent, signed on behalf of the Borrower by a Duly Authorized Officer of the
Borrower.
               (7) Governing Documents and Good Standings. Administrative Agent
shall have received (i) copies, certified as correct and complete by the
applicable state of organization of each Borrower, Pledgor and Guarantor, of the
certificate of

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incorporation, certificate of formation or certificate of limited liability
partnership, as applicable, of each Borrower, Pledgor and Guarantor, with any
amendments to any of the foregoing, (ii) copies, certified as correct and
complete by an authorized officer, member or partner of each Borrower, Pledgor
and Guarantor, of all other documents necessary for performance of the
obligations of Borrower, Pledgor and Guarantor under this Agreement and the
other Financing Agreements, and (iii) certificates of good standing for each
Borrower, Pledgor and Guarantor issued by the state of organization of each
Borrower, Pledgor and Guarantor and by each state in which each Borrower and
Guarantor is doing and currently intends to do business for which qualification
is required (such certificates set forth in (i) through (iii), the
“Certificates”).
               (8) Revolving Loan Agreement and Affiliate Revolving Loan
Financing Agreements. Fully-executed copies of the Revolving Loan Agreement and
the Affiliate Revolving Loan Financing Agreements.
               (9) UCC Financing Statements; Termination Statements; UCC
Searches. UCC Financing Statements, as requested by the Administrative Agent,
naming the Borrower as debtor and the Administrative Agent as secured party with
respect to the Collateral, together with such UCC termination statements
necessary to release all Liens (other than Permitted Liens) and other rights in
favor of any Person in any of the Collateral except the Administrative Agent
(for the ratable benefit of the Lenders and the Administrative Agent), and other
documents as the Administrative Agent deems necessary or appropriate, shall have
been filed in all jurisdictions that the Administrative Agent deems necessary or
advisable. UCC Financing Statements, as requested by the Administrative Agent,
naming the Pledgor as debtor and the Administrative Agent as secured party with
respect to the Collateral (as defined in the Pledge Agreement), and other
documents, if any, as the Administrative Agent deems necessary or appropriate,
shall have been filed in all jurisdictions that the Administrative Agent deems
necessary or advisable. UCC tax, lien, pending suit and judgment searches for
the Borrower, the Pledgor and the Guarantor (including, for each, any assumed
name or trade name) and each dated a date reasonably near to the Closing Date in
all jurisdictions deemed necessary by the Administrative Agent, the results of
which shall be satisfactory to the Administrative Agent in its sole and absolute
determination.
               (10) Insurance Certificates. Certificates from the Borrower’s
insurance carriers evidencing that all required insurance coverage is in effect,
each designating the Administrative Agent as an additional insured and “lender’s
loss payee” thereunder.
               (11) Pay Off Letter. Pay Off Letter from Capmark, in form and
substance reasonably satisfactory to Administrative Agent.
               (12) Certificate of Occupancy. To the extent available, a true
and complete copy of each certificate of occupancy with respect to the
Facilities, respectively.
               (13) Environmental Assessments. A Phase I environmental report of
the Property prepared by an environmental audit firm reasonably acceptable to
the Administrative Agent, the results of which shall be satisfactory to the
Administrative Agent in its sole and absolute determination; provided
Administrative Agent acknowledges receipt of such item.

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               (14) Title Insurance. A title insurance policy in the form of
ALTA Form Mortgagee Title Insurance Policy shall be issued by an insurer
(reasonably acceptable to the Administrative Agent) in favor of the
Administrative Agent for the Property. Each title insurance policy shall contain
such endorsements as deemed appropriate by the Administrative Agent that are
available in the applicable State. Copies of all documents of record concerning
the Property as identified on the commitment for the ALTA Policy referred to
above.
               (15) Survey. An ALTA plat of survey shall be prepared on the
Property (certified to the 2005 ALTA standards).
               (16) Appraisal. An Appraisal prepared by an independent appraiser
of the Property, which appraisal shall satisfy the requirements of the FIRREA,
if applicable, and shall evidence compliance with the supervisory loan-to-value
limits set forth in the Federal Deposit Insurance Corporation Improvement Act of
1991 (including a loan-to-value ratio on a “stabilized value” not to exceed
75%). Such appraisal (and the results thereof) shall be satisfactory to the
Administrative Agent in its sole and absolute determination.
               (17) Flood Insurance. A flood insurance policy, if applicable,
concerning the Property, reasonably satisfactory to the Administrative Agent, if
required by the Flood Disaster Protection Act of 1973.
               (18) Property Condition Report. Property Condition Reports for
each parcel of Property, the form, substance and results of which shall be
satisfactory to the Administrative Agent in its sole and absolute determination.
               (19) Capmark Terminations. Written evidence, satisfactory to the
Administrative Agent, of the terminations of that certain Capmark Intercreditor
Agreement and that certain Capmark Blocked Account Agreement (each as defined in
the “Original Loan Agreement, “ as such term is defined in the Revolving Loan
Agreement), including a signed copy of that certain Termination of Intercreditor
and Blocked Account Agreements (Capmark Facilities).
               (20) Other. The Administrative Agent shall have received, in form
and substance reasonably satisfactory to the Administrative Agent, all
certificates, orders, authorities, consents, affidavits, schedules, instruments,
agreements, financing statements, and other documents which are provided for
hereunder or under or in connection with any Financing Agreement, which the
Administrative Agent may reasonably request on or prior to the Closing Date.
               (6) Field Examinations. At the Administrative Agent’s sole
option, the Administrative Agent shall have completed its field examinations of
the Borrower’s books and records, assets, and operations which examinations will
be satisfactory to the Administrative Agent in its sole and absolute discretion.
               (7) Certificate. The Administrative Agent shall have received a
certificate signed on behalf of the Borrower by a Duly Authorized Officer and
dated the Closing Date certifying satisfaction of the conditions specified in
this Section 5.

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               (8) Closing Fee. The Borrower shall have paid the Administrative
Agent the Closing Fee.
               (9) Proposal Letter. The Borrower shall have delivered, performed
and satisfied, in the sole discretion of the Administrative Agent, any other
items set forth in that certain proposal letter dated November 10, 2010,
accepted by Guarantor on behalf of Borrower and made in favor of the
Administrative Agent.
               (10) Bank Meetings. Borrower’s senior management shall have made
themselves and Borrower’s facilities reasonably available (through scheduled
bank meetings, company visits, or other venues) to Administrative Agent and
Lenders and their representatives.
               (11) Revolving Loan Agreement. Satisfaction of each of the
conditions precedent contained in the Revolving Loan Agreement, as determined by
the Administrative Agent.
     6. COLLATERAL.
          6.1 Security Interest. As security for the prompt and complete payment
and performance of all of the Liabilities and the Affiliate Revolving Loan
Liabilities when due or declared due, each Borrower hereby grants, pledges,
conveys and transfers to the Administrative Agent (for the ratable benefit of
the Lenders and Administrative Agent) a continuing security interest in and to
all of such Borrower’s right, title and interest in and to the following
property and interests in property, whether now owned or existing or hereafter
owned, arising or acquired, and wheresoever located (collectively, the
“Collateral”): (a) all of Borrower’s accounts receivable, including, without
limitation, Accounts and Health-Care-Insurance Receivables (each as defined in
the Code), (b) all of the Borrower’s General Intangibles, including, without
limitation, General Intangibles related to accounts receivable and money;
(c) all of Borrower’s Deposit Accounts and other deposit accounts (general or
special) with, and credits and other claims against, the Administrative Agent or
any Lender, or any other financial institution with which the Borrower maintains
deposits; (d) all of the Borrower’s contracts, licenses, chattel paper,
instruments, notes, letters of credit, contract rights, bills of lading,
warehouse receipts, shipping documents, contracts, tax refunds, documents and
documents of title, and all of the Borrower’s Tangible Chattel Paper, Documents,
Electronic Chattel Paper, Letter-of-Credit Rights, letters of credit, Software,
Supporting Obligations, Payment Intangibles, and Goods (each as defined in the
Code); (e) all of the Borrower’s Inventory and Equipment and motor vehicles and
trucks; (f) all of the Borrower’s monies, and any and all other property and
interests in property of the Borrower, including, without limitation, Investment
Property, Instruments, Security Entitlements, Uncertificated Securities,
Certificated Securities, Chattel Paper, and Financial Assets (each as defined in
the Code), now or hereafter coming into the actual possession, custody or
control of the Administrative Agent, any Lender or any agent or Affiliate
thereof in any way or for any purpose (whether for safekeeping, deposit,
custody, pledge, transmission, collection or otherwise), and, independent of and
in addition to the Administrative Agent’s and each Lender’s rights of setoff
(which the Borrower acknowledges), the balance of

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any account or any amount that may be owing from time to time by Administrative
Agent or any Lender to the Borrower; (g) all insurance proceeds of or relating
to any of the foregoing property and interests in property, and any key man life
insurance policy covering the life of any officer or employee of Borrower;
(h) all proceeds and profits derived from the operation of the Borrower’s
business; (i) all of the Borrower’s books and records, computer printouts,
manuals and correspondence relating to any of the foregoing and to the
Borrower’s business; and (j) all accessions, improvements and additions to,
substitutions for, and replacements, products, profits and proceeds of any of
the foregoing.
     The Administrative Agent acknowledges that it will not have control over or
right of setoff against the Deposit Accounts into which any Government Accounts
(as defined in the Revolving Loan Agreement) of Borrower are directly paid to
the extent such control or right of setoff is or would be prohibited by
applicable Healthcare Laws, provided, however, that as soon as any such
prohibition or restriction lapses or is legally removed the Borrower shall
immediately take such all actions as are reasonably necessary to provide the
Administrative Agent with control over and/or the right of setoff against such
Deposit Accounts (at Borrower’s cost).
          6.2 Preservation of Collateral and Perfection of Security Interests
Therein. The Borrower agrees that it shall execute and deliver to Administrative
Agent, concurrently with the execution of this Agreement, and at any time or
times hereafter at the reasonable request of Administrative Agent instruments
and documents as Administrative Agent may reasonably request, in a form
satisfactory to Administrative Agent, to perfect and keep perfected the Liens in
the Collateral or to otherwise protect and preserve the Collateral and
Administrative Agent’s Liens therein (including, without limitation, if and as
applicable, financing statements, and Borrower shall pay the cost of filing or
recording the same in all public offices deemed necessary by Administrative
Agent). If the Borrower fails to do so, Administrative Agent is authorized to
file such financing statements. The Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
          6.3 Loss of Value of Collateral. The Borrower agrees to immediately
notify the Administrative Agent of any material loss or depreciation in the
value of the Collateral or any portion thereof.
          6.4 Right to File Financing Statements. Notwithstanding anything to
the contrary contained herein, the Administrative Agent may at any time and from
time to time file financing statements, continuation statements and amendments
thereto that describe the Collateral as “all assets” or in particular and which
contain any other information required by the Code for the sufficiency or filing
office acceptance of any financing statement, continuation statement or
amendment, including whether the Borrower is an organization, the type of
organization and any organization identification number issued to the Borrower.
The Borrower agrees to furnish any such information to the Administrative Agent
promptly upon request. Any such financing statements, continuation statements or
amendments may be signed (if at any time

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required) by the Administrative Agent on behalf of the Borrower and may be filed
at any time with or without signature and in any jurisdiction as reasonably
determined by the Administrative Agent. The Administrative Agent agrees to use
its reasonable efforts to notify the Borrower of the Administrative Agent taking
any such action provided in this Section; provided, however, the Borrower agrees
that the failure of the Administrative Agent to so notify the Borrower for any
reason shall not in any way invalidate the actions taken by the Administrative
Agent pursuant to this Section.
          6.5 Third Party Agreements. The Borrower shall at any time and from
time to time take such steps as the Administrative Agent may reasonably require
for the Administrative Agent: (i) to obtain an acknowledgment, in form and
substance reasonably satisfactory to the Administrative Agent, of any third
party having possession of any of the Collateral that the third party holds for
the benefit of the Administrative Agent, (ii) to obtain “control” (as defined in
the Code) of any Investment Property, Deposit Accounts, Letter of Credit Rights
or Electronic Chattel Paper (each as defined in the Code), with any agreements
establishing control to be in form and substance reasonably satisfactory to the
Administrative Agent, and (iii) otherwise to ensure the continued perfection and
priority of the Administrative Agent’s security interest in any of the
Collateral and of the preservation of its rights therein.
          6.6 All Loans One Obligation. All Liabilities of the Borrowers under
this Agreement and each of the Financing Agreements, and all of the Affiliate
Revolving Loan Liabilities under the Revolving Loan Agreement and each of the
Affiliate Revolving Loan Financing Agreements, are cross-collateralized and
cross-defaulted. Payment of all sums and indebtedness to be paid by Borrower to
Lenders and Administrative Agent under this Agreement shall be secured by, among
other things, the Financing Agreements. All loans or advances made to Borrower
under this Agreement shall constitute one Loan, and all of Borrower’s
Liabilities and other liabilities of Borrower to Lenders and Administrative
Agent shall constitute one general obligation secured by Administrative Agent’s
Lien on all of the Collateral of Borrower and by all other liens heretofore,
now, or at any time or times granted to Lender to secure the Loan (for the
ratable benefit of the Lenders and the Administrative Agent). Borrower agrees
that all of the rights of Administrative Agent and Lenders set forth in this
Agreement shall apply to any amendment, restatement or modification of, or
supplement to, this Agreement, any supplements or exhibits hereto and the
Financing Agreements, unless otherwise agreed in writing by the Administrative
Agent or Required Lenders.
          6.7 Commercial Tort Claim. If the Borrower shall at any time hereafter
acquire a Commercial Tort Claim (as defined in the Code), the Borrower shall
promptly notify the Administrative Agent of same in a writing signed by the
Borrower (describing such claim in reasonable detail) and grant to the
Administrative Agent (for the ratable benefit of the Lenders and the
Administrative Agent) in such writing (at the sole cost and expense of the
Borrower) a continuing, first-priority security interest therein and in the
proceeds thereof, with such writing to be in form and substance satisfactory to
the Administrative Agent in its sole and absolute determination.
          6.8 HUD Financing; Prepayment and Release. Notwithstanding the
provisions of Section 6.6, upon any one or more of the Borrowers obtaining HUD
Financing for their respective Facility or Facilities, Administrative Agent will
fully release and discharge the

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lien and security interest granted to Administrative Agent to secure the Loan
(for the ratable benefit of the Lenders and the Administrative Agent) under this
Agreement and the Financing Agreements on the specific Collateral of such
Borrower or Borrowers (the “Released Collateral”), and will fully release and
discharge such Borrower or Borrowers (the “Released Borrowers”) from their
obligations under this Agreement and any Financing Agreement, including the Term
Loan Note (except for contingent indemnification obligations that survive by
their terms herein), provided that and conditioned upon satisfaction of each of
the foregoing, in the sole determination of the Administrative Agent:
               (1) Administrative Agent shall receive written notice within
thirty (30) days of such Borrower or Borrowers decision to seek and obtain such
HUD Financing;
               (2) Both before and after giving effect to the HUD Financing, no
Default or Event of Default shall have occurred and be continuing (including,
without limitation, any breach of any financial ratio covenant set forth in
Section 9.12);
               (3) [Intentionally Omitted];
               (4) The release documents are reasonably acceptable to
Administrative Agent and customary for recording the release of liens and
security interests in the applicable Collateral in the jurisdictions where the
liens and security in the Released Collateral are filed or recorded. Borrower
shall be responsible for the cost and expense of preparing and recording the
applicable release documents;
               (5) All reasonably requested instruments, documents and
agreements by the Administrative Agent and Lenders in connection with such HUD
Financing are duly executed and delivered by Borrower and any Affiliate thereof
(including amendments to this Agreement and the other Financing Agreements); and
               (6) The Released Borrowers shall, substantially simultaneously
with (and in any event not later than the first (1st) Business Day following the
receipt of the net cash proceeds from the insurance or incurrence of the HUD
Financing), apply and pay in immediately available funds without setoff or
deduction of any kind an amount equal to one hundred percent (100%) of such net
cash proceeds to prepay the outstanding Term Loan amount in accordance with
Section 2.10 and any other related then due and owing Liabilities of the
Released Borrowers. As used in this Section, “Net cash proceeds” shall mean the
cash proceeds of the HUD Financing net of all taxes and customary and reasonable
fees, commissions, costs and other expenses actually incurred in connection
therewith.
          Notwithstanding the release and discharge of the Released Borrowers
and the Released Collateral as provided in this Section 6.8, this Agreement, the
other Financing Agreements and the Lien of the Administrative Agent on the
Collateral (and any other Lien provided by the other Financing Agreements,
including pursuant to the applicable Mortgages), shall remain and continue in
full force and effect as to the Borrowers other than the Released Borrowers and
the Collateral (and other assets and property subject to the other Financing
Agreements) other than the Released Collateral.

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     7. REPRESENTATIONS AND WARRANTIES.
     The Borrower represents and warrants to Administrative Agent and Lenders
that as of the date of this Agreement, and continuing as long as any Liabilities
remain outstanding, and (even if there shall be no such Liabilities outstanding)
as long as this Agreement remains in effect:
          7.1 Existence. The Borrower is a corporation or limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its incorporation or formation. The Borrower is duly (a) qualified
and in good standing as a foreign corporation or foreign limited liability
company and (b) authorized to do business in each jurisdiction where such
qualification is required because of the nature of its activities or properties.
The Borrower has all requisite power to carry on its business as now being
conducted and as proposed to be conducted. Pledgor legally and beneficially owns
or controls, either directly or indirectly through its subsidiaries, all of the
issued and outstanding capital Stock of the Borrower.
          7.2 Corporate Authority. The execution and delivery by the Borrower of
this Agreement and all of the other Financing Agreements to which Borrower is a
party and the performance of its obligations hereunder and thereunder: (i) are
within its powers; (ii) are duly authorized by the board of directors, manger or
members of the Borrower, each as applicable, and, if applicable, Pledgor; and
(iii) are not in contravention of the terms of its operating agreement, bylaws,
or of an indenture, agreement or undertaking to which it is a party or by which
it or any of its property is bound. The execution and delivery by the Borrower
of this Agreement and all of the other Financing Agreements to which it is a
party and the performance of its obligations hereunder and thereunder: (i) do
not require any governmental consent, registration or approval; (ii) do not
contravene any contractual or governmental restriction binding upon it; and
(iii) will not, except in favor of Administrative Agent, result in the
imposition of any Lien upon any property of Borrower under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other material
agreement or instrument to which it is a party or by which it or any of its
property may be bound or affected.
          7.3 Binding Effect. This Agreement and all of the other Financing
Agreements to which the Borrower is a party are the legal, valid and binding
obligations of the Borrower and are enforceable against the Borrower in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditor’s rights and remedies generally.
          7.4 Financial Data.
               (1) All income statements, balance sheets, cash flow statements,
statements of operations, and other financial data which have been or shall
hereafter be furnished to the Administrative Agent and Lenders for the purposes
of or in connection with this Agreement do and will present fairly in all
material respects in accordance with GAAP, consistently applied, the financial
condition of the Borrower as of the dates thereof and the results of its
operations for the period(s) covered thereby. The foregoing notwithstanding all
unaudited financial statements furnished or to be furnished to the
Administrative Agent and Lenders by or on behalf of Borrower are not and will
not be prepared in accordance with GAAP to the extent that such financial
statements (a) are subject to cost report and other year-end audit adjustments,
(b) do not contain footnotes, (c) were prepared without physical inventories,
(d) are

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not restated for subsequent events, (e) may not contain a statement of
construction in process, and (f) may not fully reflect the following
liabilities: (i) vacation, holiday and similar accruals, (ii) liabilities
payable in connection with workers’ compensation claims, (iii) liabilities
payable to any employee welfare benefit plan (within the meaning of Section 3(1)
of ERISA) maintained by Borrower or its affiliates on account of Borrower’s
employees, (iv) federal, state and local income or franchise taxes and (v)
bonuses payable to certain employees (collectively, the “GAAP Exceptions”).
               (2) Since December 31, 2009, there has been no Material Adverse
Change with respect to Borrower.
          7.5 Collateral. Except for the Permitted Liens, all of the Borrower’s
assets and property (including, without limitation, the Collateral) is and will
continue to be owned by Borrower (except for items of Inventory disposed of in
the ordinary course of business and sales of Equipment being replaced in the
ordinary course of business, or as a result of casualty loss or condemnation,
with other Equipment with a value equal to or greater than the Equipment being
sold), has been fully paid for and is free and clear of all Liens. No financing
statement or other document similar in effect covering all or any part of the
Collateral is on file in any recording or filing office, other than those
identifying the Administrative Agent as the secured creditor or except for
Permitted Liens. The organizational number assigned by the Secretary of State of
the Borrower’s state of incorporation or formation, as applicable, is as set
forth on Schedule 1 hereto.
          7.6 Solvency. The Borrower, as determined on a consolidated basis, is
Solvent. The Borrower, as determined on a consolidated basis, will not be
rendered insolvent by the execution and delivery of this Agreement or any
Financing Agreement, or by completion of the transactions contemplated hereunder
or thereunder.
          7.7 Principal Place of Business; State of Organization. Set forth on
Schedule 1 hereto, is, as of the Closing Date, (a) the principal place of
business and chief executive office of Borrower and (b) the Borrower’s state of
incorporation or formation. The books and records of the Borrower are at the
principal place of business and chief executive office of the Borrower.
          7.8 Other Names. As of the Closing Date the Borrower is not using, and
shall not thereafter use, any name (including, without limitation, any trade
name, trade style, assumed name, division name or any similar name), other than
the names set forth on Schedule 7.8 attached hereto.
          7.9 Tax Liabilities. The Borrower has filed all material federal,
state and local tax reports and returns required by any law or regulation to be
filed by it, except for extensions duly obtained, and has either duly paid all
taxes, duties and charges indicated due on the basis of such returns and
reports, or made adequate provision for the payment thereof, and the assessment
of any material amount of additional taxes in excess of those paid and reported
is not reasonably expected.
          7.10 Loans. Except as otherwise permitted by Section 9.2 hereof, the
Borrower is not obligated on any loans or other Indebtedness.

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          7.11 Margin Securities. The Borrower does not own any margin
securities and the Loan advanced hereunder will not be used for the purpose of
purchasing or carrying any margin securities or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase any margin
securities or for any other purpose not permitted by Regulation U of the Board
of Governors of the Federal Reserve System.
          7.12 Organizational Chart. Set forth on Schedule 7.12 hereto is a true
and complete copy of an organizational chart setting forth the Borrower and each
of its Subsidiaries and Affiliates as of the Closing Date.
          7.13 Litigation and Proceedings. As of the Closing Date, no judgments
are outstanding against the Borrower that could be an Event of Default under
clause (e) of Section 11.1, nor is there as of such date pending, or to the best
of Borrower’s knowledge, threatened, except, as of the Closing Date, as shown on
Schedule 7.13, any (i) litigation, suit, action or contested claim (other than a
personal injury tort claim), or federal, state or municipal governmental
proceeding, by or against the Borrower or any of its Property which if adversely
determined could have a Material Adverse Effect, or (ii) any tort claim for
personal injury, including death, against the Borrower as to which
(a) litigation has been instituted and is pending or (b) or a request for
medical records has been made upon Borrower by an attorney for the claimant on
or after January 1, 2009.
          7.14 Other Agreements. The Borrower is not in default under or in
breach of any agreement, contract, lease, or commitment to which it is a party
or by which it is bound which could reasonably be expected to have a Material
Adverse Effect. The Borrower does not know of any dispute regarding any
agreement, contract, instrument, lease or commitment to which it is a party
which could reasonably be expected to have a Material Adverse Effect.
          7.15 Compliance with Laws and Regulations. The execution and delivery
by the Borrower of this Agreement and all of the other Financing Agreements to
which it is a party and the performance of the Borrower’s obligations hereunder
and thereunder are not in contravention of any applicable law, rule or
regulation. The Borrower has obtained all licenses, authorizations, approvals,
licenses and permits necessary in connection with the operation of its business,
except to the extent the failure to obtain any of the foregoing could reasonably
be expected to not result in a Material Adverse Effect. The Borrower is in
compliance with all laws, orders, rules, regulations and ordinances of all
federal, foreign, state and local governmental authorities applicable to it and
its business, operations, property, and assets, except to the extent any such
non-compliance could reasonably be expected to not result in a Material Adverse
Effect.
          7.16 Intellectual Property. As of the Closing Date, the Borrower does
not own or otherwise possess any material Intellectual Property. To the
Borrower’s best knowledge, none of its Intellectual Property infringes on the
rights of any other Person; provided that the name “Diversicare” is shared in
Canada with various Diversicare entities that were sold in 2004.

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          7.17 Environmental Matters. The Borrower has not Managed Hazardous
Substances on or off its Property other than in compliance with applicable
Environmental Laws, except to the extent any such non-compliance could
reasonably be expected to not result in a Material Adverse Effect. Except as set
forth on Schedule 7.17 hereto, the Borrower has complied in all material
respects with applicable Environmental Laws regarding transfer, construction on
and operation of its business and Property, including, but not limited to,
notifying authorities, observing restrictions on use, transferring, modifying or
obtaining permits, licenses, approvals and registrations, making required
notices, certifications and submissions, complying with financial liability
requirements, and, except where not required to do so pursuant to any Commercial
Lease, Managing Hazardous Substances and Responding to the presence or Release
of Hazardous Substances connected with operation of its business or Property.
The Borrower does not have any contingent liability with respect to the
Management of any Hazardous Substance that could reasonably be expected to
result in a Material Adverse Effect. As of the Closing Date, the Borrower has
not received any Environmental Notice that could reasonably be expected to
result in a Material Adverse Effect.
          7.18 Disclosure. As of the Closing Date, none of the representations
or warranties made by the Borrower herein or in any Financing Agreement to which
the Borrower is a party and no other written information provided or statements
made by the Borrower or its representatives to the Administrative Agent or
Lenders contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of the Closing
Date, the Borrower has disclosed to the Administrative Agent and Lenders all
facts of which the Borrower has knowledge which might result in a Material
Adverse Effect either prior or subsequent to the consummation of the
transactions contemplated hereby or which, to Borrower’s knowledge, at any time
hereafter might reasonably be expected to result in a Material Adverse Effect.
          7.19 Pension Related Matters. Each employee pension plan (other than a
multiemployer plan within the meaning of Section 3(37) of ERISA and to which the
Borrower or any ERISA Affiliate has or had any obligation to contribute (a
“Multiemployer Plan”)) maintained by the Borrower or any of its ERISA Affiliates
to which Title IV of ERISA applies and (a) which is maintained for employees of
the Borrower or any of its ERISA Affiliates or (b) to which the Borrower or any
of its ERISA Affiliates made, or was required to make, contributions at any time
within the preceding five (5) years (a “Plan”), complies, and is administered in
accordance, with its terms and all material applicable requirements of ERISA and
of the Internal Revenue Code of 1986, as amended, and any successor statute
thereto (the “Tax Code”), and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Tax Code setting forth
those requirements. No “Reportable Event” or “Prohibited Transaction” (as each
is defined in ERISA) or withdrawal from a Multiemployer Plan caused by the
Borrower has occurred and no funding deficiency described in Section 302 of
ERISA caused by the Borrower exists with respect to any Plan or Multiemployer
Plan which could have a Material Adverse Effect. The Borrower and each ERISA
Affiliate has satisfied all of their respective funding standards applicable to
such Plans and Multiemployer Plans under Section 302 of ERISA and Section 412 of
the Tax Code and the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA (“PBGC”) has

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not instituted any proceedings, and there exists no event or condition caused by
the Borrower which would reasonably be expected to constitute grounds for the
institution of proceedings by PBGC, to terminate any Plan or Multiemployer Plan
under Section 4042 of ERISA which could have a Material Adverse Effect.
        7.20 Perfected Security Interests. The Lien in favor of the
Administrative Agent provided pursuant to Section 6.1 hereof is a valid and
perfected first priority security interest in the Collateral (subject only to
the Permitted Liens), and all filings and other actions necessary to perfect
such Lien have been or will be duly taken.
        7.21 [Intentionally Omitted.].
        7.22 Broker’s Fees. The Borrower does not have any obligation to any
Person in respect of any finder’s, brokers or similar fee in connection with the
Loan or this Agreement.
        7.23 Investment Company Act. The Borrower is not an “investment company”
or a company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended.
        7.24 [Intentionally Omitted.].
        7.25 [Intentionally Omitted.].
        7.26 Offenses and Penalties Under the Medicare/Medicaid Programs. Except
as listed on Schedule 7.26 attached hereto, as of the Closing Date, neither the
Borrower nor any Affiliate and/or employee of the Borrower or any Affiliate is
currently, to the best knowledge of the Borrower, after due inquiry, under
investigation or prosecution for, nor has the Borrower or any Affiliate or, to
the best knowledge of Borrower, after due inquiry, any current employee of the
Borrower or any Affiliate been convicted of: (a) any offense related to the
delivery of an item or service under the Medicare or Medicaid programs; (b) a
criminal offense related to neglect or abuse of patients in connection with the
delivery of a health care item or service; (c) fraud, theft, embezzlement or
other financial misconduct; (d) the obstruction of an investigation of any crime
referred to in subsections (a) through (c) of this Section; or (e) unlawful
manufacture, distribution, prescription, or dispensing of a controlled
substance. Except as listed on Schedule 7.26, as of the Closing Date, neither
the Borrower nor any Affiliate and/or, to the best knowledge of Borrower, after
due inquiry, any current employee of the Borrower or any Affiliate has been
required to pay any civil money penalty under applicable laws regarding false,
fraudulent or impermissible claims or payments to induce a reduction or
limitation of health care services to beneficiaries of any state or federal
health care program, nor, to the best knowledge of the Borrower, after due
inquiry, is the Borrower nor any Affiliate and/or to the best knowledge of
Borrower, after due inquiry, any current employee of the Borrower or any
Affiliate currently the subject of any investigation or proceeding that may
result in such payment.
        7.27 Medicaid/Medicare. Neither the Borrower nor any Affiliate of the
Borrower nor any current officer or director of the foregoing 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 Medicare or Medicaid; (ii) knowingly and willfully
making or causing to be made any false statement or

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representation of a material fact for use in determining rights to any benefit
or payment under Medicare or Medicaid; (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 Medicare or Medicaid on its own behalf or on
behalf of another, with intent to secure such benefit or payment fraudulently;
or (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 any individual to a Person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid; 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 in
part by Medicare or Medicaid.
          7.28 Consideration. Borrower acknowledges that it desires to have this
Agreement and the Financing Agreements to which the Borrower is a party
cross-collateralized and cross-defaulted and have the Collateral serve as
collateral for all of the Liabilities and Affiliate Revolving Loan Liabilities.
The Affiliated Revolving Borrowers and the Borrowers are Affiliates of each
other. Each Borrower will derive substantial direct and indirect benefit
(financial and otherwise) from funds made available to the Affiliated Revolving
Borrowers pursuant to this Agreement, and it is and will be to each Borrower’s
and Affiliated Revolving Borrower’s advantage to assist each other in procuring
such funds from the Lenders.
          7.29 USA Patriot Act. Borrower represents and warrants to
Administrative Agent and Lenders that neither the Borrower nor any of its
Affiliates is identified in any list of known or suspected terrorists published
by any United States government agency (collectively, as such lists may be
amended or supplemented from time to time, referred to as the “Blocked Persons
Lists”) including, without limitation, (a) the annex to Executive Order 13224
issued on September 23, 2001, and (b) the Specially Designated Nationals List
published by the Office of Foreign Assets Control.
          7.30 Absence of Foreign or Enemy Status. Neither the Borrower nor any
Affiliate of the Borrower is an “enemy” or an “ally of the enemy” within the
meaning of Section 2 of the Trading with the Enemy Act (50 U.S.C. App. §§ 1 et
seq.), as amended. Neither the Borrower nor any Affiliate of the Borrower is in
violation of, nor will the use of the Loan violate, the Trading with the Enemy
Act, as amended, or any executive orders, proclamations or regulations issued
pursuant thereto, including, without limitation, regulations administered by the
Office of Foreign Asset Control of the Department of the Treasury (31 C.F.R.
Subtitle B, Chapter V).
          7.31 [Intentionally Omitted.].
          7.32 Labor Matters. There are no strikes or other labor disputes
pending or, to the knowledge of Borrower, threatened against Borrower. All
payments due from the Borrower on account of wages and employee and retiree
health and welfare insurance and other benefits have been paid or accrued as a
liability on its books.
          7.33 Capitalization. The authorized Stock of each Borrower, as of the
Closing Date, is set forth on Schedule 7.33 hereto. Pledgor legally and
beneficially owns all of the issued

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and outstanding Stock of each Borrower. All issued and outstanding Stock of the
Borrower is duly authorized and validly issued, fully paid, non-assessable, free
and clear of all Liens or pledges other than Permitted Liens, and such Stock was
issued in compliance with all applicable state, federal and foreign laws
concerning the issuance of securities. No shares of the Stock of Borrower, other
than those owned by Pledgor are issued and outstanding. There are no preemptive
or other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from Borrower of
any equity securities of Borrower.
          7.34 Government Contracts. The Borrower is not a party to any contract
or agreement (including, but not limited to, any Lease) that requires Borrower
to comply with the Federal Assignment of Claims Act, as amended (31 U.S.C.
Section 3727) or, to the best of Borrower’s knowledge, any similar state or
local law.
          7.35 OFAC. Neither the Borrower, nor Guarantor, nor any beneficial
owner of the Borrower or Guarantor, is currently listed on the OFAC Lists.
          7.36 Commercial Leases. As of the Closing Date, there are no
Commercial Leases as to which a Borrower is the lessee and no Operating Leases
between Borrower and any Operators of the Facilities. As of the Closing Date,
each Borrower is the Operator of the Facility owned by such Borrower.
     8. AFFIRMATIVE COVENANTS.
     The Borrower covenants and agrees with Administrative Agent and Lenders
that, as long as any Liabilities of the Borrower remain outstanding, and (even
if there shall be no such Liabilities outstanding) as long as this Agreement
remains in effect:
          8.1 Reports, Certificates and Other Information. The Borrower Agent
shall deliver to the Administrative Agent and each Lender:
               (1) Financial Statements.
               (2) On or before the one hundred twentieth (120th) day after each
of Guarantor’s Fiscal Years, a copy of the annual financial statements on a
consolidated basis for Guarantor, duly certified and audited by independent
certified public accountants of nationally recognized standing selected by the
Borrower, together with the supporting consolidating statements for each
Borrower, consisting of, at least, balance sheets and statements of income and
cash flow for such period, prepared in conformity with GAAP. In lieu of its
obligations hereunder, Guarantor may submit to Administrative Agent and Lenders,
upon its filing thereof, a copy of its form 10-K as filed with the United States
Security and Exchange Commission.

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               (3) On or before the forty-fifth (45th) day of the end of each of
Guarantor’s first, second and third Fiscal Quarters, a copy of internally
prepared quarterly financial statements for Borrower prepared in accordance with
GAAP and in a manner substantially consistent with the financial statements
referred to in Section 8.1(a)(1) hereof (subject, however, to the GAAP
Exceptions), signed on behalf of the Borrower by a Duly Authorized Officer and
consisting of, at least, an income statement, a balance sheet, and statement of
cash flow as at the close of such Fiscal Quarter and statements of earnings for
such Fiscal Quarter and for the period from the beginning of such Fiscal Year to
the close of such Fiscal Quarter.
               (4) On or before (i) the forty-fifth (45th) day after the end of
each calendar month ending the Borrower’s first, second and third Fiscal
Quarters, (ii) the seventy-fifth (75th) day after the end of the calendar month
ending the Borrower’s final Fiscal Quarter, and (iii) the thirtieth (30th) day
after the end of each calendar month, a copy of internally prepared financial
statements for Borrower prepared in accordance with GAAP and in a manner
substantially consistent with the financial statements referred to in
Section 8.1(a)(1) hereof, signed on behalf of the Borrower by a Duly Authorized
Officer and consisting of, at least, an income statement and a balance sheet, as
at the close of such calendar month and statements of earnings for such calendar
month and for the period from the beginning of such Fiscal Year to the close of
such calendar month.
               (5) [Intentionally Omitted.]
               (6) Compliance Certificates. Contemporaneously with the
furnishing of each quarterly financial statements, a duly completed compliance
certificate with appropriate insertions, in form and substance satisfactory to
the Administrative Agent (a “Compliance Certificate”), dated the date of such
annual financial statement or such calendar month and signed on behalf of the
Borrower by a Duly Authorized Officer, which Compliance Certificate shall state
that no Default or Event of Default has occurred and is continuing, or, if there
is any such event, describes it and the steps, if any, being taken to cure it.
Each Compliance Certificate shall contain a computation of, and show compliance
with, each of the financial ratios and restrictions set forth in Section 9.12
hereof (each such computation and calculation to be in form and substance
acceptable to the Administrative Agent).
               (7) Real Estate Taxes. As paid, evidence of timely payment of
real estate taxes owed on the Property.
               (8) Notice of Default, Regulatory Matters, Litigation Matters or
Adverse Change in Business. Forthwith upon learning of the occurrence of any of
the following, written notice thereof which describes the same and the steps
being taken by the Borrower with respect thereto: (i) the occurrence of a
Default or an Event of Default; (ii) the institution or threatened institution
of, or any adverse determination in, any litigation (other than a personal
injury tort claim), arbitration proceeding or governmental proceeding in which
any injunctive relief or money damages is sought which if adversely determined
could have a Material Adverse Effect; (iii) the receipt of any notice from any
governmental agency concerning any violation or potential violation of any
regulations, rules or laws applicable to Borrower which could have a Material
Adverse Effect; or (iv) any Material Adverse Change.

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With regard to personal injury tort claims, upon request by Administrative
Agent, Borrower shall review with Administrative Agent the occurrence of any
personal injury or other action which could reasonably give rise to a personal
injury tort claim against the Borrower as to which (i) litigation has been
instituted and is pending or (ii) a request for medical records has been made
upon Borrower by an attorney for the claimant on or after January 1, 2009.
               (9) Insurance Reports. (i) At any time after a Default and upon
the request of the Administrative Agent, a certificate signed by a Duly
Authorized Officer that summarizes the property, casualty, liability and
malpractice insurance policies carried by the Borrower, and (ii) written
notification of any material change in any such insurance by the Borrower within
five (5) Business Days after receipt of any notice (whether formal or informal)
of such change by any of its insurers.
               (10) [Intentionally Omitted.]
               (11) Affiliate Transactions. Upon the Administrative Agent’s
reasonable request from time to time, a reasonably detailed description of each
of the material transactions between the Borrower and any of its Affiliates
during the time period reasonably requested by the Administrative Agent, which
shall include, without limitation, the amount of money either paid or received,
as applicable, by the Borrower in such transactions.
               (12) [Intentionally Omitted.]
               (13) Interim Reports. Promptly upon receipt thereof, copies of
any reports submitted to Guarantor or Borrower by the independent accountants in
connection with any interim audit of the books of any such Person and copies of
each management control letter provided to Guarantor or Borrower by independent
accountants.
               (14) Reports to the SEC. Upon the Administrative Agent’s
reasonable request from time to time, copies of any and all regular, annual,
periodic or special reports of Guarantor, any Borrower or any Affiliate thereof
filed with the Securities and Exchange Commission (“SEC”); copies of any and all
registration statements of Guarantor, any Borrower or any Affiliate thereof
filed with the SEC; and copies of any and all proxy statements or other written
communications made to security holders generally.
               (15) Other Information. Such other information, certificates,
schedules, exhibits or documents (financial or otherwise) concerning the
Borrower and its operations, business, properties, condition or otherwise as the
Administrative Agent or any Lender may reasonably request from time to time.
          8.2 Inspection; Audit Fees. Borrower shall 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 shall permit (at the expense of the Borrower provided the
Borrower shall be responsible for such reasonable expenses no more than one
(1) time per year unless an Event of Default has occurred and is continuing),
representatives of the Administrative Agent or any Person appointed by
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 (in each case excluding patient

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medical records and other records to the extent confidential or where such
examination is prohibited under applicable Laws, including without limitation
HIPPA), to conduct a collateral audit and analysis of their respective Inventory
and Accounts 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, the
Administrative Agent shall give the Borrower commercially reasonable prior
written notice of such exercise. No notice shall be required during the
existence and continuance of any Event of Default.
          8.3 Conduct of Business. The Borrower shall maintain its corporate
existence, shall maintain in full force and effect all licenses, permits,
authorizations, bonds, franchises, leases, patents, trademarks and other
Intellectual Property, contracts and other rights necessary to the conduct of
its business, shall continue in, and limit its operations to, the same general
line of business as that currently conducted and shall comply with all
applicable laws (including, without limitation, Healthcare Laws), orders,
regulations and ordinances of all federal, foreign, state and local governmental
authorities, except to the extent any such non-compliance could reasonably be
expected to result in a Material Adverse Effect. The Borrower shall keep proper
books of record and account in which full and true entries will be made of all
dealings or transactions of or in relation to the business and affairs of the
Borrower, in accordance with GAAP (subject, however, to the GAAP Exceptions),
consistently applied.
          8.4 Claims and Taxes. The Borrower agrees to pay or cause to be paid
all license fees, bonding premiums and related taxes and charges and shall pay
or cause to be paid all of the Borrower’s real and personal property taxes,
assessments and charges and all of the Borrower’s franchise, income,
unemployment, use, excise, old age benefit, withholding, sales and other taxes
and other governmental charges assessed against the Borrower, or payable by the
Borrower, at such times and in such manner as to prevent any penalty from
accruing or any Lien from attaching to its property, provided that the Borrower
shall have the right to contest in good faith, by an appropriate proceeding
promptly initiated and diligently conducted, the validity, amount or imposition
of any such tax, assessment or charge, and upon such good faith contest to delay
or refuse payment thereof, if (a) the Borrower establishes adequate reserves to
cover such contested taxes, assessments or charges, and (b) such contest does
not have a Material Adverse Effect.
          8.5 State of Incorporation or Formation. The Borrower’s state of
incorporation or formation, as applicable, set forth on Schedule 1 hereto shall
remain the Borrower’s state of incorporation or formation, as applicable,
unless: (a) the Borrower provides the Administrative Agent with at least thirty
(30) days prior written notice of any proposed change, (b) no Event of Default
then exists or will exist immediately after such proposed change, and (c) the
Borrower provides the Administrative Agent with, at Borrower’s sole cost and
expense, such financing statements, and such other agreements and documents as
the Administrative Agent shall reasonably request in connection therewith.
          8.6 Liability Insurance. The Borrower shall maintain, at its expense,
general liability and environmental insurance through commercial insurance in
such amounts and with such deductibles consistent with its past practices, and
shall deliver to the Administrative Agent the original (or a certified) copy of
each policy of insurance and evidence of the payment of all

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premiums therefor. Such policies of insurance shall contain an endorsement
showing the Administrative Agent as additional insured thereunder.
Administrative Agent acknowledges that general liability insurance coverage is
currently unavailable generally in the nursing home industry at commercially
affordable rates. Borrower has in place and will maintain either (i) so long it
is available at commercially affordable rates, for the States of Texas, Alabama,
Florida and Ohio, indemnity insurance with coverage limits of One Million
Dollars ($1,000,000.00) per medical incident, subject to a deductible of Four
Hundred Ninety-Five Thousand Dollars ($495,000.00) per claim, with a total
annual aggregate policy limit of Fifteen Million Dollars ($15,000,000.00) and a
sublimit per Facility of Three Million Dollars ($3,000,000.00) or (ii) general
liability and malpractice insurance with single limit coverage of Two Hundred
Fifty Thousand and No/100 Dollars ($250,000.00) per occurrence and Seven Hundred
Fifty Thousand and No/100 Dollars ($750,000.00) cumulative. Administrative Agent
agrees that until such time as insurance coverage is generally available in the
nursing home industry at commercially affordable rates, Administrative Agent
agrees to accept Borrower’s current coverage. Borrower shall provide
Administrative Agent, (a) on an annual basis, information from its insurance
representative, insurance carrier or from comparable insurance carriers
regarding availability of insurance and (b) with respect to the insurance
policies contemplated by this Section 8.6 and those certain insurance policies
contemplated by Section 8.7 below, prompt (but in any event, within five
(5) Business Days of any such occurrence) written notice of any alteration or
cancellation of such insurance policy.
          8.7 Property and Other Insurance. The Borrower shall, at its expense,
keep and maintain its assets material to the Business of Borrower insured
against (i) loss or damage by fire, theft, explosion, flood, earthquake,
spoilage and all other hazards and risks and (ii) business interruption, in such
amounts with such deductibles (which may include self-insurance trusts)
ordinarily insured against by other owners or users of such properties in
similar businesses of comparable size operating in the same or similar
locations. Borrower, at Borrower’s expense, shall keep and maintain workers
compensation insurance as may be required by applicable Laws. The Borrower Agent
shall deliver to the Administrative Agent the original (or a certified) copy of
each policy of insurance and evidence of payment of all premiums therefor. All
such policies of insurance shall be in form and substance reasonably
satisfactory to the Administrative Agent. Such policies of insurance shall
contain an endorsement, in form and substance satisfactory to the Administrative
Agent, showing the Administrative Agent as “Lender’s Loss Payee” and all loss
payable to the Administrative Agent (for the ratable benefit of the Lenders), as
its interests may appear, as provided in this Section. Such endorsement shall
provide that such insurance company will give the Administrative Agent at least
thirty (30) days prior written notice before any such policy or policies of
insurance shall be altered or canceled and that no act or default of the
Borrower or any other Person shall affect the right of the Administrative Agent
to recover under such policy or policies of insurance in case of loss or damage.
The Borrower hereby directs all insurers under such policies of insurance to pay
all proceeds of insurance policies directly to the Administrative Agent and the
Administrative Agent shall absent an Event of Default permit the Borrower to use
such proceeds to restore or rebuild the damaged property as the Borrower shall
determine in its reasonable and good faith determination.
          Upon the occurrence of an Event of Default under this Agreement, the
Borrower irrevocably makes, constitutes and appoints the Administrative Agent
(and all officers, employees or agents designated by the Administrative Agent in
writing to the Borrower) as the

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Borrower’s true and lawful attorney-in-fact for the purpose, subject at all
times to the terms and conditions of the Commercial Leases (if and as
applicable), of making, settling and adjusting claims on behalf of the Borrower
under all such policies of insurance, endorsing the name of the Borrower on any
check, draft, instrument or other item of payment received by the Borrower or
the Administrative Agent pursuant to any such policies of insurance, and for
making all determinations and decisions of Borrower with respect to such
policies of insurance.
     UNLESS THE BORROWER PROVIDES THE ADMINISTRATIVE AGENT WITH EVIDENCE OF THE
INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT WITHIN THREE BUSINESS DAYS
FOLLOWING ADMINISTRATIVE AGENT’S REQUEST, THE ADMINISTRATIVE AGENT MAY PURCHASE
INSURANCE AT THE BORROWER’S EXPENSE TO PROTECT THE ADMINISTRATIVE AGENT’S
INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE
INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE ADMINISTRATIVE AGENT
MAY NOT PAY ANY CLAIMS THAT THE BORROWER MAKES OR ANY CLAIM THAT IS MADE AGAINST
THE BORROWER IN CONNECTION WITH THE COLLATERAL. THE BORROWER MAY LATER CANCEL
ANY SUCH INSURANCE PURCHASED BY THE ADMINISTRATIVE AGENT, BUT ONLY AFTER
PROVIDING THE ADMINISTRATIVE AGENT WITH EVIDENCE THAT THE BORROWER HAS OBTAINED
INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE ADMINISTRATIVE AGENT PURCHASES
INSURANCE FOR THE COLLATERAL, THE BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF
THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE ADMINISTRATIVE
AGENT MAY IMPOSE 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 LIABILITIES SECURED HEREBY. THE COSTS OF THE
INSURANCE MAY BE MORE THAN THE COST OF INSURANCE THE BORROWER MAY BE ABLE TO
OBTAIN ON ITS OWN.
          8.8 Environmental. The Borrower shall promptly notify and furnish
Administrative Agent with a copy of any and all Environmental Notices which are
received by it. Except where not required to do so pursuant to any Commercial
Lease, the Borrower shall take prompt and appropriate action in response to any
and all such Environmental Notices and shall promptly furnish Administrative
Agent with a description of the Borrower’s Response thereto. The Borrower shall
(a) obtain and maintain all permits required under all applicable federal,
state, and local Environmental Laws, except as to which the failure to obtain or
maintain would not have a Material Adverse Effect; and (b) except where not
required to do so pursuant to any Commercial Lease, keep and maintain the
Property and each portion thereof in compliance with, and not cause or permit
the Property or any portion thereof to be in violation of, any Environmental
Law, except as to which the failure to comply with or the violation of which,
would not have a Material Adverse Effect. During the term of this Agreement, the
Borrower shall not permit others to, Manage, whether on or off Borrower’s
Property, Hazardous Substances, except to the extent such Management does not or
is not reasonably likely to result in or create a Material Adverse Effect.
Except where not required to do so pursuant to any Commercial Lease, the
Borrower shall take prompt action in material compliance with

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applicable Environmental Laws to Respond to the on-site or off-site Release of
Hazardous Substances connected with operation of its business or Property.
          8.9 Banking Relationship. Except as otherwise provided in the
Revolving Loan Agreement: The Borrower and the Guarantor shall at all times
maintain all of their respective primary deposit and operating accounts with the
Administrative Agent and the Administrative Agent will act as the principal
depository and remittance agent for the Borrower and Guarantor. The Borrower
agrees to pay to the Administrative Agent reasonable and customary fees for
banking services/cash management services of Borrower and Guarantor (the
“Service Fee”). The Administrative Agent shall be and hereby is authorized to
charge any deposit or operating account of the Borrower in respect of the
Service Fee.
          8.10 Intellectual Property. If after the Closing Date the Borrower
shall own or otherwise possess any registered patents, copyrights, trademarks,
trade names, or service marks other than those owned by Guarantor or any
derivation thereof (or file an application to attempt to register any of the
foregoing), the Borrower shall promptly notify the Administrative Agent in
writing of same and execute and deliver any documents or instruments (at the
Borrower’s sole cost and expense) reasonably required by Administrative Agent to
perfect a security interest in and lien on any such federally registered
Intellectual Property in favor of the Administrative Agent and assist in the
filing of such documents or instruments with the United States Patent and
Trademark Office and/or United States Copyright Office or other applicable
registrar.
          8.11 Change of Location; Etc. Any of the Collateral may be moved to
another location within the continental United States so long as: (i) the
Borrower provides the Administrative Agent with at least thirty (30) days prior
written notice, (ii) no Event of Default then exists, and (iii) the Borrower
provides the Administrative Agent with, at Borrower’s sole cost and expense,
such financing statements, landlord waivers, bailee and processor letters and
other such agreements and documents as the Administrative Agent shall reasonably
request. The Borrower shall defend and protect the Collateral against and from
all claims and demands of all Persons at any time claiming any interest therein
adverse to the Administrative Agent. If the Borrower desires to change its
principal place of business and chief executive office or its name, the Borrower
shall notify the Administrative Agent thereof in writing no later than thirty
(30) days prior to such change and the Borrower shall provide the Administrative
Agent with, at Borrower’s sole cost and expense, such financing statements,
amendment statements and other documents as the Administrative Agent shall
reasonably request in connection with such change. If the Borrower shall decide
to change the location where its books and records are maintained, the Borrower
shall notify the Administrative Agent thereof in writing no later than thirty
(30) days prior to such change.
          8.12 Health Care Related Matters. To the extent applicable, the
Borrower shall cause all licenses, permits, certificates of need, reimbursement
contracts and programs, and any other agreements necessary for the use and
operation of its business or as may be necessary for participation in Medicaid
and other applicable reimbursement programs, to remain in full force and effect,
except to the extent that the failure to do so would not cause a Material
Adverse Effect or a material adverse effect on the prospects of the Borrowers on
a consolidated basis.

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          8.13 US Patriot Act. Borrower covenants to Administrative Agent and
Lenders that if Borrower becomes aware that it or any of its Affiliates is
identified on any Blocked Persons List (as identified in Section 7.29 hereof),
Borrower shall immediately notify Administrative Agent and Lenders in writing of
such information. Borrower further agrees that in the event any of them or any
Affiliate is at any time identified on any Blocked Persons List, such event
shall be an Event of Default, and shall entitle Administrative Agent and Lenders
to exercise any and all remedies provided in any Financing Agreements or
otherwise permitted by Law. In addition, Administrative Agent and Lenders may
immediately contact the Office of Foreign Assets Control and any other
government agency Administrative Agent or Lenders deem appropriate in order to
comply with its respective obligations under any Law regulating or relating to
terrorism and international money laundering.
          8.14 [Intentionally Omitted.].
          8.15 Further Assurances. The Borrower shall, 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 the Administrative Agent or any Lender may from time to
time reasonably request in order to carry out the intent and purposes of this
Agreement and the other Financing Agreements and the transactions contemplated
hereby and thereby, including, all such actions to establish, create, preserve,
protect and perfect a first-priority Lien in favor of the Administrative Agent
(for the ratable benefit of Lenders and Administrative Agent) on the Collateral
(including Collateral acquired after the date hereof), including on any and all
unencumbered assets of Borrower whether now owned or hereafter acquired.
          8.16 Compliance with Anti-Terrorism Orders. Administrative Agent and
Lenders hereby notify Borrowers that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the
“Patriot Act”), and the policies and practices of Administrative Agent and
Lenders, the Administrative Agent and Lenders are required to obtain, verify and
record certain information and documentation that identifies each Borrower,
which information includes the name and address of each Borrower and such other
information that will allow the Administrative Agent and Lenders to identify
each Borrower in accordance with the Patriot Act. In addition, Borrowers shall
(a) ensure that no Person who owns a controlling interest in or otherwise
controls any Borrower is or shall be listed on the OFAC Lists, (b) not use or
permit the use of the proceeds of the Loan to violate any of the foreign asset
control regulations of OFAC or any enabling statute or Executive Order relating
thereto, and (c) comply with all applicable Bank Secrecy Act laws and
regulations, as amended. Borrower shall not permit the transfer of any interest
in Borrower to any Person (or any beneficial owner of such entity) who is listed
on the OFAC Lists. Borrower shall not knowingly enter into a Lease with any
party who is listed on the OFAC Lists. Borrower shall immediately notify
Administrative Agent and Lenders if Borrower has knowledge that the Guarantor,
manger or any member or beneficial owner of Borrower, Guarantor, Manager is
listed on the OFAC Lists or (i) is indicted on or (ii) arraigned and held over
on charges involving money laundering or predicate crimes to money laundering.
Borrower shall immediately notify Administrative Agent and Lenders if Borrower
knows that any Tenant 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.

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          8.17 Hedging Agreement. Within fifteen (15) days of the Closing Date,
the Borrower will execute and deliver to the Administrative Agent a Hedging
Agreement covering an amount no less than Twenty-Three Million Dollars
($23,000,000) for no less than five (5) years.
     9. NEGATIVE COVENANTS.
     The Borrower covenants and agrees with Administrative Agent and Lenders
that as long as any Liabilities remain outstanding, and (even if there shall be
no such Liabilities outstanding) as long as this Agreement remains in effect
(unless the Required Lenders shall give (or Administrative Agent upon
instruction by Required Lenders to give) prior written consent thereto):
          9.1 Encumbrances. The Borrower shall not create, incur, assume or
suffer to exist any Lien of any nature whatsoever on any of its assets or
property, including, without limitation, the Collateral, other than the
following (“Permitted Liens”): (i) Liens securing the payment of taxes, either
not yet due or the validity of which is being contested in good faith by
appropriate proceedings, and as to which the Borrower shall, if appropriate
under GAAP, have set aside on its books and records adequate reserves, provided,
that such contest does not have a material adverse effect on the ability of the
Borrower to pay any of the Liabilities, or the priority or value of the
Administrative Agent’s Lien in the Collateral; (ii) deposits under workmen’s
compensation, unemployment insurance, social security and other similar laws;
(iii) Liens in favor of the Administrative Agent (for the ratable benefit of
Lenders and Administrative Agent); (iv) liens imposed by law, such as
mechanics’, materialmen’s, landlord’s, warehousemen’s, carriers’ and other
similar liens, securing obligations incurred in the ordinary course of business
that are not past due for more than thirty (30) calendar days, or that are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established, or that are not yet due and payable;
(v) purchase money security interests upon or in any property acquired or held
by the Borrower in the ordinary course of business to secure the purchase price
of such property so long as: (a) the aggregate indebtedness relating to such
purchase money security interests and Capitalized Lease Obligations does not at
any time exceed Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) in
the aggregate at any time, (b) each such lien shall only attach to the property
to be acquired; and (c) the indebtedness incurred shall not exceed one hundred
percent (100%) of the purchase price of the item or items purchased; (v) pledges
and deposits made in the ordinary course of business in compliance with
workmen’s compensation laws, unemployment insurance and other social security
laws or regulations, or deposits to secure performance of tenders, statutory
obligations, trade contracts (other than for Indebtedness), leases (other than
Capital Lease Obligations), surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of Borrower’s
business as presently conducted; (vi) any Lien securing a judgment; provided,
that any Lien securing a judgment in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) that remains unsatisfied or undischarged for more than
thirty (30) days shall not be a Permitted Lien, unless such judgment is either
(x) fully insured and such insurer has admitted liability or (y) is being
contested or appealed by appropriate proceedings and the enforcement of such
judgment is stayed during the course of such contest or appeal, provided that
Borrower has established reserves adequate for payment of such judgment and in
the event such contest or appeal is ultimately unsuccessful pays such judgment
within ten (10) days of the final, non-

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appealable ruling rendered in such contest or appeal; and (vii) financing
statements with respect to a lessor’s rights in and to personal property leased
to a Borrower in the ordinary course of business other than through a
Capitalized Lease Obligations.
          9.2 Indebtedness; Capital Expenditures. Borrower shall not incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, any Indebtedness, except (i) the Liabilities, (ii) HUD Financing (but
only for purposes of payment and release of a Borrower and such Borrower’s
Collateral in accordance with Section 6.8 hereof), (iii) the Commercial Leases,
and any extensions or renewals thereof, (iv) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, (v) the
indebtedness not to at any time exceed Seven Hundred Fifty Thousand and No/100
Dollars ($750,000.00) relating to the purchase money security interests and
Capitalized Lease Obligations permitted pursuant to Section 9.1 hereof, and
(vi) intercompany Indebtedness of the Borrower to the extent permitted under
Section 9.4.
          9.3 Consolidations, Mergers or Transactions. The Borrower shall not be
a party to any merger, consolidation, or exchange of Stock, or purchase or
otherwise acquire all or substantially all of the assets or Stock of any class
of, or any other evidence of an equity interest in, or any partnership, limited
liability company, or joint venture interest in, any other Person; provided,
that, with prior written notice to Administrative Agent, a Borrower may merge or
consolidate with, or dissolve into, another Borrower so long as the surviving
entity remains a Borrower for all purposes under this Agreement and the other
Financing Agreements. The Borrower shall not form or establish any Subsidiary
without the Administrative Agent’s prior written consent, unless each of the
requirements identified on Schedule 9.3 hereto are satisfied, as reasonably
determined by the Administrative Agent. With prior notice to Administrative
Agent, Borrower may dissolve an inactive Subsidiary that does not conduct any
business operations and has assets with a book value not in excess of Ten
Thousand and No/100 Dollars ($10,000.00) (“Inactive Subsidiary”), provided that
any assets are transferred to Guarantor or an existing Subsidiary which is a
Borrower under this Agreement or the Revolving Loan Agreement.
          9.4 Investments or Loans. The Borrower shall not make, incur, assume
or permit to exist any loans or advances, or any investments in or to any other
Person, except (i) investments in short-term direct obligations of the United
States Government, agency or instrumentality thereof; or any (ii) investments in
negotiable certificates of deposit issued by the Administrative Agent or by any
other bank reasonably satisfactory to the Administrative Agent, payable to the
order of the Borrower or to bearer, (iii) investments in commercial paper rated
at least A-1 by Standard & Poor’s Corporation or P-1 by Moody’s Investors
Service, Inc., or carrying an equivalent rating by a nationally recognized
rating agency if both of the two named rating agencies cease publishing ratings
of investments, (iv) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (iii), above; provided that, in each case, such investment is
reasonably acceptable to the Administrative Agent, (iv) other short-term
investments as may be permitted by Administrative Agent, (vi) loans or advances
made by any Borrower to Guarantor, any other Borrower or any Affiliated
Revolving Borrower, (vii) loans and advances to employees permitted under
Section 9.8; and (viii) investments by the Borrowers in their respective
Subsidiaries existing on the date

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hereof and additional investments by the Borrower in their respective
Subsidiaries so long as such Subsidiary is a Borrower under this Agreement.
          9.5 Guarantees. The Borrower shall not guarantee, endorse or otherwise
in any way become or be responsible for obligations of any other Person, whether
by agreement to purchase the Indebtedness of any other Person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purpose of paying or discharging
any Indebtedness or obligation of such other Person or otherwise, except
(i) endorsements of negotiable instruments for collection in the ordinary course
of business, and (ii) the Indebtedness permitted under Section 9.2, above.
          9.6 Disposal of Property. The Borrower shall not sell, assign, lease,
convey, lease, transfer or otherwise dispose of (whether in one transaction or a
series of transactions) all or any substantial part of its properties, assets
and rights (or sell or assign, with or without recourse, any receivables) to any
Person except (a) sales of Inventory in the ordinary course of business, and
(b) sales of Equipment being replaced in the ordinary course of business with
other Equipment with a fair market value and orderly liquidation value equal to
or greater than the Equipment being replaced.
          9.7 Use of Proceeds. The Borrower shall use the proceeds of the Term
Loan only for the following purposes: (a) the Existing Lender Refinancing,
(b) payment of certain ordinary course capital expenditure purposes, and (c) to
pay reasonable and actually incurred transaction costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
          9.8 Loans to Officers; Consulting and Management Fees. The Borrower
shall not make any loans to its officers, directors, manager, member, or
employees or to any other Person, and the Borrower shall not pay any consulting,
management fees or similar fees to its officers, directors, member, manager,
employees, or Affiliates or any other Person, whether for services rendered to
the Borrower or otherwise; provided, however, the Borrower shall be permitted to
(i) make advances to its employees in an aggregate amount not to exceed One
Hundred Thousand Dollars ($100,000) in any Fiscal Year of Borrower for all such
employees collectively, in each case, provided that both immediately before such
contemplated payment(s) or after giving effect to any such payment(s) no Default
or Event of Default shall exist or have occurred or result therefrom; (ii) pay
reasonable outside directors fees; and (iii) pay the management fees permitted
by the Management Agreements. Administrative Agent acknowledges that travel
advances issued in the ordinary course of business do not constitute loans for
purposes of this Section 9.8.
          9.9 Dividends and Stock Redemptions. The Borrower shall not
(a) declare, make or pay any dividend or other distribution (whether in cash,
property or rights or obligations) to or for the benefit of any officer, member,
director, or any Affiliate other than (i) to Guarantor, provided that both
immediately before such contemplated payment(s) or after giving effect to any
such payment(s) Borrower is in compliance with Section 9.12(a) hereof, (ii) the
Required Dividends and Redemption Amounts, (iii) distributions under the
Borrower Cash Management Program, including distributions for Guarantor’s normal
quarterly dividends to

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common shareholders, and (iv) payment of the management fees under the
Management Agreements, or (b) purchase or redeem any of the Stock of the
Borrower or any options or warrants with respect thereto, declare or pay any
dividends or distributions thereon, or set aside any funds for any such purpose.
Notwithstanding the foregoing or anything to the contrary contained herein, the
foregoing declarations, payments, distributions, purchases or redemptions set
forth in this Section 9.9 shall, in each case, be in both manner and amount
consistent with the Borrower’s historical practices.
          9.10 Payments in Respect of Subordinated Debt.
               (1) [Intentionally Omitted.]
               (2) The Borrower shall not make any payment in respect of any
Indebtedness for borrowed money that is subordinated to the Liabilities
(including, without limitation, the Subordinated Debt); provided, however, the
Borrower shall be permitted to make solely those payments expressly permitted
pursuant to the terms of any Subordination Agreements, in each case, as long as
the Borrower is in compliance with Section 9.12 hereof both immediately before
and after any such contemplated or actual payment, provided, further, that both
immediately before any such contemplated payment or after giving effect to any
such payments no Default or Event of Default shall exist or have occurred or
result therefrom, unless otherwise permitted expressly under the terms of such
Subordinations Agreement.
          9.11 Transactions with Affiliates. Except as expressly permitted under
this Agreement, and except for the Management Agreements and payment of the fee
permitted by the terms of the Management Agreements, and the Borrower Cash
Management Program, the Borrower shall not transfer any cash or property to any
Affiliate or enter into any transaction, including, without limitation, the
purchase, lease, sale or exchange of property or the rendering of any service to
any Affiliate; provided, however, except as otherwise expressly restricted under
this Agreement, that the Borrower may transfer cash or property to Affiliates
and enter into transactions with Affiliates for fair value in the ordinary
course of business pursuant to terms that are no less favorable to the Borrower
than the terms upon which such transfers or transactions would have been made
had such transfers or transactions been made to or with a Person that is not an
Affiliate.
          9.12 Financial Ratios. Commencing with the Fiscal Quarter ending
March 31, 2011 and continuing thereafter:
          (a) Minimum EBITDAR. The consolidated Borrower shall not permit its
EBITDAR to be less than $3,300,000, measured as of the last day of each Fiscal
Quarter for the trailing twelve (12) month period; provided, Administrative
Agent acknowledges the minimum EBITDAR herein will need to be adjusted to a
mutually acceptable dollar amount as a result of any HUD Financing in accordance
with Section 6.8.
          (b) Minimum Fixed Charge Coverage Ratio. The Guarantor shall not
permit its Fixed Charge Coverage Ratio to be less than 1.05 to 1.00, measured as
of the last day of each Fiscal Quarter for the trailing twelve (12) month
period.

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          (c) Minimum Adjusted EBITDA. The Guarantor shall not permit its
Adjusted EBITDA to be less than Ten Million and No/100 Dollars ($10,000,000.00),
measured as of the last day of each Fiscal Quarter for the trailing twelve
(12) month period.
          (d) Guarantor’s Cash Balance. The Guarantor shall not permit its Cash
Balance (as defined below), tested as of the last day of each month, to be less
than Four Million Dollars ($4,000,000); provided, a violation of this
requirement for any month may be cured within fifteen (15) days of the last day
of such month and will not constitute an Event of Default unless not cured by
such day. As used in this Section, the term “Cash Balances” means the aggregate
amount of unrestricted cash of Guarantor collectively on deposit with
PrivateBank. For the avoidance of doubt, (x) cash deposits contained in any
escrow, pledged, hypothecated, assigned or restricted accounts shall not be
included in the calculation of the Cash Balance; and (y) any draws on the
Revolving Loan Commitment (as defined in the Revolving Loan Agreement) deposited
in any account ultimately controlled by the Guarantor shall also not be included
in the calculation of Cash Balance.
The Borrower and the Guarantor acknowledge and agree that the calculation and
computation of the foregoing financial ratios and covenants shall be pursuant to
and in accordance with the last sentence of Section 8.1(e) hereof.
Administrative Agent, Lenders, Borrower and Guarantor acknowledge and agree that
for purposes of the calculation and computation of the foregoing financial
ratios and covenants in subparagraphs (b), (c) and (d), the terms “Minimum
EBITDAR” and “Fixed Charge Coverage Ratio,” together with the terms “EDITDAR,”
“EDITDA,” “Adjusted EBITDA,” “Adjusted EBITDAR,” “Capital Expenditures,” “Net
Capital Expenditures” and “Fixed Charges” for purposes of this Section, shall
all be as defined, calculated and measured in the Revolving Loan Agreement, on a
consolidated basis, for all Borrowers thereunder.
          9.13 Change in Nature of Business. Borrower shall not engage, directly
or indirectly, in any business other than owning, operating and/or leasing the
Property to the Operators and matters incidental or directly related thereto.
          9.14 Other Agreements. The Borrower shall not enter into any agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any Financing Agreement to which Borrower
is a party or which would violate or breach any provision hereof or thereof, or
that would or is reasonably likely to adversely affect the Administrative
Agent’s or any Lender’s interests or rights under this Agreement and the other
Financing Agreements to which Borrower is a party or the likelihood that the
Liabilities will be paid in full when due, nor shall the Borrower’s bylaws,
articles of incorporation, operating agreement, partnership agreement or other
governing document (each a “Governing Document”), as applicable, be amended or
modified in any way that would violate or breach any provision hereof or of any
Financing Agreement to which Borrower is a party, or that would or is reasonably
likely to adversely affect the Administrative Agent’s or any Lender’s interests
or rights under this Agreement and the other Financing Agreements to which
Borrower is a party or the likelihood that the Liabilities will be paid in full
when due; provided, prior to any amendment or modification of any of the
Borrower’s Governing Documents, the Borrower

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shall furnish a correct and complete copy of any such proposed amendment or
modification to the Administrative Agent.
          9.15 Blocked Accounts and Lock Box Accounts. The Borrower shall not
establish or open any blocked account or any lock box accounts after the Closing
Date unless in favor of and with the Administrative Agent.
          9.16 Amendments to Restricted Agreements. The Borrower shall not
amend, modify or supplement any Restricted Agreement, in any manner that would
or is reasonably likely to adversely affect the Administrative Agent’s or any
Lender’s interests under this Agreement and the other Financing Agreements to
which Borrower is a party, without the Administrative Agent’s prior written
consent. Within three (3) Business Days after entering into any non-adverse
amendment, modification or supplement to any Restricted Agreement, the Borrower
Agent shall deliver to the Administrative Agent a complete and correct copy of
such amendment, modification or supplement.
          9.17 State of Incorporation or Formation. The Borrower shall not
change its state of incorporation or formation, as applicable, from that set
forth on Schedule 1 hereto.
          9.18 Environmental. Except as to environmental conditions for which it
is not responsible pursuant to any Commercial Lease, the Borrower shall not
permit the Property or any portion thereof to be involved in the use,
generation, manufacture, storage, disposal or transportation of Hazardous
Substances except in compliance in all material respects with all Environmental
Laws.
          9.19 Fiscal Year. The Borrower shall not change its Fiscal Year.
          9.20 Restrictions on Fundamental Changes. Without duplication of any
of the foregoing, Borrower shall not:
               (1) except as expressly permitted in accordance with Section 9.3
hereof, liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution);
               (2) except as required upon the termination of a Commercial
Lease, transfer, assign, convey or grant to any other Person, other than another
Borrower, the right to operate or control any Location, whether by lease,
sublease, management agreement, joint venture agreement or otherwise;
               (3) without providing Administrative Agent with thirty (30) days’
prior written notice, change its legal name (and Borrower shall provide
Administrative Agent with, at Borrower’s sole cost and expense, such amendment
and financing statements and other documents as Administrative Agent shall
reasonably request in connection with such contemplated change);
               (4) except as expressly permitted in accordance with Section 9.3
hereof, suffer or permit to occur any change in the legal or beneficial
ownership of the capital stock, partnership interests or membership interests,
or in the capital structure, or any material change in the organizational
documents or governing documents, of Borrower;

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               (5) change the licensed operator, manager or property manager for
any Property; or
               (6) consent to or acknowledge any of the foregoing.
          9.21 Margin Stock. Borrower shall not carry or purchase any “margin
security” within the meaning of Regulations U, T or X of the Board of Governors
of the Federal Reserve System.
          9.22 Truth of Statements and Certificates. Borrower shall not furnish
to the Administrative Agent or any Lender any certificate or other document that
contains any untrue statement of a material fact or that omits to state a
material fact necessary to make it not misleading in light of the circumstances
under which it was furnished.
     The Borrower agrees that compliance with this Article 9 is a material
inducement to the Lenders’ advancing credit under this Agreement. The Borrower
further agrees that in addition to all other remedies available to the
Administrative Agent and the Lenders, the Administrative Agent and Lenders shall
be entitled to specific enforcement of the covenants in this Article 9,
including injunctive relief.
          9.23 Commercial Leases. Without the prior written consent of
Administrative Agent, which consent will not unreasonably be withheld:
(a) Borrower shall not enter into any Commercial Lease as to which a Borrower
would be the lessee; (b) no Person shall be the Operator of the Facility other
than Borrower; and (c) no Operating Lease will be entered into between Borrower
and any Operator of the Facilities.
     10. HEALTH CARE MATTERS.
     Without limiting the generality of any representation or warranty made in
Article 7 or any covenant made in Articles 8 or 9, each Borrower represents and
warrants on a joint and several basis to and covenants with the Administrative
Agent and each Lender, that:
          10.1 [Intentionally Omitted].
          10.2 Certificate of Need. If required under applicable Law, each
Borrower has and shall maintain in full force and effect a valid certificate of
need (“CON”) or similar certificates, license, permit, registration,
certification or approval issued by the State Regulator for the requisite number
of beds in each Property (the “Licenses”). Borrower shall cause to be operated
the Location and the Property in a manner such that the Licenses shall remain in
full force and effect at all times, except to the extent the failure to do so
would not cause a Material Adverse Effect or a material adverse effect on the
prospects of the Borrowers on a consolidated basis. True and complete copies of
the Licenses have been delivered to Administrative Agent.
          10.3 Licenses. The Licenses: (i) are and shall continue in full force
and effect at all times throughout the term of this Agreement and are and shall
be free from restrictions or known conflicts which would materially impair the
use or operation of any Property for its current use, and if any Licenses become
provisional, probationary, conditional or restricted in any way (collectively
“Restrictions”), Borrower shall take or cause to be taken prompt action to

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correct such Restrictions; (ii) may not be, and have not been, and will not be
transferred to any location other than the Property; and (iii) have not been and
will not be pledged as collateral security for any other loan or indebtedness.
Borrower shall not do (or suffer to be done) any of the following:
               (1) Rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of the Licenses for any Property
without Administrative Agent’s prior written consent;
               (2) Amend or otherwise change any Property’s licensed beds
capacity and/or the number of beds approved by the State Regulator without
Administrative Agent’s prior written consent; or
               (3) Replace, assign or transfer all or any part of any Property’s
beds to another site or location (other than to any other Property) without
Administrative Agent’s prior written consent.
     11. DEFAULT, RIGHTS AND REMEDIES OF THE ADMINISTRATIVE AGENT.
          11.1 Event of Default. Any one or more of the following shall
constitute an “Event of Default” under this Agreement:
               (1) the Borrower fails to pay (i) any principal or interest
payable hereunder or under the Term Loan Note on the date due, declared due or
demanded (including, without limitation, any amount due under Section 2.15); or
(ii) any other amount payable to the Administrative Agent or any Lender under
this Agreement or under any other Financing Agreement to which the Borrower is a
party (including, without limitation, the Term Loan Notes) within five
(5) calendar days after the date when any such payment is due and, with respect
to clause (ii) only, such failure is not cured within five (5) calendar days
after notice to Borrower by Administrative Agent;
               (2) the Borrower fails or neglects to perform, keep or observe
any of the covenants, conditions or agreements set forth in (i) Sections 8.5,
8.6, 8.7, 8.9, 8.11, 8.12, or Section 8.17 hereof, (ii) any Section of Article 9
hereof (other than Section 9.18 hereof), or (iii) any Section of Article 10
hereof and, with respect to such Sections in Article 10 only, such failure or
neglect shall continue for a period of five (5) calendar days after the earlier
of (1) the date the Borrower actually knew of such failure or neglect and (2)
notice to the Borrower by the Administrative Agent.
               (3) the Borrower fails or neglects to perform, keep or observe
any of the covenants, conditions, promises or agreements contained in this
Agreement (which is not otherwise specifically referenced in this Section 11.1)
and such failure or neglect shall continue for a period of thirty (30) calendar
days after the earlier of (i) the date the Borrower actually knew of such
failure or neglect and (ii) notice to the Borrower by the Administrative Agent;

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               (4) any representation or warranty heretofore, now or hereafter
made by the Borrower in connection with this Agreement or any of the other
Financing Agreements to which Borrower is a party is untrue, misleading or
incorrect in any material respect, or any schedule, certificate, statement,
report, financial data, notice, or writing furnished at any time by the Borrower
to the Administrative Agent or any Lender is untrue, misleading or incorrect in
any material respect, on the date as of which the facts set forth therein are
stated or certified;
               (5) a judgment, decree or order requiring payment in excess of
Two Hundred Fifty Thousand Dollars ($250,000) shall be rendered against the
Borrower and such judgment or order shall remain unsatisfied or undischarged and
in effect for thirty (30) consecutive days without a stay of enforcement or
execution, provided that this clause (e) shall not apply to any judgment, decree
or order for which the Borrower is fully insured and with respect to which the
insurer has admitted liability, or such judgment, decree or order is being
contested or appealed by appropriate proceedings;
               (6) a notice of Lien, levy or assessment is filed or recorded
with respect to any of the assets of the Borrower (including, without
limitation, the Collateral), by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipality or other
governmental agency or any taxes or debts owing at any time or times hereafter
to any one or more of them become a Lien, upon any of the assets of the Borrower
(including, without limitation, the Collateral), provided that this clause
(f) shall not apply to any Liens, levies, or assessments which a Borrower is
contesting in good faith (provided the Borrower has complied with the provisions
of clauses (a) and (b) of Section 8.4 hereof) or which relate to current taxes
not yet due and payable;
               (7) any material portion of the Collateral is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors;
               (8) a proceeding under any bankruptcy, reorganization,
arrangement of debt, insolvency, readjustment of debt or receivership law or
statute is filed against the Borrower or any guarantor of the Liabilities,
including Guarantor, and any such proceeding is not dismissed within sixty (60)
days of the date of its filing, or a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency, readjustment of debt or
receivership law or statute is filed by the Borrower or any guarantor of the
Liabilities, including Guarantor, or the Borrower or any guarantor of the
Liabilities, including Guarantor, makes an assignment for the benefit of
creditors, or the Borrower or any guarantor of the Liabilities, including
Guarantor, takes any action to authorize any of the foregoing;
               (9) except as permitted for an Inactive Subsidiary, the Borrower
or Guarantor voluntarily or involuntarily dissolves or is dissolved, or its
existence terminates or is terminated; provided that in the case of an
administrative dissolution or revocation of existence for failure to file the
proper reports or returns with the applicable governmental authorities, no Event
of Default shall be deemed to have occurred if an application for reinstatement
is (i) filed promptly (but in any event, within fifteen (15) calendar days) upon
Guarantor or Borrower receiving notice of such dissolution or revocation from
the applicable

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governmental authority and (ii) diligently pursued to completion (if reasonably
capable of being completed), as determined by the Administrative Agent in its
sole and absolute discretion;
               (10) the Credit Parties, taken as a whole, fail, at any time, to
be Solvent;
               (11) the Borrower or any guarantor of the Liabilities, including
Guarantor, is enjoined, restrained, or in any way prevented by the order of any
court or any administrative or regulatory agency from conducting all or any
material part of its business affairs;
               (12) a breach by the Borrower shall occur under any agreement,
document or instrument (other than an agreement, document or instrument
evidencing the lending of money), whether heretofore, now or hereafter existing
between the Borrower and any other Person and the effect of such breach if not
cured within any applicable cure period will or is likely to have or create a
Material Adverse Effect;
               (13) the Borrower shall fail to make any payment due on any other
obligation for borrowed money or shall be in breach of any agreement evidencing
the lending of money and the effect of such failure or breach if not cured
within any applicable cure period would be to permit the acceleration of any
obligation, liability or indebtedness in excess of Five Hundred Thousand Dollars
($500,000);
               (14) there shall be instituted in any court criminal proceedings
against the Borrower, or the Borrower shall be indicted for any crime, in either
case for which forfeiture of a material amount of its property is a potential
penalty, unless (i) such actions are being contested or appealed in good faith
by appropriate proceedings, (ii) the potential forfeiture has been stayed during
the pendency of such proceedings, and (iii) no Medicare or Medicaid
reimbursement obligations are materially adversely affected by such proceedings;
               (15) Guarantor shall at any time after the Closing Date have
voting power over less than one hundred percent (100%) of the issued and
outstanding Stock of Diversicare Management Services Co., or directly or
indirectly of the Pledgor;
               (16) any Lien securing the Liabilities shall, in whole or in
part, cease to be a perfected first priority Lien (subject only to the Permitted
Liens); this Agreement or any of the Financing Agreements to which the Borrower
is a party, shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligations of the Borrower; or the Borrower shall directly or
indirectly, contest in any manner such effectiveness, validity, binding nature
or enforceability;
               (17) any breach, non-compliance, default or event of default
shall occur under or pursuant to any Subordination Agreement, or any other
Financing Agreement (including, without limitation, the Guaranty, any Hedging
Agreement and each Pledge Agreement) by any party thereto (other than by the
Administrative Agent), and the same is not cured or remedied within any
applicable cure period, provided that if such default or event of default,
breach, noncompliance or default, requires the giving of notice by
Administrative Agent to any party in addition to or other than Borrower,
Administrative Agent shall have

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provided Borrower with such notice at the same time as it provides such notice
to such other party;
               (18) [Intentionally Omitted];
               (19) institution by the PBGC, the Borrower or any ERISA Affiliate
of steps to terminate any Plan or to organize, withdraw from or terminate a
Multiemployer Plan if as a result of such reorganization, withdrawal or
termination, the Borrower or any ERISA Affiliate could be required to make a
contribution to such Plan or Multiemployer Plan, or could incur a liability or
obligation to such Plan or Multiemployer Plan, in excess of Two Hundred Fifty
Thousand Dollars ($250,000), or (ii) a contribution failure occurs with respect
to any Plan sufficient to give rise to a Lien under ERISA, which Lien is not
fully discharged within fifteen (15) days;
               (20) a Material Adverse Change shall occur;
               (21) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability of
this Agreement, or any of the other Financing Agreements, the legality or the
enforceability of any of the Liabilities or the perfection or priority of any
Lien granted to the Administrative Agent;
               (22) Guarantor shall revoke or attempt to revoke, terminate or
contest its obligations under the Guaranty, or the Guaranty or any provision
thereof shall cease to be in full force and effect in accordance with its terms
and provisions;
               (23) Pledgor shall revoke or attempt to revoke, terminate or
contest in any way the Pledge Agreement, or any provision thereof shall cease to
be in full force and effect in accordance with its terms and provisions;
               (24) Borrower shall be prohibited or otherwise restrained from
conducting the business theretofore conducted by it in any manner that has or
could reasonably be expected to have or result in a Material Adverse Effect;
               (25) there shall occur with respect to the Operator of any
Location any Medicare or Medicaid survey deficiencies at Level I, J, K, L or
worse (i) which deficiencies are not cured within the amount of time permitted
by the applicable reviewing agency; (ii) which result in the imposition by any
Government Authority or the applicable state survey agency of sanctions in the
form of either a program termination, temporary management, denial of payment
for new admission (which continues for thirty (30) days or more or pertains to
more than one Location) or facility closure and (iii) which sanctions could have
a Material Adverse Effect as determined by Administrative Agent in its
reasonable discretion. Upon the occurrence of such event, Borrower shall submit
to Administrative Agent its plan of correction for dealing with such event, and
shall periodically review its progress under the plan of correction with
Administrative Agent. Provided that Administrative Agent remains satisfied with
the progress under the plan of correction, then such Event shall not be an Event
of Default unless formal notice is given by Administrative Agent to Borrower;

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               (26) a state or federal regulatory agency shall have revoked any
license, permit, certificate or Medicaid or Medicare qualification pertaining to
the Property or any Location, regardless of whether such license, permit,
certificate or qualification was held by or originally issued for the benefit of
Borrower, a tenant or any other Person, the revocation of which could reasonably
be expected to have a Material Adverse Effect;
               (27) any material default by Borrower under the terms of any
material Lease following the expiration of any applicable notice and cure period
(if any);
               (28) William R. Council III or L. Glynn Riddle, Jr. shall not be
senior officers of the Borrower and devote significant time and energy to the
business of the Borrower; provided, however, it shall not constitute an Event of
Default if any such individual shall fail for any reason to be a senior officer
of the Borrower or fail to devote significant time and energy to the business of
the Borrower, and such individual shall be promptly replaced by the Borrower,
whether on an interim or permanent basis, with an individual with substantially
similar skills and experience (but in no event later than within 90 calendar
days of the former individual’s resignation, termination, permanent disability
or death) and otherwise acceptable to the Administrative Agent in its reasonable
and good faith determination;
               (29) any subordination provision in any document or instrument
governing Subordinated Debt, or any subordination provision in any guaranty by
any Subsidiary of any Subordinated Debt, shall cease to be in full force and
effect, or any Credit Party or any other Person (including the holder of any
applicable Subordinated Debt) shall contest in any manner the validity, binding
nature or enforceability of any such provision; or
               (30) an “Event of Default” shall occur under or pursuant to the
Revolving Loan Agreement or any Affiliate Revolving Loan Financing Agreement.
     Notwithstanding the foregoing, in the situations described in clauses (l),
(t), (x) and (z), above, where an Event of Default is triggered by the
occurrence of a Material Adverse Change or a Material Adverse Effect, events
which could reasonably be expected to have or result in a Material Adverse
Effect or Material Adverse Change, such occurrence shall not be deemed to be an
Event of Default hereunder provided that Borrower shall within forty-eight
(48) hours after the occurrence thereof submit to Administrative Agent in
writing a plan of correction for dealing with such Material Adverse Change or
Material Adverse Effect that is acceptable to Administrative Agent in its sole
and absolute discretion, and, if such plan of correction is so acceptable, for
so long as Administrative Agent remains satisfied in all respects with the
progress under such plan of correction and until written notice that
Administrative Agent is not so satisfied is given by Administrative Agent to
Borrower.
          11.2 Acceleration. Upon the occurrence of any Event of Default
described in Sections 11.1(h), (i), or (j), the Commitment (if it has not
theretofore terminated) shall automatically and immediately terminate and all of
the Liabilities shall immediately and automatically, without presentment,
demand, protest or notice of any kind (all of which are hereby expressly
waived), be immediately due and payable; and upon the occurrence of any other
Event of Default, the Administrative Agent may at its sole option (or, upon
written request of Required Lenders shall) declare the Commitment (if it has not
theretofore terminated) to be

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terminated and any or all of the Liabilities may, at the sole option of the
Administrative Agent (or, upon written request of Required Lenders shall), and
without presentment, demand, protest or notice of any kind (all of which are
hereby expressly waived), be declared, and thereupon shall become, immediately
due and payable, whereupon the Commitment shall immediately terminate.
          11.3 Rights and Remedies Generally.
               (1) Upon the occurrence of any Event of Default, the
Administrative Agent and Lenders shall have, in addition to any other rights and
remedies contained in this Agreement and in any of the other Financing
Agreements, all of the rights and remedies of a secured party under the Code or
other applicable laws, all of which rights and remedies shall be cumulative, and
non-exclusive, to the extent permitted by Laws, including, without limitation,
the right of Administrative Agent to sell, assign, or lease any or all of the
Collateral. The exercise of any one right or remedy shall not be deemed a waiver
or release of any other right or remedy, and the Administrative Agent, upon the
occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and in
any order. All sums received from Borrower and/or the Collateral in respect of
the Loan may be applied by the Administrative Agent to any Liabilities in such
order of application and in such amounts as the Administrative Agent shall deem
appropriate in its discretion (subject to Section 12.8). Borrower waives any
right it may have to require the Administrative Agent to pursue any Person for
any of the Liabilities.
               (2) Upon notice to Borrower after an Event of Default, Borrower
at its own expense shall assemble all or any part of the Collateral as
determined by Administrative Agent and make it available to Administrative Agent
at any location designated by Administrative Agent. In such event, Borrower
shall, at its sole cost and expense, store and keep any Collateral so assembled
at such location pending further action by Administrative Agent and provide such
security guards and maintenance services as shall be necessary to protect and
preserve such Collateral. In addition to all such rights and remedies, the sale,
lease or other disposition of the Collateral, or any part thereof, by the
Administrative Agent after an Event of Default may be for cash, credit or any
combination thereof, and the Administrative Agent (on behalf of Lenders and
itself) may purchase all or any part of the Collateral at public or, if
permitted by law, private sale, and in lieu of actual payment of such purchase
price, may set-off the amount of such purchase price against the Liabilities of
the Borrower then owing. Any sales of such Collateral may be adjourned from time
to time with or without notice. The Administrative Agent may, in its sole
discretion, cause the Collateral to remain on the Borrower’s premises, at the
Borrower’s expense, pending sale or other disposition of such Collateral. The
Administrative Agent shall have the right after an Event of Default to conduct
such sales on the Borrower’s premises, at the Borrower’s expense, or elsewhere,
on such occasion or occasions as the Administrative Agent may see fit.
          11.4 Entry Upon Premises and Access to Information. Upon the
occurrence of any Event of Default, the Administrative Agent shall have the
right to enter upon the premises of the Borrower where the Collateral is located
without any obligation to pay rent to the Borrower, or any other place or places
where such Collateral is believed to be located and kept, and remove such
Collateral therefrom to the premises of the Administrative Agent or any agent of
the

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Administrative Agent, for such time as the Administrative Agent may desire, in
order to effectively collect or liquidate such Collateral. Upon the occurrence
of any Event of Default, the Administrative Agent shall have the right to obtain
access to the Borrower’s data processing equipment, computer hardware and
software relating to the Collateral and subject to the privacy requirements and
regulations of HIPPA and of any applicable state or federal patients bill of
rights, to use all of the foregoing and the information contained therein in any
manner the Administrative Agent deems appropriate. Upon the occurrence of any
Event of Default, the Administrative Agent shall have the right to receive, open
and process all mail addressed to the Borrower and relating to the Collateral.
          11.5 Sale or Other Disposition of Collateral by the Administrative
Agent. Any notice required to be given by the Administrative Agent of a sale,
lease or other disposition or other intended action by the Administrative Agent,
with respect to any of the Collateral, which is deposited in the United States
mails, postage prepaid and duly addressed to the Borrower at the address
specified in Section 12.12 hereof, at least ten (10) calendar days prior to such
proposed action shall constitute fair and reasonable notice to the Borrower of
any such action. The net proceeds realized by the Administrative Agent upon any
such sale or other disposition, after deduction for the expense of retaking,
holding, preparing for sale, selling or the like and the attorneys’ and
paralegal’ fees and legal expenses incurred by the Administrative Agent in
connection therewith, shall be applied as provided herein toward satisfaction of
the Liabilities, including, without limitation, such Liabilities described in
Sections 8.2 and 11.2 hereof. The Administrative Agent shall account to the
Borrower for any surplus realized upon such sale or other disposition, and the
Borrower shall remain liable for any deficiency. The commencement of any action,
legal or equitable, or the rendering of any judgment or decree for any
deficiency shall not affect the Administrative Agent’s Liens in the Collateral
until the Liabilities are fully paid in cash. The Borrower agrees that the
Administrative Agent has no obligation to preserve rights to the Collateral
against any other Person. If and to the extent applicable, the Administrative
Agent is hereby granted a license or other right to use, without charge, the
Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trade styles, trademarks, service marks and advertising
matter or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale and selling any such Collateral,
and the Borrower’s rights and benefits under all licenses and franchise
agreements, if any, shall inure to the Administrative Agent’s benefit until the
Liabilities of the Borrower are paid in full in cash. Borrower covenants and
agrees not to interfere with or impose any obstacle to Administrative Agent’s
exercise of its rights and remedies with respect to the Collateral.
          11.6 Waivers (General).
               (1) Except as otherwise provided for in this Agreement and to the
fullest extent permitted by applicable Law, Borrower hereby 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 Agreements,
the Term Loan Notes or any other notes, commercial paper, Accounts, contracts,
documents, instruments, chattel paper and guaranties at any time held by
Administrative Agent or any Lender on which Borrower may in any way be liable,
and hereby ratifies and confirms whatever Administrative Agent and Lenders may
do in this regard; (ii) all

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rights to notice and a hearing prior to Administrative Agent’s taking possession
or control of, or to Administrative Agent’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 to exercise any of its remedies; and
(iii) the benefit of all valuation, appraisal and exemption Laws. Borrower
acknowledges that it has been advised by counsel of its choice and decision with
respect to this Agreement, the other Financing Agreements and the transactions
evidenced hereby and thereby.
               (2) 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 Administrative Agent; (ii) consents to any indulgences and all
extensions of time, renewals, waivers, or modifications that may be granted by
Administrative Agent with respect to the payment or other provisions of this
Agreement, the Term Loan Notes, 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 Borrower and without
affecting its liability hereunder; (iii) agrees that its liability shall be
unconditional and without regard to the liability of any other tax; and
(iv) expressly waives the benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing.
               (3) Each and every covenant and condition for the benefit of
Administrative Agent and Lenders contained in this Agreement and the other
Financing Agreements may be waived by Administrative Agent. Any forbearance by
Administrative Agent in exercising any right or remedy under any of the
Financing Agreements, or otherwise afforded by applicable Law, including any
failure to accelerate the Stated Maturity Date shall not be a waiver of or
preclude the exercise of any right or remedy nor shall it serve as a novation of
the Term Loan Note or as a reinstatement of the Loan or a waiver of such right
of acceleration or the right to insist upon strict compliance of the terms of
the Financing Agreements. Administrative Agent’s acceptance of payment of any
sum secured by any of the Financing Agreements after the due date of such
payment shall not be a waiver of Administrative Agent’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 shall not be a waiver of
Administrative Agent’s right to accelerate the maturity of the Loan, nor shall
Administrative Agent’s receipt of any condemnation awards, insurance proceeds,
or damages under this Agreement operate to cure or waive Borrower’s or
Guarantor’s default in payment of sums secured by any of the Financing
Agreements.
               (4) Without limiting the generality of anything contained in this
Agreement or the other Financing Agreements, Borrower agrees that if an Event of
Default is continuing (i) Administrative Agent is 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 shall remain in
full force and effect until Administrative Agent has exhausted all of its
remedies against the Collateral and any other properties owned by Borrower and
the Financing Agreements and other security instruments or agreements securing
the

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Liabilities has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Liabilities.
               (5) Nothing contained herein or in any other Financing Agreement
shall be construed as requiring Administrative Agent to resort to any part of
the Collateral for the satisfaction of any of Borrower’s obligations under the
Financing Agreements 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 Borrower’s obligations
under the Financing Agreements. 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 Agreements then due and payable as
determined by Administrative Agent in its sole discretion, including, without
limitation, the following circumstances: (i) if Borrower defaults beyond any
applicable grace period in the payment of one or more scheduled payments of
principal and interest, Administrative Agent may foreclose upon all or any part
of the Collateral to recover such delinquent payments, or (ii) if Administrative
Agent elects to accelerate less than the entire outstanding principal balance of
the Term Loan Notes, Administrative Agent may foreclose all or any part of the
Collateral to recover so much of the principal balance of the Term Loan Note as
Administrative Agent may accelerate and such other sums secured by one or more
of the Financing Agreements as Administrative Agent may elect. Notwithstanding
one or more partial foreclosures, any unforeclosed Collateral shall remain
subject to the Financing Agreements to secure payment of sums secured by the
Financing Agreements and not previously recovered.
               (6) To the fullest extent permitted by Law, 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 Borrower which
would require the separate sale of any of the Collateral or require
Administrative Agent to exhaust its remedies against any part of the Collateral
before proceeding against any other part of the Collateral; and further in the
event of such foreclosure Borrower does hereby expressly consent to and
authorize, at the option of Administrative Agent, the foreclosure and sale
either separately or together of each part of the Collateral.
          11.7 Waiver of Notice. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE
BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE
EXERCISE BY THE ADMINISTRATIVE AGENT OF ITS RIGHTS TO REPOSSESS THE COLLATERAL
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL
WITHOUT PRIOR NOTICE OR HEARING.
          11.8 Injunctive Relief. The parties acknowledge and agree that, in the
event of a breach or threatened breach of any Credit Party’s obligations under
any Financing Agreements, Administrative Agent 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 breach or threatened
breach. 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

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Credit Party waives the requirement of the posting of any bond in connection
with such injunctive relief.
          11.9 Marshalling; Recourse to Borrower. Administrative Agent shall
have no obligation to marshal any assets in favor of any Credit Party, or
against or in payment of any of the other Liabilities or any other obligation
owed to the Administrative Agent and Lenders by any Credit Party.
Notwithstanding anything to the contrary contained herein or in any other
Financing Agreement, the Loan and other Liabilities shall be fully recourse to
Borrower, and Administrative Agent shall be authorized, in its sole and absolute
discretion, to enforce any or all of its remedies hereunder against Borrower,
including all present and future revenue and assets of Borrower, whether or not
such assets have been pledged as collateral for the Loan.
          11.10 Advice of Counsel. The Borrower acknowledges that it has been
advised by its counsel with respect to this transaction and this Agreement,
including, without limitation, all waivers contained herein.
     12. MISCELLANEOUS.
          12.1 Waiver; Amendment. The Administrative Agent’s or Lenders’
failure, at any time or times hereafter, to require strict performance by the
Borrower of any provision of this Agreement shall not waive, affect or diminish
any right of the Administrative Agent thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by the Administrative Agent or
the Lenders, as applicable, of an Event of Default under this Agreement or a
default under any of the other Financing Agreements shall not suspend, waive or
affect any other Event of Default under this Agreement or any other default
under any of the other Financing Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different kind or character.
None of the undertakings, agreements, warranties, covenants and representations
of the Borrower contained in this Agreement or any of the other Financing
Agreements and no Event of Default under this Agreement or default under any of
the other Financing Agreements shall be deemed to have been suspended or waived
by the Administrative Agent unless such suspension or waiver is in writing
signed by an officer of the Administrative Agent, and directed to the Borrower
specifying such suspension or waiver.
          Except as otherwise set forth herein, no amendment or modification or
waiver of, or consent with respect to (as reasonably determined by
Administrative Agent) any provision of this Agreement or the other Financing
Agreements shall in any event be effective unless the same shall be in writing
and acknowledged by Borrower and either (i) Required Lenders, or
(ii) Administrative Agent with a certification that consent from the Required
Lenders has been obtained, and then any such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Notwithstanding anything contained herein to the
contrary, no amendment, modification, waiver or consent shall (a) extend or
increase the Commitment of any Lender without the written consent of such
Lender, as applicable, (b) extend the date scheduled for payment of any
principal (exclusive of mandatory prepayments) of or interest on the Loan or any
fees payable hereunder without the written consent of each Lender directly
affected thereby, (c) extend the Stated Maturity Date of the Loan without the
written consent of all Lenders (except in accordance with the terms of this
Agreement), (d) reduce the principal amount of the Loan, the rate of interest
thereon or any fees

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payable hereunder, without the consent of each Lender directly affected thereby
(except for any periodic adjustments of interest rates and fees as provided for
in this Agreement), or (e) release any party from its obligations under any
guaranty at any time hereafter provided, if any, or all or substantially all of
the Collateral granted hereunder or under any of the Financing Agreements
(except as otherwise specifically permitted or provided in this Agreement),
change the definition of Required Lenders, any provision of this Section 12.1 or
reduce the aggregate Pro Rata Share required to effect an amendment,
modification, waiver or consent, without, in each case with respect to this
subsection (e), the written consent of all Lenders, or (f) waive any material
condition set forth in Section 5 without the prior written consent of each
Lender directly affected thereby. No provision in this Agreement with respect to
the timing or application of mandatory prepayments of the Loan shall be amended,
modified or waived without the consent of Required Lenders. No provision of
Section 13 or other provision of this Agreement affecting Administrative Agent
as such shall be amended, modified or waived without the prior written consent
of Administrative Agent. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except that the Commitment of such Lender may not
be increased or extended without the consent of such Lender.
          12.2 Costs and Attorneys’ Fees.
               (1) Borrower agrees to jointly and severally pay on demand all of
the costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and out-of-pocket expenses of the Administrative
Agent’s counsel, all UCC tax, lien, judgment, pending suit, and bankruptcy
search fees and costs, UCC filing fee and costs, recording, filing and
registration fees and charges, mortgage or documentary taxes, all costs of
Intralinks or other similar transmission system, if applicable, all corporate
search fees and certified documents, all financial and legal due diligence
expenses, all audit, field exam and appraisal costs and fees, costs incurred by
Administrative Agent in connection with travel expenses of its associates,
background checks on members of management of Borrower, and real estate
appraisal fees, survey fees, recording and title insurance costs, and any
environmental report or analysis) in connection with the structuring,
preparation, negotiation, execution, delivery and closing of: (i) this
Agreement, the other Financing Agreements and all other instruments, agreements,
certificates or documents provided for herein or delivered or to be delivered
hereunder, and (ii) any and all amendments, modifications, supplements and
waivers executed and delivered pursuant hereto or any other Financing Agreement
or in connection herewith or therewith. Borrower further agrees that the
Administrative Agent, in its sole discretion, may deduct all such unpaid amounts
from the aggregate proceeds of the Loan or debit such amounts from the operating
accounts of Borrower maintained with the Administrative Agent.
               (2) The costs and expenses that the Administrative Agent and
Lenders incur in any manner or way with respect to the following shall be part
of the Liabilities, payable by Borrower jointly and severally on demand if at
any time after the date of this Agreement the Administrative Agent or any
Lender: (i) employs counsel in good faith for advice or other representation,
(ii) with respect to the amendment, modification or enforcement of this
Agreement or the other Financing Agreements, or with respect to any Collateral
securing the Liabilities hereunder, (iii) to represent the Administrative Agent
and Lender in any work-out or

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any type of restructuring of the Liabilities, or any litigation, contest,
dispute, suit or proceeding or to commence, defend or intervene or to take any
other action in or with respect to any litigation, contest, dispute, suit or
proceeding (whether instituted by the Administrative Agent, Lenders, Borrower or
any other Person) in any way or respect relating to this Agreement, the other
Financing Agreements, Borrower’s affairs or any Collateral hereunder or (iv) to
enforce any of the rights of the Administrative Agent or Lenders with respect to
Borrower provided in this Agreement, under any of the other Financing
Agreements, or otherwise (whether at law or in equity) (including any
foreclosure sale, deed in lieu transaction or costs incurred in connection with
any litigation or bankruptcy or administrative hearing and any appeals therefrom
and any post-judgment enforcement action including, without limitation,
supplementary proceedings in connection with the enforcement of this Agreement);
(v) takes any action to protect, preserve, store, ship, appraise, prepare for
sale, collect, sell, liquidate or otherwise dispose of any Collateral hereunder;
and/or (vi) seeks to enforce or enforces any of the rights and remedies of the
Administrative Agent or Lenders with respect to Borrower or any guarantor of the
Liabilities. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees include: reasonable fees, costs and expenses of
attorneys, accountants and consultants; court costs and expenses; court reporter
fees, costs and expenses; long distance telephone charges; and courier and
telecopier charges.
               (3) Borrower further agrees to pay, and to save the
Administrative Agent and Lenders harmless from all liability for, any
documentary stamp tax, intangible tax, or other stamp tax or taxes of any kind
which may be payable in connection with or related to the execution or delivery
of this Agreement, the other Financing Agreements, the borrowing hereunder, the
issuance of the Term Loan Note or of any other instruments, agreements,
certificates or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith, provided that Borrower shall not be liable
for Administrative Agent’s or any Lender’s income tax liabilities.
               (4) All of the Borrower’s obligations provided for in this
Section 12.2 shall be Liabilities secured by the Collateral and shall survive
repayment of the Loan or any termination of this Agreement or any Financing
Agreements.
          12.3 Expenditures by the Administrative Agent. In the event the
Borrower shall fail to pay taxes, insurance, audit fees and expenses, consulting
fees, filing, recording and search fees, assessments, fees, costs or expenses
which the Borrower is, under any of the terms hereof or of any of the other
Financing Agreements, required to pay, or fails to keep the Collateral free from
other Liens, except as permitted herein, the Administrative Agent may, in its
sole discretion, pay or make expenditures for any or all of such purposes, and
the amounts so expended, together with interest thereon at the Default Rate
(from the date the obligation or liability of Borrower is charged or incurred
until actually paid in full to Administrative Agent and Lenders, as applicable)
and shall be part of the Liabilities of the Borrower, payable on demand and
secured by the Collateral.
          12.4 Custody and Preservation of Collateral. The Administrative Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral in its possession if it takes such action
for that purpose as the Borrower shall request in writing, but failure by the
Administrative Agent to comply with any such request shall not of

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itself be deemed a failure to exercise reasonable care, and no failure by the
Administrative Agent to preserve or protect any right with respect to such
Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by a Borrower, shall of itself
be deemed a failure to exercise reasonable care in the custody or preservation
of such Collateral.
          12.5 Reliance by the Lenders. The Borrower acknowledges that the
Lenders and Administrative Agent, in entering into this Agreement and agreeing
to make the Loan to the Borrower hereunder, has relied upon the accuracy of the
covenants, agreements, representations and warranties made herein by the
Borrower and the information delivered by the Borrower to the Administrative
Agent and Lenders in connection herewith (including, without limitation, all
financial information and data).
          12.6 Assignability; Parties. This Agreement (including, without
limitation, any and all of the Borrower’s rights, obligations and liabilities
hereunder) may not be assigned by the Borrower without the prior written consent
of Administrative Agent and Required Lenders. Whenever in this Agreement there
is reference made to any of the parties hereto, such reference shall be deemed
to include, wherever applicable, a reference to the successors and permitted
assigns of the Borrower and the successors and assigns of the Administrative
Agent and (subject to Section 12.15 hereof) the Lenders.
          12.7 Severability; Construction. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement. 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 of the provisions of
this Agreement.
          12.8 Application of Payments. Notwithstanding any contrary provision
contained in this Agreement or in any of the other Financing Agreements, after
the occurrence of a Default or an Event of Default the Borrower irrevocably
waives the right to direct the application of any and all payments at any time
or times hereafter received by the Administrative Agent or any Lender from the
Borrower or with respect to any of the Collateral, and the Borrower does hereby
irrevocably agree that any and all payments so received shall be applied in the
following manner:
          First, to payment of that portion of the Liabilities constituting
fees, indemnities, expenses and other amounts (including fees, charges and
disbursements of counsel to Administrative Agent) payable to Administrative
Agent;
          Second, to payment of that portion of the Liabilities constituting
fees, indemnities and other amounts (other than principal and interest) payable
to PrivateBank and the other Lenders (including fees, charges and disbursements
of counsel to the respective Lenders), ratably

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among them in proportion to the respective amounts described in this clause
Second payable to them;
          Third, to payment of that portion of the Liabilities constituting
accrued and unpaid interest on the Loan and other Liabilities, ratably among
Lenders in proportion to the respective amounts described in this clause Third
payable to them;
          Fourth, to payment of that portion of the Liabilities constituting
unpaid principal of the Loan, ratably among Lenders in proportion to the
respective amounts described in this clause Fourth held by them; and
          Last, to all other Liabilities, and then, after all such Liabilities
have been indefeasibly paid in full in cash, any balance to the Borrower or as
otherwise required by applicable law.
          12.9 Payments Set Aside. To the extent that the Borrower makes a
payment or payments to the Administrative Agent or Lenders or the Administrative
Agent or Lenders enforce their respective Liens or exercises their respective
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
          12.10 Sections and Titles; UCC Termination Statements. The sections
and titles contained in this Agreement shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto. At such time as all of the Liabilities shall have been
indefeasibly paid in full in cash and this Agreement shall terminate in
accordance with its terms, the Administrative Agent will, upon Borrower’s
written request and at the Borrower’s cost and expense, timely file all Uniform
Commercial Code termination statements reasonably required by the Borrower to
evidence the termination of the Liens in the Collateral in favor of the
Administrative Agent (for the ratable benefit of Lenders and Administrative
Agent).
          12.11 Continuing Effect; Inconsistency. This Agreement, the
Administrative Agent’s Liens in the Collateral, and all of the other Financing
Agreements shall continue in full force and effect so long as any Liabilities
shall be owed to the Lenders and Administrative Agent, and (even if there shall
be no such Liabilities outstanding) so long as this Agreement has not been
terminated as provided in Section 2.9 hereof. To the extent any terms or
provisions contained in any Financing Agreement are inconsistent or conflict
with the terms and provisions of this Agreement, the terms and provisions of
this Agreement shall control and govern. The relationship between Administrative
Agent and Lenders on the one hand and Borrower on the other hand shall be that
of creditor-debtor only. No term in this Agreement or in any other Financing
Agreement and no course of dealing between the parties shall be deemed to create
any relationship or agency, partnership or joint venture or any fiduciary duty
by Administrative Agent or any Lender to Borrower or any other party. In
exercising its rights hereunder and under

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any other Financing Agreements or taking any actions herein or therein,
Administrative Agent and Lenders may act through its respective employees,
agents or independent contractors as authorized by Administrative Agent or such
Lender.
          12.12 Notices. Any notice or other communication required or permitted
under this Agreement shall be in writing and personally delivered, mailed by
registered or certified U.S. mail (return receipt requested and postage
prepaid), sent by telecopier (with a confirming copy sent by regular mail), or
sent by prepaid nationally recognized overnight courier service, and addressed
to the relevant party at its address set forth below, or at such other address
as such party may, by written notice, designate as its address for purposes of
notice under this Agreement:
(1) If to the Administrative Agent, at:
The PrivateBank and Trust Company
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Adam Panos
Telephone No.: 312-564-1278
Facsimile No.: 312-564-6889
With a copy to:
Duane Morris LLP
190 South LaSalle Street — Suite 3700
Chicago, Illinois 60603
Attention: Brian P. Kerwin
Telephone No: 312-499-6737
Facsimile No: 312-499-6701
(2) If to the Borrower or Borrower Agent, at:
Advocat Inc.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
Attention: Glynn Riddle
Telephone No.: 615-771-7575
Facsimile No.: 615-771-7409
With a copy to:
Harwell Howard Hyne Gabbert & Manner
315 Deaderick Street, Suite 1800
Nashville, Tennessee 37238
Attention: John N. Popham IV
Telephone No.: 615-251-1093
Facsimile No.: 615-251-1059

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               (c) If to Lenders, as identified on Annex A hereto.
If mailed, notice shall be deemed to be given three (3) days after being sent,
and if sent by personal delivery, telecopier or prepaid courier, notice shall be
deemed to be given when delivered. If any notice is tendered to an addressee and
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender unless expressly set forth in such notice.
          12.13 Equitable Relief. The Borrower recognizes that, in the event the
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to the Administrative Agent and Lenders; therefore, the Borrower agrees
that the Administrative Agent and Lenders, if the Administrative Agent or
Lenders so request, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
          12.14 Entire Agreement. This Agreement, together with the Financing
Agreements (and, as applicable, the Revolving Loan Agreement) executed in
connection herewith, constitutes the entire agreement among the parties with
respect to the subject matter hereof, and supersedes all prior written or oral
understandings, discussions and agreements with respect thereto (including,
without limitation, any term sheet, proposal letter or commitment letter).
Notwithstanding anything to the contrary contained in this Agreement, Borrower
is and shall be required to observe, perform and comply with each of the terms,
representations, warranties, covenants, conditions and provisions set forth in
the Revolving Loan Agreement applicable to Borrower and such terms,
representations, warranties, covenants, conditions and provisions are hereby
incorporated into this Agreement by this reference thereto.
          12.15 Participations and Assignments. (a) Any Lender may at any time
assign to one or more Persons (other than (i) a natural person or (ii) any
Defaulting Lender or its wholly-owned subsidiaries) (any such Person, an
“Assignee”) all or any portion of such Lender’s Pro Rata Share of the Loan, with
the prior written consent of Administrative Agent, and, so long as no Event of
Default has occurred and is continuing, Borrower (all of which consents shall
not be unreasonably withheld, conditioned or delayed and shall not be required
for an assignment by a Lender to another Lender or an Affiliate of a Lender).
Except as Administrative Agent may otherwise agree (and, so long as no Event of
Default has occurred and is continuing, Borrower otherwise consents in writing,
which consent shall not be unreasonably withheld, conditioned or delayed), any
such assignment shall be in a minimum aggregate amount equal to Five Million
Dollars ($5,000,000) or, if less, the remaining Loan held by the assigning
Lender. Borrower 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 Assignee until Administrative Agent shall have received and
accepted an effective assignment agreement in substantially the form of Exhibit
B hereto (an “Assignment Agreement”) executed, delivered and fully completed by
the applicable parties thereto and a processing fee of Five Thousand Dollars
($5,000). No assignment may be made to any Person if at the time of such
assignment Borrower would be obligated to pay any greater amount under
Sections 3.1 or 3.3 to the Assignee than Borrower is then obligated to pay to
the assigning Lender under such Sections (and if any assignment is made in
violation of the foregoing, Borrower will not be required to pay such greater
amounts). Any attempted

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assignment not made in accordance with this Section 12.15 shall be treated as
the sale of a participation hereunder. Borrower shall be deemed to have granted
its consent to any assignment requiring its consent hereunder unless Borrower
has expressly objected to such assignment within three (3) Business Days after
notice thereof. Notwithstanding the foregoing, no consent of Borrower or
Administrative Agent shall be required for any assignment to a Lender or an
Affiliate of a Lender (provided that no assignment shall be made to any
Defaulting Lender or its wholly-owned subsidiaries).
          (b) From and after the date on which the conditions described above
have been met, (i) such Assignee shall be deemed automatically to have become a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to such 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 (other
than its indemnification rights) and obligations hereunder. Upon the request of
the Assignee (and, as applicable, the assigning Lender) pursuant to an effective
Assignment Agreement, Borrower shall execute and deliver to Administrative Agent
for delivery to the Assignee (and, as applicable, the assigning Lender) a Term
Loan Note in the principal amount of the Assignee’s Term Loan Commitment (and,
as applicable, a Term Loan Note in the principal amount of the Term Loan
Commitment retained by the assigning Lender). Each such Term Loan Note shall be
dated the effective date of such assignment. Upon receipt by the assigning
Lender of such Term Loan Note, the assigning Lender shall return to Borrower any
prior Term Loan Note held by it.
          (c) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement and applicable promissory
note to secure obligations of such Lender, including any pledge or assignment to
secure obligations to any Federal Reserve Bank (including as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank), and such Loan(s) and promissory note(s) shall be fully
transferable as provided therein, and this Section shall not apply to any such
pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
          (d) Subject to the last sentence in Section 13.9, any Lender may at
any time (without any required consent) sell to one or more Persons (other than
(i) a natural person or (ii) a Defaulting Lender or its wholly-owned
subsidiaries) participating interests in its respective Loan 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, (a) such Lender’s obligations
under this Agreement shall remain unchanged for all purposes, (b) Administrative
Agent and Borrower shall continue to deal solely and directly with such Lender
in connection with such Lender’s rights and obligations under this Agreement and
(c) all amounts payable by 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 under this Agreement
except with respect to any event described in Section 12.1 expressly requiring
the unanimous vote of all Lenders or, as applicable, all affected Lenders. Each
Lender agrees to incorporate the requirements of the preceding sentence into
each participation agreement which such Lender enters into with any Participant.
Borrower agrees that if amounts outstanding under this

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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 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 2.13(d). Borrower
agrees that each Participant shall be entitled to the benefits of Sections 3.1
or 3.3 as if it were a Lender (provided that on the date of the participation no
Participant shall be entitled to any greater compensation pursuant to
Sections 3.1 or 3.3 than would have been paid to the participating Lender on
such date if no participation had been sold and that each Participant complies
with Section 3.3 as if it were an Assignee).
          (d) Administrative Agent will maintain a copy of each Assignment
Agreement delivered and accepted by it and register (the “Register”) for the
recordation of names and addresses of Lenders, the Term Loan Commitment
Percentage of each Lender and the portion of the Loan of each Lender and whether
such Lender is the original Lender or the Assignee. No assignment shall be
effective unless and until the Assignment Agreement is accepted and registered
in the Register. All records of transfer of a Lender’s interest in the Register
shall be conclusive, absent manifest error, as to the ownership of the interests
in such Loan. Administrative Agent shall not incur any liability of any kind
with respect to any Lender with respect to the maintenance of the Register. Upon
the reasonable written request of Borrower, Administrative Agent will furnish a
copy of the Register to the Borrower Agent or Borrower (at the cost, if any, to
Borrower).
          12.16 Indemnity. The Borrower agrees to jointly and severally defend,
protect, indemnify and hold harmless the Administrative Agent, each Lender and
each and all of their respective officers, directors, employees, attorneys,
affiliates, and agents (“Indemnified Parties”) 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, without limitation, the fees and disbursements of counsel for the
Indemnified Parties in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Parties shall be designated
by a party thereto, or otherwise), claim, cause of action, judgment, suit,
action or proceeding, which may ever be imposed on, incurred by, or asserted
against any Indemnified Party (whether direct, indirect or consequential, and
whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities, environmental and commercial laws and
regulations, under common law or at equitable cause, or on contract or
otherwise) in any manner relating to or arising out of this Agreement or the
other Financing Agreements, or any act, event or transaction related or
attendant thereto, the making and the management of the Loan (including, without
limitation, any liability under federal, state or local environmental laws or
regulations) or the use or intended use of the proceeds of the Loan hereunder;
provided, that the Borrower shall not have any obligation to any Indemnified
Party hereunder with respect to matters caused by or resulting from the gross
negligence, willful misconduct or illegal activity of such Indemnified Party. To
the extent that the undertaking to indemnify, pay and hold harmless set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable Law, to the payment and
satisfaction of all matters incurred by the Indemnified Parties. Any liability,
obligation, loss,

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damage, penalty, cost or expense incurred by the Indemnified Parties shall be
paid to the Indemnified Parties on demand, together with interest thereon at the
Default Rate from the date incurred by the Indemnified Parties until paid by the
Borrower, be added to the Liabilities, and be secured by the Collateral. The
provisions of and undertakings and indemnifications set out in this
Section 12.16 shall survive the satisfaction and payment of the Liabilities of
the Borrower and the termination of this Agreement. NO INDEMNIFIED PERSON SHALL
BE RESPONSIBLE OR LIABLE TO THE BORROWER OR TO ANY OTHER PARTY TO ANY FINANCING
AGREEMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER
FINANCING AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.
          12.17 Representations and Warranties. Notwithstanding anything to the
contrary contained herein, each representation or warranty contained in this
Agreement or any of the other Financing Agreements shall survive the execution
and delivery of this Agreement and the other Financing Agreements and the making
of the Loan and the repayment of the Liabilities hereunder.
          12.18 Counterparts. This Agreement and any amendment or supplement
hereto or any waiver granted in connection herewith may be executed in any
number of counterparts and by the different parties on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
          12.19 Limitation of Liability of Administrative Agent and Lenders. It
is hereby expressly agreed that:
               (1) Administrative Agent and Lenders may conclusively rely and
shall be protected in acting or refraining from acting upon any document,
instrument, certificate, instruction or signature believed to be genuine and may
assume and shall be protected in assuming that any Person purporting to give any
notice or instructions in connection with any transaction to which this
Agreement relates has been duly authorized to do so. Administrative Agent and
Lenders shall not be obligated to make any inquiry as to the authority,
capacity, existence or identity of any Person purporting to have executed any
such document or instrument or have made any such signature or purporting to
give any such notice or instructions;
               (2) Administrative Agent and Lenders shall not be liable for any
acts, omissions, errors of judgment or mistakes of fact or law, including,
without limitation, acts, omissions, errors or mistakes with respect to the
Collateral, except for those arising out of or in connection with Administrative
Agent’s and Lender’s gross negligence, willful misconduct or illegal activity.
Without limiting the generality of the foregoing, Administrative Agent and
Lenders shall be under no obligation to take any steps necessary to preserve
rights in the Collateral against any other parties, but may do so at its option,
and all expenses incurred in connection therewith shall be payable by Borrower;
and

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               (3) Administrative Agent and Lenders shall not be liable for any
action taken in good faith and believed to be authorized or within the rights or
powers conferred by this Agreement and the other Financing Agreements.
          12.20 Borrower Authorizing Accounting Firm. Borrower shall authorize
its accounting firm and/or service bureaus to provide Administrative Agent with
such information as is requested by Administrative Agent in accordance with this
Agreement. Borrower authorizes Administrative Agent to contact directly any such
accounting firm and/or service bureaus to obtain such information.
          12.21 Joint and Several Liability; Binding Obligations.
               (1) Borrower is defined collectively to include all Persons
constituting the Borrower; 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 Borrower; provided, further,
in case of any question as to which particular Person is to be deemed a Borrower
in any given context for purposes of any term or provision contained in this
Agreement, the Lender shall make such determination. Each Person comprising
Borrower shall be jointly and severally liable for all of the liabilities and
obligations of Borrower under this Agreement, regardless of which of the
Borrowers actually receives the proceeds of the Loan hereunder, or the manner in
which the Borrowers, or the Administrative Agent or Lenders accounts therefor in
their respective books and records. In addition, each entity comprising Borrower
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 Borrower as well as all
such Persons when taken together. By way of illustration, but without limiting
the generality of the foregoing, the terms of Article XI of this Agreement are
to be applied to each individual Person comprising the Borrower (as well as to
all such Persons taken as a whole), such that the occurrence of any of the
events described in Article XI of this Agreement as to any Person comprising the
Borrower shall constitute an Event of Default even if such event has not
occurred as to any other Persons comprising the Borrower or as to all such
Persons taken as a whole (except as otherwise expressly provided therein by, for
example, the use of the term “Material Adverse Effect”).
               (2) Each Borrower acknowledges that it will enjoy significant
benefits from the business conducted by the other Borrowers because of, inter
alia, their combined ability to bargain with other Persons including, without
limitation, their ability to receive the credit facilities hereunder and other
Financing Agreements 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 Loan with the credit support of the other Borrowers as
contemplated by this Agreement and the other Financing Agreements as well as
permit the cross-collateralization and cross-default with the Affiliate Term
Loan Liabilities, Term Loan Agreement and Affiliate Term Loan Financing
Agreements as contemplated hereunder.
               (3) The Administrative Agent and the Lenders have advised the
Borrowers that the Administrative Agent and the Lenders are unwilling to enter
into this Agreement and the other Financing Agreements and make available the
Loan extended hereby or

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thereby to any Borrower unless each Borrower agrees, among other things, to be
jointly and severally liable for the due and proper payment of the Liabilities
of each other Borrower under this Agreement and other Financing Agreements. Each
Borrower has determined that it is in its best interest and in pursuit of its
purposes that it so induce the Lenders to extend credit pursuant to this
Agreement and the other documents executed in connection herewith (i) because of
the desirability to each Borrower of the Loan and the interest rates and the
modes of borrowing available hereunder, (ii) because each Borrower may engage in
transactions jointly with other Borrowers and (iii) because each Borrower may
require, from time to time, access to funds under this Agreement for the
purposes herein set forth. Each Borrower, individually, expressly understands,
agrees and acknowledges, that the Loan would not be made available on the terms
herein in the absence of the collective credit of all of the Persons
constituting the Borrower, the joint and several liability of all such Persons,
and the cross-collateralization of the collateral of all such Persons hereunder
and under the other Financing Agreements. Accordingly, each Borrower,
individually acknowledges that the benefit to each of the Persons comprising the
Borrower as a whole constitutes reasonably equivalent value, regardless of the
amount of the Loan actually borrowed by, advanced to, or the amount of
collateral provided by, any individual Borrower.
               (4) Each Borrower has determined that it has and, after giving
effect to the transactions contemplated by this Agreement and the other
Financing Agreements (including, without limitation, the inter-Borrower
arrangement set forth in this Section) will have, assets having a fair saleable
value in excess of the amount required to pay its probable liability on its
existing debts as they fall due for payment and that the sum of its debts is not
and will not then be greater than all of its property at a fair valuation, that
such Borrower has, and will have, access to adequate capital for the conduct of
its business and the ability to pay its debts from time to time incurred in
connection therewith as such debts mature and that the value of the benefits to
be derived by such Borrower from the access to funds under this Agreement
(including, without limitation, the inter-Borrower arrangement set forth in this
Section) is reasonably equivalent to the obligations undertaken pursuant hereto.
               (5) The Borrower Agent (on behalf of each Borrower) shall
maintain records specifying (a) all Liabilities incurred by each Borrower,
(b) the date of such incurrence, (c) the date and amount of any payments made in
respect of such Liabilities and (d) all inter-Borrower obligations pursuant to
this Section. The Borrower Agent shall make copies of such records available to
the Administrative Agent, upon request.
               (6) To the extent that applicable Law otherwise would render the
full amount of the joint and several obligations of any Borrower hereunder and
under the other Financing Agreements invalid or unenforceable, such Borrower’s
obligations hereunder and under the other Financing Agreements 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 Agreements 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.
               (7) To the extent that any Borrower shall make a payment under
this Section of all or any of the Liabilities (a “Joint Liability Payment”)
which, taking into

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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 Liabilities 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
Liabilities and termination of the Loan, 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.
               (8) The term “Borrower” as used herein shall mean either one or
more particular Borrowers or all of the Borrowers collectively as the
Administrative Agent shall determine in its sole and absolute good faith
discretion.
               (9) [Intentionally Omitted.]
               (10) [Intentionally Omitted.]
               (11) 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 Liabilities from any obligor or
other action to enforce the same; (ii) the waiver or consent by Administrative
Agent with respect to any provision of any instrument evidencing the
Liabilities, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower and delivered to Administrative Agent 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 Liabilities; (iv) the institution of any proceeding under the
United States Bankruptcy Code, or any similar proceeding, by or against a
Borrower or Administrative Agent’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 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 claim(s) for repayment of any of the Liabilities; or
(vii) any other circumstance other than payment in full of the Liabilities which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor or surety.
               (12) Until all Liabilities have been paid and satisfied in full,
no payment made by or for the account of a Borrower including, without
limitation, (i) a payment made by such Borrower on behalf of the liabilities of
any other Borrower or (ii) a payment made by any other Person under any
guaranty, shall entitle such Borrower, by subrogation or otherwise, to any
payment from any other Borrower or from or out of any other Borrower’s property
and such Borrower shall not exercise any right or remedy against any other
Borrower or

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any property of any other Borrower by reason of any performance of such Borrower
of its joint and several obligations hereunder.
               (13) Any notice given by one Borrower hereunder shall constitute
and be deemed to be notice given by all Borrowers, jointly and severally. Notice
given by Administrative Agent to any one Borrower hereunder or pursuant to any
Financing Agreements in accordance with the terms hereof or thereof shall
constitute notice to each and every Borrower. The knowledge of one Borrower
shall be imputed to all Borrowers and any consent by one Borrower shall
constitute the consent of and shall bind all Borrowers.
               (14) This Section is intended only to define the relative rights
of Borrower and nothing set forth in this Section is intended to or shall impair
the obligations of Borrower, 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 Agreements. Nothing contained in this Section
shall limit the liability of any Borrower to pay the Loan made directly or
indirectly to that Borrower and accrued interest, fees and expenses with respect
thereto for which such Borrower shall be primarily liable.
               (15) 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 under this Section shall
be exercisable upon the full and indefeasible payment of the Liabilities and the
termination of the Loan.
          12.22 Confidentiality. Borrower shall not disclose the contents of
this Agreement and the other Financing Agreements to any third party (including,
without limitation, any financial institution or intermediary) unless required
by applicable Laws without Administrative Agent’s prior written consent, other
than to Borrower’s officers, lawyers and other professional advisors on a
need-to-know basis, and in connection with any filings required to be made under
any applicable federal or state securities laws or regulations (“Securities
Laws”). Borrower agrees to inform all such Persons who receive information
concerning this Agreement that such information is confidential and may not be
disclosed to any other Person, except as required by applicable Laws, including
Securities Laws.
          12.23 Fax Signatures. A signature hereto sent or delivered by
facsimile or other electronic transmission shall be as legally binding and
enforceable as a signed original for all purposes.
          12.24 Release. For and in consideration of the Loan hereunder, 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 the
Administrative Agent and each Lender, and each of their respective successors,
assigns, heirs, affiliates, subsidiaries, parent companies, principals,
directors, officers, employees, shareholders and agents (hereinafter called the
“Lender Parties”), and any other person, firm, business, corporation, insurer,
or association which may be responsible or liable for the acts or omissions of
the Lender Parties, or who may be liable for the injury or damage resulting
therefrom

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(collectively the “Released Parties”), of and from any and all actions, causes
of action, suits, debts, disputes, damages, claims, obligations, liabilities,
costs, expenses, fees (including, without limitation, reasonable attorneys’
fees) 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) have or
may have, against the Released Parties or any of them (whether directly or
indirectly) relating to events occurring on or before the date of this
Agreement, other than any claim as to which a final determination is made in a
judicial proceeding (in which the Administrative Agent and Lenders or any of the
Released Parties have had an opportunity to be heard) which determination
includes a specific finding that one of the Released Parties acted in a grossly
negligent manner or with actual willful misconduct. 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 the Lenders in agreeing to make the Loan
hereunder.
          12.25 Time; Reliance. Time is of the essence in Borrower’s performance
under this Agreement and all other Financing Agreements. Notwithstanding
anything to the contrary contained in any Financing Agreement, if and to the
extent any terms or provisions contained in any Financing Agreement are
inconsistent or conflict with the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall control and govern.
          12.26 Relationship. The relationship between, on the one hand, the
Administrative Agent and Lenders, and the Borrower, on the other hand, shall be
that of creditor-debtor only. No term in this Agreement or in the other
Financing Agreements and no course of dealing between the parties shall be
deemed to create any relationship of agency, partnership or joint venture or any
fiduciary duty by the Administrative Agent and Lenders to Borrower or any other
party.
          12.27 Borrower Agent. Each Borrower hereby irrevocably appoints
Borrower Agent as the borrowing agent and attorney-in-fact for all Borrowers
which appointment shall remain in full force and effect unless and until
Administrative Agent shall have received prior written notice signed by each
Borrower that such appointment has been revoked and that another Borrower has
been appointed Borrower Agent. Each Borrower hereby irrevocably appoints and
authorizes the Borrower Agent (i) to provide Administrative Agent with all
notices with respect to Loan obtained for the benefit of Borrower and all other
notices and instructions under this Agreement, (ii) for all purposes of delivery
or receipt of communications, preparation and delivery of financial reports,
receipt and payment of Liabilities, requests for waivers, amendments or other
accommodations and/or actions under this Agreement, and to duly execute and
deliver on behalf of Borrower any and all instruments, amendments,
modifications, reaffirmations, agreements, certificates and documents made to,
in favor of or with Administrative Agent and Lenders in connection with this
Agreement or the Financing Agreements, and (iii) to take such other action as
Borrower Agent deems appropriate on its behalf to obtain the Loan and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. Each Borrower agrees that any notice, election,
communication, representation, instrument, amendment, modification,
reaffirmation, certificate, document, agreement or undertaking made on its
behalf by Borrower Agent shall be legally binding upon and enforceable against
each such Borrower. It is understood that the handling of

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the Loan Account and Collateral of Borrowers in a combined fashion, as more
fully set forth in this Agreement, is done solely as an accommodation to
Borrowers in order to utilize the collective borrowing powers of Borrowers in
the most efficient and economical manner and at their request, and
Administrative Agent and Lenders shall not incur liability to any Borrower as a
result hereof. Each Borrower expects to derive benefit, directly or indirectly,
from the handling of the Loan Account and the Collateral in a combined fashion
since the successful operation of each Borrower is dependent on the continued
successful performance of the integrated group. To induce the Administrative
Agent and Lenders to do so, and in consideration thereof, but without limiting
any other provision contained in this Agreement, each Borrower hereby jointly
and severally agrees to indemnify Administrative Agent and each Lender and hold
Administrative Agent and Lenders harmless against any and all liability,
expense, loss or claim of damage or injury, made against Administrative Agent or
any Lender by any Borrower or by any third party or Person whosoever, arising
from or incurred by reason of (a) the handling of the Loan Account and
Collateral as herein provided, (b) the Administrative Agent’s relying on any
instructions of the Borrower Agent, or (c) any other action taken by the
Administrative Agent hereunder or under the other Financing Agreements, except
that Borrowers will have no liability to the Administrative Agent under this
Section with respect to any liability that has been finally determined by a
court of competent jurisdiction to have resulted solely from the gross
negligence, willful misconduct, or illegal activity of Administrative Agent.
          12.28 Acting Through Agents. In exercising any rights under the
Financing Agreements or taking any actions provided for therein, the
Administrative Agent may act through its employees, agents or independent
contractors as authorized by the Administrative Agent. Borrower shall authorize
its accounting firm and/or service bureaus to provide Administrative Agent with
such information as is requested by Administrative Agent in accordance with this
Agreement. Borrower authorizes the Administrative Agent to contact directly any
such accounting firm and/or service bureaus to obtain such information.
          12.29 Additional Provisions.
               (1) Consents. Each Borrower, as joint and several primary obligor
of the Liabilities directly incurred by any other Borrower, authorizes
Administrative Agent, without giving notice to such Borrower or to any other
Borrower (to the extent permitted hereunder) or obtaining such Borrower’s
consent or any other Borrower’s consent (to the extent permitted hereunder) and
without affecting the liability of such Borrower for the Liabilities directly
incurred by the other Borrower, from time to time to:
               (2) compromise, settle, renew, extend the time for payment,
change the manner or terms of payment, discharge the performance of, decline to
enforce, or release all or any of the Liabilities; grant other indulgences to
any Borrower in respect thereof; or modify in any manner any documents relating
to the Liabilities;
               (3) declare all Liabilities due and payable upon the occurrence
and during the continuance of an Event of Default;
               (4) take and hold security for the performance of the Liabilities
of any Borrower and exchange, enforce, waive and release any such security;

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               (5) apply and reapply such security and direct the order or
manner of sale thereof as Administrative Agent, in its sole discretion, may
determine;
               (6) release, surrender or exchange any deposits or other property
securing the Liabilities or on which Administrative Agent at any time may have a
Lien; release, substitute or add any one or more endorsers or guarantors of the
Liabilities of any other 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 Liabilities or
release, surrender or exchange any deposits or other property of any such
Person;
               (7) apply payments received by Administrative Agent from any
Borrower to any Liabilities, in such order as Administrative Agent shall
determine, in its sole discretion, subject to Section 12.8; and
               (8) assign this Agreement in whole or in part.
               (9) Waivers. Each Borrower, as a primary, joint and several
obligor with respect to the Liabilities directly incurred by any other Borrower,
hereby waives:
               (10) any defense based upon any legal disability or other defense
of any other Borrower, or by reason of the cessation or limitation of the
liability of any other Borrower from any cause (other than full payment of all
Liabilities), including, but not limited to, failure of consideration, breach of
warranty, statute of frauds, statute of limitations, accord and satisfaction,
and usury;
               (11) any defense based upon any legal disability or other defense
of any other guarantor or other Person;
               (12) any defense based upon any lack of authority of the
officers, directors, members, managers, partners or agents acting or purporting
to act on behalf of any other Borrower or any principal of any other Borrower or
any defect in the formation of any other Borrower or any principal of any other
Borrower;
               (13) any defense based upon the application by any other Borrower
of the proceeds of the Loan for purposes other than the purposes represented by
such other Borrower to Administrative Agent or intended or understood by
Administrative Agent or such Borrower;
               (14) any defense based on such Borrower’s rights, under statute
or otherwise, to require Administrative Agent to sue any other Borrower or
otherwise to exhaust its rights and remedies against any other Borrower or any
other Person or against any collateral before seeking to enforce its right to
require such Borrower to satisfy the Liabilities of any other Borrower;
               (15) any defense based on Administrative Agent’s failure at any
time to require strict performance by any Borrower of any provision of the
Financing Agreements. Such Borrower agrees that no such failure shall waive,
alter or diminish any right

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of Administrative Agent thereafter to demand strict compliance and performance
therewith. Nothing contained herein shall prevent Administrative Agent from
foreclosing on any Lien, or exercising any rights available to Administrative
Agent thereunder, and the exercise of any such rights shall not constitute a
legal or equitable discharge of such Borrower;
               (16) [intentionally omitted];
               (17) any defense based upon Administrative Agent’s election of
any remedy against such Borrower or any other Borrower or any of them; any
defense based on the order in which Administrative Agent enforces its remedies;
               (18) any defense based on (A) Administrative Agent’s surrender,
release, exchange, substitution, dealing with or taking any additional
collateral, (B) Administrative Agent’s abstaining from taking advantage of or
realizing upon any Lien or other guaranty, and (C) any impairment of collateral
securing the Liabilities, including, but not limited to, Administrative Agent’s
failure to perfect or maintain a Lien in such collateral;
               (19) any defense based upon Administrative Agent’s failure to
disclose to such Borrower any information concerning any other Borrower’s
financial condition or any other circumstances bearing on any other Borrower’s
ability to pay the Liabilities;
               (20) 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;
               (21) any defense based upon Administrative Agent’s election, in
any proceeding instituted under the Bankruptcy Code, of the application of
Bankruptcy Code §1111(b)(2) or any successor statute;
               (22) any defense based upon any borrowing or any grant of a
security interest under Bankruptcy Code §364;
               (23) [intentionally omitted];
               (24) except as otherwise expressly set forth herein : notice of
acceptance hereof; notice of the existence, creation or acquisition of any
Liability; notice of any Event of Default; notice of the amount of the
Liabilities 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
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);
               (25) [intentionally omitted];
               (26) any defense based on application of fraudulent conveyance or
transfer law or shareholder distribution law to any of the Liabilities or the
security therefor;

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               (27) any defense based on Administrative Agent’s failure to seek
relief from stay or adequate protection in any other Borrower’s bankruptcy
proceeding or any other act or omission by Administrative Agent which impairs
such Borrower’s prospective subrogation rights;
               (28) any defense based on legal prohibition of Administrative
Agent’s acceleration of the maturity of the Liabilities during the occurrence of
an Event of Default or any other legal prohibition on enforcement of any other
right or remedy of Administrative Agent with respect to the Liabilities and the
security therefor;
               (29) any defense available to a surety under applicable Law; and
               (30) the benefit of any statute of limitations affecting the
liability of such Borrower hereunder or the enforcement hereof.
     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 pursuant to any statute presently in
force or hereafter enacted.
               (31) Additional Waivers. Each Borrower authorizes Administrative
Agent to exercise, in its sole discretion, any right, remedy or combination
thereof which may then be available to Administrative Agent, since it is such
Borrower’s intent that the Liabilities 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 Liabilities, 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 guaranty of the Liabilities directly incurred by any other Borrower.
               (32) Primary Obligations. 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 Liabilities of any other Borrower as fully as
if such Liabilities were directly incurred by such Borrower.
          12.30 Nonliability of Administrative Agent and Lenders. The
relationship between the Borrowers on the one hand and the Administrative Agent
and Lenders on the other hand shall be solely that of borrower and lender. The
Administrative Agent and Lenders do not have any fiduciary relationship with or
duty to any Credit Party arising out of or in connection with this Agreement or
any of the other Financing Agreements, and the relationship between the Credit
Parties, on the one hand, and the Administrative Agent and Lenders, on the other
hand, in connection herewith or therewith is solely that of debtor and creditor.
The Administrative Agent does not undertake any responsibility to any Credit
Party to review or inform any Credit Party of any matter in connection with any
phase of any Credit Party’s business or operations. The Borrower Agent agrees,
on behalf of itself and each other Borrower, that the Administrative Agent and
Lenders shall have no liability to any Credit Party (whether sounding in tort,
contract or otherwise) for losses suffered by any Credit Party in connection
with, arising out of, or in any way related to the transactions contemplated and
the relationship established by the Financing

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Agreements, or any act, omission or event occurring in connection therewith,
unless it is determined in a final non-appealable judgment by a court of
competent jurisdiction that such losses resulted from the gross negligence,
willful misconduct or illegal activity of the party from which recovery is
sought. NO LENDER OR ADMINISTRATIVE AGENT SHALL BE LIABLE FOR ANY DAMAGES
ARISING FROM THE USE BY OTHERS OF ANY INFORMATION OR OTHER MATERIALS OBTAINED
THROUGH INTRALINKS OR OTHER SIMILAR INFORMATION TRANSMISSION SYSTEMS IN
CONNECTION WITH THIS AGREEMENT, NOR SHALL ANY LENDER OR ADMINISTRATIVE AGENT
HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER AGENT ON BEHALF OF ITSELF
AND EACH OTHER CREDIT PARTY, HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR
ANY SPECIAL, PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO
THIS AGREEMENT OR ANY OTHER FINANCING AGREEMENT OR ARISING OUT OF ITS ACTIVITIES
IN CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE CLOSING DATE).
Each Borrower and the Borrower Agent acknowledges that it has been advised by
counsel in the negotiation, execution and delivery of this Agreement and the
other Financing Agreements to which it is a party. No joint venture is created
hereby or by the other Financing Agreements or otherwise exists by virtue of the
transactions contemplated hereby by the Administrative Agent and Lenders or
among the Credit Parties and the Administrative Agent and Lenders.
          13. AGENCY.
          Administrative Agent, Lenders and Borrower agree that, except for the
rights expressly granted to Borrower under Section 13.9, Borrower shall not be a
party to the agreements contained in this Section 13, and shall have no
obligations under this Section 13. Without limitation of the foregoing,
Administrative Agent, Lenders and Borrower agree that in no event shall Borrower
be required to seek comment from, deliver notices to or otherwise deal with any
Lender other than Administrative Agent (except as otherwise specifically stated
in this Agreement), nor shall Borrower be required to make an independent
investigation of whether Administrative Agent has obtained any consents from the
Lenders or as may be required (it being agreed that all communications from
Administrative Agent may conclusively be deemed to be authorized by Lenders in
accordance with this Section 13). Borrower shall not have any benefits or rights
as a third party beneficiary of any term or condition contained in this
Section 13.
          13.1 Appointment and Authorization. Each Lender hereby irrevocably
appoints, designates and authorizes Administrative Agent to take such action on
its behalf under the provisions of this Agreement and each other Financing
Agreement and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Financing Agreement,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Financing Agreement, Administrative Agent shall not have any duty or
responsibility except those expressly set forth herein, nor shall Administrative
Agent have or be deemed to have any fiduciary relationship with any Lender or
participant, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Financing Agreement or otherwise exist against Administrative Agent. The duties
of Administrative Agent shall be mechanical and administrative in nature.
Without

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limiting the generality of the foregoing sentence, the use of the term “agent”
herein and in other Financing Agreements with reference to Administrative Agent
is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting
parties.
          13.2 Delegation of Duties. Administrative Agent may execute any of its
duties under this Agreement or any other Financing Agreement by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of legal
counsel and other consultants, independent public accountants or experts
concerning all matters pertaining to such duties. Administrative Agent shall not
be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects in the absence of gross negligence or willful misconduct.
          13.3 Exculpation of Administrative Agent. None of Administrative Agent
nor any of its directors, officers, employees, Affiliates or agents shall (a) be
liable to any Lender or any other Person for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other
Financing Agreement or the transactions contemplated hereby (except to the
extent resulting from its own gross negligence or willful misconduct in
connection with its duties expressly set forth herein as determined by a final,
nonappealable judgment by a court of competent jurisdiction), or (b) be
responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by Borrower or any Affiliate, or any
officer thereof, contained in this Agreement or in any other Financing
Agreement, or in any certificate, report, statement or other document referred
to or provided for in, or received by Administrative Agent under or in
connection with, this Agreement or any other Financing Agreement, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Financing Agreement (or the creation, perfection or
priority of any Lien or security interest therein), or for any failure of
Borrower or any other party to any Financing Agreement to perform its
obligations and Liabilities hereunder or thereunder, or be responsible for or
have any duty to ascertain or verify the satisfaction of any conditions
specified in this Agreement or any other Financing Agreement, except receipt of
items required to be delivered to Administrative Agent. Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Financing Agreement, or to inspect
the properties, books or records of Borrower or its Affiliates.
          13.4 Reliance by Administrative Agent. Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, electronic mail message, affidavit, letter, telegram, facsimile,
telex or telephone message, statement or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal counsel
(including legal counsel to Borrower), independent accountants and other experts
selected by Administrative Agent. Administrative Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other
Financing Agreement unless it shall first receive such advice or concurrence of
the Required Lenders or such other number or percentage of Lenders as shall be
required elsewhere in this Agreement as it deems appropriate and, if it so
requests, confirmation from Lenders of their obligation to indemnify
Administrative Agent against any and all liability

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and expense which may be incurred by it by reason of taking or continuing to
take any such action. Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other
Financing Agreement in accordance with a request or consent of the Required
Lenders or such other number or percentage of Lenders as shall be required
elsewhere in this Agreement and such request and any action taken or failure to
act pursuant thereto shall be binding upon each Lender. For purposes of
determining compliance with the conditions specified in Section 5.1, each Lender
that has signed this Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless Administrative Agent shall have received written notice from such
Lender prior to the Closing Date specifying its objection thereto.
          13.5 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 the Lenders,
unless Administrative Agent shall have received written notice from a Lender or
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 Lenders 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 the Required Lenders in accordance with Section 11.2;
provided that 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 interest of Lenders.
          13.6 Credit Decision. Each Lender acknowledges that Administrative
Agent has not made any representation or warranty to it, and that no act by
Administrative Agent hereafter taken, including any consent and acceptance of
any assignment or review of the affairs of Borrower, shall be deemed to
constitute any representation or warranty by Administrative Agent to any Lender
as to any matter, including whether Administrative Agent has disclosed material
information in its possession. Each Lender represents to Administrative Agent
that it has, independently and without reliance upon Administrative Agent and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower, and
made its own decision to enter into this Agreement and to extend credit to
Borrower hereunder. Each Lender also represents that it will, independently and
without reliance upon Administrative Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Financing Agreements, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents
expressly herein required to be furnished to Lenders by Administrative Agent,
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial or other condition or creditworthiness of
Borrower which may come into the possession of Administrative Agent.

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          13.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, each Lender shall indemnify, defend and hold harmless
upon demand Administrative Agent and its directors, officers, employees,
Affiliates and agents (to the extent not reimbursed by or on behalf of Borrower
and without limiting the obligation of Borrower to do so), according to its
applicable Pro Rata Share, from and against any and all liability, loss, damage,
claim, demand, action, penalty, cost or expense (including, without limitation,
reasonable attorneys’ fees), that Administrative Agent suffers or incurs in
connection with this Agreement or any other Financing Agreement or any action
taken or omitted by Administrative Agent hereunder or thereunder, provided that
no Lender shall be liable for any payment to any such Person of any portion
thereof to the extent determined by a final, non-appealable judgment by a court
of competent jurisdiction to have resulted from the applicable Person’s own
gross negligence or willful misconduct. No action taken in accordance with the
directions of Required Lenders shall be deemed to constitute gross negligence or
willful misconduct for purposes of this Section. Without limitation of the
foregoing, each Lender shall reimburse Administrative Agent upon demand for its
ratable share of any costs or out-of-pocket expenses (including, without
limitation, reasonable attorneys’ fees and costs) incurred by Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Financing Agreement, or any
document contemplated by or referred to herein, to the extent that
Administrative Agent is not reimbursed for such expenses by or on behalf of
Borrower. If any indemnity furnished to Administrative Agent for any purpose
shall, in the reasonable, good faith opinion of Administrative Agent, be
insufficient or become impaired, Administrative Agent may call for additional
reasonable indemnity and cease, or not commence, to do the acts indemnified
against even if so directed by Required Lenders until such additional reasonable
indemnity is furnished. The undertaking in this Section shall survive repayment
of the Loan and other Liabilities, cancellation of any promissory notes, any
foreclosure under, or modification, release or discharge of, any or all of the
Financing Agreements, termination of this Agreement and the resignation or
replacement of Administrative Agent.
          13.8 Administrative Agent in Individual Capacity. PrivateBank and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Affiliates as though PrivateBank were not Administrative Agent hereunder
and without notice to or consent of any Lender. Each Lender acknowledges that,
pursuant to such activities, PrivateBank or its Affiliates may receive
information regarding Borrower or its Affiliates (including information that may
be subject to confidentiality obligations in favor of Borrower or such
Affiliates) and acknowledge that Administrative Agent shall be under no
obligation to provide such information to them. With respect to its portion of
the Loan, PrivateBank and its Affiliates shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though
PrivateBank were not Administrative Agent, and the terms “Lender” and “Lenders”
include PrivateBank and its Affiliates, to the extent applicable, in their
individual capacities.
          13.9 Successor Administrative Agent. Administrative Agent may resign
as Administrative Agent upon thirty (30) days’ notice to Lenders. If
Administrative Agent resigns under this Agreement, Required Lenders shall, with
(so long as no Default or Event of Default

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exists) the consent of Borrower (which shall not be unreasonably withheld,
conditioned or delayed), appoint from among Lenders a successor agent for
Lenders. Notwithstanding the immediately foregoing sentence, if no successor
agent is appointed prior to the effective date of the resignation of
Administrative Agent, Administrative Agent may appoint, after consulting with
Lenders and Borrower, a successor agent from among Lenders. Upon the acceptance
of its appointment as successor agent hereunder, such successor agent shall
succeed to and become vested with all the rights, powers and duties of the
retiring Administrative Agent and the term “Administrative Agent” shall mean
such successor agent, and the retiring Administrative Agent’s appointment,
powers and duties as Administrative Agent shall be terminated. After any
retiring Administrative Agent’s resignation hereunder as Administrative Agent,
the provisions of this Section 13 and Sections 12.2 and 12.16 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is thirty (30) days
following a retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nevertheless thereupon become effective
and Lenders shall perform all of the duties of Administrative Agent hereunder
until such time, if any, as Required Lenders appoint a successor agent as
provided for above. The fees payable by Borrower to a successor agent in its
capacity as such agent shall be the same as those payable to its predecessor
unless otherwise agreed in writing between Borrower and such successor.
          13.10. Collateral Matters. Lenders irrevocably authorize
Administrative Agent, at its option and in its discretion, (a) to release any
Lien granted to or held by Administrative Agent under this Agreement and any
other Financing Agreement (i) if all Liabilities are indefeasibly paid in full
in cash; (ii) constituting property sold or to be sold or disposed of, financed
or refinanced, as part of or in connection with any sale, disposition, financing
or refinancing which is expressly permitted by this Agreement or the Revolving
Loan Agreement at any time; or (iii) subject to Section 13.1, if approved,
authorized or ratified in writing by Required Lenders; or (b) to subordinate its
interest in any Collateral to any holder of a Lien on such Collateral which is
expressly permitted by this Agreement or the Revolving Loan Agreement at any
time. Upon request by Administrative Agent at any time, Lenders will promptly
confirm in writing Administrative Agent’s authority to release, or subordinate
its interest in, particular types or items of Collateral pursuant to this
Section 13.10. Administrative Agent and each Lender hereby appoint each other
Lender as agent for the purpose of perfecting Administrative Agent’s security
interest in assets and Collateral 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 or Collateral, such Lender shall
promptly notify Administrative Agent thereof in writing, and, promptly upon
Administrative Agent’s written request therefor, shall deliver such assets or
Collateral 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, except as
otherwise expressly provided herein, it will not have any right individually to
enforce or seek to enforce this Agreement or any Financing Agreement or to
realize upon any Collateral for the Liabilities unless instructed in writing to
do so by Administrative Agent, it being understood and agreed that such rights
and remedies may be exercised only by Administrative Agent.

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          13.11 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to Borrower, Administrative Agent (irrespective of whether
the principal of the Loan shall then be due and payable as herein expressed or
by declaration or otherwise and irrespective of whether Administrative Agent
shall have made any demand on Borrower) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
          (a) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loan, and all other Liabilities
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of Lenders and Administrative Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Administrative Agent and their respective agents and
attorneys and all other amounts due Lenders and Administrative Agent under this
Agreement) allowed in such judicial proceedings; and
          (b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such
payments to Administrative Agent and, in the event that Administrative Agent
shall consent to the making of such payments directly to Lenders, to pay to
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of Administrative Agent and its agents and attorneys,
and any other amounts due Administrative Agent under this Agreement.
     Nothing contained herein shall be deemed to authorize Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Liabilities or the rights of any Lender or to authorize Administrative Agent to
vote in respect of the claim of any Lender in any such proceeding.
          13.12 Other Agents; Arrangers and Managers. None of Lenders or other
Persons identified on the facing page or signature pages of this Agreement as,
if applicable, a “joint arranger,” “syndication agent,” “documentation agent,”
“co-agent,” “book manager,” “lead manager,” “joint lead lender”, “arranger,”
“lead arranger” or “co-arranger”, if any, shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than,
in the case of such Lenders, those applicable to all Lenders as such. Without
limiting the foregoing, none of Lenders or other Persons so identified shall
have or be deemed to have any fiduciary relationship with any Lender. Each
Lender acknowledges that it has not relied, and will not rely, on any of Lenders
or other Persons so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
          13.13 Return of Payments. 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 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

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interest accruing on a daily basis at the Federal Funds Rate (as defined below).
If Administrative Agent determines at any time that any amount received by
Administrative Agent under this Agreement must be returned to 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 Agreement, 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 Borrower or such other
Person, without setoff, counterclaim or deduction of any kind. As used herein,
the term “Federal Funds Rate” means for any day, a fluctuating interest rate
equal for each day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Administrative Agent from three Federal funds brokers of recognized
standing selected by Administrative Agent; provided, Administrative Agent’s
determination of such rate shall be binding and conclusive absent manifest
error.
          13.14 PrivateBank Credit Hold. As between PrivateBank and Bankers
Trust Company, PrivateBank agrees to hold and maintain in its own portfolio at
least fifty-one percent (51.0%) of the Term Loan Commitment until the earlier of
the Stated Maturity Date (unless sooner accelerated in accordance with the terms
of this Agreement) or Bankers Trust Company is no longer a Lender hereof.
          14. JURISDICTION; JURY TRIAL WAIVER
          14.1 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
               (1) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER FINANCING AGREEMENTS TO
WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF ILLINOIS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF ILLINOIS AND APPELLATE COURTS FROM ANY THEREOF;
               (2) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW IN CONNECTION WITH
ANY SUCH ACTION OR PROCEEDING (i) ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO
PLEAD OR CLAIM THE SAME, (ii) THE RIGHT TO

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ASSERT OR IMPOSE ANY CLAIM, NONCOMPULSORY SET-OFF, COUNTERCLAIM OR CROSS-CLAIM
IN RESPECT THEREOF IN SUCH PROCEEDING; PROVIDED, HOWEVER, THIS WAIVER DOES NOT
PRECLUDE THE RIGHT TO ASSERT A DEFENSE IN SUCH ACTION OR PROCEEDING OR TO ASSERT
OR IMPOSE ANY CLAIM, COUNTERCLAIM OR CROSS-CLAIM WHICH THE BORROWER WISHES TO
PURSUE IN A SEPARATE PROCEEDING AT ITS SOLE COST AND EXPENSE, AND (iii) ALL
STATUTES OF LIMITATIONS WHICH MAY BE RELEVANT THERETO; AND
               (3) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, RETURN RECEIPT REQUESTED,
TO THE BORROWER AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER ADDRESS OF WHICH
THE LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER AGREES THAT
SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (i) SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE BORROWER IN ANY SUIT, ACTION
OR PROCEEDING, AND (ii) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE
UPON AND PERSONAL DELIVERY TO THE BORROWER. SOLELY TO THE EXTENT PROVIDED BY
APPLICABLE LAW, SHOULD THE BORROWER, AFTER BEING SERVED, FAIL TO APPEAR OR
ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER
OF DAYS PRESCRIBED BY LAW AFTER THE DELIVERY OR MAILING THEREOF, THE BORROWER
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE
COURT AGAINST THE BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. NOTHING HEREIN SHALL AFFECT THE ADMINISTRATIVE AGENT’S OR ANY
LENDER’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR LIMIT
THE ADMINISTRATIVE AGENT’S OR ANY LENDER’S RIGHT TO BRING PROCEEDINGS AGAINST
THE BORROWER OR ITS PROPERTY IN ANY COURT OR ANY OTHER JURISDICTION.
          14.2 GOVERNING LAW
          . THIS AGREEMENT SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE
WITH, AND ENFORCED AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
          14.3 JURY TRIAL. THE BORROWER, ADMINISTRATIVE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND KNOWINGLY WAIVE (TO THE FULLEST EXTENT PERMITTED BY LAW)
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT
LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS AGREEMENT, THE FINANCING
AGREEMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO,
INCLUDING, WITHOUT LIMITATION, ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY INSTRUMENT,
DOCUMENT OR

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AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (B) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR
RELATED TO THIS AGREEMENT AND THE FINANCING AGREEMENTS. THE ADMINISTRATIVE
AGENT, THE LENDERS AND THE BORROWER AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT A JURY.
[Signature Page Follows]

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     IN WITNESS WHEREOF, this Term Loan and Security Agreement has been duly
executed as of the day and year first above written.

            BORROWER:

DIVERSICARE AFTON OAKS, LLC, a
Delaware limited liability company

BY: DIVERSICARE LEASING CORP., its
sole member
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Its: Executive
Vice President &
Chief Financial Officer     

            DIVERSICARE BRIARCLIFF, LLC, a
Delaware limited liability company

BY: DIVERSICARE LEASING CORP.,its
sole member
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Its:Executive
Vice President &
Chief Financial Officer     

            DIVERSICARE CHISOLM, LLC, a
Delaware limited liability company

BY: DIVERSICARE LEASING CORP., its
sole member
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Its: Executive
Vice President &
Chief Financial Officer     

Term Loan and Security Agreement

 

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            DIVERSICARE HARTFORD, LLC, a
Delaware limited liability company

BY: DIVERSICARE LEASING CORP., its
sole member
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Its:  Executive
Vice President &
Chief Financial Officer     

Acknowledged and Agreed
solely for purposes of Sections 8.9 and 9.12 hereof:
ADVOCAT INC.

                  By:   /s/ Matthew J. Weishaar         Name:   Matthew J.
Weishaar        Its:  Asst Secretary     

Term Loan and Security Agreement

 

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            ADMINISTRATIVE AGENT:

THE PRIVATEBANK AND TRUST
COMPANY, in its capacity as administrative agent
      By:   /s/ Adam D. Panos         Name:   Adam D. Panos        Its:  
Associate Managing Director     

Term Loan and Security Agreement

 

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            LENDER:

THE PRIVATEBANK AND TRUST COMPANY
      By:   /s/ Adam D. Panos         Name:   Adam D. Panos        Its: 
Associate Managing Director     

Term Loan and Security Agreement

 

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            LENDER:

BANKERS TRUST COMPANY
      By:   /s/ Jon M. Doll         Name:   Jon M. Doll        Its:  Vice
President     

Term Loan and Security Agreement

 

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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES

     
Schedule 1
  Borrowers
Schedule 1.1(a)
  Facilities
Schedule 1.1(b)
  Real Property
Schedule 7.8
  Other Names
Schedule 7.12
  Organizational Chart
Schedule 7.13
  Litigation
Schedule 7.17
  Environmental Matters
Schedule 7.26
  Medicare and Medicaid Penalties
Schedule 7.33
  Capitalization
Schedule 9.3
  Requirements for Subsidiary Formation

EXHIBITS
Exhibit A       Form of Term Loan Note
Exhibit B       Form of Assignment Agreement
ANNEX
Annex A       Lenders, Term Loan Commitment Percentages, and Notice Information