Document:

exv10w3

Exhibit 10.3

AMENDED AND RESTATED GUARANTY

     THIS AMENDED AND RESTATED GUARANTY (“Guaranty”) dated as of February 28, 2011, by ADVOCAT
INC., a Delaware corporation (“Guarantor”), is to and for the benefit of THE PRIVATEBANK AND TRUST
COMPANY, an Illinois banking corporation in its capacity as administrative agent for the Lenders
identified below (together with its successors and assigns, the “Administrative Agent”).

R E C I T A L S:

     A. DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation, (together with each (i)
of the other borrowers set forth on Schedule 1 to the Loan Agreement (as defined below) and (ii)
additional borrowers from time to time party to the Loan Agreement (whether pursuant to an
amendment, written joinder or otherwise), individually and collectively referred to herein as,
“Borrower”, has requested that the Administrative Agent on behalf of the Lenders make certain
revolving loans (individually and collectively, the “Loan”) to Borrower pursuant to and in
accordance with that certain Amended and Restated Revolving Loan and Security Agreement dated of
even date herewith by and among Borrower, the lenders party thereto (collectively, the “Lenders”),
and the Administrative Agent (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the “Loan Agreement”); capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Loan Agreement.

     B. As security for repayment of the Loan, in addition to this Guaranty, certain other
loan and security documents have been executed and delivered to the Administrative Agent. The Loan
Agreement, the Amended and Restated Revolving Credit Notes, the Amended and Restated Pledge
Agreements, the Amended and Restated Blocked Account Agreements, this Guaranty, each other guaranty
delivered in favor of the Administrative Agent on behalf of the Lenders in connection with the Loan
Agreement, and any and all other instruments, agreements, and documents executed in conjunction
herewith and therewith (including, without limitation, each of the “Financing Agreements” (as
defined in the Loan Agreement)) are hereinafter sometimes collectively referred to herein as the
“Loan Documents.”

     C. The Guarantor and Borrower are Affiliates of each other. Guarantor will derive
substantial direct and indirect benefit (financial and otherwise) from the Loan made to Borrower
under the Loan Agreement. The Guarantor desires to induce the Administrative Agent on behalf of
the Lenders to make the Loan to Borrower.

     D. Administrative Agent on behalf of the Lenders is unwilling to make the Loan pursuant to
the Loan Agreement unless Guarantor guarantees the payment of the principal and interest and all
other amounts due or owing to the Administrative Agent and Lenders provided in the Loan Agreement
and other Loan Documents and the performance by Borrower of all of the covenants on Borrower’s part
to be performed and observed pursuant to the terms thereof, and
Guarantor has agreed to execute and deliver this Guaranty to Administrative Agent (for the
ratable benefit of Lenders and Administrative Agent).

 

     NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION RECEIVED, the adequacy and sufficiency of
which is hereby acknowledged, and in further consideration of any advances, credit or other
financial accommodation heretofore, now or that may hereafter at any time be extended to Borrower
by Administrative Agent on behalf of Lenders under, pursuant to or in connection with the Loan
Documents, (a) Guarantor hereby, jointly and severally, together with each Other Guarantor (as
defined in Section 3 below), and, unconditionally and irrevocably, guarantees, irrespective
of the validity or enforceability of any instrument, writing or agreement relating to or the
subject of any such advances, financial accommodation or loans (including, but not limited to, the
Loan Documents), and whether or not due or to become due before or after any bankruptcy or
insolvency proceeding involving Borrower or would have become due but for Borrower’s bankruptcy
proceeding, (i) the full and prompt payment to Administrative Agent and Lenders at maturity,
whether by acceleration or otherwise, and at all times thereafter of any and all “Liabilities” (as
defined in the Loan Agreement) of every kind and nature of Borrower to Administrative Agent and
Lenders (arising out of or in connection with the Loan, the Loan Agreement, and each of the other
Loan Documents to which Borrower (or any of its Affiliates) is a party, including, without
limitation, for principal, interest, default interest, charges, fees, indemnification, costs,
expenses, reasonable attorneys’ fees, or otherwise), and whether or not due or to become due before
or after any bankruptcy or insolvency proceeding involving Borrower or would have become due but
for Borrower’s bankruptcy proceeding, howsoever evidenced, whether now existing or hereafter
created or arising, directly or indirectly, primary or secondary, absolute or contingent, due or to
become due, and howsoever owned, held or acquired, whether through discount, overdraft, purchase,
direct loan or as collateral, or otherwise, and (ii) the prompt, full and faithful performance and
discharge by Borrower of each and every of the terms, conditions, agreements, covenants,
representations and warranties on the part of Borrower contained in any agreement, the Loan
Agreement and each of the other Loan Documents to which Borrower is a party, and any other
promissory notes, loan agreements, or security agreements, or in any modification or addenda
thereto or substitution thereof in connection with any advance, credit or financial accommodation
afforded by Administrative Agent on behalf of Lenders to Borrower (collectively the “Guaranteed
Liabilities”); and (b) Guarantor further agrees to pay all costs and expenses, legal and/or
otherwise (including, but not limited to, court costs and reasonable attorneys’ fees and expenses),
paid or incurred by Administrative Agent on behalf of Lenders in endeavoring to collect the
Guaranteed Liabilities, the Extraordinary Claims (as hereinbelow defined), or in either case, any
part thereof, or in enforcing this Guaranty or in defending any suit based on any act of commission
or omission of Administrative Agent or Lenders with respect to the Indebtedness, the Collateral (as
defined in the Loan Agreement), or this Guaranty or in connection with any Recovery Claim (as
hereinbelow defined) (the “Enforcement Costs”); and (c) Guarantor further agrees to pay any and all
costs, losses, damages and reasonable attorney’s fees incurred by the Administrative Agent in
connection with any of the following: (i) misapplication or misappropriation of any insurance or
condemnation proceeds; and (ii) Borrower or Guarantor institutes or becomes by virtue of a
counterclaim a party to any case, action, suit, or proceeding which reduces, impedes or impairs
Administrative Agent’s right of recourse to the Collateral or any part thereof or Borrower or
Guarantor engages in any act, omission, or misrepresentation which has the effect of suspending,
delaying, reducing, impeding,
or impairing the Administrative Agent’s right of recourse to the Collateral or any part
thereof (each of the aforesaid are collectively referred to as an “Extraordinary Claims”). The

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Guaranteed Liabilities, the Enforcement Costs, and the Extraordinary Claims are collectively
referred to as the “Guaranteed Obligations.” Capitalized terms used herein and not otherwise
defined herein shall have the meaning given to them in the Loan Agreement.

     Guarantor hereby further agrees as follows:

     1. Continuing Guaranty. This Guaranty includes any and all Guaranteed Obligations
arising under successive transactions continuing, compromising, extending, increasing, modifying,
releasing, or renewing the Guaranteed Obligations, changing the interest rate, payment terms, or
other terms and conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the maximum extent
permitted by law, Guarantor hereby waives any right to revoke this Guaranty as to future
Liabilities. If such a revocation is effective notwithstanding the foregoing waiver, Guarantor
acknowledges and agrees that (a) no such revocation shall be effective until written notice thereof
has been received by Administrative Agent, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, but not limited to, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms, or other terms and
conditions thereof), (c) no such revocation shall apply to any Guaranteed Obligations made or
created after such date to the extent made or created pursuant to a legally binding commitment of
Administrative Agent in existence on the date of such revocation, (d) no payment by Guarantor,
Borrower, or from any other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by Borrower or from any source other than
Guarantor, subsequent to the date of such revocation, shall first be applied to that portion of the
Guaranteed Obligations as to which the revocation is effective and which are not, therefore,
guaranteed hereunder, and to the extent so applied shall not reduce the maximum obligation of
Guarantor hereunder.

     2. Performance Under This Guaranty. If Borrower fails to make any payment of any
Guaranteed Obligations on or before the due date thereof and after the expiration of the applicable
notice and cure period, if any, or if Borrower shall fail, after the expiration of the applicable
notice and cure period, if any, to perform, keep, observe, or fulfill any other obligation,
covenant or agreement referred to or contained in any instrument, writing, document or agreement
relating to the Guaranteed Obligations, Guarantor immediately shall cause such payment to be made
or each of such obligations to be performed, kept, observed, or fulfilled to the extent such
obligations constitute Guaranteed Obligations.

     3. Primary Obligations. This Guaranty is a primary and original obligation of Guarantor,
is not merely the creation of a surety relationship, and is an absolute, unconditional, and
continuing guaranty of payment and performance and not of collection which shall remain in full
force and effect without respect to future changes in conditions, including any change of law or
any invalidity or irregularity with respect to the issuance of any instrument, writing or agreement
relating to the Guaranteed Obligations. Guarantor agrees that Guarantor is directly and severally
with any other guarantors of the Guaranteed Obligations liable to Administrative Agent and Lenders,
that the obligations of Guarantor hereunder are independent of the obligations of Borrower or any
other guarantor, and that a separate action may be brought against
Guarantor whether such action is brought against Borrower or any other guarantor of Borrower’s
Indebtedness, obligations or liabilities to Administrative Agent and Lenders (each an “Other

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Guarantor”) or whether Borrower or any such Other Guarantor is joined in such action. Guarantor
agrees that Guarantor’s liability hereunder shall be immediate and shall not be contingent upon the
exercise or enforcement of any lien, security interest, mortgage or realization upon any security
or collateral Administrative Agent may at any time possess. Guarantor agrees that any release
which may be given by Administrative Agent to Borrower or any Other Guarantor shall not release
Guarantor. Guarantor consents and agrees that Administrative Agent shall be under no obligation to
marshal any assets of Borrower or any Other Guarantor in favor of said Guarantor, or against or in
payment of any or all of the Guaranteed Obligations.

     4. Return of Payments. Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Administrative Agent to any amounts due under the Loan or the Loan
Agreement is rescinded or returned by Administrative Agent or any Lender for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy, liquidation or reorganization of any
party), such amounts shall, for the purposes of this Guaranty, be deemed to have continued in
existence to the extent of such payment, notwithstanding such application by Administrative Agent
and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such
amounts due under the Loan and the Loan Agreement, all as though such application by Administrative
Agent or Lenders had not been made.

     5. Waivers.

     (a) Guarantor hereby waives: (1) notice of acceptance hereof; (2) notice of any Loan or
other financial accommodations made or extended to Borrower or the creation or existence of any
Guaranteed Obligations; (3) notice of the amount of the Guaranteed Obligations, subject, however,
to Guarantor’s right to make inquiry of Administrative Agent to ascertain the amount of the
Guaranteed Obligations at any reasonable time; (4) notice of any adverse change in the financial
condition of Borrower or of any other fact that might increase Guarantor’s risk hereunder; (5)
notice of presentment for payment, demand, protest, and notice thereof as to any promissory notes
or other instruments, writing or agreements evidencing Guaranteed Obligations; (6) notice of any
event of default by Borrower under any instrument, writing or agreement with Administrative Agent
or any Lender including the Loan Documents; and (7) all other notices (except if such notice is
specifically required to be given to Guarantor hereunder) and demands to which Guarantor might
otherwise be entitled.

     (b) Guarantor hereby waives the right by statute or otherwise to require Administrative
Agent or any Lender to institute suit against Borrower or under any other guaranty; or to exhaust
any rights and remedies which Lender has or may have against Borrower or under any other guaranty;
provided, however, that nothing herein contained shall prevent Administrative Agent
from suing on the Loan Agreement or foreclosing any security interest or lien created by any of the
other Loan Documents, or from exercising any other rights thereunder, and if such commercial code
sale or other remedy is availed of, only the net proceeds therefrom, after deduction of all charges
and expenses of every kind and nature whatsoever relating to the proceedings or sale, shall be
applied in reduction of the amount due on the Loan Agreement and other Loan Documents, and
Administrative Agent shall not be required to institute or prosecute
proceedings to cover any deficiency as a condition of any payment hereunder or enforcement
hereof. At any sale of the security or collateral for the Loan, or any part thereof, whether by

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commercial code sale or otherwise, Administrative Agent may, at its discretion, purchase all or any
part of such collateral offered for sale, for its own account (on behalf of the Lenders and
itself), and may apply against the amount bid therefore the balance due it pursuant to the terms of
the Loan Agreement and other Loan Documents. Guarantor further agrees that Guarantor is bound to
the payment of all Guaranteed Obligations, whether now existing or hereafter accruing, as fully as
if such Guaranteed Obligations were directly owing to Administrative Agent and Lenders by
Guarantor. Guarantor further waives any defense arising by reason of any disability or other
defense (other than the defense that the Guaranteed Obligations shall have been fully and finally
performed and indefeasibly paid) of Borrower or by reason of the cessation from any cause
whatsoever of the liability of Borrower in respect thereof. Guarantor consents to any and all
forbearances and extensions of the time of payment of the Loan Agreement or any of the other Loan
Documents, and to any and all changes in the terms, covenants and conditions thereof hereafter made
or granted, and to any part of the collateral therefor; it being the intention and agreement hereof
that Guarantor shall remain unconditionally liable as a principal as, to and until the Guaranteed
Obligations shall have been fully repaid to Administrative Agent on behalf of the Lenders, and the
terms, covenants and conditions of the Loan Agreement and of the other Loan Documents and all other
notes, instruments, writing or agreements evidencing or securing the Guaranteed Obligations shall
have been fully performed and observed, notwithstanding any act, omission or thing which might
otherwise operate as a legal or equitable discharge of Borrower or Guarantor.

     (c) Guarantor hereby waives: (1) any rights to assert against Administrative Agent or
Lenders any defense (legal or equitable), setoff, counterclaim, or claim which Guarantor may now or
at any time hereafter have against Borrower or any other party liable to Administrative Agent or
Lenders (other than the defense that the Guaranteed Obligations shall have been fully and finally
performed and indefeasibly paid); and (2) any defense, setoff, counterclaim, or claim, of any kind
or nature, arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any security therefor
(including, but not limited to, any of the Loan Documents). Without limiting the generality of the
foregoing or any other provisions of this Guaranty, Guarantor agrees that this Guaranty shall not
be discharged, limited, impaired or affected by: (a) the transfer of all or any part of the
personal property or real property described in any of the Loan Documents; (b) any sale, pledge,
surrender, indulgence, alteration, substitution, exchange, modification or other disposition of any
of the Guaranteed Obligations, all of which Lender is expressly authorized to make from time to
time; (c) any failure, neglect or omission on the part of Administrative Agent or Lenders to
realize or protect any of the Guaranteed Obligations, or any personal property or real property or
lien security given as security therefor, or to exercise any lien upon or right of appropriation of
monies, credits or property of Borrower toward liquidation of the Indebtedness, or performance of
the covenants guaranteed hereby; and (d) any proceedings with respect to the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or substantially all the
assets, the marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, imposition or readjustment of, or other
similar proceedings affecting Borrower or any Other Guarantor or any of their respective assets, it
being expressly understood and agreed that no such proceeding shall affect, modify, limit or
discharge the liability or obligation of Guarantor hereunder in any manner whatsoever, and that
Guarantor
shall continue to remain absolutely liable under this Guaranty to the same extent, and in the
same manner, as if such proceedings had not been instituted.(d) Guarantor hereby waives any
right of

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subrogation Guarantor has or may have as against Borrower until all preference periods
under all applicable laws have expired. In addition, Guarantor hereby waives any right to proceed
against Borrower, now or hereafter for contribution, indemnity, reimbursement and any other
suretyship rights and claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may now have or hereafter
have as against Borrower. Until the Guaranteed Obligations are indefeasibly paid in full
hereunder, Guarantor also hereby waives any right to recourse to or with respect to any asset of
Borrower. Guarantor agrees that in light of the immediately foregoing waivers, the execution of
the Guaranty shall not be deemed to make Guarantor a “creditor” of Borrower, and that for purposes
of Sections 547 and 550 of the Bankruptcy Code, Guarantor shall not be deemed a “creditor” of
Borrower.

     6. Releases. No release or discharge of the Other Guarantor, or of any other person or
entity, whether primarily or secondarily liable for or obligated with respect to the Guaranteed
Obligations, or the institution of bankruptcy, receivership, insolvency, reorganization,
dissolution or liquidation proceedings by or against the Other Guarantor or any other person or
entity, or the entry of any restraining or other order in any such proceeding, shall release or
discharge Guarantor, unless and until all of the Guaranteed Obligations shall have been fully paid.
Notwithstanding anything to the contrary contained herein, Administrative Agent agrees that the
obligations of Guarantor under this Guaranty shall terminate, subject to Sections 4 and 8 hereof,
at the earlier of such time as (a) Administrative Agent on behalf of Lenders and itself shall have
received indefeasible payment in full in cash of all Guaranteed Liabilities and all other
Guaranteed Obligations under this Guaranty and all financing arrangements and accommodations by and
among Borrower, Administrative Agent and Lenders shall have been irrevocably terminated and
Administrative Agent and Lenders have no obligations to make any loans, financial accommodations or
advance any funds to Borrower which could constitute Liabilities. Release of this Guaranty, if it
occurs, however, shall not affect, in any respect, the Loan or any other instrument securing or
guarantying the Loan.

     7. Right of Setoff. Guarantor agrees that Administrative Agent and Lenders have all
rights of setoff and banker’s liens provided by applicable law. Following any default by Guarantor
hereunder or an Event of Default by Borrower under the Loan Agreement, any and all moneys, credits,
deposits, accounts, or other property belonging to the Guarantor in transit to or in the possession
or under the control of Administrative Agent or any Lender, or any agent or bailee thereof, may,
without notice and opportunity to be heard, be setoff against, and appropriated and applied against
and towards the payment of any and all of the liabilities of Guarantor under this Guaranty.
Following any default by Guarantor hereunder or an Event of Default by Borrower under the Loan
Agreement, subject to the terms of any Intercreditor Agreement, Guarantor does hereby assign and
transfer to Administrative Agent (for the ratable benefit of Lenders and itself) any and all cash,
negotiable instruments, documents of title, chattel paper, securities, certificates of deposit,
deposit accounts, other cash equivalents and other assets of said Guarantor in transit to, or in
the possession or control of Administrative Agent, or any agent or bailee of Administrative Agent
for any purpose and to apply the same on any or all of the Guaranteed Obligations. The rights of
the Administrative Agent and Lenders under this
Section are in addition to all other rights and remedies which the Administrative Agent and
Lenders may otherwise have in equity or at law.

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     8. Recovery Claim. Should a claim (“Recovery Claim”) be made upon Administrative Agent
or Lenders at any time for recovery of any amount received by Administrative Agent or Lenders in
payment of the Guaranteed Obligations (whether received from Borrower, Guarantor pursuant hereto,
or otherwise) and should Administrative Agent or any Lender repay all or part of said amount by
reason of (a) any judgment, decree, or order of any court or administrative body having
jurisdiction over Administrative Agent or any Lender or any of its respective property; or (b) any
reasonable settlement or compromise of any such Recovery Claim effected by Administrative Agent or
such Lender with the claimant (including Borrower), Guarantor shall remain liable to Administrative
Agent and Lenders for the amount so repaid to the same extent as if such amount had never
originally been received by Administrative Agent and Lenders, notwithstanding any termination
hereof or the return of this document to Guarantor or the cancellation of any note or other
instrument evidencing any of the Indebtedness.

     9. Assignments. In the event Administrative Agent shall sell, assign or transfer the
Guaranteed Obligations, or any part hereof, or grant participations therein, each and every
immediate or remote successive assignee, transferee, holder of or participant or other interests
therein, of all or any part of the Guaranteed Obligations shall have the right to enforce this
Guaranty by suit or otherwise for the benefit of such assignee, transferee, holder or participant,
as fully as if such assignee, transferee, holder or participant were herein by name specifically
given such rights, powers and benefits; but Administrative Agent (for the ratable benefit of the
Lenders and itself) shall have an unimpaired, prior and superior right to enforce this Guaranty for
Administrative Agent’s benefit as to so much of the guaranteed debt as it has not sold, assigned or
transferred.

     10. Representations and Warranties. Guarantor agrees that the following shall constitute
representations and warranties of Guarantor to Administrative Agent (for the benefit of Lenders and
itself), which shall survive the execution and delivery hereof, and that Administrative Agent on
behalf of the Lenders intends to make the Loan and other financial accommodations, if any,
guaranteed hereby in reliance thereon:

     (a) Guarantor is not in default under any agreement to which Guarantor is a party, the
effect of which will materially impair performance by the Guarantor of Guarantor’s obligations
pursuant to and as contemplated by the terms of this Guaranty, and neither the execution and
delivery of this Guaranty nor compliance with the terms and provisions of this Guaranty, will
violate any law or any presently existing regulation, order, writ, injunction or decree of any
court or governmental department, commission, board, bureau, agency or instrumentality, will
conflict or will be inconsistent with, or will result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, instrument, document, agreement or contract of any kind which creates, represents,
evidences or provides for any lien, charge or encumbrance upon any of the property or assets of the
Guarantor, or any other indenture, mortgage, deed of trust, instrument, document, agreement or
contract of any kind to which Guarantor is a party or by which Guarantor may be bound of which the
Guarantor is a party or by which Guarantor may be bound, or in the event of any such conflict, the
required consent or waiver of the other party or parties thereto has been validly
granted, is in full force and effect and is valid and sufficient therefor. This Guaranty is
the legal, valid and binding obligation of the Guarantor and is enforceable against the Guarantor
in accordance with its terms.

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     (b) Except as set forth on Schedule 10(b) hereof, there are no actions, suits or
proceedings pending or to the best of Guarantor’s knowledge threatened against the Guarantor before
any court or any governmental, administrative, regulatory, adjudicatory or arbitrational body or
agency of any kind which will materially adversely affect performance by the Guarantor of
Guarantor’s obligations pursuant to and as contemplated by the terms and provisions of this
Guaranty.

     (c) Neither this Guaranty nor any document, financial statement, credit information,
written certificate or written statement heretofore furnished or required herein to be furnished to
Lender by the Guarantor contains any untrue statement of material fact or omits to state a fact
material to this Guaranty.

     (d) Guarantor is currently informed of the financial condition of Borrower and of all
other circumstances which a diligent inquiry would reveal and which would bear upon the risk of
nonpayment of the Guaranteed Obligations. Guarantor will continue to keep informed of the
financial condition of Borrower and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guaranteed Obligations.

     (e) As of the date hereof, the present fair saleable value of Guarantor’s assets is
greater than the amount required to pay Guarantor’s total Indebtedness (contingent or otherwise),
and is greater than the amount that will be required to pay such Indebtedness as it matures and as
it becomes absolute and matured. The transactions contemplated hereby were effectuated without
actual intent to hinder, delay or defraud present or future creditors of Guarantor; it is
Guarantor’s express intention that Guarantor will maintain a Solvent financial condition, giving
effect to the Guaranteed Obligations incurred hereunder, as long as any of the Guaranteed
Obligations remain outstanding or Guarantor is obligated to Administrative Agent or any Lender in
any other manner whatsoever. At all times until the Guaranteed Obligations remain satisfied and
paid in full, the Guarantor shall keep and maintain assets sufficient to honor and pay any and all
of the Guaranteed Obligations as and when due, subject to any express monetary limitation set forth
herein.

     11. Subordination. Any rights of Guarantor, whether now existing or later arising, to
receive payment on account of any Indebtedness (including interest) owed to Guarantor by Borrower,
or to withdraw capital invested by Guarantor in Borrower, if any, or to receive and retain
distributions from Borrower if and solely as expressly provided in the Loan Agreement, shall at all
times be subordinate as to Lien and time of payment, and in all other respects to the full and
prior repayment to Administrative Agent and Lenders of all of the Liabilities owing to
Administrative Agent and Lenders pursuant to the Loan Agreement and the other Loan Documents
(including, without limitation, the Loan). Except for dividends or distributions permitted by
Section 9.9 of the Loan Agreement, Guarantor shall not be entitled to enforce or receive payment of
any sums hereby subordinated until the Loan have been paid and performed in full, and any such sums
received in violation of this Guaranty shall not be commingled with
other monies of Guarantor and shall be received by Guarantor in trust for Administrative Agent
on behalf of Lenders and itself.

     12. Payments; Application. All payments to be made hereunder by Guarantor shall be made
in lawful money of the United States of America at the time of payment, shall be made

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in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise)
or offset. All payments made by Guarantor hereunder shall be applied as follows; first, to all
costs and expenses (including, but not limited to, reasonable attorneys’ fees, expenses and court
costs) incurred by Administrative Agent in enforcing this Guaranty or in collecting the Guaranteed
Obligations; second, to all accrued and unpaid interest and fees owing to Administrative Agent and
Lenders constituting Guaranteed Obligations; and third, to the balance of the Guaranteed
Obligations, all subject to the terms of the Loan Agreement.

     13. [Intentionally Omitted]

     14. Notices. Any notice or other communication required or permitted under this Guaranty
shall be in writing and personally delivered, mailed by registered or certified U.S. mail (return
receipt requested and postage prepaid), sent by telecopier (with a confirming copy sent by regular
mail), or sent by prepaid nationally recognized overnight courier service, and addressed to the
relevant party at its address set forth below, or at such other address as such party may, by
written notice, designate as its address for purposes of notice under this Guaranty:

If to Administrative Agent, at:

The PrivateBank and Trust Company

120 South LaSalle Street

Chicago, Illinois 60603

Attention: Adam Panos

Telephone No.: 312-564-1278

Facsimile No.: 312-564-6889

With a copy to:

Duane Morris LLP

190 South LaSalle Street — Suite 3700

Chicago, Illinois 60603

Attention: Brian P. Kerwin

Telephone No: 312-499-6737

Facsimile No: 312-499-6701

If to Guarantor, at:

Advocat Inc.

1621 Galleria Boulevard

Brentwood, Tennessee 37027

Attention: Glynn Riddle

Telephone No.: 615-771-7575

Facsimile No.: 615-771-7409

With a copy to:

Harwell Howard Hyne Gabbert & Manner

315 Deaderick Street, Suite 1800

Nashville, Tennessee 37238

Attention: John N. Popham IV

Telephone No.: 615-251-1093

Facsimile No.: 615-251-1059

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If mailed, notice shall be deemed to be given three (3) days after being sent, and if sent by
personal delivery, telecopier, or prepaid courier, notice shall be deemed to be given when
delivered. If any notice is tendered to an addressee and delivery thereof is refused by such
addressee, such notice shall be effective upon such tender unless expressly set forth in such
notice.

     15. Cumulative Remedies. No remedy under this Guaranty is intended to be exclusive of any
other remedy, but each and every remedy shall be cumulative and in addition to any and every other
remedy given hereunder and those provided by law or in equity. No delay or omission by
Administrative Agent to exercise any right under this Guaranty shall impair any such right nor be
construed to be a waiver thereof. No failure on the part of Administrative Agent to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.

     16. Financial Information. Without limiting anything contained in this Guaranty,
Guarantor agrees that, so long as any of the Guaranteed Obligations remain outstanding, Guarantor
shall deliver to Administrative Agent, upon Administrative Agent’s written request and to the
extent not included in the Guarantor’s public filings with the United States Securities and
Exchange Commission, on at least an annual basis, and at such other times as Administrative Agent
may reasonably request, (i) financial statements (showing all changes in Guarantor’s financial
condition which occurred during the preceding fiscal year and Guarantor’s current financial
position), (ii) federal and state tax returns of Guarantor, as applicable, and (iii) such other
financial information as Administrative Agent or the Lenders may reasonably request. Copies of
annual tax returns shall be delivered to Administrative Agent upon Administrative Agent’s written
request therefore. The failure of Guarantor to perform or observe any of its obligations hereunder
within the period of time specified in any notice from Administrative Agent to Guarantor, which
notice shall in no event be less than five (5) business days, advising Guarantor of such failure,
shall constitute a default under this Guaranty and an Event of Default under the Loan Agreement and
the other Loan Documents.

     17. Books and Records. Guarantor agrees that Administrative Agent’s books and records
showing the Liabilities among Administrative Agent on behalf of Lenders and Borrower shall be
admissible in any action or proceeding and shall be binding upon Guarantor for the purpose of
establishing the items therein set forth and shall constitute prima facie proof thereof absent
manifest error.

     18. Interpretation and Severability of Provisions. The headings of sections and
paragraphs in this Guaranty are for convenience of reference only and shall not be construed in any
way to limit or define the content, scope or intent of the provisions hereof. As used in this
Guaranty, the singular shall include the plural, and masculine, feminine and neuter pronouns shall
be fully interchangeable, where the context so requires. Whenever the words “including”,

10

 

“include
or includes” are used in this Guaranty, they should be interpreted in a non-exclusive manner as
though the words “, without limitation,” immediately followed the same. Wherever possible, each
provision of this Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Guaranty is prohibited or unenforceable under applicable
law, such provision shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. As used herein, except in circumstances
where under the Loan Documents the term is intended to mean or refer to all of the Borrowers or all
of the Credit Parties on a consolidated basis, the term “Borrower” refers to any one or all of the
Borrowers under the Loan Agreement, as applicable, provided, however, in the event of any
disagreement between Administrative Agent and Guarantor as to whether or not a reference to
Borrower means any or all of such Borrower(s) individually or collectively herein, and the
circumstances are not covered by the Loan Documents, the Administrative Agent shall in reasonable
good faith make such determination.

     19. Bankruptcy. So long as any Guaranteed Obligations shall be owing to Administrative
Agent or Lenders, Guarantor shall file in any bankruptcy or other proceeding against Borrower in
which the filing of claims is required or permitted by law all claims which Guarantor may have
against Borrower relating to any Indebtedness of Borrower to Guarantor and will assign to
Administrative Agent (for the ratable benefit of Lenders and itself) all rights of Guarantor
thereunder. If Guarantor does not file any such claim, Administrative Agent, as attorney-in-fact
for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Administrative Agent’s
discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of
Administrative Agent’s nominee. The foregoing power of attorney is coupled with an interest and
cannot be revoked. Administrative Agent or its nominee shall have the sole right to accept or
reject any plan proposed in such proceeding and to take any other action which a party filing a
claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise,
the person or persons authorized to pay such claim shall pay to Administrative Agent the amount
payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns
to Administrative Agent (for the ratable benefit of Lenders and itself) all of Guarantor’s rights
to any such payments or distributions to which Guarantor would otherwise be entitled; provided,
however, Guarantor’s obligations hereunder shall not be satisfied except to the extent that
Administrative Agent receives cash by reason of any such payment or distribution. If
Administrative Agent receives anything hereunder other than cash, the same shall be held as
collateral for amounts due under this Guaranty. At such time as all Guaranteed Obligations have
been fully paid, any sums or other collateral received by Administrative Agent pursuant to this
Section 19 remaining in the possession of Administrative Agent shall be paid or delivered
to Guarantor.

     20. Additional and Independent Obligations. Guarantor’s obligations under this Guaranty
are in addition to Guarantor’s obligations under any other existing or future guaranties, each of
which shall remain in full force and effect until it is expressly modified or released in a writing
signed by Administrative Agent. Guarantor’s obligations under this Guaranty are
independent of those of Borrower and any Other Guarantor. Administrative Agent may bring a
separate action against Guarantor without first proceeding against Borrower, any Other Guarantor,
any other person or entity or any security that Administrative Agent may hold, and without pursuing
any other remedy. Administrative Agent’s rights under this Guaranty shall not be exhausted by any
action by Administrative Agent until all of the Indebtedness, liabilities and

11

 

obligations owing to
Administrative Agent and Lenders pursuant to the Loan Agreement and the other Loan Documents
(including, without limitation, the Loan and other Liabilities) have been indefeasibly paid in full
in cash and otherwise performed in full and all financing arrangements and accommodations among
Borrower, Administrative Agent and Lenders shall have been irrevocably terminated and
Administrative Agent and Lenders have no obligations to make any loans, financial accommodations or
advance any funds to Borrower which could constitute Liabilities.

     21. Costs and Expenses. If any lawsuit is commenced which arises out of or which relates
to this Guaranty, the Loan Documents or the Loan, including, without limitation, any insolvency,
bankruptcy or similar proceeding, Guarantor agrees to pay all of Administrative Agent’s costs and
expenses, including, without limitation, reasonable attorneys’ fees which may be incurred in any
effort to collect or enforce any term of this Guaranty. From the time(s) incurred until paid in
full to Administrative Agent on behalf of Lenders, all sums shall bear interest at the “Default
Rate” set forth in the Loan Agreement.

     22. Entire Agreement; Amendments; Other Agreements. This Guaranty constitutes the entire
agreement between Guarantor and Administrative Agent pertaining to the subject matter contained
herein, and may not be altered, amended, or modified, nor may any provision hereof be waived or
noncompliance therewith consented to, except by means of a writing executed by Guarantor as to
which such consent or waiver is applicable and by Administrative Agent. Any such alteration,
amendment, modification, waiver, or consent shall be effective only to the extent specified therein
and for the specific purpose for which it is given. No course of dealing and no delay or waiver of
any right or default under this Guaranty shall be deemed a waiver of any other similar or
dissimilar right or default or otherwise prejudice the rights and remedies hereunder. The
Guarantor shall not enter into any agreement containing any provision which would be violated or
breached by the performance of Guarantor’s obligations hereunder or which would violate or breach
any provision hereof, or that would or is reasonably likely to adversely affect the Administrative
Agent’s interests or rights under this Guaranty. Time is of the essence for the payment and
performance of this Guaranty. The recitals hereto are hereby made a part of and incorporated into
this Guaranty by this reference thereto. A signature delivered or sent by facsimile or other
electronic transmission shall be as legally binding and enforceable as a signed original for any
and all purposes.

     23. Successors and Assigns. This Guaranty shall be binding upon Guarantor’s
representatives, heirs, legal beneficiaries, successors, and assigns, as applicable, and shall
inure to the benefit of the successors and assigns of Administrative Agent; provided, however,
Guarantor shall not be permitted to assign this Guaranty or any of Guarantor’s rights, liabilities
or obligations hereunder without the prior written consent of the Administrative Agent. In the
event of the dissolution, bankruptcy or failure to maintain a Solvent financial condition, as
applicable, of the Guarantor, the Loan Agreement and any and all sums due thereunder, along
with all of the other Guaranteed Obligations, shall at once, without any notice or demand from
Administrative Agent, be due and payable.

     24. SUBMISSION OF JURISDICTION. THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

12

 

     (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
GUARANTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS AND APPELLATE COURTS FROM ANY THEREOF;

     (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING (i) ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO
PLEAD OR CLAIM THE SAME, (ii) THE RIGHT TO ASSERT OR IMPOSE ANY CLAIM, NONCOMPULSORY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM IN RESPECT THEREOF IN SUCH PROCEEDING; PROVIDED, HOWEVER, THIS WAIVER
DOES NOT PRECLUDE THE RIGHT TO ASSERT A DEFENSE IN SUCH ACTION OR PROCEEDING OR TO ASSERT OR IMPOSE
ANY CLAIM, COUNTERCLAIM OR CROSS-CLAIM WHICH THE GUARANTOR WISHES TO PURSUE IN A SEPARATE
PROCEEDING AT ITS SOLE COST AND EXPENSE, AND (iii) ALL STATUTES OF LIMITATIONS WHICH MAY BE
RELEVANT THERETO; AND

     (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, RETURN RECEIPT REQUESTED, TO THE GUARANTOR AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER
ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE GUARANTOR AGREES THAT
SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE GUARANTOR IN ANY SUIT, ACTION OR PROCEEDING, AND (ii) SHALL BE TAKEN
AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THE GUARANTOR. NOTHING HEREIN
SHALL AFFECT THE LENDER’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR LIMIT THE
LENDER’S RIGHT TO BRING PROCEEDINGS AGAINST THE GUARANTOR OR ITS PROPERTY IN ANY COURT OR ANY OTHER
JURISDICTION.

     25. GOVERNING LAW. THIS GUARANTY SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH,
AND ENFORCED AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.

     26. JURY TRIAL. THE GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND
KNOWINGLY WAIVE (TO THE FULLEST EXTENT PERMITTED BY LAW) ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS GUARANTY OR ANY
OTHER

13

 

AGREEMENTS OR TRANSACTIONS RELATED HERETO, INCLUDING, WITHOUT LIMITATION, ANY ACTION OR
PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (B) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS
GUARANTY. THE ADMINISTRATIVE AGENT AND THE GUARANTOR AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT A JURY.

     27. No Pledge of Equity. Guarantor agrees that, so long as any of the Guaranteed
Obligations remain outstanding, Guarantor shall remain the owner (either directly or through one of
its Subsidiaries) of 100% of the equity in each Borrower; and without the prior written consent of
Administrative Agent, Guarantor shall not assign, sell, convey, gift, transfer, pledge,
hypothecate, grant a security interest in, encumber or in any other manner permit any lien (other
than Permitted Liens) to exist in or on, all or any portion of the equity in or of any Borrower,
except for those pledges to the Omega Senior Lessor in effect on the date hereof.

     28. REVIEW BY GUARANTOR. The Guarantor acknowledges that Guarantor has thoroughly read
and reviewed the terms and provisions of this Guaranty, and that such terms and provisions are
clearly understood by the Guarantor, and has been fully and unconditionally consented to by the
Guarantor with the full benefit and advice of counsel chosen by the Guarantor.

[Signature Page Follows]

14

 

IN WITNESS WHEREOF, Guarantor has executed and delivered this Amended and Restated Guaranty as
of the date set forth in the first paragraph hereof.

	 	 	 	 	 
	 	Guarantor:

ADVOCAT INC.

 	 
	 	By:  	/s/ Glynn Riddle
 	 
	 	 	Name:  	Glynn Riddle 	 
	 	 	Title:  	EVP & CFO 	 

 [Signature Page — Amended and Restated Guaranty]

 

Exhibit 10.3

SCHEDULE 10(b)

Guaranty of Advocat, Inc.

LITIGATION

See attached list of pending or threatened litigation against Advocat, Inc.exv10w4

Exhibit 10.4

TERM LOAN AND SECURITY AGREEMENT

dated as of February 28, 2011

by and among

DIVERSICARE AFTON OAKS, LLC, DIVERSICARE BRIARCLIFF, LLC,

DIVERSICARE CHISOLM, LLC, and DIVERSICARE HARTFORD, LLC,

collectively, Borrower

and

THE PRIVATEBANK AND TRUST COMPANY,

as Administrative Agent for the Lenders

and

The Financial Institutions Parties Hereto as the Lenders

 

 

TERM LOAN AND SECURITY AGREEMENT

     This TERM LOAN AND SECURITY AGREEMENT (this “Agreement”), dated as of February 28,
2011, is by and among DIVERICARE AFTON OAKS, LLC, DIVERSICARE BRIARCLIFF, LLC, DIVERSICARE CHISOLM,
LLC and DIVERSICARE HARTFORD, LLC, each a Delaware limited liability company (individually and
collectively, the “Borrower”), THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking
corporation in its individual capacity (“PrivateBank”), and the other financial
institutions parties hereto (together with PrivateBank, the “Lenders”), and THE PRIVATEBANK
AND TRUST COMPANY, an Illinois banking corporation in its capacity as administrative agent for the
Lenders (together with its successors and assigns, the “Administrative Agent”).

RECITALS

     WHEREAS, Diversicare Leasing Corp., a Tennessee corporation (“Pledgor”), legally and
beneficially owns or controls all of the issued and outstanding Stock of each Borrower;

     WHEREAS, the Borrower has requested that the Lenders provide the Borrower with a certain term
loan;

     WHEREAS, in connection with this Agreement, certain Affiliates of the Borrower are entering
into that certain Amended and Restated Revolving Loan and Security Agreement to be dated of even
date herewith by and among such Affiliates of the Borrower, the Lenders and Administrative Agent
(as the same may be amended, supplemented or modified from time to time, the “Revolving Loan
Agreement”); and

     WHEREAS, the Lenders are willing to make such term loan to the Borrower, upon the terms and
provisions and subject to the conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual agreements contained herein, and of the term
loan to be made to or for the benefit of the Borrower by the Lenders, and for other good and
valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties
hereto (intending to be legally bound) hereby agree as follows:

     1. DEFINITIONS.

          1.1 General Terms. When used herein, the following terms shall have the following
meanings:

     “ACH Transactions” means any cash management or related services (including the
Automated Clearing House processing of electronic fund transfers through the direct Federal Reserve
Fedline system) provided by any Lender for the account of Borrower or its Subsidiaries.

     “Administrative Agent” means The PrivateBank and Trust Company, an Illinois banking
corporation, in its capacity as administrative agent for the Lenders hereunder and any successor
thereto in such capacity.

- 1 -

 

     “Affiliate” means, with respect to any Person, any other Person directly or indirectly
controlling (including, without limitation, all shareholders, members, directors, partners,
managers, and officers of such Person), controlled by, or under direct or indirect common control
with, such Person. A Person shall be deemed to control another Person if such first Person
possesses, directly or indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through ownership of voting securities, by contract or
otherwise.

     “Affiliated Revolving Borrowers” means each of the entities identified on Schedule
1 attached hereto.

     “Affiliate Revolving Loan Financing Agreement” means each “Financing Agreement” as
defined in the Revolving Loan Agreement, as any of the same may be restated, modified, supplemented
or amended from time to time.

     “Affiliate Revolving Loan Liabilities” means the “Liabilities” as defined in the
Revolving Loan Agreement.

     “Agreement” means this Term Loan and Security Agreement as the same may be restated,
modified, supplemented or amended from time to time.

     “Allocable Amount” shall have the meaning ascribed to such term in Section
12.21(g) hereof.

     “Applicable Libor Margin” means, with respect to Libor Loans, an amount equal to four
hundred fifty (450) basis points.

     “Appraisal” means a complete, self-contained appraisal of the Property performed in
accordance with FIRREA and the Administrative Agent’s appraisal requirements by an independent
appraiser MAI licensed in the state in which the Property is located and selected and retained by
the Administrative Agent.

     “Assignment Agreement” shall have the meaning ascribed to such term in Section
12.15 hereof.

     “Assignment of Rents and Leases” means each of those certain Assignment of Rents and
Leases dated of even date herewith made by Borrower in favor of the Administrative Agent, with
respect to each parcel of Property, respectively, in form and substance reasonably satisfactory to
the Administrative Agent, as the same may be amended, supplemented, and modified from time to time.

     “Bank Product” means (a) any of the following financial accommodations extended to
Borrower or its Subsidiaries by any Lender: (i) ACH Transactions, (ii) cash and treasury
management, including controlled disbursement, accounts or services, or (iii) any transaction
under or pursuant to any Hedging Agreement, and (b) any other service or facility extended to
the Borrower by any Lender or any Affiliate of such Lender including: (i) credit cards, (ii)
credit card processing services, (iii) debit cards, or (iv) purchase cards; provided that
consistent with

- 2 -

 

Section 8.9 hereof the Deposit Accounts specified therein shall be
maintained with PrivateBank and not any other Lender.

     “Bank Product Agreements” means those agreements entered into from time to time by
Borrower or its Subsidiaries with any Lender in connection with the obtaining of any of the Bank
Products.

     “Bank Product Obligations” means all obligations, liabilities, reimbursement
obligations, fees, or expenses owing by Borrower or its Subsidiaries to Lenders pursuant to or
evidenced by a Bank Product Agreement and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing or hereafter
arising.

     “Base
Rate” means, solely with respect to Sections 2.7(b), 3.2, 3.6 and 3.7 hereof, the greater of (a) the corporate base rate of interest per annum identified from
time to time by the Administrative Agent, as its base or prime rate, which rate shall not
necessarily be the lowest rate of interest which the Administrative Agent charges its customers,
and (b) the greater of (i) two percent (2.0%) per annum, and (ii) the Libor Rate as in effect
immediately before such time as the Libor Base Rate became unavailable. Any change in the Base
Rate shall be effective as of the effective date of such change.

     “Base Rate Loan” means a Loan that bears interest at an interest rate based upon the
Base Rate, solely with respect to Sections 2.7(b), 3.2,
3.6 and 3.7 hereof.

     “Blocked Persons List” shall have the meaning ascribed to such term in Section
7.29 hereof.

     “Borrower Agent” means Diversicare Management Services Co., a Tennessee corporation.

     “Borrower Cash Management Program” means the business practice of Guarantor and
Borrowers whereby cash receipts for Guarantor, Borrowers and the Affiliated Revolving Borrowers are
transferred/swept into a central concentration account and all cash disbursements are funded by
transfers from such central concentration account.

     “Business Day” means (a) with respect to any borrowing, payment or rate selection of
Libor Loans, a day other than Saturday or Sunday on which banks are open for business in Chicago,
Illinois and on which dealings in United States dollars are carried on in the London interbank
market, and (b) for all other purposes, a day other than Saturday or Sunday on which banks are open
for business in Chicago, Illinois.

     “Capitalized Lease Obligations” means any amount payable with respect to any lease of
any tangible or intangible property (whether real, personal or mixed), however denoted, which
either (a) is required by GAAP to be reflected as a liability on the face of the balance sheet of
the lessee thereunder, or (b) based on actual circumstances existing and ascertainable, either at
the commencement of the term of such lease or at any subsequent time at which any property
becomes subject thereto, can reasonably be anticipated to impose on such lessee substantially
the same economic risks and burdens, having regard to such lessee’s obligations and the lessor’s
rights thereunder both during and at the termination of such lease, as would be imposed on such

- 3 -

 

lessee by any lease which is required to be so reflected or by the ownership of the leased
property. For avoidance of doubt, prepaid leases shall not be deemed “Capital Lease Obligations”
except to the extent required under GAAP.

     “Capmark” means Capmark Finance Inc., a California corporation.

     “Cash Cost of Self-Insured Professional and General Liability” means the total cash
expenditures associated with professional and general liability related settlements, legal fees and
administration costs for all facilities owned or leased by the Borrower. For purposes of measuring
the Cash Cost of Self-Insured Professional and General Liability for individual facilities or
groups of facilities, these amounts shall be allocated on the basis of licensed beds of the
facility or group of facilities in relation to the total number of licensed beds for all facilities
owned or leased by the Borrower.

     “CERCLA” means the Comprehensive Environmental Release Compensation and Liability Act,
42 U.S.C. § 9601 et seq., as amended.

     “Certificates” shall have the meaning ascribed to such term in Section
5.1(e)(7) hereof.

     “CHAMPUS” means the Civilian Health and Medical Program of the Uniformed Service, a
part of TRICARE, a medical benefits program supervised by the U.S. Department of Defense.

     “Closing Date” means February 28, 2011.

     “Closing Fee” shall have the meaning ascribed to such term in Section 2.16
hereof.

     “CMS” means the Centers for Medicare and Medicaid Services of HHS and any Person
succeeding to the functions thereof.

     “Collateral” shall have the meaning ascribed to such term in Section 6.1
hereof.

     “Commercial Leases” means the collective reference to all Leases other than admission
agreements or residency agreements.

     “Commitment” means the Term Loan Commitment.

     “Compliance Certificate” shall have the meaning ascribed to such term in Section
8.1(c) hereof.

     “CON” shall have the meaning ascribed to such term in Section 10.2 hereof.

     “Credit Party” means each Borrower, the Guarantor, and each other Person that is or
becomes primarily or secondarily liable for the Liabilities, whether as a principal, surety,
guarantor, endorser or otherwise.

     “Credit Termination Date” means the earlier of (i) the Stated Maturity Date, (ii) such
other date on which the Commitments shall terminate pursuant to Section 11.2 hereof, or
(iii)

- 4 -

 

such other date as is mutually agreed in writing between the Borrower and the Administrative
Agent.

     “Default” means an event, circumstance or condition which through the passage of time
or the service of notice or both would (assuming no action is taken to cure the same) mature into
an Event of Default.

     “Default Rate” shall have the meaning ascribed to such term in Section 2.7(a)
hereof.

     “Defaulting Lender” means any Lender that (a) has failed to fund its portion of the
Loan required to be funded by it hereunder at Closing, (b) has otherwise failed to pay over to the
Administrative Agent or any other Lender any other amount required to be paid by it hereunder
within one Business Day of the date when due, unless the subject of a good faith dispute or unless
such failure has been cured, or (c) has been deemed insolvent or become the subject of a bankruptcy
or insolvency proceeding.

     “Deposit Accounts” means any deposit, securities, operating, lockbox, blocked or cash
collateral account, together with any funds, instruments or other items credited to any such
account from time to time, and all interest earned thereon.

     “Duly Authorized Officer” means the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer and the Assistant Secretary of the Borrower.

     “Environmental Indemnity Agreement” means that certain Environmental Indemnity
Agreement of even date herewith made by the Borrower in favor of the Administrative Agent, in form
and substance acceptable to the Administrative Agent, as the same may be amended or modified from
time to time.

     “Environmental Laws” means all federal, state, local, and foreign statutes,
regulations, ordinances, and similar provisions having the force or effect of law, all judicial and
administrative orders and determinations, and all common law concerning public health and safety,
worker health and safety, pollution, or protection of the environment, including all those relating
to the presence, use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release, threatened release,
control, or cleanup of any hazardous materials, substances, or wastes, chemical substances, or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise, or radiation, including, without limitation, the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., as amended; CERCLA; the Toxic
Substance Act, 15 U.S.C. § 2601 et seq., as amended; the Clean Water Act, 33 U.S.C. § 466 et seq.,
as amended; the Clean Air Act, 42 U.S.C. § 7401 et seq., as amended; state and federal superlien
and environmental cleanup programs; and U. S. Department of Transportation regulations.

     “Environmental Notice” means any summons, citation, directive, information request,
notice of potential responsibility, notice of violation or deficiency, order, claim, complaint,
investigation, proceeding, judgment, letters or other communication, written or oral to the
Borrower or any officer thereof, actual or threatened, from the United States Environmental
Protection Agency or other federal, state or local agency or authority, or any other entity or

- 5 -

 

individual, public or private, concerning any intentional or unintentional act or omission which
involves Management of Hazardous Substances on or off the property of the Borrower which could
result in the Borrower incurring a material liability or which could have a Material Adverse
Effect, or the imposition of any Lien on property, or any alleged violation of or responsibility
under Environmental Laws which could result in the Borrower incurring a material liability or which
could have a Material Adverse Effect, and, after due inquiry and investigation, any knowledge of
any facts which could give rise to any of the foregoing.

     “Equipment” means “equipment” as defined in the Code, including, without limitation,
any and all of the Borrower’s machinery, equipment, vehicles, fixtures, furniture, computers,
appliances, tools, and other tangible personal property (other than Inventory), whether located on
the Borrower’s premises or located elsewhere, together with any and all accessions, parts and
appurtenances thereto, whether presently owned or hereafter acquired by the Borrower.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
together with the regulations thereunder.

     “ERISA Affiliate” means any corporation, trade or business, which together with the
Borrower would be treated as a single employer under Section 4001 of ERISA.

     “Event of Default” shall have the meaning ascribed to such term in Section
11.1 hereof.

     “Existing Lender Refinancing” means the refinancing of all Indebtedness owed to
Capmark from the proceeds of the Term Loan.

     “Facility” or “Facilities” shall mean any one or more of the skilled nursing
homes or facilities located on the Property as further identified on Schedule 1.1(a).

     “Fee Letter” means that certain letter agreement dated February 28, 2011 by and
between PrivateBank and Borrower, pursuant to which, among other things, the arrangement relating
to compensation for certain services rendered by the Administrative Agent is set forth (together
with any similar letter from Administrative Agent to the Lenders regarding their respective share
of any particular fee payable by Borrower).

     “Financing Agreements” means any and all agreements, instruments, certificates and
documents, including, without limitation, security agreements, loan agreements, notes, guarantees,
keep well agreements, landlord waivers, mortgages, deeds of trust, subordination agreements,
intercreditor agreements, pledges, powers of attorney, consents, assignments, collateral
assignments, interest rate protection agreements, reimbursement agreements, contracts, notices,
leases, subordination and attornment agreement, collateral assignments of key man life insurance
policies, financing statements and all other written matter (including, without limitation, this
Agreement, the Term Loan Notes, the Mortgages, the Assignment of Rents and Leases, the
Environmental Indemnity Agreement, the Subordination of Management Agreements, the Guaranty, the
Pledge Agreement, the Certificates, the Fee Letter, each Hedging Agreement and any other Bank
Product Agreement), in each case evidencing, securing or relating to the Loan and the Liabilities,
whether heretofore, now, or hereafter executed by or on
behalf of the Borrower, any Affiliate, or any other Person, and delivered to or in favor of
the Administrative Agent or any Lender, together with all agreements and documents referred to

- 6 -

 

therein or contemplated thereby, as each may be amended, modified or supplemented from time to
time.

     “FIRREA” means the Financial Institutions Reform, Recovery And Enforcement Act of
1989, as amended from time to time.

     “Fiscal Quarter” means the three (3) month period ending on March 31, June 30,
September 30 and December 31 of each calendar year.

     “Fiscal Year” means the twelve (12) month period commencing on January 1 and ending on
December 31 of each calendar year.

     “GAAP” means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board (or any
successor authority) that are applicable to the circumstances as of the date of determination.

     “General Intangibles” means “general intangibles” as defined in the Code, including,
without limitation, any and all general intangibles, choses in action, causes of action, rights to
the payment of money (other than Accounts), and all other intangible personal property of the
Borrower of every kind and nature wherever located and whether currently owned or hereafter
acquired by the Borrower (other than Accounts), including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, service marks, service mark
applications, trademark applications, brand names, trade names, trademarks and all goodwill
symbolized thereby and relating thereto, trade styles, trade secrets, registrations, domain names,
websites, computer software, advertising materials, distributions on certificated and
uncertificated securities, investment property, securities entitlements, goodwill, operational
manuals, product formulas for industrial processes, blueprints, drawings, copyrights, copyright
applications, rights and benefits under contracts, licenses, license agreements, permits,
approvals, authorizations which are associated with the operation of the Borrower’s business and
granted by any Person, franchises, customer lists, deposit accounts, tax refunds, tax refund
claims, and any letters of credit, guarantee claims, security interests or other security held by
or granted to the Borrower to secure payment by an Account Debtor of any of Borrower’s Accounts,
and, to the maximum extent permitted by applicable Law, any recoveries or amounts received in
connection with any litigation or settlement of any litigation.

     “Governing Documents” shall have the meaning ascribed to such term in Section
9.14 hereof.

     “Governmental Approvals” means, collectively, all consents, licenses, and permits and
all other authorizations or approvals required from any Governmental Authority to operate the
Locations.

     “Governmental Authority” means and includes any federal, state, District of Columbia,
county, municipal, or other government and any political subdivision, department, commission,
board, bureau, agency or instrumentality thereof, whether domestic or foreign.

- 7 -

 

     “Guarantor” means Advocat Inc., a Delaware corporation in its capacity as the
guarantor pursuant to the Guaranty or as otherwise provided in this Agreement.

     “Guaranty” means that certain Guaranty of even date herewith by Guarantor in favor of
the Administrative Agent, as the same may be amended, restated, reaffirmed, modified or
supplemented from time to time.

     “Hazardous Substances” means hazardous substances, materials, wastes, and waste
constituents and reaction by-products, pesticides, oil and other petroleum products, and toxic
substances, including, without limitation, asbestos and PCBs, as those terms are defined pursuant
to Environmental Laws.

     “Healthcare Laws” means all applicable Laws relating to the possession, control,
warehousing, marketing, sale and distribution of pharmaceuticals, the operation of medical or
senior housing facilities (such as, but not limited to, nursing homes, skilled nursing facilities,
rehabilitation hospitals, intermediate care facilities, assisted living and adult care facilities),
patient healthcare, patient healthcare information, patient abuse, the quality and adequacy of
medical care, rate setting, equipment, personnel, operating policies, fee splitting, including,
without limitation, (a) all federal and state fraud and abuse laws, including, but not limited to
the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(6)), the Stark Law (42 U.S.C. §1395nn), the
civil False Claims Act (31 U.S.C. §3729 et seq.); (b) TRICARE; (c) CHAMPUS, (d) Medicare; (e)
Medicaid; (f) HIPAA; (g) quality, safety and accreditation standards and requirements of all
applicable state laws or regulatory bodies; (h) all laws, policies, procedures, permits,
requirements, certifications, and regulations pursuant to which licenses, approvals and
accreditation certificates are issued in order to operate medical, senior housing facilities,
assisted living facilities, or skilled nursing facilities; and (i) any and all other applicable
health care laws, regulations, manual provisions, policies and administrative guidance, each of (a)
through (i) as may be amended from time to time.

     “Hedging Agreement” means any interest rate, currency or commodity swap agreement, cap
agreement or collar agreement, and any other agreement or arrangement designed to protect a Person
against fluctuations in interest rates, currency exchange rates or commodity prices, in each case
in form and substance satisfactory to the Administrative Agent, as the same may be amended or
modified from time to time; provided, Borrower will only enter into any such Hedging Agreement with
PrivateBank and no other bank or financial institution.

     “HHS” means the United States Department of Health and Human Services and any Person
succeeding to the functions thereof.

     “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as the
same may be amended, modified or supplemented from time to time, and any successor statute thereto,
and any and all rules or regulations promulgated from time to time thereunder.

     “HUD” means the United States Department of Housing and Urban Development and any
successor thereto.

     “HUD Financing” means an Indebtedness of a Borrower or Borrowers that is insured by
HUD under one of its programs for HUD insured loans for long term care facilities, including a

- 8 -

 

HUD
insured loan under Section 223(f) for senior housing facilities and Section 232 for nursing home
and assisted living facilities of the National Housing Act, and any refinancing, refunding,
extension or renewal thereof, and which Indebtedness is to be secured by the assets and properties
owned or held by such Borrower or Borrowers, including the Facility or Facilities owned and
operated by such Borrower or Borrowers.

     “Indebtedness” with respect to any Person means, as of the date of determination
thereof, (a) all of such Person’s indebtedness for borrowed money, (b) all indebtedness of such
Person or any other Person secured by any Lien with respect to any property or asset owned or held
by such Person, regardless whether the indebtedness secured thereby shall have been assumed by such
Person or such Person has become liable for the payment thereof, (c) all Capitalized Lease
Obligations of such Person and obligations or liabilities created or arising under conditional sale
or other title retention agreement with respect to property used and/or acquired by Borrower even
though the rights and remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property, (d) all unfunded pension fund obligations and liabilities, (e) all
obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (f) all
obligations in respect of letters of credit, whether or not drawn, and bankers’ acceptances issued
for the account of such Person, (g) deferred and/or accrued taxes and all unfunded pension fund
obligations and liabilities, (h) all guarantees by such Person, or any undertaking by such Person
to be liable for, the debts or obligations of any other Person, described in clauses (a) through
(h), and (i) all Bank Product Obligations of such Person.

     “Indemnified Parties” shall have the meaning ascribed to such term in Section
12.16 hereof.

     “Intellectual Property” means all of the following in any jurisdiction throughout the
world: (a) all inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers, together with all
translations, adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations, and renewals in
connection therewith, (e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and production processes
and techniques, technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals), (f) all computer
software (including source code, executable code, data, databases, and related documentation), (g)
all material advertising and promotional materials, (h) all other proprietary rights, and (i) all
copies and tangible embodiments thereof (in whatever form or medium).

     “Inventory” means “inventory” as defined in the Code, including, without limitation,
any and all inventory and goods of the Borrower, wheresoever located, whether now owned or
hereafter acquired by the Borrower, which are held for sale or lease, furnished under any contract
of service or held as raw materials, work-in-process or supplies, and all materials used or

- 9 -

 

consumed in the Borrower’s business, and shall include such property the sale or other disposition
of which has given rise to Accounts and which has been returned to or repossessed or stopped in
transit by the Borrower.

     “Joint Liability Payment” shall have the meaning ascribed to such term in Section
12.21(g) hereof.

     “Laws” means, collectively, all federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations, including judicial opinions or presidential authority in
the applicable jurisdiction and Healthcare Laws and Environmental Laws, now or hereafter in effect,
and in each case as amended or supplemented from time to time.

     “Leases” means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals, guaranties, and other agreements
with respect thereto, pursuant to which the Borrower holds any leased real property (including,
without limitation, the Commercial Leases and Operating Leases).

     “Lender Parties” shall have the meaning ascribed to such term in Section 12.24
hereof.

     “Liabilities” means any and all of each of the Borrower’s liabilities, obligations and
Indebtedness to the Lenders and the Administrative Agent of any and every kind and nature, whether
heretofore, now or hereafter owing, arising, due or payable and howsoever evidenced, created,
incurred, acquired, or owing, whether primary, secondary, direct, indirect, contingent, absolute,
fixed or otherwise (including, without limitation, payments of or for principal, interest, default
interest, reimbursement obligations, interest rate hedging obligations fees, costs, expenses,
and/or indemnification, and obligations of performance, and the Closing Fee, the Prepayment
Premium, and all Bank Product Obligations, and any interest that accrues after commencement of any
insolvency or bankruptcy proceeding regardless of whether allowed or allowable in whole or in part
as a claim in any such insolvency or bankruptcy proceeding) and whether arising or existing under
written agreement, oral agreement, or by operation of law, including, without limitation, all of
each Borrower’s Indebtedness, liabilities and obligations to the Lenders and the Administrative
Agent under this Agreement (whether relating to the Loan or otherwise and including, without
limitation, all of each Borrower’s Bank Product Obligations) or each Hedging Agreement and any and
all other Financing Agreements to which Borrower is a party, and any refinancings, substitutions,
extensions, renewals, replacements and modifications for or of any or all of the foregoing.

     “Libor Base Rate” means a rate of interest equal to (a) the per annum rate of interest
at which United States dollar deposits in an amount comparable to the amount of the relevant Libor
Loan and for a period equal to the Libor Interest Period are offered in the London Interbank
Eurodollar market at 11:00 A.M. (London time) two (2) Business Days prior to the commencement of
such Libor Interest Period (or three (3) Business Days prior to the commencement of such Libor
Interest Period if banks in London, England were not open and
dealing in offshore United States dollars on such second preceding Business Day), as displayed
in the Bloomberg Financial Markets system (or other authoritative source selected by the
Administrative Agent in its sole discretion) or, if the Bloomberg Financial Markets system or
another authoritative source is not available, as the Libor Base Rate is otherwise determined by

- 10 -

 

the Administrative Agent in its sole and absolute discretion, divided by (b) a number determined by
subtracting from 1.00 the then stated maximum reserve percentage for determining reserves to be
maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities as
defined in Regulation D (or any successor category of liabilities under Regulation D), such rate to
remain fixed for such Libor Interest Period. The Administrative Agent’s determination of the Libor
Base Rate shall be conclusive, absent manifest error.

     “Libor Interest Period” means, with respect to any Libor Loan, successive one (1)
month periods, provided, however, that: (a) each Libor Interest Period occurring
after the initial Libor Interest Period of any Libor Loan shall commence on the day on which the
preceding Libor Interest Period for such Libor Loan expires, with interest for such day to be
calculated at the Libor Rate in effect for the new Libor Interest Period; (b) whenever the last day
of any Libor Interest Period would otherwise occur on a day other than a Business Day, the last day
of such Libor Interest Period shall be extended to occur on the next succeeding Business Day; (c)
whenever the first day of any Libor Interest Period occurs on a date for which there is no
numerically corresponding date in the month in which such Libor Interest Period terminates, such
Libor Interest Period shall end on the last day of such month, unless such day is not a Business
Day, in which case the Libor Interest Period shall terminate on the first Business Day of the
following month, provided, further, that so long as the Libor Rollover remains in
effect, all subsequent Libor Interest Periods shall terminate on the date of the month numerically
corresponding to the date on which the initial Libor Interest Period commenced; and (D) if at any
time the Libor Interest Period for a Libor Loan expires less than one month before the Stated
Maturity Date, such Libor Loan shall automatically renew at the then current Libor Rate for a Libor
Interest Period terminating on the Stated Maturity Date.

     “Libor Loan” means a Loan which bears interest at a Libor Rate.

     “Libor Rate” means, with respect to a Libor Loan for the relevant Libor Interest
Period, the sum of the Libor Base Rate applicable to that Libor Interest Period, plus the
Applicable Libor Margin.

     “Libor Rollover” means that each Libor Loan shall automatically renew for the Libor
Interest Period specified in this Agreement at the then current Libor Rate, except that a Libor
Interest Period for a Libor Loan shall not automatically renew with respect to any principal amount
which is scheduled to be repaid before the last day of the applicable Libor Interest Period, and
any such amounts shall bear interest at the Base Rate, until repaid.

     “Licenses” shall have the meaning ascribed to such term in Section 10.2 hereof

     “Lien” means any lien, security interest, mortgage, pledge, hypothecation, collateral
assignment, or other charge, encumbrance or preferential arrangement, including, without
limitation, the retained security title of a conditional vendor or lessor.

     “Loan Account” shall have the meaning ascribed to such term in Section 2.5
hereof.

     “Loan” means the Term Loan, and, if applicable, any and all other advances made by the
Lenders (or, if applicable, the Administrative Agent) to the Borrower pursuant to the terms of this
Agreement or any other Financing Agreement.

- 11 -

 

     “Location” or “Locations” mean one or more of the healthcare or other
facilities owned by the Borrower on the Property as identified on Schedule 1.1(a) hereto.

     “Manage” or “Management” means to generate, handle, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or burn for energy recovery, incinerate,
accumulate speculatively, transport, transfer, dispose of, release, threaten to release or abandon
Hazardous Substances.

     “Management Agreements” means, collectively, those certain Management Agreements
between (i) Manager and each Borrower for the operation and management of the Facilities and (ii)
Manager and Diversicare Therapy Services, LLC, for bookkeeping, accounting, payroll, billing and
management of its contract therapy services.

     “Manager” means Diversicare Management Services Co.

     “Material Adverse Change” or “Material Adverse Effect” means, with respect to
any event, act, condition or occurrence of whatever nature (including any adverse determination in
any litigation, arbitration, or governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, any of the following: (a) a material adverse change in, or a
material adverse effect upon, the financial condition, operations, business or properties of the
Credit Parties, taken as a whole, (b) a material adverse change in, or a material adverse effect
upon, the rights and remedies of the Administrative Agent or the Lenders under any Financing
Agreement or the ability of the Credit Parties, taken as a whole, to perform their payment or other
obligations under any Financing Agreement to which they are parties, (c) a material adverse change
in, or a material adverse effect upon, the legality, validity or enforceability of any Financing
Agreement, (d) a material adverse change in, or a material adverse effect upon, the existence,
perfection or priority of any security interest granted in any Financing Agreement or the value of
any material Collateral not resulting from any action or inaction by the Administrative Agent, or
(e) any liability of the Credit Parties, or any one or more of them, in excess of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) in the aggregate as a result the final adjudication of
one or more violations of any Healthcare Law which remains unpaid for a period of thirty (30) days,
unless such liability is being contested or appealed by appropriate proceedings and Borrower has
established appropriate reserves adequate for payment in the event such appeal or contest is
ultimately unsuccessful, provided further that in the event such contest or appeal is ultimately
unsuccessful, the Borrower shall pay the assessment no later than the deadline set forth by the
applicable agency.

     “Maximum Term Facility” means an amount equal to Twenty-Three Million and No/100
Dollars ($23,000,000.00).

     “Medicaid” mean collectively all federal statutes (whether set forth in Title XIX of
the Social Security Act or elsewhere) affecting the health insurance program established by Title
XIX of the Social Security Act (42 U.S.C. §§ 1396, et seq.), together with all applicable
provisions of all rules, regulations, manuals, final orders and administrative, reimbursement and
other applicable guidelines of all governmental authorities, including HHS, CMS or the Office of

- 12 -

 

the Inspector General of HHS, or any Person succeeding to the functions of any of the foregoing
(whether or not having the force of law).

     “Medicare” mean collectively all federal statutes (whether set forth in Title XVIII of
the Social Security Act or elsewhere) affecting the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 U.S.C. § 1395, et seq.),
together with all applicable provisions of all rules, regulations, manuals, final orders and
administrative, reimbursement and other applicable guidelines of all governmental authorities,
including HHS, CMS or the Office of the Inspector General of HHS, or any Person succeeding to the
functions of any of the foregoing (whether or not having the force of law).

     “Mortgages” means, collectively, each of those certain Mortgage, Deed of Trust,
Security Agreement, Assignment of Leases and Rents and Fixture Filing dated of even date herewith
made by the Borrower, respectively, granting and conveying to the Administrative Agent for the
ratable benefit of the Lenders a first mortgage Lien on that certain Property as identified on
Schedule 1.1(b), as the same may be amended, restated, supplemented or modified from time
to time

     “Multiemployer Plan” shall have the meaning ascribed to such term in Section
7.19 hereof.

     “Non-U.S. Participant” shall have the meaning ascribed to such term in Section
3.3 hereof.

     “OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by the Office of Foreign Asset Control, the Department of the Treasury
pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of
terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of or
by the Office of Foreign Asset Control, the Department of the Treasury or pursuant to any other
applicable Executive Orders.

     “Operating Lease” means the collective reference to any Commercial Leases between the
Borrower and any Operators, respectively, pursuant to which such Operators lease and operate each
Location.

     “Operators” or “Operator” means the respective operators of the Locations, all
of which are licensed under all applicable Healthcare Laws.

     “Participant” shall have the meaning ascribed to such term in Section 12.15(d)
hereof.

     “Patriot Act” shall have the meaning ascribed to such term in Section 8.16
hereof.

     “PBGC” shall have the meaning ascribed to such term in Section 7.19 hereof.

     “Permitted Liens” shall have the meaning ascribed to such term in Section 9.1
hereof.

     “Person” means any individual, sole proprietorship, partnership, joint venture, trust,
limited liability company, unincorporated organization, association, corporation, institution,

- 13 -

 

entity, party, or government (whether national, federal, state, provincial, county, city, municipal
or otherwise, including, without limitation, any instrumentality, division, agency, body or
department thereof).

     “Plan” shall have the meaning ascribed to such term in Section 7.19 hereof.

     “Pledge Agreement” means that certain Pledge Agreement of even date herewith made by
Pledgor in favor of the Administrative Agent, in form and substance reasonable satisfactory to the
Administrative Agent, as the same may be modified, restated, supplemented or amended from time to
time in accordance with the terms thereof.

     “Pledgor” means Diversicare Leasing Corp., a Tennessee corporation.

     “Prepayment Premium” means, with respect to prepayment of the Loan, three percent (3%)
of the amount of the outstanding principal balance of the Loan prepaid if such prepayment occurs on
or prior to the first (1st) year anniversary of the Closing Date; two percent (2%) of the amount of
the outstanding principal balance of the Loan prepaid if such prepayment occurs after the first
anniversary hereof and on or prior to the second (2nd) year anniversary of the Closing Date; and
one percent (1%) of the amount of the outstanding principal balance of the Loan prepaid if such
prepayment occurs after the second anniversary hereof and on or prior to the third (3rd)
anniversary of the Closing Date; provided, for the avoidance of doubt, there will be no Prepayment
Premium if any such prepayment occurs after the third (3rd) year anniversary of the Closing Date.

     “Pro Rata Share” means (a) with respect to a Lender’s obligation to make a portion of
the Loan hereunder and right to receive payments of principal, interest and fees with respect to
the Term Loan, the Term Loan Commitment Percentage of such Lender, and (b) for all other purposes
to any Lender, the percentage obtained by dividing (i) such Lender’s then outstanding principal
amount of the Loan, by (ii) the then aggregate outstanding principal amount of the Loan of all
Lenders.

     “Prohibited Transaction” shall have the meaning ascribed to such term in ERISA.

     “Property” means any and all real property owned, leased, sub-leased or used at any
time by Borrower, including the real estate identified on Schedule 1.1(b).

     “Register” shall have the meaning ascribed to such term in Section 12.15(d)
hereof.

     “Release” means any actual or threatened spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous
Substances into the environment, as “environment” is defined in CERCLA.

     “Released Parties” shall have the meaning ascribed to such term in Section
12.24 hereof.

     “Releasing Parties” shall have the meaning ascribed to such term in Section
12.24 hereof.

     “Required Lenders” means, as of any date of determination, (a) if there are three (3)
or fewer Lenders, Lenders holding one hundred percent (100%) of the sum of the outstanding

- 14 -

 

principal balance of the Loan (and the Term Loan Commitment), or (b) if there are more than three
(3) Lenders, Lenders holding sixty-six and two-thirds percent (66-2/3%) or more of the sum of the
outstanding principal balance of the Loan (and the Term Loan Commitment), provided, that the
commitments of, and the portion of the Liabilities held or deemed held by, any Defaulting Lender
shall be excluded for purposes of making a determination of Required Lenders.

     “Respond” or “Response” means any action taken pursuant to Environmental Laws
to correct, remove, remediate, cleanup, prevent, mitigate, monitor, evaluate, investigate or assess
the Release of a Hazardous Substance.

     “Restricted Agreements” means, collectively, each Management Agreement, Commercial
Lease, agreement, document or instrument entered into in connection with (directly or indirectly)
the Cash Management Program, any other agreement, document or instrument between or among the
Credit Parties and any agreement, document or instrument pertaining to (directly or indirectly) any
of the foregoing.

     “Restrictions” shall have the meaning ascribed to such term in Section 10.3
hereof.

     “Revolving Loan Agreement” means that certain Amended and Restated Revolving Loan and
Security Agreement dated of even date herewith by and among the Affiliated Revolving Borrowers, the
Lenders and the Administrative Agent, as the same may be restated, modified, supplemented or
amended from time to time.

     “Service Fee” shall have the meaning ascribed to such term in Section 8.9
hereof.

     “Solvent” means, with respect to any Person on a particular date, that on such date
(a) the fair value of the property of such Person is greater than the total amount of liabilities,
including contingent liabilities, of such Person; (b) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured; (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay
as such debts and liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which such Person’s
property would constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time, represents the
amount that can be reasonably be expected to become an actual or matured liability, but shall not
include incurred but not reported professional liability claims.

     “Stated Maturity Date” means February 28, 2016.

     “Stock” shall mean all certificated and uncertificated shares, options, warrants,
general or limited partnership interests, membership interests or units, limited liability company
interests,
participation or other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or nonvoting, including
common stock, preferred stock, or any other “equity security” (as such term is defined

- 15 -

 

in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934).

     “Subordinated Debt” means any and all Indebtedness owing by the Borrower to a third
party that has been subordinated to the Liabilities in writing on terms and conditions satisfactory
to the Administrative Agent in its sole and absolute discretion.

     “Subordination Agreement” means, collectively, any subordination agreements entered
into from time to time by holders of Subordinated Debt and the Administrative Agent, each in form
and substance satisfactory to the Administrative Agent in its sole and absolute discretion, each as
the same may be modified, supplemented, amended or restated from time to time.

     “Subordination of Management Agreements” means that certain Subordination of
Management Agreements of even date herewith made by the Manager in favor of the Administrative
Agent, in form and substance reasonable satisfactory to the Administrative Agent, as the same may
be modified, restated, supplemented or amended from time to time in accordance with the terms
thereof.

     “Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than fifty percent (50%) of the outstanding Stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of whether, at the
time, Stock of any other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate the vote of fifty percent (50%)
or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (ii) any
partnership or limited liability company in which such Person or one or more Subsidiaries of such
Person has an equity interest (whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%) or of which any such Person is a general partner,
managing member or manager or may exercise the powers of a general partner, managing member or
manager.

     “Tax Code” shall have the meaning ascribed to such term in Section 7.19
hereof.

     “Taxes” shall have the meaning ascribed to such term in Section 3.3 hereof.

     “Tenant” means any tenant, resident or occupant under any Lease.

     “Term Loan” shall have the meaning ascribed to such term in Section 2.1
hereof.

     “Term Note(s)” shall have the meaning ascribed to such term in Section 2.1
hereof.

     “Term Loan Commitment” shall have the meaning ascribed to such term in Section
2.1 hereof.

     “Term Loan Commitment Percentage” means, as to any Lender, the percentage set forth
opposite such Lender’s name on Annex A hereto under the column “Term Loan Commitment

- 16 -

 

Percentage”, or, if different, in the most recent Assignment Agreement to which such Lender is a
party.

     “TRICARE” means the medical program for active duty members, qualified family members,
CHAMPUS eligible retirees and their family members and survivors, of all uniformed services.

     “Uniform Commercial Code” or “UCC” or “Code” means the Uniform
Commercial Code as the same may, from to time, be in effect in the State of Illinois; provided,
however, that if, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or remedies with respect to, Administrative Agent’s Lien on the
Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of Illinois, the term “Uniform Commercial Code” or “UCC” or “Code” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this
Agreement or the other Financing Agreements relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions; provided
further that, to the extent that the Uniform Commercial Code of a particular jurisdiction
is used to define a term herein or in any Financing Agreement and such term is defined differently
in different Articles or Divisions of such Uniform Commercial Code, then the definition of such
term contained in Article or Division 9 of such Uniform Commercial Code shall control.

     “Withholding Certificate” shall have the meaning ascribed to such term in Section
3.3 hereof.

          1.2 Interpretation.

               (1) All accounting terms used in this Agreement or the other Financing Agreements shall
have, unless otherwise specifically provided herein or therein, the meaning customarily given such
term in accordance with GAAP, and all financial computations thereunder shall be computed, unless
otherwise specifically provided therein, in accordance with GAAP consistently applied; provided,
however, that all financial covenants and calculations in the Financing Agreements shall be made in
accordance with GAAP as in effect on the Closing Date unless Borrower and Administrative Agent
shall otherwise specifically agree in writing. That certain items or computations are explicitly
modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the
foregoing. Unless otherwise specified, references in this Agreement or any of the attachments
hereto or appendices hereof to a Section, subsection or clause refer to such Section, subsection or
clause as contained in this Agreement. The words “herein,” “hereof” and “hereunder” and other
words of similar import refer to this Agreement as a whole, including all annexes, exhibits and
schedules attached hereto, as the same may from time to time be amended, restated, modified or
supplemented, and not to any particular section, subsection or clause contained in this Agreement
or any such annex, exhibit or schedule.

               (2) Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine and neuter genders. The words
“including”, “includes” and “include” shall be deemed to be followed by the words “without
limitation”; the word “or” is not exclusive; references to Persons include

- 17 -

 

 their respective
successors and assigns (to the extent and only to the extent permitted by the Financing Agreements)
or, in the case of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include any amendments of the
same and any successor statutes and regulations. Whenever any provision in any Financing Agreement
refers to the knowledge (or an analogous phrase) of Borrower, except as otherwise expressly
provided for herein, such words are intended to signify that a Duly Authorized Officer of Borrower
has actual knowledge or awareness of a particular fact or circumstance or that a prudent individual
in the position of such Duly Authorized Officer of Borrower, would reasonably be expected to have
known or been aware of such fact or circumstance in the course of performing his or her duties.

     2. COMMITMENT; INTEREST; FEES.

          2.1 Term Loan. On the terms and subject to the conditions set forth in this Agreement,
and provided there does not then exist a Default or an Event of Default, each Lender, severally and
for itself alone, agrees to make such Lender’s Pro Rata Share of a term loan (the “Term
Loan”) in one advance to the Borrower on the Closing Date in the aggregate amount of the
Maximum Term Facility. Any amounts paid or applied to the principal balance of the Term Loan
(whether by mandatory prepayment or otherwise) may not be reborrowed hereunder. The Lenders’
commitment hereunder to make the Term Loan is hereinafter called the “Term Loan
Commitment.” The payment obligations of the Borrower to the Lenders hereunder are and shall be
joint and several as provided in Section 12.21 hereof. Each Lender’s obligation to fund
the Term Loan shall be limited to such Lender’s Term Loan Commitment Percentage of the Term Loan
Commitment.

               (1) The advance to the Borrower under this Section 2.1 shall be deposited, in immediately
available funds, in the Borrower’s demand deposit account with the Administrative Agent, or in such
other account as the Borrower Agent designates in writing with the Administrative Agent’s
approval.

               (2) The principal balance of the Term Loan shall be amortized over twenty-five (25) years
and shall be jointly and severally repaid by Borrower in consecutive equal monthly installments as
follows:

	 	 	 	 	 

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

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

- 18 -

 

               (3) The Term Loan shall be evidenced by a separate promissory note (hereinafter, as the
same may be amended, restated, modified or supplemented from time to time, and together with any
renewals or extensions thereof or exchanges or substitutions therefor, called the “Term Loan
Note(s)”), duly executed and delivered by the Borrower, substantially in the form set forth in
Exhibit A attached hereto, with appropriate insertions, dated the Closing Date, jointly and
severally payable to the order of each Lender, respectively, in the principal amount equal to such
Lender’s Pro Rata Share of the Maximum Term Facility. THE PROVISIONS OF THE TERM LOAN NOTES
NOTWITHSTANDING, THE TERM LOAN THEN OUTSTANDING SHALL BECOME IMMEDIATELY DUE AND PAYABLE ON A JOINT
AND SEVERAL BASIS UPON THE EARLIEST TO OCCUR OF (X) STATED MATURITY DATE; (Y) THE ACCELERATION OF
THE LIABILITIES PURSUANT TO SECTION 11.2 HEREOF; AND (Z) TERMINATION OF THIS AGREEMENT (WHETHER BY
PREPAYMENT OR OTHERWISE) IN ACCORDANCE WITH ITS TERMS.

               (4) Accrued interest on the Term Loan shall be due and payable and shall be made by the
Borrower to the Administrative Agent in accordance with Section 2.7 hereof. Monthly interest
payments on the Term Loan shall be computed using the interest rate then in effect and based on the
outstanding principal balance of the Term Loan. Upon maturity, the outstanding principal balance
of the Term Loan shall be immediately due and payable, together with any remaining accrued interest
thereon.

          2.2 [Intentionally Omitted.].

          2.3 [Intentionally Omitted.].

          2.4 [Intentionally Omitted.]

          2.5 The Borrower’s Loan Account. The Administrative Agent, on behalf of each Lender,
shall maintain a loan account (the “Loan Account”) on its books for the Borrower in which
shall be recorded (a) the
Loan made by the Lenders (including Administrative Agent) to the Borrower pursuant to this
Agreement, (b) all payments made by the Borrower on the Loan, and (c) all other appropriate debits
and credits as provided in this Agreement, including, without limitation, all fees, charges,
expenses and interest. All entries in the Loan Account shall be made in accordance with the
Administrative Agent’s customary accounting practices as in effect from time to time. The Borrower
promises to pay the amount reflected as owing by Borrower under its Loan Account and all of its
other obligations hereunder as such amounts become due or are declared due pursuant to the terms of
this Agreement. Notwithstanding the foregoing, the failure so to record any such amount or any
error in so recording any such amount shall not limit or otherwise affect the Borrower’s
obligations under this Agreement or under the Term Loan Note to repay the outstanding principal
amount of the Loan together with all interest accruing thereon.

          2.6 Statements. The Loan to the Borrower, and all other debits and credits provided for
in this Agreement, shall be evidenced by entries made by the Administrative Agent in its internal
data control systems showing the date, amount and reason for each such debit or

- 19 -

 

credit. Until such
time as the Administrative Agent shall have rendered to the Borrower Agent written statements of
account as provided herein, the balance in the Loan Account, as set forth on the Administrative
Agent’s most recent computer printout, shall be rebuttably presumptive evidence of the amounts due
and owing the Lenders by the Borrower. From time to time the Administrative Agent shall render to
the Borrower Agent a statement setting forth the balance of the Loan Account, including principal,
interest, expenses and fees. Each such statement shall be subject to subsequent adjustment by the
Administrative Agent but shall, absent manifest errors or omissions, be presumed correct and
binding upon the Borrower.

          2.7 Interest. (a) The Borrower agrees to jointly and severally pay to the Administrative
Agent on behalf of the Lenders interest on the daily outstanding principal balance of the Term Loan
at the Libor Rate; provided, however, that immediately following the occurrence and
during the continuance of an Event of Default, and notwithstanding any other provisions of this
Agreement to the contrary, the Borrower agrees to pay to the Administrative Agent on behalf of the
Lenders interest on the outstanding principal balance of the Loan at the per annum rate of three
percent (3%) plus the rate otherwise payable hereunder with respect to such Loan (the “Default
Rate”).

          (b) Accrued interest on each Libor Loan shall be payable on the last day of the Libor
Interest Period relating to such Libor Loan and at maturity, commencing with the first such last
day of the initial Libor Interest Period. If at any time applicable in accordance with
Sections 3.2, 3.6 or 3.7 hereof, accrued interest on each Base Rate Loan shall be
payable on the first calendar day of each month and at maturity. Notwithstanding the foregoing in
this Section 2.7(b), the first interest payment hereunder shall be due and payable on April
1, 2011. Monthly interest payments on the Loan shall be computed using the interest rate then in
effect and based on the outstanding principal balance of the Loan. Upon maturity, the outstanding
principal balance of the Loan shall be immediately due and payable, together with any remaining
accrued interest thereon. Interest shall be computed on the basis of a year of three hundred sixty
(360)
days for the actual number of days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). If any payment of principal of, or interest on, the Term
Loan Note falls due on a day that is not a Business Day, then such due date shall be extended to
the next following Business Day, and additional interest shall accrue and be payable for the period
of such extension.

          2.8 Method for Making Payments. All payments that the Borrower is required to make to the
Administrative Agent on behalf of the Lenders under this Agreement or under any of the other
Financing Agreements shall be made in immediately available funds not later than 1:00 p.m. (Chicago
time) on the date of payment at the Administrative Agent’s office at 120 South LaSalle Street,
Chicago, Illinois 60603, or at such other place as the Administrative Agent directs in writing
from time to time, or, in the Administrative Agent’s sole and absolute discretion after the
occurrence and during the continuance of any Default, by appropriate debits to the Loan Account.
Borrower hereby irrevocably authorizes and instructs the Administrative Agent after the occurrence
and during the continuance of any Default to direct debit any of Borrower’s operating accounts with
Administrative Agent or any Lender for all principal, interest, fees and expenses due hereunder
with respect to the Loan and the other Liabilities. Payments made after 1:00 p.m. (Chicago time)
shall be deemed to have been made on the next succeeding Business Day. Administrative Agent shall
promptly remit to each Lender its Pro

- 20 -

 

Rata Share of all such payments received in collected funds
by Administrative Agent for the account of such Lender; provided, however, all
payments due by Borrower under Section 3, as applicable, shall be made by Borrower directly
to Lender entitled thereto without setoff, counterclaim or other defense.

          2.9 Term of this Agreement. The Borrower shall have the right to terminate this Agreement
following prepayment of all of the Liabilities as provided under Section 2.10 hereof;
provided, however, that (a) all of the Administrative Agent’s and each Lender’s
rights and remedies under this Agreement, and (b) the Liens created under Section 6.1
hereof and under any of the other Financing Agreements, shall survive such termination until all of
the Liabilities under this Agreement and the other Financing Agreements have been indefeasibly paid
in full in cash. In addition, the Liabilities may be accelerated as set forth in Section
11.2 hereof. Upon the effective date of termination, all of the Liabilities shall become
immediately due and payable on a joint and several basis without notice or demand. Notwithstanding
any termination, until all of the Liabilities hereunder shall have been indefeasibly paid and
satisfied in full in cash, the Administrative Agent shall be entitled to retain its Liens (for the
ratable benefit of the Lenders and the Administrative Agent) in and to all existing and future
Collateral.

          2.10 Optional Prepayment of Loan. The Borrower may, at its option, permanently prepay, at
any time during the term of this Agreement the Loan or any portion thereof but in minimum amounts
of no less than One Hundred Thousand Dollars ($100,000), subject to the following conditions: (i)
not less than ten (10) days prior to the date upon which the Borrower desires to make any such
prepayment, Borrower shall deliver to the Administrative Agent a written notice of its intention to
prepay all
or such portion of the Loan, which notice shall be revocable (provided, that any and all costs
or expenses incurred or suffered by the Administrative Agent and the Lenders as a result of the
revocation of notice by the Borrower shall be borne solely by the Borrower) and state the amount of
the prepayment and the prepayment date, (ii) the Borrower shall pay (A) the Prepayment Premium (in
view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual
agreement of the parties as to a reasonable calculation of each Lender’s lost profits as a result
of such prepayment), (B) any amount due pursuant to Section 3.4 hereof, (C) any amounts due
in connection with such prepayment under any Hedging Agreement, and (D) all liabilities, including
any applicable swap or hedging breakage or termination fee, if any, in connection with any Hedging
Agreement; provided, however, no Prepayment Premium shall be required or due in the
event of a prepayment of the Loan or any portion thereof with the proceeds of a HUD Financing. Any
such Prepayment Premium shall constitute a part of the Liabilities and be secured by the
Collateral. Prepayments of the Loan shall be applied against installments payable under the Term
Loan Notes in the inverse order of maturity. The parties agree that the Prepayment Premium is not
a penalty. BORROWER HEREBY EXPRESSLY ACKNOWLEDGES THAT SUCH PREPAYMENT PREMIUM IS REASONABLE AND
WILL FAIRLY COMPENSATE THE LENDERS FOR ANY COSTS AND CHARGES INCURRED BY LENDERS AS A RESULT OF THE
PREPAYMENT OF ALL OR ANY PORTION OF THE LOAN. BORROWER ACKNOWLEDGES THAT THE INCLUSION OF THIS
AGREEMENT TO PAY THE PREPAYMENT PREMIUM FOR THE RIGHT TO PREPAY ALL OR ANY PORTION OF THE LOAN WAS
SEPARATELY NEGOTIATED WITH ADMINISTRATIVE AGENT AND LENDERS, THAT THE ECONOMIC VALUE OF THE VARIOUS
ELEMENTS OF THIS AGREEMENT WERE DISCUSSED, THAT THE

- 21 -

 

CONSIDERATION GIVEN BY BORROWER FOR THE LOAN
WAS ADJUSTED TO REFLECT THE SPECIFIC AGREEMENT NEGOTIATED AMONG BORROWER, ADMINISTRATIVE AGENT AND
LENDERS AND CONTAINED IN THIS SECTION.

          2.11 Limitation on Charges. It being the intent of the parties that the rate of interest
and all other charges to the Borrower be lawful, if for any reason the payment of a portion of the
interest or other charges otherwise required to be paid under this Agreement would exceed the limit
which the Lenders may lawfully charge the Borrower, then the obligation to pay interest or other
charges shall automatically be reduced to such limit and, if any amounts in excess of such limit
shall have been paid, then such amounts shall at the sole option of the Administrative Agent (or
otherwise at the direction of the Required Lenders) either be refunded to the Borrowers or credited
to the principal amount of the Liabilities (or any combination of the foregoing) so that under no
circumstances shall the interest or other charges required to be paid by the Borrowers hereunder
exceed the maximum rate allowed by applicable Laws, and Borrowers shall not have any action against
any Lender or the Administrative Agent for any damages arising out of the payment or collection of
any such excess interest.

          2.12 [Intentionally Omitted.].

          2.13 Setoff. (a) Borrower agrees that the Administrative Agent and each Lender has all
rights of setoff and banker’s liens provided by applicable law. The Borrower agrees that, if at
any time (i) any amount owing by it under this Agreement or any Financing Agreement is then due and
payable to the Administrative Agent or Lenders, or (ii) or an Event of Default shall have occurred
and be continuing, then the Administrative Agent or Lenders, in their sole discretion, may set off
against and apply to the payment of any and all Liabilities, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter with the Administrative Agent or
such Lender.

          (b) Without limitation of Section 2.13(a) hereof, the Borrower agrees that, upon and
after the occurrence of any Event of Default, the Administrative Agent and each Lender is hereby
authorized, at any time and from time to time, without prior notice to the Borrower (provided,
however, prior to an Event of Default the Administrative Agent and such Lender shall use reasonable
efforts to provide notice of any such action within a reasonable time thereafter but the
Administrative Agent and such Lender shall not be liable for any failure to provide such notice),
(i) to set off against and to appropriate and apply to the payment of any and all Liabilities any
and all amounts which the Administrative Agent or Lender is obligated to pay over to the Borrower
(whether matured or unmatured, and, in the case of deposits, whether general or special, time or
demand and however evidenced), and (ii) pending any such action, to the extent necessary, to
deposit such amounts with the Administrative Agent as Collateral to secure such Liabilities and to
dishonor any and all checks and other items drawn against any deposits so held as the
Administrative Agent in its sole discretion may elect.

          (c) The rights of the Administrative Agent and Lenders under this Section 2.13 are in
addition to all other rights and remedies which the Administrative Agent and Lenders may otherwise
have in equity or at law.

- 22 -

 

          (d) If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary,
by application of offset or otherwise), on account of (a) principal of or interest on the Term
Loan, but excluding (i) any payment pursuant to
Section 3.8 or Section 12.15 and (ii) payments of interest on any Base Rate Loan that but for Sections 3.2,
3.6 and 3.7 would be a Libor Loan, or (b) other recoveries obtained by all Lenders on account
of principal of and interest on the Loan (or such participation) then held by them, then such
Lender shall purchase from the other Lenders such participations in the Loan held by them as shall
be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably
with each of them; provided that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase
price restored to the extent of such recovery.

          2.14 Termination of Commitment. On the date on which the Commitment terminates pursuant to
Section 11.2 hereof, the Loan and other Liabilities shall become immediately due and
payable, without presentment, demand or notice of any kind.

          2.15 [Intentionally Omitted.].

          2.16 Closing Fee. On the Closing Date, the Borrower shall pay to the Administrative Agent
a one-time closing fee pursuant to the Fee Letter in immediately available funds, which fee shall
be nonrefundable and deemed fully earned as of such date (“Closing Fee”).

          2.17 Late Charge. If any installment of principal or interest due hereunder shall become
overdue for five (5) days after the date when due, the Borrower shall pay to the Administrative
Agent (for the ratable benefit of the Lenders) on demand a “late charge” of five cents ($.05) for
each dollar so overdue in order to defray part of the increased cost of collection occasioned by
any such late payment, as liquidated damages and not as a penalty.

     3. CHANGE IN CIRCUMSTANCES.

          3.1 Yield Protection. If, after the date of this Agreement (for purposes of this
Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all guidelines and
regulations adopted in connection therewith are deemed to have been adopted after the date hereof),
the adoption of any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any change therein, or any
change in the interpretation or administration thereof, or the compliance of any Lender therewith,
or Regulation D of the Board of Governors of the Federal Reserve System,

               (1) subjects any Lender to any tax, duty, charge or withholding on or from payments due
from the Borrower (excluding taxation of the overall net income or receipts of such Lender or any
branch profits taxes), or changes the basis of taxation of payments to such Lender in respect of
its portion of the Loan or other amounts due it hereunder, or

            
   (2) imposes, modifies, or increases or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of,

- 23 -

 

deposits with or for the account
of, or credit extended by, any Lender (other than reserves and assessments taken into account in
determining the interest rate applicable to Libor Loans), or

               (3) imposes any other condition the result of which is to increase the cost to any Lender
of making, funding or maintaining advances or reduces any
amount receivable by such Lender in connection with advances, or requires any Lender to
make any payment calculated by reference to the amount of advances held or interest received by it,
by an amount deemed material by such Lender, or

               (4) affects the amount of capital required or expected to be maintained by any Lender or
any corporation controlling such Lender and such Lender determines the amount of capital required
is increased by or based upon the existence of this Agreement or its obligation to make the Loan
hereunder or of commitments of this type,
then, within three (3) Business Days of demand by such Lender, the Borrower agrees to pay such
Lender that portion of such increased expense incurred (including, in the case of clause (d), any
reduction in the rate of return on capital to an amount below that which it could have achieved but
for such law, rule, regulation, policy, guideline or directive and after taking into account such
Lender’s policies as to capital adequacy) or reduction in an amount received which such Lender
determines is attributable to making, funding and maintaining the Loan.

          3.2 Availability of Rate Options. If Administrative Agent determines (or Required Lenders
advise Administrative Agent in writing) that maintenance of any Libor Loans would violate any
applicable law, rule, regulation or directive of any government or any division, agency, body or
department thereof, whether or not having the force of law, the Lenders shall suspend the
availability of the Libor Rate option and the Administrative Agent shall require any Libor Loans
outstanding to be promptly converted to a Base Rate Loan subject to the Borrower’s compliance with
Section 3.4 hereof; or if Administrative Agent determines (or Required Lenders advise
Administrative Agent in writing) that (i) deposits of a type or maturity appropriate to match fund
Libor Loans are not available, the Lenders shall suspend the availability of the Libor Rate after
the date of any such determination, or (ii) the Libor Rate does not accurately reflect the cost of
making a Libor Loan, then, if for any reason whatsoever the provisions of Section 3.1
hereof are inapplicable, the Lenders shall, at their option, suspend the availability of the Libor
Rate after the date of any such determination or permit (solely in the case of clause (ii))
the Borrower to pay the Lenders for any increased cost the Lenders may incur.

          3.3 Taxes. All payments by the Borrower under this Agreement shall be made free and clear
of, and without deduction for, any present or future income, excise, stamp or other taxes, fees,
levies, duties, withholdings or other charges of any nature whatsoever, now or hereafter imposed by
any taxing authority, other than franchise taxes and taxes imposed on or measured by any Lender’s
net income or receipts or branch profits taxes (such non-excluded items being called
“Taxes”). If any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation,
then the Borrower shall:

               (1) pay directly to the relevant authority the full amount required to be so withheld or
deducted;

- 24 -

 

               (2) promptly forward to the Administrative Agent an official receipt or other
documentation satisfactory to the Administrative Agent evidencing such payment to such authority;
and

               (3) pay to the Lenders such additional amount or amounts as is necessary to ensure that
the net amount actually received by the Lenders will equal the full amount the Lenders would have
received had no such withholding or deduction been required.

          Moreover, if any Taxes are directly asserted against any Lender with respect to any payment
received by such Lender hereunder, such Lender may pay such Taxes and the Borrower agrees to
promptly pay such additional amounts (including, without limitation, any penalties, interest or
expenses) as is necessary in order that the net amount received by the Lenders after the payment of
such Taxes (including, without limitation, any Taxes on such additional amount) shall equal the
amount the Lenders would have received had not such Taxes been asserted.

          To the extent permitted by applicable law, each Lender that is not a United States person
within the meaning of Code Section 7701(a)(30) (a “Non-U.S. Participant”) shall deliver to
Borrower and Administrative Agent on or prior to the Closing Date (or in the case of a Lender that
is an Assignee, on the date of such assignment to such Lender) two accurate and complete original
signed copies of IRS Form W-8BEN, W-8ECI, or W-8IMY (or any successor or other applicable form
prescribed by the IRS) certifying to such Lender’s entitlement to a complete exemption from United
States withholding tax on interest payments to be made hereunder or on the Loan. If a Lender that
is a Non-U.S. Participant is claiming a complete exemption from withholding on interest pursuant to
Code Sections 871(h) or 881(c), such Lender shall deliver (along with two accurate and complete
original signed copies of IRS Form W-8BEN) a certificate in form and substance reasonably
acceptable to Administrative Agent (any such certificate, a “Withholding Certificate”). In
addition, each Lender that is a Non-U.S. Participant agrees that from time to time after the
Closing Date (or in the case of a Lender that is an Assignee, after the date of the assignment to
such Lender), when a lapse in time (or change in circumstances occurs) renders the prior
certificates hereunder obsolete or inaccurate in any material respect, such Lender shall, to the
extent permitted under applicable law, deliver to Borrower and Administrative Agent two new and
accurate and complete original signed copies of an IRS Form W-8BEN, W-8ECI, or W-8IMY (or any
successor or other applicable forms prescribed by the IRS), and if applicable, a new Withholding
Certificate, to confirm or establish the entitlement of such Lender or Administrative Agent to an
exemption from United States withholding tax on interest payments to be made hereunder or on the
Loan.

          Each Lender that is not a Non-U.S. Participant (other than any such Lender which is taxed as a
corporation for U.S. federal income tax purposes) shall provide two properly completed and duly
executed copies of IRS Form W-9 (or any successor or other applicable form) to Borrower and
Administrative Agent certifying that such Lender is exempt from United States backup withholding
tax. To the extent that a form provided pursuant to this Section is rendered obsolete or
inaccurate in any material respects as result of change in circumstances with respect to the status
of a Lender, such Lender shall, to the extent permitted by applicable law, deliver to Borrower and
Administrative Agent revised forms necessary to confirm or establish the entitlement to such
Lender’s or Administrative Agent’s exemption from United States

- 25 -

 

backup withholding tax. Borrower shall not be required to pay additional amounts to a Lender,
or indemnify any Lender, under this Section to the extent that such obligations would not have
arisen but for the failure of such Lender to comply with this Section.

          Each Lender agrees to and shall indemnify Administrative Agent and hold Administrative Agent
harmless for the full amount of any and all present or future Taxes and related liabilities
(including penalties, interest, additions to tax and expenses, and any Taxes imposed by any
jurisdiction on amounts payable to Administrative Agent under this Section 3.3) which are
imposed on or with respect to principal, interest or fees payable to such Lender hereunder as a
result of the failure by such Lender to deliver, or as a result of the inaccuracy, inadequacy or
deficiency of, any documentation required to be delivered by such Lender to the Administrative
Agent as set forth above. Such indemnification shall be made within thirty (30) days from the date
Administrative Agent makes written demand therefor.

          3.4 Funding Indemnification. If any payment of a Libor Loan occurs on a date that is not
the last day of the applicable Libor Interest Period, whether because of acceleration, prepayment
or otherwise, or a Libor Loan is not made on the date specified by the Borrower, the Borrower shall
indemnify the Lender for any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the
Libor Loan.

          3.5 Lender Statements. Each affected Lender shall deliver a written statement to the
Borrower and Administrative Agent as to the amount due, if any, under Sections 3.1,
3.3 or 3.4 hereof. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of demonstrable error. Unless otherwise provided herein,
the amount specified in the written statement shall be payable on demand after receipt by the
Borrower of the written statement.

          3.6 Basis for Determining Interest Rate Inadequate or Unfair. If with respect to any
Libor Interest Period: (a) Administrative Agent reasonably determines (or Required Lenders advise
Administrative Agent in writing), which determination shall be binding and conclusive on the
Borrower, that by reason of circumstances affecting the interlender Libor Base market adequate and
reasonable means do not exist for ascertaining the applicable Libor Base Rate; or (b)
Administrative Agent reasonably determines (or Required Lenders advise Administrative Agent in
writing) that the Libor Base Rate will not adequately and fairly reflect the cost to Lenders of
maintaining or funding the Loan or any portion thereof for such Libor Interest Period, or that the
making or funding of Libor Loans has become impracticable as a result of an event occurring after
the date of this Agreement which in the opinion of Administrative Agent (or Required Lenders)
adversely affects such Loan, then, in either case, so long as such circumstances shall continue:
(i) Lenders shall not be under any obligation to make, maintain, convert into or continue Libor
Loans and (ii) on the last day of the then current Libor Interest Period for each Libor Loan, each
such Loan shall, unless then repaid
in full, automatically convert to a Base Rate Loan. Each affected Lender shall promptly give
the Borrower written notice of any determination made by it under this Section accompanied by a
statement setting forth in reasonable detail the basis of such determination.

- 26 -

 

          3.7 Illegality. If any applicable law or regulation, or any interpretation thereof by any
court or any governmental or other regulatory body charged with the administration thereof, should
make it unlawful for any Lender or its lending office to make, maintain or fund any Libor Loan,
then the obligation of such Lender to make, convert into or continue such Libor Loan shall, upon
the effectiveness of such event, be suspended for the duration of such unlawfulness, and on the
last day of the current Libor Interest Period for such Libor Loan (or, in any event, if
Administrative Agent or Required Lenders so request, on such earlier date as may be required by the
relevant law, regulation or interpretation), the Libor Loans shall, unless then repaid in full,
automatically convert to Base Rate Loans.

          3.8 Right of Lenders to Fund through Other Offices. Each Lender may, if it so
elects, fulfill its commitment as to any Libor Loan by causing a foreign branch or Affiliate of
such Lender to make such Loan; provided that such election shall not increase the costs to
Borrower hereunder and that in such event for the purposes of this Agreement such Loan shall be
deemed to have been made by such Lender and the obligation of Borrower to repay such Loan shall
nevertheless be to such Lender and shall be deemed held by it, to the extent of such Loan, for the
account of such branch or Affiliate.

          3.9 Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of
this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of
its portion of the Loan in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if such Lender had
actually funded and maintained each Libor Loan during each Libor Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such Libor Interest Period and
bearing an interest rate equal to the Libor Rate for such Libor Interest Period.

     4. ATTORNEY-IN-FACT.

          4.1 Appointment of the Administrative Agent as the Borrower’s Attorney-in-Fact. The
Borrower hereby irrevocably designates, makes, constitutes and appoints the Administrative Agent
(and all Persons designated by the Administrative Agent in writing to the Borrower) as the
Borrower’s true and lawful attorney-in-fact, and authorizes the Administrative Agent, in the
Borrower’s or the Administrative Agent’s name, after an Event of Default has occurred and is
continuing to do the following: (a) at any time, (i) endorse the Borrower’s name upon any items of
payment or proceeds thereof and deposit the same in the Administrative Agent’s account on account
of the Borrower’s Liabilities, and (ii) do all other acts and things which are necessary, in the
Administrative Agent’s reasonable discretion, to
fulfill the Borrower’s obligations under this Agreement. The Borrower hereby ratifies and
approves all acts under such power of attorney and neither Administrative Agent nor any other
Person acting as Borrower’s attorney hereunder will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law made in good faith except as result of its gross
negligence, willful misconduct or illegal activity. The appointment of Administrative Agent (and
any of the Administrative Agent’s officers, employees or agents designated by the Administrative
Agent) as Borrower’s attorney, and each and every one of Administrative Agent’s rights and powers,
being coupled with an interest, are irrevocable until all of the Liabilities have been fully repaid
and this Agreement shall have expired or been terminated in accordance with the terms hereunder.

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Without restricting the generality of the foregoing, after an Event of Default has occurred and is
continuing, Borrower hereby appoints and constitutes the Administrative Agent its lawful
attorney-in-fact with full power of substitution in the Property to advance funds in excess of the
face amount of the Term Loan Note, to pay, settle or compromise all existing bills and claims,
which may be liens or security interests, or to avoid such bills and claims becoming liens against
the Collateral; to execute all applications and certificates in the name of Borrower prosecute and
defend all actions or proceedings in connection with the Collateral (including any Leases
pertaining to Property); and to do any and every act which the Borrower might do in its own behalf;
it being understood and agreed that this power of attorney shall be a power coupled with an
interest and cannot be revoked.

     5. CONDITIONS OF LOAN.

          5.1 Conditions to Loan. Notwithstanding any other term or provision contained in this
Agreement, the Administrative Agent’s and Lenders’ obligation to make the Term Loan hereunder is
subject to the satisfaction of each of the following conditions precedent:

               (1) The Borrower’s Request. The Administrative Agent shall have received a borrowing
notice from Borrower, signed by a Duly Authorized Officer of the Borrower, irrevocably electing the
Loan to be made on the Closing Date. If at any time applicable, if at all, the Administrative
Agent and Lenders shall have no liability to the Borrower or any other Person as a result of acting
on any telephonic request that the Administrative Agent believes in good faith to have been made by
any Person authorized by Borrower to make a borrowing request on behalf of Borrower. Promptly upon
receipt of such borrowing request, Administrative Agent will advise each Lender thereof. Not later
than 1:00 p.m. (Chicago time), on the date of the proposed borrowing of the Loan, each Lender shall
provide Administrative Agent at the office specified by Administrative Agent with immediately
available funds covering such Lender’s Pro Rata Share of such borrowing and, so long as
Administrative Agent has not received written notice that the conditions precedent set forth in
Section 5 with respect to such borrowing have not been satisfied, Administrative Agent shall pay
over the funds received by Administrative Agent to Borrower on the requested borrowing date.

               (2) No Default. Neither a Default nor an Event of Default shall have occurred or be in
existence.

               (3) Representations and Warranties. All of the representations and warranties contained
in the Financing Agreements to which the Borrower is a party and in this Agreement (including,
without limitation, those set forth in Section 7 hereof), are true and correct.

               (4) Fees and Expenses. The Borrower shall have paid all fees owed to the Administrative
Agent and Lenders and reimbursed Administrative Agent and the Lenders for all costs, disbursements,
fees and expenses due and payable hereunder on or before the Closing Date, including, without
limitation, all fees and costs identified in Section 12.2(a) hereof.

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               (5) Documents. The Administrative Agent shall have received all of the following, each
duly executed and delivered and dated the Closing Date, or such earlier date as shall be
satisfactory to the Administrative Agent, each in form and substance reasonably satisfactory to the
Administrative Agent in its sole determination:

               (1) Financing Agreements. This Agreement, the Term Loan Notes, the Guaranty, the Pledge
Agreement, the Mortgage, the Assignment of Rents and Leases, the Environmental Indemnity Agreement,
the Subordination of Management Agreements, and such other Financing Agreements as the
Administrative Agent may require (provided each Lender shall also receive a fully-executed original
of this Agreement and such Lender’s respective Term Loan Note).

               (2) Resolutions; Incumbency and Signatures. Copies of resolutions of the Board of
Directors of the Borrower, and, if required, the shareholder of the Borrower, authorizing or
ratifying the execution, delivery and performance by the Borrower of this Agreement, the Financing
Agreements to which the Borrower is a party and any other document provided for herein or therein
to be executed by Borrower, certified by a Duly Authorized Officer. A certificate of a Duly
Authorized Officer certifying the names of the officers of the Borrower authorized to make a
borrowing request and sign this Agreement and the Financing Agreements to which the Borrower is a
party, together with a sample of the true signature of each such officer; the Lender may
conclusively rely on each such certificate until formally advised by a like certificate of any
changes therein. A copy of resolutions of the Board of Directors of Guarantor and Pledgor
authorizing or ratifying the execution, delivery and performance by Guarantor and Pledgor,
respectively, of the Guaranty and its Pledge Agreement.

               (3) Consents. Certified copies of all documents evidencing any necessary consents and
governmental approvals, if any, with respect to this Agreement, the Financing Agreements, and any
other documents provided for herein or therein to be executed by Borrower.

               (4) Opinions of Counsel. An opinion of Harwell Howard Hyne Gabbert & Manner, the legal
counsel to the Borrower, Guarantor and Pledgor, and local counsel opinions in the jurisdictions
where the Facilities are located with respect to the Mortgages, each in form and substance
reasonably satisfactory to Administrative Agent.

               (5) Certain Restricted Agreements Correct and complete copies of the fully executed
Commercial Leases, Management Agreements, the nursing home licenses of each Borrower, and any other
Restricted Agreement, together with all applicable amendments thereto.

               (6) Financial Condition Certificate. A Financial Condition Certificate, in form and
substance reasonably satisfactory to the Administrative Agent, signed on behalf of the Borrower by
a Duly Authorized Officer of the Borrower.

               (7) Governing Documents and Good Standings. Administrative Agent shall have received (i)
copies, certified as correct and complete by the applicable state of organization of each Borrower,
Pledgor and Guarantor, of the certificate of

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incorporation, certificate of formation or certificate
of limited liability partnership, as applicable, of each Borrower, Pledgor and Guarantor, with any
amendments to any of the foregoing, (ii) copies, certified as correct and complete by an authorized
officer, member or partner of each Borrower, Pledgor and Guarantor, of all other documents
necessary for performance of the obligations of Borrower, Pledgor and Guarantor under this
Agreement and the other Financing Agreements, and (iii) certificates of good standing for each
Borrower, Pledgor and Guarantor issued by the state of organization of each Borrower, Pledgor and
Guarantor and by each state in which each Borrower and Guarantor is doing and currently intends to
do business for which qualification is required (such certificates set forth in (i) through (iii),
the “Certificates”).

               (8) Revolving Loan Agreement and Affiliate Revolving Loan Financing Agreements.
Fully-executed copies of the Revolving Loan Agreement and the Affiliate Revolving Loan Financing
Agreements.

               (9) UCC Financing Statements; Termination Statements; UCC Searches. UCC Financing
Statements, as requested by the Administrative Agent, naming the Borrower as debtor and the
Administrative Agent as secured party with respect to the Collateral, together with such UCC
termination statements necessary to release all Liens (other than Permitted Liens) and other rights
in favor of any Person in any of the Collateral except the Administrative Agent (for the ratable
benefit of the Lenders and the Administrative Agent), and other documents as the Administrative
Agent deems necessary or appropriate, shall have been filed in all jurisdictions that the
Administrative Agent deems necessary or advisable. UCC Financing Statements, as requested by the
Administrative Agent, naming the Pledgor as debtor and the Administrative Agent as secured party
with respect to the Collateral (as defined in the Pledge Agreement), and other documents, if any,
as the Administrative Agent deems necessary or appropriate, shall have been filed in all
jurisdictions that the Administrative Agent deems necessary or advisable. UCC tax, lien, pending
suit and judgment searches for the Borrower, the Pledgor and the Guarantor (including, for each,
any assumed name or trade name) and each dated a date reasonably near to the Closing Date in all
jurisdictions deemed necessary by the Administrative Agent, the results of which shall be
satisfactory to the Administrative Agent in its sole and absolute determination.

               (10) Insurance Certificates. Certificates from the Borrower’s insurance carriers
evidencing that all required insurance coverage is in effect, each designating the Administrative
Agent as an additional insured and “lender’s loss payee” thereunder.

               (11) Pay Off Letter. Pay Off Letter from Capmark, in form and substance reasonably
satisfactory to Administrative Agent.

               (12) Certificate of Occupancy. To the extent available, a true and complete copy of each
certificate of occupancy with respect to the Facilities, respectively.

               (13) Environmental Assessments. A Phase I environmental report of the Property prepared by
an environmental audit firm reasonably acceptable to the Administrative Agent, the results of which
shall be satisfactory to the Administrative Agent in its sole and absolute determination; provided
Administrative Agent acknowledges receipt of such item.

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               (14) Title Insurance. A title insurance policy in the form of ALTA Form Mortgagee
Title Insurance Policy shall be issued by an insurer (reasonably acceptable to the Administrative
Agent) in favor of the Administrative Agent for the Property. Each title insurance policy shall
contain such endorsements as deemed appropriate by the Administrative Agent that are available in
the applicable State. Copies of all documents of record concerning the Property as identified on
the commitment for the ALTA Policy referred to above.

               (15) Survey. An ALTA plat of survey shall be prepared on the Property (certified to
the 2005 ALTA standards).

               (16) Appraisal. An Appraisal prepared by an independent appraiser of the Property,
which appraisal shall satisfy the requirements of the FIRREA, if applicable, and shall evidence
compliance with the supervisory loan-to-value limits set forth in the Federal Deposit Insurance
Corporation Improvement Act of 1991 (including a loan-to-value ratio on a “stabilized value” not to
exceed 75%). Such appraisal (and the results thereof) shall be satisfactory to the Administrative
Agent in its sole and absolute determination.

               (17) Flood Insurance. A flood insurance policy, if applicable, concerning the
Property, reasonably satisfactory to the Administrative Agent, if required by the Flood Disaster
Protection Act of 1973.

               (18) Property Condition Report. Property Condition Reports for each parcel of
Property, the form, substance and results of which shall be satisfactory to the Administrative
Agent in its sole and absolute determination.

               (19) Capmark Terminations. Written evidence, satisfactory to the Administrative
Agent, of the terminations of that certain Capmark Intercreditor Agreement and that certain Capmark
Blocked Account Agreement (each as defined in the “Original Loan Agreement, “ as such term is
defined in the Revolving Loan Agreement), including a signed copy of that certain Termination of
Intercreditor and Blocked Account Agreements (Capmark Facilities).

               (20) Other. The Administrative Agent shall have received, in form and substance
reasonably satisfactory to the Administrative Agent, all certificates, orders, authorities,
consents, affidavits, schedules, instruments, agreements, financing statements, and other documents
which are provided for hereunder or under or in connection with any Financing Agreement, which the
Administrative Agent may reasonably request on or prior to the Closing Date.

               (6) Field Examinations. At the Administrative Agent’s sole option, the Administrative
Agent shall have completed its field examinations of the Borrower’s books and records, assets, and
operations which examinations will be satisfactory to the Administrative Agent in its sole and
absolute discretion.

               (7) Certificate. The Administrative Agent shall have received a certificate signed on
behalf of the Borrower by a Duly Authorized Officer and dated the Closing Date certifying
satisfaction of the conditions specified in this Section 5.

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               (8) Closing Fee. The Borrower shall have paid the Administrative Agent the Closing
Fee.

               (9) Proposal Letter. The Borrower shall have delivered, performed and satisfied, in the
sole discretion of the Administrative Agent, any other items set forth in that certain proposal
letter dated November 10, 2010, accepted by Guarantor on behalf of Borrower and made in favor of
the Administrative Agent.

               (10) Bank Meetings. Borrower’s senior management shall have made themselves and
Borrower’s facilities reasonably available (through scheduled bank meetings, company visits, or
other venues) to Administrative Agent and Lenders and their representatives.

               (11) Revolving Loan Agreement. Satisfaction of each of the conditions precedent contained
in the Revolving Loan Agreement, as determined by the Administrative Agent.

     6. COLLATERAL. 

          6.1 Security Interest. As security for the prompt and complete payment and performance of
all of the Liabilities and the Affiliate Revolving Loan Liabilities when due or declared due, each
Borrower
hereby grants, pledges, conveys and transfers to the Administrative Agent (for the ratable
benefit of the Lenders and Administrative Agent) a continuing security interest in and to all of
such Borrower’s right, title and interest in and to the following property and interests in
property, whether now owned or existing or hereafter owned, arising or acquired, and wheresoever
located (collectively, the “Collateral”): (a) all of Borrower’s accounts receivable,
including, without limitation, Accounts and Health-Care-Insurance Receivables (each as defined in
the Code), (b) all of the Borrower’s General Intangibles, including, without limitation, General
Intangibles related to accounts receivable and money; (c) all of Borrower’s Deposit Accounts and
other deposit accounts (general or special) with, and credits and other claims against, the
Administrative Agent or any Lender, or any other financial institution with which the Borrower
maintains deposits; (d) all of the Borrower’s contracts, licenses, chattel paper, instruments,
notes, letters of credit, contract rights, bills of lading, warehouse receipts, shipping documents,
contracts, tax refunds, documents and documents of title, and all of the Borrower’s Tangible
Chattel Paper, Documents, Electronic Chattel Paper, Letter-of-Credit Rights, letters of credit,
Software, Supporting Obligations, Payment Intangibles, and Goods (each as defined in the Code); (e)
all of the Borrower’s Inventory and Equipment and motor vehicles and trucks; (f) all of the
Borrower’s monies, and any and all other property and interests in property of the Borrower,
including, without limitation, Investment Property, Instruments, Security Entitlements,
Uncertificated Securities, Certificated Securities, Chattel Paper, and Financial Assets (each as
defined in the Code), now or hereafter coming into the actual possession, custody or control of the
Administrative Agent, any Lender or any agent or Affiliate thereof in any way or for any purpose
(whether for safekeeping, deposit, custody, pledge, transmission, collection or otherwise), and,
independent of and in addition to the Administrative Agent’s and each Lender’s rights of setoff
(which the Borrower acknowledges), the balance of

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any account or any amount that may be owing from
time to time by Administrative Agent or any Lender to the Borrower; (g) all insurance proceeds of
or relating to any of the foregoing property and interests in property, and any key man life
insurance policy covering the life of any officer or employee of Borrower; (h) all proceeds and
profits derived from the operation of the Borrower’s business; (i) all of the Borrower’s books and
records, computer printouts, manuals and correspondence relating to any of the foregoing and to the
Borrower’s business; and (j) all accessions, improvements and additions to, substitutions for, and
replacements, products, profits and proceeds of any of the foregoing.

     The Administrative Agent acknowledges that it will not have control over or right of setoff
against the Deposit Accounts into which any Government Accounts (as defined in the Revolving Loan
Agreement) of Borrower are directly paid to the extent such control or right of setoff is or would
be prohibited by applicable Healthcare Laws, provided, however, that as soon as any such
prohibition or restriction lapses or is legally removed the Borrower shall immediately take such
all actions as are reasonably necessary to provide the Administrative Agent with control over
and/or the right of setoff against such Deposit Accounts (at Borrower’s cost).

          6.2 Preservation of Collateral and Perfection of Security Interests Therein. The Borrower
agrees that it shall execute and deliver to Administrative Agent, concurrently with the execution
of this Agreement, and at any time or times hereafter at the
reasonable request of Administrative Agent instruments and documents as Administrative Agent
may reasonably request, in a form satisfactory to Administrative Agent, to perfect and keep
perfected the Liens in the Collateral or to otherwise protect and preserve the Collateral and
Administrative Agent’s Liens therein (including, without limitation, if and as applicable,
financing statements, and Borrower shall pay the cost of filing or recording the same in all public
offices deemed necessary by Administrative Agent). If the Borrower fails to do so, Administrative
Agent is authorized to file such financing statements. The Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.

          6.3 Loss of Value of Collateral. The Borrower agrees to immediately notify the
Administrative Agent of any material loss or depreciation in the value of the Collateral or any
portion thereof.

          6.4 Right to File Financing Statements. Notwithstanding anything to the contrary
contained herein, the Administrative Agent may at any time and from time to time file financing
statements, continuation statements and amendments thereto that describe the Collateral as “all
assets” or in particular and which contain any other information required by the Code for the
sufficiency or filing office acceptance of any financing statement, continuation statement or
amendment, including whether the Borrower is an organization, the type of organization and any
organization identification number issued to the Borrower. The Borrower agrees to furnish any such
information to the Administrative Agent promptly upon request. Any such financing statements,
continuation statements or amendments may be signed (if at any time

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required) by the Administrative
Agent on behalf of the Borrower and may be filed at any time with or without signature and in any
jurisdiction as reasonably determined by the Administrative Agent. The Administrative Agent agrees
to use its reasonable efforts to notify the Borrower of the Administrative Agent taking any such
action provided in this Section; provided, however, the Borrower agrees that the
failure of the Administrative Agent to so notify the Borrower for any reason shall not in any way
invalidate the actions taken by the Administrative Agent pursuant to this Section.

          6.5 Third Party Agreements. The Borrower shall at any time and from time to time take
such steps as the Administrative Agent may reasonably require for the Administrative Agent: (i) to
obtain an acknowledgment, in form and substance reasonably satisfactory to the Administrative
Agent, of any third party having possession of any of the Collateral that the third party holds for
the benefit of the Administrative Agent, (ii) to obtain “control” (as defined in the Code) of any
Investment Property, Deposit Accounts, Letter of Credit Rights or Electronic Chattel Paper (each as
defined in the Code), with any agreements establishing control to be in form and substance
reasonably satisfactory to the Administrative Agent, and (iii) otherwise to ensure the continued
perfection and priority of the Administrative Agent’s security interest in any of the Collateral
and of the preservation of its rights therein.

          6.6 All Loans One Obligation. All Liabilities of the Borrowers under this Agreement and
each of the Financing Agreements, and all of the Affiliate Revolving Loan Liabilities under the
Revolving Loan Agreement and each of the Affiliate Revolving Loan Financing Agreements, are
cross-collateralized and cross-defaulted. Payment of all sums and indebtedness to be paid by
Borrower to Lenders and Administrative Agent under this Agreement shall be secured by, among other
things, the Financing Agreements. All loans or advances made to Borrower under this Agreement
shall constitute one Loan, and all of Borrower’s Liabilities and other liabilities of Borrower to
Lenders and Administrative Agent shall constitute one general obligation secured by Administrative
Agent’s Lien on all of the Collateral of Borrower and by all other liens heretofore, now, or at any
time or times granted to Lender to secure the Loan (for the ratable benefit of the Lenders and the
Administrative Agent). Borrower agrees that all of the rights of Administrative Agent and Lenders
set forth in this Agreement shall apply to any amendment, restatement or modification of, or
supplement to, this Agreement, any supplements or exhibits hereto and the Financing Agreements,
unless otherwise agreed in writing by the Administrative Agent or Required Lenders.

          6.7 Commercial Tort Claim. If the Borrower shall at any time hereafter acquire a
Commercial Tort Claim (as defined in the Code), the Borrower shall promptly notify the
Administrative Agent of same in a writing signed by the Borrower (describing such claim in
reasonable detail) and grant to the Administrative Agent (for the ratable benefit of the Lenders
and the Administrative Agent) in such writing (at the sole cost and expense of the Borrower) a
continuing, first-priority security interest therein and in the proceeds thereof, with such writing
to be in form and substance satisfactory to the Administrative Agent in its sole and absolute
determination.

          6.8 HUD Financing; Prepayment and Release. Notwithstanding the provisions of
Section 6.6, upon any one or more of the Borrowers obtaining HUD Financing for their
respective Facility or Facilities, Administrative Agent will fully release and discharge the

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lien and security interest granted to Administrative Agent to secure the Loan (for the ratable benefit
of the Lenders and the Administrative Agent) under this Agreement and the Financing Agreements on
the specific Collateral of such Borrower or Borrowers (the “Released Collateral”), and will
fully release and discharge such Borrower or Borrowers (the “Released Borrowers”) from
their obligations under this Agreement and any Financing Agreement, including the Term Loan Note
(except for contingent indemnification obligations that survive by their terms herein), provided
that and conditioned upon satisfaction of each of the foregoing, in the sole determination of the
Administrative Agent:

               (1) Administrative Agent shall receive written notice within thirty (30) days of such Borrower
or Borrowers decision to seek and obtain such HUD Financing;

               (2) Both before and after giving effect to the HUD Financing, no Default or Event of Default
shall have occurred and be continuing (including, without limitation, any breach of any financial
ratio covenant set forth in Section 9.12);

               (3) [Intentionally Omitted];

               (4) The release documents are reasonably acceptable to Administrative Agent and customary for
recording the release of liens and security interests in the applicable Collateral in the
jurisdictions where the liens and security in the Released Collateral are filed or recorded.
Borrower shall be responsible for the cost and expense of preparing and recording the applicable
release documents;

               (5) All reasonably requested instruments, documents and agreements by the Administrative Agent
and Lenders in connection with such HUD Financing are duly executed and delivered by Borrower and
any Affiliate thereof (including amendments to this Agreement and the other Financing Agreements);
and

               (6) The Released Borrowers shall, substantially simultaneously with (and in any event not
later than the first (1st) Business Day following the receipt of the net cash proceeds
from the insurance or incurrence of the HUD Financing), apply and pay in immediately available
funds without setoff or deduction of any kind an amount equal to one hundred percent (100%) of such
net cash proceeds to prepay the outstanding Term Loan amount in accordance with Section
2.10 and any other related then due and owing Liabilities of the Released Borrowers. As used
in this Section, “Net cash proceeds” shall mean the cash proceeds of the HUD Financing net
of all taxes and customary and reasonable fees, commissions, costs and other expenses actually
incurred in connection therewith.

          Notwithstanding the release and discharge of the Released Borrowers and the Released
Collateral as provided in this Section 6.8, this Agreement, the other Financing Agreements
and the Lien of the Administrative Agent on the Collateral (and any other Lien provided by the
other Financing Agreements, including pursuant to the applicable Mortgages), shall remain and
continue in full force and effect as to the Borrowers other than the Released Borrowers and the
Collateral (and other assets and property subject to the other Financing Agreements) other than the
Released Collateral.

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     7. REPRESENTATIONS AND WARRANTIES. 

     The Borrower represents and warrants to Administrative Agent and Lenders that as of the date
of this Agreement, and continuing as long as any Liabilities remain outstanding, and (even if there
shall be no such Liabilities outstanding) as long as this Agreement remains in effect:

          7.1 Existence. The Borrower is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the state of its incorporation or
formation. The Borrower is duly (a) qualified and in good standing as a foreign corporation or
foreign limited liability company and (b) authorized to do business in each jurisdiction where such
qualification is required because of the nature of its activities or properties. The Borrower has
all requisite power to carry on its business as now being conducted and as proposed to be
conducted. Pledgor legally and beneficially owns or controls, either directly or indirectly
through its subsidiaries, all of the issued and outstanding capital Stock of the Borrower.

          7.2 Corporate Authority. The execution and delivery by the Borrower of this Agreement and
all of the other Financing Agreements to which Borrower is a party and the performance of its
obligations hereunder and thereunder: (i) are within its powers; (ii) are duly authorized by the
board of directors, manger or members of the Borrower, each as applicable, and, if applicable,
Pledgor; and (iii) are not in contravention of the terms of its operating agreement, bylaws, or of
an indenture, agreement or undertaking to which it is a party or by which it or any of its property
is bound. The execution and delivery by the Borrower of this Agreement and all of the other
Financing Agreements to which it is a party and the performance of its obligations hereunder and
thereunder: (i) do not require any governmental consent, registration or approval; (ii) do not
contravene any contractual or governmental restriction binding upon it; and (iii) will not, except
in favor of Administrative Agent, result in the imposition of any Lien upon any property of
Borrower under any existing indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which it is a party or by which it or any of its property may
be bound or affected.

          7.3 Binding Effect. This Agreement and all of the other Financing Agreements to which the
Borrower is a party are the legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the enforcement of
creditor’s rights and remedies generally.

          7.4 Financial Data.

               (1) All income statements, balance sheets, cash flow statements, statements of operations,
and other financial data which have been or shall hereafter be furnished to the Administrative
Agent and Lenders for the purposes of or in connection with this Agreement do and will present
fairly in all material respects in accordance with GAAP, consistently applied, the financial
condition of the Borrower as of the dates thereof and the results of its operations for the
period(s) covered thereby. The foregoing notwithstanding all unaudited financial statements
furnished or to be furnished to the Administrative Agent and Lenders by or on behalf of Borrower
are not and will not be prepared in accordance with GAAP to the extent that such financial
statements (a) are subject to cost report and other year-end audit adjustments, (b) do not contain
footnotes, (c) were prepared without physical inventories, (d) are

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not restated for subsequent
events, (e) may not contain a statement of construction in process, and (f) may not fully reflect
the following liabilities: (i) vacation, holiday and similar accruals, (ii) liabilities payable in
connection with workers’ compensation claims, (iii) liabilities payable to any employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) maintained by Borrower or its affiliates
on account of Borrower’s employees, (iv) federal, state and local income or franchise taxes and (v)
bonuses payable to certain employees (collectively, the “GAAP Exceptions”).

               (2) Since December 31, 2009, there has been no Material Adverse Change with respect to
Borrower.

          7.5 Collateral. Except for the Permitted Liens, all of the Borrower’s assets and property
(including, without limitation, the Collateral) is and will continue to be owned by Borrower
(except for items of Inventory disposed of in the ordinary course of business and sales of
Equipment being replaced in the ordinary course of business, or as a result of casualty loss or
condemnation, with other Equipment with a value equal to or greater than the Equipment being sold),
has been fully paid for and is free and clear of all Liens. No financing statement or other
document similar in effect covering all or any part of the Collateral is on file in any recording
or filing office, other than those identifying the Administrative Agent as the secured creditor or
except for Permitted Liens. The organizational number assigned by the Secretary of State of the
Borrower’s state of incorporation or formation, as applicable, is as set forth on Schedule
1 hereto.

          7.6 Solvency. The Borrower, as determined on a consolidated basis, is Solvent. The
Borrower, as determined on a consolidated basis, will not be rendered insolvent by the execution
and delivery of this Agreement or any Financing Agreement, or by completion of the transactions
contemplated hereunder or thereunder.

          7.7 Principal Place of Business; State of Organization. Set forth on Schedule 1
hereto, is, as of the Closing Date, (a) the principal place of business and chief executive office
of Borrower and (b) the Borrower’s state of incorporation or formation. The books and records of
the Borrower are at the principal place of business and chief executive office of the Borrower.

          7.8 Other Names. As of the Closing Date the Borrower is not using, and shall not
thereafter use, any name (including, without limitation, any trade name, trade style, assumed name,
division name or any similar name), other than the names set forth on Schedule 7.8 attached
hereto.

          7.9 Tax Liabilities. The Borrower has filed all material federal, state and local tax
reports and returns required by any law or regulation to be filed by it, except for extensions duly
obtained, and has either duly paid all taxes, duties and charges indicated due on the basis of such
returns and reports, or made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is not reasonably
expected.

          7.10 Loans. Except as otherwise permitted by Section 9.2 hereof, the Borrower is
not obligated on any loans or other Indebtedness.

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          7.11 Margin Securities. The Borrower does not own any margin securities and the Loan advanced hereunder will not be
used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing
or retiring any Indebtedness which was originally incurred to purchase any margin securities or for
any other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve
System.

          7.12 Organizational Chart. Set forth on Schedule 7.12 hereto is a true and
complete copy of an organizational chart setting forth the Borrower and each of its Subsidiaries
and Affiliates as of the Closing Date.

          7.13 Litigation and Proceedings. As of the Closing Date, no judgments are outstanding
against the Borrower that could be an Event of Default under clause (e) of Section 11.1,
nor is there as of such date pending, or to the best of Borrower’s knowledge, threatened, except,
as of the Closing Date, as shown on Schedule 7.13, any (i) litigation, suit, action or
contested claim (other than a personal injury tort claim), or federal, state or municipal
governmental proceeding, by or against the Borrower or any of its Property which if adversely
determined could have a Material Adverse Effect, or (ii) any tort claim for personal injury,
including death, against the Borrower as to which (a) litigation has been instituted and is pending
or (b) or a request for medical records has been made upon Borrower by an attorney for the claimant
on or after January 1, 2009.

          7.14 Other Agreements. The Borrower is not in default under or in breach of any agreement,
contract, lease, or commitment to which it is a party or by which it is bound which could
reasonably be expected to have a Material Adverse Effect. The Borrower does not know of any
dispute regarding any agreement, contract, instrument, lease or commitment to which it is a party
which could reasonably be expected to have a Material Adverse Effect.

          7.15 Compliance with Laws and Regulations. The execution and delivery by the Borrower of
this Agreement and all of the other Financing Agreements to which it is a party and the performance
of the Borrower’s obligations hereunder and thereunder are not in contravention of any applicable
law, rule or regulation. The Borrower has obtained all licenses, authorizations, approvals,
licenses and permits necessary in connection with the operation of its business, except to the
extent the failure to obtain any of the foregoing could reasonably be expected to not result in a
Material Adverse Effect. The Borrower is in compliance with all laws, orders, rules, regulations
and ordinances of all federal, foreign, state and local governmental authorities applicable to it
and its business, operations, property, and assets, except to the extent any such non-compliance
could reasonably be expected to not result in a Material Adverse Effect.

          7.16 Intellectual Property. As of the Closing Date, the Borrower does not own or otherwise
possess any material Intellectual Property. To the Borrower’s best knowledge, none of its
Intellectual Property infringes on the rights of any other Person; provided that the name
“Diversicare” is shared in Canada with various Diversicare entities that were sold in 2004.

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          7.17 Environmental Matters. The Borrower has not Managed Hazardous Substances on or off
its Property other than in compliance with applicable Environmental Laws, except to the extent any
such non-compliance could reasonably be expected to not result in a Material Adverse Effect.
Except as set forth on Schedule 7.17 hereto, the Borrower has complied in all material
respects with applicable Environmental Laws regarding transfer, construction on and operation of
its business and Property, including, but not limited to, notifying authorities, observing
restrictions on use, transferring, modifying or obtaining permits, licenses, approvals and
registrations, making required notices, certifications and submissions, complying with financial
liability requirements, and, except where not required to do so pursuant to any Commercial Lease,
Managing Hazardous Substances and Responding to the presence or Release of Hazardous Substances
connected with operation of its business or Property. The Borrower does not have any contingent
liability with respect to the Management of any Hazardous Substance that could reasonably be
expected to result in a Material Adverse Effect. As of the Closing Date, the Borrower has not
received any Environmental Notice that could reasonably be expected to result in a Material Adverse
Effect.

          7.18 Disclosure. As of the Closing Date, none of the representations or warranties made by
the Borrower herein or in any Financing Agreement to which the Borrower is a party and no other
written information provided or statements made by the Borrower or its representatives to the
Administrative Agent or Lenders contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of the Closing Date, the Borrower has disclosed to the
Administrative Agent and Lenders all facts of which the Borrower has knowledge which might result
in a Material Adverse Effect either prior or subsequent to the consummation of the transactions
contemplated hereby or which, to Borrower’s knowledge, at any time hereafter might reasonably be
expected to result in a Material Adverse Effect.

          7.19 Pension Related Matters. Each employee pension plan (other than a multiemployer plan
within the meaning of Section 3(37) of ERISA and to which the Borrower or any ERISA Affiliate has
or had any obligation to contribute (a “Multiemployer Plan”)) maintained by the Borrower or
any of its ERISA Affiliates to which Title IV of ERISA applies and (a) which is maintained for
employees of the Borrower or any of its ERISA Affiliates or (b) to which the Borrower or any of its
ERISA Affiliates made, or was required to make, contributions at any time within the
preceding five (5) years (a “Plan”), complies, and is administered in accordance, with
its terms and all material applicable requirements of ERISA and of the Internal Revenue Code of
1986, as amended, and any successor statute thereto (the “Tax Code”), and with all material
applicable rulings and regulations issued under the provisions of ERISA and the Tax Code setting
forth those requirements. No “Reportable Event” or “Prohibited Transaction” (as each is defined
in ERISA) or withdrawal from a Multiemployer Plan caused by the Borrower has occurred and no
funding deficiency described in Section 302 of ERISA caused by the Borrower exists with respect to
any Plan or Multiemployer Plan which could have a Material Adverse Effect. The Borrower and each
ERISA Affiliate has satisfied all of their respective funding standards applicable to such Plans
and Multiemployer Plans under Section 302 of ERISA and Section 412 of the Tax Code and the Pension
Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA
(“PBGC”) has

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not instituted any proceedings, and there exists no event or condition caused
by the Borrower which would reasonably be expected to constitute grounds for the institution of
proceedings by PBGC, to terminate any Plan or Multiemployer Plan under Section 4042 of ERISA which
could have a Material Adverse Effect.

        7.20 Perfected Security Interests. The Lien in favor of the Administrative Agent provided
pursuant to Section 6.1 hereof is a valid and perfected first priority security interest in
the Collateral (subject only to the Permitted Liens), and all filings and other actions necessary
to perfect such Lien have been or will be duly taken.

        7.21 [Intentionally Omitted.].

        7.22 Broker’s Fees. The Borrower does not have any obligation to any Person in respect of
any finder’s, brokers or similar fee in connection with the Loan or this Agreement.

        7.23 Investment Company Act. The Borrower is not an “investment company” or a company
“controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940,
as amended.

        7.24 [Intentionally Omitted.].

        7.25 [Intentionally Omitted.].

        7.26 Offenses and Penalties Under the Medicare/Medicaid Programs. Except as listed on Schedule 7.26 attached hereto, as of the Closing Date, neither
the Borrower nor any Affiliate and/or employee of the Borrower or any Affiliate is currently, to
the best knowledge of the Borrower, after due inquiry, under investigation or prosecution for, nor
has the Borrower or any Affiliate or, to the best knowledge of Borrower, after due inquiry, any
current employee of the Borrower or any Affiliate been convicted of: (a) any offense related to
the delivery of an item or service under the Medicare or Medicaid programs; (b) a criminal offense
related to neglect or abuse of patients in connection with the delivery of a health care item or
service; (c) fraud, theft, embezzlement or other financial misconduct; (d) the obstruction of an
investigation of any crime referred to in subsections (a) through (c) of this Section; or (e)
unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. Except
as listed on Schedule 7.26, as of the Closing Date, neither the Borrower nor any Affiliate
and/or, to the best knowledge of Borrower, after due inquiry, any current employee of the Borrower
or any Affiliate has been required to pay any civil money penalty under applicable laws regarding
false, fraudulent or impermissible claims or payments to induce a reduction or limitation of health
care services to beneficiaries of any state or federal health care program, nor, to the best
knowledge of the Borrower, after due inquiry, is the Borrower nor any Affiliate and/or to the best
knowledge of Borrower, after due inquiry, any current employee of the Borrower or any Affiliate
currently the subject of any investigation or proceeding that may result in such payment.

        7.27 Medicaid/Medicare. Neither the Borrower nor any Affiliate of the Borrower nor any
current officer or director of the foregoing has engaged in any of the following: (i) knowingly
and willfully making or causing to be made a false statement or representation of a material fact
in any application for any benefit or payment under Medicare or Medicaid; (ii) knowingly and
willfully making or causing to be made any false statement or

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representation of a material fact for
use in determining rights to any benefit or payment under Medicare or Medicaid; (iii) failing to
disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued
right to any benefit or payment under Medicare or Medicaid on its own behalf or on behalf of
another, with intent to secure such benefit or payment fraudulently; or (iv) knowingly and
willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind or offering to pay such
remuneration: (A) in return for referring any individual to a Person for the furnishing or
arranging for the furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid; or (B) in return for purchasing, leasing or ordering or arranging for
or recommending the purchasing, leasing or ordering of any good, facility, service or item for
which payment may be made in whole in part by Medicare or Medicaid.

          7.28 Consideration. Borrower acknowledges that it desires to have this Agreement and the
Financing Agreements to which the Borrower is a party cross-collateralized and cross-defaulted and
have the Collateral serve as collateral for all of the Liabilities and Affiliate Revolving Loan
Liabilities. The Affiliated Revolving Borrowers and the Borrowers are Affiliates of each other.
Each Borrower will derive substantial direct and indirect benefit (financial and otherwise) from
funds made available to the Affiliated Revolving Borrowers pursuant to this Agreement, and it is
and will be to each Borrower’s and Affiliated Revolving Borrower’s advantage to assist each
other in procuring such funds from the Lenders.

          7.29 USA Patriot Act. Borrower represents and warrants to Administrative Agent and Lenders
that neither the Borrower nor any of its Affiliates is identified in any list of known or suspected
terrorists published by any United States government agency (collectively, as such lists may be
amended or supplemented from time to time, referred to as the “Blocked Persons Lists”)
including, without limitation, (a) the annex to Executive Order 13224 issued on September 23, 2001,
and (b) the Specially Designated Nationals List published by the Office of Foreign Assets Control.

          7.30 Absence of Foreign or Enemy Status. Neither the Borrower nor any Affiliate of the
Borrower is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading
with the Enemy Act (50 U.S.C. App. §§ 1 et seq.), as amended. Neither the Borrower
nor any Affiliate of the Borrower is in violation of, nor will the use of the Loan violate, the
Trading with the Enemy Act, as amended, or any executive orders, proclamations or regulations
issued pursuant thereto, including, without limitation, regulations administered by the Office of
Foreign Asset Control of the Department of the Treasury (31 C.F.R. Subtitle B, Chapter V).

          7.31 [Intentionally Omitted.].

          7.32 Labor Matters. There are no strikes or other labor disputes pending or, to the
knowledge of Borrower, threatened against Borrower. All payments due from the Borrower on account
of wages and employee and retiree health and welfare insurance and other benefits have been paid or
accrued as a liability on its books.

          7.33 Capitalization. The authorized Stock of each Borrower, as of the Closing Date, is set
forth on Schedule 7.33 hereto. Pledgor legally and beneficially owns all of the issued

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and
outstanding Stock of each Borrower. All issued and outstanding Stock of the Borrower is duly
authorized and validly issued, fully paid, non-assessable, free and clear of all Liens or pledges
other than Permitted Liens, and such Stock was issued in compliance with all applicable state,
federal and foreign laws concerning the issuance of securities. No shares of the Stock of
Borrower, other than those owned by Pledgor are issued and outstanding. There are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from Borrower of any equity securities of Borrower.

          7.34 Government Contracts. The Borrower is not a party to any contract or agreement (including, but not limited to,
any Lease) that requires Borrower to comply with the Federal Assignment of Claims Act, as amended
(31 U.S.C. Section 3727) or, to the best of Borrower’s knowledge, any similar state or local law.

          7.35 OFAC. Neither the Borrower, nor Guarantor, nor any beneficial owner of the Borrower
or Guarantor, is currently listed on the OFAC Lists.

          7.36 Commercial Leases. As of the Closing Date, there are no Commercial Leases as to which
a Borrower is the lessee and no Operating Leases between Borrower and any Operators of the
Facilities. As of the Closing Date, each Borrower is the Operator of the Facility owned by such
Borrower.

     8. AFFIRMATIVE COVENANTS. 

     The Borrower covenants and agrees with Administrative Agent and Lenders that, as long as any
Liabilities of the Borrower remain outstanding, and (even if there shall be no such Liabilities
outstanding) as long as this Agreement remains in effect:

          8.1 Reports, Certificates and Other Information. The Borrower Agent shall deliver to the
Administrative Agent and each Lender:

               (1) Financial Statements.

               (2) On or before the one hundred twentieth (120th) day after each of Guarantor’s Fiscal Years,
a copy of the annual financial statements on a consolidated basis for Guarantor, duly certified and
audited by independent certified public accountants of nationally recognized standing selected by
the Borrower, together with the supporting consolidating statements for each Borrower, consisting
of, at least, balance sheets and statements of income and cash flow for such period, prepared in
conformity with GAAP. In lieu of its obligations hereunder, Guarantor may submit to Administrative
Agent and Lenders, upon its filing thereof, a copy of its form 10-K as filed with the United States
Security and Exchange Commission.

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               (3) On or before the forty-fifth (45th) day of the end of each of Guarantor’s first, second
and third Fiscal Quarters, a copy of internally prepared quarterly financial statements for
Borrower prepared in accordance with GAAP and in a manner substantially consistent with the
financial statements referred to in Section 8.1(a)(1) hereof (subject, however, to the GAAP
Exceptions), signed on behalf of the Borrower by a Duly Authorized Officer and consisting of, at
least, an income statement, a balance sheet, and
statement of cash flow as at the close of such Fiscal Quarter and statements of earnings for
such Fiscal Quarter and for the period from the beginning of such Fiscal Year to the close of such
Fiscal Quarter.

               (4) On or before (i) the forty-fifth (45th) day after the end of each calendar
month ending the Borrower’s first, second and third Fiscal Quarters, (ii) the seventy-fifth
(75th) day after the end of the calendar month ending the Borrower’s final Fiscal
Quarter, and (iii) the thirtieth (30th) day after the end of each calendar month, a copy of
internally prepared financial statements for Borrower prepared in accordance with GAAP and in a
manner substantially consistent with the financial statements referred to in Section 8.1(a)(1)
hereof, signed on behalf of the Borrower by a Duly Authorized Officer and consisting of, at least,
an income statement and a balance sheet, as at the close of such calendar month and statements of
earnings for such calendar month and for the period from the beginning of such Fiscal Year to the
close of such calendar month.

               (5) [Intentionally Omitted.]

               (6) Compliance Certificates. Contemporaneously with the furnishing of each quarterly
financial statements, a duly completed compliance certificate with appropriate insertions, in form
and substance satisfactory to the Administrative Agent (a “Compliance Certificate”), dated the date
of such annual financial statement or such calendar month and signed on behalf of the Borrower by a
Duly Authorized Officer, which Compliance Certificate shall state that no Default or Event of
Default has occurred and is continuing, or, if there is any such event, describes it and the steps,
if any, being taken to cure it. Each Compliance Certificate shall contain a computation of, and
show compliance with, each of the financial ratios and restrictions set forth in Section 9.12
hereof (each such computation and calculation to be in form and substance acceptable to the
Administrative Agent).

               (7) Real Estate Taxes. As paid, evidence of timely payment of real estate taxes owed on
the Property.

               (8) Notice of Default, Regulatory Matters, Litigation Matters or Adverse Change in
Business. Forthwith upon learning of the occurrence of any of the following, written notice
thereof which describes the same and the steps being taken by the Borrower with respect thereto:
(i) the occurrence of a Default or an Event of Default; (ii) the institution or threatened
institution of, or any adverse determination in, any litigation (other than a personal injury tort
claim), arbitration proceeding or governmental proceeding in which any injunctive relief or money
damages is sought which if adversely determined could have a Material Adverse Effect; (iii) the
receipt of any notice from any governmental agency concerning any violation or potential violation
of any regulations, rules or laws applicable to Borrower which could have a Material Adverse
Effect; or (iv) any Material Adverse Change.

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With regard to personal injury tort claims, upon request by Administrative Agent, Borrower shall review with Administrative Agent the occurrence of
any personal injury or other action which could reasonably give rise to a personal injury tort
claim against the Borrower as to which (i) litigation has been instituted and is pending or (ii) a
request for medical records has been made upon Borrower by an attorney for the claimant on or after
January 1, 2009.

               (9) Insurance Reports. (i) At any time after a Default and upon the request of the
Administrative Agent, a certificate signed by a Duly Authorized Officer that summarizes the
property, casualty, liability and malpractice insurance policies carried by the Borrower, and (ii)
written notification of any material change in any such insurance by the Borrower within five (5)
Business Days after receipt of any notice (whether formal or informal) of such change by any of its
insurers.

               (10) [Intentionally Omitted.]

               (11) Affiliate Transactions. Upon the Administrative Agent’s reasonable request from time
to time, a reasonably detailed description of each of the material transactions between the
Borrower and any of its Affiliates during the time period reasonably requested by the
Administrative Agent, which shall include, without limitation, the amount of money either paid or
received, as applicable, by the Borrower in such transactions.

               (12) [Intentionally Omitted.]

               (13) Interim Reports. Promptly upon receipt thereof, copies of any reports submitted to
Guarantor or Borrower by the independent accountants in connection with any interim audit of the
books of any such Person and copies of each management control letter provided to Guarantor or
Borrower by independent accountants.

               (14) Reports to the SEC. Upon the Administrative Agent’s reasonable request from time to
time, copies of any and all regular, annual, periodic or special reports of Guarantor, any Borrower
or any Affiliate thereof filed with the Securities and Exchange Commission (“SEC”); copies of any
and all registration statements of Guarantor, any Borrower or any Affiliate thereof filed with the
SEC; and copies of any and all proxy statements or other written communications made to security
holders generally.

               (15) Other Information. Such other information, certificates, schedules, exhibits or
documents (financial or otherwise) concerning the Borrower and its operations, business,
properties, condition or otherwise as the Administrative Agent or any Lender may reasonably request
from time to time.

          8.2 Inspection; Audit Fees. Borrower shall keep proper books of record and account in
accordance with GAAP in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and shall permit (at the expense of the
Borrower provided the Borrower shall be responsible for such reasonable expenses no more than one
(1) time per year unless an Event of Default has occurred and is continuing), representatives of
the Administrative Agent or any Person appointed by Administrative Agent to visit and inspect any
of their respective properties, to examine and make abstracts or copies from any of their
respective books and records (in each case excluding patient

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medical records and other records to
the extent confidential or where such examination is prohibited under applicable Laws, including
without limitation HIPPA), to conduct a collateral audit and analysis of their respective Inventory
and Accounts and to discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants as often as may reasonably be
desired. In the absence of an Event of Default, the Administrative Agent shall give the
Borrower commercially reasonable prior written notice of such exercise. No notice shall be
required during the existence and continuance of any Event of Default.

          8.3 Conduct of Business. The Borrower shall maintain its corporate existence, shall
maintain in full force and effect all licenses, permits, authorizations, bonds, franchises, leases,
patents, trademarks and other Intellectual Property, contracts and other rights necessary to the
conduct of its business, shall continue in, and limit its operations to, the same general line of
business as that currently conducted and shall comply with all applicable laws (including, without
limitation, Healthcare Laws), orders, regulations and ordinances of all federal, foreign, state and
local governmental authorities, except to the extent any such non-compliance could reasonably be
expected to result in a Material Adverse Effect. The Borrower shall keep proper books of record
and account in which full and true entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Borrower, in accordance with GAAP (subject, however, to
the GAAP Exceptions), consistently applied.

          8.4 Claims and Taxes. The Borrower agrees to pay or cause to be paid all license fees,
bonding premiums and related taxes and charges and shall pay or cause to be paid all of the
Borrower’s real and personal property taxes, assessments and charges and all of the Borrower’s
franchise, income, unemployment, use, excise, old age benefit, withholding, sales and other taxes
and other governmental charges assessed against the Borrower, or payable by the Borrower, at such
times and in such manner as to prevent any penalty from accruing or any Lien from attaching to its
property, provided that the Borrower shall have the right to contest in good faith, by an
appropriate proceeding promptly initiated and diligently conducted, the validity, amount or
imposition of any such tax, assessment or charge, and upon such good faith contest to delay or
refuse payment thereof, if (a) the Borrower establishes adequate reserves to cover such contested
taxes, assessments or charges, and (b) such contest does not have a Material Adverse Effect.

          8.5 State of Incorporation or Formation. The Borrower’s state of incorporation or
formation, as applicable, set forth on Schedule 1 hereto shall remain the Borrower’s state
of incorporation or formation, as applicable, unless: (a) the Borrower provides the Administrative
Agent with at least thirty (30) days prior written notice of any proposed change, (b) no Event of
Default then exists or will exist immediately after such proposed change, and (c) the Borrower
provides the Administrative Agent with, at Borrower’s sole cost and expense, such financing
statements, and such other agreements and documents as the Administrative Agent shall reasonably
request in connection therewith.

          8.6 Liability Insurance. The Borrower shall maintain, at its expense, general liability
and environmental insurance through commercial insurance in such amounts and with such deductibles
consistent with its past practices, and shall deliver to the Administrative Agent the original (or
a certified)
copy of each policy of insurance and evidence of the payment of all

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premiums therefor. Such
policies of insurance shall contain an endorsement showing the Administrative Agent as additional
insured thereunder. Administrative Agent acknowledges that general liability insurance coverage is
currently unavailable generally in the nursing home industry at commercially affordable rates.
Borrower has in place and will maintain either (i) so long it is available at commercially
affordable rates, for the States of Texas, Alabama, Florida and Ohio, indemnity insurance with
coverage limits of One Million Dollars ($1,000,000.00) per medical incident, subject to a
deductible of Four Hundred Ninety-Five Thousand Dollars ($495,000.00) per claim, with a total
annual aggregate policy limit of Fifteen Million Dollars ($15,000,000.00) and a sublimit per
Facility of Three Million Dollars ($3,000,000.00) or (ii) general liability and malpractice
insurance with single limit coverage of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00)
per occurrence and Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) cumulative.
Administrative Agent agrees that until such time as insurance coverage is generally available in
the nursing home industry at commercially affordable rates, Administrative Agent agrees to accept
Borrower’s current coverage. Borrower shall provide Administrative Agent, (a) on an annual basis,
information from its insurance representative, insurance carrier or from comparable insurance
carriers regarding availability of insurance and (b) with respect to the insurance policies
contemplated by this Section 8.6 and those certain insurance policies contemplated by
Section 8.7 below, prompt (but in any event, within five (5) Business Days of any such
occurrence) written notice of any alteration or cancellation of such insurance policy.

          8.7 Property and Other Insurance. The Borrower shall, at its expense, keep and maintain
its assets material to the Business of Borrower insured against (i) loss or damage by fire, theft,
explosion, flood, earthquake, spoilage and all other hazards and risks and (ii) business
interruption, in such amounts with such deductibles (which may include self-insurance trusts)
ordinarily insured against by other owners or users of such properties in similar businesses of
comparable size operating in the same or similar locations. Borrower, at Borrower’s expense, shall
keep and maintain workers compensation insurance as may be required by applicable Laws. The
Borrower Agent shall deliver to the Administrative Agent the original (or a certified) copy of each
policy of insurance and evidence of payment of all premiums therefor. All such policies of
insurance shall be in form and substance reasonably satisfactory to the Administrative Agent. Such
policies of insurance shall contain an endorsement, in form and substance satisfactory to the
Administrative Agent, showing the Administrative Agent as “Lender’s Loss Payee” and all loss
payable to the Administrative Agent (for the ratable benefit of the Lenders), as its interests may
appear, as provided in this Section. Such endorsement shall provide that such insurance company
will give the Administrative Agent at least thirty (30) days prior written notice before any such
policy or policies of insurance shall be altered or canceled and that no act or default of the
Borrower or any other Person shall affect the right of the Administrative Agent to recover under
such policy or policies of insurance in case of loss or damage. The Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds of insurance policies directly to the
Administrative Agent and the Administrative Agent shall absent an Event of Default permit the
Borrower to use such proceeds to restore or rebuild the damaged property as the Borrower shall
determine in its reasonable and good faith determination.

          Upon the occurrence of an Event of Default under this Agreement, the Borrower irrevocably
makes, constitutes and appoints the Administrative Agent (and all officers, employees or agents
designated by the Administrative Agent in writing to the Borrower) as the

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Borrower’s true and
lawful attorney-in-fact for the purpose, subject at all times to the terms and conditions of the
Commercial Leases (if and as applicable), of making, settling and adjusting claims on behalf of the
Borrower under all such policies of insurance, endorsing the name of the Borrower on any check,
draft, instrument or other item of payment received by the Borrower or the Administrative Agent
pursuant to any such policies of insurance, and for making all determinations and decisions of
Borrower with respect to such policies of insurance.

     UNLESS THE BORROWER PROVIDES THE ADMINISTRATIVE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE
REQUIRED BY THIS AGREEMENT WITHIN THREE BUSINESS DAYS FOLLOWING ADMINISTRATIVE AGENT’S REQUEST, THE
ADMINISTRATIVE AGENT MAY PURCHASE INSURANCE AT THE BORROWER’S EXPENSE TO PROTECT THE ADMINISTRATIVE
AGENT’S INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE INTERESTS IN
THE COLLATERAL. THE COVERAGE PURCHASED BY THE ADMINISTRATIVE AGENT MAY NOT PAY ANY CLAIMS THAT THE
BORROWER MAKES OR ANY CLAIM THAT IS MADE AGAINST THE BORROWER IN CONNECTION WITH THE COLLATERAL.
THE BORROWER MAY LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE ADMINISTRATIVE AGENT, BUT ONLY
AFTER PROVIDING THE ADMINISTRATIVE AGENT WITH EVIDENCE THAT THE BORROWER HAS OBTAINED INSURANCE AS
REQUIRED BY THIS AGREEMENT. IF THE ADMINISTRATIVE AGENT PURCHASES INSURANCE FOR THE COLLATERAL,
THE BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER
CHARGES THAT THE ADMINISTRATIVE AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE,
UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE
INSURANCE MAY BE ADDED TO THE LIABILITIES SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE
THAN THE COST OF INSURANCE THE BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.

          8.8 Environmental. The Borrower shall promptly notify and furnish Administrative Agent
with a copy of any and all Environmental Notices which are received by it. Except where not
required to do so pursuant to any Commercial Lease, the Borrower shall take prompt and appropriate
action in response to any and all such Environmental Notices and shall promptly furnish
Administrative Agent with a description of the Borrower’s Response thereto. The Borrower shall (a)
obtain and maintain all permits required under all applicable federal, state, and local
Environmental Laws, except as to which the failure to obtain or maintain would not have a Material
Adverse Effect; and (b) except where not required to do so pursuant to any Commercial Lease, keep
and maintain the Property and each portion thereof in compliance with, and not cause or permit the
Property or any portion thereof to be in violation of, any Environmental Law, except as to which
the failure to comply with or the violation of which, would not have a Material Adverse Effect.
During the term of this Agreement, the Borrower shall not permit
others to, Manage, whether on or off Borrower’s Property, Hazardous Substances, except to the
extent such Management does not or is not reasonably likely to result in or create a Material
Adverse Effect. Except where not required to do so pursuant to any Commercial Lease, the Borrower
shall take prompt action in material compliance with

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applicable Environmental Laws to Respond to
the on-site or off-site Release of Hazardous Substances connected with operation of its business or
Property.

          8.9 Banking Relationship. Except as otherwise provided in the Revolving Loan Agreement:
The Borrower and the Guarantor shall at all times maintain all of their respective primary deposit
and operating accounts with the Administrative Agent and the Administrative Agent will act as the
principal depository and remittance agent for the Borrower and Guarantor. The Borrower agrees to
pay to the Administrative Agent reasonable and customary fees for banking services/cash management
services of Borrower and Guarantor (the “Service Fee”). The Administrative Agent shall be
and hereby is authorized to charge any deposit or operating account of the Borrower in respect of
the Service Fee.

          8.10 Intellectual Property. If after the Closing Date the Borrower shall own or otherwise
possess any registered patents, copyrights, trademarks, trade names, or service marks other than
those owned by Guarantor or any derivation thereof (or file an application to attempt to register
any of the foregoing), the Borrower shall promptly notify the Administrative Agent in writing of
same and execute and deliver any documents or instruments (at the Borrower’s sole cost and expense)
reasonably required by Administrative Agent to perfect a security interest in and lien on any such
federally registered Intellectual Property in favor of the Administrative Agent and assist in the
filing of such documents or instruments with the United States Patent and Trademark Office and/or
United States Copyright Office or other applicable registrar.

          8.11 Change of Location; Etc. Any of the Collateral may be moved to another location
within the continental United States so long as: (i) the Borrower provides the Administrative Agent
with at least thirty (30) days prior written notice, (ii) no Event of Default then exists, and
(iii) the Borrower provides the Administrative Agent with, at Borrower’s sole cost and expense,
such financing statements, landlord waivers, bailee and processor letters and other such agreements
and documents as the Administrative Agent shall reasonably request. The Borrower shall defend and
protect the Collateral against and from all claims and demands of all Persons at any time claiming
any interest therein adverse to the Administrative Agent. If the Borrower desires to change its
principal place of business and chief executive office or its name, the Borrower shall notify the
Administrative Agent thereof in writing no later than thirty (30) days prior to such change and the
Borrower shall provide the Administrative Agent with, at Borrower’s sole cost and expense, such
financing statements, amendment statements and other documents as the Administrative Agent shall
reasonably request in connection with such change. If the Borrower shall decide to change the
location where its books and records are maintained, the Borrower
shall notify the Administrative Agent thereof in writing no later than thirty (30) days prior
to such change.

          8.12 Health Care Related Matters. To the extent applicable, the Borrower shall cause all
licenses, permits, certificates of need, reimbursement contracts and programs, and any other
agreements necessary for the use and operation of its business or as may be necessary for
participation in Medicaid and other applicable reimbursement programs, to remain in full force and
effect, except to the extent that the failure to do so would not cause a Material Adverse Effect or
a material adverse effect on the prospects of the Borrowers on a consolidated basis.

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          8.13 US Patriot Act. Borrower covenants to Administrative Agent and Lenders that if
Borrower becomes aware that it or any of its Affiliates is identified on any Blocked Persons List
(as identified in Section 7.29 hereof), Borrower shall immediately notify Administrative
Agent and Lenders in writing of such information. Borrower further agrees that in the event any of
them or any Affiliate is at any time identified on any Blocked Persons List, such event shall be an
Event of Default, and shall entitle Administrative Agent and Lenders to exercise any and all
remedies provided in any Financing Agreements or otherwise permitted by Law. In addition,
Administrative Agent and Lenders may immediately contact the Office of Foreign Assets Control and
any other government agency Administrative Agent or Lenders deem appropriate in order to comply
with its respective obligations under any Law regulating or relating to terrorism and international
money laundering.

          8.14 [Intentionally Omitted.].

          8.15 Further Assurances. The Borrower shall, at its own cost and expense, cause to be
promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and
assurances as may from time to time be necessary or as the Administrative Agent or any Lender may
from time to time reasonably request in order to carry out the intent and purposes of this
Agreement and the other Financing Agreements and the transactions contemplated hereby and thereby,
including, all such actions to establish, create, preserve, protect and perfect a first-priority
Lien in favor of the Administrative Agent (for the ratable benefit of Lenders and Administrative
Agent) on the Collateral (including Collateral acquired after the date hereof), including on any
and all unencumbered assets of Borrower whether now owned or hereafter acquired.

          8.16 Compliance with Anti-Terrorism Orders. Administrative Agent and Lenders hereby notify
Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56,
signed into law October 26, 2001) (the “Patriot Act”), and the policies and practices of
Administrative Agent and Lenders, the Administrative Agent and Lenders are required to obtain,
verify and record certain
information and documentation that identifies each Borrower, which information includes the
name and address of each Borrower and such other information that will allow the Administrative
Agent and Lenders to identify each Borrower in accordance with the Patriot Act. In addition,
Borrowers shall (a) ensure that no Person who owns a controlling interest in or otherwise controls
any Borrower is or shall be listed on the OFAC Lists, (b) not use or permit the use of the proceeds
of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute
or Executive Order relating thereto, and (c) comply with all applicable Bank Secrecy Act laws and
regulations, as amended. Borrower shall not permit the transfer of any interest in Borrower to any
Person (or any beneficial owner of such entity) who is listed on the OFAC Lists. Borrower shall
not knowingly enter into a Lease with any party who is listed on the OFAC Lists. Borrower shall
immediately notify Administrative Agent and Lenders if Borrower has knowledge that the Guarantor,
manger or any member or beneficial owner of Borrower, Guarantor, Manager is listed on the OFAC
Lists or (i) is indicted on or (ii) arraigned and held over on charges involving money laundering
or predicate crimes to money laundering. Borrower shall immediately notify Administrative Agent
and Lenders if Borrower knows that any Tenant is listed on the OFAC Lists or (A) is convicted on,
(B) pleads nolo contendere to, (C) is indicted on or (D) is arraigned and held over on charges
involving money laundering or predicate crimes to money laundering.

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          8.17 Hedging Agreement. Within fifteen (15) days of the Closing Date, the Borrower
will execute and deliver to the Administrative Agent a Hedging Agreement covering an amount no
less than Twenty-Three Million Dollars ($23,000,000) for no less than five (5) years.

     9. NEGATIVE COVENANTS.

     The Borrower covenants and agrees with Administrative Agent and Lenders that as long as any
Liabilities remain outstanding, and (even if there shall be no such Liabilities outstanding) as
long as this Agreement remains in effect (unless the Required Lenders shall give (or Administrative
Agent upon instruction by Required Lenders to give) prior written consent thereto):

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

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appealable ruling rendered in such contest or appeal; and (vii) financing statements with
respect to a lessor’s rights in and to personal property leased to a Borrower in the ordinary
course of business other than through a Capitalized Lease Obligations.

          9.2 Indebtedness; Capital Expenditures. Borrower shall not incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Indebtedness, except (i) the
Liabilities, (ii) HUD Financing (but only for purposes of payment and release of a Borrower and
such Borrower’s Collateral in accordance with Section 6.8 hereof), (iii) the Commercial
Leases, and any extensions or renewals thereof, (iv) trade obligations and normal accruals in the
ordinary course of business not yet due and payable, (v) the indebtedness not to at any time exceed
Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) relating to the purchase money
security interests and Capitalized Lease Obligations permitted pursuant to Section 9.1
hereof, and (vi) intercompany Indebtedness of the Borrower to the extent permitted under
Section 9.4.

          9.3 Consolidations, Mergers or Transactions. The Borrower shall not be a party to any
merger, consolidation, or exchange of Stock, or purchase or otherwise acquire all or substantially
all of the assets or Stock of any class of, or any other evidence of an equity interest in, or any
partnership, limited liability company, or joint venture interest in, any other Person;
provided, that, with prior written notice to Administrative Agent, a Borrower may merge or
consolidate with, or dissolve into, another Borrower so long as the surviving entity remains a
Borrower for all purposes under this Agreement and the other Financing Agreements. The Borrower shall not form or establish any
Subsidiary without the Administrative Agent’s prior written consent, unless each of the
requirements identified on Schedule 9.3 hereto are satisfied, as reasonably determined by
the Administrative Agent. With prior notice to Administrative Agent, Borrower may dissolve an
inactive Subsidiary that does not conduct any business operations and has assets with a book value
not in excess of Ten Thousand and No/100 Dollars ($10,000.00) (“Inactive Subsidiary”),
provided that any assets are transferred to Guarantor or an existing Subsidiary which is a Borrower
under this Agreement or the Revolving Loan Agreement.

          9.4 Investments or Loans. The Borrower shall not make, incur, assume or permit to exist
any loans or advances, or any investments in or to any other Person, except (i) investments in
short-term direct obligations of the United States Government, agency or instrumentality thereof;
or any (ii) investments in negotiable certificates of deposit issued by the Administrative Agent or
by any other bank reasonably satisfactory to the Administrative Agent, payable to the order of the
Borrower or to bearer, (iii) investments in commercial paper rated at least A-1 by Standard &
Poor’s Corporation or P-1 by Moody’s Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies cease publishing
ratings of investments, (iv) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (iii), above; provided that, in
each case, such investment is reasonably acceptable to the Administrative Agent, (iv) other
short-term investments as may be permitted by Administrative Agent, (vi) loans or advances made by
any Borrower to Guarantor, any other Borrower or any Affiliated Revolving Borrower, (vii) loans and
advances to employees permitted under Section 9.8; and (viii) investments by the Borrowers
in their respective Subsidiaries existing on the date

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hereof and additional investments by the
Borrower in their respective Subsidiaries so long as such Subsidiary is a Borrower under this
Agreement.

          9.5 Guarantees. The Borrower shall not guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other Person, whether by agreement to purchase the
Indebtedness of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purpose of paying or discharging any
Indebtedness or obligation of such other Person or otherwise, except (i) endorsements of negotiable
instruments for collection in the ordinary course of business, and (ii) the Indebtedness permitted
under Section 9.2, above.

          9.6 Disposal of Property. The Borrower shall not sell, assign, lease, convey, lease,
transfer or otherwise dispose of (whether in one transaction or a series of transactions) all or
any substantial part of its properties, assets and rights (or sell or assign, with or without
recourse, any receivables) to any Person except (a) sales of Inventory in the ordinary course of
business, and (b) sales of Equipment being replaced in the ordinary course of business with other
Equipment with a fair market value and orderly liquidation value equal to or greater than the Equipment being
replaced.

          9.7 Use of Proceeds. The Borrower shall use the proceeds of the Term Loan only for the
following purposes: (a) the Existing Lender Refinancing, (b) payment of certain ordinary course
capital expenditure purposes, and (c) to pay reasonable and actually incurred transaction costs and
expenses in connection with this Agreement and the transactions contemplated hereby.

          9.8 Loans to Officers; Consulting and Management Fees. The Borrower shall not make any
loans to its officers, directors, manager, member, or employees or to any other Person, and the
Borrower shall not pay any consulting, management fees or similar fees to its officers, directors,
member, manager, employees, or Affiliates or any other Person, whether for services rendered to the
Borrower or otherwise; provided, however, the Borrower shall be permitted to (i)
make advances to its employees in an aggregate amount not to exceed One Hundred Thousand Dollars
($100,000) in any Fiscal Year of Borrower for all such employees collectively, in each case,
provided that both immediately before such contemplated payment(s) or after giving effect to any
such payment(s) no Default or Event of Default shall exist or have occurred or result therefrom;
(ii) pay reasonable outside directors fees; and (iii) pay the management fees permitted by the
Management Agreements. Administrative Agent acknowledges that travel advances issued in the
ordinary course of business do not constitute loans for purposes of this Section 9.8.

          9.9 Dividends and Stock Redemptions. The Borrower shall not (a) declare, make or pay any
dividend or other distribution (whether in cash, property or rights or obligations) to or for the
benefit of any officer, member, director, or any Affiliate other than (i) to Guarantor,
provided that both immediately before such contemplated payment(s) or after giving effect
to any such payment(s) Borrower is in compliance with Section 9.12(a) hereof, (ii) the
Required Dividends and Redemption Amounts, (iii) distributions under the Borrower Cash Management
Program, including distributions for Guarantor’s normal quarterly dividends to

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common shareholders,
and (iv) payment of the management fees under the Management Agreements, or (b) purchase or redeem
any of the Stock of the Borrower or any options or warrants with respect thereto, declare or pay
any dividends or distributions thereon, or set aside any funds for any such purpose.
Notwithstanding the foregoing or anything to the contrary contained herein, the foregoing
declarations, payments, distributions, purchases or redemptions set forth in this Section
9.9 shall, in each case, be in both manner and amount consistent with the Borrower’s historical
practices.

          9.10 Payments in Respect of Subordinated Debt.

               (1) [Intentionally Omitted.]

               (2) The Borrower shall not make any payment in respect of any Indebtedness for borrowed
money that is subordinated to the Liabilities (including, without limitation, the Subordinated
Debt); provided, however, the Borrower shall be permitted to make solely those payments expressly
permitted pursuant to the terms of any Subordination Agreements, in each case, as long as the
Borrower is in compliance with Section 9.12 hereof both immediately before and after any such
contemplated or actual payment, provided, further, that both immediately before any such
contemplated payment or after giving effect to any such payments no Default or Event of Default
shall exist or have occurred or result therefrom, unless otherwise permitted expressly under the
terms of such Subordinations Agreement.

          9.11 Transactions with Affiliates. Except as expressly permitted under this Agreement, and
except for the Management Agreements and payment of the fee permitted by the terms of the
Management Agreements, and the Borrower Cash Management Program, the Borrower shall not transfer
any cash or property to any Affiliate or enter into any transaction, including, without limitation,
the purchase, lease, sale or exchange of property or the rendering of any service to any Affiliate;
provided, however, except as otherwise expressly restricted under this Agreement,
that the Borrower may transfer cash or property to Affiliates and enter into transactions with
Affiliates for fair value in the ordinary course of business pursuant to terms that are no less
favorable to the Borrower than the terms upon which such transfers or transactions would have been
made had such transfers or transactions been made to or with a Person that is not an Affiliate.

          9.12 Financial Ratios. Commencing with the Fiscal Quarter ending March 31, 2011 and
continuing thereafter:

          (a) Minimum EBITDAR. The consolidated Borrower shall not permit its EBITDAR to be
less than $3,300,000, measured as of the last day of each Fiscal Quarter for the trailing twelve
(12) month period; provided, Administrative Agent acknowledges the minimum EBITDAR herein
will need to be adjusted to a mutually acceptable dollar amount as a result of any HUD Financing in
accordance with Section 6.8.

          (b) Minimum Fixed Charge Coverage Ratio. The Guarantor shall not permit its Fixed
Charge Coverage Ratio to be less than 1.05 to 1.00, measured as of the last day of each Fiscal
Quarter for the trailing twelve (12) month period.

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          (c) Minimum Adjusted EBITDA. The Guarantor shall not permit its Adjusted EBITDA to be
less than Ten Million and No/100 Dollars ($10,000,000.00), measured as of the last day of each
Fiscal Quarter for the trailing twelve (12) month period.

          (d) Guarantor’s Cash Balance. The Guarantor shall not permit its Cash Balance (as
defined below), tested as of the last day of each month, to be less than Four Million Dollars
($4,000,000); provided, a violation of this requirement for any month may be cured within
fifteen (15) days of the last day of such month and will not constitute an Event of Default
unless not cured by such day. As used in this Section, the term “Cash Balances” means
the aggregate amount of unrestricted cash of Guarantor collectively on deposit with PrivateBank.
For the avoidance of doubt, (x) cash deposits contained in any escrow, pledged, hypothecated,
assigned or restricted accounts shall not be included in the calculation of the Cash Balance; and
(y) any draws on the Revolving Loan Commitment (as defined in the Revolving Loan Agreement)
deposited in any account ultimately controlled by the Guarantor shall also not be included in the
calculation of Cash Balance.

The Borrower and the Guarantor acknowledge and agree that the calculation and computation of the
foregoing financial ratios and covenants shall be pursuant to and in accordance with the last
sentence of Section 8.1(e) hereof.

Administrative Agent, Lenders, Borrower and Guarantor acknowledge and agree that for purposes of
the calculation and computation of the foregoing financial ratios and covenants in subparagraphs
(b), (c) and (d), the terms “Minimum EBITDAR” and “Fixed Charge Coverage Ratio,” together with the
terms “EDITDAR,” “EDITDA,” “Adjusted EBITDA,” “Adjusted EBITDAR,” “Capital Expenditures,” “Net
Capital Expenditures” and “Fixed Charges” for purposes of this Section, shall all be as defined,
calculated and measured in the Revolving Loan Agreement, on a consolidated basis, for all Borrowers
thereunder.

          9.13 Change in Nature of Business. Borrower shall not engage, directly or indirectly, in
any business other than owning, operating and/or leasing the Property to the Operators and matters
incidental or directly related thereto.

          9.14 Other Agreements. The Borrower shall not enter into any agreement containing any
provision which would be violated or breached by the performance of its obligations hereunder or
under any Financing Agreement to which Borrower is a party or which would violate or breach any
provision hereof or thereof, or that would or is reasonably likely to adversely affect the
Administrative Agent’s or any Lender’s interests or rights under this Agreement and the other
Financing Agreements to which Borrower is a party or the likelihood that the Liabilities will be
paid in full when due, nor shall the Borrower’s bylaws, articles of incorporation, operating
agreement, partnership agreement or other governing document (each a “Governing Document”),
as applicable, be amended or modified in any way that would violate or breach any provision hereof
or of any Financing Agreement to which Borrower is a party, or that would or is reasonably likely
to adversely affect the Administrative Agent’s or any Lender’s interests or rights under this
Agreement and the other Financing Agreements to which Borrower is a party or the likelihood that
the Liabilities will be paid in full when due; provided, prior to any amendment or modification of
any of the Borrower’s Governing Documents, the Borrower

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shall furnish a correct and complete copy
of any such proposed amendment or modification to the Administrative Agent.

          9.15 Blocked Accounts and Lock Box Accounts. The Borrower shall not establish or open any blocked account or any lock box accounts after
the Closing Date unless in favor of and with the Administrative Agent.

          9.16 Amendments to Restricted Agreements. The Borrower shall not amend, modify or
supplement any Restricted Agreement, in any manner that would or is reasonably likely to adversely
affect the Administrative Agent’s or any Lender’s interests under this Agreement and the other
Financing Agreements to which Borrower is a party, without the Administrative Agent’s prior written
consent. Within three (3) Business Days after entering into any non-adverse amendment,
modification or supplement to any Restricted Agreement, the Borrower Agent shall deliver to the
Administrative Agent a complete and correct copy of such amendment, modification or supplement.

          9.17 State of Incorporation or Formation. The Borrower shall not change its state of
incorporation or formation, as applicable, from that set forth on Schedule 1 hereto.

          9.18 Environmental. Except as to environmental conditions for which it is not responsible
pursuant to any Commercial Lease, the Borrower shall not permit the Property or any portion thereof
to be involved in the use, generation, manufacture, storage, disposal or transportation of
Hazardous Substances except in compliance in all material respects with all Environmental Laws.

          9.19 Fiscal Year. The Borrower shall not change its Fiscal Year.

          9.20 Restrictions on Fundamental Changes. Without duplication of any of the foregoing,
Borrower shall not:

               (1) except as expressly permitted in accordance with Section 9.3 hereof, liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution);

               (2) except as required upon the termination of a Commercial Lease, transfer, assign,
convey or grant to any other Person, other than another Borrower, the right to operate or control
any Location, whether by lease, sublease, management agreement, joint venture agreement or
otherwise;

               (3) without providing Administrative Agent with thirty (30) days’ prior written notice,
change its legal name (and Borrower shall provide Administrative Agent with, at Borrower’s sole
cost and expense, such amendment and financing statements and other documents as Administrative
Agent shall reasonably request in connection with such contemplated change);

               (4) except as expressly permitted in accordance with Section 9.3 hereof, suffer or permit
to occur any change in the legal or beneficial ownership of the capital stock, partnership
interests or membership interests, or in the capital structure, or any material change in the
organizational documents or governing documents, of Borrower;

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               (5) change the licensed operator, manager or property manager for any Property;
or

               (6) consent to or acknowledge any of the foregoing.

          9.21 Margin Stock. Borrower shall not carry or purchase any “margin security” within the
meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System.

          9.22 Truth of Statements and Certificates. Borrower shall not furnish to the
Administrative Agent or any Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished.

     The Borrower agrees that compliance with this Article 9 is a material inducement to
the Lenders’ advancing credit under this Agreement. The Borrower further agrees that in addition
to all other remedies available to the Administrative Agent and the Lenders, the Administrative
Agent and Lenders shall be entitled to specific enforcement of the covenants in this Article
9, including injunctive relief.

          9.23 Commercial Leases. Without the prior written consent of Administrative Agent,
which consent will not unreasonably be withheld: (a) Borrower shall not enter into any Commercial
Lease as to which a Borrower would be the lessee; (b) no Person shall be the Operator of the
Facility other than Borrower; and (c) no Operating Lease will be entered into between Borrower and
any Operator of the Facilities.

     10. HEALTH CARE MATTERS.

     Without limiting the generality of any representation or warranty made in Article 7 or
any covenant made in Articles 8 or 9, each Borrower represents and warrants on a
joint and several basis to and covenants with the Administrative Agent and each Lender, that:

          10.1 [Intentionally Omitted].

          10.2 Certificate of Need. If required under applicable Law, each Borrower has and shall
maintain in full force and effect a valid certificate of need (“CON”) or similar
certificates, license, permit, registration, certification or approval issued by the State
Regulator for the requisite number of beds in each Property (the “Licenses”). Borrower
shall cause to be operated the Location and the Property in a manner such that the Licenses shall
remain in full force and effect at all times,
except to the extent the failure to do so would not cause a Material Adverse Effect or a
material adverse effect on the prospects of the Borrowers on a consolidated basis. True and
complete copies of the Licenses have been delivered to Administrative Agent.

          10.3 Licenses. The Licenses: (i) are and shall continue in full force and effect at all
times throughout the term of this Agreement and are and shall be free from restrictions or known
conflicts which would materially impair the use or operation of any Property for its current use,
and if any Licenses become provisional, probationary, conditional or restricted in any way
(collectively “Restrictions”), Borrower shall take or cause to be taken prompt action to

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correct such Restrictions; (ii) may not be, and have not been, and will not be transferred to any
location other than the Property; and (iii) have not been and will not be pledged as collateral
security for any other loan or indebtedness. Borrower shall not do (or suffer to be done) any of
the following:

               (1) Rescind, withdraw, revoke, amend, modify, supplement, or otherwise alter the nature,
tenor or scope of the Licenses for any Property without Administrative Agent’s prior written
consent;

               (2) Amend or otherwise change any Property’s licensed beds capacity and/or the number of
beds approved by the State Regulator without Administrative Agent’s prior written consent; or

               (3) Replace, assign or transfer all or any part of any Property’s beds to another site or
location (other than to any other Property) without Administrative Agent’s prior written
consent.

     11. DEFAULT, RIGHTS AND REMEDIES OF THE ADMINISTRATIVE AGENT.

          11.1 Event of Default. Any one or more of the following shall constitute an “Event of
Default” under this Agreement:

               (1) the Borrower fails to pay (i) any principal or interest payable hereunder or under the
Term Loan Note on the date due, declared due or demanded (including, without limitation, any amount
due under Section 2.15); or (ii) any other amount payable to the Administrative Agent or any Lender
under this Agreement or under any other Financing Agreement to which the Borrower is a party
(including, without limitation, the Term Loan Notes) within five (5) calendar days after the date
when any such payment is due and, with respect to clause (ii) only, such failure is not cured
within five (5) calendar days after notice to Borrower by Administrative Agent;

               (2) the Borrower fails or neglects to perform, keep or observe any of the covenants,
conditions or agreements set forth in (i) Sections 8.5, 8.6, 8.7, 8.9, 8.11,
8.12, or Section 8.17 hereof, (ii) any Section of Article 9 hereof (other than Section
9.18 hereof), or (iii) any Section of Article 10 hereof and, with respect to such Sections in
Article 10 only, such failure or neglect shall continue for a period of five (5) calendar days
after the earlier of (1) the date the Borrower actually knew of such failure or neglect and (2)
notice to the Borrower by the Administrative Agent.

               (3) the Borrower fails or neglects to perform, keep or observe any of the covenants,
conditions, promises or agreements contained in this Agreement (which is not otherwise specifically
referenced in this Section 11.1) and such failure or neglect shall continue for a period of thirty
(30) calendar days after the earlier of (i) the date the Borrower actually knew of such failure or
neglect and (ii) notice to the Borrower by the Administrative Agent;

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               (4) any representation or warranty heretofore, now or hereafter made by the Borrower in
connection with this Agreement or any of the other Financing Agreements to which Borrower is a
party is untrue, misleading or incorrect in any material respect, or any schedule, certificate,
statement, report, financial data, notice, or writing furnished at any time by the Borrower to the
Administrative Agent or any Lender is untrue, misleading or incorrect in any material respect, on
the date as of which the facts set forth therein are stated or certified;

               (5) a judgment, decree or order requiring payment in excess of Two Hundred Fifty Thousand
Dollars ($250,000) shall be rendered against the Borrower and such judgment or order shall remain
unsatisfied or undischarged and in effect for thirty (30) consecutive days without a stay of
enforcement or execution, provided that this clause (e) shall not apply to any judgment, decree or
order for which the Borrower is fully insured and with respect to which the insurer has admitted
liability, or such judgment, decree or order is being contested or appealed by appropriate
proceedings;

               (6) a notice of Lien, levy or assessment is filed or recorded with respect to any of the
assets of the Borrower (including, without limitation, the Collateral), by the United States, or
any department, agency or instrumentality thereof, or by any state, county, municipality or other
governmental agency or any taxes or debts owing at any time or times hereafter to any one or more
of them become a Lien, upon any of the assets of the Borrower (including, without limitation, the
Collateral), provided that this clause (f) shall not apply to any Liens, levies, or assessments
which a Borrower is contesting in good faith (provided the Borrower has complied with the
provisions of clauses (a) and (b) of Section 8.4 hereof) or which relate to current taxes not yet
due and payable;

               (7) any material portion of the Collateral is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors;

               (8) a proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt or receivership law or statute is filed against the Borrower or any guarantor
of the Liabilities, including Guarantor, and any such proceeding is not dismissed within sixty (60)
days of the date of its filing, or a proceeding under
any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt or
receivership law or statute is filed by the Borrower or any guarantor of the Liabilities, including
Guarantor, or the Borrower or any guarantor of the Liabilities, including Guarantor, makes an
assignment for the benefit of creditors, or the Borrower or any guarantor of the Liabilities,
including Guarantor, takes any action to authorize any of the foregoing;

               (9) except as permitted for an Inactive Subsidiary, the Borrower or Guarantor voluntarily
or involuntarily dissolves or is dissolved, or its existence terminates or is terminated; provided
that in the case of an administrative dissolution or revocation of existence for failure to file
the proper reports or returns with the applicable governmental authorities, no Event of Default
shall be deemed to have occurred if an application for reinstatement is (i) filed promptly (but in
any event, within fifteen (15) calendar days) upon Guarantor or Borrower receiving notice of such
dissolution or revocation from the applicable

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governmental authority and (ii) diligently pursued to
completion (if reasonably capable of being completed), as determined by the Administrative Agent in
its sole and absolute discretion;

               (10) the Credit Parties, taken as a whole, fail, at any time, to be Solvent;

               (11) the Borrower or any guarantor of the Liabilities, including Guarantor, is enjoined,
restrained, or in any way prevented by the order of any court or any administrative or regulatory
agency from conducting all or any material part of its business affairs;

               (12) a breach by the Borrower shall occur under any agreement, document or instrument
(other than an agreement, document or instrument evidencing the lending of money), whether
heretofore, now or hereafter existing between the Borrower and any other Person and the effect of
such breach if not cured within any applicable cure period will or is likely to have or create a
Material Adverse Effect;

               (13) the Borrower shall fail to make any payment due on any other obligation for borrowed
money or shall be in breach of any agreement evidencing the lending of money and the effect of such
failure or breach if not cured within any applicable cure period would be to permit the
acceleration of any obligation, liability or indebtedness in excess of Five Hundred Thousand
Dollars ($500,000);

               (14) there shall be instituted in any court criminal proceedings against the Borrower, or
the Borrower shall be indicted for any crime, in either case for which forfeiture of a material
amount of its property is a potential penalty, unless (i) such actions are being contested or
appealed in good faith by appropriate proceedings, (ii) the potential forfeiture has been stayed
during the pendency of such proceedings, and (iii) no Medicare or Medicaid reimbursement
obligations are materially adversely affected by such proceedings;

               (15) Guarantor shall at any time after the Closing Date have voting power over less than
one hundred percent (100%) of the issued and outstanding Stock of Diversicare Management Services
Co., or directly or indirectly of the Pledgor;

               (16) any Lien securing the Liabilities shall, in whole or in part, cease to be a perfected
first priority Lien (subject only to the Permitted Liens); this Agreement or any of the Financing
Agreements to which the Borrower is a party, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligations of the Borrower; or the Borrower shall directly or indirectly, contest in
any manner such effectiveness, validity, binding nature or enforceability;

               (17) any breach, non-compliance, default or event of default shall occur under or pursuant
to any Subordination Agreement, or any other Financing Agreement (including, without limitation,
the Guaranty, any Hedging Agreement and each Pledge Agreement) by any party thereto (other than by
the Administrative Agent), and the same is not cured or remedied within any applicable cure period,
provided that if such default or event of default, breach, noncompliance or default, requires the
giving of notice by Administrative Agent to any party in addition to or other than Borrower,
Administrative Agent shall have

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provided Borrower with such notice at the same time as it provides
such notice to such other party;

               (18) [Intentionally Omitted];

               (19) institution by the PBGC, the Borrower or any ERISA Affiliate of steps to terminate
any Plan or to organize, withdraw from or terminate a Multiemployer Plan if as a result of such
reorganization, withdrawal or termination, the Borrower or any ERISA Affiliate could be required to
make a contribution to such Plan or Multiemployer Plan, or could incur a liability or obligation to
such Plan or Multiemployer Plan, in excess of Two Hundred Fifty Thousand Dollars ($250,000), or
(ii) a contribution failure occurs with respect to any Plan sufficient to give rise to a Lien under
ERISA, which Lien is not fully discharged within fifteen (15) days;

               (20) a Material Adverse Change shall occur;

               (21) Borrower or any Affiliate of Borrower, shall challenge or contest, in any action,
suit or proceeding, the validity or enforceability of this Agreement, or any of the other Financing
Agreements, the legality or the enforceability of any of the Liabilities or the perfection or
priority of any Lien granted to the Administrative Agent;

               (22) Guarantor shall revoke or attempt to revoke, terminate or contest its obligations
under the Guaranty, or the Guaranty or any provision thereof shall cease to be in full force and
effect in accordance with its terms and provisions;

               (23) Pledgor shall revoke or attempt to revoke, terminate or contest in any way the Pledge
Agreement, or any provision thereof shall cease to be in full force and effect in accordance with
its terms and provisions;

               (24) Borrower shall be prohibited or otherwise restrained from conducting the business
theretofore conducted by it in any manner that has or could reasonably be expected to have or
result in a Material Adverse Effect;

               (25) there shall occur with respect to the Operator of any Location any Medicare or
Medicaid survey deficiencies at Level I, J, K, L or worse (i) which deficiencies are not cured
within the amount of time permitted by the applicable reviewing agency; (ii) which result in the
imposition by any Government Authority or the applicable state survey agency of sanctions in the
form of either a program termination, temporary management, denial of payment for new admission
(which continues for thirty (30) days or more or pertains to more than one Location) or facility
closure and (iii) which sanctions could have a Material Adverse Effect as determined by
Administrative Agent in its reasonable discretion. Upon the occurrence of such event, Borrower
shall submit to Administrative Agent its plan of correction for dealing with such event, and shall
periodically review its progress under the plan of correction with Administrative Agent. Provided
that Administrative Agent remains satisfied with the progress under the plan of correction, then
such Event shall not be an Event of Default unless formal notice is given by Administrative Agent
to Borrower;

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               (26) a state or federal regulatory agency shall have revoked any license, permit,
certificate or Medicaid or Medicare qualification pertaining to the Property or any Location,
regardless of whether such license, permit, certificate or qualification was held by or originally
issued for the benefit of Borrower, a tenant or any other Person, the revocation of which could
reasonably be expected to have a Material Adverse Effect;

               (27) any material default by Borrower under the terms of any material Lease following the
expiration of any applicable notice and cure period (if any);

               (28) William R. Council III or L. Glynn Riddle, Jr. shall not be senior officers of the
Borrower and devote significant time and energy to the business of the Borrower; provided, however,
it shall not constitute an Event of Default if any such individual shall fail for any reason to be
a senior officer of the Borrower or fail to devote significant time and energy to the business of
the Borrower, and such individual shall be promptly replaced by the Borrower, whether on an interim
or permanent basis, with an individual with substantially similar skills and experience (but in no
event later than within 90 calendar days of the former individual’s resignation, termination,
permanent disability or death) and otherwise acceptable to the Administrative Agent in its
reasonable and good faith determination;

               (29) any subordination provision in any document or instrument governing Subordinated
Debt, or any subordination provision in any guaranty by any Subsidiary of any Subordinated Debt,
shall cease to be in full force and effect, or any Credit Party or any other Person (including the
holder of any applicable Subordinated Debt) shall contest in any manner the validity, binding
nature or enforceability of any such provision; or

               (30) an “Event of Default” shall occur under or pursuant to the Revolving Loan Agreement
or any Affiliate Revolving Loan Financing Agreement.

     Notwithstanding the foregoing, in the situations described in clauses (l), (t), (x) and (z),
above, where an Event of Default is triggered by the occurrence of a Material Adverse Change or a
Material Adverse Effect, events which could reasonably be expected to have or result in a Material
Adverse Effect or Material Adverse Change, such occurrence shall not be deemed to be an Event of
Default hereunder provided that Borrower shall within forty-eight (48) hours after
the occurrence thereof submit to Administrative Agent in writing a plan of correction for
dealing with such Material Adverse Change or Material Adverse Effect that is acceptable to
Administrative Agent in its sole and absolute discretion, and, if such plan of correction is so
acceptable, for so long as Administrative Agent remains satisfied in all respects with the progress
under such plan of correction and until written notice that Administrative Agent is not so
satisfied is given by Administrative Agent to Borrower.

          11.2 Acceleration. Upon the occurrence of any Event of Default described in Sections
11.1(h), (i), or (j), the Commitment (if it has not theretofore terminated)
shall automatically and immediately terminate and all of the Liabilities shall immediately and
automatically, without presentment, demand, protest or notice of any kind (all of which are hereby
expressly waived), be immediately due and payable; and upon the occurrence of any other Event of
Default, the Administrative Agent may at its sole option (or, upon written request of Required
Lenders shall) declare the Commitment (if it has not theretofore terminated) to be 

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terminated and
any or all of the Liabilities may, at the sole option of the Administrative Agent (or, upon written
request of Required Lenders shall), and without presentment, demand, protest or notice of any kind
(all of which are hereby expressly waived), be declared, and thereupon shall become, immediately
due and payable, whereupon the Commitment shall immediately terminate.

          11.3 Rights and Remedies Generally.

               (1) Upon the occurrence of any Event of Default, the Administrative Agent and Lenders
shall have, in addition to any other rights and remedies contained in this Agreement and in any of
the other Financing Agreements, all of the rights and remedies of a secured party under the Code or
other applicable laws, all of which rights and remedies shall be cumulative, and non-exclusive, to
the extent permitted by Laws, including, without limitation, the right of Administrative Agent to
sell, assign, or lease any or all of the Collateral. The exercise of any one right or remedy shall
not be deemed a waiver or release of any other right or remedy, and the Administrative Agent, upon
the occurrence of an Event of Default, may proceed against Borrower, and/or the Collateral, at any
time, under any agreement, with any available remedy and in any order. All sums received from
Borrower and/or the Collateral in respect of the Loan may be applied by the Administrative Agent to
any Liabilities in such order of application and in such amounts as the Administrative Agent shall
deem appropriate in its discretion (subject to Section 12.8). Borrower waives any right it may
have to require the Administrative Agent to pursue any Person for any of the Liabilities.

               (2) Upon notice to Borrower after an Event of Default, Borrower at its own expense shall
assemble all or any part of the Collateral as determined by Administrative Agent and make it
available to Administrative Agent at any location designated by Administrative Agent. In such
event, Borrower shall, at its sole cost and expense, store and keep any Collateral so assembled at
such location pending further action by Administrative Agent and provide such security guards and
maintenance services as shall be necessary to protect and preserve such Collateral. In addition to
all such rights and remedies, the sale, lease or other
disposition of the Collateral, or any part thereof, by the Administrative Agent after an
Event of Default may be for cash, credit or any combination thereof, and the Administrative Agent
(on behalf of Lenders and itself) may purchase all or any part of the Collateral at public or, if
permitted by law, private sale, and in lieu of actual payment of such purchase price, may set-off
the amount of such purchase price against the Liabilities of the Borrower then owing. Any sales of
such Collateral may be adjourned from time to time with or without notice. The Administrative
Agent may, in its sole discretion, cause the Collateral to remain on the Borrower’s premises, at
the Borrower’s expense, pending sale or other disposition of such Collateral. The Administrative
Agent shall have the right after an Event of Default to conduct such sales on the Borrower’s
premises, at the Borrower’s expense, or elsewhere, on such occasion or occasions as the
Administrative Agent may see fit.

          11.4 Entry Upon Premises and Access to Information. Upon the occurrence of any Event of
Default, the Administrative Agent shall have the right to enter upon the premises of the Borrower
where the Collateral is located without any obligation to pay rent to the Borrower, or any other
place or places where such Collateral is believed to be located and kept, and remove such
Collateral therefrom to the premises of the Administrative Agent or any agent of the

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 Administrative
Agent, for such time as the Administrative Agent may desire, in order to effectively collect or
liquidate such Collateral. Upon the occurrence of any Event of Default, the Administrative Agent
shall have the right to obtain access to the Borrower’s data processing equipment, computer
hardware and software relating to the Collateral and subject to the privacy requirements and
regulations of HIPPA and of any applicable state or federal patients bill of rights, to use all of
the foregoing and the information contained therein in any manner the Administrative Agent deems
appropriate. Upon the occurrence of any Event of Default, the Administrative Agent shall have the
right to receive, open and process all mail addressed to the Borrower and relating to the
Collateral.

          11.5 Sale or Other Disposition of Collateral by the Administrative Agent. Any notice
required to be given by the Administrative Agent of a sale, lease or other disposition or other
intended action by the Administrative Agent, with respect to any of the Collateral, which is
deposited in the United States mails, postage prepaid and duly addressed to the Borrower at the
address specified in Section 12.12 hereof, at least ten (10) calendar days prior to such
proposed action shall constitute fair and reasonable notice to the Borrower of any such action.
The net proceeds realized by the Administrative Agent upon any such sale or other disposition,
after deduction for the expense of retaking, holding, preparing for sale, selling or the like and
the attorneys’ and paralegal’ fees and legal expenses incurred by the Administrative Agent in
connection therewith, shall be applied as provided herein toward satisfaction of the Liabilities,
including, without limitation, such Liabilities described in Sections 8.2 and 11.2
hereof. The Administrative Agent shall account to the Borrower for any surplus realized upon such
sale or other disposition, and the Borrower shall remain liable for any deficiency. The
commencement of any action, legal or equitable, or the rendering of any judgment or decree for any
deficiency shall not affect the Administrative Agent’s Liens in the Collateral until the
Liabilities are fully paid in cash. The Borrower agrees that the Administrative Agent has no
obligation to preserve rights to the Collateral against any other Person. If and to the extent
applicable, the Administrative Agent is hereby granted a license or other right to use, without
charge, the Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trade styles, trademarks, service marks and advertising matter or any property of a
similar nature, as it pertains to the Collateral, in completing production of, advertising for sale
and selling any such Collateral, and the Borrower’s rights and benefits under all licenses and
franchise agreements, if any, shall inure to the Administrative Agent’s benefit until the
Liabilities of the Borrower are paid in full in cash. Borrower covenants and agrees not to
interfere with or impose any obstacle to Administrative Agent’s exercise of its rights and remedies
with respect to the Collateral.

          11.6 Waivers (General).

               (1) Except as otherwise provided for in this Agreement and to the fullest extent permitted
by applicable Law, Borrower hereby waives: (i) presentment, demand and protest, and notice of
presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all Financing Agreements, the Term
Loan Notes or any other notes, commercial paper, Accounts, contracts, documents, instruments,
chattel paper and guaranties at any time held by Administrative Agent or any Lender on which
Borrower may in any way be liable, and hereby ratifies and confirms whatever Administrative Agent
and Lenders may do in this regard; (ii) all 

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rights to notice and a hearing prior to Administrative
Agent’s taking possession or control of, or to Administrative Agent’s replevy, attachment or levy
upon, any Collateral or any bond or security which might be required by any court prior to allowing
Administrative Agent to exercise any of its remedies; and (iii) the benefit of all valuation,
appraisal and exemption Laws. Borrower acknowledges that it has been advised by counsel of its
choice and decision with respect to this Agreement, the other Financing Agreements and the
transactions evidenced hereby and thereby.

               (2) Borrower for itself and all endorsers, guarantors and sureties and their heirs, legal
representatives, successors and assigns, (i) agrees that its liability shall not be in any manner
affected by any indulgence, extension of time, renewal, waiver, or modification granted or
consented to by Administrative Agent; (ii) consents to any indulgences and all extensions of time,
renewals, waivers, or modifications that may be granted by Administrative Agent with respect to the
payment or other provisions of this Agreement, the Term Loan Notes, and to any substitution,
exchange or release of the Collateral, or any part thereof, with or without substitution, and
agrees to the addition or release of any Borrower, endorsers, guarantors, or sureties, or whether
primarily or secondarily liable, without notice to Borrower and without affecting its liability
hereunder; (iii) agrees that its liability shall be unconditional and without regard to the
liability of any other tax; and (iv) expressly waives the benefit of any statute or rule of law or
equity now provided, or which may hereafter be provided, which would produce a result contrary to
or in conflict with the foregoing.

               (3) Each and every covenant and condition for the benefit of Administrative Agent and
Lenders contained in this Agreement and the other Financing Agreements may be waived by
Administrative Agent. Any forbearance by Administrative Agent in exercising any right or remedy
under any of the Financing Agreements, or otherwise afforded
by applicable Law, including any failure to accelerate the Stated Maturity Date shall not
be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of
the Term Loan Note or as a reinstatement of the Loan or a waiver of such right of acceleration or
the right to insist upon strict compliance of the terms of the Financing Agreements.
Administrative Agent’s acceptance of payment of any sum secured by any of the Financing Agreements
after the due date of such payment shall not be a waiver of Administrative Agent’s right to either
require prompt payment when due of all other sums so secured or to declare a default for failure to
make prompt payment. The procurement of insurance or the payment of taxes or other liens or
charges by Administrative Agent shall not be a waiver of Administrative Agent’s right to accelerate
the maturity of the Loan, nor shall Administrative Agent’s receipt of any condemnation awards,
insurance proceeds, or damages under this Agreement operate to cure or waive Borrower’s or
Guarantor’s default in payment of sums secured by any of the Financing Agreements.

               (4) Without limiting the generality of anything contained in this Agreement or the other
Financing Agreements, Borrower agrees that if an Event of Default is continuing (i) Administrative
Agent is not subject to any “one action” or “election of remedies” law or rule, and (ii) all liens
and other rights, remedies or privileges provided to Administrative Agent shall remain in full
force and effect until Administrative Agent has exhausted all of its remedies against the
Collateral and any other properties owned by Borrower and the Financing Agreements and other
security instruments or agreements securing the 

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Liabilities has been foreclosed, sold and/or
otherwise realized upon in satisfaction of the Liabilities.

               (5) Nothing contained herein or in any other Financing Agreement shall be construed as
requiring Administrative Agent to resort to any part of the Collateral for the satisfaction of any
of Borrower’s obligations under the Financing Agreements in preference or priority to any other
Collateral, and Administrative Agent may seek satisfaction out of all of the Collateral or any part
thereof, in its absolute discretion in respect of Borrower’s obligations under the Financing
Agreements. In addition, Administrative Agent shall have the right from time to time to partially
foreclose upon any Collateral in any manner and for any amounts secured by the Financing Agreements
then due and payable as determined by Administrative Agent in its sole discretion, including,
without limitation, the following circumstances: (i) if Borrower defaults beyond any applicable
grace period in the payment of one or more scheduled payments of principal and interest,
Administrative Agent may foreclose upon all or any part of the Collateral to recover such
delinquent payments, or (ii) if Administrative Agent elects to accelerate less than the entire
outstanding principal balance of the Term Loan Notes, Administrative Agent may foreclose all or any
part of the Collateral to recover so much of the principal balance of the Term Loan Note as
Administrative Agent may accelerate and such other sums secured by one or more of the Financing
Agreements as Administrative Agent may elect. Notwithstanding one or more partial foreclosures,
any unforeclosed Collateral shall remain subject to the Financing Agreements to secure payment of
sums secured by the Financing Agreements and not previously recovered.

               (6) To the fullest extent permitted by Law, Borrower, for itself and its successors and
assigns, waives in the event of foreclosure of any or all of the Collateral any equitable right
otherwise available to Borrower which would require the separate sale of any of the Collateral or
require Administrative Agent to exhaust its remedies against any part of the
Collateral before proceeding against any other part of the Collateral; and further in the
event of such foreclosure Borrower does hereby expressly consent to and authorize, at the option of
Administrative Agent, the foreclosure and sale either separately or together of each part of the
Collateral.

          11.7 Waiver of Notice. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE BORROWER HEREBY
WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE ADMINISTRATIVE
AGENT OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR
LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.

          11.8 Injunctive Relief. The parties acknowledge and agree that, in the event of a breach
or threatened breach of any Credit Party’s obligations under any Financing Agreements,
Administrative Agent may have no adequate remedy in money damages and, accordingly, shall be
entitled to an injunction (including without limitation, a temporary restraining order, preliminary
injunction, writ of attachment, or order compelling an audit) against such breach or threatened
breach. However, no specification in this Agreement of a specific legal or equitable remedy shall
be construed as a waiver or prohibition against any other legal or equitable remedies in the event
of a breach or threatened breach of any provision of this Agreement. Each 

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Credit Party waives the
requirement of the posting of any bond in connection with such injunctive relief.

          11.9 Marshalling; Recourse to Borrower. Administrative Agent shall have no obligation to
marshal any assets in favor of any Credit Party, or against or in payment of any of the other
Liabilities or any other obligation owed to the Administrative Agent and Lenders by any Credit
Party. Notwithstanding anything to the contrary contained herein or in any other Financing
Agreement, the Loan and other Liabilities shall be fully recourse to Borrower, and Administrative
Agent shall be authorized, in its sole and absolute discretion, to enforce any or all of its
remedies hereunder against Borrower, including all present and future revenue and assets of
Borrower, whether or not such assets have been pledged as collateral for the Loan.

          11.10 Advice of Counsel. The Borrower acknowledges that it has been advised by its counsel
with respect to this transaction and this Agreement, including, without limitation, all waivers
contained herein.

     12. MISCELLANEOUS.

          12.1 Waiver; Amendment. The Administrative Agent’s or Lenders’ failure, at any time or times hereafter, to require
strict performance by the Borrower of any provision of this Agreement shall not waive, affect or
diminish any right of the Administrative Agent thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by the Administrative Agent or the Lenders, as
applicable, of an Event of Default under this Agreement or a default under any of the other
Financing Agreements shall not suspend, waive or affect any other Event of Default under this
Agreement or any other default under any of the other Financing Agreements, whether the same is
prior or subsequent thereto and whether of the same or of a different kind or character. None of
the undertakings, agreements, warranties, covenants and representations of the Borrower contained
in this Agreement or any of the other Financing Agreements and no Event of Default under this
Agreement or default under any of the other Financing Agreements shall be deemed to have been
suspended or waived by the Administrative Agent unless such suspension or waiver is in writing
signed by an officer of the Administrative Agent, and directed to the Borrower specifying such
suspension or waiver.

          Except as otherwise set forth herein, no amendment or modification or waiver of, or consent
with respect to (as reasonably determined by Administrative Agent) any provision of this Agreement
or the other Financing Agreements shall in any event be effective unless the same shall be in
writing and acknowledged by Borrower and either (i) Required Lenders, or (ii) Administrative Agent
with a certification that consent from the Required Lenders has been obtained, and then any such
amendment, modification, waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Notwithstanding anything contained herein to the contrary,
no amendment, modification, waiver or consent shall (a) extend or increase the Commitment of any
Lender without the written consent of such Lender, as applicable, (b) extend the date scheduled for
payment of any principal (exclusive of mandatory prepayments) of or interest on the Loan or any
fees payable hereunder without the written consent of each Lender directly affected thereby, (c)
extend the Stated Maturity Date of the Loan without the written consent of all Lenders (except in
accordance with the terms of this Agreement), (d) reduce the principal amount of the Loan, the rate
of interest thereon or any fees 

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payable hereunder, without the consent of each Lender directly
affected thereby (except for any periodic adjustments of interest rates and fees as provided for in
this Agreement), or (e) release any party from its obligations under any guaranty at any time
hereafter provided, if any, or all or substantially all of the Collateral granted hereunder or
under any of the Financing Agreements (except as otherwise specifically permitted or provided in
this Agreement), change the definition of Required Lenders, any provision of this Section
12.1 or reduce the aggregate Pro Rata Share required to effect an amendment, modification,
waiver or consent, without, in each case with respect to this subsection (e), the written consent
of all Lenders, or (f) waive any material condition set forth in Section 5 without the
prior written consent of each Lender directly affected thereby. No provision in this Agreement
with respect to the timing or application of mandatory prepayments of the Loan shall be amended,
modified or waived without the consent of Required Lenders. No provision of Section 13 or
other provision of this Agreement affecting Administrative Agent as such shall be amended, modified
or waived without the prior written consent of Administrative Agent. Notwithstanding anything to
the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be
increased or extended without the consent of such Lender.

          12.2 Costs and Attorneys’ Fees.

               (1) Borrower agrees to jointly and severally pay on demand all of the costs and expenses
of the Administrative Agent (including, without limitation, the reasonable fees and out-of-pocket
expenses of the Administrative Agent’s counsel, all UCC tax, lien, judgment, pending suit, and
bankruptcy search fees and costs, UCC filing fee and costs, recording, filing and registration fees
and charges, mortgage or documentary taxes, all costs of Intralinks or other similar transmission
system, if applicable, all corporate search fees and certified documents, all financial and legal
due diligence expenses, all audit, field exam and appraisal costs and fees, costs incurred by
Administrative Agent in connection with travel expenses of its associates, background checks on
members of management of Borrower, and real estate appraisal fees, survey fees, recording and title
insurance costs, and any environmental report or analysis) in connection with the structuring,
preparation, negotiation, execution, delivery and closing of: (i) this Agreement, the other
Financing Agreements and all other instruments, agreements, certificates or documents provided for
herein or delivered or to be delivered hereunder, and (ii) any and all amendments, modifications,
supplements and waivers executed and delivered pursuant hereto or any other Financing Agreement or
in connection herewith or therewith. Borrower further agrees that the Administrative Agent, in its
sole discretion, may deduct all such unpaid amounts from the aggregate proceeds of the Loan or
debit such amounts from the operating accounts of Borrower maintained with the Administrative
Agent.

               (2) The costs and expenses that the Administrative Agent and Lenders incur in any manner
or way with respect to the following shall be part of the Liabilities, payable by Borrower jointly
and severally on demand if at any time after the date of this Agreement the Administrative Agent or
any Lender: (i) employs counsel in good faith for advice or other representation, (ii) with respect
to the amendment, modification or enforcement of this Agreement or the other Financing Agreements,
or with respect to any Collateral securing the Liabilities hereunder, (iii) to represent the
Administrative Agent and Lender in any work-out or 

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any type of restructuring of the Liabilities, or
any litigation, contest, dispute, suit or proceeding or to commence, defend or intervene or to take
any other action in or with respect to any litigation, contest, dispute, suit or proceeding
(whether instituted by the Administrative Agent, Lenders, Borrower or any other Person) in any way
or respect relating to this Agreement, the other Financing Agreements, Borrower’s affairs or any
Collateral hereunder or (iv) to enforce any of the rights of the Administrative Agent or Lenders
with respect to Borrower provided in this Agreement, under any of the other Financing Agreements,
or otherwise (whether at law or in equity) (including any foreclosure sale, deed in lieu
transaction or costs incurred in connection with any litigation or bankruptcy or administrative
hearing and any appeals therefrom and any post-judgment enforcement action including, without
limitation, supplementary proceedings in connection with the enforcement of this Agreement); (v)
takes any action to protect, preserve, store, ship, appraise, prepare for sale, collect, sell,
liquidate or otherwise dispose of any Collateral hereunder; and/or (vi) seeks to enforce or
enforces any of the rights and remedies of the Administrative Agent or Lenders with respect to
Borrower or any guarantor of the Liabilities. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees include: reasonable fees, costs and expenses of attorneys,
accountants and consultants; court costs and
expenses; court reporter fees, costs and expenses; long distance telephone charges; and
courier and telecopier charges.

               (3) Borrower further agrees to pay, and to save the Administrative Agent and Lenders
harmless from all liability for, any documentary stamp tax, intangible tax, or other stamp tax or
taxes of any kind which may be payable in connection with or related to the execution or delivery
of this Agreement, the other Financing Agreements, the borrowing hereunder, the issuance of the
Term Loan Note or of any other instruments, agreements, certificates or documents provided for
herein or delivered or to be delivered hereunder or in connection herewith, provided that Borrower
shall not be liable for Administrative Agent’s or any Lender’s income tax liabilities.

               (4) All of the Borrower’s obligations provided for in this Section 12.2 shall be
Liabilities secured by the Collateral and shall survive repayment of the Loan or any termination of
this Agreement or any Financing Agreements.

          12.3 Expenditures by the Administrative Agent. In the event the Borrower shall fail to pay
taxes, insurance, audit fees and expenses, consulting fees, filing, recording and search fees,
assessments, fees, costs or expenses which the Borrower is, under any of the terms hereof or of any
of the other Financing Agreements, required to pay, or fails to keep the Collateral free from other
Liens, except as permitted herein, the Administrative Agent may, in its sole discretion, pay or
make expenditures for any or all of such purposes, and the amounts so expended, together with
interest thereon at the Default Rate (from the date the obligation or liability of Borrower is
charged or incurred until actually paid in full to Administrative Agent and Lenders, as applicable)
and shall be part of the Liabilities of the Borrower, payable on demand and secured by the
Collateral.

          12.4 Custody and Preservation of Collateral. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as the Borrower shall request in writing, but
failure by the Administrative Agent to comply with any such request shall not of 

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itself be deemed a
failure to exercise reasonable care, and no failure by the Administrative Agent to preserve or
protect any right with respect to such Collateral against prior parties, or to do any act with
respect to the preservation of such Collateral not so requested by a Borrower, shall of itself be
deemed a failure to exercise reasonable care in the custody or preservation of such Collateral.

          12.5 Reliance by the Lenders. The Borrower acknowledges that the Lenders and
Administrative Agent, in entering into this Agreement and agreeing to make the Loan to the Borrower
hereunder, has relied upon the accuracy of the covenants, agreements, representations and
warranties made herein by the Borrower and the information delivered by the Borrower to the
Administrative Agent and Lenders in connection herewith (including, without limitation, all
financial information and data).

          12.6 Assignability; Parties. This Agreement (including, without limitation, any and all of
the Borrower’s rights, obligations and liabilities hereunder) may not be assigned by the Borrower
without the prior written consent of Administrative Agent and Required Lenders. Whenever in this
Agreement there is reference made to any of the parties hereto, such reference shall be deemed to
include, wherever applicable, a reference to the successors and permitted assigns of the Borrower
and the successors and assigns of the Administrative Agent and (subject to Section 12.15
hereof) the Lenders.

          12.7 Severability; Construction. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Agreement. The parties hereto
have participated jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

          12.8 Application of Payments. Notwithstanding any contrary provision contained in this
Agreement or in any of the other Financing Agreements, after the occurrence of a Default or an
Event of Default the Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by the Administrative Agent or any Lender from the
Borrower or with respect to any of the Collateral, and the Borrower does hereby irrevocably agree
that any and all payments so received shall be applied in the following manner:

          First, to payment of that portion of the Liabilities constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of counsel to Administrative
Agent) payable to Administrative Agent;

          Second, to payment of that portion of the Liabilities constituting fees, indemnities
and other amounts (other than principal and interest) payable to PrivateBank and the other Lenders
(including fees, charges and disbursements of counsel to the respective Lenders), ratably 

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among
them in proportion to the respective amounts described in this clause Second payable to
them;

          Third, to payment of that portion of the Liabilities constituting accrued and unpaid
interest on the Loan and other Liabilities, ratably among Lenders in proportion to the respective
amounts described in this clause Third payable to them;

          Fourth, to payment of that portion of the Liabilities constituting unpaid principal of
the Loan, ratably among Lenders in proportion to the respective amounts described in this clause
Fourth held by them; and

          Last, to all other Liabilities, and then, after all such Liabilities have been
indefeasibly paid in full in cash, any balance to the Borrower or as otherwise required by
applicable law.

          12.9 Payments Set Aside. To the extent that the Borrower makes a payment or payments to
the Administrative Agent or Lenders or the Administrative Agent or Lenders enforce their respective
Liens or exercises their respective rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such recovery, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

          12.10 Sections and Titles; UCC Termination Statements. The sections and titles contained in
this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto. At such time as all of the Liabilities shall
have been indefeasibly paid in full in cash and this Agreement shall terminate in accordance with
its terms, the Administrative Agent will, upon Borrower’s written request and at the Borrower’s
cost and expense, timely file all Uniform Commercial Code termination statements reasonably
required by the Borrower to evidence the termination of the Liens in the Collateral in favor of the
Administrative Agent (for the ratable benefit of Lenders and Administrative Agent).

          12.11 Continuing Effect; Inconsistency. This Agreement, the Administrative Agent’s Liens in
the Collateral, and all of the other Financing Agreements shall continue in full force and effect
so long as any Liabilities shall be owed to the Lenders and Administrative Agent, and (even if
there shall be no such Liabilities outstanding) so long as this Agreement has not been terminated
as provided in Section 2.9 hereof. To the extent any terms or provisions contained in any
Financing Agreement are inconsistent or conflict with the terms and provisions of this Agreement,
the terms and provisions of this Agreement shall control and govern. The relationship between
Administrative Agent and Lenders on the one hand and Borrower on the other hand shall be that of
creditor-debtor only. No term in this Agreement or in any other Financing Agreement and no course
of dealing between the parties shall be deemed to create any relationship or agency, partnership or
joint venture or any fiduciary duty by Administrative Agent or any Lender to Borrower or any other
party. In exercising its rights hereunder and under 

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any other Financing Agreements or taking any
actions herein or therein, Administrative Agent and Lenders may act through its respective
employees, agents or independent contractors as authorized by Administrative Agent or such Lender.

          12.12 Notices. Any notice or other communication required or permitted under this Agreement shall be in
writing and personally delivered, mailed by registered or certified U.S. mail (return receipt
requested and postage prepaid), sent by telecopier (with a confirming copy sent by regular mail),
or sent by prepaid nationally recognized overnight courier service, and addressed to the relevant
party at its address set forth below, or at such other address as such party may, by written
notice, designate as its address for purposes of notice under this Agreement:

(1) If to the Administrative Agent, at:

The PrivateBank and Trust Company

120 South LaSalle Street

Chicago, Illinois 60603

Attention: Adam Panos

Telephone No.: 312-564-1278

Facsimile No.: 312-564-6889

With a copy to:

Duane Morris LLP

190 South LaSalle Street — Suite 3700

Chicago, Illinois 60603

Attention: Brian P. Kerwin

Telephone No: 312-499-6737

Facsimile No: 312-499-6701

(2) If to the Borrower or Borrower Agent, at:

Advocat Inc.

1621 Galleria Boulevard

Brentwood, Tennessee 37027

Attention: Glynn Riddle

Telephone No.: 615-771-7575

Facsimile No.: 615-771-7409

With a copy to:

Harwell Howard Hyne Gabbert & Manner

315 Deaderick Street, Suite 1800

Nashville, Tennessee 37238

Attention: John N. Popham IV

Telephone No.: 615-251-1093

Facsimile No.: 615-251-1059

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               (c) If to Lenders, as identified on Annex A hereto.

If mailed, notice shall be deemed to be given three (3) days after being sent, and if sent by
personal delivery, telecopier or prepaid courier, notice shall be deemed to be given when
delivered. If any notice is tendered to an addressee and delivery thereof is refused by such
addressee, such notice shall be effective upon such tender unless expressly set forth in such
notice.

          12.13 Equitable Relief. The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this Agreement, any
remedy at law may prove to be inadequate relief to the Administrative Agent and Lenders; therefore,
the Borrower agrees that the Administrative Agent and Lenders, if the Administrative Agent or
Lenders so request, shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.

          12.14 Entire Agreement. This Agreement, together with the Financing Agreements (and, as
applicable, the Revolving Loan Agreement) executed in connection herewith, constitutes the entire
agreement among the parties with respect to the subject matter hereof, and supersedes all prior
written or oral understandings, discussions and agreements with respect thereto (including, without
limitation, any term sheet, proposal letter or commitment letter). Notwithstanding anything to the
contrary contained in this Agreement, Borrower is and shall be required to observe, perform and
comply with each of the terms, representations, warranties, covenants, conditions and provisions
set forth in the Revolving Loan Agreement applicable to Borrower and such terms, representations,
warranties, covenants, conditions and provisions are hereby incorporated into this Agreement by
this reference thereto.

          12.15 Participations and Assignments. (a) Any Lender may at any time assign to one or more
Persons (other than (i) a natural person or (ii) any Defaulting Lender or its wholly-owned
subsidiaries) (any such Person, an “Assignee”) all or any portion of such Lender’s Pro Rata
Share of the Loan, with the prior written consent of Administrative Agent, and, so long as no Event
of Default has occurred and is continuing, Borrower (all of which consents shall not be
unreasonably withheld, conditioned or delayed and shall not be required for an assignment by a
Lender to another Lender or an Affiliate of a Lender). Except as Administrative Agent may
otherwise agree (and, so long as no Event of Default has occurred and is continuing, Borrower
otherwise consents in writing, which consent shall not be unreasonably withheld, conditioned or
delayed), any such assignment shall be in a minimum aggregate amount equal to Five Million Dollars
($5,000,000) or, if less, the remaining Loan held by the assigning Lender. Borrower and
Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned to an Assignee until Administrative Agent shall have
received and accepted an effective assignment agreement in substantially the form of Exhibit
B hereto (an “Assignment Agreement”) executed, delivered and fully completed by the
applicable parties thereto and a processing fee of Five Thousand Dollars ($5,000). No assignment
may be made to any Person if at the time of such assignment Borrower would be obligated to pay any
greater amount under Sections 3.1 or 3.3 to the Assignee than Borrower is then
obligated to pay to the assigning Lender under such Sections (and if any assignment is made in
violation of the foregoing,
Borrower will not be required to pay such greater amounts). Any attempted 

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assignment not made
in accordance with this Section 12.15 shall be treated as the sale of a participation
hereunder. Borrower shall be deemed to have granted its consent to any assignment requiring its
consent hereunder unless Borrower has expressly objected to such assignment within three (3)
Business Days after notice thereof. Notwithstanding the foregoing, no consent of Borrower or
Administrative Agent shall be required for any assignment to a Lender or an Affiliate of a Lender
(provided that no assignment shall be made to any Defaulting Lender or its wholly-owned
subsidiaries).

          (b) From and after the date on which the conditions described above have been met, (i) such
Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights
and obligations hereunder have been assigned to such Assignee pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and (ii) the assigning
Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to
such Assignment Agreement, shall be released from its rights (other than its indemnification
rights) and obligations hereunder. Upon the request of the Assignee (and, as applicable, the
assigning Lender) pursuant to an effective Assignment Agreement, Borrower shall execute and deliver
to Administrative Agent for delivery to the Assignee (and, as applicable, the assigning Lender) a
Term Loan Note in the principal amount of the Assignee’s Term Loan Commitment (and, as applicable,
a Term Loan Note in the principal amount of the Term Loan Commitment retained by the assigning
Lender). Each such Term Loan Note shall be dated the effective date of such assignment. Upon
receipt by the assigning Lender of such Term Loan Note, the assigning Lender shall return to
Borrower any prior Term Loan Note held by it.

          (c) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement and applicable promissory note to secure obligations of such
Lender, including any pledge or assignment to secure obligations to any Federal Reserve Bank
(including as collateral security pursuant to Regulation A and any Operating Circular issued by
such Federal Reserve Bank), and such Loan(s) and promissory note(s) shall be fully transferable as
provided therein, and this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.

          (d) Subject to the last sentence in Section 13.9, any Lender may at any time (without
any required consent) sell to one or more Persons (other than (i) a natural person or (ii) a
Defaulting Lender or its wholly-owned subsidiaries) participating interests in its respective Loan
or other interests hereunder (any such Person, a “Participant”). In the event of a sale by
a Lender of a participating interest to a Participant, (a) such Lender’s obligations under this
Agreement shall remain unchanged for all purposes, (b) Administrative Agent and Borrower shall
continue to deal solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and (c) all amounts payable by Borrower shall be determined as if
such Lender had not sold such participation and shall be paid directly to such Lender. No
Participant shall have any direct or indirect voting rights under this Agreement except with
respect to any event described in Section 12.1 expressly requiring the unanimous vote of
all Lenders or, as applicable, all affected Lenders. Each Lender agrees to incorporate the
requirements of the preceding sentence into each participation agreement which such Lender
enters into with any Participant. Borrower agrees that if amounts outstanding under this

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Agreement are due and payable (as a result of acceleration or otherwise), each Participant shall be
deemed to have the right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement; provided that such right of set-off shall be
subject to the obligation of each Participant to share with Lenders, and Lenders agree to share
with each Participant, as provided in Section 2.13(d). Borrower agrees that each
Participant shall be entitled to the benefits of Sections 3.1 or 3.3 as if it were
a Lender (provided that on the date of the participation no Participant shall be entitled to any
greater compensation pursuant to Sections 3.1 or 3.3 than would have been paid to
the participating Lender on such date if no participation had been sold and that each Participant
complies with Section 3.3 as if it were an Assignee).

          (d) Administrative Agent will maintain a copy of each Assignment Agreement delivered and
accepted by it and register (the “Register”) for the recordation of names and addresses of
Lenders, the Term Loan Commitment Percentage of each Lender and the portion of the Loan of each
Lender and whether such Lender is the original Lender or the Assignee. No assignment shall be
effective unless and until the Assignment Agreement is accepted and registered in the Register. All
records of transfer of a Lender’s interest in the Register shall be conclusive, absent manifest
error, as to the ownership of the interests in such Loan. Administrative Agent shall not incur any
liability of any kind with respect to any Lender with respect to the maintenance of the Register.
Upon the reasonable written request of Borrower, Administrative Agent will furnish a copy of the
Register to the Borrower Agent or Borrower (at the cost, if any, to Borrower).

          12.16 Indemnity. The Borrower agrees to jointly and severally defend, protect, indemnify
and hold harmless the Administrative Agent, each Lender and each and all of their respective
officers, directors, employees, attorneys, affiliates, and agents (“Indemnified Parties”)
from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for the Indemnified Parties
in connection with any investigative, administrative or judicial proceeding, whether or not the
Indemnified Parties shall be designated by a party thereto, or otherwise), claim, cause of action,
judgment, suit, action or proceeding, which may ever be imposed on, incurred by, or asserted
against any Indemnified Party (whether direct, indirect or consequential, and whether based on any
federal or state laws or other statutory regulations, including, without limitation, securities,
environmental and commercial laws and regulations, under common law or at equitable cause, or on
contract or otherwise) in any manner relating to or arising out of this Agreement or the other
Financing Agreements, or any act, event or transaction related or attendant thereto, the making and
the management of the Loan (including, without limitation, any liability under federal, state or
local environmental laws or regulations) or the use or intended use of the proceeds of the Loan
hereunder; provided, that the Borrower shall not have any obligation to any Indemnified
Party hereunder with respect to matters caused by or resulting from the gross negligence, willful
misconduct or illegal activity of such Indemnified Party. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable Law, to the payment and
satisfaction of all matters incurred by the Indemnified Parties. Any liability, obligation, loss,

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damage, penalty, cost or expense incurred by the Indemnified Parties shall be paid to the
Indemnified Parties on demand, together with interest thereon at the Default Rate from the date
incurred by the Indemnified Parties until paid by the Borrower, be added to the Liabilities, and be
secured by the Collateral. The provisions of and undertakings and indemnifications set out in this
Section 12.16 shall survive the satisfaction and payment of the Liabilities of the Borrower
and the termination of this Agreement. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO THE
BORROWER OR TO ANY OTHER PARTY TO ANY FINANCING AGREEMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER FINANCING AGREEMENT OR AS A
RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

          12.17 Representations and Warranties. Notwithstanding anything to the contrary contained
herein, each representation or warranty contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement and the other Financing
Agreements and the making of the Loan and the repayment of the Liabilities hereunder.

          12.18 Counterparts. This Agreement and any amendment or supplement hereto or any waiver
granted in connection herewith may be executed in any number of counterparts and by the different
parties on separate counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.

          12.19 Limitation of Liability of Administrative Agent and Lenders. It is hereby expressly
agreed that:

               (1) Administrative Agent and Lenders may conclusively rely and shall be protected in
acting or refraining from acting upon any document, instrument, certificate, instruction or
signature believed to be genuine and may assume and shall be protected in assuming that any Person
purporting to give any notice or instructions in connection with any transaction to which this
Agreement relates has been duly authorized to do so. Administrative Agent and Lenders shall not be
obligated to make any inquiry as to the authority, capacity, existence or identity of any Person
purporting to have executed any such document or instrument or have made any such signature or
purporting to give any such notice or instructions;

               (2) Administrative Agent and Lenders shall not be liable for any acts, omissions, errors
of judgment or mistakes of fact or law, including, without limitation, acts, omissions, errors or
mistakes with respect to the Collateral, except for those arising out of
or in connection with Administrative Agent’s and Lender’s gross negligence, willful
misconduct or illegal activity. Without limiting the generality of the foregoing, Administrative
Agent and Lenders shall be under no obligation to take any steps necessary to preserve rights in
the Collateral against any other parties, but may do so at its option, and all expenses incurred in
connection therewith shall be payable by Borrower; and

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               (3) Administrative Agent and Lenders shall not be liable for any action taken in good
faith and believed to be authorized or within the rights or powers conferred by this Agreement and
the other Financing Agreements.

          12.20 Borrower Authorizing Accounting Firm. Borrower shall authorize its accounting firm
and/or service bureaus to provide Administrative Agent with such information as is requested by
Administrative Agent in accordance with this Agreement. Borrower authorizes Administrative Agent
to contact directly any such accounting firm and/or service bureaus to obtain such information.

          12.21 Joint and Several Liability; Binding Obligations.

               (1) Borrower is defined collectively to include all Persons constituting the Borrower;
provided, however, that any references herein to “any Borrower”, “each Borrower” or similar
references, shall be construed as a reference to each individual Person comprising the Borrower;
provided, further, in case of any question as to which particular Person is to be deemed a Borrower
in any given context for purposes of any term or provision contained in this Agreement, the Lender
shall make such determination. Each Person comprising Borrower shall be jointly and severally
liable for all of the liabilities and obligations of Borrower under this Agreement, regardless of
which of the Borrowers actually receives the proceeds of the Loan hereunder, or the manner in which
the Borrowers, or the Administrative Agent or Lenders accounts therefor in their respective books
and records. In addition, each entity comprising Borrower hereby acknowledges and agrees that all
of the representations, warranties, covenants, obligations, conditions, agreements and other terms
contained in this Agreement shall be applicable to and shall be binding upon and measured and
enforceable individually against each Person comprising Borrower as well as all such Persons when
taken together. By way of illustration, but without limiting the generality of the foregoing, the
terms of Article XI of this Agreement are to be applied to each individual Person comprising the
Borrower (as well as to all such Persons taken as a whole), such that the occurrence of any of the
events described in Article XI of this Agreement as to any Person comprising the Borrower shall
constitute an Event of Default even if such event has not occurred as to any other Persons
comprising the Borrower or as to all such Persons taken as a whole (except as otherwise expressly
provided therein by, for example, the use of the term “Material Adverse Effect”).

               (2) Each Borrower acknowledges that it will enjoy significant benefits from the business
conducted by the other Borrowers because of, inter alia, their combined ability to bargain with
other Persons including, without limitation, their ability to receive the credit facilities
hereunder and other Financing Agreements which would not have
been available to an individual Borrower acting alone. Each Borrower has determined that
it is in its best interest to procure the Loan with the credit support of the other Borrowers as
contemplated by this Agreement and the other Financing Agreements as well as permit the
cross-collateralization and cross-default with the Affiliate Term Loan Liabilities, Term Loan
Agreement and Affiliate Term Loan Financing Agreements as contemplated hereunder.

               (3) The Administrative Agent and the Lenders have advised the Borrowers that the
Administrative Agent and the Lenders are unwilling to enter into this Agreement and the other
Financing Agreements and make available the Loan extended hereby or 

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thereby to any Borrower unless
each Borrower agrees, among other things, to be jointly and severally liable for the due and proper
payment of the Liabilities of each other Borrower under this Agreement and other Financing
Agreements. Each Borrower has determined that it is in its best interest and in pursuit of its
purposes that it so induce the Lenders to extend credit pursuant to this Agreement and the other
documents executed in connection herewith (i) because of the desirability to each Borrower of the
Loan and the interest rates and the modes of borrowing available hereunder, (ii) because each
Borrower may engage in transactions jointly with other Borrowers and (iii) because each Borrower
may require, from time to time, access to funds under this Agreement for the purposes herein set
forth. Each Borrower, individually, expressly understands, agrees and acknowledges, that the Loan
would not be made available on the terms herein in the absence of the collective credit of all of
the Persons constituting the Borrower, the joint and several liability of all such Persons, and the
cross-collateralization of the collateral of all such Persons hereunder and under the other
Financing Agreements. Accordingly, each Borrower, individually acknowledges that the benefit to
each of the Persons comprising the Borrower as a whole constitutes reasonably equivalent value,
regardless of the amount of the Loan actually borrowed by, advanced to, or the amount of collateral
provided by, any individual Borrower.

               (4) Each Borrower has determined that it has and, after giving effect to the transactions
contemplated by this Agreement and the other Financing Agreements (including, without limitation,
the inter-Borrower arrangement set forth in this Section) will have, assets having a fair saleable
value in excess of the amount required to pay its probable liability on its existing debts as they
fall due for payment and that the sum of its debts is not and will not then be greater than all of
its property at a fair valuation, that such Borrower has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to time incurred in
connection therewith as such debts mature and that the value of the benefits to be derived by such
Borrower from the access to funds under this Agreement (including, without limitation, the
inter-Borrower arrangement set forth in this Section) is reasonably equivalent to the obligations
undertaken pursuant hereto.

               (5) The Borrower Agent (on behalf of each Borrower) shall maintain records specifying (a)
all Liabilities incurred by each Borrower, (b) the date of such incurrence, (c) the date and amount
of any payments made in respect of such Liabilities and (d) all inter-Borrower obligations pursuant
to this Section. The Borrower Agent shall make copies of such records available to the
Administrative Agent, upon request.

               (6) To the extent that applicable Law otherwise would render the full amount of the joint
and several obligations of any Borrower hereunder and under the
other Financing Agreements invalid or unenforceable, such Borrower’s obligations hereunder
and under the other Financing Agreements shall be limited to the maximum amount which does not
result in such invalidity or unenforceability, provided, however, that each Borrower’s obligations
hereunder and under the other Financing Agreements shall be presumptively valid and enforceable to
their fullest extent in accordance with the terms hereof or thereof, as if this Section were not a
part of this Agreement.

               (7) To the extent that any Borrower shall make a payment under this Section of all or any
of the Liabilities (a “Joint Liability Payment”) which, taking into 

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account all other Joint
Liability Payments then previously or concurrently made by any other Borrower, exceeds the amount
which such Borrower would otherwise have paid if each Borrower had paid the aggregate Liabilities
satisfied by such Joint Liability Payments in the same proportion that such Borrower’s “Allocable
Amount” (as defined below) (as determined immediately prior to such Joint Liability Payments) bore
to the aggregate Allocable Amounts of each of the Borrowers as determined immediately prior to the
making of such Joint Liability Payments, then, following indefeasible payment in full in cash of
the Liabilities and termination of the Loan, such Borrower shall be entitled to receive
contribution and indemnification payments from, and be reimbursed by, each other Borrower for the
amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately
prior to such Joint Liability Payments. As of any date of determination, the “Allocable Amount” of
any Borrower shall be equal to the maximum amount of the claim which could then be recovered from
such Borrower under this Section without rendering such claim voidable or avoidable under Section
548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

               (8) The term “Borrower” as used herein shall mean either one or more particular Borrowers
or all of the Borrowers collectively as the Administrative Agent shall determine in its sole and
absolute good faith discretion.

               (9) [Intentionally Omitted.]

               (10) [Intentionally Omitted.]

               (11) Each Borrower hereby agrees that, except as hereinafter provided, its obligations
hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect the
Liabilities from any obligor or other action to enforce the same; (ii) the waiver or consent by
Administrative Agent with respect to any provision of any instrument evidencing the Liabilities, or
any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower and
delivered to Administrative Agent or any Lender; (iii) failure by Administrative Agent to take any
steps to perfect and maintain its security interest in, or to preserve its rights to, any security
or collateral for the Liabilities; (iv) the institution of any proceeding under the United States
Bankruptcy Code, or any similar proceeding, by or against a Borrower or Administrative Agent’s
election in any such proceeding of the application of Section 1111(b)(2) of the United States
Bankruptcy Code; (v) any borrowing or grant of a security interest by a Borrower as
debtor-in-possession, under Section 364 of the United States Bankruptcy Code; (vi) the
disallowance, under Section 502 of the United States Bankruptcy Code, of all or any portion of
Administrative Agent’s claim(s) for repayment of any of the
Liabilities; or (vii) any other circumstance other than payment in full of the Liabilities
which might otherwise constitute a legal or equitable discharge or defense of a guarantor or
surety.

               (12) Until all Liabilities have been paid and satisfied in full, no payment made by or for
the account of a Borrower including, without limitation, (i) a payment made by such Borrower on
behalf of the liabilities of any other Borrower or (ii) a payment made by any other Person under
any guaranty, shall entitle such Borrower, by subrogation or otherwise, to any payment from any
other Borrower or from or out of any other Borrower’s property and such Borrower shall not exercise
any right or remedy against any other Borrower or 

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any property of any other Borrower by reason of
any performance of such Borrower of its joint and several obligations hereunder.

               (13) Any notice given by one Borrower hereunder shall constitute and be deemed to be
notice given by all Borrowers, jointly and severally. Notice given by Administrative Agent to any
one Borrower hereunder or pursuant to any Financing Agreements in accordance with the terms hereof
or thereof shall constitute notice to each and every Borrower. The knowledge of one Borrower shall
be imputed to all Borrowers and any consent by one Borrower shall constitute the consent of and
shall bind all Borrowers.

               (14) This Section is intended only to define the relative rights of Borrower and nothing
set forth in this Section is intended to or shall impair the obligations of Borrower, jointly and
severally, to pay any amounts as and when the same shall become due and payable in accordance with
the terms of this Agreement or any other Financing Agreements. Nothing contained in this Section
shall limit the liability of any Borrower to pay the Loan made directly or indirectly to that
Borrower and accrued interest, fees and expenses with respect thereto for which such Borrower shall
be primarily liable.

               (15) The parties hereto acknowledge that the rights of contribution and indemnification
hereunder shall constitute assets of each Borrower to which such contribution and indemnification
is owing. The rights of any indemnifying Borrower against the other Borrowers under this Section
shall be exercisable upon the full and indefeasible payment of the Liabilities and the termination
of the Loan.

          12.22 Confidentiality. Borrower shall not disclose the contents of this Agreement and the
other Financing Agreements to any third party (including, without limitation, any financial
institution or intermediary) unless required by applicable Laws without Administrative Agent’s
prior written consent, other than to Borrower’s officers, lawyers and other professional advisors
on a need-to-know basis, and in connection with any filings required to be made under any
applicable federal or state securities laws or regulations (“Securities Laws”). Borrower
agrees to inform all such Persons who receive information concerning this Agreement that such
information is confidential and may not be disclosed to any other Person, except as required by
applicable Laws, including Securities Laws.

          12.23 Fax Signatures. A signature hereto sent or delivered by facsimile or other electronic
transmission shall be as legally binding and enforceable as a signed original for all purposes.

          12.24 Release. For and in consideration of the Loan hereunder, each Borrower, voluntarily,
knowingly, unconditionally, and irrevocably, with specific and express intent, for and on behalf of
itself and its agents, attorneys, heirs, successors, and assigns (collectively the “Releasing
Parties”) does hereby fully and completely release, acquit and forever discharge the
Administrative Agent and each Lender, and each of their respective successors, assigns, heirs,
affiliates, subsidiaries, parent companies, principals, directors, officers, employees,
shareholders and agents (hereinafter called the “Lender Parties”), and any other person,
firm, business, corporation, insurer, or association which may be responsible or liable for the
acts or omissions of the Lender Parties, or who may be liable for the injury or damage resulting
therefrom 

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(collectively the “Released Parties”), of and from any and all actions, causes of
action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses, fees
(including, without limitation, reasonable attorneys’ fees) and demands of any kind whatsoever, at
law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent,
choate or inchoate, known or unknown that the Releasing Parties (or any of them) have or may have,
against the Released Parties or any of them (whether directly or indirectly) relating to events
occurring on or before the date of this Agreement, other than any claim as to which a final
determination is made in a judicial proceeding (in which the Administrative Agent and Lenders or
any of the Released Parties have had an opportunity to be heard) which determination includes a
specific finding that one of the Released Parties acted in a grossly negligent manner or with
actual willful misconduct. Each Borrower acknowledges that the foregoing release is a material
inducement to Administrative Agent’s and each Lender’s decision to extend to Borrower the financial
accommodations hereunder and has been relied upon by the Lenders in agreeing to make the Loan
hereunder.

          12.25 Time; Reliance. Time is of the essence in Borrower’s performance under this Agreement
and all other Financing Agreements. Notwithstanding anything to the contrary contained in any
Financing Agreement, if and to the extent any terms or provisions contained in any Financing
Agreement are inconsistent or conflict with the terms and provisions of this Agreement, the terms
and provisions of this Agreement shall control and govern.

          12.26 Relationship. The relationship between, on the one hand, the Administrative Agent and
Lenders, and the Borrower, on the other hand, shall be that of creditor-debtor only. No term in
this Agreement or in the other Financing Agreements and no course of dealing between the parties
shall be deemed to create any relationship of agency, partnership or joint venture or any fiduciary
duty by the Administrative Agent and Lenders to Borrower or any other party.

          12.27 Borrower Agent. Each Borrower hereby irrevocably appoints Borrower Agent as the borrowing agent and
attorney-in-fact for all Borrowers which appointment shall remain in full force and effect unless
and until Administrative Agent shall have received prior written notice signed by each Borrower
that such appointment has been revoked and that another Borrower has been appointed Borrower Agent.
Each Borrower hereby irrevocably appoints and authorizes the Borrower Agent (i) to provide
Administrative Agent with all notices with respect to Loan obtained for the benefit of Borrower and
all other notices and instructions under this Agreement, (ii) for all purposes of delivery or
receipt of communications, preparation and delivery of financial reports, receipt and payment of
Liabilities, requests for waivers, amendments or other accommodations and/or actions under this
Agreement, and to duly execute and deliver on behalf of Borrower any and all instruments,
amendments, modifications, reaffirmations, agreements, certificates and documents made to, in favor
of or with Administrative Agent and Lenders in connection with this Agreement or the Financing
Agreements, and (iii) to take such other action as Borrower Agent deems appropriate on its behalf
to obtain the Loan and to exercise such other powers as are reasonably incidental thereto to carry
out the purposes of this Agreement. Each Borrower agrees that any notice, election, communication,
representation, instrument, amendment, modification, reaffirmation, certificate, document,
agreement or undertaking made on its behalf by Borrower Agent shall be legally binding upon and
enforceable against each such Borrower. It is understood that the handling of 

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the Loan Account and
Collateral of Borrowers in a combined fashion, as more fully set forth in this Agreement, is done
solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of
Borrowers in the most efficient and economical manner and at their request, and Administrative
Agent and Lenders shall not incur liability to any Borrower as a result hereof. Each Borrower
expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower is dependent on
the continued successful performance of the integrated group. To induce the Administrative Agent
and Lenders to do so, and in consideration thereof, but without limiting any other provision
contained in this Agreement, each Borrower hereby jointly and severally agrees to indemnify
Administrative Agent and each Lender and hold Administrative Agent and Lenders harmless against any
and all liability, expense, loss or claim of damage or injury, made against Administrative Agent or
any Lender by any Borrower or by any third party or Person whosoever, arising from or incurred by
reason of (a) the handling of the Loan Account and Collateral as herein provided, (b) the
Administrative Agent’s relying on any instructions of the Borrower Agent, or (c) any other action
taken by the Administrative Agent hereunder or under the other Financing Agreements, except that
Borrowers will have no liability to the Administrative Agent under this Section with respect to any
liability that has been finally determined by a court of competent jurisdiction to have resulted
solely from the gross negligence, willful misconduct, or illegal activity of Administrative Agent.

          12.28 Acting Through Agents. In exercising any rights under the Financing Agreements or
taking any actions provided for therein, the Administrative Agent may act through its employees,
agents or independent contractors as authorized by the Administrative Agent. Borrower shall
authorize its accounting firm and/or service bureaus to provide Administrative Agent with such
information as is requested by Administrative Agent in accordance with this Agreement. Borrower
authorizes the Administrative Agent to contact directly any such accounting firm and/or
service bureaus to obtain such information.

          12.29 Additional Provisions.

               (1) Consents. Each Borrower, as joint and several primary obligor of the Liabilities
directly incurred by any other Borrower, authorizes Administrative Agent, without giving notice to
such Borrower or to any other Borrower (to the extent permitted hereunder) or obtaining such
Borrower’s consent or any other Borrower’s consent (to the extent permitted hereunder) and without
affecting the liability of such Borrower for the Liabilities directly incurred by the other
Borrower, from time to time to:

               (2) compromise, settle, renew, extend the time for payment, change the manner or terms of
payment, discharge the performance of, decline to enforce, or release all or any of the
Liabilities; grant other indulgences to any Borrower in respect thereof; or modify in any manner
any documents relating to the Liabilities;

               (3) declare all Liabilities due and payable upon the occurrence and during the continuance of
an Event of Default;

               (4) take and hold security for the performance of the Liabilities of any Borrower and
exchange, enforce, waive and release any such security;

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               (5) apply and reapply such security and direct the order or manner of sale thereof as
Administrative Agent, in its sole discretion, may determine;

               (6) release, surrender or exchange any deposits or other property securing the Liabilities or
on which Administrative Agent at any time may have a Lien; release, substitute or add any one or
more endorsers or guarantors of the Liabilities of any other Borrower or such Borrower; or
compromise, settle, renew, extend the time for payment, discharge the performance of, decline to
enforce, or release all or any obligations of any such endorser or guarantor or other Person who is
now or may hereafter be liable on any Liabilities or release, surrender or exchange any deposits or
other property of any such Person;

               (7) apply payments received by Administrative Agent from any Borrower to any Liabilities, in
such order as Administrative Agent shall determine, in its sole discretion, subject to Section
12.8; and

               (8) assign this Agreement in whole or in part.

               (9) Waivers. Each Borrower, as a primary, joint and several obligor with respect to the
Liabilities directly incurred by any other Borrower, hereby waives:

               (10) any defense based upon any legal disability or other defense of any other Borrower, or by
reason of the cessation or limitation of the liability of any other Borrower from any cause (other
than full payment of all Liabilities), including, but not
limited to, failure of consideration, breach of warranty, statute of frauds, statute of
limitations, accord and satisfaction, and usury;

               (11) any defense based upon any legal disability or other defense of any other guarantor or
other Person;

               (12) any defense based upon any lack of authority of the officers, directors, members,
managers, partners or agents acting or purporting to act on behalf of any other Borrower or any
principal of any other Borrower or any defect in the formation of any other Borrower or any
principal of any other Borrower;

               (13) any defense based upon the application by any other Borrower of the proceeds of the Loan
for purposes other than the purposes represented by such other Borrower to Administrative Agent or
intended or understood by Administrative Agent or such Borrower;

               (14) any defense based on such Borrower’s rights, under statute or otherwise, to require
Administrative Agent to sue any other Borrower or otherwise to exhaust its rights and remedies
against any other Borrower or any other Person or against any collateral before seeking to enforce
its right to require such Borrower to satisfy the Liabilities of any other Borrower;

               (15) any defense based on Administrative Agent’s failure at any time to require strict
performance by any Borrower of any provision of the Financing Agreements. Such Borrower agrees
that no such failure shall waive, alter or diminish any right

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of Administrative Agent thereafter to
demand strict compliance and performance therewith. Nothing contained herein shall prevent
Administrative Agent from foreclosing on any Lien, or exercising any rights available to
Administrative Agent thereunder, and the exercise of any such rights shall not constitute a legal
or equitable discharge of such Borrower;

               (16) [intentionally omitted];

               (17) any defense based upon Administrative Agent’s election of any remedy against such
Borrower or any other Borrower or any of them; any defense based on the order in which
Administrative Agent enforces its remedies;

               (18) any defense based on (A) Administrative Agent’s surrender, release, exchange,
substitution, dealing with or taking any additional collateral, (B) Administrative Agent’s
abstaining from taking advantage of or realizing upon any Lien or other guaranty, and (C) any
impairment of collateral securing the Liabilities, including, but not limited to, Administrative
Agent’s failure to perfect or maintain a Lien in such collateral;

               (19) any defense based upon Administrative Agent’s failure to disclose to such Borrower any
information concerning any other Borrower’s financial condition or any other circumstances bearing
on any other Borrower’s ability to pay the Liabilities;

               (20) any defense based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in any other respects more burdensome than that of a
principal;

               (21) any defense based upon Administrative Agent’s election, in any proceeding instituted
under the Bankruptcy Code, of the application of Bankruptcy Code §1111(b)(2) or any successor
statute;

               (22) any defense based upon any borrowing or any grant of a security interest under Bankruptcy
Code §364;

               (23) [intentionally omitted];

               (24) except as otherwise expressly set forth herein : notice of acceptance hereof; notice of
the existence, creation or acquisition of any Liability; notice of any Event of Default; notice of
the amount of the Liabilities outstanding from time to time; notice of any other fact which might
increase such Borrower’s risk; diligence; presentment; demand of payment; protest; filing of claims
with a court in the event of any other Borrower’s receivership or bankruptcy and all other notices
and demands to which such Borrower might otherwise be entitled (and agrees the same shall not have
to be made on the other Borrower as a condition precedent to such Borrower’s obligations
hereunder);

               (25) [intentionally omitted];

               (26) any defense based on application of fraudulent conveyance or transfer law or shareholder
distribution law to any of the Liabilities or the security therefor;

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               (27) any defense based on Administrative Agent’s failure to seek relief from stay or
adequate protection in any other Borrower’s bankruptcy proceeding or any other act or omission by
Administrative Agent which impairs such Borrower’s prospective subrogation rights;

               (28) any defense based on legal prohibition of Administrative Agent’s acceleration of the
maturity of the Liabilities during the occurrence of an Event of Default or any other legal
prohibition on enforcement of any other right or remedy of Administrative Agent with respect to the
Liabilities and the security therefor;

               (29) any defense available to a surety under applicable Law; and

               (30) the benefit of any statute of limitations affecting the liability of such Borrower
hereunder or the enforcement hereof.

     Each Borrower further agrees that its obligations hereunder shall not be impaired in any
manner whatsoever by any bankruptcy, extensions, moratoria or other relief granted to any other
Borrower pursuant to any statute presently in force or hereafter enacted.

               (31) Additional Waivers. Each Borrower authorizes Administrative Agent to exercise, in
its sole discretion, any right, remedy or combination thereof which may then be available to
Administrative Agent, since it is such Borrower’s intent that the Liabilities be absolute,
independent and unconditional obligations of such Borrower under all circumstances.
Notwithstanding any foreclosure of any Lien with respect to any or all of any property securing the
Liabilities, whether by the exercise of the power of sale contained therein, by an action for
judicial foreclosure or by an acceptance of a deed in lieu of foreclosure, each Borrower shall
remain bound under such Borrower’s guaranty of the Liabilities directly incurred by any other
Borrower.

               (32) Primary Obligations. This Agreement is a primary and original obligation of each of
the Borrowers and each of the Borrowers shall be liable for all existing and future Liabilities of
any other Borrower as fully as if such Liabilities were directly incurred by such Borrower.

          12.30
Nonliability of Administrative Agent and Lenders. The relationship between the
Borrowers on the one hand and the Administrative Agent and Lenders on the other hand shall be
solely that of borrower and lender. The Administrative Agent and Lenders do not have any fiduciary
relationship with or duty to any Credit Party arising out of or in connection with this Agreement
or any of the other Financing Agreements, and the relationship between the Credit Parties, on the
one hand, and the Administrative Agent and Lenders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor. The Administrative Agent does not undertake any
responsibility to any Credit Party to review or inform any Credit Party of any matter in connection
with any phase of any Credit Party’s business or operations. The Borrower Agent agrees, on behalf
of itself and each other Borrower, that the Administrative Agent and Lenders shall have no
liability to any Credit Party (whether sounding in tort, contract or otherwise) for
losses suffered by any Credit Party in connection with, arising out of, or in any way related
to the transactions contemplated and the relationship established by the Financing

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Agreements, or any act, omission or event occurring in connection therewith, unless it is
determined in a final non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence, willful misconduct or illegal activity of the party from which
recovery is sought. NO LENDER OR ADMINISTRATIVE AGENT SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM
THE USE BY OTHERS OF ANY INFORMATION OR OTHER MATERIALS OBTAINED THROUGH INTRALINKS OR OTHER
SIMILAR INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT, NOR SHALL ANY LENDER OR
ADMINISTRATIVE AGENT HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER AGENT ON BEHALF OF ITSELF
AND EACH OTHER CREDIT PARTY, HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL,
PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER
FINANCING AGREEMENT OR ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER
BEFORE OR AFTER THE CLOSING DATE). Each Borrower and the Borrower Agent acknowledges that it has
been advised by counsel in the negotiation, execution and delivery of this Agreement and the other
Financing Agreements to which it is a party. No joint venture is created hereby or by the other
Financing Agreements or otherwise exists by virtue of the transactions contemplated hereby by the
Administrative Agent and Lenders or among the Credit Parties and the Administrative Agent and
Lenders.

          13. AGENCY.

          Administrative Agent, Lenders and Borrower agree that, except for the rights expressly granted
to Borrower under Section 13.9, Borrower shall not be a party to the agreements contained
in this Section 13, and shall have no obligations under this Section 13. Without
limitation of the foregoing, Administrative Agent, Lenders and Borrower agree that in no event
shall Borrower be required to seek comment from, deliver notices to or otherwise deal with any
Lender other than Administrative Agent (except as otherwise specifically stated in this Agreement),
nor shall Borrower be required to make an independent investigation of whether Administrative Agent
has obtained any consents from the Lenders or as may be required (it being agreed that all
communications from Administrative Agent may conclusively be deemed to be authorized by Lenders in
accordance with this Section 13). Borrower shall not have any benefits or rights as a
third party beneficiary of any term or condition contained in this Section 13.

          13.1 Appointment and Authorization. Each Lender hereby irrevocably appoints,
designates and authorizes Administrative Agent to take such action on its behalf under the
provisions of this Agreement and each other Financing Agreement and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this Agreement or any other
Financing Agreement, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other
Financing Agreement, Administrative Agent shall not have any duty or responsibility except those
expressly set forth herein, nor shall Administrative Agent have or be deemed to have any fiduciary
relationship with any Lender or participant, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any other Financing
Agreement or otherwise exist against Administrative Agent. The duties of Administrative Agent
shall be mechanical and administrative in nature. Without

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limiting the generality of the foregoing sentence, the use of the term “agent” herein and in
other Financing Agreements with reference to Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable
law. Instead, such term is used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting parties.

          13.2 Delegation of Duties. Administrative Agent may execute any of its duties under
this Agreement or any other Financing Agreement by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of legal counsel and other consultants,
independent public accountants or experts concerning all matters pertaining to such duties.
Administrative Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

          13.3 Exculpation of Administrative Agent. None of Administrative Agent nor any of its
directors, officers, employees, Affiliates or agents shall (a) be liable to any Lender or any other
Person for any action taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Financing Agreement or the transactions contemplated hereby (except to the
extent resulting from its own gross negligence or willful misconduct in connection with its duties
expressly set forth herein as determined by a final, nonappealable judgment by a court of competent
jurisdiction), or (b) be responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by Borrower or any Affiliate, or any officer thereof,
contained in this Agreement or in any other Financing Agreement, or in any certificate, report,
statement or other document referred to or provided for in, or received by Administrative Agent
under or in connection with, this Agreement or any other Financing Agreement, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing
Agreement (or the creation, perfection or priority of any Lien or security interest therein), or
for any failure of Borrower or any other party to any Financing Agreement to perform its
obligations and Liabilities hereunder or thereunder, or be responsible for or have any duty to
ascertain or verify the satisfaction of any conditions specified in this Agreement or any other
Financing Agreement, except receipt of items required to be delivered to Administrative Agent.
Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or conditions of, this
Agreement or any other Financing Agreement, or to inspect the properties, books or records of
Borrower or its Affiliates.

          13.4 Reliance by Administrative Agent. Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, communication, signature,
resolution, representation, notice, consent, certificate, electronic mail message, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal counsel (including legal counsel
to Borrower), independent accountants and other experts selected by Administrative Agent.
Administrative Agent shall be fully justified in failing or refusing to take any action under this
Agreement or any other Financing Agreement unless it shall first receive such advice or concurrence
of the Required Lenders or such other number or percentage of Lenders as shall be required
elsewhere in this Agreement as it deems appropriate and, if it so requests, confirmation from
Lenders of their obligation to indemnify Administrative Agent against any and all liability

- 86 -

 

and expense which may be incurred by it by reason of taking or continuing to take any such
action. Administrative Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Financing Agreement in accordance with a request or
consent of the Required Lenders or such other number or percentage of Lenders as shall be required
elsewhere in this Agreement and such request and any action taken or failure to act pursuant
thereto shall be binding upon each Lender. For purposes of determining compliance with the
conditions specified in Section 5.1, each Lender that has signed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each document or other
matter required thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless Administrative Agent shall have received written notice from such Lender prior to the
Closing Date specifying its objection thereto.

          13.5 Notice of Default. Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default except with respect to defaults in the
payment of principal, interest and fees required to be paid to Administrative Agent for the account
of the Lenders, unless Administrative Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of Default and stating that
such notice is a “notice of default”. Administrative Agent will notify Lenders of its receipt of
any such notice. Administrative Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with Section 11.2;
provided that unless and until Administrative Agent has received any such request, Administrative
Agent may (but shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable or in the best interest
of Lenders.

          13.6 Credit Decision. Each Lender acknowledges that Administrative Agent has not made
any representation or warranty to it, and that no act by Administrative Agent hereafter taken,
including any consent and acceptance of any assignment or review of the affairs of Borrower, shall
be deemed to constitute any representation or warranty by Administrative Agent to any Lender as to
any matter, including whether Administrative Agent has disclosed material information in its
possession. Each Lender represents to Administrative Agent that it has, independently and without
reliance upon Administrative Agent and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower, and made its own decision
to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also
represents that it will, independently and without reliance upon Administrative Agent and based on
such documents and information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under this Agreement and
the other Financing Agreements, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents expressly herein
required to be furnished to Lenders by Administrative Agent, Administrative Agent shall not have
any duty or responsibility to provide any Lender with any credit or other information concerning
the business, prospects, operations, property, financial or other condition or creditworthiness of
Borrower which may come into the possession of Administrative Agent.

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          13.7 Indemnification. Whether or not the transactions contemplated hereby are
consummated, each Lender shall indemnify, defend and hold harmless upon demand Administrative Agent
and its directors, officers, employees, Affiliates and agents (to the extent not reimbursed by or
on behalf of Borrower and without limiting the obligation of Borrower to do so), according to its
applicable Pro Rata Share, from and against any and all liability, loss, damage, claim, demand,
action, penalty, cost or expense (including, without limitation, reasonable attorneys’ fees), that
Administrative Agent suffers or incurs in connection with this Agreement or any other Financing
Agreement or any action taken or omitted by Administrative Agent hereunder or thereunder, provided
that no Lender shall be liable for any payment to any such Person of any portion thereof to the
extent determined by a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the applicable Person’s own gross negligence or willful misconduct. No action taken
in accordance with the directions of Required Lenders shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section. Without limitation of the
foregoing, each Lender shall reimburse Administrative Agent upon demand for its ratable share of
any costs or out-of-pocket expenses (including, without limitation, reasonable attorneys’ fees and
costs) incurred by Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this
Agreement, any other Financing Agreement, or any document contemplated by or referred to herein, to
the extent that Administrative Agent is not reimbursed for such expenses by or on behalf of
Borrower. If any indemnity furnished to Administrative Agent for any purpose shall, in the
reasonable, good faith opinion of Administrative Agent, be insufficient or become impaired,
Administrative Agent may call for additional reasonable indemnity and cease, or not commence, to do
the acts indemnified against even if so directed by Required Lenders until such additional
reasonable indemnity is furnished. The undertaking in this Section shall survive repayment of the
Loan and other Liabilities, cancellation of any promissory notes, any foreclosure under, or
modification, release or discharge of, any or all of the Financing Agreements, termination of this
Agreement and the resignation or replacement of Administrative Agent.

          13.8 Administrative Agent in Individual Capacity. PrivateBank and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with Borrower and its Affiliates as though PrivateBank were not Administrative
Agent hereunder and without notice to or consent of any Lender. Each Lender acknowledges that,
pursuant to such activities, PrivateBank or its Affiliates may receive information regarding
Borrower or its Affiliates (including information that may be subject to confidentiality
obligations in favor of Borrower or such Affiliates) and acknowledge that Administrative Agent
shall be under no obligation to provide such information to them. With respect to its portion of
the Loan, PrivateBank and its Affiliates shall have the same rights and powers under this Agreement
as any other Lender and may exercise the same as though PrivateBank were not Administrative Agent,
and the terms “Lender” and “Lenders” include PrivateBank and its Affiliates, to the extent
applicable, in their individual capacities.

          13.9 Successor Administrative Agent. Administrative Agent may resign as
Administrative Agent upon thirty (30) days’ notice to Lenders. If Administrative Agent resigns
under this Agreement, Required Lenders shall, with (so long as no Default or Event of Default

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exists) the consent of Borrower (which shall not be unreasonably withheld, conditioned or
delayed), appoint from among Lenders a successor agent for Lenders. Notwithstanding the
immediately foregoing sentence, if no successor agent is appointed prior to the effective date of
the resignation of Administrative Agent, Administrative Agent may appoint, after consulting with
Lenders and Borrower, a successor agent from among Lenders. Upon the acceptance of its appointment
as successor agent hereunder, such successor agent shall succeed to and become vested with all the
rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent”
shall mean such successor agent, and the retiring Administrative Agent’s appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s
resignation hereunder as Administrative Agent, the provisions of this Section 13 and
Sections 12.2 and 12.16 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor
agent has accepted appointment as Administrative Agent by the date which is thirty (30) days
following a retiring Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective and Lenders shall perform all of
the duties of Administrative Agent hereunder until such time, if any, as Required Lenders appoint a
successor agent as provided for above. The fees payable by Borrower to a successor agent in its
capacity as such agent shall be the same as those payable to its predecessor unless otherwise
agreed in writing between Borrower and such successor.

          13.10. Collateral Matters. Lenders irrevocably authorize Administrative Agent, at its
option and in its discretion, (a) to release any Lien granted to or held by Administrative Agent
under this Agreement and any other Financing Agreement (i) if all Liabilities are indefeasibly paid
in full in cash; (ii) constituting property sold or to be sold or disposed of, financed or
refinanced, as part of or in connection with any sale, disposition, financing or refinancing which
is expressly permitted by this Agreement or the Revolving Loan Agreement at any time; or (iii)
subject to Section 13.1, if approved, authorized or ratified in writing by Required
Lenders; or (b) to subordinate its interest in any Collateral to any holder of a Lien on such
Collateral which is expressly permitted by this Agreement or the Revolving Loan Agreement at any
time. Upon request by Administrative Agent at any time, Lenders will promptly confirm in writing
Administrative Agent’s authority to release, or subordinate its interest in, particular types or
items of Collateral pursuant to this Section 13.10. Administrative Agent and each Lender
hereby appoint each other Lender as agent for the purpose of perfecting Administrative Agent’s
security interest in assets and Collateral which, in accordance with the Uniform Commercial Code in
any applicable jurisdiction, can be perfected by possession or control. Should any Lender (other
than Administrative Agent) obtain possession or control of any such assets or Collateral, such
Lender shall promptly notify Administrative Agent thereof in writing, and, promptly upon
Administrative Agent’s written request therefor, shall deliver such assets or Collateral to
Administrative Agent or in accordance with Administrative Agent’s instructions or transfer control
to Administrative Agent in accordance with Administrative Agent’s instructions. Each Lender agrees
that, except as otherwise expressly provided herein, it will not have any right individually to
enforce or seek to enforce this Agreement or any Financing Agreement or to realize upon any
Collateral for the Liabilities unless instructed in writing to do so by Administrative Agent, it
being understood and agreed that such rights and remedies may be exercised only by Administrative
Agent.

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          13.11 Administrative Agent May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to Borrower, Administrative Agent (irrespective
of whether the principal of the Loan shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether Administrative Agent shall have made any
demand on Borrower) shall be entitled and empowered, by intervention in such proceeding or
otherwise:

          (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loan, and all other Liabilities that are owing and unpaid and to file such
other documents as may be necessary or advisable in order to have the claims of Lenders and
Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Administrative Agent and their respective agents and attorneys and all
other amounts due Lenders and Administrative Agent under this Agreement) allowed in such judicial
proceedings; and

          (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;
 and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to
Administrative Agent and, in the event that Administrative Agent shall consent to the making of
such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Administrative Agent and its agents and
attorneys, and any other amounts due Administrative Agent under this Agreement.

     Nothing contained herein shall be deemed to authorize Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Liabilities or the rights of any Lender or to authorize
Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

          13.12 Other Agents; Arrangers and Managers. None of Lenders or other Persons
identified on the facing page or signature pages of this Agreement as, if applicable, a “joint
arranger,” “syndication agent,” “documentation agent,” “co-agent,” “book manager,” “lead manager,”
“joint lead lender”, “arranger,” “lead arranger” or “co-arranger”, if any, shall have any right,
power, obligation, liability, responsibility or duty under this Agreement other than, in the case
of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of
Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship
with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of
Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not
taking action hereunder.

          13.13 Return of Payments. If Administrative Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related payment has been or will be received by
Administrative Agent from Borrower and such related payment is not received by Administrative
Agent, then Administrative Agent will be entitled to recover such amount from such Lender on demand
without setoff, counterclaim or deduction of any kind, together with

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interest accruing on a daily basis at the Federal Funds Rate (as defined below). If Administrative
Agent determines at any time that any amount received by Administrative Agent under this Agreement
must be returned to Borrower or paid to any other Person pursuant to any insolvency law or
otherwise, then, notwithstanding any other term or condition of this Agreement or any other
Financing Agreement, Administrative Agent will not be required to distribute any portion thereof to
any Lender. In addition, each Lender will repay to Administrative Agent on demand any portion of
such amount that Administrative Agent has distributed to such Lender, together with interest at
such rate, if any, as Administrative Agent is required to pay to Borrower or such other Person,
without setoff, counterclaim or deduction of any kind. As used herein, the term “Federal Funds
Rate” means for any day, a fluctuating interest rate equal for each day during such period to
the weighted average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Administrative Agent from three Federal
funds brokers of recognized standing selected by Administrative Agent; provided, Administrative
Agent’s determination of such rate shall be binding and conclusive absent manifest error.

          13.14 PrivateBank Credit Hold. As between PrivateBank and Bankers Trust Company,
PrivateBank agrees to hold and maintain in its own portfolio at least fifty-one percent (51.0%) of
the Term Loan Commitment until the earlier of the Stated Maturity Date (unless sooner accelerated
in accordance with the terms of this Agreement) or Bankers Trust Company is no longer a Lender
hereof.

          14. JURISDICTION; JURY TRIAL WAIVER

          14.1 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY:

               (1) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT AND THE OTHER FINANCING AGREEMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF ILLINOIS AND APPELLATE COURTS FROM ANY THEREOF;

               (2) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING (i) ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME, (ii) THE RIGHT TO 

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ASSERT OR IMPOSE ANY CLAIM, NONCOMPULSORY SET-OFF, COUNTERCLAIM OR CROSS-CLAIM IN RESPECT THEREOF IN SUCH PROCEEDING;
PROVIDED, HOWEVER, THIS WAIVER DOES NOT PRECLUDE THE RIGHT TO ASSERT A DEFENSE IN SUCH ACTION OR
PROCEEDING OR TO ASSERT OR IMPOSE ANY CLAIM, COUNTERCLAIM OR CROSS-CLAIM WHICH THE BORROWER WISHES
TO PURSUE IN A SEPARATE PROCEEDING AT ITS SOLE COST AND EXPENSE, AND (iii) ALL STATUTES OF
LIMITATIONS WHICH MAY BE RELEVANT THERETO; AND

               (3) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, RETURN RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER
ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER AGREES THAT
SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE BORROWER IN ANY SUIT, ACTION OR PROCEEDING, AND (ii) SHALL BE TAKEN AND
HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THE BORROWER. SOLELY TO THE EXTENT
PROVIDED BY APPLICABLE LAW, SHOULD THE BORROWER, AFTER BEING SERVED, FAIL TO APPEAR OR ANSWER TO
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW
AFTER THE DELIVERY OR MAILING THEREOF, THE BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR
JUDGMENT MAY BE ENTERED BY THE COURT AGAINST THE BORROWER AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. NOTHING HEREIN SHALL AFFECT THE ADMINISTRATIVE AGENT’S OR
ANY LENDER’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR LIMIT THE
ADMINISTRATIVE AGENT’S OR ANY LENDER’S RIGHT TO BRING PROCEEDINGS AGAINST THE BORROWER OR ITS
PROPERTY IN ANY COURT OR ANY OTHER JURISDICTION.

          14.2 GOVERNING LAW

          . THIS AGREEMENT SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND ENFORCED AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

          14.3 JURY TRIAL. THE BORROWER, ADMINISTRATIVE AGENT AND THE LENDERS HEREBY
IRREVOCABLY AND KNOWINGLY WAIVE (TO THE FULLEST EXTENT PERMITTED BY LAW) ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF
THIS AGREEMENT, THE FINANCING AGREEMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR
THERETO, INCLUDING, WITHOUT LIMITATION, ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT OR

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

[Signature Page Follows]

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

	 	 	 	 	 
	 	BORROWER:

DIVERSICARE AFTON OAKS, LLC, a
 Delaware limited
liability company

BY: DIVERSICARE LEASING CORP., its
 sole member

 	 
	 	By:  	/s/ Glynn Riddle
 	 
	 	 	Name:  	Glynn Riddle 	 
	 	 	Its:	       Executive Vice President &
 Chief
Financial Officer 	 
	 

	 	 	 	 	 
	 	DIVERSICARE BRIARCLIFF, LLC, a
 Delaware limited
liability company

BY: DIVERSICARE LEASING CORP.,its
  sole member

 	 
	 	By:  	/s/ Glynn Riddle
 	 
	 	 	Name:  	Glynn Riddle 	 
	 	 	Its:	Executive Vice President &
 Chief
Financial Officer 	 
	 

	 	 	 	 	 
	 	DIVERSICARE CHISOLM, LLC, a 
Delaware limited
liability company

BY: DIVERSICARE LEASING CORP., its
 sole member

 	 
	 	By:  	/s/ Glynn Riddle
 	 
	 	 	Name:  	Glynn Riddle 	 
	 	 	Its:	       Executive Vice President &
 Chief
Financial Officer 	 
	 

Term Loan and Security Agreement

 

 

	 	 	 	 	 
	 	DIVERSICARE HARTFORD, LLC, a
 Delaware limited
liability company

BY: DIVERSICARE LEASING CORP., its 
sole member

 	 
	 	By:  	/s/ Glynn Riddle
 	 
	 	 	Name:  	Glynn Riddle 	 
	 	 	Its: 	       Executive Vice President &

 Chief Financial
Officer 	 
	 

Acknowledged and Agreed

solely for purposes of Sections 8.9 and 9.12 hereof:

ADVOCAT INC.

	 	 	 	 	 
	 	 	 
	 	By:  	

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

Term Loan and Security Agreement

 

 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT:

THE PRIVATEBANK AND TRUST 
COMPANY, in its capacity as
administrative agent

 	 
	 	By:  	/s/ Adam D. Panos
 	 
	 	 	Name:  	Adam D. Panos 	 
	 	 	Its:   	        Associate Managing Director 	 
	 

Term Loan and Security Agreement

 

 

	 	 	 	 	 
	 	LENDER:

THE PRIVATEBANK AND TRUST COMPANY

 	 
	 	By:  	/s/  Adam D. Panos
 	 
	 	 	Name:  	Adam D. Panos 	 
	 	 	Its: 	            Associate Managing Director 	 
	 

Term Loan and Security Agreement

 

 

	 	 	 	 	 
	 	LENDER:

BANKERS TRUST COMPANY

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

Term Loan and Security Agreement

 

 

LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

	 	 	 
	Schedule 1

	 	Borrowers
	Schedule 1.1(a)

	 	Facilities
	Schedule 1.1(b)

	 	Real Property
	Schedule 7.8

	 	Other Names
	Schedule 7.12

	 	Organizational Chart
	Schedule 7.13

	 	Litigation
	Schedule 7.17

	 	Environmental Matters
	Schedule 7.26

	 	Medicare and Medicaid Penalties
	Schedule 7.33

	 	Capitalization
	Schedule 9.3

	 	Requirements for Subsidiary Formation

EXHIBITS

Exhibit A       Form of Term Loan Note

Exhibit B       Form of Assignment Agreement

 ANNEX

Annex A       Lenders, Term Loan Commitment Percentages, and Notice Information

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