EX-4.1






$200,000,000




THIRD AMENDED AND RESTATED CREDIT AGREEMENT




among




EXTENDICARE HOLDINGS, INC.,




EXTENDICARE HEALTH SERVICES, INC.

as Borrower,




The Several Lenders




from Time to Time Parties Hereto,




LEHMAN BROTHERS INC.,

as Arranger




U.S. BANK, NATIONAL ASSOCIATION,




as Syndication Agent,




GENERAL ELECTRIC CAPITAL CORPORATION,




and




LASALLE BANK NATIONAL ASSOCIATION,

as Co-Documentation Agents




and




LEHMAN COMMERCIAL PAPER INC.,




as Administrative Agent




Dated as of August 4, 2005







1






TABLE OF CONTENTS




SECTION 1. DEFINITIONS


1.1 Defined Terms


1.2 Other Definitional Provisions



SECTION 2. AMOUNT AND TERMS OF COMMITMENTS


2.1 Term Loan Commitments


2.2 Procedure for Term Loan Borrowing


2.3 Repayment of Term Loans


2.4 Revolving Credit Commitments


2.5 Procedure for Revolving Credit Borrowing


2.6 Swing Line Commitment


2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans


2.8 Repayment of Loans; Evidence of Debt


2.9 Commitment Fees, etc


2.10 Termination or Reduction of Revolving Credit Commitments


2.11 Optional Prepayments


2.12 Mandatory Prepayments


2.13 Conversion and Continuation Options


2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches


2.15 Interest Rates and Payment Dates


2.16 Computation of Interest and Fees


2.17 Inability to Determine Interest Rate


2.18 Pro Rata Treatment and Payments


2.19 Requirements of Law


2.20 Taxes


2.21 Indemnity


2.22 Illegality


2.23 Change of Lending Office


2.24 Replacement of Lenders under Certain Circumstances


2.25 Commitment Increases



SECTION 3. LETTERS OF CREDIT


3.1 L/C Commitment


3.2 Procedure for Issuance of Letter of Credit


3.3 Fees and Other Charges


3.4 L/C Participations


3.5 Reimbursement Obligation of the Borrower


3.6 Obligations Absolute


3.7 Letter of Credit Payments


3.8 Applications



SECTION 4. REPRESENTATIONS AND WARRANTIES


4.1 Financial Condition


4.2 No Change


4.3 Corporate Existence; Compliance with Law


4.4 Corporate Power; Authorization; Enforceable Obligations


4.5 No Legal Bar


4.6 No Material Litigation


4.7 No Default


4.8 Ownership of Property; Liens


4.9 Intellectual Property


4.10 Taxes


4.11 Federal Regulations


4.12 Labor Matters


4.13 ERISA


4.14 Investment Company Act; Other Regulations


4.15 Material Subsidiaries


4.16 Use of Proceeds


4.17 Environmental Matters


4.18 Compliance With Health Care Laws


4.19 HIPAA Compliance


4.20 Accuracy of Information, etc


4.21 Security Documents


4.22 Solvency


4.23 Senior Indebtedness


4.24 Regulation H


4.25 Deposit Accounts and Securities Accounts


4.26 Reimbursement From Third Party Payors


4.27 Fraud and Abuse


4.28 Inactive Subsidiaries



SECTION 5. CONDITIONS PRECEDENT


5.1 Conditions to Closing Date and Initial Extension of Credit


5.2 Conditions to Each Extension of Credit



SECTION 6. AFFIRMATIVE COVENANTS


6.1 Financial Statements


6.2 Certificates; Other Information


6.3 Payment of Obligations and Compliance with Agreements


6.4 Conduct of Business and Maintenance of Existence, etc


6.5 Maintenance of Property; Insurance


6.6 Inspection of Property; Books and Records; Discussions


6.7 Notices


6.8 Environmental Laws


6.9 Additional Collateral, etc


6.10 Further Assurances


6.11 Use of Proceeds


6.12 Additional Mortgaged Property


6.13 Existing Mortgages; Existing Mortgagee Title Insurance Policies


6.14 Repayment of Indebtedness



SECTION 7. NEGATIVE COVENANTS


7.1 Financial Condition Covenants.


7.2 Limitation on Indebtedness


7.3 Limitation on Liens


7.4 Limitation on Fundamental Changes


7.5 Limitation on Disposition of Property


7.6 Limitation on Restricted Payments


7.7 Limitation on Capital Expenditures


7.8 Limitation on Investments


7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc


7.10 Limitation on Transactions with Affiliates


7.11 [Reserved]


7.12 Limitation on Changes in Fiscal Periods


7.13 Limitation on Negative Pledge Clauses


7.14 Limitation on Restrictions on Subsidiary Distributions


7.15 Limitation on Lines of Business


7.16 Limitation on Activities of Holdings


7.17 Limitation on Hedge Agreements


7.18 Limitation on Activities of Inactive Subsidiaries.



SECTION 8. EVENTS OF DEFAULT



SECTION 9. THE AGENTS


9.1 Appointment


9.2 Delegation of Duties


9.3 Exculpatory Provisions


9.4 Reliance by Agents


9.5 Notice of Default


9.6 Non Reliance on Agents and Other Lenders


9.7 Indemnification


9.8 Agent in Its Individual Capacity


9.9 Successor Administrative Agent


9.10 Authorization to Release Liens and Guarantees


9.11 The Arranger; the Syndication Agent; the Co-Documentation Agents


9.12 The Administrative Agent and the Secured Parties.



SECTION 10. MISCELLANEOUS


10.1 Amendments and Waivers


10.2 Notices


10.3 No Waiver; Cumulative Remedies


10.4 Survival of Representations and Warranties


10.5 Payment of Expenses


10.6 Successors and Assigns; Participations and Assignments


10.7 Adjustments; Set off


10.8 Counterparts


10.9 Severability


10.10 Integration


10.11 GOVERNING LAW


10.12 Submission To Jurisdiction; Waivers


10.13 Acknowledgments


10.14 Confidentiality


10.15 Release of Collateral and Guarantee Obligations


10.16 Accounting Changes


10.17 Delivery of Lender Addenda


10.18 WAIVERS OF JURY TRIAL



ANNEXES:



A            Existing Letters of Credit



SCHEDULES:



1.1(a) Existing Mortgaged Properties


1.1(b) Additional Mortgaged Properties


1.1(c) Existing Mortgages


1.1(d) Inactive Subsidiaries


4.4 Consents, Authorizations, Filings and Notices


4.15 Material Subsidiaries


4.21(a) UCC Filing Jurisdictions


4.21(b) Mortgage Filing Jurisdictions


4.25 Deposit Accounts and Securities Accounts


5.1(o)(i) Real Property Surveys


5.1(o)(ii) Environmental Affidavits


7.2(d) Existing Indebtedness


7.3(f) Existing Liens



EXHIBITS:



A            Copy of Guarantee and Collateral Agreement


B            Form of Compliance Certificate


C            Form of Closing Certificate


D-1 Form of Additional Mortgage


D-2 Form of Mortgage Amendments


E            Form of Assignment and Acceptance


F            Form of Legal Opinion of Foley & Lardner


G-1 Form of Revolving Credit Note


G-2 Form of Swing Line Note


G-3 Form of Term Loan Note


H            Form of Exemption Certificate


I            Form of Lender Addendum


J            Form of Borrowing Notice


K            Form of Consent and Confirmation


L            Form of New Lender Supplement


M            Form of Commitment Increase Supplement



2




THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 4, 2005, among
EXTENDICARE HOLDINGS, INC., a Wisconsin corporation (“Holdings”), EXTENDICARE HEALTH
SERVICES, INC., a Delaware corporation (the “Borrower”), the several banks and other
financial institutions or entities from time to time parties to this Agreement (the
“Lenders”), LEHMAN BROTHERS INC., as advisor, lead arranger and book manager (in such
capacity, the “Arranger”), U.S. BANK, NATIONAL ASSOCIATION, as syndication agent (in such
capacity, the “Syndication Agent”), GENERAL ELECTRIC CAPITAL CORPORATION and LASALLE BANK
NATIONAL ASSOCIATION, as Co-Documentation Agents (in such capacity, the “Co-Documentation
Agents”), and LEHMAN COMMERCIAL PAPER INC. (“LCPI”), as administrative agent (in such
capacity, the “Administrative Agent”).



W I T N E S S E T H:




WHEREAS, the Borrower and Holdings are parties to the Second Amended and Restated Credit
Agreement, dated as of April 22, 2004 (as amended, supplemented or otherwise modified prior to the
date hereof, the “Existing Credit Agreement”), with the lenders parties thereto (the
“Existing Lenders”), Lehman Commercial Paper Inc., as administrative agent, and others;



WHEREAS, the Borrower has requested that the Existing Credit Agreement be amended and restated
as set forth below, to provide for, among other things, a decrease in the Total Revolving Credit
Commitments and a new Term Loan Facility; and



WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation
of the obligations and liabilities existing under the Existing Credit Agreement and which remain
outstanding or evidence repayment of any such obligations and liabilities and that this Agreement
amend and restate in its entirety the Existing Credit Agreement and re-evidence the obligations of
the Borrower outstanding thereunder and evidence the obligations of the Borrower in respect of the
new term loans to be made hereunder;



NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the
parties hereto hereby agree that, on the Closing Date, the Existing Credit Agreement will be
amended and restated in its entirety as follows:



SECTION 1. DEFINITIONS




1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1
shall have the respective meanings set forth in this Section 1.1.



“Acquisition”: the acquisition of Assisted Living by Alpha pursuant to the Plan of
Merger and Acquisition Agreement, dated as of November 4, 2004 (the “Acquisition
Agreement”), by and among Assisted Living, the Borrower and Alpha.



“Additional Mortgaged Property”: the real properties listed on Schedule 1.1(b).



“Additional Mortgages”: as defined in Section 6.12.



“Administrative Agent”: as defined in the preamble hereto.



“Affiliate”: as to any Person, any other Person that, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person. For purposes of this
definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10%
or more of the securities having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.



“Agents”: the collective reference to the Syndication Agent, the Co-Documentation
Agents and the Administrative Agent.



“Aggregate Exposure”: with respect to any Lender at any time, an amount equal to (a)
until the Closing Date, the aggregate amount of such Lender’s Commitments at such time and (b)
thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender’s Term Loans
and (ii) the amount of such Lender’s Revolving Credit Commitment then in effect or, if the
Revolving Credit Commitments have been terminated, the amount of such Lender’s Revolving Extensions
of Credit then outstanding.



“Aggregate Exposure Percentage”: with respect to any Lender at any time, the ratio
(expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the sum of the
Aggregate Exposures of all Lenders at such time.



“Agreement”: this Third Amended and Restated Credit Agreement, as amended,
supplemented, restated or otherwise modified from time to time.



“AL Debt Facilities”: the collective reference to the ID Facility, the WA Facility
and the OH Facility.



“Alpha”: Alpha Acquisition, Inc., a wholly owned Subsidiary of the Borrower.



“Alpha Equity Contribution”: the contribution by the Borrower of $140,000,000 in cash
to the equity of Alpha in connection with the Acquisition.



“Applicable Margin”: for Base Rate Loans, 0.75% per annum, and for Eurodollar Loans,
1.75% per annum.



“Application”: an application, in such form as the relevant Issuing Lender may
specify from time to time, requesting such Issuing Lender to issue a Letter of Credit.



“Arranger”: as defined in the preamble hereto.



“Asset Sale”: any Disposition of Property or series of related Dispositions of
Property (excluding any such Disposition permitted by clause (a), (b), (c), (d), (e) or (g) of
Section 7.5) which yields gross proceeds to the Borrower or any of its Restricted Subsidiaries
(valued at the initial principal amount thereof in the case of non-cash proceeds consisting of
notes or other debt securities and valued at fair market value in the case of other non-cash
proceeds) in excess of $1,000,000.



“Assignee”: as defined in Section 10.6(c).



“Assignor”: as defined in Section 10.6(c).



“Assisted Living”: Assisted Living Concepts, Inc., a Nevada corporation.



“Available Revolving Credit Commitment”: with respect to any Revolving Credit Lender
at any time, an amount equal to the excess, if any, of (a) such Lender’s Revolving Credit
Commitment then in effect over (b) such Lender’s Revolving Extensions of Credit then
outstanding; provided, that in calculating any Lender’s Revolving Extensions of Credit for
the purpose of determining such Lender’s Available Revolving Credit Commitment pursuant to Section
2.9(a), the aggregate principal amount of Swing Line Loans then outstanding shall be deemed to be
zero.



“Base Rate”: for any day, a rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: “Prime
Rate” shall mean the prime lending rate as set forth on the British Banking Association
Telerate Page 5 (or such other comparable page as may, in the opinion of the Administrative Agent,
replace such page for the purpose of displaying such rate), as in effect form time to time. Any
change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective as of the opening of business on the effective day of such change in the Prime Rate or
the Federal Funds Effective Rate, respectively.



“Base Rate Loans”: Loans for which the applicable rate of interest is based upon the
Base Rate.



“Benefited Lender”: as defined in Section 10.7.



“Board”: the Board of Governors of the Federal Reserve System of the United States
(or any successor).



“Borrower”: as defined in the preamble hereto.



“Borrowing Date”: any Business Day specified by the Borrower as a date on which the
Borrower requests the Lenders to make Loans hereunder.



“Borrowing Notice”: with respect to any request for a borrowing of Loans hereunder, a
notice from the Borrower, substantially in the form of, and containing the information prescribed
by, Exhibit J, delivered to the Administrative Agent.



“Business Day”: (a) for all purposes other than as covered by clause (b) below, a day
other than a Saturday, Sunday or other day on which commercial banks in New York City are
authorized or required by law to close and (b) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (a) and which is also a day for trading by and between banks in
Dollar deposits in the interbank eurodollar market.



“Capital Expenditures”: for any period, with respect to any Person, the aggregate of
all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of
fixed or capital assets or additions to equipment (including replacements, capitalized repairs and
improvements during such period) which are required to be capitalized under GAAP on a balance sheet
of such Person.



“Capital Lease Obligations”: with respect to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person under GAAP; and,
for the purposes of this Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with GAAP.



“Capital Stock”: any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all equivalent ownership interests
in a Person (other than a corporation) and any and all warrants, rights or options to purchase any
of the foregoing.



“Cash Equivalents”: (a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing within one year from the date of
acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank
deposits having maturities of six months or less from the date of acquisition issued by any Lender
or by any commercial bank organized under the laws of the United States of America or any state
thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of
an issuer rated at least A-2 by Standard & Poor’s Ratings Services (“S&P”) or P-2 by
Moody’s Investors Service, Inc. (“Moody’s”), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies cease publishing
ratings of commercial paper issuers generally, and maturing within six months from the date of
acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30 days with respect
to securities issued or fully guaranteed or insured by the United States government; (e) securities
with maturities of one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign government, the securities
of which state, commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by Moody’s; (f) securities with
maturities of six months or less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; and (g) shares of money market mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this definition.



“Change of Control”: the occurrence of any of the following events: (a) any “person”
or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), shall become, or obtain rights (whether by means of
warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange Act), directly or indirectly, of more than 35% of the outstanding common
stock of the Parent; (b) the board of directors of the Parent shall cease to consist of a majority
of Continuing Directors; (c) the Parent shall cease to own and control, of record and beneficially,
directly or indirectly, a majority of each class of outstanding Capital Stock of Holdings free and
clear of all Liens (except Liens created by the Guarantee and Collateral Agreement); (d) Holdings
shall cease to own and control, of record and beneficially, directly, 100% of each class of
outstanding Capital Stock of the Borrower free and clear of all Liens (except Liens created by the
Guarantee and Collateral Agreement); or (e) a Specified Change of Control.



“Closing Date”: the date on which the conditions precedent set forth in Section 5.1
shall have been satisfied, which date is August 4, 2005.



“Code”: the Internal Revenue Code of 1986, as amended from time to time.



“Collateral”: all Property of the Loan Parties, now owned or hereafter acquired, upon
which a Lien is created or purported to be created by any Security Document.



“Commitment”: with respect to any Lender, each of the Term Loan Commitment and the
Revolving Credit Commitment of such Lender.



“Commonly Controlled Entity”: an entity, whether or not incorporated, that is under
common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group
that includes the Borrower and that is treated as a single employer under Section 414 of the Code.



“Compliance Certificate”: a certificate duly executed by a Responsible Officer,
substantially in the form of Exhibit B.



“Consent and Confirmation”: the Consent and Confirmation, substantially in the form
of Exhibit K, to be executed and delivered by Holdings, the Borrower and each Subsidiary Guarantor
on the Closing Date.



“Consolidated EBITDA”: for any period, Consolidated Net Income for such period
plus, without duplication and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a) income tax expense, (b) Consolidated
Interest Expense, amortization or write-off of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness, (c) depreciation
and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill)
and organization costs, (e) any extraordinary, unusual (including increases to actuarial reserves
for the Transferred Properties) or non-recurring expenses or losses (including, whether or not
otherwise includable as a separate item in the statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary course of business), (f) any other
non-cash charges including write-off of goodwill or write-down of fixed asset values and (g) any
write-down of warrants of Omnicare held by the Borrower on March 31, 2002 and minus,
without duplication and to the extent included in the statement of Consolidated Net Income for such
period, the sum of (a) interest income (except to the extent deducted in determining Consolidated
Interest Expense), (b) any extraordinary, unusual or non-recurring income or gains (including,
whether or not otherwise includable as a separate item in the statement of such Consolidated Net
Income for such period, gains on the sales of assets outside of the ordinary course of business),
(c) income tax credits and (d) any other non-cash income, all as determined on a consolidated
basis; provided, that for purposes of calculating Consolidated EBITDA for any period, (i)
the consolidated EBITDA of any Person, or any assets constituting a business unit, acquired by the
Borrower or its Subsidiaries during such period (calculated for such Person and its Subsidiaries in
the same manner as Consolidated EBITDA of the Borrower and its Subsidiaries is calculated pursuant
to the foregoing provisions of this definition) shall be included on a pro forma basis for such
period (assuming the consummation of such acquisition and the incurrence or assumption of any
Indebtedness in connection therewith occurred on the first day of such period) if the consolidated
balance sheet of such acquired Person and its consolidated Subsidiaries, or such business unit, as
at the end of the period preceding the acquisition of such Person, or such business unit, and the
related consolidated statements of income and stockholders’ equity and of cash flows for the period
in respect of which Consolidated EBITDA is to be calculated (x) have been previously provided to
the Administrative Agent and the Lenders and (y) either (1) have been reported on without a
qualification arising out of the scope of the audit by independent certified public accountants of
nationally recognized standing or (2) have been found acceptable by the Administrative Agent, (ii)
the consolidated EBITDA of any Person, or attributable to the assets constituting a business unit,
Disposed of by the Borrower or its Subsidiaries during such period (calculated for such Person and
its Subsidiaries in the same manner as Consolidated EBITDA of the Borrower and its Subsidiaries is
calculated pursuant to the foregoing provisions of this definition) (including the Transferred
Properties, in the case of calculation of Consolidated EBITDA of the Borrower and its Subsidiaries
for any period which includes any date on or prior to the date of Disposition of the Transferred
Properties) shall be excluded for such period (assuming the consummation of such Disposition and
the repayment of any Indebtedness in connection therewith occurred on the first day of such period)
and (iii) the consolidated EBITDA attributable to any Non-Recourse Subsidiary or any assets that
secure Permitted Non-Recourse Debt (calculated for such Person and its Subsidiaries in the same
manner as Consolidated EBITDA of the Borrower and its Subsidiaries is calculated pursuant to the
foregoing provisions of this definition) shall be excluded from Consolidated EBITDA of the Borrower
and its Subsidiaries. In addition, changes in accounting principles affecting financial covenants
within such testing period shall be reversed so as to nullify such effect.



“Consolidated EBITDAR”: for any period, Consolidated EBITDA for such period,
plus Consolidated Lease Expense for such period; provided, that in determining
Consolidated EBITDAR for any period which includes any date on or prior to the date of Disposition
of the Transferred Properties, all amounts specified in the foregoing definition that are
attributable to the Transferred Properties shall not be included.



“Consolidated Fixed Charge Coverage Ratio”: for any period, the ratio of (a)
Consolidated EBITDAR for such period minus Consolidated Maintenance Capital Expenditures
for such period to (b) Consolidated Fixed Charges for such period.



“Consolidated Fixed Charges”: for any period, the sum (without duplication) of (a)
Consolidated Interest Expense for such period, (b) Consolidated Lease Expense for such period and
(c) scheduled payments made during such period on account of principal of Indebtedness of the
Borrower or any of its Subsidiaries; provided, that in determining Consolidated Fixed
Charges for any period which includes any date on or prior to the date of Disposition of the
Transferred Properties, all amounts specified in the foregoing definition that are attributable to
the Transferred Properties shall not be included.



“Consolidated Growth Capital Expenditures”: for any period, all Capital Expenditures
of the Borrower and its Subsidiaries for such period representing the purchase price for, or other
costs associated with the acquisition, construction or expansion of, a facility owned or operated
by the Borrower or any Subsidiary; provided, that in determining Consolidated Growth
Capital Expenditures for any period which includes any date on or prior to the date of Disposition
of the Transferred Properties, all Capital Expenditures that are attributable to the Transferred
Properties shall not be included.



“Consolidated Interest Expense”: for any period, total cash interest expense
(excluding that attributable to Capital Lease Obligations and any amounts for amortization of costs
relative to previous financings) of the Borrower and its Subsidiaries for such period with respect
to all outstanding Indebtedness of the Borrower and its Subsidiaries (including, without
limitation, all commissions, discounts and other fees and charges owed by the Borrower with respect
to letters of credit and bankers’ acceptance financing and net costs of the Borrower under Hedge
Agreements in respect of interest rates to the extent such net costs are allocable to such period
in accordance with GAAP).



“Consolidated Lease Expense”: for any period, the aggregate amount of fixed and
contingent rentals payable by the Borrower and its Subsidiaries for such period with respect to
leases of real and personal property, determined on a consolidated basis in accordance with GAAP,
provided, that payments in respect of Capital Lease Obligations shall not constitute
Consolidated Lease Expense.



“Consolidated Maintenance Capital Expenditures”: for any period, all Capital
Expenditures of the Borrower and its Subsidiaries for such period, other than Consolidated Growth
Capital Expenditures; provided, that in determining Consolidated Maintenance Capital
Expenditures for any period which includes any date on or prior to the date of Disposition of the
Transferred Properties, all Capital Expenditures that are attributable to the Transferred
Properties shall not be included.



“Consolidated Net Income”: for any period, the consolidated net income (or loss) of
the Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, that in calculating Consolidated Net Income for any period, there
shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its
Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower)
in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent
that any such income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions, (c) the undistributed earnings of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than
under any Loan Document) or Requirement of Law applicable to such Subsidiary, (d) in determining
Consolidated Net Income for any period which includes the date of Disposition of the Transferred
Properties, the amount of consolidated net income attributable to the Transferred Properties for
such period shall not be included and (e) in determining Consolidated Net Income for any period,
the consolidated net income for such period attributable to any Non-Recourse Subsidiary or any
assets that secure Permitted Non-Recourse Debt shall be excluded.



“Consolidated Senior Debt”: all Consolidated Total Debt other than (a) the Senior
Subordinated Notes and (b) Permitted Non-Recourse Debt.



“Consolidated Senior Leverage Ratio”: as at the last day of any period of four
consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated Senior Debt on such day
to (b) Consolidated EBITDA for such period.



“Consolidated Senior Secured Leverage Ratio”: as at the last day of any period of
four consecutive fiscal quarters of the Borrower, the ratio of (a) the amount of all Consolidated
Senior Debt on such day other than unsecured Indebtedness to (b) Consolidated EBITDA for such
period.



“Consolidated Tangible Net Worth”: at any date, the difference of (a) all amounts
that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower
and its Subsidiaries under stockholders’ equity at such date (excluding either write-ups or
write-downs of the Transferred Properties or consideration received in respect thereto)
minus (b) the amounts included on such consolidated balance sheet for goodwill (other than
goodwill related to the Acquisition), trade names, trademarks, patents, unamortized debt discount
and expense and other like intangible assets.



“Consolidated Total Debt”: at any date, the aggregate principal amount of all
Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis
in accordance with GAAP.



“Continuing Directors”: the directors of the Parent on the Closing Date, and each
other director of the Parent, if, in each case, such other director’s nomination for election to
the board of directors of the Parent is recommended by the nominating committee of the board of
directors of the Parent.



“Contractual Obligation”: as to any Person, any provision of any security issued by
such Person or of any agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its Property is bound.



“Control Agreement”: (a) with respect to each Deposit Account, a control agreement,
in form and substance reasonably satisfactory to the Administrative Agent, providing (i) for the
Administrative Agent to have “control” (within the meaning of Section 9-104 of the applicable
Uniform Commercial Code) of such Deposit Account and (ii) that the Administrative Agent will not
exercise any remedies thereunder except during the continuance of an Event of Default and (b) with
respect to each Securities Account, a control agreement, in form and substance reasonably
satisfactory to the Administrative Agent, providing (i) for the Administrative Agent to have
“control” (within the meaning of Section 9-106 of the applicable Uniform Commercial Code) of such
Securities Account and (ii) that the Administrative Agent will not exercise any remedies thereunder
except during the continuance of an Event of Default.



“Control Investment Affiliate”: as to any Person, any other Person that (a) directly
or indirectly, is in control of, is controlled by, or is under common control with, such Person and
(b) is organized by such Person primarily for the purpose of making equity or debt investments in
one or more companies. For purposes of this definition, “control” of a Person means the power,
directly or indirectly, to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.



“Default”: any of the events specified in Section 8, whether or not any requirement
for the giving of notice, the lapse of time, or both, has been satisfied.



“Deposit Account”: each “deposit account” (as defined in Section 9-102 of the New
York Uniform Commercial Code) in respect of which the Borrower or any of its Subsidiaries (other
than any Excluded Foreign Subsidiary or any Unrestricted Subsidiary) is the depositor.



“Derivatives Counterparty”: as defined in Section 7.6.



“Disposition”: with respect to any Property, any sale, lease, sale and leaseback,
assignment, conveyance, transfer or other disposition thereof; and the terms “Dispose” and
“Disposed of” shall have correlative meanings.



“Dollars” and “$”: lawful currency of the United States of America.



“Domestic Subsidiary”: any Subsidiary of the Borrower organized under the laws of any
jurisdiction within the United States of America.



“Environmental Laws”: any and all laws, rules, orders, regulations, statutes,
ordinances, guidelines, codes, decrees, or other legally enforceable requirements (including,
without limitation, common law) of any international authority, foreign government, the United
States, or any state, local, municipal or other governmental authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of the environment or of human
health, or employee health and safety, as has been, is now, or may at any time hereafter be, in
effect.



“Environmental Permits”: any and all permits, licenses, approvals, registrations,
notifications, exemptions and other authorizations required under any Environmental Law.



“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to
time.



“Eurocurrency Reserve Requirements”: for any day, the aggregate (without duplication)
of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and emergency reserves) under any
regulations of the Board or other Governmental Authority having jurisdiction with respect thereto
dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal
Reserve System.



“Eurodollar Base Rate”: with respect to each day during each Interest Period, the
rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to
such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of
the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen
(or otherwise on such screen), the “Eurodollar Base Rate” for purposes of this definition
shall be determined by reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent.



“Eurodollar Loans”: Loans for which the applicable rate of interest is based upon the
Eurodollar Rate.



“Eurodollar Rate”: with respect to each day during each Interest Period, a rate per
annum determined for such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):



Eurodollar Base Rate

1.00 — Eurocurrency Reserve Requirements




“Eurodollar Tranche”: the collective reference to Eurodollar Loans under any Facility
the then current Interest Periods with respect to all of which begin on the same date and end on
the same later date (whether or not such Loans shall originally have been made on the same day).



“Event of Default”: any of the events specified in Section 8, provided that
any requirement for the giving of notice, the lapse of time, or both, has been satisfied.



“Excluded Foreign Subsidiaries”: any Foreign Subsidiary in respect of which either
(a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing
by such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in
adverse tax consequences to the Borrower.



“Existing Credit Agreement”: as defined in the recitals to this Agreement.



“Existing Lenders”: as defined in the recitals to this Agreement.



“Existing Letters of Credit”: the letters of credit described in Annex A.



“Existing Mortgaged Property”: the real properties listed on Schedule 1.1(a).



“Existing Mortgagee Title Policies”: the collective reference to each of the existing
mortgagee policies of title insurance issued to the Administrative Agent pursuant to the Existing
Credit Agreement in respect of each of the Existing Mortgaged Properties.



“Existing Mortgages”: the collective reference to each existing deed of trust and
mortgage listed on Schedule 1.1(c), in each case, as amended, assigned or otherwise modified from
time to time, delivered pursuant to the Existing Credit Agreement in respect of each of the
Existing Mortgaged Properties.



“Existing Revolving Credit Loans”: revolving credit loans made by the Existing
Lenders to the Borrower pursuant to the Existing Credit Agreement.



“Facility”: each of (a) the Term Loan Commitments and the Term Loans made thereunder
(the “Term Loan Facility”) and (b) the Revolving Credit Commitments and the extensions of
credit made thereunder (the “Revolving Credit Facility”).



“Federal Funds Effective Rate”: for any day, 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 on the next succeeding 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 the day of such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.



“Foreign Subsidiary”: any Subsidiary of the Borrower that is not a Domestic
Subsidiary.



“FQ1”, “FQ2 “, “FQ3”, and “FQ4”: when used with a numerical
year designation, means the first, second, third or fourth fiscal quarters, respectively, of such
fiscal year of the Borrower. (e.g., FQ4 2004 means the fourth fiscal quarter of the Borrower’s 2004
fiscal year, which ended December 31, 2004).



“Funding Office”: the office specified from time to time by the Administrative Agent
as its funding office by notice to the Borrower and the Lenders.



“GAAP”: generally accepted accounting principles in the United States of America as
in effect from time to time.



“GECC Credit Facility”: the Credit Agreement dated as of December 23, 2003 among ALC
Properties II, Inc., Texas ALC II, Inc and General Electric Capital Corporation.



“Governmental Authority”: any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.



“Guarantee and Collateral Agreement”: the Amended and Restated Guarantee and
Collateral Agreement, dated as of June 28, 2002, made by Holdings, the Borrower and each Subsidiary
Guarantor in favor of the Administrative Agent, a copy of which is attached as Exhibit A, as the
same may be amended, supplemented or otherwise modified from time to time.



“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any
obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any
bank under any letter of credit), if to induce the creation of such obligation of such other Person
the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other
obligations (the “primary obligations”) of any other third Person (the “primary
obligor”) in any manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase Property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing
person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower
in good faith.



“Guarantors”: the collective reference to Holdings and the Subsidiary Guarantors.



“Healthcare Laws”: collectively, any and all federal, state or local laws, rules,
regulations and administrative manuals, orders, guidelines and requirements issued under or in
connection with Medicare, Medicaid or any government payment program or any law governing the
licensure of or regulating healthcare providers, professionals, facilities or payors or otherwise
governing or regulating the provision of, or payment for, medical services.



“Hedge Agreements”: all interest rate or currency swaps, caps or collar agreements,
foreign exchange agreements, commodity contracts or similar arrangements entered into by the
Borrower or its Subsidiaries providing for protection against fluctuations in interest rates,
currency exchange rates, commodity prices or the exchange of nominal interest obligations, either
generally or under specific contingencies and not for speculative purposes. For avoidance of
doubt, Hedge Agreements shall include any interest rate swap or similar agreement that provides for
the payment by the Borrower or any of its Subsidiaries of amounts based upon a floating rate in
exchange for receipt by the Borrower or such Subsidiary of amounts based upon a fixed rate.



“HIPAA”: 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.



“Holdings Intercompany Loan”: the 6% senior unsecured loan due January 1, 2010 in the
aggregate principal amount of $55,000,000 made by Holdings to the Borrower in connection with the
Acquisition.



“ID Facility”: the credit facility provided to Assisted Living pursuant to the
Mortgage Loan Origination and Financing Agreement, dated as of July 1, 1997, by and among the Idaho
Housing and Finance Association, United States National Bank of Oregon, Assisted Living and First
Security Bank, N.A., and the related indenture, reimbursement agreement and related financing and
collateral agreements and instruments.



“Inactive Subsidiaries”: the Subsidiaries listed on Schedule 1.1(d).



“Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness
of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase
price of Property or services (other than trade payables incurred in the ordinary course of such
Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such
Person, (f) all obligations of such Person, contingent or otherwise, as an account party or
applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any
Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above; (i) all obligations of the
kind referred to in clauses (a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property
(including, without limitation, accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligation and (j) for the
purposes of Section 8(e) only, all obligations of such Person in respect of Hedge Agreements.



“Indemnified Liabilities”: as defined in Section 10.5.



“Indemnitee”: as defined in Section 10.5.



“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan is
insolvent within the meaning of Section 4245 of ERISA.



“Insolvent”: pertaining to a condition of Insolvency.



“Intellectual Property”: the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents,
patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights
to sue at law or in equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.



“Interest Payment Date”: (a) as to any Base Rate Loan, the last day of each March,
June, September and December to occur while such Loan is outstanding and the final maturity date of
such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or shorter, the
last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day that is three months, or a whole multiple thereof, after the first day
of such Interest Period and the last day of such Interest Period and (d) as to any Loan (other than
any Revolving Credit Loan that is a Base Rate Loan and any Swing Line Loan), the date of any
repayment or prepayment made in respect thereof.



“Interest Period”: as to any Eurodollar Loan, (a) initially, the period commencing on
the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with respect thereto; and (b)
thereafter, each period commencing on the last day of the next preceding Interest Period applicable
to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior
to the last day of the then current Interest Period with respect thereto; provided that,
all of the foregoing provisions relating to Interest Periods are subject to the following:




	 	(i)	 	if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately preceding
Business Day;






	 	(ii)	 	any Interest Period that would otherwise extend
beyond the Revolving Credit Termination Date or beyond the date final
payment is due on the Term Loans, shall end on the Revolving Credit
Termination Date or such due date, as applicable; and






	 	(iii)	 	any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period.





“Investments”: as defined in Section 7.8.



“Issuing Lender”: initially, LaSalle Bank National Association, and thereafter any
Revolving Credit Lender from time to time designated by the Borrower as an Issuing Lender with the
consent of such Revolving Credit Lender and the Administrative Agent.



“L/C Commitment”: $114,000,000.



“L/C Fee Payment Date”: the last day of each March, June, September and December and
the last day of the Revolving Credit Commitment Period.



“L/C Obligations”: at any time, an amount equal to the sum of (a) the aggregate then
undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount
of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5.



“L/C Participants”: with respect to any Letter of Credit, the collective reference to
all the Revolving Credit Lenders other than the Issuing Lender that issued such Letter of Credit.



“Lehman Entity”: any of Lehman Commercial Paper Inc. or any of its affiliates
(including Syndicated Loan Funding Trust).



“Lender Addendum”: with respect to any initial Lender, a Lender Addendum,
substantially in the form of Exhibit I, to be executed and delivered by such Lender on the Closing
Date as provided in Section 10.17.



“Lenders”: as defined in the preamble hereto.



“Letters of Credit”: as defined in Section 3.1(a).



“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or any preference,
priority or other security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the foregoing).



“Loan”: any loan made by any Lender pursuant to this Agreement.



“Loan Documents”: this Agreement, the Security Documents, the Applications and the
Notes.



“Loan Parties”: Holdings, the Borrower and each Subsidiary of the Borrower that is a
party to a Loan Document.



“Majority Facility Lenders”: with respect to any Facility, the holders of more than
50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of
Credit, as the case may be, outstanding under such Facility (or, in the case of the Revolving
Credit Facility, prior to any termination of the Revolving Credit Commitments, the holders of more
than 50% of the Total Revolving Credit Commitments).



“Material Adverse Effect”: a material adverse effect on (a) the condition (financial
or otherwise), operations, business, assets, liabilities or prospects of Holdings, the Borrower and
its Restricted Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any
material obligation under any Loan Document to which it is a party or (c) the material rights or
remedies of the Agents or the Lenders hereunder or thereunder.



“Material Environmental Amount”: an amount or amounts payable by the Borrower and/or
any of its Subsidiaries, in the aggregate in excess of $1,000,000, for: costs to comply with any
Environmental Law; costs of any investigation, and any remediation, of any Material of
Environmental Concern; and compensatory damages (including, without limitation damages to natural
resources), punitive damages, fines, and penalties pursuant to any Environmental Law.



“Material Subsidiary”: any Subsidiary other than an Inactive Subsidiary.



“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil
or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity, and any other substances or forces
of any kind, whether or not any such substance or force is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give rise to liability under any
Environmental Law.



“Moody’s”: as defined in the definition of “Cash Equivalents” in this Section 1.1.



“Mortgages”: the collective reference to (a) the Existing Mortgages, (b) each of the
Mortgage Amendments and (c) each of the Additional Mortgages.



“Mortgage Amendments”: each of the amendments to any mortgage or deed of trust
executed and delivered by any Loan Party, substantially in the form of Exhibit D-2 (with such
changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or
deed of trust is to be recorded as the Administrative Agent on or before the Closing Date shall
reasonably determine is necessary to maintain the priority of the first mortgage Lien encumbering
the relevant Existing Mortgaged Property).



“Mortgaged Property”: the Existing Mortgaged Property and, from and after the time
such properties become subject to a mortgage in favor of the Administrative Agent for the benefit
of the Lenders in accordance with Section 6.12, the Additional Mortgaged Property.



“Multiemployer Plan”: a Plan that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.



“Net Cash Proceeds”: (a) in connection with any Asset Sale or any Recovery Event, the
proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by
way of deferred payment of principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery
Event, net of reasonable attorneys’ fees, accountants’ fees, investment banking fees, amounts
required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted
hereunder on any asset which is the subject of such Asset Sale or Recovery Event (other than any
Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to be payable as a result
thereof (after taking into account any available tax credits or deductions and any tax sharing
arrangements), (b) in connection with any issuance or sale of equity securities or debt securities
or instruments or the incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of reasonable attorneys’ fees, investment banking fees, accountants’ fees,
underwriting discounts and commissions and other customary fees and expenses actually incurred in
connection therewith and (c) in connection with any Purchase Price Refund, the cash amount thereof,
net of any expenses incurred in the collection thereof.



“Non-Excluded Taxes”: as defined in Section 2.12(a).



“Non-Recourse Debt”: Indebtedness (a) as to which none of Holdings, the Borrower nor
any of its Subsidiaries (other than the Non-Recourse Subsidiary that is the obligor on such
Indebtedness) (i) provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (ii) is directly or indirectly liable (as a
guarantor or otherwise), or (iii) constitutes the lender; (b) no default with respect to which
(including any rights that the holders thereof may have to take enforcement action against any
Non-Recourse Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness (other than the Obligations) of Holdings, the Borrower or any of its Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; (c) as to which the lenders thereunder will not have any
recourse to the Capital Stock or assets of Holdings, the Borrower or any of Subsidiaries (other
than the Non-Recourse Subsidiary that is the obligor on such Indebtedness); and (d) the Net Cash
Proceeds of which are used to finance the purchase of Property used in the business of the Borrower
and its Subsidiaries or improvements made to such Property.



“Non-Recourse Subsidiary”: any Subsidiary that incurs Non-Recourse Debt and that has
no material Property other than the Property that was purchased or improved with the proceeds of
such Non-Recourse Debt.



“Non-U.S. Lender”: as defined in Section 2.12(d).



“Notes”: the Revolving Credit Notes, the Swing Line Notes and the Term Loan Notes.



“Obligations”: the unpaid principal of and interest on (including, without
limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and
interest accruing after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the Loans, the Reimbursement
Obligations and all other obligations and liabilities of Holdings and the Borrower or any
Restricted Subsidiary to the Administrative Agent or to any Lender or any Qualified Counterparty,
whether direct or indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other
Loan Document, the Letters of Credit, any Specified Hedge Agreement or any other document made,
delivered or given in connection herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all
fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are
required to be paid by the Borrower pursuant hereto) or otherwise; provided, that (i)
obligations of the Borrower or any Restricted Subsidiary under any Specified Hedge Agreement shall
be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so
long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or
Guarantors effected in the manner permitted by this Agreement shall not require the consent of
holders of obligations under Specified Hedge Agreements.



“OH Facility”: the credit facility provided to Assisted Living pursuant to the
Financing Agreement, dated as of July 1, 1998, by and among Ohio Housing Finance Agency, Assisted
Living and PNC Bank, National Association, and the related indenture, reimbursement agreement and
related financing and collateral agreements and instruments.



“Omnicare”: Omnicare, Inc., a Delaware corporation.



“OR Facility”: the six credit facilities provided to Assisted Living or its
predecessors and affiliates by the State of Oregon, acting by and through the Oregon Housing and
Community Services Department, pursuant to Loan Agreements dated as of July 25, 1995, December 28,
1995, February 13, 1996, May 23, 1991, February 26, 1996, March 5, 1996, as amended, and the
related financing and collateral agreements and instruments.



“Other Taxes”: any and all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or from
the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.



“Parent”: Extendicare Inc., a Canadian limited company.



“Parent/Borrower Intercompany Loan”: the 6% senior unsecured loan due January 1, 2010
in the aggregate principal amount of $8,900,000 made by Parent to the Borrower.



“Parent Intercompany Loan”: the 6% senior unsecured loan due January 1, 2010 in the
aggregate principal amount of $55,000,000 made by Parent to Holdings in connection with the
Acquisition.



“Participant”: as defined in Section 10.6(b).



“Payment Office”: the office specified from time to time by the Administrative Agent
as its payment office by notice to the Borrower and the Lenders.



“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA (or any successor).



“Permitted Non-Recourse Debt”: Non-Recourse Debt permitted to be incurred by Section
7.2.



“Person”: an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.



“Plan”: at a particular time, any employee benefit plan that is covered by ERISA and
in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.



“Pro Forma Balance Sheet”: as defined in Section 4.1(a).



“Projections”: as defined in Section 6.2(c).



“Property”: any right or interest in or to property of any kind whatsoever, whether
real, personal or mixed and whether tangible or intangible, including, without limitation, Capital
Stock.



“Purchase Price Refund”: any amount received by Holdings, the Borrower or any
Restricted Subsidiary as a result of a purchase price adjustment or similar event in connection
with any acquisition of Property by Holdings, the Borrower or any Restricted Subsidiary.



“Qualified Counterparty”: with respect to any Specified Hedge Agreement, any
counterparty thereto that, at the time such Specified Hedge Agreement was entered into, was a
Lender or an affiliate of a Lender.



“Recovery Event”: any settlement of or payment in respect of any property or casualty
insurance claim or any condemnation proceeding relating to any asset of Holdings, the Borrower or
any of its Restricted Subsidiaries.



“Refunded Swing Line Loans”: as defined in Section 2.9(b).



“Refunding Date”: as defined in Section 2.7(c).



“Register”: as defined in Section 10.6(d).



“Regulation H”: Regulation H of the Board as in effect from time to time.



“Regulation U”: Regulation U of the Board as in effect from time to time.



“Reimbursement Obligation”: the obligation of the Borrower to reimburse each Issuing
Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit issued by such Issuing
Lender.



“Reinvestment Deferred Amount”: with respect to any Reinvestment Event, the aggregate
Net Cash Proceeds received by Holdings, the Borrower or any of its Restricted Subsidiaries in
connection therewith that are not applied to prepay the Term Loans or Revolving Credit Loans
pursuant to Section 2.12(b) as a result of the delivery of a Reinvestment Notice.



“Reinvestment Event”: any Asset Sale, Purchase Price Refund or Recovery Event in
respect of which the Borrower has delivered a Reinvestment Notice.



“Reinvestment Notice”: a written notice executed by a Responsible Officer stating
that no Default or Event of Default has occurred and is continuing and that the Borrower (directly
or indirectly through a Restricted Subsidiary) intends and expects to use all or a specified
portion of the Net Cash Proceeds of an Asset Sale, Purchase Price Refund or Recovery Event to
acquire assets (other than inventory) useful in its business.



“Reinvestment Prepayment Amount”: with respect to any Reinvestment Event, the
Reinvestment Deferred Amount relating thereto less any amount expended prior to the
relevant Reinvestment Prepayment Date to acquire assets (other than inventory) useful in the
business of the Borrower and its Restricted Subsidiaries.



“Reinvestment Prepayment Date”: with respect to any Reinvestment Event, the earlier
of (a) the date occurring one year after such Reinvestment Event and (b) the date on which the
Borrower shall have determined not to, or shall have otherwise ceased to, acquire assets (other
than inventory) useful in the business of the Borrower and its Restricted Subsidiaries with all or
any portion of the relevant Reinvestment Deferred Amount.



“Related Fund”: with respect to any Lender, any fund that (a) invests in commercial
loans and (b) is managed or advised by the same investment advisor as such Lender, by such Lender
or an Affiliate of such Lender.



“Reorganization”: with respect to any Multiemployer Plan, the condition that such
plan is in reorganization within the meaning of Section 4241 of ERISA.



“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other
than those events as to which the thirty day notice period is waived under subsections .27, .28,
        .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.



“Required Lenders”: at any time, the holders of more than 66-2/3% of (a) until the
Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate unpaid principal
amount of the Term Loans then outstanding and (ii) the Total Revolving Credit Commitments then in
effect or, if the Revolving Credit Commitments have been terminated, the Total Revolving Extensions
of Credit then outstanding.



“Required Prepayment Lenders”: the Majority Facility Lenders in respect of each
Facility.



“Requirement of Law”: as to any Person, the Certificate of Incorporation and By-Laws
or other organizational or governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.



“Responsible Officer”: the chief executive officer, senior vice president, vice
president or chief financial officer of the Borrower, but in any event, with respect to financial
matters, the chief financial officer of the Borrower.



“Restricted Payments”: as defined in Section 7.6.



“Restricted Subsidiary”: any Subsidiary other than an Unrestricted Subsidiary.



“Revolving Credit Commitment”: as to any Lender, the obligation of such Lender, if
any, to make Revolving Credit Loans and participate in Swing Line Loans and Letters of Credit, in
an aggregate principal and/or face amount not to exceed the amount set forth under the heading
“Revolving Credit Commitment” on the Lender Addendum delivered by such Lender, or, as the case may
be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the
same may be changed from time to time pursuant to the terms hereof. The original aggregate amount
of the Total Revolving Credit Commitments is $114,000,000.



“Revolving Credit Commitment Period”: the period from and including the Closing Date
to the Revolving Credit Termination Date.



“Revolving Credit Facility”: as defined in the definition of “Facility” in this
Section 1.1.



“Revolving Credit Lender”: each Lender that has a Revolving Credit Commitment or that
is the holder of Revolving Credit Loans.



“Revolving Credit Loans”: as defined in Section 2.4(a).



“Revolving Credit Note”: as defined in Section 2.8(e).



“Revolving Credit Percentage”: as to any Revolving Credit Lender at any time, the
percentage which such Lender’s Revolving Credit Commitment then constitutes of the Total Revolving
Credit Commitments (or, at any time after the Revolving Credit Commitments shall have expired or
terminated, the percentage which the aggregate amount of such Lender’s Revolving Extensions of
Credit then outstanding constitutes of the amount of the Total Revolving Extensions of Credit then
outstanding).



“Revolving Credit Termination Date”: July 31, 2010.



“Revolving Extensions of Credit”: as to any Revolving Credit Lender at any time, an
amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by
such Lender then outstanding, (b) the aggregate amount of such Lender’s participating interests in
the L/C Obligations then outstanding (or, in the case of each Issuing Lender, such Issuing Lender’s
interest remaining in such L/C Obligations after giving effect to the grant of participating
interests therein to the other Lenders pursuant to Section 3.4) and (c) such Lender’s Revolving
Credit Percentage of the aggregate principal amount of Swing Line Loans then outstanding (or, in
the case of the Swing Line Lender, such Lender’s interest remaining in such Swing Line Loans after
giving effect to the grant of participating interests therein to the other Lenders pursuant to
Section 2.7).



“SEC”: the Securities and Exchange Commission (or successors thereto or an analogous
Governmental Authority).



“Secured Parties”: as defined in the Guarantee and Collateral Agreement.



“Securities Account”: each “securities account” (as defined in Section 8-501 of the
New York Uniform Commercial Code) in respect of which the Borrower or any of its Subsidiaries
(other than any Excluded Foreign Subsidiary or any Unrestricted Subsidiary) is the holder of the
securities entitlements carried in such securities account.



“Security Documents”: the collective reference to the Guarantee and Collateral
Agreement, the Control Agreements, the Mortgages and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any Property of any Person to secure the
obligations and liabilities of any Loan Party under any Loan Document.



“Senior Note Indenture”: the Indenture entered into by the Borrower in connection
with the issuance of the Senior Notes, together with all instruments and other agreements entered
into by the Borrower or such Subsidiaries in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with Section 7.9.



“Senior Notes”: the Borrower’s unsecured 9.50% Senior Notes, due 2010, in the
aggregate principal amount of $150,000,000.



“Senior Subordinated Note Indenture”: the Indenture entered into by the Borrower in
connection with the issuance of the Senior Subordinated Notes, together with all instruments and
other agreements entered into by the Borrower or such Subsidiaries in connection therewith, as the
same may be amended, supplemented or otherwise modified from time to time in accordance with
Section 7.9.



“Senior Subordinated Notes”: the Borrower’s 6?% Senior Subordinated Notes, due 2014,
in the aggregate principal amount of $125,000,000.



“Single Employer Plan”: any Plan that is covered by Title IV of ERISA, but which is
not a Multiemployer Plan.



“S&P”: as defined in the definition of “Cash Equivalents” in this Section 1.1.



“Solvent”: with respect to any Person, as of any date of determination, (a) the
amount of the “present fair saleable value” of the assets of such Person will, as of such date,
exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as
such quoted terms are determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of
such Person will, as of such date, be greater than the amount that will be required to pay the
liability of such Person on its debts as such debts become absolute and matured, (c) such Person
will not have, as of such date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For purposes of this
definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to
payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.



“Specified Change of Control”: a “Change of Control”, or like event, as defined in
the Senior Subordinated Note Indenture or in the Senior Note Indenture.



“Specified Hedge Agreement”: any Hedge Agreement entered into by (a) the Borrower or
any of its Restricted Subsidiaries and (b) any Person that, at the time such Hedge Agreement is
entered into, is a Qualified Counterparty.



“Subsidiary”: as to any Person, a corporation, partnership, limited liability company
or other entity of which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.



“Subsidiary Guarantor”: each Material Subsidiary of the Borrower other than any
Excluded Foreign Subsidiary and any Unrestricted Subsidiary.



“Swing Line Commitment”: the obligation of the Swing Line Lender to make Swing Line
Loans pursuant to Section 2.6 in an aggregate principal amount at any one time outstanding not to
exceed $10,000,000.



“Swing Line Lender”: Lehman Commercial Paper Inc., in its capacity as the lender of
Swing Line Loans.



“Swing Line Loans”: as defined in Section 2.6(a).



“Swing Line Note”: as defined in Section 2.8(e).



“Swing Line Participation Amount”: as defined in Section 2.7(c).



“Term Loan”: as defined in Section 2.1.



“Term Loan Commitment”: as to any Lender, the obligation of such Lender, if any, to
make a Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth
under the heading “Term Loan Commitment” opposite such Lender’s name on Schedule 1 to the Lender
Addendum delivered by such Lender or, as the case may be, in the Assignment and Acceptance pursuant
to which such Lender became a party hereto, as the same may be changed from time to time pursuant
to the terms hereof.. The original aggregate amount of the Term Loan Commitments is $86,000,000.



“Term Loan Facility”: as defined in the definition of “Facility” in this Section 1.1.



“Term Loan Lender”: each Lender that has a Term Loan Commitment or is the holder of a
Term Loan.



“Term Loan Note”: as defined in Section 2.8(e).



“Term Loan Percentage”: as to any Term Loan Lender at any time, the percentage which
such Lender’s Term Loan Commitment then constitutes of the aggregate Term Loan Commitments (or, at
any time after the Closing Date, the percentage which the aggregate principal amount of such
Lender’s Term Loans then outstanding constitutes of the aggregate principal amount of the Term
Loans then outstanding).



“Total Revolving Credit Commitments”: at any time, the aggregate amount of the
Revolving Credit Commitments then in effect.



“Total Revolving Extensions of Credit”: at any time, the aggregate amount of the
Revolving Extensions of Credit of the Revolving Credit Lenders outstanding at such time.



“Transferee”: as defined in Section 10.14.



“Transferred Properties”: the collective reference to (a) all of the Borrower’s Texas
nursing home operations (seventeen nursing homes with capacity of 1,421 residents) transferred to
affiliates of Senior Health Properties-Texas, Inc. and (b) all of the Borrower’s Florida facilities
(32 facilities with 3,427 beds) disposed of or leased through a series of transactions, including
fifteen facilities transferred to Greystone Tribeca Acquisition LLC, nine facilities leased and
subsequently sold to Tandem Health Care, Inc. and six facilities leased to Senior Health
Properties-South, Inc.



“Type”: as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.



“Unrestricted Subsidiary”: Assisted Living and each of its direct and indirect
Subsidiaries other than ALC Properties II, Inc. and Texas ALC II, Inc.; provided that upon
the termination of the AL Debt Facilities pursuant to Section 6.14, Assisted Living shall no longer
be an Unrestricted Subsidiary and shall be considered a Restricted Subsidiary for purposes of the
Loan Documents; provided, further that upon the Administrative Agent’s receipt from
time to time of written designation by the Borrower of one or more direct or indirect Subsidiaries
of Assisted Living as Restricted Subsidiaries, together with an Assumption Agreement in the form of
Annex I to the Guaranty and Collateral Agreement executed and delivered by an authorized officer of
such Subsidiary(ies), such Subsidiary(ies) shall be considered Restricted Subsidiaries for purposes
of the Loan Documents.



“Unused Restricted Payment Amount”: in any fiscal year, the amount equal to
$25,000,000 minus the amount of Restricted Payments made in such year.



“WA Facility”: the credit facility provided to Assisted Living pursuant to the
Mortgage Loan Origination and Financing Agreement, dated as of November 1, 1996, by and among the
Washington State Housing Finance Commission, U.S. Bank of Washington, National Association,
Assisted Living Concepts, Inc. and Norwest Bank Minnesota, National Association, and the related
indenture, reimbursement agreement and and related financing and collateral agreements and
instruments.



“Wholly Owned Subsidiary”: as to any Person, any other Person all of the Capital
Stock of which (other than directors’ qualifying shares required by law) is owned by such Person
directly and/or through other Wholly Owned Subsidiaries.



“Wholly Owned Subsidiary Guarantor”: any Subsidiary Guarantor that is a Wholly Owned
Subsidiary of the Borrower.



1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms
defined in this Agreement shall have the defined meanings when used in the other Loan Documents or
any certificate or other document made or delivered pursuant hereto or thereto.



(b) As used herein and in the other Loan Documents, and any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 and accounting
terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.



(c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.



(d) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.



(e) All calculations of financial ratios set forth in Section 7.1 and the calculation of the
Consolidated Senior Leverage Ratio for purposes of determining the Applicable Margin shall be
calculated to the same number of decimal places as the relevant ratios are expressed in and shall
be rounded upward if the number in the decimal place immediately following the last calculated
decimal place is five or greater. For example, if the relevant ratio is to be calculated to the
hundredth decimal place and the calculation of the ratio is 5.126, the ratio will be rounded up to
5.13.



SECTION 2. AMOUNT AND TERMS OF COMMITMENTS




2.1 Term Loan Commitments. Subject to the terms and conditions hereof, the Term Loan
Lenders severally agree to make term loans (each, a “Term Loan”) to the Borrower on the
Closing Date in an amount for each Term Loan Lender not to exceed the amount of the Term Loan
Commitment of such Lender. The Term Loans may from time to time be Eurodollar Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with
Sections 2.2 and 2.13.



2.2 Procedure for Term Loan Borrowing. The Borrower shall deliver to the
Administrative Agent a Borrowing Notice (which Borrowing Notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the
anticipated Closing Date) requesting that the Term Loan Lenders make the Term Loans on the Closing
Date. The Term Loans made on the Closing Date shall initially be Base Rate Loans. Upon receipt of
such Borrowing Notice the Administrative Agent shall promptly notify each Term Loan Lender thereof.
Not later than 12:00 Noon, New York City time, on the Closing Date each Term Loan Lender shall
make available to the Administrative Agent at the Funding Office an amount in immediately available
funds equal to the Term Loan or Term Loans to be made by such Lender. The Administrative Agent
shall make available to the Borrower the aggregate of the amounts made available to the
Administrative Agent by the Term Loan Lenders, in like funds as received by the Administrative
Agent.



2.3 Repayment of Term Loans. The Term Loan of each Term Loan Lender shall mature in
20 consecutive quarterly installments, commencing on September 30, 2005, each of which shall be in
an amount equal to such Lender’s Term Loan Percentage multiplied by the percentage
set forth below opposite such installment of the aggregate amount of the Term Loans made on the
Closing Date:



	 	 	 	 	 
	Installment	 	Percentage
	September 30, 2005

	 	 	0.25	%
	 
	 	 	 	 
	December 31, 2005

	 	 	0.25	%
	 
	 	 	 	 
	March 31, 2006

	 	 	0.25	%
	 
	 	 	 	 
	June 30, 2006

	 	 	0.25	%
	 
	 	 	 	 
	September 30, 2006

	 	 	0.25	%
	 
	 	 	 	 
	December 31, 2006

	 	 	0.25	%
	 
	 	 	 	 
	March 31, 2007

	 	 	0.25	%
	 
	 	 	 	 
	June 30, 2007

	 	 	0.25	%
	 
	 	 	 	 
	September 30, 2007

	 	 	0.25	%
	 
	 	 	 	 
	December 31, 2007

	 	 	0.25	%
	 
	 	 	 	 
	March 31, 2008

	 	 	0.25	%
	 
	 	 	 	 
	June 30, 2008

	 	 	0.25	%
	 
	 	 	 	 
	September 30, 2008

	 	 	0.25	%
	 
	 	 	 	 
	December 31, 2008

	 	 	0.25	%
	 
	 	 	 	 
	March 31, 2009

	 	 	0.25	%
	 
	 	 	 	 
	June 30, 2009

	 	 	0.25	%
	 
	 	 	 	 
	September 30, 2009

	 	 	24.00 	%
	 
	 	 	 	 
	December 31, 2009

	 	 	24.00 	%
	 
	 	 	 	 
	March 31, 2010

	 	 	24.00 	%
	 
	 	 	 	 
	July 31, 2010

	 	 	24.00 	%






2.4 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, the
Revolving Credit Lenders severally agree to make revolving credit loans (“Revolving Credit
Loans”) to the Borrower from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding for each Revolving Credit Lender which, when
added to such Lender’s Revolving Credit Percentage of the sum of (i) the L/C Obligations then
outstanding and (ii) the aggregate principal amount of the Swing Line Loans then outstanding (other
than Swing Line Loans being repaid with the proceeds of such Revolving Credit Loans), does not
exceed the amount of such Lender’s Revolving Credit Commitment. During the Revolving Credit
Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof. The Revolving Credit Loans may from time to time be Eurodollar Loans or Base
Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance
with Sections 2.5 and 2.13, provided that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date.



(b) Pursuant to the Existing Credit Agreement, the Existing Lenders made Existing Revolving
Credit Loans to the Borrower; from and after the Closing Date, any Existing Revolving Credit Loans
outstanding on the Closing Date shall constitute Loans under this Agreement until repaid in
accordance with this Agreement.



(c) The Borrower shall repay all outstanding Revolving Credit Loans on the Revolving Credit
Termination Date (or on such earlier date on which the Loans become due and payable pursuant to
Section 8).



2.5 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the
Revolving Credit Commitments on any Business Day during the Revolving Credit Commitment Period,
provided that the Borrower shall deliver to the Administrative Agent a Borrowing Notice
(which Borrowing Notice must be received by the Administrative Agent prior to (a) 12:00 Noon, New
York City time, three Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, or (b) 1:00 p.m., New York City time, one Business Day prior to the requested
Borrowing Date, in the case of Base Rate Loans). Each borrowing of Revolving Credit Loans under
the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans,
$1,000,000 or a whole multiple thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$3,000,000 or a whole multiple of $1,000,000 in excess thereof; provided, that the Swing
Line Lender may request, on behalf of the Borrower, borrowings of Base Rate Loans under the
Revolving Credit Commitments in other amounts pursuant to Section 2.7. Upon receipt of any such
Borrowing Notice from the Borrower, the Administrative Agent shall promptly notify each Revolving
Credit Lender thereof. Each Revolving Credit Lender will make its Revolving Credit Percentage of
the amount of each borrowing of Revolving Credit Loans available to the Administrative Agent for
the account of the Borrower at the Funding Office prior to 1:00 p.m., New York City time, on the
Borrowing Date requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in
like funds as received by the Administrative Agent.



2.6 Swing Line Commitment. (a) Subject to the terms and conditions hereof, the Swing
Line Lender agrees that, during the Revolving Credit Commitment Period, it will make available to
the Borrower in the form of swing line loans (“Swing Line Loans”) a portion of the credit
otherwise available to the Borrower under the Revolving Credit Commitments; provided that
(i) the aggregate principal amount of Swing Line Loans outstanding at any time shall not exceed the
Swing Line Commitment then in effect (notwithstanding that the Swing Line Loans outstanding at any
time, when aggregated with the Swing Line Lender’s other outstanding Revolving Credit Loans
hereunder, may exceed the Swing Line Commitment then in effect or such Swing Line Lender’s
Revolving Credit Commitment then in effect) and (ii) the Borrower shall not request, and the Swing
Line Lender shall not make, any Swing Line Loan if, after giving effect to the making of such Swing
Line Loan, the aggregate amount of the Available Revolving Credit Commitments would be less than
zero. During the Revolving Credit Commitment Period, the Borrower may use the Swing Line Commitment
by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof.
Swing Line Loans shall be Base Rate Loans only.



(b) The Borrower shall repay all outstanding Swing Line Loans on the Revolving Credit
Termination Date (or on such earlier date on which the Loans become due and payable pursuant to
Section 8).



2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans. (a) The
Borrower may borrow under the Swing Line Commitment on any Business Day during the Revolving Credit
Commitment Period, provided, the Borrower shall give the Swing Line Lender irrevocable
telephonic notice confirmed promptly in writing (which telephonic notice must be received by the
Swing Line Lender not later than 12:00 P.M., New York City time, on the proposed Borrowing Date),
specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date. Each borrowing
under the Swing Line Commitment shall be in an amount equal to $500,000 or a whole multiple of
$100,000 in excess thereof. Not later than 2:00 P.M., New York City time, on the Borrowing Date
specified in the borrowing notice in respect of any Swing Line Loan, the Swing Line Lender shall
make available to the Administrative Agent at the Funding Office an amount in immediately available
funds equal to the amount of such Swing Line Loan. The Administrative Agent shall make the proceeds
of such Swing Line Loan available to the Borrower on such Borrowing Date in like funds as received
by the Administrative Agent.



(b) The Swing Line Lender, at any time and from time to time in its sole and absolute
discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender
to act on its behalf), on one Business Day’s notice given by the Swing Line Lender no later than
12:00 Noon, New York City time, request each Revolving Credit Lender to make, and each Revolving
Credit Lender hereby agrees to make, a Revolving Credit Loan (which shall initially be a Base Rate
Loan), in an amount equal to such Revolving Credit Lender’s Revolving Credit Percentage of the
aggregate amount of the Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on
the date of such notice, to repay the Swing Line Lender. Each Revolving Credit Lender shall make
the amount of such Revolving Credit Loan available to the Administrative Agent at the Funding
Office in immediately available funds, not later than 10:00 A.M., New York City time, one Business
Day after the date of such notice. The proceeds of such Revolving Credit Loans shall be made
immediately available by the Administrative Agent to the Swing Line Lender for application by the
Swing Line Lender to the repayment of the Refunded Swing Line Loans.



(c) If prior to the time a Revolving Credit Loan would have otherwise been made pursuant to
Section 2.7(b), one of the events described in Section 8(f) shall have occurred and be continuing
with respect to the Borrower, or if for any other reason, as determined by the Swing Line Lender in
its sole discretion, Revolving Credit Loans may not be made as contemplated by Section 2.7(b), each
Revolving Credit Lender shall, on the date such Revolving Credit Loan was to have been made
pursuant to the notice referred to in Section 2.7(b) (the “Refunding Date”), purchase for
cash an undivided participating interest in the then outstanding Swing Line Loans by paying to the
Swing Line Lender an amount (the “Swing Line Participation Amount”) equal to (i)
such Revolving Credit Lender’s Revolving Credit Percentage times (ii) the sum of the
aggregate principal amount of Swing Line Loans then outstanding which were to have been repaid with
such Revolving Credit Loans.



(d) Whenever, at any time after the Swing Line Lender has received from any Revolving Credit
Lender such Lender’s Swing Line Participation Amount, the Swing Line Lender receives any payment on
account of the Swing Line Loans, the Swing Line Lender will distribute to such Lender its Swing
Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender’s participating interest was outstanding and funded and, in
the case of principal and interest payments, to reflect such Lender’s pro rata
portion of such payment if such payment is not sufficient to pay the principal of and interest on
all Swing Line Loans then due); provided, however, that in the event that such
payment received by the Swing Line Lender is required to be returned, such Revolving Credit Lender
will return to the Swing Line Lender any portion thereof previously distributed to it by the Swing
Line Lender.



(e) Each Revolving Credit Lender’s obligation to make the Loans referred to in Section 2.7(b)
and to purchase participating interests pursuant to Section 2.7(c) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without limitation, (i) any
setoff, counterclaim, recoupment, defense or other right which such Revolving Credit Lender or the
Borrower may have against the Swing Line Lender, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure
to satisfy any of the other conditions specified in Section 5; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other
Loan Document by the Borrower, any other Loan Party or any other Revolving Credit Lender; or (v)
any other circumstance, happening or event whatsoever, whether or not similar to any of the
foregoing.



2.8 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of the appropriate Revolving Credit
Lender or Term Loan Lender, as the case may be, (i) the then unpaid principal amount of each
Revolving Credit Loan of such Revolving Credit Lender on the Revolving Credit Termination Date (or
on such earlier date on which the Loans become due and payable pursuant to Section 8), (ii) the
then unpaid principal amount of each Swing Line Loan of such Swing Line Lender on the Revolving
Credit Termination Date (or such earlier date on which the Loans become due and payable pursuant to
Section 8) and (iii) the then unpaid principal amount of each Term Loan of such Term Lender in
installments according to the amortization schedule set forth in Section 2.3 (or on such earlier
date on which the Loans become due and payable pursuant to Section 8). The Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding
from the date hereof until payment in full thereof at the rates per annum, and on the dates, set
forth in Section 2.15.



(b) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from
time to time, including the amounts of principal and interest payable and paid to such Lender from
time to time under this Agreement.



(c) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant
to Section 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the
amount of each Loan made hereunder and any Note evidencing such Loan, the Type of such Loan and
each Interest Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the
amount of any sum received by the Administrative Agent hereunder from the Borrower and each
Lender’s share thereof.



(d) The entries made in the Register and the accounts of each Lender maintained pursuant to
Section 2.8(b) shall, to the extent permitted by applicable law, be prima facie
evidence of the existence and amounts of the obligations of the Borrower therein recorded;
provided, however, that the failure of any Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by
such Lender in accordance with the terms of this Agreement.



(e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the
Borrower will promptly execute and deliver to such Lender a promissory note of the Borrower
evidencing the Revolving Credit Loans, Swing Line Loans or Term Loans of such Lender, as the case
may be, substantially in the form of Exhibit G-1, G-2 or G-3, respectively (a “Revolving Credit
Note”, “Swing Line Note” and “Term Loan Note”, respectively) with appropriate
insertions as to date and principal amount; provided, that delivery of Term Loan Notes and
Revolving Credit Notes shall not be a condition precedent to the occurrence of the Closing Date or
the making of the Loans on the Closing Date.



2.9 Commitment Fees, etc. (a) The Borrower agrees to pay to the Administrative Agent
for the account of each Revolving Credit Lender a commitment fee for the period from and including
the Closing Date to the last day of the Revolving Credit Commitment Period, computed at the rate of
0.50% per annum on the average daily amount of the Available Revolving Credit Commitment of such
Lender during the period for which payment is made, payable quarterly in arrears on the last day of
each March, June, September and December and on the Revolving Credit Termination Date, commencing
on the first of such dates to occur after the date hereof.



(b) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the
dates from time to time agreed to in writing by the Borrower and the Administrative Agent.



2.10 Termination or Reduction of Revolving Credit Commitments. The Borrower shall
have the right, upon not less than three Business Days’ notice to the Administrative Agent, to
terminate the Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of
the Revolving Credit Commitments; provided that no such termination or reduction of
Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans and Swing Line Loans made, or terminations or expirations
of Letters of Credit occurring, on the effective date thereof, the Total Revolving Extensions of
Credit would exceed the Total Revolving Credit Commitments. Any such reduction shall be in an
amount equal to (i) $1,000,000, or a whole multiple thereof or (ii) the then aggregate Available
Revolving Credit Commitments, and shall reduce permanently the Revolving Credit Commitments then in
effect.



2.11 Optional Prepayments. The Borrower may at any time and from time to time prepay
the Loans, in whole or in part, without premium or penalty (except as otherwise provided herein),
upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior
thereto in the case of Eurodollar Loans and no later than 11:00 a.m. on the date of prepayment in
the case of Base Rate Loans, which notice shall specify the date and amount of such prepayment,
whether such prepayment is of Term Loans or Revolving Credit Loans, and whether such prepayment is
of Eurodollar Loans or Base Rate Loans; provided, that (i) if a Eurodollar Loan is prepaid
on any day other than the last day of the Interest Period applicable thereto, the Borrower shall
also pay any amounts owing pursuant to Section 2.21 and (ii) no prior notice is required for the
prepayment of Swing Line Loans. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein, together with (except in the
case of Revolving Credit Loans that are Base Rate Loans and Swing Line Loans) accrued interest to
such date on the amount prepaid. Partial prepayments of Term Loans and Revolving Credit Loans
shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof or the
aggregate principal amount of the Loans, or the applicable Eurodollar Tranche thereof, then
outstanding. Partial prepayments of Swing Line Loans shall be in an aggregate principal amount of
$100,000 or a whole multiple thereof.



2.12 Mandatory Prepayments. (a) Unless the Required Prepayment Lenders shall
otherwise agree, if any Indebtedness shall be incurred by Holdings, the Borrower or any of its
Restricted Subsidiaries (excluding any Indebtedness incurred in accordance with Section 7.2 as in
effect on the date of this Agreement), then on the date of such incurrence, the Term Loans or
Revolving Credit Loans shall be prepaid (without any automatic reduction of Revolving Credit
Commitments), by an amount equal to the amount of the Net Cash Proceeds of such incurrence, as set
forth in Section 2.12(c). The provisions of this Section do not constitute a consent to the
incurrence of any Indebtedness by Holdings, the Borrower or any of its Restricted Subsidiaries.



(b) Unless the Required Prepayment Lenders shall otherwise agree, if on any date Holdings, the
Borrower or any of its Restricted Subsidiaries shall receive Net Cash Proceeds from any Asset Sale,
Purchase Price Refund or Recovery Event then, unless a Reinvestment Notice shall be delivered in
respect thereof, on the date of receipt by Holdings, the Borrower or any of its Restricted
Subsidiaries of such Net Cash Proceeds, the Term Loans or Revolving Credit Loans shall be prepaid
(without any automatic reduction of Revolving Credit Commitments) by an amount equal to the amount
of such Net Cash Proceeds; provided, that, notwithstanding the foregoing, (i) the aggregate
Net Cash Proceeds of Asset Sales and Recovery Events that may be excluded from the foregoing
requirement pursuant to a Reinvestment Notice shall not exceed $20,000,000 in any fiscal year of
the Borrower and (ii) on each Reinvestment Prepayment Date the Term Loans or Revolving Credit Loans
shall be prepaid (without any automatic reduction of Revolving Credit Commitments) by an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event, as set
forth in Section 2.12(c). The provisions of this Section do not constitute a consent to the
consummation of any Disposition not permitted by Section 7.5.



(c) Amounts to be applied in connection with prepayments made pursuant to this Section shall
be applied, first, to the prepayment of the Term Loans and, second, to the
prepayment of the Revolving Credit Loans.



2.13 Conversion and Continuation Options. (a) The Borrower may elect from time to
time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two
Business Days’ prior irrevocable notice of such election, provided that any such conversion
of Eurodollar Loans may be made only on the last day of an Interest Period with respect thereto.
The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days’ prior irrevocable notice of such election
(which notice shall specify the length of the initial Interest Period therefor), provided
that no Base Rate Loan under a particular Facility may be converted into a Eurodollar Loan (i) when
any Event of Default has occurred and is continuing and the Administrative Agent has, or the
Majority Facility Lenders in respect of such Facility have, determined in its or their sole
discretion not to permit such conversions or (ii) after the date that is one month prior to the
final scheduled termination or maturity date of such Facility. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.



(b) The Borrower may elect to continue any Eurodollar Loan as such upon the expiration of the
then current Interest Period with respect thereto by giving irrevocable notice to the
Administrative Agent at least three Business Days’ prior to such election, in accordance with the
applicable provisions of the term “Interest Period” set forth in Section 1.1, of the length of the
next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan under
a particular Facility may be continued as such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such
Facility have, determined in its or their sole discretion not to permit such continuations or (ii)
after the date that is one month prior to the final scheduled termination or maturity date of such
Facility, and provided, further, that if the Borrower shall fail to give any
required notice as described above in this paragraph or if such continuation is not permitted
pursuant to the preceding proviso, such Loans shall be converted automatically to Base Rate Loans
on the last day of such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.



2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches. Notwithstanding
anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional
prepayments of Eurodollar Loans and all selections of Interest Periods shall be in such amounts and
be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate
principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to
$3,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no more than eight
Eurodollar Tranches shall be outstanding at any one time.



2.15 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest
for each day during each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such day plus the Applicable Margin in effect for such day.



(b) Each Base Rate Loan shall bear interest for each day on which it is outstanding at a rate
per annum equal to the Base Rate in effect for such day plus the Applicable Margin in effect for
such day.



(c) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation
shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all
outstanding Loans and Reimbursement Obligations (whether or not overdue) (to the extent legally
permitted) shall bear interest at a rate per annum that is equal to (x) in the case of the Loans,
the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this
Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate
Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a portion of any interest
payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then
applicable to Base Rate Loans under the relevant Facility plus 2% (or, in the case of any such
other amounts that do not relate to a particular Facility, the rate then applicable to Base Rate
Loans under the Revolving Credit Facility plus 2%), in each case, with respect to clauses (i) and
(ii) above, from the date of such non-payment until such amount is paid in full (after as well as
before judgment).



(d) Interest shall be payable in arrears on each Interest Payment Date, provided that
interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on
demand.



2.16 Computation of Interest and Fees. (a) Interest, fees, commissions payable
pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed,
except that, with respect to Base Rate Loans on which interest is calculated on the basis of the
Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case
may be) day year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any
change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency
Reserve Requirements shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such change in interest rate.



(b) Each determination of an interest rate by the Administrative Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the
absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver
to the Borrower a statement showing the quotations used by the Administrative Agent in determining
any interest rate pursuant to Section 2.15(a).



2.17 Inability to Determine Interest Rate. If prior to the first day of any Interest
Period:




(a) the Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period, or




(b) the Administrative Agent shall have received notice from the Majority Facility
Lenders in respect of the relevant Facility that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining their affected
Loans during such Interest Period,



the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the
relevant Lenders as soon as practicable thereafter. If such notice is given, (x) any Eurodollar
Loans under the relevant Facility requested to be made on the first day of such Interest Period
shall be made as Base Rate Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base
Rate Loans and (z) any outstanding Eurodollar Loans under the relevant Facility shall be converted,
on the last day of the then current Interest Period with respect thereto, to Base Rate Loans.
Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans under
the relevant Facility shall be made or continued as such, nor shall the Borrower have the right to
convert Loans under the relevant Facility to Eurodollar Loans.



2.18 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the
Lenders hereunder, each payment by the Borrower on account of any commitment fee or Letter of
Credit fee, and any reduction of the Revolving Credit Commitments of the Lenders, shall be made
pro rata according to the respective Term Loan Percentages or Revolving Credit
Percentages, as the case may be, of the relevant Lenders. Each payment of interest in respect of
the Loans and each payment in respect of fees payable hereunder shall be applied to the amounts of
such obligations owing to the Lenders pro rata according to the respective amounts
then due and owing to the Lenders.



(b) Each payment on account of principal of the Term Loans shall be allocated among the Term
Loan Lenders pro rata based on the principal amount of Term Loans held by the Term
Loan Lenders. Amounts prepaid on account of the Term Loans may not be reborrowed.



(c) Each payment (including each prepayment) by the Borrower on account of principal of the
Revolving Credit Loans shall be made pro rata according to the respective
outstanding principal amounts of the Revolving Credit Loans then held by the Revolving Lenders.
Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be
made to the Issuing Lender that issued such Letter of Credit for the account of such Issuing Lender
and the Revolving Credit Lenders, if any, which participated in such Letter of Credit pursuant to
Section 3.4(a).



(d) The application of any payment of Loans under any Facility (including optional and
mandatory prepayments) shall be made, first, to Base Rate Loans under such Facility and,
second, to Eurodollar Loans under such Facility. Each payment of the Loans (except in the
case of Revolving Credit Loans that are Base Rate Loans and Swing Line Loans) shall be accompanied
by accrued interest to the date of such payment on the amount paid.



(e) All payments (including prepayments) to be made by the Borrower hereunder, whether on
account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and
shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the relevant Lenders, at the Payment Office, in Dollars
and in immediately available funds. Any payment made by the Borrower after 12:00 Noon, New York
City time, on any Business Day shall be deemed to have been on the next following Business Day. The
Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like
funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes
due and payable on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next succeeding Business
Day unless the result of such extension would be to extend such payment into another calendar
month, in which event such payment shall be made on the immediately preceding Business Day. In the
case of any extension of any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.



(f) Unless the Administrative Agent shall have been notified in writing by any Lender prior to
a borrowing that such Lender will not make the amount that would constitute its share of such
borrowing available to the Administrative Agent, the Administrative Agent may assume that such
Lender is making such amount available to the Administrative Agent, and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If
such amount is not made available to the Administrative Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing
under this paragraph shall be conclusive in the absence of manifest error. If such Lender’s share
of such borrowing is not made available to the Administrative Agent by such Lender within three
Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the
relevant Facility, on demand, from the Borrower.



(g) Unless the Administrative Agent shall have been notified in writing by the Borrower prior
to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make
such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is
making such payment, and the Administrative Agent may, but shall not be required to, in reliance
upon such assumption, make available to the Lenders their respective pro rata
shares of a corresponding amount. If such payment is not made to the Administrative Agent by the
Borrower within three Business Days after such due date, the Administrative Agent shall be entitled
to recover, on demand, from each Lender to which any amount which was made available pursuant to
the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the
Administrative Agent or any Lender against the Borrower or the rights of the Borrower against any
Lender.



2.19 Requirements of Law. (a) If the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:




	 	(i)	 	shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by Section 2.20 and changes in the rate of
tax on the overall net income of such Lender);






	 	(ii)	 	shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender that is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or






	 	(iii)	 	shall impose on such Lender any other
condition;





and the result of any of the foregoing is to increase the cost to such Lender, by an amount which
such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar
Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative
Agent) of the event by reason of which it has become so entitled.



(b) If any Lender shall have determined that the adoption of or any change in any Requirement
of Law regarding capital adequacy or in the interpretation or application thereof or compliance by
such Lender or any corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental Authority made
subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender’s
or such corporation’s capital as a consequence of its obligations hereunder or under or in respect
of any Letter of Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration such Lender’s or
such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to the Borrower (with a copy
to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such corporation for such
reduction.



(c) A certificate setting forth in reasonable detail calculations as to any additional amounts
payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the
Borrower pursuant to this Section shall survive the termination of this Agreement and the payment
of the Loans and all other amounts payable hereunder.



2.20 Taxes. (a) All payments made by the Borrower under this Agreement shall be made
free and clear of, and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on any
Agent or any Lender as a result of a present or former connection between such Agent or such Lender
and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision
or taxing authority thereof or therein (other than any such connection arising solely from such
Agent’s or such Lender’s having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded
Taxes”) or any Other Taxes are required to be withheld from any amounts payable to any Agent or
any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the
extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes and
Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement; provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes
(i) that are attributable to such Lender’s failure to comply with the requirements of paragraph (d)
or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable
to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that
such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional
amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a).



(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority
in accordance with applicable law.



(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Administrative Agent for the account of the
relevant Agent or Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary evidence, the Borrower
shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that
may become payable by any Agent or any Lender as a result of any such failure. The agreements in
this Section shall survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.



(d) Each Lender (or Transferee) that is not a citizen or resident of the United States of
America, a corporation, partnership or other entity created or organized in or under the laws of
the United States of America (or any jurisdiction thereof), or any estate or trust that is subject
to federal income taxation regardless of the source of its income (a “Non-U.S. Lender”)
shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to
the Lender from which the related participation shall have been purchased) two copies of either
U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of “portfolio interest” a statement substantially in the form of Exhibit I
and a Form W-8BEN, or any subsequent versions thereof or successors thereto properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the Borrower under this Agreement and the other Loan
Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes
a party to this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver
such forms promptly upon the obsolescence or invalidity of any form previously delivered by such
Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines
that it is no longer in a position to provide any previously delivered certificate to the Borrower
(or any other form of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to
deliver.



(e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax
under the law of the jurisdiction in which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without withholding or at a
reduced rate, provided that such Lender is legally entitled to complete, execute and
deliver such documentation and in such Lender’s reasonable judgment such completion, execution or
submission would not materially prejudice the legal position of such Lender.



2.21 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each
Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of
(a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Loans after the Borrower has given a notice requesting the same in accordance with the provisions
of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has
given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a
prepayment or conversion of Eurodollar Loans on a day that is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such prepayment or of such
failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of
a failure to borrow, convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable rate of interest for such Loans provided for herein
(excluding, however, the Applicable Margin included therein, if any) over (ii) the amount
of interest (as reasonably determined by such Lender) that would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with leading banks in the
interbank Eurodollar market. A certificate setting forth in reasonable detail calculations as to
any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.



2.22 Illegality. Notwithstanding any other provision herein, if the adoption of or
any change in any Requirement of Law or in the interpretation or application thereof shall make it
unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a)
the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such
and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender’s
Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate
Loans on the respective last days of the then current Interest Periods with respect to such Loans
or within such earlier period as required by law. If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period with respect thereto,
the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section
2.21.



2.23 Change of Lending Office. Each Lender agrees that, upon the occurrence of any
event giving rise to the operation of Section 2.19, 2.20(a) or 2.22 with respect to such Lender, it
will, if requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans affected by such
event with the object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its
lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided,
further, that nothing in this Section shall affect or postpone any of the obligations of
any Borrower or the rights of any Lender pursuant to Section 2.19, 2.20(a) or 2.22.



2.24 Replacement of Lenders under Certain Circumstances. The Borrower shall be
permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to
Section 2.19 or 2.20 or gives a notice of illegality pursuant to Section 2.20 or (b) defaults in
its obligation to make Loans hereunder, with a replacement financial institution; provided that (i)
such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have
occurred and be continuing at the time of such replacement, (iii) prior to any such replacement,
such Lender shall have taken no action under Section 2.23 so as to eliminate the continued need for
payment of amounts owing pursuant to Section 2.19 or 2.20 or to eliminate the illegality referred
to in such notice of illegality given pursuant to Section 2.22, (iv) the replacement financial
institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or
prior to the date of replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.21 (as though Section 2.21 were applicable) if any Eurodollar Loan owing to such replaced
Lender shall be purchased other than on the last day of the Interest Period relating thereto, (vi)
the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to
the Administrative Agent, (vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 10.6 (provided that the Borrower shall be obligated to
pay the registration and processing fee referred to therein), (viii) the Borrower shall pay all
additional amounts (if any) required pursuant to Section 2.19 or 2.20, as the case may be, in
respect of any period prior to the date on which such replacement shall be consummated, and (ix)
any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the
Administrative Agent or any other Lender shall have against the replaced Lender.



2.25 Commitment Increases. (a) At any time after the Closing Date, provided
that no Event of Default shall have occurred and be continuing, the Borrower may request an
increase of the aggregate Commitments (which increase may be, at the Borrower’s option, in the form
of an increase in the Total Revolving Credit Commitments and/or Commitments to make additional Term
Loans) in an aggregate amount up to $15,000,000 by notice to the Administrative Agent in writing of
the amount (the “Offered Increase Amount”) of such proposed increase (such notice, a
“Commitment Increase Notice”). Any such Commitment Increase Notice must offer each Lender
under each Facility the opportunity to subscribe for its pro rata share of the increased
Commitments relating to such Facility; provided, that the Borrower may, with the consent of
the Administrative Agent (which consent shall not be unreasonably withheld or delayed), without
offering to each Lender the opportunity to subscribe for its pro rata share of the increased
Commitments, offer to any bank or other financial institution that is not an existing Lender the
opportunity to provide a new Commitment pursuant to paragraph (b) below. If any portion of the
increased Commitments offered to the Lenders as contemplated in the immediately preceding sentence
is not subscribed for by the Lenders, the Borrower may, with the consent of the Administrative
Agent as to any bank or financial institution that is not at such time a Lender (which consent
shall not be unreasonably withheld or delayed), offer to any existing Lender or to one or more
additional banks or financial institutions the opportunity to provide all or a portion of such
unsubscribed portion of the increased Commitments pursuant to paragraph (b) below.



(b) Any additional bank or financial institution that the Borrower selects to offer the
opportunity to provide any portion of the increased Commitments, and that elects to become a party
to this Agreement and provide a Commitment, shall execute a New Lender Supplement with the Borrower
and the Administrative Agent, substantially in the form of Exhibit L (a “New Lender
Supplement”), whereupon such bank or financial institution (a “New Lender”) shall
become a Lender for all purposes and to the same extent as if originally a party hereto and shall
be bound by and entitled to the benefits of this Agreement; provided that the Commitment of
any such New Lender shall be in a principal amount not less than $5,000,000.



(c) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant
to this Section 2.25 shall, in each case, execute a Commitment Increase Supplement with the
Borrower and the Administrative Agent, substantially in the form of Exhibit M (a “Commitment
Increase Supplement”), whereupon such Lender (an “Increasing Lender”) shall be bound by
and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as
so increased.



(d) The effectiveness of any New Lender Supplement or Commitment Increase Supplement shall be
contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrower
and legal opinions of counsel to the Borrower as the Administrative Agent shall reasonably request
with respect thereto



(e) Unless otherwise agreed by the Administrative Agent, on each closing date of an increase
in the Commitments, the Borrower shall borrow Loans from each Lender participating in the relevant
increase to the extent necessary to rebalance the outstanding Loans pro rata among
the Lenders in an amount determined by reference to the amount of each Type of Loan under each
Facility which would then have been outstanding from such Lender if it had been a Lender on the
Closing Date.



(f) Notwithstanding anything to the contrary in this Section 2.25, no Lender under either
Facility shall have any obligation to increase its Commitment under such Facility unless it agrees
to do so in its sole discretion.



SECTION 3. LETTERS OF CREDIT




3.1 L/C Commitment. (a) Prior to the Closing Date, the Issuing Lenders have issued
the Existing Letters of Credit under the Existing Credit Agreement which, from and after the
Closing Date, shall constitute Letters of Credit hereunder. Subject to the terms and conditions
hereof, each Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders
set forth in Section 3.4(a), agrees to issue letters of credit (the letters of credit issued on and
after the Closing Date pursuant to this Section 3, together with any Existing Letters of Credit,
collectively, the “Letters of Credit”) for the account of the Borrower on any Business Day
during the Revolving Credit Commitment Period in such form as may be approved from time to time by
such Issuing Lender; provided, that no Issuing Lender shall have any obligation to issue
any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed
the L/C Commitment or (ii) the aggregate amount of the Available Revolving Credit Commitments would
be less than zero. Each Letter of Credit shall (i) be in form and substance reasonably acceptable
to the Issuing Lender, (ii) be denominated in Dollars and (iii) expire no later than the earlier of
(x) the first anniversary of its date of issuance and (y) the date which is five Business Days
prior to the Revolving Credit Termination Date; provided that any Letter of Credit with a
one-year term may provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referred to in clause (y) above).



(b) No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder
if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed
any limits imposed by, any applicable Requirement of Law.



3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time
request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its
address for notices specified herein (with a copy to the Administrative Agent) an Application
therefor, completed to the satisfaction of such Issuing Lender, and such other certificates,
documents and other papers and information as such Issuing Lender may request. Upon receipt of any
Application, an Issuing Lender will process such Application and the certificates, documents and
other papers and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested thereby by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by
such Issuing Lender and the Borrower (but in no event shall any Issuing Lender be required to issue
any Letter of Credit earlier than three Business Days after its receipt of the Application therefor
and all such other certificates, documents and other papers and information relating thereto).
Promptly after issuance by an Issuing Lender of a Letter of Credit, such Issuing Lender shall
furnish a copy of such Letter of Credit to the Borrower. Each Issuing Lender shall promptly give
notice to the Administrative Agent of the issuance of each Letter of Credit issued by such Issuing
Lender (including the amount thereof).



3.3 Fees and Other Charges. (a) The Borrower will pay a fee on the aggregate
drawable amount of all outstanding Letters of Credit at a per annum rate equal to the Applicable
Margin then in effect with respect to Eurodollar Loans under the Revolving Credit Facility, which
fee shall be shared ratably among the Revolving Credit Lenders in accordance with their respective
Revolving Credit Percentages and shall be payable quarterly in arrears on each L/C Fee Payment Date
after the issuance date. In addition, the Borrower shall pay to the relevant Issuing Lender for
its own account a fronting fee on the aggregate drawable amount of all outstanding Letters of
Credit issued by it at a per annum rate agreed upon by the Borrower and such Issuing Lender, which
fee shall be payable quarterly in arrears on each L/C Fee Payment Date after the Issuance Date.



(b) In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender
for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender
in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of
Credit.



3.4 L/C Participations. (a) Effective on the date of issuance thereof, each Issuing
Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from each Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant’s own account and risk, an undivided
interest equal to such L/C Participant’s Revolving Credit Percentage in each Issuing Lender’s
obligations and rights under each Letter of Credit issued by such Issuing Lender hereunder and the
amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally
and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit
issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to such
Issuing Lender upon demand at such Issuing Lender’s address for notices specified herein an amount
equal to such L/C Participant’s Revolving Credit Percentage of the amount of such draft, or any
part thereof, that is not so reimbursed.



(b) If any amount required to be paid by any L/C Participant to an Issuing Lender pursuant to
Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender
under any Letter of Credit is paid to such Issuing Lender within three Business Days after the date
such payment is due, such L/C Participant shall pay to such Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate
during the period from and including the date such payment is required to the date on which such
payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of
which is the number of days that elapse during such period and the denominator of which is 360. If
any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made
available to such Issuing Lender by such L/C Participant within three Business Days after the date
such payment is due, such Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the rate per annum
applicable to Base Rate Loans under the Revolving Credit Facility. A certificate of such Issuing
Lender submitted to any L/C Participant with respect to any such amounts owing under this Section
shall be conclusive in the absence of manifest error.



(c) Whenever, at any time after an Issuing Lender has made payment under any Letter of Credit
and has received from any L/C Participant its pro rata share of such payment in
accordance with Section 3.4(a), such Issuing Lender receives any payment related to such Letter of
Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied
thereto by such Issuing Lender), or any payment of interest on account thereof, such Issuing Lender
will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by such Issuing
Lender shall be required to be returned by such Issuing Lender, such L/C Participant shall return
to such Issuing Lender the portion thereof previously distributed by such Issuing Lender to it.



3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse each
Issuing Lender, on each date on which such Issuing Lender notifies the Borrower of the date and
amount of a draft presented under any Letter of Credit and paid by such Issuing Lender, for the
amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by such Issuing Lender in connection with such payment (the amounts described in the
foregoing clauses (a) and (b) in respect of any drawing, collectively, the “Payment
Amount”). Each such payment shall be made to such Issuing Lender at its address for notices
specified herein in lawful money of the United States of America and in immediately available
funds. Interest shall be payable on each Payment Amount from the date of the applicable drawing
until payment in full at the rate set forth in (i) until the second Business Day following the date
of the applicable drawing, Section 2.15(b) and (ii) thereafter, Section 2.15(c). Each drawing
under any Letter of Credit shall (unless an event of the type described in clause (i) or (ii) of
Section 8(f) shall have occurred and be continuing with respect to the Borrower, in which case the
procedures specified in Section 3.4 for funding by L/C Participants shall apply) constitute a
request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 2.5 of Base
Rate Loans (or, at the option of the Administrative Agent and the Swing Line Lender in their sole
discretion, a borrowing pursuant to Section 2.7 of Swing Line Loans). The Borrowing Date with
respect to such borrowing shall be the first date on which a borrowing of Revolving Credit Loans
(or, if applicable, Swing Line Loans) could be made, pursuant to Section 2.5 (or, if applicable,
Section 2.7), if the Administrative Agent had received a notice of such borrowing at the time the
Administrative Agent receives notice from the relevant Issuing Lender of such drawing under such
Letter of Credit.



3.6 Obligations Absolute. The Borrower’s obligations under this Section 3 shall be
absolute and unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment that the Borrower may have or have had against any Issuing
Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with
each Issuing Lender that such Issuing Lender shall not be responsible for, and the Borrower’s
Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even though such documents
shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the
Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any message or advice,
however transmitted, in connection with any Letter of Credit, except for errors or omissions found
by a final and nonappealable decision of a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of such Issuing Lender. The Borrower agrees that any
action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit
issued by it or the related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the Uniform Commercial
Code of the State of New York, shall be binding on the Borrower and shall not result in any
liability of such Issuing Lender to the Borrower.



3.7 Letter of Credit Payments. If any draft shall be presented for payment under any
Letter of Credit, the relevant Issuing Lender shall promptly notify the Borrower of the date and
amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection
with any draft presented for payment under any Letter of Credit, in addition to any payment
obligation expressly provided for in such Letter of Credit issued by such Issuing Lender, shall be
limited to determining that the documents (including each draft) delivered under such Letter of
Credit in connection with such presentment appear on their face to be in conformity with such
Letter of Credit.



3.8 Applications. To the extent that any provision of any Application related to any
Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this
Section 3 shall apply.



SECTION 4. REPRESENTATIONS AND WARRANTIES




To induce the Agents and the Lenders to enter into this Agreement and to make the Loans and
issue or participate in the Letters of Credit, Holdings and the Borrower hereby jointly and
severally represent and warrant to each Agent and each Lender that:



4.1 Financial Condition. (a) The unaudited pro forma consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2004 and March
31, 2005 (including the notes thereto) (the “Pro Forma Balance Sheet”), copies of which
have heretofore been furnished to each Lender, has been prepared giving effect (as if such events
had occurred on such date) to (i) the Loans to be made on the Closing Date and the use of proceeds
thereof and (ii) the payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to the Borrower as of the
date of delivery thereof, and presents fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at December 31, 2004 and March
31, 2005, assuming that the events specified in the preceding sentence had actually occurred at
such date.



(b) The audited consolidated balance sheets of the Borrower as at December 31, 2003 and
December 31, 2004, and the related consolidated statements of income and of cash flows for the
fiscal years ended on such dates, reported on by and accompanied by an unqualified report from KPMG
LLP, present fairly the consolidated financial condition of the Borrower as at such date, and the
consolidated results of its operations and its consolidated cash flows for the respective fiscal
years then ended. The unaudited consolidated balance sheet of the Borrower as at March 31, 2005,
and the related unaudited consolidated statements of income and cash flows for the three-month
period ended on such date, present fairly the consolidated financial condition of the Borrower as
at such date, and the consolidated results of its operations and its consolidated cash flows for
the three-month period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved (except as approved by
the aforementioned firm of accountants and disclosed therein). The Borrower and its Subsidiaries
do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes,
or any long-term leases or unusual forward or long-term commitments, including, without limitation,
any interest rate or foreign currency swap or exchange transaction or other obligation in respect
of derivatives, that are not reflected in the most recent financial statements referred to in this
paragraph. During the period from December 31, 2004 to and including the date hereof there has
been no Disposition by the Borrower of any material part of its business or Property.



4.2 No Change. Since December 31, 2004 there has been no development or event that
has had or could reasonably be expected to have a Material Adverse Effect.



4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its
Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and the legal right,
to own and operate its Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or operation of
Property or the conduct of its business requires such qualification and (d) is in compliance with
all Requirements of Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.



4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has the
corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents
to which it is a party and, in the case of the Borrower, to borrow hereunder. Each Loan Party has
taken all necessary corporate or other action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the
borrowings on the terms and conditions of this Agreement. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or the execution, delivery, performance,
validity or enforceability of this Agreement or any of the other Loan Documents, except (i)
consents, authorizations, filings and notices described in Schedule 4.4, which consents,
authorizations, filings and notices have been obtained or made and are in full force and effect and
(ii) the filings referred to in Section 4.21. Each Loan Document has been duly executed and
delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes, and
each other Loan Document upon execution will constitute, a legal, valid and binding obligation of
each Loan Party that is a party thereto, enforceable against each such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally
and by general equitable principles (whether enforcement is sought by proceedings in equity or at
law).



4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the
other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of
the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of
Holdings, the Borrower or any of its Subsidiaries and will not result in, or require, the creation
or imposition of any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security
Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of
its Subsidiaries could reasonably be expected to have a Material Adverse Effect.



4.6 No Material Litigation. No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of Holdings or the
Borrower, threatened by or against Holdings, the Borrower or any of its Subsidiaries or against any
of their respective properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a
Material Adverse Effect.



4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any respect that could
reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.



4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries
has title in fee simple to, or a valid leasehold interest in, all its real property, and good title
to, or a valid leasehold interest in, all its other Property, and none of such Property is subject
to any Lien except as permitted by Section 7.3.



4.9 Intellectual Property. Holdings, the Borrower and each of its Subsidiaries owns,
or is licensed to use, all Intellectual Property necessary for the conduct of its business as
currently conducted. No material claim has been asserted and is pending by any Person challenging
or questioning the use of any Intellectual Property or the validity or effectiveness of any
Intellectual Property, nor does Holdings or the Borrower know of any valid basis for any such
claim. The use of Intellectual Property by Holdings, the Borrower and its Subsidiaries does not
infringe on the rights of any Person in any material respect.



4.10 Taxes. Each of Holdings, the Borrower and each of its Subsidiaries has filed or
caused to be filed all Federal, state and other material tax returns that are required to be filed
and has paid all taxes shown to be due and payable on said returns or on any assessments made
against it or any of its Property and all other taxes, fees or other charges imposed on it or any
of its Property by any Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its
Subsidiaries, as the case may be); and no tax Lien has been filed, and, to the knowledge of
Holdings and the Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge.



4.11 Federal Regulations. No part of the proceeds of any Loans will be used for
“purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted
terms under Regulation U as now and from time to time hereafter in effect or for any purpose that
violates the provisions of the Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1
referred to in Regulation U.



4.12 Labor Matters. There are no strikes or other labor disputes against Holdings, the
Borrower or any of its Subsidiaries pending or, to the knowledge of Holdings or the Borrower,
threatened that (individually or in the aggregate) could reasonably be expected to have a Material
Adverse Effect. Hours worked by and payment made to employees of Holdings, the Borrower and its
Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable
Requirement of Law dealing with such matters that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. All payments due from Holdings, the
Borrower or any of its Subsidiaries on account of employee health and welfare insurance that
(individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect
if not paid have been paid or accrued as a liability on the books of Holdings, the Borrower or the
relevant Subsidiary.



4.13 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency”
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the
five-year period prior to the date on which this representation is made or deemed made with respect
to any Plan, and each Plan has complied in all material respects with the applicable provisions of
ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of
the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a
material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to
result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled
Entity would become subject to any material liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is made or deemed made.
No such Multiemployer Plan is in Reorganization or Insolvent.



4.14 Investment Company Act; Other Regulations. No Loan Party is an “investment
company”, or a company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any
Requirement of Law (other than Regulation X of the Board) which limits its ability to incur
Indebtedness under this Agreement and the other Loan Documents.



4.15 Material Subsidiaries. (a) The Subsidiaries listed on Schedule 4.15 constitute
all the Material Subsidiaries of the Borrower as of the Closing Date. Schedule 4.15 sets forth as
of the Closing Date the name and jurisdiction of incorporation of each Material Subsidiary and, as
to each Material Subsidiary, the percentage of each class of Capital Stock of such Subsidiary owned
by each Loan Party and whether such Subsidiary is a Restricted Subsidiary or an Unrestricted
Subsidiary.



(b) As of the Closing Date, there are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to employees or
directors and directors’ qualifying shares) of any nature relating to any Capital Stock of
Holdings, the Borrower or any Subsidiary, except as disclosed on Schedule 4.15.



4.16 Use of Proceeds. The proceeds of the initial Loans shall be used to (1)
refinance the GECC Credit Facility, (2) refinance Existing Revolving Credit Loans and (3) pay
related fees and expenses in connection with the foregoing. The remaining proceeds of the Loans
and the Letters of Credit shall be used to refinance the AL Debt Facilities and for working capital
needs and general corporate purposes of the Borrower and its Subsidiaries.



4.17 Environmental Matters. Other than exceptions to any of the following that could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:



(a) The Borrower and its Subsidiaries: (i) are, and within the period of all applicable
statutes of limitation have been, in compliance with all applicable Environmental Laws; (ii) hold
all Environmental Permits (each of which is in full force and effect) required for any of their
current or intended operations or for any property owned, leased, or otherwise operated by any of
them; (iii) are, and within the period of all applicable statutes of limitation have been, in
compliance with all of their Environmental Permits; and (iv) reasonably believe that: each of
their Environmental Permits will be timely renewed and complied with, without material expense; any
additional Environmental Permits that may be required of any of them will be timely obtained and
complied with, without material expense; and compliance with any Environmental Law that is or is
expected to become applicable to any of them will be timely attained and maintained, without
material expense.



(b) Materials of Environmental Concern are not present at, on, under, in, or about any real
property now or formerly owned, leased or operated by the Borrower or any of its Subsidiaries, or
at any other location (including, without limitation, any location to which Materials of
Environmental Concern have been sent for re-use or recycling or for treatment, storage, or
disposal) which could reasonably be expected to (i) give rise to liability of the Borrower or any
of its Subsidiaries under any applicable Environmental Law or otherwise result in costs to the
Borrower or any of its Subsidiaries, or (ii) interfere with the Borrower’s or any of its
Subsidiaries’ continued operations, or (iii) impair the fair saleable value of any real property
owned or leased by the Borrower or any of its Subsidiaries.



(c) There is no judicial, administrative, or arbitral proceeding (including any notice of
violation or alleged violation) under or relating to any Environmental Law to which the Borrower or
any of its Subsidiaries is, or to the knowledge of the Borrower or any of its Subsidiaries will be,
named as a party that is pending or, to the knowledge of the Borrower or any of its Subsidiaries,
threatened.



(d) Neither the Borrower nor any of its Subsidiaries has received any written request for
information, or been notified that it is a potentially responsible party under or relating to the
federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or with respect to any Materials of Environmental Concern.



(e) Neither the Borrower nor any of its Subsidiaries has entered into or agreed to any consent
decree, order, or settlement or other agreement, or is subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral, or other forum for dispute resolution,
relating to compliance with or liability under any Environmental Law.



(f) Neither the Borrower nor any of its Subsidiaries has assumed or retained, by contract or
operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any
Environmental Law or with respect to any Material of Environmental Concern.



4.18 Compliance With Health Care Laws. Without limiting the generality of Section
4.3(c) or any other representation or warranty made herein, to the Borrower’s knowledge, the
healthcare facilities operated by the Borrower and its Subsidiaries, and each of its licensed
employees in the exercise of their respective duties on behalf of such facilities, is in compliance
with all applicable statutes, laws, ordinances, rules and regulations of any governmental authority
with respect to regulatory matters primarily relating to patient healthcare (including without
limitation Section 1128B(b) of the Social Security Act, as amended, 42 U.S.C. Section 1320a-7(b)
(Criminal Penalties Involving Medicare or State Health Care Programs), commonly referred to as the
“Federal Anti-Kickback Statute,” and the Social Security Act, as amended, Section 1877, 42 U.S.C
Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as “Stark Statute”)
except to the extent that the failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect. The Borrower and each of its Subsidiaries has
maintained in all material respects all records required to be maintained by the Joint Commission
on Accreditation of Healthcare Organizations, the Food and Drug Administration, Drug Enforcement
Agency and State Boards of Pharmacy and the federal and state Medicare and Medicaid programs as
required by the Healthcare Laws and, to the knowledge of the Borrower, there are no presently
existing circumstances or violations of Healthcare Laws which are, in the aggregate, reasonably
likely to result in a Material Adverse Effect. The Borrower and its Subsidiaries and the owners of
the facilities and other businesses managed by the Borrower or its Subsidiaries have such permits,
licenses, franchises, certificates and other approvals or authorizations of governmental or
regulatory authorities as are necessary under applicable law to own their respective properties and
to conduct their respective business (including without limitation such permits as are required
under such federal, state and other health care laws, and under such HMO or similar licensure laws
and such insurance laws and regulations, as are applicable thereto) except to the extent that the
failure to obtain or possess such approvals or authorizations could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.



4.19 HIPAA Compliance. To the extent that and for so long as the Borrower is a
“covered entity” within the meaning of HIPAA, the Borrower (a) has undertaken or will promptly
undertake all necessary surveys, audits, inventories, reviews, analyses and/or assessments
(including any necessary risk assessments) of all areas of its business and operations required by
HIPAA and/or that could be adversely affected by the failure of the Borrower to be HIPAA Compliant
(as defined below); (b) has developed or will promptly develop a detailed plan and time line for
becoming HIPAA Compliant (a “HIPAA Compliance Plan”); and (c) has implemented or will
implement those provisions of such HIPAA Compliance Plan in all material respects necessary to
ensure that the Borrower is or becomes HIPAA Compliant. For purposes hereof, “HIPAA
Compliant” shall mean that the Borrower (i) is or will be in compliance with each of the
applicable requirements of the so-called “Administrative Simplification” provisions of HIPAA on and
as of each date that any part thereof, or any final rule or regulation thereunder, becomes
effective in accordance with its or their terms, as the case may be (each such date, a “HIPAA
Compliance Date”) and (ii) is not and could not reasonably be expected to become, as of any
date following any such HIPAA Compliance Date, the subject of any civil or criminal penalty,
process, claim, action or proceeding, or any administrative or other regulatory review, survey,
process or proceeding (other than routine surveys or reviews conducted by any government health
plan or other accreditation entity) that could reasonably be expected to have a Material Adverse
Effect.



4.20 Accuracy of Information, etc. No statement or information contained in this
Agreement, any other Loan Document or any other document, certificate or statement furnished to the
Administrative Agent or the Lenders or any of them, by or on behalf of any Loan Party for use in
connection with the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate was so furnished, any
untrue statement of a material fact or omitted to state a material fact necessary in order to make
the statements contained herein or therein not misleading. The projections and pro
forma financial information contained in the materials referenced above are based upon good
faith estimates and assumptions believed by management of the Borrower to be reasonable at the time
made, it being recognized by the Lenders that such financial information as it relates to future
events is not to be viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth therein by a material
amount. There is no fact known to any Loan Party that could reasonably be expected to have a
Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents
or in any other documents, certificates and statements furnished to the Agents and the Lenders for
use in connection with the transactions contemplated hereby and by the other Loan Documents.



4.21 Security Documents. (a) The Guarantee and Collateral Agreement is effective to
create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral described therein and proceeds thereof. In the
case of the Pledged Stock described in the Guarantee and Collateral Agreement, any stock
certificates representing such Pledged Stock having been delivered to the Administrative Agent, and
in the case of the other Collateral described in the Guarantee and Collateral Agreement, financing
statements in appropriate form having been filed in the offices specified on Schedule 4.21(a) and
such other filings as are specified on Schedule 3 to the Guarantee and Collateral Agreement having
been completed, the Guarantee and Collateral Agreement constitutes (or will constitute, in the
case of the New Loan Parties, upon filing of appropriate financing statements) a fully perfected
Lien on, and security interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee
and Collateral Agreement), in each case prior and superior in right to any other Person (except, in
the case of Collateral other than Pledged Stock, Liens permitted by Section 7.3).



(b) Each of the Mortgages is effective to create in favor of the Administrative Agent, for the
benefit of the Secured Parties, a legally valid and enforceable Lien on the Existing Mortgaged
Properties described therein and proceeds thereof, and when the Mortgage Amendments are filed in
the offices set forth in Schedule 4.21(b), each Existing Mortgage (as amended by such Mortgage
Amendment) shall continue to constitute a fully perfected Lien on, and security interest in, all
right, title and interest of the Loan Parties in the Existing Mortgaged Properties and the proceeds
thereof, as security for the Obligations (as defined in the relevant Existing Mortgage), in each
case prior and superior in right to any other Person (other than Persons holding Liens or other
encumbrances or rights permitted by the relevant Existing Mortgage).



4.22 Solvency. Each Loan Party is, and after giving effect to the transactions
contemplated hereby and the incurrence of all Indebtedness and obligations being incurred in
connection herewith and therewith will be and will continue to be, Solvent.



4.23 Senior Indebtedness. The Obligations and the obligations of each Subsidiary
Guarantor under the Guarantee and Collateral Agreement constitute “Designated Senior Debt” under
and as defined in the Senior Subordinated Note Indenture.



4.24 Regulation H. No Mortgage encumbers improved real property which is located in
an area that has been identified by the Secretary of Housing and Urban Development as an area
having special flood hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968 (except any Mortgaged Properties as to which such flood
insurance as required by Regulation H has been obtained and is in full force and effect as required
by this Agreement).



4.25 Deposit Accounts and Securities Accounts. Schedule 4.25 lists all Deposit
Accounts and Securities Accounts in existence on the Closing Date, after giving effect to the
transactions to be effected on the Closing Date.



4.26 Reimbursement From Third Party Payors. Each of the Borrower and its Subsidiaries
is in compliance with the written material reimbursement policies, rules and regulations of third
party payors such as Medicare, Medicaid, private insurance companies, health maintenance
organizations, preferred provider organizations, managed care systems and other third party payors,
including, without limitation, adjustments under any capitation arrangement, fee schedule, discount
formula or cost-based reimbursement the failure to comply with which would be reasonably likely to
have a Material Adverse Effect.



4.27 Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any stockholder,
officer or director, acting on behalf of the Borrower or any Subsidiary, has engaged on behalf of
the Borrower or any Subsidiary in any of the following, except where there would likely be no
Material Adverse Effect: (a) knowing and willfully making or causing to be made a false statement
or representation of a material fact in any applications for any benefit or payment under Medicare
or Medicaid programs; (b) knowing and willfully making or causing to be made any false statement or
representation of a material fact for use in determining rights to any benefit or payment under
Medicare or Medicaid programs; (c) any knowing and willful failure by the Borrower or any
Subsidiary to disclose to the appropriate government contractor any material overpayment or other
improper payment received from the Medicare and Medicaid program; or (iv) any knowing and willful
violation of the Federal and State anti-kick-back or fraud and abuse laws, the regulations
promulgated thereunder.



4.28 Inactive Subsidiaries. None of the Inactive Subsidiaries (a) is engaged in any
material business operations, (b) holds any material assets or (c) guarantees, or otherwise
provides direct credit support (including a Lien on its assets) for, Indebtedness of the Borrower
or any of its Subsidiaries.



SECTION 5. CONDITIONS PRECEDENT




5.1 Conditions to Closing Date and Initial Extension of Credit. The occurrence of the
Closing Date and the agreement of each Lender to make the initial extension of credit requested to
be made by it hereunder are subject to the satisfaction of the following conditions precedent:



(a) Loan Documents. The Administrative Agent shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of Holdings and the Borrower, (ii) the Consent
and Confirmation executed and delivered by a duly authorized officer of Holdings, the Borrower and
each Subsidiary Guarantor, (iii) to the extent not previously delivered to the Administrative Agent
pursuant to the Existing Credit Agreement, any Control Agreements requested pursuant to Section
6.9(d), (iv) an Assumption Agreement in the form of Annex I to the Guarantee and Collateral
Agreement executed and delivered by a duly authorized officer of each new Loan Party and (v) a
Lender Addendum executed and delivered by each Lender, and accepted by the Borrower.



(b) Refinancing of GECC Credit Facility; Refinancing of Existing, Revolving Credit
Loans. The Administrative Agent shall have received satisfactory evidence that (i) the GECC
Credit Facility shall have been terminated and all amounts thereunder have been paid in full (or
will paid in full with the proceeds of the initial Loans), (ii) all Liens securing such facility
have been paid in full (or will paid in full with the proceeds of the initial Loans) and (iii) the
Existing Revolving Credit Loans owing to any Existing Lender that is not a Revolving Credit Lender
hereunder have been paid in full (or will paid in full with the proceeds of the initial Loans).



(c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received,
in each case in form and substance satisfactory to the Lenders, (i) the Pro Forma Balance Sheet,
(ii) audited consolidated financial statements of the Borrower for the 2003 and 2004 fiscal years
and (iii) unaudited interim consolidated financial statements of the Borrower for each fiscal
quarterly period ended subsequent to the date of the latest applicable financial statements
delivered pursuant to clause (ii) of this paragraph as to which such financial statements are
available.



(d) Approvals. All governmental and third party approvals necessary in connection
with the continuing operations of Holdings, the Borrower and its Subsidiaries and the transactions
contemplated hereby shall have been obtained and be in full force and effect.



(e) Fees. The Lenders and the Administrative Agent shall have received on or before
the Closing Date (i) all fees required to be paid, and all expenses for which invoices have been
presented (including reasonable fees, disbursements and other charges of counsel to the Agents) and
(ii) for the account of each Lender (as defined in the Existing Credit Agreement) that executes and
delivers this Agreement on or before August 4, 2005, an amendment fee equal to 0.25% of the sum of
each such Lender’s Revolving Credit Commitments (as defined in the Existing Credit Agreement); and
all commitment fees and letter of credit fees accrued but not yet paid under the Existing Credit
Agreement for the period prior to the Closing Date shall have been paid. All such amounts will be
paid with proceeds of Loans made on the Closing Date and will be reflected in the funding
instructions given by the Borrower to the Administrative Agent on or before the Closing Date.



(f) Business Plan. The Lenders shall have received a satisfactory business plan for
fiscal year 2005 and a satisfactory written analysis of the business and prospects of the Borrower
and its Subsidiaries for the period from the Closing Date through 2010.



(g) Lien Searches. If reasonably requested by the Administrative Agent, the
Administrative Agent have received the results of a recent lien search with respect to each Loan
Party (i) in the state of incorporation or formation of such Loan Party, (ii) in the state in which
the chief executive office of such Loan Party is located, (iii) in each state in which such Loan
Party is authorized to conduct business and (iv) in any other jurisdiction in which Uniform
Commercial Code financing statement or other filings or recordations should be made to evidence or
perfect security interests in all material assets of the Loan Party (excluding real properties
which are not, and fixtures not relating to, Mortgaged Properties), and such search shall reveal no
liens on any of the assets of the Loan Parties, except for Liens permitted by Section 7.3.



(h) Environmental Matters. If reasonably requested by the Administrative Agent, the
Administrative Agent shall have received, with a copy for each Lender, completed environmental
questionnaires prepared internally with respect to each of the Mortgaged Properties.



(i) Closing Certificate. The Administrative Agent shall have received a certificate
of Holdings, the Borrower and each new Loan Party, dated the Closing Date, in form reasonably
satisfactory to the Administrative Agent and containing the representations and items included in
Exhibit C, with appropriate insertions and attachments.



(j) Legal Opinions. The Administrative Agent and requesting Lenders shall have
received an executed legal opinion of Foley & Lardner LLP, counsel to Holdings, the Borrower and
its Subsidiaries, substantially in the form of Exhibit F. Such legal opinion shall cover such
other matters incident to the transactions contemplated by this Agreement as the Administrative
Agent may reasonably require.



(k) Pledged Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes. The
Administrative Agent shall have received, (i) to the extent not previously delivered pursuant to
the Existing Credit Agreement, (A) the certificates representing the shares of Capital Stock
pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power
for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and
(B) each promissory note pledged pursuant to the Guarantee and Collateral Agreement endorsed
(without recourse) in blank (or accompanied by an executed transfer form in blank satisfactory to
the Administrative Agent) by the pledgor thereof and (ii) an Acknowledgment and Consent,
substantially in the form of Annex II to the Guarantee and Collateral Agreement, duly executed by
any issuer of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement that is not
itself a party to the Guarantee and Collateral Agreement.



(l) Filings, Registrations and Recordings. Each document (including, without
limitation, any Uniform Commercial Code financing statement) required by the Security Documents or
under law or reasonably requested by the Administrative Agent to be filed, registered or recorded
in order to reflect the creation in favor of the Administrative Agent, for the benefit of the
Secured Parties, of a perfected Lien on the Collateral described therein, prior and superior in
right to any other Person (other than with respect to Liens expressly permitted by Section 7.3),
shall have been filed, registered or recorded or shall have been delivered to the Administrative
Agent in proper form for filing, registration or recordation.



(m) Flood Insurance. If requested by the Administrative Agent, the Administrative
Agent shall have received (A) a policy of flood insurance that (1) covers any parcel of improved
real property that is encumbered by any Existing Mortgage (2) is written in an amount not less than
the outstanding principal amount of the indebtedness secured by such Existing Mortgage that is
reasonably allocable to such real property or the maximum limit of coverage made available with
respect to the particular type of property under the National Flood Insurance Act of 1968,
whichever is less, and (3) will remain in force until the maturity of the indebtedness secured by
such Existing Mortgage and (B) confirmation that the Borrower has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board.



(n) Insurance. The Administrative Agent shall have received insurance certificates
satisfying the requirements of Section 5.3 of the Guarantee and Collateral Agreement.



(o) Affidavits. If requested by the Administrative Agent, the Administrative Agent
shall have received: (i) an affidavit from Borrower, in form and substance reasonably acceptable to
the Administrative Agent, certifying that since the delivery of real property surveys identified on
Schedule 5.1(o)(i) attached hereto to the Loan Parties for each of the Existing Mortgaged
Properties in connection with the Existing Credit Agreement, no changes have occurred or
improvements have been made to the Existing Mortgaged Properties that would adversely affect or
limit the coverage available to the Loan Parties under the Existing Mortgagee Title Policies as
endorsed by the issuing title insurance company; (ii) an affidavit from Borrower, in form and
substance reasonably acceptable to the Administrative Agent, certifying that no changes have
occurred to the environmental condition of each of the Existing Mortgaged Properties since the
execution by Borrower of each of the environmental affidavits identified on Schedule 5.1(o)(ii)
attached hereto and delivered to the Loan Parties in connection with the Existing Credit Agreement;
and (iii) any other affidavits or certifications that may be reasonably requested by the
Administrative Agent or the issuing title company necessary to insure the first priority Lien of
each of the Existing Mortgages.



(p) PATRIOT Act. The Lenders shall have received, sufficiently in advance of the
Closing Date, all documentation and other information required by bank regulatory authorities under
applicable “know your customer” and anti-money laundering rules and regulations, including without
limitation the United States PATRIOT Act.



5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any
extension of credit requested to be made by it hereunder on any date (including, without
limitation, its initial extension of credit) is subject to the satisfaction of the following
conditions precedent:



(a) Representations and Warranties. Each of the representations and warranties made
by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such
date as if made on and as of such date.



(b) No Default. No Default or Event of Default shall have occurred and be continuing
on such date or after giving effect to the extensions of credit requested to be made on such date.



Each borrowing by and issuance or extension of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of the date of such
extension of credit that the conditions contained in this Section 5.2 have been satisfied.



SECTION 6. AFFIRMATIVE COVENANTS




Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to
any Lender or any Agent hereunder, each of Holdings and the Borrower shall and shall cause each of
its Subsidiaries to:



6.1 Financial Statements. Furnish to each Agent and each Lender:



(a) as soon as available, but in any event within 90 days after the end of each fiscal year of
the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related audited consolidated statements of income
and of cash flows for such year, setting forth in each case in comparative form the figures as of
the end of and for the previous year, reported on without a “going concern” or like qualification
or exception, or qualification arising out of the scope of the audit, by KPMG LLP or other
independent certified public accountants of nationally recognized standing; and



(b) as soon as available, but in any event not later than 45 days after the end of each of the
first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated statements of income and of cash flows for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures as of the end of and for the corresponding period in the previous
year, certified by a Responsible Officer as being fairly stated in all material respects (subject
to normal year-end audit adjustments);



all such financial statements to be complete and correct in all material respects and to be
prepared in reasonable detail and in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).



6.2 Certificates; Other Information. Furnish to each Agent and each Lender, or, in
the case of clause (h), to the relevant Lender:



(a) concurrently with the delivery of the financial statements referred to in Section 6.1(a),
a certificate of the independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such certificate (it being understood that
such certificate shall be limited to the items that independent certified public accountants are
permitted to cover in such certificates pursuant to their professional standards and customs of the
profession);



(b) concurrently with the delivery of any financial statements pursuant to Section 6.1, (i) a
certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s
knowledge, each Loan Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default except as
specified in such certificate and (ii) in the case of quarterly or annual financial statements, (x)
a Compliance Certificate containing all information and calculations necessary for determining
compliance by Holdings, the Borrower and its Subsidiaries with the provisions of this Agreement
referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the
case may be, (y) a list of any Intellectual Property acquired by any Loan Party since the date of
the most recent list delivered pursuant to this clause (y) (or, in the case of the first such list
so delivered, since the Closing Date) and (z) a list of any UCC financing statements or other
filings specified in such Compliance Certificate as being required to be delivered therewith;



(c) as soon as available, and in any event no later than 45 days after the end of each fiscal
year of the Borrower, a detailed consolidated budget for the following fiscal year (including
projected consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of
the end of the following fiscal year, and the related consolidated and consolidating statements of
projected cash flow, projected changes in financial position and projected income), and, as soon as
available, significant revisions, if any, of such budget and projections with respect to such
fiscal year (collectively, the “Projections”), which Projections shall in each case be
accompanied by a certificate of a Responsible Officer stating that such Projections are based on
reasonable estimates, information and assumptions and that such Responsible Officer has no reason
to believe that such Projections are incorrect or misleading in any material respect;



(d) within 45 days after the end of each fiscal quarter of the Borrower, a narrative
discussion and analysis of the financial condition and results of operations of the Borrower and
its Restricted Subsidiaries for such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter, as compared to the portion of the
Projections covering such periods and to the comparable periods of the previous year;



(e) no later than 10 Business Days prior to the effectiveness thereof, copies of substantially
final drafts of any proposed amendment, supplement, waiver or other modification with respect to
the Senior Subordinated Note Indenture, the Senior Note Indenture, the Parent Intercompany Loan,
the Holdings Intercompany Loan or the Parent/Borrower Intercompany Loan;



(f) within five days after the same are sent, copies of all financial statements and reports
that Holdings or the Borrower sends to the holders of any class of its debt securities or public
equity securities and, within five days after the same are filed, copies of all financial
statements and reports that Holdings or the Borrower may make to, or file with, the SEC;



(g) as soon as possible and in any event within 10 days of obtaining knowledge thereof: (i)
any development, event, or condition that, individually or in the aggregate with other
developments, events or conditions, could reasonably be expected to result in the payment by the
Borrower and its Subsidiaries, in the aggregate, of a Material Environmental Amount; and (ii) any
notice that any governmental authority may deny any application for an Environmental Permit sought
by, or revoke or refuse to renew any Environmental Permit held by, the Borrower; and



(h) promptly, such additional financial and other information as any Lender may from time to
time reasonably request.



6.3 Payment of Obligations and Compliance with Agreements. Pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all
its material obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves in conformity with
GAAP with respect thereto have been provided on the books of Holdings, the Borrower or its
Subsidiaries, as the case may be; and comply with its obligations under the other Loan Documents.



6.4 Conduct of Business and Maintenance of Existence, etc. (a) (i) Preserve, renew
and keep in full force and effect its corporate or other existence and (ii) take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable in the normal
conduct of its business, except, in each case, as otherwise permitted by Section 7.4 and except, in
the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements
of Law, except to the extent that failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.



6.5 Maintenance of Property; Insurance. (a) Keep all Property and systems useful and
necessary in its business in good working order and condition, ordinary wear and tear excepted and
(b) maintain with financially sound and reputable insurance companies insurance on all its Property
in at least such amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured against in the same
general area by companies engaged in the same or a similar business.



6.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of
records and account in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation to its business and
activities and (b) permit representatives of any Lender to visit and inspect its corporate offices
and examine and make abstracts from any of its books and records at any reasonable time upon
reasonable prior notice and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of Holdings, the Borrower and its
Subsidiaries with officers and employees of Holdings, the Borrower and its Subsidiaries and with
its independent certified public accountants.



6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of:



(a) the occurrence of any Default or Event of Default;



(b) any (i) default or event of default under any Contractual Obligation of Holdings, the
Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist
at any time between Holdings, the Borrower or any of its Subsidiaries and any Governmental
Authority, that in either case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;



(c) any litigation or proceeding affecting Holdings, the Borrower or any of its Subsidiaries
in which the amount involved is $2,500,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;



(d) the following events, as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a Plan, the creation of any
Lien in favor of a Plan or any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action
by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and



(e) any development or event that has had or could reasonably be expected to have a Material
Adverse Effect.



Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer
setting forth details of the occurrence referred to therein and stating what action Holdings, the
Borrower or the relevant Subsidiary proposes to take with respect thereto.



6.8 Environmental Laws. (a) Comply in all material respects with, and ensure
compliance in all material respects by all tenants and subtenants, if any, with, all applicable
Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure
that all tenants and subtenants obtain and comply in all material respects with and maintain, any
and all licenses, approvals, notifications, registrations or permits required by applicable
Environmental Laws.



(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial,
removal and other actions required under Environmental Laws and promptly comply in all material
respects with all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws.



6.9 Additional Collateral, etc. (a) With respect to any Property acquired after the
Closing Date by Holdings, the Borrower or any of its Material Subsidiaries (other than (v) any real
property, (w) any property described in paragraph (b) or paragraph (d) of this Section, (x) the
Capital Stock of Assisted Living or any of its Unrestricted Subsidiaries, (y) any Property subject
to a Lien expressly permitted by Section 7.3(f) or (g) and (z) Property acquired by an Excluded
Foreign Subsidiary or an Unrestricted Subsidiary) as to which the Administrative Agent, for the
benefit of the Secured Parties, does not have a perfected Lien, promptly (i) execute and deliver to
the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent deems necessary or advisable to grant to the Administrative
Agent, for the benefit of the Secured Parties, a security interest in such Property and (ii) take
all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the
Secured Parties, a perfected first priority security interest in such Property, including without
limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may
be required by the Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent. For purposes of clarity and notwithstanding any provisions of the Guarantee
and Collateral Agreement or any other Loan Document to the contrary, the Capital Stock of Assisted
Living or any of its Unrestricted Subsidiaries shall not be subject to the security interest of the
Administrative Agent and shall be deemed to be “Excluded Assets” under and as defined in the
Guarantee and Collateral Agreement.



(b) With respect to (i) any new Material Subsidiary (other than an Excluded Foreign Subsidiary
or an Unrestricted Subsidiary) created or acquired after the Closing Date (which, for the purposes
of this paragraph, shall include any existing Subsidiary that ceases to be an Excluded Foreign
Subsidiary or an Unrestricted Subsidiary), by Holdings, the Borrower or any of its Subsidiaries,
(ii) any Excluded Foreign Subsidiary which becomes a guarantor of or provides direct credit support
with respect to any Indebtedness of Holdings, the Borrower or any Domestic Subsidiary, (iii) any
Unrestricted Subsidiary which becomes a guarantor of or provides direct credit support with respect
to any Indebtedness of Holdings, the Borrower or any Loan Party or (iv) any Inactive Subsidiary
which ceases to qualify as an Inactive Subsidiary pursuant to Section 7.18 (such Subsidiary
thereafter to be deemed a Material Subsidiary for all purposes of this Agreement), promptly (A)
execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral
Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative
Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the
Capital Stock of such Material Subsidiary that is owned by Holdings, the Borrower or any of its
Restricted Subsidiaries, (B) deliver to the Administrative Agent the certificates representing such
Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly
authorized officer of Holdings, the Borrower or such Restricted Subsidiary, as the case may be, (C)
cause such Material Subsidiary (1) to become a party to the Guarantee and Collateral Agreement and
(2) to take such actions necessary or advisable to grant to the Administrative Agent for the
benefit of the Secured Parties a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement with respect to such Material Subsidiary (other
than items described in clauses (v), (x), (y) and (z) of subsection (a) above), including, without
limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may
be required by the Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent, and (D) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above, which opinions shall
be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.
Notwithstanding the foregoing, to the extent that any Unrestricted Subsidiary provides an unsecured
guarantee but no other credit support with respect to any Indebtedness of Holdings, the Borrower or
any Loan Party, such Unrestricted Subsidiary shall only be required to execute and deliver an
unsecured guarantee, in a form reasonably satisfactory to the Administrative Agent, with respect to
the Obligations.



(c) Subject to Section 6.9(b)(ii), with respect to any new Excluded Foreign Subsidiary created
or acquired after the Closing Date by Holdings, the Borrower or any of its Subsidiaries (other than
any Subsidiary which is an Excluded Foreign Subsidiary or an Unrestricted Subsidiary), promptly (i)
execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral
Agreement or such other documents as the Administrative Agent deems necessary or advisable in order
to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in the Capital Stock of such new Subsidiary that is owned by Holdings,
the Borrower or any of its Subsidiaries (other than any Excluded Foreign Subsidiaries or
Unrestricted Subsidiaries), (provided that in no event shall more than 65% of the total outstanding
Capital Stock of any such new Excluded Foreign Subsidiary be required to be so pledged), (ii)
deliver to the Administrative Agent the certificates representing such Capital Stock, together with
undated stock powers, in blank, executed and delivered by a duly authorized officer of Holdings,
the Borrower or such Subsidiary, as the case may be, and take such other action as may be necessary
or, in the opinion of the Administrative Agent, desirable to perfect the Lien of the Administrative
Agent thereon, and (iii) if requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative Agent.



(d) If at any time after the Closing Date, any Loan Party establishes, or any new Subsidiary
(other than a Foreign Subsidiary or an Unrestricted Subsidiary) created or acquired after the
Closing Date holds, a Deposit Account or Securities Account (other than (x) any Deposit Accounts
into which proceeds of Medicare or Medicaid Receivables (as defined in the Guarantee and Collateral
Agreement) are directly deposited by the obligor thereof, (y) any Deposit Accounts or Securities
Accounts constituting ordinary course operating accounts holding cash and Investment Property (as
defined in the Guarantee and Collateral Agreement) in an amount (with the value of such Investment
Property being determined in accordance with GAAP) not exceeding $100,000 for any such Deposit
Account or Securities Account and not exceeding $1,000,000 in the aggregate for all such Deposit
Accounts and Securities Accounts, in each case excluding Deposit Accounts described in clause (x)
above, and (z) any Securities Account containing Investment Property (as defined in the Guarantee
and Collateral Agreement) the value of which (determined in accordance with GAAP) does not exceed
$100,000) or obtains, or holds, Letter-of-Credit Rights which do not constitute Supporting
Obligations (as defined in the Guarantee and Collateral Agreement) (other than any such Letter of
Credit Rights the value of which does not exceed $100,000 in the aggregate), promptly but in any
event within 45 days after the establishment or obtaining of such Deposit Account, Securities
Account or Letter-of-Credit Right, or the creation or acquisition of such Subsidiary, (i) execute
and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement
as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for
the benefit of the Secured Parties, a perfected first priority security interest in such Deposit
Account, Securities Account or Letter-of-Credit Rights and (ii) take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the Secured Parties a perfected
first priority security interest in such Deposit Account, Securities Account or Letter-of-Credit
Rights, including actions to cause the Administrative Agent to obtain “control” (within the meaning
of the applicable Uniform Commercial Code) thereof.



6.10 Further Assurances. From time to time execute and deliver, or cause to be
executed and delivered, such additional instruments, certificates or documents, and take such
actions, as the Administrative Agent may reasonably request for the purposes of implementing or
effectuating the provisions of this Agreement and the other Loan Documents, or of more fully
perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the
Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with
respect to any other property or assets hereafter acquired by the Borrower or any Restricted
Subsidiary which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the
exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy
pursuant to this Agreement or the other Loan Documents which requires any consent, approval,
recording, qualification or authorization of any Governmental Authority, the Borrower will execute
and deliver, or will cause the execution and delivery of, all applications, certifications,
instruments and other documents and papers that the Administrative Agent or such Lender may be
required to obtain from the Borrower or any of its Subsidiaries for such governmental consent,
approval, recording, qualification or authorization.



6.11 Use of Proceeds. Use the proceeds of the initial Loans to (1) refinance the GECC
Credit Facility, (2) refinance Existing Revolving Credit Loans and (3) pay related fees and
expenses in connection with the foregoing. The remaining proceeds of the Loans and the Letters of
Credit shall be used to refinance the AL Debt Facilities and for working capital needs and general
corporate purposes of the Borrower and its Subsidiaries.



6.12 Additional Mortgaged Property. Within 30 days of the Closing Date, the
Administrative Agent shall have received:



(a) a mortgage or deed of trust made by the applicable Loan Party in favor of the
Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit D-1 (the
“Additional Mortgages”), covering each of the Additional Mortgaged Properties, executed and
delivered by a duly authorized officer of each party thereto;



(b) if requested by the Administrative Agent, maps or plats of an as-built survey of the sites
of the Additional Mortgaged Properties certified to the Administrative Agent and the title
insurance company issuing the policy referred to in paragraph (c) below (the “Title Insurance
Company”) in a manner satisfactory to them, dated a date satisfactory to the Administrative
Agent and the Title Insurance Company by an independent professional licensed land surveyor
satisfactory to the Administrative Agent and the Title Insurance Company, which maps or plats and
the surveys on which they are based shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the
generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings, structures and other improvements
and the established building setback lines; (B) the lines of streets abutting the sites and width
thereof; (C) all access and other easements appurtenant to the sites; (D) all roadways, paths,
driveways, easements, encroachments and overhanging projections and similar encumbrances affecting
the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to
the surveyor; (E) any encroachments on any adjoining property by the building structures and
improvements on the sites; (F) if the site is described as being on a filed map, a legend relating
the survey to said map; and (G) the flood zone designations, if any, in which the Additional
Mortgaged Properties are located;



(c) a mortgagee’s title insurance policy (or policies) or marked up unconditional binder for
such insurance in respect of each Additional Mortgaged Property. Each such policy shall (A) be in
an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure
that the Additional Mortgage insured thereby creates a valid first Lien on such Additional
Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (D)
name the Administrative Agent for the benefit of the Secured Parties as the insured thereunder; (E)
be in the form of ALTA Loan Policy — 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies);
(F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably
request and (G) be issued by title companies satisfactory to the Administrative Agent (including
any such title companies acting as co-insurers or reinsurers, at the option of the Administrative
Agent). The Administrative Agent shall have received evidence satisfactory to it that all premiums
in respect of each such policy, all charges for mortgage recording tax, and all related expenses,
if any, have been paid;



(d) if requested by the Administrative Agent, (A) a policy of flood insurance that (1) covers
any parcel of improved real property that is encumbered by any Additional Mortgage, (2) is written
in an amount not less than the outstanding principal amount of the indebtedness secured by such
Additional Mortgage that is reasonably allocable to such real property or the maximum limit of
coverage made available with respect to the particular type of property under the National Flood
Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of
the indebtedness secured by such Additional Mortgage or that may be extended to such maturity date
and (B) confirmation that the Borrower has received the notice required pursuant to Section
208(e)(3) of Regulation H of the Board;



(e) a copy of all recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in paragraph (c) above and a copy of all other material
documents affecting the Additional Mortgaged Properties; and



(f) if requested by the Administrative Agent, an opinion of local counsel with respect to each
Additional Mortgage in form and substance satisfactory to the Administrative Agent.



6.13 Existing Mortgages; Existing Mortgagee Title Insurance Policies. Within 30 days
of the Closing Date, the Administrative Agent shall have received:



(a) in respect of each of the Existing Mortgages a Mortgage Amendment which will continue to
secure the Obligations to the same extent, and with the same priority, as such Existing Mortgage
secured the obligations of the Borrower and its Affiliates under the Existing Credit Agreement; and



(b) in respect of each of the Existing Mortgagee Title Policies an endorsement from the
issuing title insurance company which shall (i) insure that the Existing Mortgage insured thereby
(as amended) shall continue to be a valid first Lien on the Existing Mortgaged Property encumbered
thereby as of the effective date of such Existing Mortgagee Title Policy, to the same extent and
with the same priority as such Existing Mortgagee Title Policy insured the Existing Mortgage; (ii)
name the Administrative Agent for the benefit of the Secured Parties as the insured thereunder; and
(iii) be in form and substance reasonably satisfactory to the Administrative Agent.



6.14 Repayment of Indebtedness. Within 180 days of the Closing Date, the
Administrative Agent shall have received (i) satisfactory evidence that the AL Debt Facilities have
been terminated and all amounts thereunder have been paid in full, (ii) satisfactory evidence that
all Liens securing such facilities have been terminated and (iii) an Assumption Agreement in the
form of Annex I to the Guarantee and Collateral Agreement executed and delivered by a duly
authorized officer of Assisted Living.



SECTION 7. NEGATIVE COVENANTS




Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to
any Lender or any Agent hereunder, each of Holdings and the Borrower shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly:



7.1 Financial Condition Covenants.



(a) Consolidated Senior Leverage Ratio. Permit the Consolidated Senior Leverage Ratio
as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with
any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal
quarter:



	 	 	 
	 	 	Consolidated
	Fiscal Quarter	 	Senior Leverage Ratio
	June 30, 2005 – June 30, 2008

	 	4.25 to 1.0
	 
	 	 
	September 30, 2008 and thereafter

	 	4.00 to 1.0






(b) Consolidated Senior Secured Leverage Ratio. Permit the Consolidated Senior
Secured Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the
Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below
opposite such fiscal quarter:



	 	 	 
	 	 	Consolidated
	 	 	Senior Secured
	Fiscal Quarter	 	Leverage Ratio
	June 30, 2005 – June 30, 2008

	 	2.25 to 1.0
	 
	 	 
	September 30, 2008 and thereafter

	 	2.00 to 1.0






(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge
Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any
fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal
quarter:



	 	 	 
	 	 	Consolidated
	Fiscal Quarter	 	Fixed Charge Coverage Ratio
	June 30, 2005 – June 30, 2008

	 	1.20 to 1.0
	 
	 	 
	September 30, 2008 and thereafter

	 	1.20 to 1.0






(d) Maintenance of Consolidated Tangible Net Worth. Permit Consolidated Tangible Net
Worth on any date of determination to be less than the sum of (i) 85% the amount of Consolidated
Tangible Net Worth at the end of FQ1 2002, plus (ii) 50% of Consolidated Net Income for each fiscal
quarter, commencing with FQ2 2002 and ending with the fiscal quarter most recently ended prior to
the date of determination, in which Consolidated Net Income was positive, plus (iii) 100% of the
aggregate Net Cash Proceeds of any issuance and sale after March 31, 2002 of the Capital Stock of
the Borrower or any contribution to the equity of the Borrower after March 31, 2002.



7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:



(a) Indebtedness of any Loan Party pursuant to any Loan Document;



(b) Indebtedness of the Borrower to any Subsidiary and of any Wholly Owned Subsidiary
Guarantor to the Borrower or any other Subsidiary provided such Indebtedness is subordinated to the
Obligations;



(c) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens
permitted by Section 7.3(g) in an aggregate principal amount not to exceed $5,000,000 at any one
time outstanding;



(d) Indebtedness outstanding on the date hereof and listed on Schedule 7.2(d) and any
refinancings, refundings, renewals or extensions thereof (without any increase in the principal
amount thereof or any shortening of the maturity of any principal amount thereof);



(e) Guarantee Obligations made in the ordinary course of business by the Borrower or any of
its Subsidiaries of obligations of the Borrower or any Subsidiary Guarantor;



(f) Indebtedness in respect of the Senior Notes in an aggregate principal amount not to exceed
$150,000,000;



(g) Indebtedness in respect of the Senior Subordinated Notes in an aggregate principal amount
not to exceed $125,000,000;



(h) Non-Recourse Debt in an aggregate principal amount at any time outstanding not exceeding
(i) $50,000,000, at any time when the senior, unsecured, non credit-enhanced debt of the Borrower
is rated lower than either B1 or BB- by Moody’s or S&P, respectively, and (ii) $75,000,000, at any
time when the senior, unsecured, non credit-enhanced debt of the Borrower is rated at least as high
as B1 and BB- by Moody’s and S&P, respectively;



(i) the Parent Intercompany Loan and the Holdings Intercompany Loan;



(j) additional Indebtedness of the Borrower or any of its Restricted Subsidiaries in an
aggregate principal amount (for the Borrower and all Restricted Subsidiaries) not to exceed
$5,000,000 at any one time outstanding; and



(k) the Parent/Borrower Intercompany Loan.



7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any
of its Property, whether now owned or hereafter acquired, except for:



(a) Liens for taxes not yet due or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained on the
books of the Borrower or its Restricted Subsidiaries, as the case may be, in conformity with GAAP;



(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period of more than 30 days
or that are being contested in good faith by appropriate proceedings;



(c) pledges or deposits in connection with workers’ compensation, unemployment insurance and
other social security legislation;



(d) deposits to secure the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, and letters of credit issued in lieu of or in support of any of the
foregoing, in each case incurred in the ordinary course of business;



(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business that, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the Property subject thereto or materially
interfere with the ordinary conduct of the business of the Borrower or any of its Restricted
Subsidiaries;



(f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness
permitted by Section 7.2(d), provided that no such Lien is spread to cover any additional
Property after the Closing Date and that the amount of Indebtedness secured thereby is not
increased;



(g) Liens securing Indebtedness of the Borrower or any other Restricted Subsidiary incurred
pursuant to Section 7.2(c) to finance the acquisition of fixed or capital assets, provided
that (i) such Liens shall be created substantially simultaneously with the acquisition of such
fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than the
Property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not
increased;



(h) Liens in favor of the Administrative Agent created pursuant to the Security Documents;



(i) any interest or title of a lessor under any lease entered into by the Borrower or any
other Subsidiary in the ordinary course of its business and covering only the assets so leased;



(j) [Reserved];



(k) Liens securing Permitted Non-Recourse Debt; provided, that such Liens encumber
only the assets financed with the proceeds of such Permitted Non-Recourse Debt and the Capital
Stock of any Non-Recourse Subsidiary created to incur such Permitted Non-Recourse Debt; and



(l) Liens not otherwise permitted by this Section 7.3 so long as (i) neither (A) the aggregate
outstanding principal amount of the obligations secured thereby nor (B) the aggregate fair market
value (determined, in the case of each such Lien, as of the date such Lien is incurred) of the
assets subject thereto exceeds (as to the Borrower and all Restricted Subsidiaries) $5,000,000 at
any one time and (ii) such Liens do not attach to any Receivables (as defined in the Guarantee and
Collateral Agreement) or Mortgaged Property.



7.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution),
or Dispose of all or substantially all of its Property or business, except that:



(a) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into the
Borrower (provided that the Borrower shall be the continuing or surviving corporation) or
with or into any Subsidiary Guarantor (provided that (i) the Subsidiary Guarantor shall be
the continuing or surviving corporation or (ii) simultaneously with such transaction, the
continuing or surviving corporation shall become a Subsidiary Guarantor and the Borrower shall
comply with Sections 6.9 and 6.10 in connection therewith); and



(b) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other Subsidiary of the Borrower, provided that no
Restricted Subsidiary may Dispose of any assets which constitute Collateral to any Unrestricted
Subsidiary.



7.5 Limitation on Disposition of Property. Dispose of any of its Property (including,
without limitation, receivables and leasehold interests), whether now owned or hereafter acquired,
or, in the case of any Restricted Subsidiary, issue or sell any shares of such Restricted
Subsidiary’s Capital Stock to any Person, except:



(a) the Disposition of obsolete or worn out property in the ordinary course of business;



(b) (i) the sale of inventory in the ordinary course of business and (ii) the leasing, as
lessor, of facilities in the ordinary course of business under leases providing to the lessor lease
income that contributes to Consolidated EBITDA an amount substantially equivalent to the
contribution of such facilities to Consolidated EBITDA if such facilities were operated by the
Borrower;



(c) Dispositions permitted by Section 7.4(b);



(d) the sale or issuance of any Subsidiary’s Capital Stock to the Borrower or any Subsidiary
Guarantor;



(e) the Disposition in the ordinary course of business of Cash Equivalents and other
investment securities;



(f) the Disposition of Property of the Borrower or any Restricted Subsidiary in an asset swap;
provided, (i) that the amount of Consolidated EBITDA attributable to any Property so
Disposed of by the Borrower or any Restricted Subsidiary, for the period of four consecutive fiscal
quarters most recently ended prior to the date of such Disposition, does not exceed $5,000,000 and
(ii) the amount of Consolidated EBITDA attributable to the Property acquired by the Borrower or any
Restricted Subsidiary in such asset swap, for the period of four consecutive fiscal quarters most
recently ended prior to the date of such Disposition, is not less than 90% of the Consolidated
EBITDA for such period of the asset swapped by the Borrower or such Restricted Subsidiary;



(g) the Disposition of Transferred Properties of the Borrower and its Restricted Subsidiaries
in transactions resulting in the receipt by the Borrower and its Restricted Subsidiaries of the
fair market value of the Transferred Properties, it being understood that the Disposition of the
Transferred Properties for the purchase price contained in option purchase agreements existing on
June 28, 2002 and previously disclosed to the Administrative Agent shall constitute fair market
value;



(h) the Disposition of notes or other non-cash consideration received as consideration in
connection with Dispositions permitted pursuant to clause (g) of this Section;



(i) the Disposition of other assets in sales for fair market value; provided, that (i)
the aggregate amount of Net Cash Proceeds of such Dispositions shall not exceed, while this
Agreement is in effect (A) $60,000,000, so long as, at the time of any Disposition pursuant to this
clause (a), the Consolidated Senior Secured Leverage Ratio is not at least 0.50 lower than the
maximum Consolidated Senior Secured Leverage Ratio permitted pursuant to Section 7.1(b) at the time
of such Disposition or (B) $100,000,000, so long as, at the time of any Disposition pursuant to
this clause (b), the Consolidated Senior Secured Leverage Ratio is at least 0.50 lower than the
maximum Consolidated Senior Secured Leverage Ratio permitted pursuant to Section 7.1(b) at the time
of such Disposition and (ii) not more than 75% of the Net Cash Proceeds of all such Dispositions
shall be attributable to Dispositions of Properties subject to the Existing Mortgages;



(j) the Disposition by: (i) the Borrower or any Restricted Subsidiary of any assets to the
Borrower or any Subsidiary Guarantor; or (ii) any Restricted Subsidiary of assets not constituting
Collateral to any Unrestricted Subsidiary; and



(k) any Recovery Event, provided, that the requirements of Section 2.12(b) are
complied with in connection therewith.



7.6 Limitation on Restricted Payments. Declare or pay any dividend on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any Capital Stock of Holdings, the
Borrower or any Restricted Subsidiary, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash or property or in
obligations of Holdings, the Borrower or any Restricted Subsidiary, or enter into any derivatives
or other transaction with any financial institution, commodities or stock exchange or clearinghouse
(a “Derivatives Counterparty”) obligating Holdings, the Borrower or any Restricted
Subsidiary to make payments to such Derivatives Counterparty as a result of any change in market
value of any such Capital Stock (collectively, “Restricted Payments”), except that:



(a) any Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor;



(b) the Borrower may make disbursements to Holdings to permit Holdings to (i) pay corporate
overhead expenses incurred in the ordinary course of business and/or to pay dividends to the Parent
to pay Holdings’ proportionate share of corporate overhead expenses of the Parent incurred in the
ordinary course of business and (ii) pay any taxes which are due and payable by Holdings and the
Borrower as part of a consolidated group; provided, that the amount of such taxes allocated
to the Borrower shall be determined on an arms’ length basis; and



(c) the Borrower may make Restricted Payments in any fiscal year in an aggregate amount not
exceeding the lesser of (i) 50% of Consolidated Net Income for such fiscal year, (ii) $25,000,000
plus the Unused Restricted Payment Amount for the previous fiscal year and (iii)
$50,000,000.



7.7 Limitation on Capital Expenditures. Make or commit to make any Capital
Expenditure, except (a) Consolidated Maintenance Capital Expenditures of the Borrower and its
Restricted Subsidiaries in the ordinary course of business, (b) Capital Expenditures made with the
proceeds of any Reinvestment Deferred Amount and (c) Consolidated Growth Capital Expenditures to
the extent permitted by Section 7.8(h).



7.8 Limitation on Investments. Make any advance, loan, extension of credit (by way of
guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes,
debentures or other debt securities of, or any assets constituting an ongoing business from, or
make any other investment in, any other Person (all of the foregoing, “Investments”),
except:



(a) extensions of trade credit in the ordinary course of business consistent with past
practice;



(b) investments in Cash Equivalents;



(c) Investments arising in connection with the incurrence of Indebtedness permitted by Section
7.2(b) and (e);



(d) (i) advances for business expenses to employees of Holdings, the Borrower or any
Restricted Subsidiaries of the Borrower in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses) and (ii) loans to employees of
Holdings, the Borrower or any Restricted Subsidiaries of the Borrower in an aggregate amount for
Holdings, the Borrower and Restricted Subsidiaries of the Borrower not to exceed $2,500,000 at any
one time outstanding;



(e) Investments in assets (other than inventory) useful in the Borrower’s business made by the
Borrower or any of its Restricted Subsidiaries with the proceeds of any Reinvestment Deferred
Amount;



(f) Investments (other than those relating to the incurrence of Indebtedness permitted by
Section 7.8(c)) by: (i) Holdings or the Borrower or any Subsidiary in the Borrower or any Person
that, prior to such Investment, is a Subsidiary Guarantor; or (ii) any Restricted Subsidiary in the
Borrower or any Person that, prior to such Investment, is a Subsidiary, provided that the aggregate
outstanding amount of such Investments made by the Borrower and the Restricted Subsidiaries in
Unrestricted Subsidiaries may not at any time exceed the sum of (i) the amount of the total
Investments existing in the Unrestricted Subsidiaries as of June 30, 2005 (the “Existing
Unrestricted Subsidiary Investment”) and (ii) $40,000,000. The Borrower shall, on or prior to
December 31, 2005, provide to the Administrative Agent the Borrower’s calculation of the amount of
the Existing Unrestricted Subsidiary Investment.



(g) the Alpha Equity Contribution and the Acquisition; and



(h) in addition to Investments otherwise expressly permitted by this Section, the Borrower or
any of its Restricted Subsidiaries may make Investments in Subsidiaries and Persons that become
Subsidiaries as a result of such Investments and may make Consolidated Growth Capital Expenditures;
provided, (i) all such Investments and Consolidated Growth Capital Expenditures shall be
for the acquisition or improvement of assets (including Capital Stock of another Person) to be used
in the same type of business that the Borrower and its Restricted Subsidiaries are engaged in on
the date of this Agreement, (ii) such Investments and Consolidated Growth Capital Expenditures
shall not be limited at any time when the Consolidated Senior Leverage Ratio is less than 3.00 to
1.00, (iii) the aggregate amount of all such Investments and Consolidated Growth Capital
Expenditures at any time when the Consolidated Senior Leverage Ratio is greater than 3.00 to 1.00
shall not exceed (A) $20,000,000 for any particular such Investment or Consolidated Growth Capital
Expenditure or (B) an aggregate amount for all such Investments and Consolidated Growth Capital
Expenditures while this Agreement is in effect of $60,000,000 plus, at any time when the
Consolidated Senior Secured Leverage Ratio is at least 0.25 lower than the maximum level permitted
at such time, an additional amount, not exceeding $30,000,000 in the aggregate, equal to the
aggregate Net Cash Proceeds of Asset Sales consummated after the Closing Date and (iv) after giving
effect to such Investment no Default or Event of Default shall have occurred and be continuing.



7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc. (a)
Make any optional or voluntary payment, prepayment, repurchase or redemption of, or otherwise
voluntarily or optionally defease, the Senior Subordinated Notes or the Senior Notes, or segregate
funds for any such payment, prepayment, repurchase, redemption or defeasance, or enter into any
derivative or other transaction with any Derivatives Counterparty obligating Holdings, the Borrower
or any Subsidiary to make payments to such Derivatives Counterparty as a result of any change in
market value of the Senior Subordinated Notes or the Senior Notes, (b) repurchase or redeem any or
all of the Senior Notes or the Senior Subordinated Notes upon occurrence of a Specified Change of
Control, (c) make any optional or voluntary payment, prepayment, repurchase or redemption of, or
otherwise voluntarily or optionally defease, the Parent Intercompany Loan, the Holdings
Intercompany Loan or the Parent/Borrower Intercompany Loan, or segregate funds for any such
payment, prepayment, repurchase, redemption or defeasance, or make any payment of interest in cash
thereon, in each case if a Default or Event of Default then exists and is continuing or would be
caused thereby, (d) amend, modify or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior Subordinated Notes or the
Senior Notes (other than any such amendment, modification, waiver or other change which (i) would
extend the maturity or reduce the amount of any payment of principal thereof, reduce the rate or
extend the date for payment of interest thereon or relax any covenant or other restriction
applicable to Holdings, the Borrower or any of its Subsidiaries and (ii) does not involve the
payment of a consent fee), (e) amend, modify or otherwise change, or consent or agree to any
amendment, modification, waiver or other change to, any of the terms of the Parent Intercompany
Loan, Holdings Intercompany Loan or the Parent/Borrower Intercompany Loan in a manner that would be
materially adverse to the interests of the Lenders, (f) designate any Indebtedness (other than the
Obligations) as “Designated Senior Indebtedness” for the purposes of the Senior Subordinated Note
Indenture or (h) amend its certificate of incorporation in any manner determined by the
Administrative Agent to be adverse to the Lenders.



7.10 Limitation on Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of
any service or the payment of any management, advisory or similar fees, with any Affiliate (other
than Holdings, the Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of business of Holdings, the Borrower or
such Restricted Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less
favorable to Holdings, the Borrower or such Restricted Subsidiary, as the case may be, than it
would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate.



7.11 [Reserved]



7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of the Borrower
to end on a day other than December 31 or change the Borrower’s method of determining fiscal
quarters.



7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to exist or become
effective any agreement that prohibits or limits the ability of Holdings, the Borrower or any of
its Restricted Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its
Property or revenues, whether now owned or hereafter acquired, to secure the Obligations or, in the
case of any guarantor, its obligations under the Guarantee and Collateral Agreement, other than (a)
this Agreement and the other Loan Documents, (b) the Senior Subordinated Note Indenture and the
Senior Note Indenture, and (c) any agreements governing any purchase money Liens or Permitted
Non-Recourse Indebtedness or Capital Lease Obligations otherwise permitted hereby (in which case,
any prohibition or limitation shall only be effective against the assets financed thereby and
proceeds thereof) or any agreements governing Indebtedness and Liens permitted by Sections 7.3(f)
(in which case, any prohibition or limitation shall only be effective against the assets financed
thereby and proceeds thereof).



7.14 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to
exist or become effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such
Restricted Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other
Restricted Subsidiary, (b) make Investments in the Borrower or any other Restricted Subsidiary or
(c) transfer any of its assets to the Borrower or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the
Loan Documents, (ii) any restrictions with respect to a Restricted Subsidiary imposed pursuant to
an agreement that has been entered into in connection with the Disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary, (iii) any restrictions in any agreements
governing any purchase money Indebtedness or Capital Lease Obligations or Permitted Non-Recourse
Indebtedness otherwise permitted hereby (in which case, any prohibition or limitation shall only be
effective against the assets financed thereby), (iv) any restrictions in any agreements governing
Indebtedness of Foreign Subsidiaries otherwise permitted hereby (in which case, any restrictions
shall only be effective against such Foreign Subsidiary and its Foreign Subsidiaries) and (v) any
restrictions in the agreements governing the OR Facility.



7.15 Limitation on Lines of Business. Enter into any business, either directly or
through any Restricted Subsidiary, except for those businesses in which the Borrower and its
Restricted Subsidiaries are engaged on the date of this Agreement or that are reasonably related
thereto.



7.16 Limitation on Activities of Holdings. In the case of Holdings, notwithstanding
anything to the contrary in this Agreement or any other Loan Document, (a) hold any assets other
than the Capital Stock of the Borrower and the other direct Subsidiaries of Holdings, (b) have any
liabilities other than (i) the liabilities under the Loan Documents, (ii) tax liabilities in the
ordinary course of business, (iii) Investments permitted under Section 7.8(f) and (iv) corporate,
administrative and operating expenses in the ordinary course of business and (c) engage in any
business other than (i) owning the Capital Stock of the Borrower and its other Subsidiaries and
activities incidental or related thereto and (ii) acting as a Guarantor and pledging the Capital
Stock of the Borrower to the Administrative Agent, for the benefit of the Secured Parties, pursuant
to the Guarantee and Collateral Agreement.



7.17 Limitation on Hedge Agreements. Enter into any Hedge Agreement other than Hedge
Agreements entered into in the ordinary course of business, and not for speculative purposes, to
protect against changes in interest rates, commodity prices or foreign exchange rates.



7.18 Limitation on Activities of Inactive Subsidiaries. In the case of each Inactive
Subsidiary, (a) engage in any material business operations, (b) guarantee, or otherwise provide
direct credit support (including a Lien on its assets) for, Indebtedness of Holdings, the Borrower
or any of its Subsidiaries, (c) own assets having a fair market value which, when added to the
assets of all other Inactive Subsidiaries, exceeds 5% of the fair market value of consolidated
assets of the Borrower and its Restricted Subsidiaries or (d) have Consolidated EBITDA which, when
added to the Consolidated EBITDA of all other Inactive Subsidiaries, constitutes more than 5% of
the Consolidated EBITDA of the Borrower and its Restricted Subsidiaries.



SECTION 8. EVENTS OF DEFAULT




If any of the following events shall occur and be continuing:



(a) The Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when
due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan
or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes due in accordance with
the terms hereof or thereof; or



(b) Any representation or warranty made or deemed made by any Loan Party herein or in any
other Loan Document or that is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this Agreement or any such other
Loan Document shall prove to have been inaccurate in any material respect on or as of the date made
or deemed made or furnished; or



(c) (i) Any Loan Party shall default in the observance or performance of any agreement
contained in clause (i) or (ii) of Section 6.4(a) (with respect to Holdings and the Borrower only),
Section 6.7(a), Section 6.12 or Section 7, or in Section 5 of the Guarantee and Collateral
Agreement or (ii) an “Event of Default” under and as defined in any Mortgage shall have occurred
and be continuing; or



(d) Any Loan Party shall default in the observance or performance of any other agreement
contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a)
through (c) of this Section), and such default shall continue unremedied for a period of 30 days;
or



(e) Holdings, the Borrower or any of its Material Subsidiaries shall (i) default in making any
payment of any principal of any Indebtedness (including, without limitation, any Guarantee
Obligation, but excluding the Loans and Reimbursement Obligations) on the scheduled or original due
date with respect thereto; or (ii) default in making any payment of any interest on any such
Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or to permit the holder
or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary)
to cause, with the giving of notice if required, such Indebtedness to become due prior to its
stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or
(in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable;
provided, that the failure of Assisted Living to obtain a consent to the Acquisition or to
the terms and conditions of this Agreement from the Housing and Community Services Department of
the State of Oregon shall not constitute a default under this clause (iii) prior to any such
Indebtedness being declared due and payable as a result thereof and the occurrence of Assisted
Living’s failure to make such payment within five days of when due and; provided
further, that a default, event or condition described in clause (i), (ii) or (iii) of this
paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or
more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this
paragraph (e) shall have occurred and be continuing with respect to Indebtedness, individually or
in the aggregate, the outstanding principal amount of which exceeds in the aggregate $5,000,000; or



(f) (i) Holdings, the Borrower or any of its Material Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar official for it or for
all or any substantial part of its assets, or Holdings, the Borrower or any of its Material
Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall
be commenced against Holdings, the Borrower or any of its Material Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above that (A) results in the
entry of an order for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against
Holdings, the Borrower or any of its Material Subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets that results in the entry of an order for any such relief that
shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) Holdings, the Borrower or any of its Material Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its
Material Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or



(g) Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of
ERISA or Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding deficiency”
(as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan,
or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in
the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Required Lenders shall be likely to, incur any liability
in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan
or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together with all other such events or
conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to
have a Material Adverse Effect; or



(h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of
its Material Subsidiaries involving for Holdings, the Borrower and its Subsidiaries taken as a
whole a liability (not paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $5,000,000 or more, and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry
thereof; or



(i) Any of the Security Documents shall cease, for any reason (other than by reason of the
express release thereof pursuant to Section 10.15), to be in full force and effect, or any Loan
Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect and priority purported to
be created thereby; or



(j) The guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall
cease, for any reason (other than by reason of the express release thereof pursuant to Section
10.15), to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall
so assert; or



(k) Any Change of Control shall occur; or



(l) The Senior Subordinated Notes or the guarantees thereof shall cease, for any reason, to be
validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the
Guarantee and Collateral Agreement, as the case may be, as provided in the Senior Subordinated Note
Indenture or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Senior
Subordinated Notes or the holders of at least 25% in aggregate principal amount of the Senior
Subordinated Notes shall so assert; or



(m) The Borrower or any Subsidiary, to the extent, if any, presently participating or required
by law to participate, in Medicaid or Medicare programs is excluded from or shall otherwise fail to
be eligible for any reason to participate in Medicaid or Medicare programs or to accept assignments
or rights to reimbursement under Requirements of Law applicable to Medicaid or Medicare, such
failure could reasonably be expected to have a Material Adverse Effect, and such failure shall also
continue beyond the completion of any appeal process diligently pursued by the Borrower or such
Subsidiary in good faith;



then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or
(ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement and the other Loan Documents (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) shall immediately become due and payable,
and (B) if such event is any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Facility Lenders in respect of the Revolving Credit
Facility, the Administrative Agent may, or upon the request of such Majority Facility Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Revolving Credit Commitments to
be terminated forthwith, whereupon the Revolving Credit Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare
the Loans hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) to be due and payable forthwith, whereupon the same
shall immediately become due and payable; and (C) the Administrative Agent shall have the rights
and remedies provided to it under the Guarantee and Collateral Agreement or at law or equity,
including rights and remedies provided under the Uniform Commercial Code. In the case of all
Letters of Credit with respect to which presentment for honor shall not have occurred at the time
of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall
be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit,
and the unused portion thereof after all such Letters of Credit shall have expired or been fully
drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under
the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn
upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the
Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if
any, in such cash collateral account shall be returned to the Borrower (or such other Person as may
be lawfully entitled thereto).



SECTION 9. THE AGENTS




9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as
the agents of such Lender under this Agreement and the other Loan Documents, and each Lender
irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to such Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any
duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against
any Agent.



9.2 Delegation of Duties. Each Agent may execute any of its duties under this
Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.



9.3 Exculpatory Provisions. Neither any Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted from its or such
Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received by the Agents under
or in connection with, this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder.
The Agents 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 Loan Document, or to inspect the properties, books or records of any Loan Party.



9.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully
protected in relying, upon any instrument, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order 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, without
limitation, counsel to the Loan Parties), independent accountants and other experts selected by
such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with Section 10.6 and all
actions required by such Section in connection with such transfer shall have been taken. Each
Agent shall be fully justified in failing or refusing to take any action under this Agreement or
any other Loan Document unless it shall first receive such advice or concurrence of the Required
Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of
Lenders specified by this Agreement) as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense that may be incurred by
it by reason of taking or continuing to take any such action. Each Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so specified by this
Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement), and
such request and any action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.



9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless such Agent shall have received
notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a “notice of default”. In the event that the
Administrative Agent shall receive such a notice, the Administrative Agent shall give notice
thereof to the Lenders. The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so
specified by this Agreement, all Lenders or any other instructing group of Lenders specified by
this Agreement); provided that unless and until the Administrative Agent shall have
received such directions, the 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 in the best interests of the Lenders.



9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that
neither any of the Agents nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates have made any representations or warranties to it and that no act
by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate
of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any
Lender. Each Lender represents to the Agents that it has, independently and without reliance upon
any Agent or any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their affiliates and
made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon any Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the time, continue to make
its own credit analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder,
no Agent shall have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into
the possession of such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.



9.7 Indemnification. The Lenders severally agree to indemnify each Agent in its
capacity as such (to the extent not reimbursed by Holdings or the Borrower and without limiting the
obligation of Holdings or the Borrower to do so), ratably according to their respective Aggregate
Exposure Percentages in effect on the date on which indemnification is sought under this Section
(or, if indemnification is sought after the date upon which the Commitments shall have terminated
and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure
Percentages immediately prior to such date), for, and to save each Agent harmless from and against,
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at any time (including, without
limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under
or in connection with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from such Agent’s gross negligence
or willful misconduct. The agreements in this Section shall survive the payment of the Loans and
all other amounts payable hereunder.



9.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans
to, accept deposits from and generally engage in any kind of business with any Loan Party as though
such Agent were not an Agent. With respect to its Loans made or renewed by it and with respect to
any Letter of Credit issued or participated in by it, each Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as
though it were not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in its
individual capacity.



9.9 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 10 days’ notice to the Lenders and the Borrower. If the Administrative
Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then
the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 8(a) or Section 8(f) with respect
to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower
(which approval shall not be unreasonably withheld or delayed), whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and the term
“Administrative Agent” shall mean such successor agent effective upon such appointment and
approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no
successor agent has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and
perform all of the duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. The Syndication Agent may, at
any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent
hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndication Agent
hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent,
without any further act by the Syndication Agent, the Administrative Agent or any Lender. After
any retiring Agent’s resignation as Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.



9.10 Authorization to Release Liens and Guarantees. The Administrative Agent is
hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee
obligations contemplated by Section 10.15.



9.11 The Arranger; the Syndication Agent; the Co-Documentation Agents. None of the
Arranger, the Syndication Agent or any Co-Documentation Agent, in their respective capacities as
such, shall have any duties or responsibilities, or incur any liability, under this Agreement and
the other Loan Documents.



9.12 The Administrative Agent and the Secured Parties. Notwithstanding that the
Administrative Agent is named in one or more of the Security Documents as agent for Qualified
Counterparties as well as for the Lenders, each Lender agrees, on behalf of itself and any
affiliate thereof that may at any time be a Qualified Counterparty under any Specified Hedge
Agreement, that the Administrative Agent (i) shall have no duty or obligation whatsoever to any
Qualified Counterparty under any Specified Hedge Agreement, and (ii) shall have no duty or
obligation to any Qualified Counterparty under any Security Documents other than the obligation to
deliver to such Qualified Counterparty its ratable share (as determined by the Administrative
Agent) of any proceeds received by the Administrative Agent under the Security Documents upon the
exercise by the Administrative Agent of its remedies thereunder. Without limiting the generality
of the foregoing, each Lender agrees, on behalf of itself and any affiliate thereof that may at any
time be a Qualified Counterparty under any Specified Hedge Agreement, that (i) the Administrative
Agent shall incur no liability to any Qualified Counterparty as a result of any release by the
Administrative Agent of any Collateral or Guarantors under any Security Document or any other
action or inaction by the Administrative Agent under any Security Document and (ii) the
Administrative Agent shall be entitled to the same exculpations and protections, in respect of the
Qualified Counterparties, as it is entitled to with respect to the Lenders pursuant to the other
provisions of this Section 9 (other than Section 9.7), mutatis mutandis.



SECTION 10. MISCELLANEOUS




10.1 Amendments and Waivers. Neither this Agreement or any other Loan Document, nor
any terms hereof or thereof may be amended, supplemented or modified except in accordance with the
provisions of this Section 10.1. The Required Lenders and each Loan Party party to the relevant
Loan Document may, or (with the written consent of the Required Lenders) the Agents and each Loan
Party party to the relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents (including
amendments and restatements hereof or thereof) for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the
Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as may be specified
in the instrument of waiver, any of the requirements of this Agreement or the other Loan Documents
or any Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall:




	 	(i)	 	forgive the principal amount or extend the
final scheduled date of maturity of any Loan or Reimbursement
Obligation, extend the scheduled date of any amortization payment in
respect of the Term Loans, reduce the stated rate of any interest or
fee payable hereunder or extend the scheduled date of any payment
thereof (except (x) in connection with the waiver of applicability of
any post-default increase in interest rates (which waiver shall be
effective with the consent of the Majority Facility Lenders of each
adversely affected Facility) and (y) that any amendment or modification
of defined terms used in the financial covenants in this Agreement
shall not constitute a reduction in the rate of interest or fees for
purposes of this clause (i)), or increase the amount or extend the
expiration date of the Revolving Credit Commitment of any Lender, in
each case without the consent of each Lender directly affected thereby;






	 	(ii)	 	amend, modify or waive any provision of this
Section or reduce any percentage specified in the definition of
Required Lenders or Required Prepayment Lenders, consent to the
assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, release
all or substantially all of the Collateral or release all or
substantially all of the Guarantors from their guarantee obligations
under the Guarantee and Collateral Agreement, in each case without the
consent of all Lenders;






	 	(iii)	 	reduce the percentage specified in the
definition of Majority Facility Lenders with respect to any Facility
without the consent of all of the Lenders under such Facility;






	 	(iv)	 	amend, modify or waive any provision of Section
9 or any other provision of this Agreement which directly affects the
rights or obligations of any Agent, in either case without the consent
of each Agent directly affected thereby;






	 	(v)	 	amend, modify or waive any provision of Section
2.18(a) or (b) without the consent of each Lender directly affected
thereby;






	 	(vi)	 	amend, modify or waive any provision of Section
3 without the consent of each relevant Issuing Lender; or






	 	(vii)	 	amend, modify or waive any provision of
Section 2.6 or 2.7 without the consent of the Swing Line Lender.





Any such waiver and any such amendment, supplement or modification shall apply equally to each of
the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Agents
shall be restored to their former position and rights hereunder and under the other Loan Documents,
and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected
by a written instrument signed by the parties required to sign pursuant to the foregoing provisions
of this Section; provided, that delivery of an executed signature page of any such
instrument by facsimile transmission shall be effective as delivery of a manually executed
counterpart thereof.



10.2 Notices. All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered, or three Business
Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed (a) in the case of Holdings, the Borrower and the Agents, as follows and (b) in
the case of the Lenders, as set forth in an administrative questionnaire delivered to the
Administrative Agent or on Schedule I to the Lender Addendum to which such Lender is a party or, in
the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and
Acceptance, in such Assignment and Acceptance or (c) in the case of any party, to such other
address as such party may hereafter notify to the other parties hereto:



	 	 	 
	Holdings:

	 	Extendicare Holdings, Inc.

111 West Michigan Street

Milwaukee, Wisconsin 53203-290

Attention: President
	 
	 	 
	
 
	 	with a copy to:
	 
	 	 
	
 
	 	Extendicare Holdings, Inc.

111 West Michigan Street

Milwaukee, Wisconsin 53203-290

Attention: General Counsel
	 
	 	 
	The Borrower:

	 	Extendicare Health Services, Inc.

111 West Michigan Street

Milwaukee, Wisconsin 53203-290

Attention: President
	 
	 	 
	
 
	 	with a copy to:
	 
	 	 
	
 
	 	Extendicare Holdings, Inc.

111 West Michigan Street

Milwaukee, Wisconsin 53203-290

Attention: General Counsel
	 
	 	 
	The Administrative Agent:

	 	Lehman Commercial Paper Inc.







745 Seventh Avenue




New York, New York 10019




Attention: Brian McNany




Telecopy: (212) 526-6643




Telephone: (212) 526-6590




	 	 	 	Issuing Lender: As notified by such Issuing Lender to the Administrative Agent and
the Borrower





provided that any notice, request or demand to or upon the any Agent, any Issuing Lender or
any Lender shall not be effective until received.



10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.



10.4 Survival of Representations and Warranties. All representations and warranties
made herein, in the other Loan Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the execution and delivery of this
Agreement and the making of the Loans and other extensions of credit hereunder.



10.5 Payment of Expenses. Each of Holdings and the Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred
in connection with the syndication of the Revolving Credit Commitments (other than fees payable to
syndicate members) and the development, preparation and execution of, and any amendment, supplement
or modification to, this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable fees and
disbursements and other charges of counsel to the Administrative Agent and the charges of
Intralinks, (b) to pay or reimburse each Lender and the Agents for all their costs and expenses
incurred in connection with the enforcement or preservation of any rights under this Agreement, the
other Loan Documents and any other documents prepared in connection herewith or therewith,
including, without limitation, the fees and disbursements of counsel (including the allocated fees
and disbursements and other charges of in-house counsel) to each Lender and of counsel to the
Agents, (c) to pay, indemnify, or reimburse each Lender and the Agents for, and hold each Lender
and the Agents harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the execution and delivery of,
or consummation or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the
other Loan Documents and any such other documents, and (d) to pay, indemnify or reimburse each
Lender, each Agent, their respective affiliates, and their respective officers, directors,
trustees, employees, advisors, agents and controlling persons (each, an “Indemnitee”) for,
and hold each Indemnitee harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other documents, including,
without limitation, any of the foregoing relating to the use of proceeds of the Loans or the
violation of, noncompliance with or liability under, any Environmental Law applicable to the
operations of Holdings, the Borrower any of its Subsidiaries or any of the Properties and the fees
and disbursements and other charges of legal counsel in connection with claims, actions or
proceedings by any Indemnitee against the Borrower hereunder (all the foregoing in this clause (d),
collectively, the “Indemnified Liabilities”), provided, that Holdings and the
Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use
by unauthorized persons of Information or other materials sent through electronic,
telecommunications or other information transmission systems that are intercepted by such persons
or for any special, indirect, consequential or punitive damages in connection with the Revolving
Credit Commitments. Without limiting the foregoing, and to the extent permitted by applicable law,
the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives
and agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights
of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee. All amounts due under
this Section shall be payable not later than 30 days after written demand therefor. Statements
payable by the Borrower pursuant to this Section shall be submitted to the Borrower at its address
set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the
Borrower in a notice to the Administrative Agent. The agreements in this Section shall survive
repayment of the Loans and all other amounts payable hereunder.



10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement
shall be binding upon and inure to the benefit of Holdings, the Borrower, the Lenders, the Agents,
all future holders of the Loans and their respective successors and assigns, except that Holdings
and the Borrower may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Agents and each Lender.



(b) Any Lender may, without the consent of the Borrower, in accordance with applicable law, at
any time sell to one or more banks, financial institutions or other entities (each, a
“Participant”) participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s
obligations under this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and
the Borrower and the Agents shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and the other Loan
Documents. In no event shall any Participant under any such participation have any right to
approve any amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent
would require the consent of all Lenders pursuant to Section 10.1. The Borrower agrees that if
amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right
of setoff 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, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as
provided in Section 10.7(a) as fully as if such Participant were a Lender hereunder. The Borrower
also agrees that each Participant shall be entitled to the benefits of Sections 2.19, 2.20 and 2.21
with respect to its participation in the Commitments and the Loans outstanding from time to time as
if such Participant were a Lender; provided that, in the case of Section 2.20, such
Participant shall have complied with the requirements of said Section, and provided,
further, that no Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such Participant had no such
transfer occurred.



(c) Any Lender (an “Assignor”) may, in accordance with applicable law and upon written
notice to the Administrative Agent, at any time and from time to time assign to any Lender or any
affiliate, Related Fund or Control Investment Affiliate thereof or, with the consent of the
Borrower and the Agents, and in the case of any assignment of Revolving Credit Commitments, the
written consent of each Issuing Lender and the Swing Line Lender (which, in each case, shall not be
unreasonably withheld or delayed) (provided that (x) no such consent need be obtained by
any Lehman Entity and (y) the consent of the Borrower need not be obtained with respect to any
assignment of Term Loans), to an additional bank, financial institution or other entity (an
“Assignee”) all or any part of its rights and obligations under this Agreement pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit E, executed by such Assignee and
such Assignor (and, where the consent of the Borrower, the Agents or the Issuing Lender or the
Swing Line Lender is required pursuant to the foregoing provisions, by the Borrower and such other
Persons) and delivered to the Administrative Agent for its acceptance and recording in the
Register; provided that no such assignment to an Assignee (other than any Lender or any
affiliate thereof) shall be in an aggregate principal amount of less than $5,000,000, in the case
of the Revolving Credit Facility, or $1,000,000, in the case of the Term Loan Facility (in each
case other than in the case of an assignment of all of a Lender’s interests under this Agreement),
unless otherwise agreed by the Borrower and the Administrative Agent. Any such assignment need not
be ratable as among the Facilities. Upon such execution, delivery, acceptance and recording, from
and after the effective date determined pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder with Commitments and/or Loans as
set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment
and Acceptance, be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor’s rights and obligations under this
Agreement, such Assignor shall cease to be a party hereto, except as to Section 2.19, 2.20 and 10.5
in respect of the period prior to such effective date). Notwithstanding any provision of this
Section, the consent of the Borrower shall not be required for any assignment that occurs at any
time when any Event of Default shall have occurred and be continuing. For purposes of the minimum
assignment amounts set forth in this paragraph, multiple assignments by two or more Related Funds
shall be aggregated.



(d) The Administrative Agent shall, on behalf of the Borrower, maintain at its address
referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register
(the “Register”) for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower,
each Agent and the Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loans and any Notes evidencing such Loans recorded therein for all purposes of this
Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only
upon appropriate entries with respect thereto being made in the Register (and each Note shall
expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note
shall be registered on the Register only upon surrender for registration of assignment or transfer
of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance;
thereupon one or more new Notes in the same aggregate principal amount shall be issued to the
designated Assignee, and the old Notes shall be returned by the Administrative Agent to the
Borrower marked “canceled”. The Register shall be available for inspection by the Borrower or any
Lender (with respect to any entry relating to such Lender’s Loans) at any reasonable time and from
time to time upon reasonable prior notice.



(e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee
(and, in any case where the consent of any other Person is required by Section 10.6(c), by each
such other Person) together with payment to the Administrative Agent of a registration and
processing fee of $3,500 (treating multiple, simultaneous assignments by or to two or more Related
Funds as a single assignment) (except that no such registration and processing fee shall be payable
(y) in connection with an assignment by or to a Lehman Entity or (z) in the case of an Assignee
which is already a Lender or is an affiliate or Related Fund of a Lender or a Person under common
management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the information
contained therein in the Register and give notice of such acceptance and recordation to the
Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request,
shall execute and deliver to the Administrative Agent (in exchange for the Term Loan Note or
Revolving Credit Note, as applicable, of the assigning Lender) a new Term Loan Note or Revolving
Credit Note to the order of such Assignee in an amount equal to the Revolving Credit Commitment
assumed or acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has
retained a Revolving Credit Commitment upon request, a new Term Loan Note or Revolving Credit Note
to the order of the Assignor in an amount equal to the Revolving Credit Commitment retained by it
hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the
form of the Note or Notes replaced thereby.



(f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of
this Section concerning assignments of Loans and Notes relate only to absolute assignments and that
such provisions do not prohibit assignments creating security interests in Loans and Notes,
including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.



(g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting
Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such
in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower,
the option to provide to the Borrower all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the
Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a
Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent,
and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no
SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all outstanding
commercial paper or other indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the United States or any state thereof. In addition,
notwithstanding anything to the contrary in this Section 10.6(g), any SPC may (A) with notice to,
but without the prior written consent of, the Borrower and the Administrative Agent and without
paying any processing fee therefor, assign all or a portion of its interests in any Loans to the
Granting Lender, or with the prior written consent of the Borrower and the Administrative Agent
(which consent shall not be unreasonably withheld) to any financial institutions providing
liquidity and/or credit support to or for the account of such SPC to support the funding or
maintenance of Loans, and (B) disclose on a confidential basis any non-public information relating
to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or
credit or liquidity enhancement to such SPC; provided that non-public information with
respect to the Borrower may be disclosed only with the Borrower’s consent which will not be
unreasonably withheld. This paragraph (g) may not be amended without the written consent of any
SPC with Loans outstanding at the time of such proposed amendment.



10.7 Adjustments; Set-off. (a) Except to the extent that this Agreement provides for
payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if
any Lender (a “Benefitted Lender”) shall at any time receive any payment of all or part of
the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section
8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender’s Obligations, such Benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such portion of each such
other Lender’s Obligations, or shall provide such other Lenders with the benefits of any such
collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter recovered from such
Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.



(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall
have the right, without prior notice to Holdings or the Borrower, any such notice being expressly
waived by Holdings and the Borrower to the extent permitted by applicable law, upon any amount
becoming due and payable by Holdings or the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise), to set off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute
or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of Holdings or the Borrower, as the case may be.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such
setoff and application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such setoff and application.



10.8 Counterparts. This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument. Delivery of an executed signature page
of this Agreement or of a Lender Addendum by facsimile transmission shall be effective as delivery
of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.



10.9 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.



10.10 Integration. This Agreement and the other Loan Documents represent the entire
agreement of Holdings, the Borrower, the Agents, the Arranger and the Lenders with respect to the
subject matter hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Arranger, any Agent or any Lender relative to subject matter hereof not expressly
set forth or referred to herein or in the other Loan Documents.



10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK.



10.12 Submission To Jurisdiction; Waivers. Each of Holdings and the Borrower hereby
irrevocably and unconditionally:



(a) submits for itself and its Property in any legal action or proceeding relating to this
Agreement and the other Loan Documents 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 New York, the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;



(b) consents that any such action or proceeding may be brought in such courts and waives 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;



(c) agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to Holdings or the Borrower, as the case may be at its address set forth in Section 10.2
or at such other address of which the Administrative Agent shall have been notified pursuant
thereto;



(d) agrees that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other jurisdiction; and



(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.



10.13 Acknowledgments. Each of Holdings and the Borrower hereby acknowledges that:



(a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents;



(b) neither the Arranger, any Agent nor any Lender has any fiduciary relationship with or duty
to Holdings or the Borrower arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Arranger, the Agents and the Lenders, on one hand,
and Holdings and the Borrower, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and



(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Arranger, the Agents and the Lenders or
among Holdings, the Borrower and the Lenders.



10.14 Confidentiality. Each of the Agents and the Lenders agrees to keep confidential
all non-public information provided to it by any Loan Party pursuant to this Agreement that is
designated by such Loan Party as confidential; provided that nothing herein shall prevent
any Agent or any Lender from disclosing any such information (a) to the Arranger, any Agent, any
other Lender or any affiliate of any thereof, (b) to any Participant or Assignee (each, a
“Transferee”) or prospective Transferee that agrees in writing to maintain such information
as confidential on terms substantially similar to those contained in this Section 10.14, (c) to any
of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) to
any financial institution that is a direct or indirect contractual counterparty in swap agreements
or such contractual counterparty’s professional advisor (so long as such contractual counterparty
or professional advisor to such contractual counterparty agrees to be bound by the provisions of
this Section), (e) upon the request or demand of any Governmental Authority having jurisdiction
over it, (f) in response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (g) in connection with any litigation or
similar proceeding, (h) that has been publicly disclosed other than in breach of this Section, (i)
to the National Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a Lender’s investment
portfolio in connection with ratings issued with respect to such Lender or (j) in connection with
the exercise of any remedy hereunder or under any other Loan Document.



10.15 Release of Collateral and Guarantee Obligations. (a) Notwithstanding anything
to the contrary contained herein or in any other Loan Document, upon request of the Borrower in
connection with any Disposition of Property permitted by the Loan Documents, the Administrative
Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender
that is a party to any Specified Hedge Agreement) take such actions as shall be required to release
its security interest in any Collateral being Disposed of in such Disposition, and to release any
guarantee obligations under any Loan Document of any Person being Disposed of in such Disposition,
to the extent necessary to permit consummation of such Disposition in accordance with the Loan
Documents.



(b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when
all Obligations (other than obligations in respect of any Specified Hedge Agreement) have been paid
in full, all Commitments have terminated or expired and no Letter of Credit shall be outstanding,
upon request of the Borrower, the Administrative Agent shall (without notice to, or vote or consent
of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement)
take such actions as shall be required to release its security interest in all Collateral, and to
release all guarantee obligations under any Loan Document, whether or not on the date of such
release there may be outstanding Obligations in respect of Specified Hedge Agreements. Any such
release of guarantee obligations shall be deemed subject to the provision that such security
interests and guarantee obligations shall automatically be reinstated if after such release any
portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must
otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though such payment had not
been made.



(c) Notwithstanding anything to the contrary contained herein or in any other Loan Document,
on any date after the Closing Date, upon the request of the Borrower the Administrative Agent shall
(without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is party
to any Specified Hedge Agreement) take such actions as shall be required to release its interest in
one or more Mortgages securing facilities operating up to an aggregate of 750 licensed skilled
nursing beds and/or assisted living facility units in order to permit the Disposition of such
facilities or the incurrence of Permitted Non-Recourse Debt in respect of such facility.



10.16 Accounting Changes. In the event that any “Accounting Change” (as defined
below) shall occur and such change results in a change in the method of calculation of financial
covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent
agree to enter into negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Change with the desired result that the criteria for evaluating
the Borrower’s financial condition shall be the same after such Accounting Change as if such
Accounting Change had not been made. Until such time as such an amendment shall have been executed
and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be calculated or construed as if
such Accounting Change had not occurred. “Accounting Change” refers to any change in accounting
principles required by the promulgation of any rule, regulation, pronouncement or opinion by the
Financial Accounting Standards Board of the American Institute of Certified Public Accountants or,
if applicable, the SEC.



10.17 Delivery of Lender Addenda. Each initial Lender shall become a party to this
Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender,
the Borrower and the Administrative Agent.



10.18 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.



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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the day and year first above written.




EXTENDICARE HOLDINGS, INC.




By:  \s\ Richard L. Bertrand

Name: Richard L. Bertrand

Title: Senior Vice President, Chief Financial

Officer and Treasurer





EXTENDICARE HEALTH SERVICES, INC.




By:  \s\ Richard L. Bertrand

Name: Richard L. Bertrand

Title: Senior Vice President, Chief Financial

Officer and Treasurer





LEHMAN BROTHERS INC.,




as Arranger




By:  \s\ Craig Malloy 

Name: Craig Malloy

Title: Vice President





LEHMAN COMMERCIAL PAPER INC.,




as Administrative Agent




By:  \s\ Craig Malloy 

Name: Craig Malloy

Title: Authorized Signatory




U.S. BANK NATIONAL ASSOCIATION,




as Syndication Agent




By:  \s\ Matthew J. Schultz 

Name: Matthew J. Schultz

Title: Vice President




GENERAL ELECTRIC CAPITAL CORPORATION



as a Co-Documentation Agent




By:  \s\ Steve J. Warner

Name: Steve J. Warner

Title: Duly Authorized Signatory



LASALLE BANK NATIONAL ASSOCIATION,



as a Co-Documentation Agent




By:  \s\ Jon R. Huitink

Name: Jon R. Huitink

Title: Vice President





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