Exhibit 10.1





Exhibit 10.1




AMENDED AND RESTATED LOAN AGREEMENT




THIS AMENDED AND RESTATED LOAN AGREEMENT (the “2010 Agreement”) is made and entered into and
is effective as of September 30, 2010 (the “Effective Date”), for the purpose of amending,
restating and superseding the original Loan Agreement dated June 12, 2009 (the “2009 Agreement”),
by and between ALC THREE, LLC, a Wisconsin limited liability company (the “Borrower”), Borrower’s
parent company, ASSISTED LIVING CONCEPTS, INC., a Nevada corporation (the “Guarantor”) and TCF
NATIONAL BANK, a national banking association (the “Bank”).



WHEREAS, the Bank made a loan to the Borrower in the amount of Fourteen Million and 00/100
Dollars ($14,000,000.00) pursuant to the 2009 Agreement (the “2009 Loan”), which was evidenced by a
promissory note from the Borrower to the Bank in the same amount, dated June 12, 2009 (the “2009
Note”) and secured by certain collateral documents also dated June 12, 2009 (collectively the “2009
Collateral Documents”), consisting of a general business security agreement from the Borrower to
the Bank (the “2009 Security Agreement”) and recorded assignments of rents and leases from the
Borrower to the Bank (the “2009 Rent Assignments”) as well as recorded mortgages from the Borrower
to the Bank (the “2009 Mortgages”), which each encumber three separate assisted living facilities
consisting of land, buildings and related improvements, which are owned by the Borrower and leased
to and operated by the Guarantor, located at: (a) 1024 East 12th Street, Carroll, Iowa
51401 (“Swan House”); (b) 1400 and 1406 East 19th Street, Atlantic, Iowa 50022 (“Allen
House”); and (c) 4010 Ironwood Drive, South Bend, Indiana 46614 (“Inwood Hills Estates”); all as
legally described in the 2009 Mortgages, which are incorporated herein by reference (referred to
individually by name or as a “2009 Facility” and collectively the “2009 Facilities”);



WHEREAS, the Guarantor is transferring legal title to three additional separate assisted
living facilities to the Borrower, located at: (a) 167 Walter Scholer Drive, Lafayette, Indiana
(the “Digby House”); (b) 2801 County Highway I, Chippewa Falls, Wisconsin (the “Wissota Springs
House”); and (c) 725 W. 50th Street, Marion, Indiana (the “York House”), all as legally
described on Exhibit A, which is attached hereto and incorporated herein by reference
(referred to individually by name or as a “2010 Facility” and collectively the “2010 Facilities”)
(the 2009 Facilities and the 2010 Facilities are hereinafter referred to collectively as the
“Facilities” and each individually as a “Facility”);



WHEREAS, the Borrower will enter into written leases with the Guarantor (or any wholly-owned
subsidiary of the Guarantor) for the lease of all three 2010 Facilities (each a “2010 Facility
Lease” and collectively the “2010 Facilities Leases”) and the Guarantor currently operates assisted
living businesses at each 2010 Facility;



WHEREAS, the Borrower has requested and the Bank has agreed to provide financing to the
Borrower for the Borrower’s acquisition of the 2010 Facilities, on the terms and conditions set
forth in this 2010 Agreement.


 


 









 





NOW, THEREFORE, in consideration of the recitals and the mutual agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Guarantor and the Bank hereby agree to amend, restate and supersede
the 2009 Agreement as follows:



ARTICLE I




TERM LOANS




The Bank has or shall make the following loans to the Borrower (the “Loans”) and the Borrower
has or shall deliver the following promissory notes to the Bank (the “Notes”), subject to the
following terms and conditions:



1.1 2009 Loan and 2009 Note. The parties acknowledge and agree that: (a) the Bank
made the 2009 Loan to the Borrower, in the amount of Fourteen Million and 00/100 Dollars
($14,000,000.00), on June 12, 2009; (b) the 2009 Loan is evidenced by the 2009 Note payable to the
Bank; (c) the current principal balance of the 2009 Note as of the Effective Date is Thirteen
Million Five Hundred Sixty Thousand Eight Hundred Twenty and 23/100 Dollars ($13,560,820.23); (d) a
new note in the amount of Thirteen Million Five Hundred Sixty Thousand Eight Hundred Twenty and
23/100 Dollars ($13,560,820.23), in the form which is attached hereto and incorporated herein by
reference as Exhibit B (the “Replacement 2009 Note”), shall be executed by the Borrower and
delivered to the Bank on the Effective Date; and (e) the Replacement 2009 Note shall replace and
supersede the 2009 Note, but shall not constitute a novation thereof. As the 2009 Note did, the
Replacement 2009 Note shall continue to provide for a fixed rate of interest of six and one-half
percent (6.5%) per annum and equal monthly payments amortized over twenty (20) years from the
original date of the 2009 Note, in the amount of One Hundred Five Thousand One Hundred Seventy-five
and 58/100 Dollars ($105,175.58) each, continuing on the 12th day of each month, including October
12, 2010 and each month thereafter until September 12, 2015. However, the maturity date of the
Replacement 2009 Note shall be extended until September 30, 2015, at which time the entire
remaining principal balance of the Replacement 2009 Note and all accrued interest shall be due and
payable in full.



1.2 2010 Loan and 2010 Note. Provided that no Event of Default then exists and
subject to the satisfaction of the conditions precedent set forth in Article III, below, on the
Effective Date, the Bank hereby agrees to lend to the Borrower Twelve Million Two Hundred Fifty
Thousand and 00/100 Dollars ($12,250,000.00) (the “2010 Loan”), which 2010 Loan shall be evidenced
by a promissory note payable to the Bank, in the form attached hereto and incorporated herein by
reference as Exhibit C (the “2010 Note”). Interest on the outstanding balance of the 2010
Note shall accrue at a fixed rate of six and one-half percent (6.5%) per annum. The Borrower shall
make equal monthly payments of principal and interest on the 2010 Note, amortized over a period of
fifteen (15) years, in the amount of One Hundred Seven Thousand Five Hundred Eighty-three and
42/100 Dollars ($107,583.42) each, beginning on November 12, 2010 and continuing on the 12th day of
each month thereafter until September 12, 2015, with the entire remaining principal balance of the
2010 Note and all accrued interest due and payable in full on September 30, 2015.


 


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1.3 Prepayment. The Borrower may make partial prepayments on either or both Notes in
an amount equal to not more than ten percent (10%) of the remaining principal balance of the
applicable Note once each year on or before the anniversary date of the applicable Note, without a
prepayment fee or penalty. If the Borrower prepays any greater amount due under either or both
Notes (voluntarily or as a result of any acceleration following any Event of Default, as defined in
Section 7.1, below), the Borrower shall pay to the Bank a prepayment fee equal to: (a) three
percent (3.0%) of the prepayment amount, if the prepayment occurs on or before the second
anniversary date of the applicable Note; (b) two percent (2.0%) of the prepayment amount, if the
prepayment occurs after the second anniversary date, but on or before the fourth anniversary date
of the applicable Note; or (c) one percent (1.0%) of the prepayment amount, if the prepayment
occurs after the fourth anniversary date, but before the maturity date of the applicable Note.



1.4 Monthly Statements. The Bank shall send the Borrower monthly statements setting
forth the next due date and full amount (including all interest, principal, late charges,
prepayment penalties, or other amounts lawfully due to the Bank) of each payment due to the Bank on
each Note.



1.5 Non-business Days. Whenever any payment to be made hereunder or under either Note
shall be stated to be due on a Saturday, Sunday, or a public holiday under the laws of the State of
Wisconsin, such payment may be made on the next succeeding business day, and such extension of time
shall be included in the computation of interest under the applicable Note.



1.6 Authorizations; Set Off. The Bank is authorized to charge any account of the
Borrower at the Bank for the amount of any and all payments due under this 2010 Agreement, on the
Notes, or with respect to any other indebtedness of the Borrower to the Bank. If any Event of
Default (as defined in Article VII, below) occurs hereunder or with respect to any other
indebtedness of the Borrower to the Bank or any attachment of any balance of the Borrower occurs or
is contemplated, any indebtedness from the Bank to the Borrower may be offset and applied toward
the payment of the Notes or other indebtedness to the Bank, whether or not the Notes or such other
indebtedness, or any part thereof, shall then be due. Promptly upon its charging the account of
the Borrower pursuant to this Section 1.6, the Bank shall give written notice thereof.



1.7 Default Rate. While any Event of Default (as defined in Article VII, below)
exists, the Borrower agrees to pay interest on the unpaid balance of both Notes at a per annum rate
which is equal to the interest rate publicly announced by the Bank from time to time as its base
rate for interest rate determinations in Milwaukee, Wisconsin (the “Reference Rate”), in effect
from time to time, plus six hundred (600) basis points or six percent (6.0%), but not less than
nine and one-half percent (9.5%) per annum (the “Default Rate”). The Default Rate shall change on
each day on which the Reference Rate changes.


 


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1.8 Interest Computation. Interest shall be computed on the basis of actual days
elapsed and a year of three hundred sixty days (360). In no event shall the interest rate
charged hereunder exceed the highest rate permissible under any law that a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the event such a court
determines that Bank has received interest hereunder in excess of such highest rate, Bank shall
promptly refund such excess to the Borrower without any other penalty or damages of any kind.



1.9 Commitment Fee. The Borrower shall pay to the Bank a one-time commitment fee equal
to Sixty-one Thousand Two Hundred Fifty and 00/100 Dollars ($61,250.00) for the 2010 Loan upon
execution of this 2010 Agreement. If the 2010 Loan does not close for any reason, the commitment
fee shall be applied against any costs incurred by the Bank in connection with the 2010 Loan and
any remaining balance shall be refundable to the Borrower.



ARTICLE II




COLLATERAL




The 2009 Collateral Documents, including but not limited to the 2009 Security Agreement, shall
continue to secure the Borrower’s obligations pursuant to the Replacement 2009 Note and shall also
secure the Borrower’s obligations pursuant to this 2010 Agreement and the 2010 Note and any other
obligations of the Borrower to the Bank, and guarantee the priority of their payment. In addition,
the Bank shall have received the following documents from the Borrower (which shall secure the
Borrower’s obligations pursuant to this 2010 Agreement, the Replacement 2009 Note and the 2010 Note
and any other obligations of the Borrower to the Bank, and guarantee the priority of their payment)
prior to disbursing any funds to the Borrower pursuant to the 2010 Loan (the “2010 Collateral
Documents”):



2.1 Mortgages. The Borrower shall deliver to the Bank a duly executed recordable
mortgage for the Wissota Springs House Facility, in the form attached hereto as Exhibit D
and incorporated herein by reference (the “Wissota Springs House Mortgage”), and duly executed
recordable mortgages for the Digby House Facility and the York House Facility, in the form attached
hereto as Exhibit E and incorporated herein by reference (the “Digby House and York House
Mortgages”), granting to the Bank a first priority mortgage interest in each 2010 Facility
(collectively the “2010 Mortgages”).



2.2 2009 Mortgage Amendments. The Borrower shall deliver to the Bank a duly executed
recordable mortgage amendment for the Inwood Hills Estates Facility, in the form attached hereto as
Exhibit F and incorporated herein by reference (the “Inwood Mortgage Amendment”), and duly
executed recordable mortgage amendments for the Swan House Facility and the Allen House Facility,
in the form attached hereto as Exhibit G and incorporated herein by reference (the “Swan
House and Allen House Mortgage Amendments”), which shall amend the prior grant to the Bank of a
first priority mortgage interest in each 2009 Facility in order to secure both Notes.


 


4









 





2.3 Rent Assignments. The Borrower shall deliver to the Bank duly executed recordable
assignments of rents and leases, in the form attached hereto as Exhibit H and
incorporated herein by reference, which assign and transfer to the Bank all of the Borrower’s
right, title and interest in and to the 2010 Facilities Leases and any other leases now existing or
entered into in the future with respect to each 2010 Facility (the “2010 Rent Assignments”).



2.4 2009 Rent Assignment Amendments. The Borrower shall deliver to the Bank duly
executed recordable amendments to the 2009 Rent Assignments, in the form attached hereto as
Exhibit I and incorporated herein by reference, which shall amend the 2009 Rent Assignments
in order to secure both Notes (the “2010 Rent Assignment Amendments”).



2.5 Guaranty. The Guarantor shall deliver to the Bank a duly executed amended and
restated unlimited guaranty, in the form attached hereto as Exhibit J and incorporated
herein by reference, by which the Guarantor shall guaranty the payment of both Notes, as well as
the performance of all obligations of the Borrower pursuant to this 2010 Agreement and any
documents called for herein (the “2010 Guaranty”). The 2010 Guaranty shall amend, restate and
supersede the original Guaranty, which was executed and delivered by the Guarantor to the Bank
pursuant to the 2009 Agreement.



2.6 Environmental Indemnity Agreement. The Borrower and the Guarantor shall deliver
to the Bank a duly executed amended and restated environmental indemnity agreement, in the form
attached hereto as Exhibit K and incorporated herein by reference, whereby the Borrower and
the Guarantor shall jointly and severally indemnify the Bank from any and all liability with
respect to environmental issues relating to each 2009 Facility and each 2010 Facility (the “2010
Environmental Indemnity Agreement”). The 2010 Environmental Indemnity Agreement shall amend,
restate and supersede the original Environmental Indemnity Agreement, which was executed and
delivered by the Borrower and the Guarantor to the Bank pursuant to the 2009 Agreement.



2.7 Real Estate Tax Escrow. The Borrower shall make monthly escrow payments to the
Bank on the same date that monthly principal and interest payments are made on the Notes, in an
amount equal to one-twelfth (1/12th) of the annual real estate property taxes for each
of the 2009 Facilities and each of the 2010 Facilities, as reasonably estimated by the Bank to be
sufficient to pay such taxes prior to their due dates. The Bank shall hold the escrow payments in
a commingled non-interest bearing account for the benefit of the Borrower.



2.8 Other Documents. The Borrower shall deliver such additional collateral documents
as shall be reasonably requested by the Bank or the Bank’s counsel.



2.9 Return of Certain Documents. Upon execution by the Borrower and the Guarantor, as
applicable, and delivery to the Bank of the original Replacement 2009 Note, 2010 Guaranty and 2010
Environmental Indemnity Agreement, the original 2009 Note, Guaranty and Environmental Indemnity
Agreement, each dated June 12, 2009, shall be marked cancelled and returned to the Borrower and
Guarantor, as applicable, by the Bank.


 


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ARTICLE III




CONDITIONS OF BORROWING




Without limiting any of the terms of this 2010 Agreement, the Bank shall not be required to
make any loan or advance to the Borrower hereunder unless the requirements and conditions set forth
herein shall have been met to the reasonable satisfaction of the Bank:



3.1 Ownership, Title Insurance and Modification Endorsements. The Borrower has fee
simple title to each 2010 Facility and has provided to the Bank and has paid the applicable
premiums for commitments of mortgagee’s title insurance covering each 2010 Facility (“the “Title
Commitments”), written by First American Title Insurance Company (the “Title Company”), on the
current 2006 ALTA form, in amounts assigned to each 2010 Facility and approved by the Bank, which
collectively total the amount of the 2010 Loan, insuring to the Bank that the 2010 Mortgages and
the 2010 Rent Assignments create first liens on the marketable fee simple title of each 2010
Facility, subject only to Permitted Liens (as defined in Section 5.8, below). The Title
Commitments and the policies subsequently issued (the “Title Policies”) shall each contain: (i) a
Comprehensive (ALTA Form 9) Endorsement, (ii) an Access Endorsement, (iii) a Contiguity
Endorsement, (iv) a Location Endorsement, (v) a Utilities/Facilities Endorsement, (vi) a Tax
Parcel Endorsement, (vii) a GAP Coverage Endorsement, and (viii) an Environmental Protection
Endorsement (Form 8.1). In addition, the Borrower shall cause the Title Company to issue a
Modification Endorsement for each of the existing title policies covering each of the 2009
Facilities, in order to confirm that the Inwood Mortgage Amendment and the Swan House and Allen
House Mortgage Amendments, together with the 2009 Mortgages, as well as the 2009 Rent Assignments
and the 2010 Rent Assignment Amendments, constitute first liens on the marketable fee simple title
of each 2009 Facility, subject only to Permitted Liens.



3.2. Surveys. The Borrower has delivered to the Bank current surveys of each 2010
Facility, certified by a registered surveyor reasonably acceptable to Bank, in a form showing: (i)
the perimeters of each 2010 Facility and the bearing and dimensions of such perimeters; (ii) the
location of all improvements on each 2010 Facility; (iii) the distance of the improvements from the
perimeters of each 2010 Facility; (iv) the location of all easements and other matters of record
affecting each 2010 Facility; and (v) the location of all adjacent streets and of all adjacent
property with access to each 2010 Facility. Alternatively the Borrower has delivered to the Bank
such other documentation as may be reasonably necessary to cause the Title Company to remove the
standard survey exceptions from its Title Commitments and Title Policies for each 2010 Facility, as
reasonably acceptable to the Title Company.



3.3 Flood Plain Certificates. The Borrower has provided a flood plain certification
reasonably satisfactory to Bank indicating that each 2010 Facility is not located in a floodplain.



3.4 Environmental Reports. The Borrower has provided to the Bank a current phase I
environmental site assessment report for each 2010 Facility that is reasonably
satisfactory to the Bank in all respects.


 


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3.5 Appraisals. The Borrower has provided or the Bank has obtained acceptable
appraisals of each 2010 Facility on a fee simple title basis, confirming that the combined fair
market value of all 2010 Facilities is not less than Fifteen Million Two Hundred Eighty Thousand
and 00/100 Dollars ($15,280,000.00).



3.6 Utilities/Zoning. The Borrower has provided to the Bank satisfactory evidence
that each 2010 Facility has all necessary utility connections, street access and other appropriate
amenities and is properly zoned to permit the existing operations therein.



3.7 Permits/Approvals. The Borrower has provided to the Bank satisfactory evidence
that the Borrower and the Guarantor have all necessary governmental and private third party
easements, licenses, permits, approvals and agreements to permit the use of each 2010 Facility for
the operations therein.



3.8 Leases. The Borrower has provided to the Bank a fully executed copy of each 2010
Facility Lease, together with an estoppel, subordination, attornment and non-disturbance agreement
for each, in the form attached hereto as Exhibit L and incorporated herein by reference
(the “SNDA’s”), from the Guarantor (or a wholly-owned subsidiary of the Guarantor), as tenant.



3.9 2010 Note and 2010 Collateral Documents. The 2010 Note and the 2010 Collateral
Documents have been duly and validly executed and delivered to the Bank by the Borrower, in
recordable form where appropriate.



3.10 Insurance. The Borrower has provided to the Bank satisfactory evidence that the
Borrower has obtained all insurance policies and endorsements required by the 2010 Agreement or any
other applicable document, accompanied by evidence of payment of the premiums therefor has been
delivered to the Bank by the Borrower (this shall include flood insurance if the certificate to be
obtained under Section 3.3, above reveals the need therefor).



3.11 Inspection of 2010 Facilities. The Bank’s representative or agent has physically
inspected each 2010 Facility, which are each reasonably satisfactory to the Bank in all respects.



3.12 Closing Costs. The Borrower has paid to Bank at closing all closing costs and
expenses related to this 2010 Agreement, including but not limited to, appraisal fees, lien status
search fees, title insurance fees, survey fees, credit report fees, environmental and other
inspection fees, and the Bank’s reasonable legal fees. The Bank hereby acknowledges receipt of the
Borrower’s deposit in the amount of Seventy Thousand and 00/100 Dollars ($70,000.00) as a
pre-payment of the closing costs.


 


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3.13 No Default or Material Adverse Change. No Event of Default under this 2010
Agreement, the Notes, any 2009 or 2010 Collateral Document and any SNDA (collectively the “Loan
Documents”) has occurred and is continuing and no material adverse
change to the business of the Borrower or the Guarantor or to any of the 2009 Facilities or
the 2010 Facilities shall have occurred. In addition, no event known to the Borrower or the
Guarantor has occurred which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder or a material adverse change to the business of the
Borrower or the Guarantor or to any of the 2009 Facilities or the 2010 Facilities.



3.14 Organizational Documents. The Bank shall have received the Borrower’s and the
Guarantor’s organizational documents and resolutions authorizing the issuance, execution, delivery
and performance of all documents related to the 2010 Loan.



3.15 Legal Opinion. The Borrower has provided, in form and content reasonably
satisfactory to the Bank, an opinion of counsel for the Borrower and the Guarantor pertaining to
the Replacement 2009 Note, the 2010 Loan, the 2010 Collateral Documents and the 2010 Facilities in
substantially the same form as the legal opinion which was provided for the 2009 Agreement.



3.16 Other Documents. The Borrower has provided such other documentation as Bank or
its counsel may reasonably deem necessary or appropriate to evidence the intent or effectuate the
purpose of this 2010 Agreement.



ARTICLE IV




REPRESENTATIONS AND WARRANTIES




In order to induce the Bank to make the Loans as herein provided, the Borrower and the
Guarantor each represent and warrant to the Bank as follows:



4.1 Organization. The Borrower is a limited liability company duly organized and
existing in current and active status under the laws of Wisconsin. The Guarantor is a corporation
duly organized and existing in current and active status under the laws of Nevada. Each is
authorized to do business and own property in Iowa, Indiana and Wisconsin, and each has all
requisite power and authority, corporate, limited liability company or otherwise, to conduct its
respective business and to own its respective property, wherever conducted or located.



4.2 Ownership and Authority. The execution, delivery and performance of this 2010
Agreement, the Notes, and the applicable Loan Documents are within the limited liability company or
corporate powers of the Borrower and the Guarantor, have been duly authorized by all necessary
action of the Borrower and the Guarantor and do not and will not: (a) require any further consent
or approval of the members, shareholders, managers, directors or officers of the Borrower or the
Guarantor; (b) violate any provision of the articles of organization and operating agreement or the
articles of incorporation and by-laws of the Borrower and the Guarantor or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award presently in effect
having applicability to the Borrower or the Guarantor; (c) require the consent or approval of, or
filing or registration with, any governmental


 


8









 






body, agency or authority; or (d) result in a breach
of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Borrower or the Guarantor pursuant to
any indenture or other material agreement or instrument under which the Borrower or the Guarantor
is a party, or by which the Borrower or the Guarantor or any of their properties may be bound or
affected. This 2010 Agreement, the Notes and the applicable Loan Documents will, when executed and
delivered, constitute legal, valid and binding obligations of the Borrower and the Guarantor, as
applicable, enforceable against each in accordance with their respective terms, except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of creditors’ rights generally.



4.3 Financial Statements. The Borrower’s and the Guarantor’s financial statements,
information and other data previously furnished or to be furnished to the Bank in connection with
the transactions contemplated by this 2010 Agreement and the related documents, are and will
remain, in all material respects, accurate and correct, and the financial statements have or will
have been prepared in accordance with generally accepted accounting principles (“GAAP”)
consistently applied. No material adverse change in the financial condition of the Borrower or the
Guarantor has or will have occurred since the date of such financial statements.



4.4 Liens. The Borrower owns each 2009 Facility and on the Effective Date shall own
each 2010 Facility in fee simple, free and clear of all liens and encumbrances and the Borrower has
good and marketable title to all of its other real and personal property and to all of its assets,
free and clear of all liens, security interests and encumbrances of any kind, except Permitted
Liens (as defined in Section 5.8, below).



4.5 Contingent Liabilities. Except as expressly disclosed in their respective
financial statements previously submitted to the Bank or as contemplated by this 2010 Agreement,
the Borrower and the Guarantor have no guarantees or other contingent liabilities outstanding,
including, without limitation, liabilities by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest in any debtor or
otherwise to assure any creditor against loss that would be required to be disclosed under GAAP,
but which have not been so disclosed. In addition, no such liabilities exist as of the date of
this 2010 Agreement.



4.6 Taxes. Except as expressly disclosed in their respective financial statements
previously submitted to the Bank, the Borrower and the Guarantor, have no material outstanding
unpaid tax liability (except for taxes which are currently accruing from current operations and
ownership of property, which are not delinquent), and no material tax deficiencies have been
proposed or assessed against the Borrower or the Guarantor that would be required to be disclosed
under GAAP, but which have not been so disclosed. In addition, no such liabilities or deficiencies
exist as of the date of this 2010 Agreement. To the best of Borrower’s and the Guarantor’s
knowledge, the Borrower and the Guarantor have each filed when due, if any, all federal and state
income and other tax returns (or proper extensions for such returns) which are required to be filed
and have paid all taxes shown on said returns. To the best of Borrower’s and the Guarantor’s
knowledge, neither the Borrower nor the Guarantor, has any material liabilities, which may be
asserted against either of them by any taxing authority.


 


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4.7 Absence of Adverse Conditions or Litigation. Neither the Borrower nor the
Guarantor has any notice or knowledge of any existing contract, claim, condition or circumstances
involving the Borrower or the Guarantor, or their respective property or business, and neither the
Borrower nor the Guarantor is a party to any litigation or administrative proceeding, nor so far as
is known to the Borrower is any litigation or administrative proceeding threatened against the
Borrower or the Guarantor, which: (a) relates to the execution, delivery or performance of this
2010 Agreement, the Notes, the Collateral Documents or any other Loan Document required hereunder;
(b) would, if adversely determined, cause any material adverse change in any of the 2009 Facilities
or the 2010 Facilities, financial condition or the conduct of business of the Borrower and the
Guarantor; or (c) asserts or alleges that the Borrower or the Guarantor violated any order, decree,
ordinance, law, statute, or regulation of any local, state or federal governmental authority,
including but not limited to environmental laws, relating to the 2009 Facilities or the 2010
Facilities, except to the extent such violation would not be expected to have a material adverse
effect on the operations of the 2009 Facilities or the 2010 Facilities.



4.8 Absence of Default. No event has occurred and is continuing which either of
itself or with the lapse of time or the giving of notice or both, would give any creditor of the
Borrower or the Guarantor the right to accelerate the maturity of any indebtedness of the Borrower
or the Guarantor for borrowed money, which would materially adversely affect the ability of
Borrower and the Guarantor, to perform their obligations hereunder. The Guarantor (or any
wholly-owned subsidiary of the Guarantor), as tenant, is not in default under its rental or other
monetary obligations or its insurance obligations under the 2009 Facilities Leases or the 2010
Facilities Leases. To the best of Borrower’s and Guarantor’s knowledge, neither the Borrower, as
landlord, nor the Guarantor (or any wholly-owned subsidiary of the Guarantor), as tenant, is in
default under or in violation of the non-monetary obligations of the 2009 Facilities Leases or the
2010 Facilities Leases. To the best of Borrower’s and Guarantor’s knowledge, neither the
Borrower, as landlord, nor the Guarantor (or any wholly-owned subsidiary of the Guarantor), as
tenant, is in default under or in violation of any recorded private covenants, conditions and
restrictions, any zoning ordinance or other law and regulation applicable to any Facility or any
other lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction,
decree, determination or award, non-compliance with which would materially adversely affect its
property, financial condition or business operations. No Event of Default or event which with the
lapse of time, the giving of notice, or both, would constitute such an Event of Default shall have
occurred or be continuing under this 2010 Agreement or any document executed in connection with
this 2010 Agreement.



4.9 No Burdensome Agreements. Neither the Borrower nor the Guarantor is a party to
any agreement, instrument or undertaking, or subject to any other restriction: (a) which materially
adversely affects the ability of Borrower and the Guarantor to perform their respective obligations
under this 2010 Agreement and the Guaranty; or (b) under or pursuant to which the Borrower or the
Guarantor is or will be required to place (or under which any other person may place) a lien upon
any Facility or upon any of the other personal property which secures the Loan hereunder other than
Permitted Liens.


 


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4.10 Patriot Act. The Borrower and the Guarantor each acknowledge that the Bank has
notified the Borrower and the Guarantor that pursuant to the requirements of the USA PATRIOT Act,
Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Act”), and the Bank’s policies
and practices, the Bank is required to obtain, verify and record certain information and
documentation that identifies the Borrower and the Guarantor, which information includes the name
and address of the Borrower and the Guarantor and such other information that will allow the Bank
to identify the Borrower and the Guarantor in accordance with the Act. The Borrower shall (a)
ensure that no person who owns a controlling interest in or otherwise controls the Borrower or any
affiliated entity is or shall be listed on the “Specially Designated Nationals and Blocked Person
List” or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury, or included in any Executive Orders, (b) not use or permit the use of
the proceeds of the loans to violate any of the foreign asset control regulations of OFAC or any
enabling statute or Executive Order relating thereto, and (c) comply, and cause each affiliated
entity to comply, with all applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.



4.11 Full Disclosure. Subject to the following sentence, no written information,
exhibit or report furnished by the Borrower or the Guarantor to the Bank in connection with the
negotiation or execution of this 2010 Agreement contains any material misstatement of fact as of
the date when made or omitted to state a material fact or any material fact necessary to make the
statements contained therein not misleading as of the date when made. Certificates or statements
furnished by or on behalf of the Borrower or the Guarantor to the Bank consisting of projections or
forecasts of future results or events have been prepared in good faith and based on good faith
estimates and assumptions of the management of the Borrower or the Guarantor, as applicable, and
neither the Borrower nor the Guarantor have any reason to believe that such projections or
forecasts are not reasonable.



ARTICLE V




NEGATIVE COVENANTS




Unless otherwise stated, while any part of the principal of or interest on either or both
Notes remains unpaid, the Borrower (and the Guarantor, only as to those specific items noted below)
agrees that it shall not do any of the following without the prior written consent of the Bank:



5.1 EBITDA and Rent. The Guarantor fails to maintain and report to the Bank, on a
calendar year basis, EBITDA for its (or its wholly-owned subsidiary’s) operations of the 2009
Facilities and the 2010 Facilities, plus rental payments made to the Borrower under the 2009
Facilities Leases and the 2010 Facilities Leases, of not less than: (a) One Million Four Hundred
Fifty-four Thousand and 00/100 Dollars ($1,454,000.00) for the 2009 Facilities; and (b) One Million
Five Hundred Forty-nine Thousand and 00/100 Dollars ($1,549,000.00) for the 2010 Facilities. For
purposes of this 2010 Agreement, “EBITDA” is defined as net income from continuing operations
before income taxes, interest expense net of interest income, depreciation and amortization, and
non-cash non-recurring gains and losses, including disposal of assets and impairment of long lived
assets.


 


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5.2 Borrower’s Net Rental Income. The Borrower fails to maintain and report to the
Bank, on a calendar year basis, net rental income generated from the 2009 Facilities Leases and the
2010 Facilities Leases of not less than: (a) One Million Five Hundred Fourteen Thousand Five
Hundred Twenty Eight and 40/100 Dollars ($1,514,528.40) for the 2009 Facilities; and (b) One
Million Five Hundred Forty-nine Thousand and 00/100 Dollars ($1,549,000.00) for the 2010
Facilities. Notwithstanding the preceding requirement, to the extent that the Borrower has excess
EBITDA available after payment of all required annual principal and interest payments to the Bank
pursuant to the Notes and after payment of all other obligations or liabilities of the Borrower,
such excess EBITDA may be distributed by the Borrower to the Guarantor, as the Borrower’s sole
member.




5.3 Guarantor’s Consolidated Leverage and Fixed Charge Coverage Ratios.



(a) Consolidated Leverage Ratio. The Guarantor fails to maintain and report to the
Bank, on a calendar year basis, a maximum “Consolidated Leverage Ratio” (as defined in the Credit
Agreement between the Guarantor, General Electric Capital Corporation (“GE Capital”) and certain
other parties, dated November 10, 2006, as amended by the First Amendment entered into as of August
22, 2008 (the “GE Capital Agreement”)) of five to one (5.0 to 1.0) for the Guarantor’s consolidated
operations.



(b) Consolidated Fixed Charge Coverage Ratio. The Guarantor fails to maintain and
report to the Bank, on a calendar year basis, a minimum “Consolidated Fixed Charge Coverage Ratio”
(as defined in the GE Capital Agreement) of one and four-tenths to one (1.4 to 1.0) for the
Guarantor’s consolidated operations.



(c) FASB Rule Changes. The Guarantor, the Borrower and the Bank acknowledge
that the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards
Board (“IASB”) are contemplating changing the accounting treatment of operating leases. In the
event such a change is adopted, the Guarantor, the Borrower and the Bank agree that: (i) such
changes alone will not cause the Borrower or the Guarantor to be in breach of Sections 5.3 (a) or
5.3 (b); (ii) the Bank shall be deemed to have provided its prior written consent to the
Guarantor’s use of the prior accounting treatment of operating leases for purposes of compliance
with Sections 5.3 (a) and 5.3 (b); and (iii) the Guarantor, the Borrower and the Bank will
cooperate in amending this 2010 Agreement to make appropriate changes to the definitions and ratios
in Sections 5.3 (a) and 5.3 (b).



5.4 Facilities Leases. The Borrower and the Guarantor (or any wholly-owned subsidiary
of the Guarantor, as tenant of any Facility) fail to maintain valid, enforceable, triple net leases
during the entire term of this 2010 Agreement with each other, upon substantially the same terms as
the 2009 Facilities Leases and the 2010 Facilities Leases existing on the date of the 2010 Loan.



5.5 Licenses and Permits. The Borrower and the Guarantor fail to maintain all
necessary governmental and private third party easements, licenses, permits, approvals and
agreements to permit the continued use of each Facility for the existing operations therein.


 


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5.6 Salaries and Bonuses. The Borrower pays any salary or bonuses to members,
officers or employees of the Borrower, which are unreasonable in comparison to those paid by
businesses similar in size and nature.



5.7 Restriction on Borrower Indebtedness. The Borrower creates, incurs, assumes or
has outstanding any indebtedness, except: (a) the Replacement 2009 Note and the 2010 Note; (b)
inter-company indebtedness incurred in the ordinary course of business; and (c) indebtedness to
contractors, suppliers and other trade creditors incurred in the ordinary course of business or for
wages or other compensation due to employees and agents of the Borrower for services actually
performed and not otherwise prohibited hereby.



5.8 Restriction on Liens. The Borrower and the Guarantor create or permit to be
created or allow to exist any mortgage, pledge, encumbrance or other lien upon or security interest
on the 2009 Facilities or the 2010 Facilities or any personal property used exclusively in
connection with the 2009 Facilities or the 2010 Facilities, except “Permitted Liens” defined as
follows:



(a) liens for taxes, assessments or governmental charges, and liens incident to construction
and purchase money liens arising out of the acquisition of equipment or fixed assets, all of which
are either not delinquent or are being contested in good faith by the Borrower by appropriate
proceedings which will prevent foreclosure of such liens, and, with respect to taxes, assessments,
government charges and construction liens against which adequate reserves have been provided; and
easements, restrictions, minor title irregularities and similar matters which have no material
adverse effect as a practical matter upon the ownership and use of the property by the Borrower;



(b) liens or deposits in connection with worker’s compensation or other insurance or to secure
customs’ duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to
secure performance of contracts or bids (other than contracts for the payment of money borrowed),
or deposits required by law or governmental regulations or by any court order, decree, judgment or
rule as a condition to the transaction of business or the exercise of any right, privilege or
license; or other liens or deposits of a like nature made in the ordinary course of business;



(c) recorded easements and restrictions disclosed on the Title Commitments, which the Bank, in
its sole discretion, accepts at closing;



(d) rights of the Guarantor, as tenant of the 2009 Facilities and the 2010 Facilities, and
rights of all occupants and residents of the 2009 Facilities and the 2010 Facilities; and


 


13









 





(e) liens or security interests in favor of the Bank.



5.9 Acquisitions and Investments. The Borrower shall not: (i) acquire any other real
property or business; (ii) make any loan, advance or extension of credit to, or investment in, any
other person, corporation or other entity, excluding inter-company loans between the Borrower and
the Guarantor, but including investments acquired in exchange for stock or other securities or
obligations of any nature of the Borrower; or (iii) create or participate in the creation of any
joint venture, except investments in: (a) bank repurchase agreements; (b) savings accounts or
certificates of deposit in a financial institution of recognized standing; (c) obligations issued
or fully guaranteed by the United States; and (d) prime commercial paper maturing within ninety
(90) days of the date of acquisition by the Borrower.



5.10 Liquidation, Merger, Disposition of Assets. Neither the Borrower nor the
Guarantor shall liquidate or dissolve, nor shall the Borrower merge with or into or consolidate
with or into any other entity, or sell, lease, transfer or otherwise dispose of all or any
substantial part of any of the 2009 Facilities or the 2010 Facilities or its other properties,
assets or businesses.



5.11 Receivables. The Borrower shall not discount or sell with recourse, or sell for
less than the face amount thereof, any of its leases, notes or accounts receivable, whether now
owned or hereafter acquired.



5.12 Contingent Liabilities by Borrower. The Borrower shall not guarantee or become a
surety or otherwise contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise
invest in any debtor or otherwise to assure a creditor against loss) for any obligations of others,
except pursuant to the deposit and collection of checks and similar items in the ordinary course of
business.



5.13 Prohibition of Fundamental Changes/No Change in Ownership. Neither the Borrower
nor the Guarantor shall liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution). The Borrower shall not enter into any transaction of merger, consolidation or
amalgamation; convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series
of transactions, all or a substantial part of any of the 2009 Facilities or the 2010 Facilities;
acquire by purchase or otherwise all or substantially all the business or assets of, or stock or
other evidences of beneficial ownership of, any person; make any change in the nature of its
present business or its method of conducting its present business (except to the extent such change
would not reasonably be expected to have a material adverse effect on the operations of the 2009
Facilities or the 2010 Facilities); or sell, transfer, or otherwise dispose of, or permit any party
to sell, transfer or otherwise dispose of, any shares or membership interest in the Borrower;
construct any new improvements or make any physical changes to any of the 2009 Facilities or the
2010 Facilities, costing in excess of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
in any calendar year for any one Facility and not more than Five Hundred Thousand and 00/100
Dollars ($500,000.00) in the aggregate for all six (6) Facilities in any calendar year.


 


14









 





5.14 Dividends and Distributions by Borrower. Except as permitted by Section 5.2,
above, the Borrower shall not declare any dividends on, make any distribution or payment on account
of, or set apart assets for a sinking or other analogous fund for the purchase, redemption,
retirement or other acquisition of, any shares or membership interest in the Borrower, whether now
or hereafter outstanding, or make any other distribution, either directly or indirectly, whether in
cash, property or obligations in respect of, or on account of, or purchase or otherwise acquire,
any shares or membership interest in the Borrower, whether now or hereafter outstanding, from any
person (all such declarations, payments, purchases, redemptions, retirements, acquisitions or
distributions being herein called “restricted payments”).



5.15 Fiscal Year/Address. Borrower and Guarantor shall not change its fiscal year or,
without thirty (30) days written notice to Bank, change its name or location of its principal place
of business.



ARTICLE VI




AFFIRMATIVE COVENANTS




While any part of the principal of or interest on either or both Notes remains unpaid, the
Borrower (and the Guarantor, only as to those specific items noted below) shall, unless waived in
writing by the Bank:



6.1 Reporting Requirements. The Borrower and the Guarantor, as applicable, shall each
submit to the Bank for calendar year 2010 and thereafter:



(a) audited annual consolidated financial statement of the Guarantor, prepared by a certified
public accountant in accordance with GAAP, within ninety (90) days after the end of each fiscal or
calendar year;



(b) true and complete copies of each quarterly Form 10-Q report filed by the Guarantor with
the Securities and Exchange Commission (“SEC”), within five (5) business days after each filing
with the SEC or reasonably equivalent information in a reasonably similar format, within forty-five
(45) after the end of each calendar quarter, if the Guarantor is no longer required to file Form
10-Q;



(c) internally prepared quarterly property operating statements for each individual Facility,
within thirty (30) days after the end of each quarter;



(d) a compliance certificate containing the appropriate calculations of the financial
covenants required pursuant to Sections 5.1 to 5.3, above, and a statement certifying compliance
with all terms of this 2010 Agreement, executed by the principal officer or managing member of the
Borrower and the Guarantor, within ninety (90) days after the end of each calendar year;


 


15









 





(e) within thirty (30) days after the end of each quarter (together with the internally
prepared quarterly property operating statements for each individual Facility required
pursuant to Subsection 6.1(c), above), unless prohibited by the United States Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”) or any other applicable federal or state law
regarding disclosure of patient personal health information, copies of all reports, notices,
inquiries, surveys and correspondence received during the quarter by either the Borrower or the
Guarantor (or any wholly-owned subsidiary of the Guarantor, as tenant of any Facility), from any
federal, state or local governmental entity regarding operational compliance issues, other
regulatory matters, delinquent taxes, delinquent filing of other required reports, building code
violations, environmental or other property conditions, condemnation proceedings or any other
matter, which would have a material adverse effect on the operation or condition of any of the
Facilities (each a “Government Non-Compliance Communication”); to the extent that any individual
Government Non-Compliance Communication has been completely resolved prior to the end of the
quarter through the filing of requested documentation and/or the payment of Five Hundred and 00/100
Dollars ($500.00) or less, such Government Non-Compliance Communication shall be deemed immaterial
and need not be disclosed; and



(f) any other information that the Bank may reasonably request from time to time relating
to the financial condition, business, operation, and properties of the Borrower or the Guarantor.



6.2 Insurance. Borrower shall maintain for each Facility (on an individual or
combined basis) and provide the Bank with evidence of the following:



(a) full replacement cost commercial property insurance insuring the 2009 Facilities and the
2010 Facilities and all other personal property, owned or leased by the Borrower and located at the
2009 Facilities and the 2010 Facilities, with the Bank named as loss payee, in a form reasonably
acceptable to the Bank;



(b) commercial general liability insurance with coverage limits of not less than Five Million
Dollars ($5,000,000.00) per occurrence, in a form reasonably acceptable to the Bank;




(c) worker’s compensation insurance coverage, as required by law; and



(d) any other insurance coverage as is customarily carried by businesses of the size and
character of the business of the Borrower and as may be reasonably required by the Bank (including
insurance required under the Collateral Documents) in amounts and coverage terms reasonably
acceptable to the Bank.



While Borrower shall not be required to maintain loss of rents insurance for the 2009 Facilities or
the 2010 Facilities, the 2009 Facilities Leases and the 2010 Facilities Leases shall provide that
rent does not abate during any period of reconstruction. Guarantor (or any wholly-owned subsidiary
of the Guarantor, as tenant) shall maintain business interruption insurance with coverage limits
reasonably sufficient to cover the rental obligations to the Borrower under the 2009 Facilities
Leases and the 2010 Facilities Leases during any period of reconstruction. All insurers shall be
subject to the Bank’s reasonable approval. Each insurance policy shall be


 


16









 






prepaid for a period of
one (1) year from the policy inception date and shall provide that the coverage may not be canceled or terminated without at least thirty (30) days prior written notice
of cancellation to the Bank. All commercial property insurance claims in excess of Two Hundred
Fifty Thousand Dollars ($250,000.00) shall be adjusted or settled by the Borrower only with the
prior written approval of Bank, which approval shall not be unreasonably withheld, conditioned or
delayed, and all other insurance proceeds shall be settled by the Borrower and delivered to
Borrower to be used as necessary for the repair of the applicable Facility or otherwise to
compensate Borrower for its loss.



6.3 Legal Existence/Obligations. The Borrower and the Guarantor shall each do all
things necessary to: (a) maintain its limited liability company or corporate existence and all
rights and franchises necessary or desirable for the conduct of its business; (b) comply with all
applicable laws, rules, regulations and ordinances, and all restrictions imposed by governmental
authorities, including those relating to environmental standards and controls, except to the extent
such failure to comply would not reasonably expected to have a material adverse effect on the
operations of the 2009 Facilities or the 2010 Facilities; (c) comply in all respects with all
agreements to which the Borrower and/or the Guarantor is bound, except to the extent such failure
to comply would not reasonably be expected to have a material adverse effect on the operations of
the 2009 Facilities or the 2010 Facilities; and (d) pay, before the same become delinquent and
before penalties accrue thereon, all taxes, assessments and other governmental charges against it
or its property, and all of its other liabilities, except to the extent and so long as the same are
being contested in good faith by appropriate proceedings in such manner as not to cause any
material adverse effect upon its property, financial condition or business operations, with
adequate reserves provided for such payments.



6.4 Business Activities. The Borrower and the Guarantor (as to the 2009 Facilities
and the 2010 Facilities only) shall each continue to carry on its respective business activities in
substantially the manner such activities are conducted on the date of this 2010 Agreement and not
make any material change in the nature of its business without the Bank’s prior written consent,
which will not be unreasonably withheld, conditioned or delayed.



6.5 Facilities. Keep the 2009 Facilities and the 2010 Facilities and all personal
property located at the 2009 Facilities or the 2010 Facilities in good condition, repair and
working order (ordinary wear and tear and obsolescence excepted) and free from all liens,
encumbrances and security interests other than Permitted Liens, and make or cause to be made from
time to time all necessary repairs thereto (including external or structural repairs) and renewals
and replacements thereof. Pay and discharge when due all taxes, assessments and other governmental
charges upon all real and personal property as well as claims for labor and materials which, if
unpaid, might become a lien or charge upon the 2009 Facilities or the 2010 Facilities; provided,
that the Borrower and/or the Guarantor may pay special assessments in installments to the extent
permitted by applicable law without being deemed past due; and provided further, that a tax,
assessment, government charge or construction lien claim need not be paid as long as: (i) the
Borrower and/or the Guarantor is contesting such payment in good faith by appropriate proceedings
which will avoid foreclosure of liens securing such items; and (ii) in the case of a contest of a
construction lien or if a judgment is issued in connection with any other contested matter, the
Borrower and/or the Guarantor has deposited with the Bank or posted a bond in a sufficient amount
in order to assure the prompt payment of the lien or judgment
amount in the event that the Borrower is not ultimately successful in its contest. Comply
with all provisions of the existing 2009 Facilities Leases and the 2010 Facilities Leases and any
other leases for any part of the 2009 Facilities or the 2010 Facilities, all recorded private
covenants, conditions and restrictions and all zoning ordinances and other laws and regulations
applicable to each Facility, except to the extent such failure to comply would not reasonably be
expected to have a material adverse effect on the operations of the 2009 Facilities or the 2010
Facilities.


 


17









 





6.6 Audits, Reviews, Meetings with Bank and Inspection of Records. The Borrower and
the Guarantor shall permit the Bank to schedule and perform periodic (but not to exceed
semi-annually) audits or reviews of the Borrower’s and the Guarantor’s financial records at the
Borrower’s or the Guarantor’s principal place of business, at such times as are mutually agreeable
to the parties, provided that the Bank shall not have the right to audit the Guarantor’s financial
records so long as the Guarantor is being periodically audited by a reputable, independent third
party auditor. The Borrower and the Bank shall further schedule meetings between the Borrower’s
management and representatives of the Bank at the Borrowers’ principal place of business
periodically, at such times as are mutually agreeable, for the purpose of reviewing the Borrower’s
financial performance. The Borrower shall further permit representatives of the Bank to visit and
inspect any of the properties and examine any of the books and records of the Borrower at any
reasonable time, upon prior written notice to the Borrower, and as often as may be reasonably
desired, and to contact any contractors and vendors of the Borrower and any other party with any
contractual relationship with the Borrower and to take such other and further actions as they may
reasonably deem necessary or appropriate to verify any matters referred to in, or contemplated by,
this 2010 Agreement, provided however that the Bank shall not unreasonably interfere with the
operations of the 2009 Facilities or the 2010 Facilities in the exercise of its rights under this
Section 6.6.



6.7 Compliance with Laws. Timely comply with all applicable local, state and federal
ordinances, statutes, laws or regulations, including but not limited to environmental laws, failure
to comply with which would reasonably be expected to have a material adverse effect on the
financial condition or business operations of the Borrower and the Guarantor or the operation of
the 2009 Facilities or the 2010 Facilities.



6.8 Orders, Decrees and Other Documents. Provide to the Bank, promptly upon receipt,
copies of any correspondence, notice, pleading, citation, indictment, complaint, order, decree, or
other document from any source asserting or alleging a circumstance or condition which requires or
may require a financial contribution by the Borrower or a cleanup, removal, remedial action, or
other response by or on the part of the Borrower under any state or federal environmental laws or
which seeks damages or civil, criminal or punitive penalties from the Borrower for an alleged
violation of any ordinance, statute, law, regulation or common law, except to the extent such
damages or penalties would not reasonably be expected to have a material adverse effect on the
operation of the 2009 Facilities or the 2010 Facilities.



6.9 Agreement to Update. Advise the Bank in writing as soon as the Borrower becomes
aware of any condition or circumstance, which makes the environmental warranties, contained in this
2010 Agreement or the Environmental Indemnity Agreement incomplete or inaccurate in any material
respect.


 


18









 





ARTICLE VII




DEFAULTS




7.1 Defaults. The occurrence of one or more of the following shall constitute an
“Event of Default”:



(a) the Borrower shall fail to pay any installment of principal and interest on either Note
within ten (10) days after its due date;



(b) the Borrower or the Guarantor, as applicable, shall fail to deliver to the Bank any
certificate, report or other document required by this 2010 Agreement or any of the Loan Documents
by its due date and such failure is not remedied within fifteen (15) days after the date on which
written notice thereof shall have been given to the Borrower or Guarantor, as applicable, by the
Bank;



(c) the Borrower or the Guarantor, as applicable, shall default in the performance or
observance of any agreement, covenant, condition, provision or term of this 2010 Agreement or any
of the Loan Documents and such failure shall not be cured within thirty (30) days after the date on
which notice thereof shall have been give to the Borrower or the Guarantor, as applicable, by the
Bank;



(d) any representation or warranty made by the Borrower or the Guarantor, as applicable, in
this 2010 Agreement or in any of the Loan Documents, or in any certificate delivered pursuant
hereto, or in any financial statement delivered to the Bank hereunder, shall prove to have been
false in any material respect as of the time when made or given;



(e) the Borrower shall: (i) fail to pay all or any part of the principal of or interest on any
other indebtedness for borrowed money owed to any other lender as and when due and payable
(whether at maturity, by acceleration or otherwise), unless such default is waived by the other
lender; (ii) fail to pay any rent due under any lease or sublease, unless such default is waived by
the lessor; or (iii) default in the performance or observance of any agreement, covenant,
condition, provision or term of any other indebtedness for borrowed money, or under any lease or
sublease, and such default shall not be cured within the period or periods of grace, if any,
specified in the instruments governing such obligations, unless such default is waived by the other
lender or lessor;



(f) the Guarantor shall (i) fail to make any payment when due (whether due because of
scheduled maturity, required prepayment provisions, acceleration, demand or otherwise) on any
indebtedness of Guarantor for borrowed money, including but not limited to the indebtedness owed to
GE Capital pursuant to the GE Capital Agreement or any indebtedness which refinances the GE Capital
indebtedness, and such default shall not be cured within the period(s) of grace specified in the
instruments governing such indebtedness, unless such default is waived by the lender or unless such
default does not materially adversely affect the ability of the


 


19









 






Borrower and Guarantor to perform
their obligations under this 2010 Agreement and the Guaranty; (ii) fail to pay any rent due under any material lease or sublease, unless such
default is waived by the lessor or unless such default does not materially adversely affect the
ability of the Borrower and Guarantor to perform their obligations under this 2010 Agreement and
the Guaranty; or (iii) default in the performance or observance of any agreement, covenant,
condition, provision or term of any indebtedness of Guarantor for borrowed money, or under any
material lease or sublease, and such default shall not be cured within the period(s) of grace, if
any, specified in the instruments governing such obligations, unless such default is waived by the
lender or unless such default does not materially adversely affect the ability of the Borrower and
Guarantor to perform their obligations under this 2010 Agreement and the Guaranty;



(g) a final judgment which, together with other outstanding final judgments against the
Borrower exceeds an aggregate amount of Fifty Thousand Dollars ($50,000.00) shall be entered
against the Borrower and shall remain outstanding and unsatisfied, un-bonded, un-stayed or
uninsured after sixty (60) days from the date of entry thereof;



(h) a final judgment which, together with other outstanding final judgments against the
Guarantor exceeds an aggregate amount of Five Million Dollars ($5,000,000.00) shall be entered
against the Guarantor and shall remain outstanding and unsatisfied, un-bonded, un-stayed or
uninsured after sixty (60) days from the date of entry thereof;



(i) the Borrower or the Guarantor shall: (i) become insolvent and such insolvency is not cured
by the Borrower or the Guarantor, as applicable, within sixty (60) days; (ii) be unable, or admit
in writing its inability to pay its debts as they mature; (iii) make a general assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial amount of its property;
(iv) become the subject of an “order for relief” within the meaning of the United States Bankruptcy
Code; (v) file an answer to a creditor’s petition (admitting the material allegations thereof) for
liquidation, reorganization or to effect a plan or other arrangement with creditors and such
proceeding is not dismissed within sixty (60) days; (vi) apply to a court for the appointment of a
receiver for any of its assets and such proceeding is not dismissed within sixty (60) days; (vii)
have a receiver appointed for any of its assets (with or without the consent of the Borrower or the
Guarantor) and such proceeding is not dismissed within sixty (60) days; or (viii) otherwise become
the subject of any insolvency proceedings and such proceeding is not dismissed within sixty (60)
days; or



(j) this 2010 Agreement, the Notes and the Loan Documents shall, at any time after their
respective execution and delivery, and for any reason, cease to be in full force and effect in all
material respects, or shall be declared null and void, or be revoked or terminated, or the validity
or enforceability thereof or hereof shall be contested by the Borrower or the Guarantor, as
applicable, or such party shall deny that it has any or further liability or obligation thereunder
or hereunder, or should the Bank cease to have a perfected first priority security interest in any
material portion of the Collateral pledged to Bank, except for Permitted Liens.


 


20









 






7.2 Termination of Loans and Acceleration of Obligations.



(a) In each case of any Event of Default under Section 7.1, the Bank may, without any
further notice or demand to the Borrower, immediately declare the unpaid principal
balance of either or both Notes payable to the Bank, together with all interest accrued
thereon, and any other indebtedness or obligation of the Borrower to the Bank to be immediately due
and payable; and the unpaid principal balance of, and the accrued interest on, the Notes shall
thereupon be due and payable. Presentment, demand, protest and notice of acceleration, nonpayment
and dishonor are hereby expressly waived.



(b) Upon any Event of Default, the Bank shall have all rights and remedies for default
provided by this 2010 Agreement, the Notes and the Loan Documents and by the Uniform Commercial
Code, as well as any other applicable law including, without limitation, the right to repossess,
render unusable or dispose of collateral without judicial process which is hereby expressly waived
by the Borrower. With respect to such rights and remedies:




(i) Assembling Collateral. The Bank may require the Borrower to assemble the
Collateral covered by the 2009 Security Agreement and to make it available to Bank at any
convenient place designated by the Bank, and the Borrower hereby consents to the entry of
any injunctive order, or other appropriate equitable relief, compelling the Borrower to
assemble such Collateral and to make it available to the Bank at such place. The Borrower
waives any bond or undertaking, which might otherwise be required in connection with such
relief. The Bank may enter the 2009 Facilities or the 2010 Facilities or any other premises
of the Borrower or wherever the Collateral may be located, and keep and store the same on
said premises without charge, until sold.




(ii) Collection and Handling of Receivables. The Bank may receive, open and
dispose of all mail addressed to the Borrower and notify the post office authorities to
change the address for delivery of mail addressed to the Borrower to such address as the
Bank may designate and may endorse the name of the Borrower on any notes, acceptances,
checks, drafts, money orders or other instruments for the payment of money or pledges to the
Borrower. The Bank may without notice to the Borrower, collect, by legal proceedings or
otherwise, extend the time of payment of, or compromise or settle for cash, credit or
otherwise upon any terms, receivables or pledges to the Borrower or release the obligor
thereon and release or impair the Collateral. Nothing in this 2010 Agreement shall be
construed to constitute the Bank as the Borrower’s agent for any purpose. Absent willful
misconduct, the Bank shall not be liable for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the receivables or pledges or
any instrument received in payment thereof or for any damages resulting therefrom.




(iii) Notice of Disposition of Collateral. Written notice, when required by
law, sent to any address of the Borrower and Borrower’s Counsel in this 2010 Agreement, at
least twenty (20) calendar days (counting the day of mailing) before the date of a proposed
disposition of the Collateral is reasonable notice.




(iv) Protection and Preservation of Collateral. The Bank has no duty to
protect, insure, collect or realize upon the Collateral or preserve rights in it against
prior parties. Absent reckless or willful misconduct, the Bank shall not be responsible or
liable
for any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral regardless of the cause thereof.


 


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(v) Expenses and Application of Proceeds. The Borrower shall reimburse the
Bank for any reasonable expenses incurred by the Bank in protecting and enforcing its rights
under this 2010 Agreement and the Collateral Documents including, without limitation,
reasonable legal fees and expenses and all expenses of taking possession, holding, preparing
for disposition and disposing of the Collateral. After deduction of such expenses, the Bank
shall apply the proceeds of disposition to Borrower’s obligations hereunder, and to all of
the Borrower’s other debts, obligations and liabilities secured hereby, in such order and
amounts as the Bank elects.




(vi) Performance by Bank/Waiver. The Bank may, at its option, take any action,
in the Borrower’s name or otherwise, as may be reasonably necessary or desirable to fully or
partially remedy such default, including without limitation signing the Borrower’s name or
paying any amount so required, and the cost shall be and treated for all purposes as an
advance made by the Bank to the Borrower, or the Bank may permit the Borrower to remedy any
default, each without waiving any other subsequent or prior default by the Borrower.



ARTICLE VIII




MISCELLANEOUS




8.1 Accounting Terms/Definitions. Except as otherwise provided, all accounting terms
used herein shall be construed in accordance with GAAP consistently applied and consistent with
those applied in the preparation of the financial statements referred to in Sections 4.3 and 6.1,
and financial data submitted pursuant to this 2010 Agreement shall be prepared in accordance with
such principles.



8.2 Expenses and Attorneys’ Fees. The Borrower and the Guarantor agree, whether or
not the transaction hereby contemplated shall be consummated, to pay and hold the Bank harmless
against liability for the payment of all out-of-pocket expenses arising in connection with the
negotiation, consummation, administration, amendment and collection of this 2010 Agreement, the
Notes and all Loan Documents, as amended, including the reasonable fees and expenses of the Bank’s
counsel in connection with (a) the preparation and consummation of the transactions contemplated by
this 2010 Agreement, plus expenses and (b) the administration of this 2010 Agreement, including all
costs of collection. Notwithstanding the preceding sentence, if this transaction is not
consummated solely due to the Bank’s failure to close, without fault of the Borrower or Guarantor,
neither the Borrower nor the Guarantor shall be liable for the payment of the Bank’s expenses or
attorney fees.


 


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8.3 Successors. The provisions of this 2010 Agreement shall inure to the benefit of
any holder of either Note, and shall inure to the benefit of and be binding upon any successor to
any of the parties hereto. No delay on the part of the Bank or any holder of any Note in
exercising any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any right, power or privilege hereunder preclude other
or further exercise thereof or the exercise of any other right, power or privilege. The rights and
remedies herein specified are cumulative and are not exclusive of any rights or remedies, which the
Bank or any holder of either Note would otherwise have.



8.4 Survival. All agreements, representations and warranties made herein shall
survive the execution of this 2010 Agreement, the making of the Loans hereunder and the execution
and delivery of the Notes until all amounts due hereunder have been paid in full (except as
provided in Section 8.8 below).



8.5 GOVERNING LAW. THIS 2010 AGREEMENT, THE REPLACEMENT 2009 NOTE, THE 2010 NOTE, THE
COLLATERAL DOCUMENTS AND ALL LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF IOWA, INDIANA AND/OR WISCONSIN, AS APPLICABLE (AND, IF NOT
MANDATORY, AS ELECTED BY THE BANK), EXCEPT TO THE EXTENT SUPERSEDED BY FEDERAL LAW. AS A MATERIAL
INDUCEMENT TO BANK TO ENTER INTO THIS 2010 AGREEMENT, THE BORROWER IRREVOCABLY AGREES THAT ANY AND
ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR RELATED TO THIS
2010 AGREEMENT, THE REPLACEMENT 2009 NOTE, THE 2010 NOTE, THE COLLATERAL DOCUMENTS OR ANY LOAN
DOCUMENT, MAY BE LITIGATED IN COURTS WITHIN: (A) MILWAUKEE, WISCONSIN WHERE THE BANK’S PRINCIPAL
PLACE OF BUSINESS IS LOCATED; OR (B) THE APPLICABLE COUNTY IN WISCONSIN, IOWA OR INDIANA WHERE THE
APPLICABLE FACILITY IS LOCATED. THE BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN ANY OF THESE PLACES.



8.6 Entire Agreement/Severability. This 2010 Agreement and the other Loan Documents
executed contemporaneously herewith constitute the entire agreement of the parties pertaining to
the subject matter hereof and supersede all prior or contemporaneous agreements and understandings
of the parties in connection therewith. Invalidity of any provision of this 2010 Agreement shall
not affect the validity of any other provisions.



8.7 WAIVER OF RIGHT TO TRIAL BY JURY. THE BANK AND THE BORROWER HEREBY KNOWINGLY AND
VOLUNTARILY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
ON OR ARISING OUT OF OR IN CONNECTION WITH THIS 2010 AGREEMENT OR ANY LOAN DOCUMENT OR OTHER
AGREEMENT CONTEMPLATED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE BANK TO ENTER INTO THIS 2010 AGREEMENT.


 


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8.8 Indemnification.



(a) The Borrower and the Guarantor jointly and severally agree to indemnify and hold harmless
the Bank, its directors, employees and agents, from and against any and all claims, actions, suits,
losses, liabilities, damages and expenses of every nature and character, except those arising from
the Bank’s reckless or willful misconduct or as set forth in Section 8.2, above, including
reasonable attorneys’ fees and expenses which at any time may be incurred by or asserted against
any of them in connection with or arising out of this 2010 Agreement, the Notes, the Collateral
Documents or any Loan Document, or arising out of the entering into, documentation, amendment or
performance of the transactions contemplated hereby.



(b) If after receipt of any payment of all or any part of any obligation of the Borrower, the
Bank is for any reason compelled to surrender such payment to any person or entity, because such
payment is determined to be void or voidable as a preference, impermissible setoff or a diversion
of trust funds, or for any other reason, this 2010 Agreement shall continue in full force and the
Borrower shall be liable to, and shall indemnify and hold the Bank harmless for, the amount of such
payment surrendered.



(c) The provisions of this Section 8.8 shall be and remain effective notwithstanding any
contrary action which may have been taken by the Bank in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to the Bank’s rights under this 2010 Agreement
and shall be deemed to have been conditioned upon such payment having become final and irrevocable.
The provisions of this Section 8.8 shall survive the termination of this 2010 Agreement.



8.9 Notice of Breach by Bank. The Borrower agrees to give the Bank written notice of
and a reasonable opportunity to cure any action or inaction by the Bank or any agent or attorney of
the Bank in connection with this 2010 Agreement or the obligations that may be actionable against
the Bank or any agent or attorney of the Bank or a defense to payment of the obligations for any
reason, including, but not limited to, commission of a tort or violation of any contractual duty or
duty implied by law. No such claim, defense or event currently exists.



8.10 Counterparts. This 2010 Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the same instrument.



8.11 Participations. The Borrower agrees that the Bank may, at its option, sell to a
financing institution or any other party (except a direct competitor of the Borrower or the
Guarantor, prior to any Event of Default) interests in the Loan and the Borrower’s obligations
pursuant to the Loan Documents and, in connection with each such sale, and thereafter, disclose to
the purchaser of each such interest, financial and other information concerning the Borrower.


 


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8.12 Notices. All communications or notices required under this 2010 Agreement shall
be deemed to have been given on the date when shall be deemed to have been received when personally
delivered, mailed by registered or certified mail, with return receipt requested, or by fax or
e-mail (provided the original is mailed within two (2) days of the fax or e-mail transmission) to
the addresses shown below (unless and until any of such parties advises the other in writing of a
change in such address):




	 	(a)	 	If to the Borrower:







ALC, Three, LLC

c/o Assisted Living Concepts, Inc.

W140 N8981 Lilly Road

Menomonee Falls, WI 53051

Attn: Chief Financial Officer

Fax: 262-257-8999

E-Mail: jbuono@alcco.com




With a copy to:




Assisted Living Concepts, Inc.

W140 N8981 Lilly Road

Menomonee Falls, WI 53051

Attn: General Counsel

Fax: 262-257-8901

E-Mail: efonstad@alcco.com




	 	(b)	 	If to the Bank:







TCF National Bank

500 West Brown Deer Road

P.O. Box 170708

Milwaukee, Wisconsin 53217

Attn: Anthony J. Laszewski

Fax: 414-351-8694

E-mail: tlaszews@tcfbank.com




With a copy to:




O’Neil, Cannon, Hollman, DeJong & Laing S.C.

111 E. Wisconsin Avenue, Suite 1400

Milwaukee, Wisconsin 53202-4870

Attn: Claude J. Krawczyk

Fax: 414-276-6581

E-mail: claude.krawczyk@wilaw.com


 


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Executed as of the Effective Date.



	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	ALC THREE, LLC, a Wisconsin limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John Buono
 

John Buono, Treasurer
	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	ASSISTED LIVING CONCEPTS, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John Buono
 

John Buono, Senior Vice President,

Chief Financial Officer, Treasurer
	 	 
	 
	 	 	 	 	 	 
	 	 	TCF NATIONAL BANK, a national banking association	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ Anthony J. Laszewski
 

Anthony J. Laszewski, Vice President
	 	 






 


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