Document:

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                                                                     EXHIBIT 4.3

                                     FORM OF
            AMENDED AND RESTATED PNM RESOURCES, INC. PNM DIRECT PLAN

            This is an amendment and restatement of the PNM Resources, Inc.
PNM Direct Plan that became effective on December 21, 2001 to replace and assume
the Public Service Company of New Mexico PNM Direct Plan originally established
on August 28, 1996.

         1. Definitions

         The following terms when used herein shall have the following meanings:

         "Broker" shall mean one or more securities broker-dealers selected from
time to time by the Plan Administrator to act as independent agents for the
Participants in the purchase and sale of shares of the Company's Common Stock
under the Plan.

         "Common Stock" shall mean the Company's common stock, no par value.

         "Company" shall mean PNM Resources, Inc., a New Mexico corporation

         "Dividend Payment Date" shall mean each date on which dividends are
paid on the Company's Common Stock. These dates are usually on or about February
15, May 15, August 15, and November 15 of each year.

         "Enrollment Form" shall mean such enrollment form as the Plan
Administrator or the Company may from time to time, or upon request, furnish to
Shareholders or new investors who are not Shareholders and which shall be
returned to the Plan Administrator together with the Initial Cash Investment to
indicate their election to participate in the Plan.

         "Exchange" shall mean the New York Stock Exchange.

         "Initial Cash Investment" shall mean any initial cash investment made
by a new investor for the purchase of their first shares of the Company's Common
Stock under the Plan. An Initial Cash Investment may not (a) equal less than $50
or (b) total more than $10,000.

         "Optional Cash Investment" shall mean any additional cash payment made
by a Participant for the purchase of shares of the Company's Common Stock under
the Plan. Optional Cash Investments may not (a) equal less than $50 each or (b)
total more than $10,000 in any month.

         "Participant" shall mean any Shareholder or new investor who is not a
Shareholder who has enrolled in the Plan on-line over the Internet or has
returned an Enrollment Form to the Plan Administrator indicating election to
participate in the Plan.

         "Plan" shall mean the Amended and Restated PNM Resources, Inc. PNM
Direct Plan.

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         "Plan Administrator" shall mean [Mellon Bank, N.A. through its
designated affiliates Mellon Investor Services and FutureShare Financial LLC] or
other agent duly appointed by the Company to administer the Plan.

         "Pricing Period" shall have the meaning set forth below in Section 9.

         "Shareholder" shall mean any holder of record of the Company's Common
Stock.

         "Threshold Price" shall have the meaning set forth below in Section 10.

         "Trading Day" shall have the meaning set forth below in Section 9.

         "Waiver Investment Date" shall have the meaning set forth below in
Section 9.

         2. Purpose

         The purpose of this Plan is to provide Shareholders and interested new
investors with a convenient and economical method of investing cash dividends
and making cash investments in shares of the Company's Common Stock. The shares
of the Company's Common Stock purchased under this Plan with reinvested cash
dividends and Initial and Optional Cash Investments will, at the election of the
Company, be newly issued shares purchased directly from the Company, treasury
shares purchased directly from the Company, shares purchased on the open market
by the Broker or a combination thereof.

         3. Eligibility for Participation

         Existing Shareholders and interested new investors who are not
Shareholders are eligible to participate in the Plan and may do so by enrolling
on-line [over the Internet through Investor ServiceDirect at
www.melloninvestor.com] or by completing the Enrollment Form and returning it to
the Plan Administrator, together with an Initial Cash Investment or an Optional
Cash Investment, as the case may be. Instructions for enrollment on-line over
the Internet are provided by the Plan Administrator. Any Shareholder who owns
less than 100 shares shall be automatically enrolled in the full dividend
reinvestment portion of the Plan, unless the Participant elects to receive cash
dividends.

         4. Administration

         The Plan Administrator shall maintain records and perform such other
duties as may be required. In addition, the Plan Administrator shall send to
each Participant (a) annual or quarterly (annual if the Participant holds less
than 100 shares and participates only in the dividend reinvestment portion of
the Plan) statements of the Participant's Plan account, and (b) annual and
quarterly reports to Shareholders, proxy statements and income tax information
for reporting dividends. Shares purchased by a Participant through the Plan
shall be held by the Plan Administrator in book-entry form. Unless instructed
otherwise, the dividends on such shares shall be automatically reinvested on
each Dividend Payment Date.

         The Company shall pay all costs of administering the Plan, except as
provided in this paragraph of this Section 4. Participants will pay the trading
fees for any shares purchased on the open market and a fee for plan histories.
No commission will be paid on any newly issued shares purchased directly from
the Company under the Plan. A Participant will incur trading and transaction
fees upon the sale of shares in the Participant's Plan account in connection
with the withdrawal of a Participant from this Plan as described in Section 12.
Additional fees are set forth in the fee schedule attached as Appendix A. The
fee schedule in Appendix A may be amended from time to time by the Company.

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         5. Reinvestment of Dividends

         A. Full Dividend Reinvestment. Shareholders may elect to have their
cash dividends automatically reinvested by enrolling on-line over the Internet
[through Investor ServiceDirect at www.melloninvestor.com] or completing the
Enrollment Form to that effect and returning it to the Plan Administrator. In
such cases, cash dividends on shares held in a Participant's Plan account will
be automatically reinvested until such shares are withdrawn from the
Participant's Plan account or until the Participant changes his or her dividend
reinvestment election by notifying the Plan Administrator. Cash dividends will
be reinvested as promptly as practicable (normally within 5 business days of the
Dividend Payment Date). Reinvestment of cash dividends shall commence with
dividends paid on the next Dividend Payment Date following the Plan
Administrator's receipt of the Enrollment Form or the processing of enrollment
on-line provided the enrollment request is received on or before the record date
established for payment of the dividends. If the Plan Administrator receives the
enrollment request after such record date, then the reinvestment of dividends
shall commence with the Dividend Payment Date following the next established
record date.

         B. Partial Dividend Reinvestment. A Participant may elect to have cash
dividends on a designated number of shares held in the Participant's Plan
account paid directly to the Participant, with the balance being reinvested in
shares of Common Stock, except that Participants owning less than 100 shares of
Common Stock may not elect this partial dividend reinvestment option.

         C. Cash Investment Only. A Participant may elect to have cash dividends
on all shares held in the Participant's Plan account paid directly to the
Participant in lieu of being reinvested.

         D. No Option Chosen. If a Participant does not elect a cash dividend
participation option as described above in Subsections 5A, 5B or 5C, then such
Participant will be deemed to have elected the full divided reinvestment option
described in Subsection 5A above.

         E. Return of Uninvested Cash Dividends. Any cash dividends to be
reinvested under the Plan that are not reinvested in shares of Common Stock
within 30 days of the applicable Dividend Payment Date shall be promptly paid,
without interest, to the Participant at his or her address of record by First
Class Mail.

         6. Initial and Optional Cash Investments

         Shareholders or interested new investors may elect to make an Initial
Cash Investment by enrolling on-line over the Internet [through Investor
ServiceDirect at www.melloninvestor.com] or by completing the Enrollment Form
for that purpose and returning it to the Plan Administrator. Participants are
eligible to make Optional Cash Investments at any time. Initial and/or Optional
Cash Investments, or any portion thereof, may be accepted or rejected by the
Plan Administrator or Company in their sole discretion. Any Initial or Optional
Cash Investment, or portion thereof, that is rejected by the Plan Administrator
or the Company will be returned to the Participant as promptly as practical
after the Plan Administrator or the Company elects to reject such investments.
Initial Cash Investments and Optional Cash Investments shall be used to purchase
shares of the Company's Common Stock as promptly as practical (normally, at
least once every five business days) after the Plan Administrator receives the
Participant's Initial Cash Investment or Optional Cash Investment in the form of
an electronic bank transfer, check or money order payable to [Mellon Bank, N.A.]
No Participant's Initial Cash Investment may (a) equal less than $50 or (b)
total more than $10,000. No Participant's Optional Cash Investments may (a)
equal less than $50 each or (b) total more than $10,000 in any month. Any
Initial Cash Investments and Optional Cash Investments

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that are not invested within 35 days of receipt by the Plan Administrator or the
Company shall be promptly returned, without interest, to the Participant at his
or her address of record by First Class Mail.

         7. Cash Investments Over the Maximum Monthly Amount

         Interested new investors may make an Initial Cash Investment and/or
Participants may make an Optional Cash Investment in excess of $10,000 per month
with the Company's prior written approval. Approval is obtained by submitting a
"Request for Waiver" form, which may be obtained by contacting the Plan
Administrator's Waiver Department at [1-917-320-6300] (or such other number as
the Plan Administrator or the Company may establish from time to time).
Completed Request For Waiver forms must be sent to the Plan Administrator's
Waiver Department via facsimile no later than three business days prior to the
Pricing Period Start Date provided in Appendix B (which Appendix B may be
amended from time to time by the Plan Administrator and an authorized officer of
the Company) to this Plan for the applicable Pricing Period. If a Request for
Waiver is approved, then the Participant must send to the Plan Administrator its
Optional Cash Investment of greater than $10,000.

         The Plan Administrator must receive the Initial or Optional Cash
Investment in excess of the $10,000 monthly maximum in good funds pursuant to a
Request For Waiver form by the "Optional Cash Investments Must be Received By"
date as set forth on Appendix B. This date is the close of business on the last
day immediately preceding the first day of the applicable Pricing Period Start
Date as set forth in Appendix B. Funds received after this date will be returned
to the Participant without interest.

         The Company has the sole discretion whether to approve any request to
make an Initial or Optional Cash Investment in excess of the $10,000 monthly
maximum. In deciding whether to approve a Request for Waiver, the Company may
consider, among other things, the following factors:

         o    whether, at the time of such request, the Plan Administrator is
              acquiring shares of Common Stock for the Plan directly from the
              Company or in the open market or in privately negotiated
              transactions with third parties;

         o    the Company's need for additional funds;

         o    the Company's desire to obtain additional funds through the sale
              of Common Stock as compared to other sources of funds;

         o    the purchase price likely to apply to any sale of Common Stock;

         o    the extent and nature of a Participant's prior participation in
              the Plan;

         o    the number of shares of Common Stock a Participant holds of
              record; and

         o    the total amount of Initial and Optional Cash Investments in
              excess of $10,000 per month for which Requests for Waiver have
              been submitted.

         If Requests for Waivers are submitted for any Pricing Period for an
aggregate amount in excess of the amount the Company is then willing to accept,
the Company may honor such requests in order of receipt, pro rata or by any
other method that the Company determines, in its sole discretion, to be
appropriate. In making this determination, the Company may consider the make-up
of its shareholder base and existing ownership levels.

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         8. Purchase of Shares

         Shares of the Common Stock purchased under the Plan will, at the
Company's election, be newly issued shares purchased directly from the Company,
treasury shares purchased directly from the Company, shares purchased by a
Broker in the open market, or a combination thereof. The Company has full
discretion as to whether the Common Stock purchased under the Plan will be
purchased on the open market or purchased directly from the Company.

         o    Common Stock purchased in the open market. The investment price of
              the Common Stock purchased in the open market with reinvested
              dividends, Initial Cash Investments or with Optional Cash
              Investments will be the weighted average price, including
              brokerage trading fees, incurred in connection with the purchase
              of such shares for the relevant investment date. No interest will
              be paid on funds held by the Plan Administrator pending
              investment. The Plan Administrator will normally invest cash
              dividends within 5 business days of the Dividend Payment Date and
              will normally invest Initial and Optional Cash Investments at
              least once every 5 business days.

         o    Common Stock purchased directly from the Company. The price of the
              Common Stock purchased directly from the Company with reinvested
              dividends, Initial Cash Investments or Optional Cash Investments
              will be the average of the high and low sale prices of shares of
              the Common Stock reported on the Exchange for the Dividend Payment
              Date, Initial Cash Investment date or Optional Cash Investment
              date, as the case may be. No interest will be paid on funds held
              by the Plan Administrator pending investment. The Plan
              Administrator will normally invest Initial and Optional Cash
              investments at least once every 5 business days.

         The Participants will be credited with that number of shares, including
fractional shares computed to 4 decimal places, equal to the amount invested
with respect to his, her or its Plan account, divided by the price per share of
such shares for all purchases for all Participants during the applicable period.

         9. Purchase of Shares Upon a Request for Waiver

         Shares purchased pursuant to a granted Request for Waiver are purchased
directly from the Company. Initial and Optional Cash Investments made pursuant
to a Request for Waiver will be applied to the purchase of shares of Common
Stock as soon as practicable on or after the "Waiver Investment Date" as set
forth in Appendix B to the Plan (which Appendix B may be amended from time to
time by the Plan Administrator and an authorized officer of the Company).
Initial and Optional Cash Investments made pursuant to a Request for Waiver are
acquired at a price equal to the average of the daily high and low sales prices
computed up to four decimal places, if necessary, of the Common Stock as
reported on the Exchange for the 10 Trading Days (as defined below) immediately
preceding the applicable Waiver Investment Date. A "Trading Day" means a day on
which trades in the Common Stock are reported on the Exchange. The period
encompassing the first 10 Trading Days immediately preceding the next following
Waiver Investment Date constitutes the relevant "Pricing Period." The Plan
Administrator will apply all Initial and Optional Cash Investments for which
good funds are received on or before the first business day before the Pricing
Period to the purchase of shares of common stock as soon as practicable on or
after the next following Waiver Investment Date.

         A discount of up to 3% from the purchase price may be offered, in the
Company's sole discretion, with respect to a particular Waiver Investment Date
to Participants on purchases of the Company's common stock through Initial or
Optional Cash Investments in excess of $10,000 per month.

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         Setting a discount from the purchase price for Initial or Optional Cash
Investments in excess of $10,000 per month for a particular Pricing Period will
not affect the setting of a discount for any other Pricing Period. The Company
may increase, decrease, or waive its right to set a discount from the purchase
price for any particular Pricing Period. Neither the Company nor the Plan
Administrator is required to give a new investor or Participant notice of the
discount for any Pricing Period. When setting the discount, if any, the Company
will consider, among other things, capital needs, whether the Company wants to
issue equity to meet capital needs and how quickly the Company desires to close
the investment.

         10. Threshold Price

         The Company may set a minimum purchase price per share (the "Threshold
Price") for Initial or Optional Cash Investments in excess of $10,000 per month
made pursuant to a granted Request for Waiver for any Pricing Period. The
determination of whether to set a Threshold Price will be made at least three
business days before the first day of the Pricing Period.

         The Company will notify the Plan Administrator of the Threshold Price,
if any. In deciding whether to set a Threshold Price, the Company will consider
current market conditions, the level of participation in the Plan and the
current and projected capital needs. Participants and potential new investors
may ascertain whether a Threshold Price has been set or waived for any given
Pricing Period by calling [Mellon's Waiver Department at 1-917-320-6300] (or
such other number as the Plan Administrator or the Company may establish from
time to time).

         The Company will fix the Threshold Price for a Pricing Period as a
dollar amount that the average of the high and low sales prices as reported by
the Exchange for each Trading Day of that Pricing Period (not adjusted for
discounts, if any) must equal or exceed. The Company will exclude from the
Pricing Period and from the determination of the purchase price any Trading Day
within the Pricing Period that does not meet the Threshold Price. The Company
also will exclude from the Pricing Period and from the determination of the
purchase price any day in which no trades of Common Stock are made on the
Exchange. Thus, for example, if the Threshold Price is not met or no sales of
Common Stock are reported for 2 of the 10 Trading Days in a Pricing Period, then
the Company will base the purchase price upon the remaining 8 Trading Days in
which the Threshold Price was met.

         In addition, the Company will return a pro rata portion of each Initial
or Optional Cash Investment made pursuant to an approved Request for Waiver for
each Trading Day of a Pricing Period for which the Threshold Price is not met or
for each day in which no trades of common stock are reported on the Exchange as
soon as reasonably practical after the Pricing Period, without interest.

         The returned amount will equal one-tenth (1/10th) of the total amount
of that Initial or Optional Cash Investment (not just the amount exceeding
$10,000) for each Trading Day that the Threshold Price is not met or for each
Trading Day in which sales are not reported. Thus, for example, if the Threshold
Price is not met or no sales of Company Common Stock are reported for 2 of the
10 Trading Days in a Pricing Period, then the Company will return two-tenths
(2/10th or 20%) of the Initial or Optional Cash Investment to the investor
without interest after conclusion of the Pricing Period. This does not
constitute a discount to the purchase price; however, it does reduce the amount
of the offering.

         The establishment of the Threshold Price and the possible return of a
portion of the payment apply only to Initial and/or Optional Cash Investments
exceeding $10,000 per month made pursuant to a granted Request for Waiver.
Setting a Threshold Price for a Pricing Period will not affect the setting of a
Threshold Price for any other Pricing Period. The Company may waive its right to
set a Threshold Price

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for any particular Pricing Period. Neither the Company nor the Plan
Administrator is required to give an interested new investor or Participant
notice of the Threshold Price for any Pricing Period. The Company may alter or
amend at our sole discretion these Pricing Periods at any time and from time to
time, prior to the commencement of any Pricing Period and prior to the granting
of any waiver with respect to such period.

         11. Amendment of Investment Option

         A Participant may change the investment option elected under this Plan
by notifying the Plan Administrator in writing, by telephone or on-line over the
Internet. With respect to the dividend reinvestment portion of the Plan, notices
received by the Plan Administrator not later than the record date established
for any Dividend Payment Date shall be effective as of such Dividend Payment
Date and thereafter.

         12. Withdrawal of Purchased Shares and Termination of Account

         A Participant who has purchased shares of the Company's Common Stock
under this Plan may withdraw all or a portion of such shares by notifying the
Plan Administrator, specifying in the notice the number of shares to be
withdrawn. If requested, certificates for whole shares withdrawn shall be issued
to the Participant or transferred to a Participant's brokerage account. In no
case shall certificates or transfers for fractional shares be issued. Any
fractional share withdrawn shall be liquidated as soon as practicable after
receipt of withdrawal notice by the Plan Administrator. The liquidated amount
for any fractional share and certificate(s) for whole shares shall be mailed
directly to the withdrawing Participant by the Plan Administrator.

         If the Participant is terminating participation in this Plan, the
Participant may withdraw all shares and request that a certificate be issued,
that whole shares be transferred to a Participant's brokerage account or that
shares be sold and the cash proceeds be forwarded to the Participant. Such sale
shall be made by the Broker. The Broker will have full discretion as to all
matters relating to sales by the Broker, including the date of any sales and the
prices received for such shares. The proceeds of such sale by the Broker, less
trading and transaction fees, shall be paid to such Participant. Shares that are
to be sold by the Broker may be aggregated with those of other terminating
Participants, in which case the proceeds to each terminating Participant will be
based on the average sales price, less trading and transaction fees.

         13. Common Stock Rights Offering, Stock Split, Stock Dividend

         Participation in any Common Stock rights offering shall be based upon
both the shares registered in the Participant's name and the shares (including
fractional shares) credited to the Participant's Plan account in book-entry
form. Any stock dividend or share resulting from any stock split with respect to
shares credited to the Participant's Plan account shall be added to such
account.

         14. Voting

         All shares credited to a Participant's Plan account in book-entry form
shall be voted as the Participant directs. If on the record date for a meeting
of Shareholders there are shares credited to the Participant's Plan account, the
Participant (whether or not any shares are registered in the Participant's own
name) shall be sent the proxy materials for such meeting. If the Participant
returns an executed proxy, all shares credited to the Participant (including any
fractional shares) shall be voted in accordance with such proxy; otherwise, the
Participant may vote such shares in person at such meeting.

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<PAGE>

         15. Liability

         In administering this Plan, neither the Company nor the Plan
Administrator nor any Broker shall be liable for any good faith acts or
omissions, including, without limitation, any failure to terminate a
Participant's Plan account upon such Participant's death or adjudicated
incompetence, prior to receiving notice in writing of such death or adjudicated
incompetence, or with respect to the prices at which shares are purchased or
sold for a Participant's account and the times when such purchases and sales are
made, or with respect to any loss or fluctuation in the market value after the
purchase or sale of such shares.

         16. Termination, Suspension or Modification

         The Company reserves the right to modify, suspend or terminate this
Plan at any time. The Company also reserves the right to change the
administrative procedures of the Plan, together with the Plan Administrator. The
Company reserves the right to modify, suspend or terminate participation in the
Plan by otherwise eligible persons to eliminate practices that are inconsistent
with the purpose of the Plan. In such event, the Plan Administrator will notify
the Participant in writing and will continue to keep safe shares of Common Stock
allocated to the Participant, but will no longer accept optional cash
investments or reinvest dividends.

         17. Direct Registration System

         Shares purchased under the Plan (unless requested otherwise by the
Participant) will be in book-entry-form through the use of the Direct
Registration System. Shares may be transferred from the Participant's Plan
account to a Participant's brokerage account and vice versa.

         18. Compliance With Applicable Laws and Regulations

         The Company's obligation to offer, issue or sell shares of the
Company's Common Stock under this Plan shall be subject to (a) the Company's
obtaining any necessary approval, authorization or consent from any regulatory
authority having jurisdiction and from any stock exchange on which shares of the
Company's Common Stock may then be listed and (b) the condition that, at the
time of the offer, issuance or sale, the price at which such shares are being
offered, issued or sold shall be at least equal to the then stated value of such
shares.

         19. Selection of Broker

         Any Broker serving in such capacity pursuant to the Plan shall be
selected by the Company, and the Plan Administrator and the Company, or either
of them, shall, subject to the provisions hereof, make such arrangements and
enter into such agreements with the Broker in connection with the activities
contemplated by the Plan as the Plan Administrator and the Company, or either of
them, deem reasonable and appropriate.

         20. Source of Shares of Common Stock

         The Company shall not change the source of Common Stock purchased by
Participants in the Plan (i.e., either (i) newly issued shares of Common Stock
or shares of Common Stock held in the Company's treasury (not reserved for any
other purpose) purchased from the Company, or (ii) shares of Common Stock
purchased in the open market) more often than every 3 months. The Company shall
not exercise its right to change the source of shares absent a recorded
determination by the Company's Board of Directors,

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<PAGE>

Chief Financial Officer or Treasurer that the Company's need to raise additional
capital has changed or there is another valid reason for a change.

         21. Plan Of Distribution

         Subject to the discussion below, the Company will distribute newly
issued shares of its Common Stock sold under the Plan. [FutureShare Financial
LLC], a registered broker/dealer, will assist in the identification of investors
and other related services, but will not be acting as an underwriter with
respect to shares of Common Stock sold under the Plan. There are no brokerage
commissions or service charges allocated to Participants in the Plan in
connection with their purchases of such newly issued shares of Common Stock.

         In connection with the administration of the Plan, the Company may be
requested to approve investments made pursuant to Requests for Waiver by or on
behalf of Participants or other investors who may be engaged in the securities
business. Persons who acquire shares of the Company's Common Sock through the
Plan and resell them shortly after acquiring them, including coverage of short
positions, under certain circumstances, may be participating in a distribution
of securities that would require compliance with Regulation M under the
Securities Exchange Act of 1934, as amended, and may be considered to be
underwriters within the meaning of the Securities Act of 1933, as amended. The
Company will not extend to any such person any rights or privileges other than
those to which it would be entitled as a Participant, nor will the Company enter
into any agreement with any such person regarding the resale or distribution by
any such person of the shares of our Common Stock so purchased. The Company may,
however, accept investments made pursuant to Requests for Waiver by such
persons. From time to time, financial intermediaries, including brokers and
dealers, and other persons may engage in positioning transactions in order to
benefit from any waiver discounts applicable to investments made pursuant to
Requests for Waiver under the Plan. Those transactions may cause fluctuations in
the trading volume of the Common Stock. Financial intermediaries and such other
persons who engage in positioning transactions may be deemed to be underwriters.
The Company has no arrangements or understandings, formal or informal, with any
person relating to the sale of shares of our Common Stock to be received under
the Plan.

         22. Controlling Law

         This Plan shall be construed, regulated and administered under the laws
of the State of New Mexico.

         23. Uncollectible Funds

         If a check or automatic debit submitted for investment is returned
unpaid or rejected for any reason, the Plan Administrator will consider the
request for investment of such funds null and void and will charge the
Participant the applicable fees set forth in Appendix A, as revised from time to
time. Any shares purchased upon the prior credit of such funds will be
immediately removed from the Participant's account. The Plan Administrator will
be entitled to sell those shares to satisfy any uncollected amounts. If the net
proceeds of the sale of such shares are not sufficient to satisfy the balance of
such uncollected amounts, the Plan Administrator may sell additional shares from
the Participant's account to satisfy the uncollected balance.

         24. Acceptance of Terms and Conditions of Plan by Participants

         Each Participant, by completing an Enrollment Form and as a condition
of participation herein, for himself or herself, his or her heirs, executors,
administrators, legal representatives and assigns, approves and agrees to be
bound by the provisions of this Plan and any subsequent amendments hereto, and
all actions of the Company and the Plan Administrator hereunder.

                                       9
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                                   APPENDIX A

                                  FEE SCHEDULE

<Table>
<S>                                                         <C>
ENROLLMENT FEE FOR NEW INVESTORS.....................       NO CHARGE

PURCHASE OF SHARES...................................       TRADING FEE INCLUDED IN SHARE PRICE (CURRENTLY [$0.06]
                                                            PER SHARE), APPLICABLE WHEN SHARES ARE ACQUIRED ON THE
                                                            OPEN MARKET BY THE PLAN ADMINISTRATOR THROUGH ITS
                                                            BROKER

REINVESTMENT OF DIVIDENDS............................       TRADING FEE INCLUDED IN SHARE PRICE (CURRENTLY [$0.06]
                                                            PER SHARE), APPLICABLE WHEN SHARES ARE ACQUIRED ON THE
                                                            OPEN MARKET BY THE PLAN ADMINISTRATOR THROUGH ITS
                                                            BROKER

OPTIONAL CASH INVESTMENTS............................       TRADING FEE INCLUDED IN SHARE PRICE (CURRENTLY [$0.06]
                                                            PER SHARE), APPLICABLE WHEN SHARES ARE ACQUIRED ON THE
                                                            OPEN MARKET BY THE PLAN ADMINISTRATOR THROUGH ITS
                                                            BROKER

SALE OF SHARES (PARTIAL OR FULL):
     TRANSACTION FEE.................................       $15 PER SALE TRANSACTION OR LIQUIDATION
     TRADING FEE.....................................       CURRENTLY $0.06 PER SHARE

GIFT OR TRANSFER OF SHARES...........................       NO CHARGE

SAFEKEEPING OF STOCK CERTIFICATES....................       NO CHARGE

CERTIFICATE ISSUANCE.................................       NO CHARGE

RETURNED CHECKS OR REJECTED AUTOMATIC DEBIT..........       $35 PER CHECK OR TRANSACTION

DUPLICATE STATEMENTS:
     CURRENT YEAR....................................       NO CHARGE
     PRIOR YEAR(s)...................................       $20 FLAT FEE PER REQUEST PER EACH PRIOR YEAR
</Table>

PLAN FEES ARE AT THE DISCRETION OF PNM RESOURCES, INC. INVESTORS SHOULD NOT RELY
SOLELY ON THE ABOVE SCHEDULE AS FEES ARE SUBJECT TO CHANGE. FOR MORE
INFORMATION, PLEASE CONTACT THE PLAN ADMINISTRATOR AT 1-800____________________.

<PAGE>
                                   APPENDIX B

"REQUEST FOR WAIVER" INITIAL OR OPTIONAL CASH INVESTMENTS OF MORE THAN $10,000
PER MONTH

<Table>
<Caption>
                     Threshold Price and
                   Waiver Discount, if any,       Optional Cash Investments      Pricing Period           Waiver
    Year                will be set by               Must be received by           Start Date         Investment Date
    ----           ------------------------       -------------------------      --------------       ---------------
<S>                <C>                            <C>                            <C>                  <C>
    2003                  January 13                   January 15                  January 16            January 31
                          February 3                   February 5                  February 6           February 21
                          February 24                  February 26                 February 27            March 13
                           March 14                     March 18                    March 19              April 2
                            April 3                      April 7                     April 8              April 23
                           April 24                     April 28                    April 29               May 13
                            May 14                       May 16                      May 19                June 3
                            June 4                       June 6                      June 9               June 23
                            June 24                      June 26                    June 27               July 14
                            July 15                      July 17                    July 18               August 1
                           August 4                     August 6                   August 7              August 21
                           August 22                    August 26                  August 27            September 11
                         September 12                 September 16               September 17            October 1
                           October 2                    October 6                  October 7             October 21
                          October 22                   October 24                 October 27            November 10
                          November 11                  November 13               November 14            December 1
                          December 2                   December 4                 December 5            December 19
                          December 22                  December 24                December 26         January 12, 2004

    2004                  January 13                   January 15                 January 16             February 2
                          February 3                   February 5                 February 6            February 23
                          February 24                  February 26                February 27             March 12
                           March 15                     March 17                   March 18               April 1
                            April 2                      April 6                    April 7               April 22
                           April 23                     April 27                   April 28                May 12
                            May 13                       May 17                     May 18                 June 2
                            June 3                       June 7                     June 8                June 22
                            June 23                      June 25                    June 28               July 13
                            July 14                      July 16                    July 19              August 14
                           August 3                     August 5                   August 6              August 20
                           August 23                    August 25                  August 26            September 10
                         September 13                 September 15               September 16           September 30
                           October 1                    October 5                  October 6             October 20
                          October 21                   October 25                 October 26             November 9
</Table>

         PRICING PERIODS ARE AT THE DISCRETION OF PNM RESOURCES, INC. INVESTORS
SHOULD NOT RELY SOLELY ON THE ABOVE SCHEDULE AS PRICING PERIODS AND WAIVER
INVESTMENT DATES MAY VARY. FOR MORE INFORMATION, PLEASE CONTACT THE PLAN
ADMINISTRATOR'S WAIVER DEPARTMENT AT [1-917-320-6300].LEHMAN BROTHERS

                                  Transactions

Date:        28 June 2002

To:          Richard Bertrand
             Senior Vice President Planning and Development
             Extendicare Health Services, Inc.
             111 West Michigan Street
             Milwaukee, WI 53202-290
             Telephone:  (414) 908-8298
             Telecopier: (414) 908-8111

Cc           Laura Brown
             Deputy General Counsel
             (414) 908-8452
             Fax (414) 908-8481

From:        Lehman Brothers Special Financing Inc.
             745 7th Avenue, 5th Floor
             New York, NY 10019
             Lorna Brown - Transaction Management Group
             Facsimile:    201-524-2080 (United States of America)
             Telephone:    212-526-9201

Global ID: 255057

--------------------------------------------------------------------------------
Dear Sir or Madam:

The purpose of this communication (this "Confirmation") is to confirm the terms
and conditions of the transaction (the "Transaction") entered into between
Lehman Brothers Special Financing Inc. ("Party A") and Extendicare Health
Services, Inc. ("Party B") on the Trade Date specified below. This Confirmation
constitutes a "Confirmation" as referred to in the Agreement specified below.

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of 11 June, 2002, as amended and supplemented from time to
time, between Party A and Party B (the "Agreement"). All provisions contained in
the Agreement shall govern this Confirmation except as expressly modified below.

The definitions and provisions contained in the 2000 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc. (the
"Definitions") are incorporated into this Confirmation. In the event of any
inconsistency between the Definitions and the terms of this Confirmation, this
Confirmation will govern. For the purpose of the Definitions, references herein
to a "Transaction" shall be deemed to be references to a "Swap Transaction".

Party A and Party B each represents that entering into the Transaction is within
its capacity, is duly authorized and does not violate any laws of its
jurisdiction of organization or residence or the terms of any agreement to which
it is a party. Party A and Party B each represents that (a) it is not relying on
the other party in connection with its decision to enter into this Transaction,
and neither party is acting as an advisor to or fiduciary of the other party in
connection with this Transaction regardless of whether the other party provides
it with market information or its views; (b) it understands the risks of the
Transaction and any legal, regulatory, tax, accounting and economic consequences
resulting therefrom; and (c) it has

                              LEHMAN BROTHERS INC.
                     745 SEVENTH AVENUE, NEW YORK NY 10019

<PAGE>

determined based upon its own judgment and upon any advice received from its own
professional advisors as it has deemed necessary to consult that entering into
the Transaction is appropriate for such party in light of its financial
capabilities and objectives. Party A and Party B each represents that upon due
execution and delivery of this Confirmation, it will constitute a legally valid
and binding obligation, enforceable against it in accordance with its terms,
subject to applicable principles of bankruptcy and creditors' rights generally
and to equitable principles of general application.

The terms of the particular Transaction to which this Confirmation relates are
as follows:

        GENERAL TERMS:

                Trade Date:                     28 June, 2002

                Effective Date:                 28 June, 2002

                Termination Date:               The earlier of (i) 15 December,
                                                2007 and (ii), the Optional
                                                Termination Date (as defined
                                                below)

                Optional Termination Date:      Party A has the option to
                                                terminate this Transaction
                                                effective 15 December, 2002 and
                                                each Business Day thereafter
                                                (the "Optional Termination
                                                Date"), with oral notice to
                                                Party B, thirty (30) calendar
                                                days prior to such Optional
                                                Termination Date. The Optional
                                                Termination Date will become
                                                both the Termination Date, and
                                                each party's final Payment Date
                                                in respect of this Transaction.

                                                Payments relating to the
                                                Optional Termination shall be
                                                calculated in accordance with
                                                the following formula:

                                                (the corresponding Premium minus
                                                100%) multiplied by the Notional
                                                Amount.

<TABLE>
<CAPTION>
                                                    Optional Termination Date      Premium
                                                    <S>                         <C>
                                                          12/15/02                 104.675%
                                                          12/15/03                 l03.117%
                                                          12/15/04                 101.558%
                                                          12/15/05                  100.00%
</TABLE>

                Notional Amount:                USD150,000,000

        FIXED AMOUNTS:

                Fixed Amount Payer:             Party A

                               Global id: 255057

                                   Page 2 of 4

<PAGE>

        Fixed Amount Payer                      The 15th calendar day of June
        Period End Dates:                       and December, commencing 15
                                                December, 2002, and ending on
                                                the Termination Date, subject to
                                                subject to adjustment in
                                                accordance with the Following
                                                Business Day Convention, with No
                                                Adjustment of Period End Dates.

        Fixed Amount Payer Payment Dates:       The 15th calendar day of June
                                                and December, commencing 15
                                                December, 2002, and ending on
                                                the Termination Date, subject to
                                                adjustment in accordance with
                                                the Following Business Day
                                                Convention, with No Adjustment
                                                of Period End Dates.

        Fixed Rate:                             9.35% per annum

        Fixed Rate Day Count Fraction:          30/360

FLOATING AMOUNTS:

        Floating Amount Payer:                  Party B

        Floating Amount Payer                   The 15th calendar day of each
        Period End Dates:                       month, commencing 15 July, 2002,
                                                and ending on the Termination
                                                Date, subject to adjustment in
                                                accordance with the Following
                                                Business Day Convention.

        Floating Amount Payer Payment Dates:    The 15th calendar day of each
                                                month, commencing 15 July, 2002,
                                                and ending on the Termination
                                                Date, subject to adjustment in
                                                accordance with the Following
                                                Business Day Convention.

        Floating Rate for initial
        Calculation Period:                     1.83875% (exclusive of the
                                                Spread)

        Floating Rate Option:                   USD-LIBOR-BBA

        Designated Maturity:                    1 month

        Spread:                                 4.805%

        Floating Rate Day Count Fraction:       Actual/360

        Reset Dates:                            The first day of each
                                                Calculation Period

BUSINESS DAYS:                                  New York

MISCELLANEOUS:

        Calculation Agent:                      Party A

        Office:                                 For the purposes of this
                                                Transaction, Party A is not a
                                                Multibranch Party, and the
                                                Office of Party B is its Head
                                                Office Branch.

                               Global id: 255057

                                   Page 3 of 4

<PAGE>

                                               ADDITIONAL PROVISION:

                                               In the event Party B terminates
                                               this Swap Transaction, then the
                                               Related Transactions shall also
                                               be terminated.

RELATED TRANSACTION:                           The Transaction (Lehman Global
                                               Id: 255059) with a Trade Date of
                                               28 June, 2002 and a Maturity
                                               Date of 15 December, 2007

Please confirm your agreement with the foregoing by executing this Confirmation
and returning such Confirmation, in its entirety, to us at facsimile number
201-524-2080 (United States of America), Attention: Documentation.

Yours sincerely,                               Accepted and agreed to:
Lehman Brothers Special Financing Inc.         Extendicare Health Services, Inc.

Diana Nottingham
Vice President
Lehman Brothers Special Financing Inc.         By: /s/ Richard L. Bertrand
/s/ Diana Nottingham                               ----------------------------
                                               Name:   Richard L. Bertrand
                                               Title:  Senior V.P.

                               Global id: 255057
<PAGE>
                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

(MULTICURRENCY-CROSS BORDER)

                                     ISDA(R)

                  International Swap Dealers Association, Inc.

                                MASTER AGREEMENT

                            dated as of June 11, 2002

         LEHMAN BROTHERS                            EXTENDICARE HEALTH
      SPECIAL FINANCING INC.                           SERVICES, INC.

have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows: -

1.       INTERPRETATION

(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purposes of the relevant Transaction.

(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement") and the parties would
not otherwise enter into any Transactions.

2.       OBLIGATIONS

(a)      GENERAL CONDITIONS.

         (i) Each party will make each payment or delivery specified in each
         Confirmation to be made by it, subject to the other provisions of this
         Agreement.

<PAGE>

         (ii) Payments under this Agreement will be made on the due date for
         value on that date in the place of the account specified in the
         relevant Confirmation or otherwise pursuant to this Agreement, in
         freely transferable funds and in the manner customary for payments in
         the required currency. Where settlement is by delivery (that is, other
         than by payment), such delivery will be made for receipt on the due
         date in the manner customary for the relevant obligation unless
         otherwise specified in the relevant Confirmation or elsewhere in this
         Agreement.

         (iii) Each obligation of each party under Section 2(a)(i) is subject to
         (1) the condition precedent that no Event of Default or Potential Event
         of Default with respect to the other party has occurred and is
         continuing, (2) the condition precedent that no Early Termination Date
         in respect of the relevant Transaction has occurred or been effectively
         designated and (3) each other applicable condition precedent specified
         in this Agreement.

(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.

(c)      NETTING.  If on any date amounts would otherwise be payable: -

         (i) in the same currency; and

         (ii) in respect of the same Transaction,

by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.

(d)      DEDUCTION OR WITHHOLDING FOR TAX.

         (i) GROSS-UP. All payments under this Agreement will be made without
         any deduction or withholding for or on account of any Tax unless such
         deduction or withholding is required by any applicable law, as modified
         by the practice of any relevant

                                       2
<PAGE>

         governmental revenue authority, then in effect. If a party is so
         required to deduct or withhold, then that party ("X") will: -

                  (1) promptly notify the other party ("Y") of such requirement;

                  (2) pay to the relevant authorities the full amount required
                  to be deducted or withheld (including the full amount required
                  to be deducted or withheld from any additional amount paid by
                  X to Y under this Section 2(d)) promptly upon the earlier of
                  determining that such deduction or withholding is required or
                  receiving notice that such amount has been assessed against Y;

                  (3) promptly forward to Y an official receipt (or a certified
                  copy), or other documentation reasonably acceptable to Y,
                  evidencing such payment to such authorities; and

                  (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition
                  to the payment to which Y is otherwise entitled under this
                  Agreement, such additional amount as is necessary to ensure
                  that the net amount actually received by Y (free and clear of
                  Indemnifiable Taxes, whether assessed against X or Y) will
                  equal the full amount Y would have received had no such
                  deduction or withholding been required. However, X will not be
                  required to pay any additional amount to Y to the extent that
                  it would not be required to be paid but for: -

                           (A) the failure by Y to comply with or perform any
                           agreement contained in Section 4(a)(i), 4(a)(iii) or
                           4(d); or

                           (B) the failure of a representation made by Y
                           pursuant to Section 3(f) to be accurate and true
                           unless such failure would not have occurred but for
                           (I) any action taken by a taxing authority, or
                           brought in a court of competent jurisdiction, on or
                           after the date on which a Transaction is entered into
                           (regardless of whether such action is taken or
                           brought with respect to a party to this Agreement) or
                           (II) a Change in Tax Law.

         (ii) LIABILITY. If: -

                  (1) X is required by any applicable law, as modified by the
                  practice of any relevant governmental revenue authority, to
                  make any deduction or withholding in respect of which X would
                  not be required to pay an additional amount to Y under Section
                  2(d)(i)(4);

                  (2) X does not so deduct or withhold; and

                  (3) a liability resulting from such Tax is assessed directly
                  against X,

         then, except to the extent Y has satisfied or then satisfies the
         liability resulting from such Tax, Y will promptly pay to X the amount
         of such liability (including any related liability for interest, but
         including any related liability for penalties only if Y has failed to
         comply with or perform any agreement contained in Section 4(a)(i),
         4(a)(iii) or 4(d)).

                                       3
<PAGE>

(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.

3.       REPRESENTATIONS

Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that: -

(a)      BASIC REPRESENTATIONS.

         (i) STATUS. It is duly organised and validly existing under the laws of
         the jurisdiction of its organisation or incorporation and, if relevant
         under such laws, in good standing;

         (ii) POWERS. It has the power to execute this Agreement and any other
         documentation relating to this Agreement to which it is a party, to
         deliver this Agreement and any other documentation relating to this
         Agreement that it is required by this Agreement to deliver and to
         perform its obligations under this Agreement and any obligations it has
         under any Credit Support Document to which it is a party and has taken
         all necessary action to authorise such execution, delivery and
         performance;

         (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
         performance do not violate or conflict with any law applicable to it,
         any provision of its constitutional documents, any order or judgment of
         any court or other agency of government applicable to it or any of its
         assets or any contractual restriction binding on or affecting it or any
         of its assets;

         (iv) CONSENTS. All governmental and other consents that are required to
         have been obtained by it with respect to this Agreement or any Credit
         Support Document to which it is a party have been obtained and are in
         full force and effect and all conditions of any such consents have been
         complied with; and

         (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
         Credit Support Document to which it is a party constitute its legal,
         valid and binding obligations, enforceable in accordance with their
         respective terms (subject to applicable bankruptcy, reorganisation,
         insolvency, moratorium or similar laws affecting creditors' rights
         generally and subject, as to enforceability, to equitable principles of
         general application (regardless of whether enforcement is sought in a
         proceeding in equity or at law)).

                                       4
<PAGE>

(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.

(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.

(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.

(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.

(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.

4.       AGREEMENTS

Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party: -

(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs: -

         (i) any forms, documents or certificates relating to taxation specified
         in the Schedule or any Confirmation;

         (ii) any other documents specified in the Schedule or any Confirmation;
         and

         (iii) upon reasonable demand by such other party, any form or document
         that may be required or reasonably requested in writing in order to
         allow such other party or its Credit Support Provider to make a payment
         under this Agreement or any applicable Credit Support Document without
         any deduction or withholding for or on account of any Tax or with such
         deduction or withholding at a reduced rate (so long as the completion,
         execution or submission of such form or document would not materially
         prejudice the legal or commercial position of the party in receipt of
         such demand), with any such form or document to be accurate and
         completed in a manner reasonably satisfactory to such other party and
         to be executed and to be delivered with any reasonably required
         certification,

                                       5
<PAGE>

in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.

(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.

(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.

(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.

(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.

5.       EVENTS OF DEFAULT AND TERMINATION EVENTS

(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party: -

         (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
         any payment under this Agreement or delivery under Section 2(a)(i) or
         2(e) required to be made by it if such failure is not remedied on or
         before the third Local Business Day after notice of such failure is
         given to the party;

         (ii) BREACH OF AGREEMENT. Failure by the party to comply with or
         perform any agreement or obligation (other than an obligation to make
         any payment under this Agreement or delivery under Section 2(a)(i) or
         2(e) or to give notice of a Termination Event or any agreement or
         obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
         with or performed by the party in accordance with this Agreement if
         such failure is not remedied on or before the thirtieth day after
         notice of such failure is given to the party;

                                       6
<PAGE>

         (iii) CREDIT SUPPORT DEFAULT.

                  (1) Failure by the party or any Credit Support Provider of
                  such party to comply with or perform any agreement or
                  obligation to be complied with or performed by it in
                  accordance with any Credit Support Document if such failure is
                  continuing after any applicable grace period has elapsed;

                  (2) the expiration or termination of such Credit Support
                  Document or the failing or ceasing of such Credit Support
                  Document to be in full force and effect for the purpose of
                  this Agreement (in either case other than in accordance with
                  its terms) prior to the satisfaction of all obligations of
                  such party under each Transaction to which such Credit Support
                  Document relates without the written consent of the other
                  party; or

                  (3) the party or such Credit Support Provider disaffirms,
                  disclaims, repudiates or rejects, in whole or in part, or
                  challenges the validity of, such Credit Support Document;

         (iv) MISREPRESENTATION. A representation (other than a representation
         under Section 3(e) or (f)) made or repeated or deemed to have been made
         or repeated by the party or any Credit Support Provider of such party
         in this Agreement or any Credit Support Document proves to have been
         incorrect or misleading in any material respect when made or repeated
         or deemed to have been made or repeated;

         (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
         Provider of such party or any applicable Specified Entity of such party
         (1) defaults under a Specified Transaction and, after giving effect to
         any applicable notice requirement or grace period, there occurs a
         liquidation of, an acceleration of obligations under, or an early
         termination of, that Specified Transaction, (2) defaults, after giving
         effect to any applicable notice requirement or grace period, in making
         any payment or delivery due on the last payment, delivery or exchange
         date of, or any payment on early termination of, a Specified
         Transaction (or such default continues for at least three Local
         Business Days if there is no applicable notice requirement or grace
         period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
         or in part, a Specified Transaction (or such action is taken by any
         person or entity appointed or empowered to operate it or act on its
         behalf);

         (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
         applying to the party, the occurrence or existence of (l) a default,
         event of default or other similar condition or event (however
         described) in respect of such party, any Credit Support Provider of
         such party or any applicable Specified Entity of such party under one
         or more agreements or instruments relating to Specified Indebtedness of
         any of them (individually or collectively) in an aggregate amount of
         not less than the applicable Threshold Amount (as specified in the
         Schedule) which has resulted in such Specified Indebtedness becoming,
         or becoming capable at such time of being declared, due and payable
         under such agreements or instruments, before it would otherwise have
         been due and payable or (2) a default by such party, such Credit
         Support Provider or such Specified Entity (individually or
         collectively) in making one or more payments on the due date thereof in

                                       7
<PAGE>

         an aggregate amount of not less than the applicable Threshold Amount
         under such agreements or instruments (after giving effect to any
         applicable notice requirement or grace period);

         (vii) BANKRUPTCY. The party, any Credit Support Provider of such party
         or any applicable Specified Entity of such party: -

                  (1) is dissolved (other than pursuant to a consolidation,
                  amalgamation or merger); (2) becomes insolvent or is unable to
                  pay its debts or fails or admits in writing its inability
                  generally to pay its debts as they become due; (3) makes a
                  general assignment, arrangement or composition with or for the
                  benefit of its creditors; (4) institutes or has instituted
                  against it a proceeding seeking a judgment of insolvency or
                  bankruptcy or any other relief under any bankruptcy or
                  insolvency law or other similar law affecting creditors'
                  rights, or a petition is presented for its winding-up or
                  liquidation, and, in the case of any such proceeding or
                  petition instituted or presented against it, such proceeding
                  or petition (A) results in a judgment of insolvency or
                  bankruptcy or the entry of an order for relief or the making
                  of an order for its winding-up or liquidation or (B) is not
                  dismissed, discharged, stayed or restrained in each case
                  within 30 days of the institution or presentation thereof; (5)
                  has a resolution passed for its winding-up, official
                  management or liquidation (other than pursuant to a
                  consolidation, amalgamation or merger); (6) seeks or becomes
                  subject to the appointment of an administrator, provisional
                  liquidator, conservator, receiver, trustee, custodian or other
                  similar official for it or for all or substantially all its
                  assets; (7) has a secured party take possession of all or
                  substantially all its assets or has a distress, execution,
                  attachment, sequestration or other legal process levied,
                  enforced or sued on or against all or substantially all its
                  assets and such secured party maintains possession, or any
                  such process is not dismissed, discharged, stayed or
                  restrained, in each case within 30 days thereafter; (8) causes
                  or is subject to any event with respect to it which, under the
                  applicable laws of any jurisdiction, has an analogous effect
                  to any of the events specified in clauses (1) to (7)
                  (inclusive); or (9) takes any action in furtherance of, or
                  indicating its consent to, approval of, or acquiescence in,
                  any of the foregoing acts; or

         (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
         Provider of such party consolidates or amalgamates with, or merges with
         or into, or transfers all or substantially all its assets to, another
         entity and, at the time of such consolidation, amalgamation, merger or
         transfer: -

                  (1) the resulting, surviving or transferee entity fails to
                  assume all the obligations of such party or such Credit
                  Support Provider under this Agreement or any Credit Support
                  Document to which it or its predecessor was a party by
                  operation of law or pursuant to an agreement reasonably
                  satisfactory to the other party to this Agreement; or

                                       8
<PAGE>

                  (2) the benefits of any Credit Support Document fail to extend
                  (without the consent of the other party) to the performance by
                  such resulting, surviving or transferee entity of its
                  obligations under this Agreement.

(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below: -

         (i) ILLEGALITY. Due to the adoption of, or any change in, any
         applicable law after the date on which a Transaction is entered into,
         or due to the promulgation of, or any change in, the interpretation by
         any court, tribunal or regulatory authority with competent jurisdiction
         of any applicable law after such date, it becomes unlawful (other than
         as a result of a breach by the party of Section 4(b)) for such party
         (which will be the Affected Party): -

                  (1) to perform any absolute or contingent obligation to make a
                  payment or delivery or to receive a payment or delivery in
                  respect of such Transaction or to comply with any other
                  material provision of this Agreement relating to such
                  Transaction; or

                  (2) to perform, or for any Credit Support Provider of such
                  party to perform, any contingent or other obligation which the
                  party (or such Credit Support Provider) has under any Credit
                  Support Document relating to such Transaction;

         (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
         brought in a court of competent jurisdiction, on or after the date on
         which a Transaction is entered into (regardless of whether such action
         is taken or brought with respect to a party to this Agreement) or (y) a
         Change in Tax Law, the party (which will be the Affected Party) will,
         or there is a substantial likelihood that it will, on the next
         succeeding Scheduled Payment Date (1) be required to pay to the other
         party an additional amount in respect of an Indemnifiable Tax under
         Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
         6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
         required to be deducted or withheld for or on account of a Tax (except
         in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no
         additional amount is required to be paid in respect of such Tax under
         Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or
         (B));

         (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
         next succeeding Scheduled Payment Date will either (1) be required to
         pay an additional amount in respect of an Indemnifiable Tax under
         Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
         6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
         been deducted or withheld for or on account of any Indemnifiable Tax in
         respect of which the other party is not required to pay an additional
         amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
         either case as a result of a party consolidating

                                       9
<PAGE>

         or amalgamating with, or merging with or into, or transferring all or
         substantially all its assets to, another entity (which will be the
         Affected Party) where such action does not constitute an event
         described in Section 5(a)(viii);

         (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
         specified m the Schedule as applying to the party, such party ("X"),
         any Credit Support Provider of X or any applicable Specified Entity of
         X consolidates or amalgamates with, or merges with or into, or
         transfers all or substantially all its assets to, another entity and
         such action does not constitute an event described in Section
         5(a)(viii) but the creditworthiness of the resulting, surviving or
         transferee entity is materially weaker than that of X, such Credit
         Support Provider or such Specified Entity, as the case may be,
         immediately prior to such action (and, in such event, X or its
         successor or transferee, as appropriate, will be the Affected Party);
         or

         (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
         is specified in the Schedule or any Confirmation as applying, the
         occurrence of such event (and, in such event, the Affected Party or
         Affected Parties shall be as specified for such Additional Termination
         Event in the Schedule or such Confirmation).

(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.

6.       EARLY TERMINATION

(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

(b)      RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.

         (i) NOTICE. If a Termination Event occurs, an Affected Party will,
         promptly upon becoming aware of it, notify the other party, specifying
         the nature of that Termination Event and each Affected Transaction and
         will also give such other information about that Termination Event as
         the other party may reasonably require.

         (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
         Section 5(b)(i)(l) or a Tax Event occurs and there is only one Affected
         Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
         the Affected Party, the Affected Party

                                       10
<PAGE>

         will, as a condition to its right to designate an Early Termination
         Date under Section 6(b)(iv), use all reasonable efforts (which will not
         require such party to incur a loss, excluding immaterial, incidental
         expenses) to transfer within 20 days after it gives notice under
         Section 6(b)(i) all its rights and obligations under this Agreement in
         respect of the Affected Transactions to another of its Offices or
         Affiliates so that such Termination Event ceases to exist.

         If the Affected Party is not able to make such a transfer it will give
         notice to the other party to that effect within such 20 day period,
         whereupon the other party may effect such a transfer within 30 days
         after the notice is given under Section 6(b)(i).

         Any such transfer by a party under this Section 6(b)(ii) will be
         subject to and conditional upon the prior written consent of the other
         party, which consent will not be withheld if such other party's
         policies in effect at such time would permit it to enter into
         transactions with the transferee on the terms proposed.

         (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(l)
         or a Tax Event occurs and there are two Affected Parties, each party
         will use all reasonable efforts to reach agreement within 30 days after
         notice thereof is given under Section 6(b)(i) on action to avoid that
         Termination Event.

         (iv) RIGHT TO TERMINATE. If: -

                  (1) a transfer under Section 6(b)(ii) or an agreement under
                  Section 6(b)(iii), as the case may be, has not been effected
                  with respect to all Affected Transactions within 30 days after
                  an Affected Party gives notice under Section 6(b)(i); or

                  (2) an Illegality under Section 5(b)(i)(2), a Credit Event
                  Upon Merger or an Additional Termination Event occurs, or a
                  Tax Event Upon Merger occurs and the Burdened Party is not the
                  Affected Party,

         either party in the case of an Illegality, the Burdened Party in the
         case of a Tax Event Upon Merger, any Affected Party in the case of a
         Tax Event or an Additional Termination Event if there is more than one
         Affected Party, or the party which is not the Affected Party in the
         case of a Credit Event Upon Merger or an Additional Termination Event
         if there is only one Affected Party may, by not more than 20 days
         notice to the other party and provided that the relevant Termination
         Event is then continuing, designate a day not earlier than the day such
         notice is effective as an Early Termination Date in respect of all
         Affected Transactions.

(c)      EFFECT OF DESIGNATION.

         (i) If notice designating an Early Termination Date is given under
         Section 6(a) or (b), the Early Termination Date will occur on the date
         so designated, whether or not the relevant Event of Default or
         Termination Event is then continuing.

         (ii) Upon the occurrence or effective designation of an Early
         Termination Date, no further payments or deliveries under Section
         2(a)(i) or 2(e) in respect of the Terminated

                                       11
<PAGE>

         Transactions will be required to be made, but without prejudice to the
         other provisions of this Agreement. The amount, if any, payable in
         respect of an Early Termination Date shall be determined pursuant to
         Section 6(e).

(d)      CALCULATIONS.

         (i) STATEMENT. On or as soon as reasonably practicable following the
         occurrence of an Early Termination Date, each party will make the
         calculations on its part, if any, contemplated by Section 6(e) and will
         provide to the other party a statement (1) showing, in reasonable
         detail, such calculations (including all relevant quotations and
         specifying any amount payable under Section 6(e)) and (2) giving
         details of the relevant account to which any amount payable to it is to
         be paid. In the absence of written confirmation from the source of a
         quotation obtained in determining a Market Quotation, the records of
         the party obtaining such quotation will be conclusive evidence of the
         existence and accuracy of such quotation.

         (ii) PAYMENT DATE. An amount calculated as being due in respect of any
         Early Termination Date under Section 6(e) will be payable on the day
         that notice of the amount payable is effective (in the case of an Early
         Termination Date which is designated or occurs as a result of an Event
         of Default) and on the day which is two Local Business Days after the
         day on which notice of the amount payable is effective (in the case of
         an Early Termination Date which is designated as a result of a
         Termination Event). Such amount will be paid together with (to the
         extent permitted under applicable law) interest thereon (before as well
         as after judgment) in the Termination Currency, from (and including)
         the relevant Early Termination Date to (but excluding) the date such
         amount is paid, at the Applicable Rate. Such interest will be
         calculated on the basis of daily compounding and the actual number of
         days elapsed.

(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.

         (i) EVENTS OF DEFAULT. If the Early Termination Date results from an
         Event of Default: -

                  (1) First Method and Market Quotation. If the First Method and
                  Market Quotation apply, the Defaulting Party will pay to the
                  Non-defaulting Party the excess, if a positive number, of (A)
                  the sum of the Settlement Amount (determined by the
                  Non-defaulting Party) in respect of the Terminated
                  Transactions and the Termination Currency Equivalent of the
                  Unpaid Amounts owing to the Non-defaulting Party over (B) the
                  Termination Currency Equivalent of the Unpaid Amounts owing to
                  the Defaulting Party.

                                       12
<PAGE>

                  (2) First Method and Loss. If the First Method and Loss apply,
                  the Defaulting Party will pay to the Non-defaulting Party, if
                  a positive number, the Non-defaulting Party's Loss in respect
                  of this Agreement.

                  (3) Second Method and Market Quotation. If the Second Method
                  and Market Quotation apply, an amount will be payable equal to
                  (A) the sum of the Settlement Amount (determined by the
                  Non-defaulting Party) in respect of the Terminated
                  Transactions and the Termination Currency Equivalent of the
                  Unpaid Amounts owing to the Non-defaulting Party less (B) the
                  Termination Currency Equivalent of the Unpaid Amounts owing to
                  the Defaulting Party. If that amount is a positive number, the
                  Defaulting Party will pay it to the Non-defaulting Party; if
                  it is a negative number, the Non-defaulting Party will pay the
                  absolute value of that amount to the Defaulting Party.

                  (4) Second Method and Loss. If the Second Method and Loss
                  apply, an amount will be payable equal to the Non-defaulting
                  Party's Loss in respect of this Agreement. If that amount is a
                  positive number, the Defaulting Party will pay it to the
                  Non-defaulting Party; if it is a negative number, the
                  Non-defaulting Party will pay the absolute value of that
                  amount to the Defaulting Party.

         (ii) TERMINATION EVENTS. If the Early Termination Date results from a
         Termination Event: -

                  (1) One Affected Party. If there is one Affected Party, the
                  amount payable will be determined in accordance with Section
                  6(e)(i)(3), if Market Quotation applies, or Section
                  6(e)(i)(4), if Loss applies, except that, in either case,
                  references to the Defaulting Party and to the Non-defaulting
                  Party will be deemed to be references to the Affected Party
                  and the party which is not the Affected Party, respectively,
                  and, if Loss applies and fewer than all the Transactions are
                  being terminated, Loss shall be calculated in respect of all
                  Terminated Transactions.

                  (2) Two Affected Parties. If there are two Affected Parties: -

                           (A) if Market Quotation applies, each party will
                           determine a Settlement Amount in respect of the
                           Terminated Transactions, and an amount will be
                           payable equal to (I) the sum of (a) one-half of the
                           difference between the Settlement Amount of the party
                           with the higher Settlement Amount ("X") and the
                           Settlement Amount of the party with the lower
                           Settlement Amount ("Y") and (b) the Termination
                           Currency Equivalent of the Unpaid Amounts owing to X
                           less (II) the Termination Currency Equivalent of the
                           Unpaid Amounts owing to Y; and

                           (B) if Loss applies, each party will determine its
                           Loss in respect of this Agreement (or, if fewer than
                           all the Transactions are being terminated, in respect
                           of all Terminated Transactions) and an amount will be
                           payable equal to one-half of the difference between
                           the Loss of the party with the higher Loss ("X") and
                           the Loss of the party with the lower Loss ("Y").

                                       13
<PAGE>

                  If the amount payable is a positive number, Y will pay it to
                  X; if it is a negative number, X will pay the absolute value
                  of that amount to Y.

         (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
         Termination Date occurs because "Automatic Early Termination" applies
         in respect of a party, the amount determined under this Section 6(e)
         will be subject to such adjustments as are appropriate and permitted by
         law to reflect any payments or deliveries made by one party to the
         other under this Agreement (and retained by such other party) during
         the period from the relevant Early Termination Date to the date for
         payment determined under Section 6(d)(ii).

         (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
         an amount recoverable under this Section 6(e) is a reasonable
         pre-estimate of loss and not a penalty. Such amount is payable for the
         loss of bargain and the loss of protection against future risks and
         except as otherwise provided in this Agreement neither party will be
         entitled to recover any additional damages as a consequence of such
         losses.

7.       TRANSFER

Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that: -

(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and

(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

8.       CONTRACTUAL CURRENCY

(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency

                                       14
<PAGE>

payable in respect of this Agreement, the party receiving the payment will
refund promptly the amount of such excess.

(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.

(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.

(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.

9.       MISCELLANEOUS

(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.

(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.

(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.

                                       15
<PAGE>

(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.

(e)      COUNTERPARTS AND CONFIRMATIONS.

         (i) This Agreement (and each amendment, modification and waiver in
         respect of it) may be executed and delivered in counterparts (including
         by facsimile transmission), each of which will be deemed an original.

         (ii) The parties intend that they are legally bound by the terms of
         each Transaction from the moment they agree to those terms (whether
         orally or otherwise). A Confirmation shall he entered into as soon as
         practicable and may he executed and delivered in counterparts
         (including by facsimile transmission) or be created by an exchange of
         telexes or by an exchange of electronic messages on an electronic
         messaging system, which in each case will be sufficient for all
         purposes to evidence a binding supplement to this Agreement. The
         parties will specify therein or through another effective means that
         any such counterpart, telex or electronic message constitutes a
         Confirmation.

(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.

(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.

10.      OFFICES; MULTIBRANCH PARTIES

(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.

(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.

(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.

                                       16
<PAGE>

11.      EXPENSES

A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.

12.      NOTICES

(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated: -

         (i) if in writing and delivered in person or by courier, on the date it
         is delivered;

         (ii) if sent by telex, on the date the recipient's answer back is
         received;

         (iii) if sent by facsimile transmission, on the date that transmission
         is received by a responsible employee of the recipient in legible form
         (it being agreed that the burden of proving receipt will be on the
         sender and will not be met by a transmission report generated by the
         sender's facsimile machine);

         (iv) if sent by certified or registered mail (airmail, if overseas) or
         the equivalent (return receipt requested), on the date that mail is
         delivered or its delivery is attempted; or

         (v) if sent by electronic messaging system, on the date that electronic
         message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.

(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.

13.      GOVERNING LAW AND JURISDICTION

(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.

(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably: -

                                       17
<PAGE>

         (i) submits to the jurisdiction of the English courts, if this
         Agreement is expressed to be governed by English law, or to the
         non-exclusive jurisdiction of the courts of the State of New York and
         the United States District Court located in the Borough of Manhattan in
         New York City, if this Agreement is expressed to be governed by the
         laws of the State of New York; and

         (ii) waives any objection which it may have at any time to the laying
         of venue of any Proceedings brought in any such court, waives any claim
         that such Proceedings have been brought in an inconvenient forum and
         further waives the right to object, with respect to such Proceedings,
         that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.

(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.

(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.

14.      DEFINITIONS

As used in this Agreement: -

"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).

"AFFECTED PARTY" has the meaning specified in Section 5(b).

"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.

                                       18
<PAGE>

"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.

"APPLICABLE RATE" means: -

(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;

(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and

(d) in all other cases, the Termination Rate.

"BURDENED PARTY" has the meaning specified in Section 5(b).

"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.

"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.

"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).

"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.

"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.

"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.

"DEFAULTING PARTY" has the meaning specified in Section 6(a).

"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).

"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.

"ILLEGALITY" has the meaning specified in Section 5(b).

                                       19
<PAGE>

"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).

"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.

"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.

"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 1l. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.

"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference

                                       20
<PAGE>

Market-makers. Each quotation will be for an amount, if any, that would be paid
to such party (expressed as a negative number) or by such party (expressed as a
positive number) in consideration of an agreement between such party (taking
into account any existing Credit Support Document with respect to the
obligations of such party) and the quoting Reference Market-maker to enter into
a transaction (the "Replacement Transaction") that would have the effect of
preserving for such party the economic equivalent of any payment or delivery
(whether the underlying obligation was absolute or contingent and assuming the
satisfaction of each applicable condition precedent) by the parties under
Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
Transactions that would, but for the occurrence of the relevant Early
Termination Date, have been required after that date. For this purpose, Unpaid
Amounts in respect of the Terminated Transaction or group of Terminated
Transactions are to be excluded but, without limitation, any payment or delivery
that would, but for the relevant Early Termination Date, have been required
(assuming satisfaction of each applicable condition precedent) after that Early
Termination Date is to be included. The Replacement Transaction would be subject
to such documentation as such party and the Reference Market-maker may, in good
faith, agree. The party making the determination (or its agent) will request
each Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time zones)
on or as soon as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be obtained will be
selected in good faith by the party obliged to make a determination under
Section 6(e), and, if each party is so obliged, after consultation with the
other. If more than three quotations are provided, the Market Quotation will be
the arithmetic mean of the quotations, without regard to the quotations having
the highest and lowest values. If exactly three such quotations are provided,
the Market Quotation will be the quotation remaining after disregarding the
highest and lowest quotations. For this purpose, if more than one quotation has
the same highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed that
the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.

"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.

"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).

"OFFICE" means a branch or office of a party, which may be such party's head or
home office.

"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.

"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.

"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an

                                       21
<PAGE>

Office through which the party is acting for purposes of this Agreement is
located, (c) in which the party executes this Agreement and (d) in relation to
any payment, from or through which such payment is made.

"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.

"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.

"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of: -

(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and

(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.

"SPECIFIED ENTITY" has the meanings specified in the Schedule.

"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.

"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.

"STAMP TAX" means any stamp, registration, documentation or similar tax.

"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or

                                       22
<PAGE>

other taxing authority in respect of any payment under this Agreement other than
a stamp, registration, documentation or similar tax.

"TAX EVENT" has the meaning specified in Section 5(b).

"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).

"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).

"TERMINATION CURRENCY" has the meaning specified in the Schedule.

"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.

"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.

"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.

"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have

                                       23
<PAGE>

been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.

             LEHMAN BROTHERS                         EXTENDICARE HEALTH
         SPECIAL FINANCING INC.                        SERVICES, INC.
             (Name of Party)                          (Name of Party)

         /s/ Zdenka S. Griswold                     /s/ Richard L. Bertrand
--------------------------------------     ----------------------------------

Name:    Zdenka S. Griswold                Name:    Richard L. Bertrand
     ---------------------------------          -----------------------------

Title:   Authorized Signatory              Title:   Senior Vice President
      --------------------------------           ----------------------------

Date:    6/28/02                           Date:    6/28/02
     ---------------------------------          -----------------------------

                                       24
<PAGE>

(MULTICURRENCY-CROSS BORDER)

                                    SCHEDULE
                                     TO THE
                                MASTER AGREEMENT
                           DATED AS OF JUNE 11, 2002,
                                     BETWEEN
               LEHMAN BROTHERS SPECIAL FINANCING INC. ("PARTY A"),
                    A CORPORATION ORGANIZED UNDER THE LAWS OF
                              THE STATE OF DELAWARE
                                       AND
                  EXTENDICARE HEALTH SERVICES, INC. (PARTY B")
                    A CORPORATION ORGANIZED UNDER THE LAWS OF
                             THE STATE OF DELAWARE.

PART 1:  TERMINATION PROVISIONS

In this Agreement: -

(a)      "SPECIFIED ENTITY" means in relation to Party A for the purpose of:

                  Section 5(a)(v),   Lehman Brothers Finance S.A. and Lehman
                  ---------------    Brothers Commercial Corporation.
                  Section 5(a)(vi),  Not applicable.
                  ----------------
                  Section 5(a)(vii), Not applicable.
                  -----------------
                  Section 5(b)(iv},  Not applicable.
                  ----------------

                             and in relation to Party B for the purpose of:

                  Section 5(a)(v),   Not applicable.
                  ---------------
                  Section 5(a)(vi),  Not applicable.
                  ----------------
                  Section 5(a)(vii), Not applicable.
                  -----------------
                  Section 5(b)(iv),  Not applicable.
                  ----------------

(b)      "SPECIFIED TRANSACTION" will have the meaning specified in Section 14
         of this Agreement.

(c)      The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party
         A and Party B.

         The following provisions apply:

         "SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14
         of this Agreement.

         "THRESHOLD AMOUNT" means the lesser of (i) USD forty (40) million or
         (ii) two percent (2%) of the Stockholders' Equity of Lehman Brothers
         Holdings Inc. ("Holdings"), in the case of Party A and Holdings (or its
         equivalent in any other currency), and USD five (5) million, in the
         case of

                                       25
<PAGE>

         Party B and any Credit Support Provider of Party B (or its
         equivalent in any other currency).

         For purposes hereof, the term "STOCKHOLDERS' EQUITY" means with respect
         to any entity, at any time, the sum at such time of (i) its capital
         stock (including preferred stock) outstanding, taken at par value, (ii)
         its capital surplus and (iii) its retained earnings, minus (iv)
         treasury stock, each to be determined in accordance with generally
         accepted accounting principles consistently applied.

(d)      The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will
         apply to Party A and Party B; provided, however, that the term
         "materially weaker" means, with respect to Party A, that Holdings or
         the resulting, surviving or transferee entity of Holdings, as the case
         may be, fails to maintain a long-term senior unsecured debt rating of
         at least Baa3 as determined by Moody's Investor Services, Inc
         ("Moody's") and BBB- as determined by Standard & Poor's Ratings
         Services ("S&P"). In the event of a split rating, the lower rating
         shall be determinative.

(e)      The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not
         apply to either Party A or Party B.

(f)      PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
         Agreement, Loss and the Second Method will apply.

(g)      "TERMINATION CURRENCY" means United States Dollars ("USD").

(h)      ADDITIONAL TERMINATION EVENTS will apply. Each of the following shall
         constitute an Additional Termination Event: -

         (i)      COMPLIANCE CERTIFICATE. Party B fails to deliver to Party A a
                  Compliance Certificate pursuant to Part 3(b) of the Schedule
                  to this Agreement.

                  For the purpose of the foregoing Termination Event, Party B
                  shall be the Affected Party.

         (ii)     LBSF AS A SECURED PARTY. At any time (1) Party A ceases to be
                  a Secured Party, (2) all or substantially all of the
                  Collateral is released to the relevant Loan Parties, (3) all
                  or substantially all of the guarantee obligations under any
                  Loan Document is released, or (4) Party B takes any action
                  that may render its obligations or liabilities under this
                  Agreement as unsecured indebtedness. For clarification, except
                  for the terms "Party A," "Party B" and "Agreement," all
                  capitalized terms used herein shall have the meanings assigned
                  to such terms in the Credit Agreement.

                  For the purpose of the foregoing Termination Event, Party B
                  shall be the Affected Party.

                                       26
<PAGE>

         (iii)    FINANCIAL COVENANTS. At any time Party B fails to comply with
                  any of the terms and provisions set forth in the following
                  sections of the Credit Agreement or any section(s)
                  substituting for such section(s) in the Substitute Credit
                  Agreement: (1) Section 7.1(a) (Consolidated Senior Leverage
                  Ratio); (2) Section 7.1(b) (Consolidated Senior Secured
                  Leverage Ratio); (3) Section 7.1(c) (Consolidated Fixed Charge
                  Coverage Ratio); (4) Section 7.1(d) (Maintenance of
                  Consolidated Tangible Net Worth) (all such financial
                  covenants, the "EXISTING FINANCIAL COVENANTS"); and (5) any
                  and all financial covenants added to the Credit Agreement at
                  any time in the future (all such financial covenants, the
                  "FUTURE FINANCIAL COVENANTS" and together with the Existing
                  Financial Covenants, the "FINANCIAL COVENANTS"),

                  For the purpose of the foregoing Termination Event, Party B
                  shall be the Affected Party.

         For purposes of Part 1(h), all capitalized terms used and not otherwise
         defined in this Agreement shall have the meanings assigned to such
         terms in the Amended and Restated Credit Agreement, dated as of June
         28, 2002 (as amended, supplemented or otherwise modified from time to
         time, the "CREDIT AGREEMENT'), by and among (1) Extendicare Holdings,
         Inc., a Delaware corporation, (2) Extendicare Health Services, Inc., a
         Delaware corporation, (3) the Lenders party thereto, (4) Lehman
         Brothers Inc., as Arranger, (5) U.S. Bank, National Association, as
         Syndication Agent, (6) General Electric Capital Corporation, GMAC-RFC
         Health Capital and LaSalle Bank National Association, as
         Co-Documentation Agents, and (7) Lehman Commercial Paper Inc., as
         Administrative Agent. To the extent there is a substitute credit
         facility (the "SUBSTITUTE CREDIT FACILITY"), the term "Credit
         Agreement" shall also reference any agreement (as amended, supplemented
         or otherwise modified from time to time, the "SUBSTITUTE CREDIT
         AGREEMENT") that evidences such Substitute Credit Facility.

         If, prior to the termination of this Agreement, (1) the Credit
         Agreement is terminated or is no longer binding on Party B or (2) Party
         A or an Affiliate of Party A ceases to be a Lender party to the Credit
         Agreement, then the defined terms listed in such Credit Agreement and
         used herein and the terms and provisions with respect to the Financial
         Covenants shall remain in force and effect for purposes of this
         Agreement as though set forth in full herein until the date on which
         all of Party B's obligations under this Agreement are fully performed
         and this Agreement is terminated. For clarification, such defined terms
         and Financial Covenants shall be those that exist prior to the
         occurrence of the relevant event,

PART 2:  TAX REPRESENTATIONS

(a)      PAYER TAX REPRESENTATIONS.  Not applicable.

(b)      PAYEE TAX REPRESENTATIONS.  Not applicable.

                                       27
<PAGE>

PART 3:  AGREEMENT TO DELIVER DOCUMENTS

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:

(a)      Tax forms, documents or certificates to be delivered are:

<TABLE>
<CAPTION>
           PARTY REQUIRED TO
           -----------------                                                          DATE BY WHICH
           DELIVER DOCUMENT              FORM/DOCUMENT/CERTIFICATE                   TO BE DELIVERED
           -----------------             -------------------------                   ---------------
<S>                                <C>                                    <C>
Party A and Party B                Forms and/or documents described in    Upon reasonable demand by the other
                                   Section 4(a)(ii) of the Agreement.     party.

</TABLE>

(b)      Other documents to be delivered are:

<TABLE>
<CAPTION>

    PARTY REQUIRED TO                     FORM/DOCUMENT/                                 DATE BY WHICH            COVERED BY
    -----------------                     --------------                                 -------------            ----------
     DELIVER DOCUMENT                      CERTIFICATE                                  TO BE DELIVERED          SECTION 3(D)
     ----------------                      -----------                                  ---------------          ------------
<S>                         <C>                                                       <C>                        <C>
Party A and                 An incumbency certificate with respect to                 Upon execution of this         Yes
Party B                     the signatory of this Agreement and any                   Agreement.
                            Credit Support Document.

Party A and                 A copy of the annual report of (i) in the                 Upon request.                  Yes
Party B                     case of Party A, its Credit Support Provider
                            and (ii) Party B, containing audited consolidated
                            financial statements for such fiscal year certified
                            by independent public accountants and prepared in
                            accordance with generally accepted accounting
                            principles consistently applied.

Party A and                 For its most recent fiscal quarter, a                     Upon request.                  Yes
Party B                     copy of the unaudited financial statements of
                            (i) in the case of Party A, its Credit
                            Support Provider and (ii) Party B, prepared in
                            accordance with generally accepted accounting
                            principles consistently applied.

Party A and                 A copy of the resolutions or other action                 Upon execution of this         Yes
Party B                     (the "Authorizing Resolutions") of (i) in                 Agreement.
                            the case of

</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>
    PARTY REQUIRED TO                     FORM/DOCUMENT/                                 DATE BY WHICH            COVERED BY
    -----------------                     --------------                                 -------------            ----------
     DELIVER DOCUMENT                      CERTIFICATE                                  TO BE DELIVERED          SECTION 3(D)
     ----------------                      -----------                                  ---------------          ------------
<S>                         <C>                                                       <C>                        <C>
                            Party A, the board of directors of Party
                            A and (ii) in the case of Party B, the board of
                            directors or loan committee of Party B, certified by
                            a secretary or assistant secretary of the relevant
                            entity, pursuant to which such entity is authorized
                            to enter into this Agreement, any Credit Support
                            Document, and each Transaction from Lime to time
                            entered into hereunder.

Party A                     A guarantee of Holdings in the form of                    Upon execution of this         No
                            Exhibit A to this Schedule.                               Agreement.

Party B                     Compliance Certificate, as of the last                    Within 45 days after           Yes
                            day of the fiscal quarter or fiscal year                  the end of each of the
                            of Party B, certified by a Responsible                    first three quarterly
                            Officer (as defined in the Credit                         periods of each fiscal
                            Agreement), attesting (1) that no                         year, and within 90
                            condition or event has occurred with                      days after the end of
                            respect to Party B which would constitute                 each fiscal year.
                            an Event of Default, a Potential Event of
                            Default or a Termination Event under this
                            Agreement and (2) that Party B is in
                            compliance with financial covenants
                            referenced in Part 1(h) of this
                            Agreement.  The Compliance Certificate
                            shall set forth reasonably detailed
                            calculations evidencing Party B's
                            compliance with such financial covenants.

Party B                     An opinion of counsel to Party B in form                  Upon execution of this         No
                            and substance reasonably satisfactory to                  Agreement.
                            Party A.

</TABLE>

                                       29
<PAGE>

PART 4:  MISCELLANEOUS

(a)      ADDRESSES FOR NOTICES.  For the purpose of Section 12(a) of this
         Agreement: -

         Address for notices or communications to Party A: -
         Address:                   Lehman Brothers Special Financing Inc.
                                    c/o Lehman Brothers Inc.
                                    Transaction Management
                                    745 Seventh Avenue, 28th Floor
                                    New York, New York 10019

         Attention:                 Documentation Manager
         Telephone No.:             (212) 526-7187
         Facsimile No.:             (212) 526-7672

                                    For all purposes.

         Address for notices or communications to Party B;
         Address:                   Extendicare Health Services, Inc.
                                    111 West Michigan Street
                                    Milwaukee, Wisconsin 53203

         Attention:                 Mel Rhinelander
                                    Chairman & Chief Executive Officer
         Telephone No.:             (212) 908-8555
         Facsimile No.:             (212) 908-8585

                                    For all purposes; and

         Attention:                 Roch Carter
                                    General Counsel
         Telephone No.:             (414) 908-8406
         Facsimile No.:             (212) 908-8481

                                    For all purposes

(b)      PROCESS AGENT.  For the purpose of Section 13(c) of this Agreement:

         Party A appoints as its Process Agent:  Not applicable.

         Party B appoints as its Process Agent: Not applicable

(c)      OFFICES.  The provisions of Section 10(a) will apply to this Agreement.

(d)      MULTIBRANCH PARTY.  For the purpose of Section 10(c) of this Agreement:

         Party A is not a Multibranch Party.

                                       30
<PAGE>

         Party B is not a Multibranch Party.

(e)      CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
         specified in a Confirmation in relation to the relevant Transaction.

(f)      CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document, each
         of which is incorporated by reference in, constitutes part of, and is
         in connection with, this Agreement and each Confirmation (unless
         provided otherwise in a Confirmation) as if set forth in full in this
         Agreement or such Confirmation:

         In the ease of Party A: A guarantee of Party A's obligations hereunder
         in the form annexed hereto as Exhibit A to this Schedule.

         In the case of Party B: Each of the Security Documents (as defined in
         the Credit Agreement).

(g)      CREDIT SUPPORT PROVIDER.

         Credit Support Provider means in relation to Party A: Lehman Brothers
         Holdings Inc.

         Credit Support Provider means in relation to Party B: Each of the Loan
         Parties (as defined in the Credit Agreement).

(h)      GOVERNING LAW. This Agreement will be governed by and construed in
         accordance with the laws of the State of New York (without reference to
         choice of law doctrine).

(i)      JURISDICTION. Section 13(b) is hereby amended by: (i) deleting in the
         second line of subparagraph (i) thereof the word "non-"; and (ii)
         deleting the final paragraph thereof.

(j)      NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this
         Agreement will not apply to any Transactions (in each case starting
         from the date of this Agreement).

(k)      "AFFILIATE" will have the meaning specified in Section 14 of this
         Agreement.

PART 5:  OTHER PROVISIONS

(a)      GENERAL CONDITIONS. The condition precedent in Section 2(a)(iii)(l)
         does not apply to a payment and delivery owing by a party if the other
         party shall have satisfied in full all its payment or delivery
         obligations then due under Section 2(a)(i) of this Agreement.

(b)      TAX REPRESENTATIONS IN CONFIRMATIONS. For purposes of Sections
         2(d)(i)(4) and 3(f), any payee tax representation specified in a
         Confirmation under this Agreement shall be deemed to be specified in
         this Schedule.

(c)      ACCURACY OF SPECIFIED INFORMATION. Section 3(d) is hereby amended by
         adding in the third line thereof after the word "respect" and before
         the period the words "or, in the case of audited or unaudited financial
         statements, a fair presentation, in all material respects, of the
         financial condition of the relevant person."

                                       31
<PAGE>

(d)      NO VIOLATION OR CONFLICT REPRESENTATION. Section 3(a)(iii) is hereby
         amended by inserting the words "or investment policies, or guidelines,
         procedures, or restrictions" immediately following the word
         "documents".

(e)      REPRESENTATIONS. Section 3 is hereby amended by adding the following
         additional subsections:

         (g)      NO AGENCY. It is entering into this Agreement, any Credit
                  Support Document to which it is a party, and each Transaction,
                  and any other documentation relating to this Agreement or any
                  Transaction as principal (and not as agent or in any other
                  capacity, fiduciary or otherwise).

         (h)      ELIGIBLE CONTRACT PARTICIPANT. It is an "eligible contract
                  participant" as that term is defined in the Commodities
                  Futures Modernization Act of 2000.

         (i)      NON-RELIANCE. In connection with the negotiation of, the
                  entering into, and the execution of, this Agreement, any
                  Credit Support Document to which it is a party, and each
                  Transaction: (i) the other party is acting for its own account
                  and is not acting as a fiduciary or financial or investment
                  advisor for it; (ii) it is not relying upon any communications
                  (whether written or oral) of the other party as investment
                  advice or as a recommendation to enter into this Agreement,
                  any Credit Support Document to which it is a party and each
                  Transaction (other than the representations expressly set
                  forth in this Agreement and in such Credit Support Document),
                  it being understood that information and explanations related
                  to the terms and conditions of a Transaction shall not be
                  considered investment advice or a recommendation to enter into
                  that Transaction; (iii) it has not received from the other
                  party any assurance or guarantee as to the expected results of
                  any Transaction; and (iv) it has consulted with its own legal,
                  regulatory, tax, business, investment, financial, and
                  accounting advisors to the extent it has deemed necessary, and
                  it has made its own independent investment, hedging, and
                  trading decisions based upon its own judgment and upon any
                  advice from such advisors as it has deemed necessary and not
                  upon any view expressed by the other party.

(f)      ADDITIONAL REPRESENTATIONS AND AGREEMENTS OF PARTY B. Party B
         represents and warrants (which representation will be deemed to be
         repeated by Party a at all times until the termination of this
         Agreement) each of the following to Party A, and covenants and agrees
         the same with Party A, on the date hereof and at all times until the
         termination of this Agreement:

         (1)      Party B is complying and will be in full compliance with each
                  and every provision in its constitutional documents
                  (including, but not limited to, any and all resolutions,
                  investment policies or guidelines, procedures or restrictions,
                  and other similar documents) and each Transaction contemplated
                  hereunder is and will be an authorized and permitted
                  transaction thereunder.

         (2)      This Agreement (and each and every Transaction entered into
                  hereunder) is a Specified Hedge Agreement (as defined in the
                  Loan Documents) entered into by

                                       32
<PAGE>

                  Party B in accordance with and as permitted by relevant
                  provisions in the Loan Documents, and this Agreement (and each
                  and every Transaction entered into hereunder) does not and
                  will not violate or conflict with any provision in the Loan
                  Documents or any Contractual Obligation of Party B. For
                  purposes hereof, the terms "Loan Documents" and "Contractual
                  Obligation" shall have the meanings assigned to such terms in
                  the Credit Agreement.

         (3)      Party B has not and will not take any action during the term
                  of this Agreement that may render any of the representations
                  and warranties in this Agreement untrue, incorrect or
                  incomplete, and if any event or condition should occur that
                  would render any such representations and warranties untrue,
                  incorrect or incomplete, Party B shall immediately give
                  written notice thereof to Party A.

(g)      OTHER SPECIFIED HEDGE AGREEMENTS. Party B hereby acknowledges and
         agrees that if Party B enters into any other Specified Hedge Agreement
         and such Specified Hedge Agreement contains covenants, terms or
         provisions for the relevant counterparty that are more favorable (as
         reasonably determined by Party A) to those provided to Party A herein,
         such covenants, terms and provisions shall hereby be incorporated by
         reference in, and made part of, this Agreement for the benefit of Party
         A to the same extent as if such covenants, terms and provisions were
         set forth in full herein.

(h)      SET-OFF.

         (1)      In addition to any rights of set-off a party may have as a
                  matter of law or otherwise, upon the occurrence of an Event of
                  Default or an Additional Termination Event and the designation
                  of an Early Termination Date pursuant to Section 6(e) of the
                  Agreement with respect to a party ("X"), the other party ("Y")
                  will have the right (but not be obliged) without prior notice
                  to X or any other person to set-off or apply any obligation of
                  X owed to Y (and to any Affiliate of Y) (whether or not
                  matured or contingent and whether or not arising under this
                  Agreement, and regardless of the currency, place of payment or
                  booking office of the obligation) against any obligation of Y
                  (and of any Affiliate of Y) owed to X (whether or not matured
                  or contingent and whether or not arising under this Agreement,
                  and regardless of the currency, place of payment or booking
                  office of the obligation.)

         (2)      For the purpose of cross-currency set-off, Y may convert
                  either obligation at the applicable market exchange rate
                  selected by Y on the relevant date.

         (3)      If the amount of an obligation is unascertained, Y may in good
                  faith estimate that amount and set-off in respect of the
                  estimate, subject to the relevant party accounting to the
                  other when the amount of the obligation is ascertained.

         (4)      This clause (l) shall not constitute a mortgage, charge, lien
                  or other security interest upon any of the property or assets
                  of either party to this Agreement. Party A covenants and
                  agrees that in the event Party A exercises its right of
                  set-off or application in accordance with the provisions set
                  forth above, Party A shall

                                       33
<PAGE>

                  provide a notice of its exercise of such right immediately
                  thereafter to Party B, provided that any failure to give such
                  notice shall not affect the validity of such setoff and
                  application.

(i)      TRANSFER. Notwithstanding anything to the contrary in Section 7 of this
         Agreement, Party A may assign its rights and obligations under this
         Agreement, in whole or in part, to (1) any Affiliate of Holdings
         effective upon delivery to Party B of the guarantee by Holdings, in
         favor of Party B, of the obligations of such Affiliate, such guarantee
         to be otherwise identical to the guarantee then in effect of the
         obligations of the transferor, or (2) with the prior written consent of
         Party B (such consent not to be unreasonably withheld), to any entity
         with the same or higher long term senior unsecured debt rating (as
         determined by S&P or Moody's) as Holdings at the time of such transfer.

(j)      NOTICES. For the purposes of subsections (iii) and (v) of Section
         12(a), the date of receipt shall be presumed to be the date sent if
         sent on a Local Business Day or, if not sent on a Local Business Day,
         the date of receipt shall be presumed to be the first Local Business
         Day following the date Sent.

(k)      SERVICE OF PROCESS. The penultimate sentence of Section 13(c) shall be
         amended by adding the following language at the end thereof: "if
         permitted in the jurisdiction where the proceedings are initiated and
         in the jurisdiction where service is to be made."

(l)      OUTSTANDING SPECIFIED TRANSACTIONS. Upon the effectiveness of this
         Agreement, unless otherwise agreed to in writing by the parties to this
         Agreement with respect to enumerated Specified Transactions, all
         Specified Transactions then outstanding between the parties shall be
         subject to the terms hereof.

(m)      DEFINITIONS. This Agreement, each Confirmation, and each Transaction
         are subject to the 2000 ISDA Definitions as published by the
         International Swaps and Derivatives Association, Inc. as amended,
         supplemented, updated, restated, and superseded from time to time (the
         "Definitions") and will be governed in all respects by the Definitions.
         The Definitions, as so modified are incorporated by reference in, and
         made part of, this Agreement and each Confirmation as if set forth in
         full in this Agreement and such Confirmations, Subject to Section 1(b),
         in the event of any inconsistency between the provisions of this
         Agreement and the Definitions, this Agreement will prevail. Also,
         subject to Section 1(b), in the event of any inconsistency between the
         provisions of any Confirmation and this Agreement, or the Definitions,
         such Confirmation will prevail for the purpose of the relevant
         Transaction.

(n)      WAIVER OF TRIAL BY JURY. INSOFAR AS IS PERMITTED BY LAW, EACH PARTY
         IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
         PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION, AND
         ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE OTHER
         PARTY'S ENTERING INTO THIS AGREEMENT AND EACH TRANSACTION HEREUNDER.

                                       34
<PAGE>

The parties executing this Schedule have executed the Master Agreement and have
agreed as to the contents of this Schedule.

                 LEHMAN BROTHERS                        EXTENDICARE HEALTH
             SPECIAL FINANCING INC.                       SERVICES, INC.
                 (Name of Party)                         (Name of Party)

         /s/ Zdenka S. Griswold                        /s/ Richard L. Bertrand
---------------------------------------       ----------------------------------

Name:    Zdenka S. Griswold                   Name:    Richard L. Bertrand
     ----------------------------------            -----------------------------

Title:   Authorized Signatory                 Title:   Senior Vice President
      ---------------------------------             ----------------------------

Date:    6/28/02                              Date:    6/28/02
     ----------------------------------            -----------------------------

                                       35

<PAGE>

                              EXHIBIT A TO SCHEDULE

                   GUARANTEE OF LEHMAN BROTHERS HOLDINGS INC.

         LEHMAN BROTHERS SPECIAL FINANCING INC. ("Party A") and EXTENDICARE
HEALTH SERVICES, INC. ("Party B") have entered into a Master Agreement dated as
of June 11, 2002, (the "Master Agreement"), pursuant to which Party A and Party
B have entered and/or anticipate entering into one or more transactions (each a
"Transaction"), the Confirmation of each of which supplements, forms part of,
and will be read and construed as one with, the Master Agreement (collectively
referred to as the "Agreement"). This Guarantee is a Credit Support Document as
contemplated in the Agreement. For value received, and in consideration of the
financial accommodation accorded to Party A by Party B under the Agreement,
LEHMAN BROTHERS HOLDINGS INC., a corporation organized and existing under the
laws of the State of Delaware ("Guarantor"), hereby agrees to the following;

                  (a) Guarantor hereby unconditionally guarantees to Party B the
due and punctual payment of all amounts payable by Party A under each
Transaction when and as Party A's obligations thereunder shall become due and
payable in accordance with the terms of the Agreement. In case of the failure of
Party A to pay punctually any such amounts, Guarantor hereby agrees, upon
written demand by Party B, to pay or cause to be paid any such amounts
punctually when and as the same shall become due and payable.

                  (b) Guarantor hereby agrees that its obligations under this
Guarantee constitute a guarantee of payment when due and not of collection.

                  (c) Guarantor hereby agrees that its obligations under this
Guarantee shall be unconditional, irrespective of the validity, regularity or
enforceability of the Agreement against Party A (other than as a result of the
unenforceability thereof against Party B), the absence of any action to enforce
Party A's obligations under the Agreement, any waiver or consent by Party B with
respect to any provisions thereof, the entry by Party A and Party B into
additional Transactions under the Agreement or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor (excluding the defense of payment if statute of limitations, neither
of which is waived) provided, however, that Guarantor shall be entitled to
exercise any right that Party A could have exercised under the Agreement to cure
any default in respect of its obligations under the Agreement or to setoff,
counterclaim or withhold payment in respect of any Event of Default or Potential
Event of Default in respect of Party B or any Affiliate, but only to die extent
such right is provided to Party A under the Agreement. The Guarantor
acknowledges that Party A and Party B may from time to time enter into one or
more Transactions pursuant to the Agreement and agrees that the obligations of
the Guarantor under this Guarantee will upon the execution of any such
Transaction by Party A and Party B extend to all such Transactions without the
taking of further action by the Guarantor.

                  (d) This Guarantee shall remain in full force and effect until
such time as Party B shall receive written notice of termination. Termination of
this Guarantee shall not affect Guarantor's liability hereunder as to
obligations incurred or arising out of Transactions entered into prior to the
termination hereof.

                                       36
<PAGE>

                  (e) Guarantor further agrees that this Guarantee shall
continue to be effective or be reinstated, as the case may be, if at any time,
payment, or any part thereof, of any obligation or interest thereon is rescinded
or must otherwise be restored by Party B upon an Event of Default as set forth
in Section 5(a)(vii) of the Master Agreement affecting Party A or Guarantor.

                  (f) Guarantor hereby waives (i) promptness, diligence,
presentment, demand of payment, protest, order and, except as set forth in
paragraph (a) hereof, notice of any kind in connection with the Agreement and
this Guarantee, or (ii) any requirement that Party B exhaust any right to take
any action against Party A or any other person prior to or contemporaneously
with proceeding to exercise any right against Guarantor under this Guarantee.

         This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York, without reference to choice of law doctrine.
All capitalized terms not defined in this Guarantee, but defined in the
Agreement, shall have the meanings assigned thereto in the Agreement.

         Any notice hereunder will be sufficiently given if given in accordance
with the provisions for notices under the Agreement and will be effective as set
forth therein. All notices hereunder shall be delivered to Lehman Brothers
Holdings Inc., Attention: Treasurer, at 745 Seventh Avenue, 11th Floor, New
York, New York , 10019 USA (Facsimile No. 212-526-0339) with a copy to Lehman
Brothers Special Financing Inc., Attention: Transaction Management, 745 Seventh
Avenue, 28th Floor, New York, New York 10019 USA.

         IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be executed
in its corporate name by its duly authorized officer as of the date of the
Agreement.

                                           LEHMAN BROTHERS HOLDINGS INC.

                                           -----------------------------------
                                           Name:
                                           Title:
                                           Date:

                                       37

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