Document:

Exhibit 10.71

 

Exhibit 10.71

LOAN AND SECURITY AGREEMENT

     This LOAN AND SECURITY AGREEMENT (this “Agreement”), dated as of December 31, 2004, is
by and among OP THERAPY, INC., a Michigan corporation (“Therapy”), and OP HOSPICE, INC., a
Michigan corporation (“Hospice”), and LASALLE BANK NATIONAL ASSOCIATION, a national banking
association (together with its successors and assigns, the “Lender”). As used herein,
Therapy and Hospice are sometimes referred to individually as “Borrower” and collectively
as, “Borrowers”.

W I T N E S S E T H:

     WHEREAS, Tandem Health Care Inc., a Pennsylvania corporation (“Tandem”), legally and
beneficially owns all of the issued and outstanding capital stock of each Borrower;

     WHEREAS, Therapy desires to acquire (“Acquisition A”) substantially all of the assets
and business of The Mobile Medical Group, Inc., a Michigan corporation (“Mobile Medical”),
and Hospice desires to acquire (“Acquisition B”, together with Acquisition A, the
“Acquisitions”) substantially all of the assets and business of Lighthouse Hospice Limited
Partnership, a Delaware limited partnership (“Lighthouse”);

     WHEREAS, the Borrower has requested that the Lender provide the Borrower with (i) certain
revolving loans in an amount of up to Five Million and No/100 Dollars ($5,000,000.00), (ii) a
certain term loan of Twenty-Five Million and No/100 Dollars ($25,000,000.00), and (iii) a certain
assumed debt loan of One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00), to
partially finance the Acquisitions and support the working capital needs of the Borrower; and

     WHEREAS, the Lender is willing to make such loans 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 any loans
or other financial accommodations now or hereafter made to or for the benefit of the Borrower by
the Lender, 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:

     “Account Debtor” means the Person who is obligated on or under an Account.

     “Accounts” means “accounts” as defined in the Code, including, without limitation, (i)
the third party reimbursable portion of accounts receivable owing to the Borrower or arising out of
the delivery by the Borrower of healthcare, ancillary healthcare or other professional services
and/or the sale or lease of goods related to any of such services (whether such services are
supplied by the Borrower or a third party), (ii) all rights to reimbursement under any agreement

 

 

with an Account Debtor and (iii) all present and future accounts receivable and other rights
of the Borrower to payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not they have been earned by performance.

     “Acquisitions” has the meaning contained in the Recitals to this Agreement.

     “Acquisition Agreements” means, collectively, that certain Asset Purchase Agreement
dated as of October 28, 2004 by and between Therapy and Mobile Medical, and that certain Asset
Purchase Agreement dated as of October 28, 2004 by and between Hospice and Lighthouse.

     “Acquisition Documents” means, collectively, the Acquisition Agreements, any
operations transfer agreements, and the other documents, instruments and agreements executed or
delivered in connection therewith or otherwise in connection with the Acquisitions, in each case as
the same may be amended or modified in conformity with Section 9.16 of this Agreement.

     “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.

     “Affiliate Loan Documents” means (i) that certain Term Loan and Security Agreement
dated as of May 31, 2002 by and among RE Bayonet Point, Inc., RE Jacksonville, Inc., RE Port
Charlotte, Inc., RE Sarasota, Inc., RE Orange Park, Inc., RE St. Petersburg, Inc., and RE Safety
Harbor, Inc., and the Lender, (ii) that certain Revolving Loan and Security Agreement dated as of
May 31, 2002 by and among Tandem Health Care of Bayonet Point, Inc., Tandem Health Care of
Jacksonville, Inc., Tandem Health Care of Port Charlotte, Inc., Tandem Health Care of Sarasota,
Inc., Tandem Health Care of Orange Park, Inc., Tandem Health Care of St. Petersburg, Inc., and
Tandem Health Care of Safety Harbor, Inc., and the Lender, (iii) that certain Amended and Restated
Term Loan and Security Agreement dated as of April 1, 2003 by and between Tandem Health Care of
Florida, Inc., and the Lender, (iv) that certain Revolving Loan and Security Agreement dated as of
April 1, 2003 by and among OP Brandon, Inc., OP Lake Parker, Inc., OP Melbourne, Inc., OP West
Altamonte, Inc., OP Pensacola, Inc., OP Tallahassee, Inc., and the Lender, (v) that certain Loan
and Security Agreement dated as of October 2, 2003 by and between LaurelPharm, LLC and the Lender,
and (vi) as applicable, each of the “Financing Agreements” as such term is defined in each of the
foregoing agreements, as each of the foregoing have been or hereafter may further be amended,
supplemented, restated, or modified from time to time.

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

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     “Applicable Base Rate Margin” means, (a) with respect to Base Rate Loans that are
Revolving Loans, the number of basis points as identified in Section 2.7(a) hereof; and (b)
with respect to any part of the Term Loan that is a Base Rate Loan, the number of basis points as
identified in Section 2.7(a) hereof.

     “Applicable Libor Margin” means, (a) with respect to Libor Loans that are Revolving
Loans, the number of basis points as identified in Section 2.7(a) hereof; and (b) with
respect to any part of the Term Loan that is a Libor Loan, the number of basis points as identified
in Section 2.7(a) hereof.

     “Assumed Debt Loan” shall have the meaning ascribed to such term in Section
2.2B hereof.

     “Assumed Debt Commitment” shall have the meaning ascribed to such term in Section
2.2B hereof.

     “Assumed Debt Note” shall have the meaning ascribed to such term in Section
2.2B hereof.

     “Base Rate” means the corporate base rate of interest per annum identified from time
to time by the Lender, as its base or prime rate, which rate shall not necessarily be the lowest
rate of interest which the Lender charges its customers. 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 on the
Base Rate.

     “Borrowing Base” means, at any time, without duplication, an amount equal to up to
eighty percent (80%) of the face amount (less discounts, credits and allowances which have
knowingly been taken by or granted to Account Debtors in connection therewith) of all existing
Eligible Accounts that are set forth in the Schedule of Accounts then most recently delivered by
the Borrower to the Lender, which amount shall be reduced by one hundred percent (100%) of the face
amount of all payments which the Borrower has received on or in connection with its Eligible
Accounts since the date of such Schedule of Accounts.

     “Borrowing Date” means a date on which a Libor Loan is made hereunder.

     “Borrowing Notice” shall have the meaning ascribed to such term in Section
2.12 hereof.

     “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.

     “Capital Expenditures” means, as to any Person, any and all expenditures of such
Person for fixed or capital assets, including, without limitation, the incurrence of Capitalized
Lease Obligations, all as determined in accordance with GAAP, except that Capital Expenditures
shall

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not include expenditures for fixed or capital assets to the extent such expenditures are paid
for or reimbursed from the proceeds of insurance.

     “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 (i) is required by GAAP to be reflected as a liability on the face of the balance sheet of
the lessee thereunder, or (ii) 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 lessee by
any lease which is required to be so reflected or by the ownership of the leased property.

     “Cash Collateral Account” shall have the meaning ascribed to such term in Section
4.4 hereof.

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

     “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 December 31, 2004.

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

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

     “Code” means the Uniform Commercial Code as adopted in the State of Illinois.

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

     “Collateral Assignment of Acquisition Agreements” means, collectively, that certain
Collateral Assignment of Acquisition Agreement of dated even date herewith by and among Therapy,
Mobile Medical, the Mezzanine Lender and the Lender, and that certain Collateral Assignment of
Acquisition Agreement of dated even date herewith by and among Hospice, Lighthouse, the Mezzanine
Lender and the Lender, each in form and substance acceptable to the Lender, which shall provide for
an assignment of the Borrower’s rights under the Acquisition Agreement in favor of the Lender and
Mezzanine Lender.

     “Collateral Report” shall have the meaning contained in Section 8.1(g) hereof.

     “Commercial Lock Box Agreement” means Lender’s standard lockbox agreement signed by
the Borrower relating to the Commercial Lock Box Account, to which payments on all Accounts, other
than Government Accounts, are to be forwarded.

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     “Commitments” means, collectively, the Revolving Loan Commitment, the Term Loan
Commitment, and the Assumed Debt Commitment.

     “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 10.2 hereof, or
(iii) such other date as is mutually agreed in writing between the Borrower and the Lender.

     “Debt Service Coverage Ratio” means, for the applicable trailing 12 month period, an
amount equal to the following for such period: (i) (a) EBITDA during the applicable period; to
(ii) Fixed Charges for such period, all as determined from financial statements of the combined
entities constituting the Borrower in accordance with GAAP, which Coverage Ratio shall be tested
quarterly as provided in Section 9.12(i) hereof.

     “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.

     “Demand Deposit Account” shall have the meaning ascribed to such term in Section
4.3 hereof.

     “Deposit Accounts” means any deposit, securities, operating, lockbox or cash
collateral account (including, without limitation, the Cash Collateral Account, the Demand Deposit
Account, and the Commercial Lock Box 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, the Treasurer, any Vice President and the Secretary
of the Borrower.

     “EBITDA” means with respect to the Borrower, for any period of determination, the net
earnings of the Borrower before nonrecurring items (in accordance with GAAP and as reasonably
agreed to by the Lender), cash interest, taxes, depreciation, and amortization (including amortized
transaction expense), all as determined in accordance with GAAP, consistently applied.

     “Eligible Accounts” means an Account owing to the Borrower which meets each of the
following requirements, as determined by the Lender in its sole and absolute discretion:

     (a) Accounts which do not remain unpaid more than one hundred twenty (120) calendar days from
the invoice date;

     (b) is to be paid pursuant to either a Medicaid Provider Agreement or a Medicare Provider
Agreement, or is a liability of an Account Debtor which is (i) a commercial insurance company (or
managed care company) acceptable to the Lender in its reasonable determination, organized under the
laws of any jurisdiction in the United States and having its principal office in the United States,
or (ii) any other institutional Account Debtor acceptable to the Lender,

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including health maintenance organizations, unions, or any other type of Account Debtor, not
included in the categories of Account Debtors listed in the foregoing clause (i), organized under
the laws of any jurisdiction in the United States, having its principal office in the United
States, in either case, in which such obligor agrees to pay the Borrower for the applicable
services rendered or performed or, if applicable, goods sold;

     (c) the Account Debtor of which has received notice to forward payment to either the
Commercial Lock Box and/or the Government Lock Box, as applicable;

     (d) those Accounts of Borrower as to which the Lender has a first priority perfected Lien and
that comply with all of the representations and warranties made to the Lender under this Agreement
and the Financing Agreements;

     (e) to the extent such Account does not include any contingent payments;

     (f) to the extent such Account does not include late charges or finance charges, and is net of
any contractual discount and/or Medicare/Medicaid fee schedule adjustments; and

     (g) which complies with such other terms and conditions as may be specified from time to time
by the Lender in its reasonable discretion;

provided, however, the following Accounts of the Borrower are not Eligible
Accounts:

(i) Accounts in which the Borrower expects to be reimbursed or paid for care, treatment and
services provided to residents whose Medicaid eligibility is pending approval by the Michigan
Medicaid program; (ii) Accounts to be paid pursuant to a Medicare Provider Agreement or Private
Insurance/Managed Care Accounts, or any other otherwise Eligible Account, which, in either case,
remain unpaid more than one hundred twenty (120) calendar days from the billing date; (iii) all
Private Pay Accounts; (iv) Accounts with respect to which the Account Debtor is a director,
officer, employee, equityholder, or Affiliate of the Borrower; (v) Accounts with respect to which
the Account Debtor is the United States of America or any department, agency or instrumentality
thereof, unless such Account Debtor deposits all payments arising under the Government Accounts to
the Government Lock Box Account in accordance with the terms of the Government Lock Box Agreement;
(vi) Accounts with respect to which the Account Debtor is not subject to service of process within
the continental United States of America; (vii) Accounts known by Borrower (whether actual or
constructive knowledge) to be in dispute (but only to the extent of such disputed amount) or with
respect to which the Account Debtor has asserted, or the Borrower or the Lender has reason to
believe the Account Debtor is entitled to assert, a counterclaim or right of setoff (but only to
the extent of such counterclaim or setoff amount); (viii) Accounts with respect to which the
prospect of payment or performance by the Account Debtor is or will be impaired, as determined by
the Lender in the exercise of its reasonable discretion; (ix) Accounts that are not valid, legally
enforceable obligations of the Account Debtor thereunder; (x) Accounts with respect to which the
Account Debtor is the subject of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been conveyed to a receiver or
trustee; (xi) Accounts with respect to which the Account Debtor’s obligation to pay the Account is
conditional upon the Account Debtor’s approval; (xii) Accounts which arise out of services or, if
applicable, sales not made in the ordinary course of the Borrower’s business; (xiii) Accounts with
respect to which any document

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or agreement executed or delivered in connection therewith, or any procedure used in connection
with any such document or agreement, fails in any material respect to comply with the requirements
of applicable law, or with respect to which any representation or warranty contained in this
Agreement is untrue or misleading in any material respect; and (xiv) Accounts with respect to which
Borrower is or may become liable to the Account Debtor for services rendered, or if applicable,
goods sold, by the Account Debtor to Borrower, to the extent of Borrower’s existing or potential
liability to such Account Debtor;

     provided, further, an Account which is at any time an Eligible Account, but
which subsequently fails to meet any of the foregoing requirements for eligibility, shall forthwith
cease to be an Eligible Account, and further, with respect to any Account, if the Lender at any
time hereafter determines in its reasonable discretion that the prospect of payment or performance
by the Account Debtor with respect thereto is materially impaired for any reason whatsoever, such
Account shall cease to be an Eligible Account after notice of such determination is given to the
Borrower.

     “Environmental Laws” means all federal, state and local laws, statutes, rules,
regulations, ordinances, programs, permits, guidances, orders and consent decrees relating to
health, safety and environmental matters applicable to the Borrower and its business, assets and
property, 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
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.

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     “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
10.1 hereof.

     “Excess Cash Flow” means for any period the excess of (a) EBITDA for such period minus
the total for such period of (i) scheduled principal and interest paid, (ii) income taxes paid
without regard to the period for which such taxes are payable (assuming an income tax rate of 40%),
(iii) Capital Expenditures, and (iv) the difference in Working Capital from such Fiscal Year period
to the immediately prior Fiscal Year period over (b) Fixed Charges.

     “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, collateral assignments of key man life insurance policies, financing statements and all
other written matter (including, without limitation, the Revolving Credit Note, the Term Loan Note,
the Assumed Debt Note, the Limited Guaranty, the Collateral Assignment of Acquisition Agreements,
the Subordination Agreements, the Governmental Lockbox Agreement, and the Commercial Lock Box
Agreement, in each case evidencing, securing or relating to the Loans 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 Lender, together with all agreements and documents
referred to therein or contemplated thereby, as each may be amended, modified or supplemented 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.

     “Fixed Charge Coverage Ratio” means, on any date of determination, the ratio of (a)
EBITDA for the period of 12 consecutive months then ended, to (b) the sum of (i) interest expense
of Borrower that has been paid during such period, (ii) regularly scheduled principal payments of
Borrower to be made during such period, (iii) the aggregate amount of any and all advances to the
Affiliates of the Borrower, and (iv) Capital Expenditures.

     “Fixed Charges” means, for any period, the sum of (i) cash interest expense for such
period, plus (ii) payments of principal with respect to all Indebtedness for borrowed money
(including, without limitation, permitted payments of interest on the Subordinated Debt) and
Capitalized Lease Obligations scheduled or otherwise required to be paid during such period, all as
determined in accordance with GAAP, consistently applied.

     “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

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(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, tradenames, trademarks and all goodwill
symbolized thereby and relating thereto, tradestyles, trade secrets, registrations, 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.

     “Government Accounts” means Accounts on which any federal or state governmental unit
or any intermediary for any federal or state governmental unit is the Account Debtor.

     “Government Lock Box Account” shall have the meaning ascribed to such term in
Section 4.4 hereof.

     “Government Lock Box Agreement” means the lockbox agreement signed by the Borrower
relating to the Government Lock Box Account, to which payments on all Government Accounts are to be
forwarded.

     “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.

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

     “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 obligations or liabilities
created or arising under any lease of real or personal property, or conditional sale or other title
retention agreement with respect to property used and/or acquired by Borrower even

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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, and (i) all other indebtedness,
liabilities and obligations of such Person, now or hereafter owing, due or payable, however
evidenced, created, incurred or owing and however arising.

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

     “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
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.

     “Liabilities” means any and all of the Borrower’s liabilities, obligations and
Indebtedness to the Lender 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, fees, costs, expenses, and/or
indemnification, and obligations of performance) and whether arising or existing under written
agreement, oral agreement, or by operation of law, including, without limitation, all the
Borrower’s Indebtedness, liabilities and obligations to the Lender under this Agreement (whether
relating to any of the Loans or otherwise) or the Financing Agreements to which the 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, with respect to a Libor Loan for the relevant Libor Interest
Period, the offered rate per annum for deposits of U.S. dollars for a period equal to such Libor
Interest Period that appears on Telerate Page 3750 as of 11:00 A.M. (London, England time) two (2)
Business Days prior to the first day in such Libor Interest Period. If no such offered rate
exists, such rate will be the rate at which deposits in U.S. dollars on immediately available funds
are offered to the Lender by major lenders in the interlender Libor market at approximately 10:00
a.m. (Chicago time) two (2) Business Days prior to the first day of such Libor Interest Period, in
the approximate amount of the Libor Loan and having a maturity approximately equal to the Libor
Interest Period, less any reserve required under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve System with respect to liabilities consisting
of or including eurocurrency liabilities.

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     “Libor Interest Period” means, with respect to a Libor Loan, a period of thirty (30),
sixty (60), or ninety (90) days commencing on a Business Day selected by the Borrower pursuant to
this Agreement. Such Libor Interest Period shall end on (but exclude) the day which corresponds
numerically to the date thirty (30), sixty (60), or ninety (90) days thereafter; provided,
however, that if a Libor Interest Period would otherwise end on a day that is not a
Business Day, such Libor Interest Period shall end on the next succeeding Business Day;
provided, further, that if such next succeeding Business Day occurs after the
applicable period, such Libor Interest Period shall end on the immediately preceding Business Day.

     “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.

     “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.

     “Lighthouse” has the meaning contained in the Recitals hereto.

     “Limited Guaranty” means that certain Limited Guaranty dated of even date herewith by
Tandem in favor of the Lender, as the same may be amended, reaffirmed, modified or supplemented
from time to time.

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

     “Loans” means, individually, either a Revolving Loan, the Assumed Debt Loan, or the
Term Loan, as applicable, and collectively, the Revolving Loans, the Assumed Debt Loan, the Term
Loan, and any and all other advances made by the Lender to the Borrower pursuant to the terms of
this Agreement.

     “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.

     “Material Adverse Change” or “Material Adverse Effect” means any change,
event, action, condition or effect which, individually or in the aggregate, (a) impairs the
legality, validity or enforceability of this Agreement or any Financing Agreement, (b) impairs the
fully perfected first priority status of the Liens granted hereunder and under the Financing
Agreements in favor of the Lender in the Collateral or any other assets pledged in favor of Lender
to secure the Liabilities or any portion thereof (subject only to the Permitted Liens), or (c)
materially and adversely affects the business, property or assets (whether real or personal),
operations, performance, or condition (financial or otherwise) of the Borrower or any or all of the
Collateral, or the ability of the Borrower to repay the Liabilities when due or declared due and
perform the Borrower’s obligations under this Agreement and the Financing Agreements to which it is
a party.

 - 11 -

 

     “Maximum Facility” means Thirty-One Million One Hundred Thousand and No/100 Dollars
($31,100,000.00).

     “Maximum Revolving Facility” means, at any time, an amount equal to Five Million and
No/100 Dollars ($5,000,000.00).

     “MDCH” means Michigan Department of Community Health, together with its successors and
assigns.

     “Medicaid Certification” means, with respect to Borrower, certification by the
Medicaid program in each state in which the Borrower conducts business which is under or affected
by the Medicaid Regulations that the Borrower complies with all of the applicable requirements for
participation set forth in the Medicaid Regulations.

     “Medicaid Provider Agreement” means an agreement entered into with the Medicaid
program in each state in which the Borrower conducts business which is under or affected by the
Medicaid Regulations under which such state Medicaid program agrees to pay for covered services
provided by the Borrower to Medicaid beneficiaries in accordance with the terms of such agreement
and the Medicaid Regulations.

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

     “Medicare Certification” means certification of CMS or a state agency or entity under
contract with CMS that the Borrower complies with all of the applicable requirements for
participation set forth in the Medicare Regulations.

     “Medicare Provider Agreement” means an agreement entered into with CMS or a state
agency under contract with CMS under which CMS agrees to pay for covered services provided by the
Borrower to Medicare beneficiaries in accordance with the terms of such agreement and the Medicare
Regulations.

     “Medicare Regulations” 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).

     “Mezzanine Debt Documents” means, collectively, the Note Purchase Agreement, the
subordinated note(s) issued pursuant thereto, and the documents, instruments and agreements

 - 12 -

 

executed or delivered in connection therewith, in each case as the same may be amended or
modified in conformity with Section 9.16 of this Agreement.

     “Mezzanine Lender” means Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., a Delaware corporation, and its successors and assigns.

     “Mobile Medical” has the meaning contained in the Recitals hereto.

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

     “Net Cash Proceeds” means, with respect to any transaction or event, an amount equal
to the cash proceeds received by Borrower from or in respect of such transaction or event
(including proceeds of any non-cash proceeds of such transaction), less: (i) any out-of-pocket
expenses paid to a Person that are reasonably incurred by Borrower in connection therewith and (ii)
in the case of an asset disposition, the amount of any Indebtedness secured by a Lien on the
related asset and discharged from the proceeds of such asset disposition and any taxes paid or
reasonably estimated by the Borrower to be payable by such Person in respect of such asset
disposition (provided, that if the actual amount of taxes paid is less than the estimated
amount, the difference shall immediately constitute Net Cash Proceeds).

     “Note Purchase Agreement” means that certain Senior Subordinated Note Purchase
Agreement dated of even date herewith among the Borrower, the Mezzanine Lender, and any other
lender at any time a party thereto, as the same may be modified, supplemented or amended from time
to time.

     “Notes” means, individually, either the Revolving Credit Note, the Assumed Debt Note,
or the Term Loan Note, as applicable, and collectively, the Revolving Credit Note, the Assumed Debt
Note, and the Term Loan Note.

     “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,
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.

     “Private Insurance/Managed Care Account” means Accounts owing from insurance companies
or managed care companies to a Person for services provided or rendered by the Borrower to a Person
where the Person has assigned the right to the Account to the Borrower.

     “Private Insurance/Managed Care Contracts” means contracts and agreements between the
Borrower (or an Affiliate thereof) and insurance companies and/or managed care companies

 - 13 -

 

pursuant to which the Borrower has the right to make a claim for and receive payment for
services rendered or furnished to a Person that is an intended beneficiary of such contract or
agreement.

     “Private Pay Accounts” means Accounts owing directly from an individual for services
provided or rendered by the Borrower to such individual.

     “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.

     “Rate Option” means the Libor Rate or the Base Rate.

     “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.

     “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.

     “Revolving Credit Note” shall have the meaning ascribed to such term in Section
2.1 hereof.

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

     “Revolving Loans” shall have the meaning ascribed to such term in Section 2.1
hereof.

     “Schedule of Accounts” means an aged trial balance and reconciliation to the Borrowing
Base in form and substance reasonably satisfactory to the Lender (which may at the Lender’s
discretion include copies of original invoices) listing the Accounts of the Borrower, certified on
behalf of the Borrower by a Duly Authorized Officer, to be delivered on a monthly basis to the
Lender by the Borrower pursuant to Section 8.1(d) hereof.

     “Seller Notes” means, collectively, that certain promissory note dated December 31,
2004 from Therapy in favor of Mobile Medical in the original principal amount of $8,516,000, and
that certain promissory note dated December 31, 2004 from Hospice in favor of Lighthouse in the
original principal amount of $1,695,000.

     “Standard Federal” means Standard Federal Bank N.A.

     “Stated Maturity Date” means (i) with respect to the Assumed Debt Loan, December 31,
2007 and (ii) with respect to the Revolving Loans and the Term Loan, November 30, 2009.

     “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

 - 14 -

 

to the Lender in its sole and absolute determination, including, without limitation, (i)
certain indebtedness owing to Mobile Medical and Lighthouse, respectively, by the Borrower pursuant
to the Seller Notes, and (ii) certain indebtedness owing to the Mezzanine Lender by the Borrower
pursuant to the Mezzanine Debt Documents.

     “Subordination Agreement” means (i) that certain Subordination and Intercreditor
Agreement of even date herewith among Mobile Medical, Therapy, the Mezzanine Lender and the Lender,
as the same may be modified, supplemented or amended from time to time, which must be in form and
substance acceptable to the Lender, (ii) that certain Subordination and Intercreditor Agreement of
even date herewith among Lighthouse, Hospice, the Mezzanine Lender and the Lender, as the same may
be modified, supplemented or amended from time to time, which must be in form and substance
acceptable to the Lender, and (iii) that certain Subordination and Intercreditor Agreement of even
date herewith between the Mezzanine Lender and the Lender, as the same may be modified,
supplemented or amended from time to time, which must be in form and substance acceptable to the
Lender.

     “Tandem” has the meaning set forth in the Recitals hereto.

     “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.

     “Term Loan” shall have the meaning ascribed to such term in Section 2.2
hereof.

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

     “Term Loan Note” shall have the meaning ascribed to such term in Section 2.2
hereof.

     “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.

     “Warranty of Validity of Accounts” has the meaning contained in Section
5.2(b)(5) hereof.

     “Working Capital” means with respect to the Borrower, for any period of determination,
Accounts minus accounts payable.

     1.2 Accounting Terms. Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily given to such terms in accordance
with GAAP. If changes in GAAP shall be mandated by the Financial Accounting Standards Board or
shall be recommended by the Borrower’s certified public accountants, and such changes would
materially modify the interpretation or computation of the financial covenants set forth in
Section 9.12 hereof at the time of execution hereof, then in such event such changes shall
not be followed in calculating such financial covenants.

 - 15 -

 

     1.3 Others Defined in Code. All terms contained in this Agreement (and which are not
otherwise specifically defined herein) shall have the meanings provided by the Code to the extent
the same are used or defined therein.

     2. COMMITMENTS; INTEREST; FEES.

     2.1 Revolving Loans. (a) 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, the Lender
agrees to make revolving loans (such loans collectively called “Revolving Loans” and
individually called a “Revolving Loan”) to the Borrower from time to time on and after the
Closing Date and prior to the Credit Termination Date, so long as the aggregate amount of such
advances outstanding at any time to the Borrower do not exceed the lesser of: (i) the Maximum
Revolving Facility at such time minus any reserves established by the Lender pursuant to
Section 2.1(c) hereof; and (ii) the Borrowing Base at such time minus any reserves
established by the Lender pursuant to Section 2.1(c) hereof. The Borrower shall have the
right to repay and reborrow any of the Revolving Loans without premium or penalty (subject to
Section 3.4 hereof); provided, however, that it shall be a condition precedent to
any reborrowing that as of the date of any reborrowing (any such date herein called a
“Reborrowing Date”) all of the conditions to borrowing set forth in Section 5.1 of
this Agreement shall be satisfied and all representations and warranties made herein shall be true
and correct in all material respects as of such Reborrowing Date. The Lender’s commitment hereunder
to make Revolving Loans is hereinafter called the “Revolving Loan Commitment”. The payment
obligations of the Borrower to the Lender hereunder are and shall be joint and several as provided
in Section 11.21 hereof.

          (b) Each advance to the Borrower under this Section 2.1 shall be in integral multiples
of Ten Thousand Dollars ($10,000) and shall, on the day of such advance, be deposited, in
immediately available funds, in the Borrower’s demand deposit account with the Lender, or in such
other account as the Borrower may, from time to time, designate in writing with the Lender’s
approval.

          (c) The Borrower acknowledges and agrees that the Lender may from time to time (i) upon five
(5) calendar days notice, increase or decrease the advance rates with respect to Eligible Accounts
in the Lender’s reasonable discretion (provided, prior to a Default, the Lender will not reduce any
such advance rate by more than ten percent (10%), but after the occurrence of any Default, the
Lender may reduce any such advance rate in any amount in its reasonable discretion), and/or (ii)
establish reserves against the Borrowing Base, the Eligible Accounts in the Lender’s reasonable
discretion.

          (d) The Revolving Loans shall be evidenced by a promissory note (hereinafter, as the same may
be amended, modified or supplemented from time to time, and together with any renewals or
extensions thereof or exchanges or substitutions therefor, called the “Revolving Credit
Note”), 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, payable to
the order of the Lender in the principal amount of Five Million and No/100 Dollars ($5,000,000.00).
THE PROVISIONS OF THE REVOLVING CREDIT NOTE NOTWITHSTANDING, THE REVOLVING LOANS THEN OUTSTANDING
SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIEST TO OCCUR OF

 - 16 -

 

(X) STATED MATURITY DATE; (Y) THE ACCELERATION OF THE LIABILITIES PURSUANT TO SECTION
10.2 HEREOF; AND (Z) TERMINATION OF THIS AGREEMENT (WHETHER BY PREPAYMENT OR OTHERWISE) IN
ACCORDANCE WITH ITS TERMS.

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

     2.2 Term Loan. (a) 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, the Lender
shall, immediately following the execution of this Agreement by the Borrower and the Lender, extend
in one (1) advance a term loan (the “Term Loan”) to the Borrower in an aggregate principal
amount equal to Twenty-Five Million and No/100 Dollars ($25,000,000.00). The principal balance of
the Term Loan shall be amortized over five (5) years and shall be repaid in consecutive equal
monthly installments as set forth below:

Term Loan Amortization

	 	 	 	 	 	 	 	 	 
	Term Loan Facility	 	Annual Amortization	 	 	Principal Remaining	 
	Months 1-6
	 	$	0	 	 	$	25,000,000	 
	Months 7-24
	 	$	3,000,000	 	 	$	20,500,000	 
	Months 25-36
	 	$	4,200,000	 	 	$	16,300,000	 
	Months 37-48
	 	$	5,400,000	 	 	$	10,900,000	 
	Months 49-60
	 	$	6,600,000	 	 	$	4,300,000	 

, together with interest accrued thereon, each payable on the first day of each calendar month,
commencing on the first day of the first month immediately following the Closing Date, 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. 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. 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 Lender’s commitment hereunder to make the Term
Loan is hereinafter called the “Term Loan Commitment”. Upon maturity, the outstanding
principal balance of the Term Loan shall be immediately due and payable, together with any
remaining accrued interest thereon, to Lender by Borrower. The payment obligations of the Borrower
to the Lender hereunder are and shall be joint and several as provided in Section 11.21
hereof.

          (b) The Term Loan shall be evidenced by a promissory note (hereinafter, as the same may be
amended, modified or supplemented from time to time, and together with any renewals or extensions
thereof or exchanges or substitutions therefor, called the “Term Loan 

 - 17 -

 

Note”), duly executed and delivered by the Borrower, substantially in the form set
forth in Exhibit B attached hereto, with appropriate insertions, dated the Closing Date,
payable to the order of the Lender in the principal amount of Twenty-Five Million and No/100
Dollars ($25,000,000.00). THE PROVISIONS OF THE TERM LOAN NOTE NOTWITHSTANDING, THE TERM LOAN SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIEST TO OCCUR OF (X) THE STATED MATURITY DATE; (Y)
THE ACCELERATION OF THE LIABILITIES PURSUANT TO SECTION 10.2 HEREOF; AND (Z) THE
TERMINATION OF THIS AGREEMENT (WHETHER BY PREPAYMENT OR OTHERWISE) IN ACCORDANCE WITH ITS TERMS.

     B. Assumed Debt Loan. (a) 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, the Lender
shall, immediately following the execution of this Agreement by the Borrower and the Lender, extend
in one (1) advance a term loan (the “Assumed Debt Loan”) to the Borrower in an aggregate
principal amount equal to One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00). The
principal balance of the Term Loan shall be amortized over three (3) years and shall be repaid in
consecutive equal monthly installments of Thirty Thousand Five Hundred Fifty Five and 55/100
Dollars ($30,555.55), together with interest accrued thereon, each payable on the first day of each
calendar month, commencing on February 1, 2005, and otherwise in accordance with Section
2.7 hereof, with a final installment of the aggregate unpaid principal balance of the Assumed
Debt Loan, together with interest accrued thereon, payable on the Credit Termination Date. Monthly
interest payments on the Assumed Debt Loan shall be computed using the interest rate then in effect
and based on the outstanding principal balance of the Assumed Debt Loan. Any amounts paid or
applied to the principal balance of the Assumed Debt Loan (whether by mandatory prepayment or
otherwise) may not be reborrowed hereunder. The Lender’s commitment hereunder to make the Assumed
Debt Loan is hereinafter called the “Assumed Debt Loan Commitment”. Upon maturity, the
outstanding principal balance of the Assumed Debt Loan shall be immediately due and payable,
together with any remaining accrued interest thereon, to Lender by Borrower. The payment
obligations of the Borrower to the Lender hereunder are and shall be joint and several as provided
in Section 11.21 hereof. The Assumed Debt Loan shall be evidenced by a promissory note
(hereinafter, as the same may be amended, modified or supplemented from time to time, and together
with any renewals or extensions thereof or exchanges or substitutions therefor, called the
“Assumed Debt Note”), duly executed and delivered by the Borrower, in form and substance
satisfactory to the Lender, dated the Closing Date, payable to the order of the Lender in the
principal amount of One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00). THE
PROVISIONS OF THE ASSUMED DEBT NOTE NOTWITHSTANDING, THE ASSUMED DEBT LOAN SHALL BECOME IMMEDIATELY
DUE AND PAYABLE UPON THE EARLIEST TO OCCUR OF (X) THE STATED MATURITY DATE; (Y) THE ACCELERATION OF
THE LIABILITIES PURSUANT TO SECTION 10.2 HEREOF; AND (Z) THE TERMINATION OF THIS AGREEMENT
(WHETHER BY PREPAYMENT OR OTHERWISE) IN ACCORDANCE WITH ITS TERMS.

     2.3 Reduction of Revolving Loan Commitment by the Borrower. The Borrower may from
time to time on at least five (5) Business Days’ prior written notice received by the Lender
permanently reduce the amount of the Revolving Loan Commitment but only upon first repaying

 - 18 -

 

the amount, if any, by which the aggregate unpaid principal amount of the Revolving Credit
Note exceeds the then reduced amount of the Revolving Loan Commitment.

     2.4 Principal Balance of Liabilities Not to Exceed the Maximum Facility. The sum of
the aggregate outstanding principal balance of the Loans to the Borrower made under this Agreement
shall not, at any time, exceed the Maximum Facility. The Borrower agrees that if at any time any
such excess shall arise, the Borrower shall immediately pay to the Lender such amount as may be
necessary to eliminate such excess.

     2.5 The Borrower’s Loan Account. The Lender shall maintain a loan account (the
“Loan Account”) on its books for the Borrower in which shall be recorded (a) all Loans made
by the Lender to the Borrower pursuant to this Agreement, (b) all payments made by the Borrower on
all such Loans, 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 Lender’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 any of the Notes to repay
the outstanding principal amount of any of the Loans together with all interest accruing thereon.

     2.6 Statements. All Loans to the Borrower, and all other debits and credits provided
for in this Agreement, shall be evidenced by entries made by the Lender in its internal data
control systems showing the date, amount and reason for each such debit or credit. Until such time
as the Lender shall have rendered to the Borrower written statements of account as provided herein,
the balance in the Loan Account, as set forth on the Lender’s most recent computer printout, shall
be rebuttably presumptive evidence of the amounts due and owing the Lender by the Borrower. From
time to time the Lender shall render to the Borrower 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 Lender but shall, absent manifest errors or omissions, be
presumed correct and binding upon the Borrower.

     2.7 Interest. (a) The Borrower agrees to pay to the Lender interest on the daily
outstanding principal balance of (i) the Base Rate Loans at the Base Rate from time to time in
effect, plus the Applicable Base Rate Margin, and (ii) the Libor Loans 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 Lender interest on the outstanding principal
balance of the Loans at the per annum rate of three percent (3%) plus the rate otherwise
payable hereunder with respect to such Loans (the “Default Rate”).

; provided, further, on and as of the Closing, the Applicable Base Rate Margin and
the Applicable Libor Margin shall be as identified in Level II of the schedule immediately below,
and commencing with the Lender’s receipt of the December 31, 2005 audited financial statements of
the Borrower prepared in accordance with Section 8.1(a) hereof, and continuing

 - 19 -

 

thereafter, the Applicable Base Rate Margin and Applicable Libor Margin shall be set then and on
each Fiscal Quarter of the Borrower according to the following schedule based on the Borrower’s
“Senior Term Loan Debt to EBITDA” ratio as set forth in Section 9.12(ii):

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Level	 	STL/EBITDA	 	LIBOR Margin	 	Base Rate Margin
	I
	 	 	2.503 X < 3.00	 	 	+375 bps	 	+75 bps
	II
	 	 	2.003 X < 2.50	 	 	+350 bps	 	+50 bps
	III
	 	 	1.503 X < 2.00	 	 	+325 bps	 	+25 bps
	IV
	 	 	< 1.50	 	 	+275 bps	 	-25 bps

     The Applicable Base Rate Margin and Applicable Libor Margin shall be adjusted from time to
time upon delivery to the Lender of the Compliance Certificate of the Borrower required to be
delivered on a quarterly basis pursuant to Section 8.1(c) hereof accompanied by a written
calculation of the “Senior Term Loan Debt to EBITDA” ratio as set forth in Section 9.12(ii)
certified by a Duly Authorized Officer. If such calculation (as verified and approved by the
Lender) indicates that the Applicable Base Rate Margin and/or Applicable Libor Margin shall
increase or decrease, then three (3) Business Days after the date of delivery of such written
documents, the Applicable Base Rate Margin and/or Applicable Libor Margin shall be adjusted in
accordance therewith; provided, however, that if the Borrower shall fail to deliver
any such Compliance Certificate for any required period by the date required in Section
8.1(a) hereof, then, effective as of the first Business Day following the date such Compliance
Certificate was to have been delivered, and continuing through the date which is one (1) Business
Day after the date when such Compliance Certificate and such written calculation are finally
delivered to Lender, the Applicable Base Rate Margin and Applicable Libor Margin shall be
conclusively presumed to equal the highest “Applicable Margin” specified in the pricing table set
forth above.

          (b) Accrued interest on each Base Rate Loan shall be payable on the first calendar day of each
month and at maturity, commencing with the first day of the calendar month after the initial
disbursement of such loan; provided, however, 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. Monthly
interest payments on the Loans shall be computed using the interest rate then in effect and based
on the outstanding principal balance of the Loans. Upon maturity, the outstanding principal
balance of all Loans 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. If any payment of principal of, or interest on, any of
the Notes 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 Lender 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
Lender’s office at 135 South LaSalle Street, Chicago, Illinois 60603, or at such

 - 20 -

 

other place as the Lender directs in writing from time to time, or, in the Lender’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 Lender after the
occurrence and during the continuance of any Default to direct debit any of Borrower’s operating
accounts with Lender for all principal, interest, fees and expenses due hereunder with respect to
the Loans and the Liabilities. Payments made after 1:00 p.m. (Chicago time) shall be deemed to
have been made on the next succeeding Business Day.

     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 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 addition, the
Liabilities may be accelerated as set forth in Section 10.2 hereof. Upon the effective
date of termination, all of the Liabilities shall become immediately due and payable without notice
or demand. Notwithstanding any termination, until all of the Liabilities hereunder shall have been
indefeasibly paid and satisfied, the Lender shall be entitled to retain its Liens in and to all
existing and future Collateral and the Borrower shall continue to remit collections of Accounts of
the Borrower and proceeds as provided herein.

     2.10 Optional Prepayment of Loans. Borrower may, at its option, permanently prepay,
without penalty or premium (other than as specified in Section 3.4 hereof), at any time
during the term of this Agreement all or any portion of any of the Loans. Prepayments of the Term
Loan shall be applied against installments payable under the Term Loan Note in the inverse order of
maturity.

     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 Lender 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 Lender
either be refunded to the Borrower 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 Borrower hereunder exceed the maximum rate allowed by applicable law,
and Borrower shall not have any action against Lender for any damages arising out of the payment or
collection of any such excess interest.

     2.12 Method of Selecting Rate Options; Additional Provisions Regarding Libor Loans.
The Borrower may select a Libor Rate with respect to a Loan as provided in this Section
2.12; provided, however, that with respect to each and all Libor Loans made
hereunder (i) the initial advance shall be in an amount not less than Five Hundred Thousand Dollars
($500,000) and in integral multiples of One Hundred Thousand Dollars ($100,000) thereafter; and
(ii) there shall not exist at any one time outstanding more than three (3) separate tranches of
Libor Loans. Loans shall bear interest at the Base Rate plus the Applicable Base Rate Margin
unless the Borrower provides a Borrowing Notice to the Lender in the form of Exhibit C,
signed by a Duly

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Authorized Officer of the Borrower, irrevocably electing that all or a portion of the Loans
are to bear interest at a Libor Rate (the “Borrowing Notice”). The Borrowing Notice shall
be delivered to the Lender not later than two (2) Business Days before the Borrowing Date for each
Libor Loan, specifying:

          (a) The Borrowing Date, which shall be a Business Day, of such Loan;

          (b) The type and aggregate amount of such Loan;

          (c) The Rate Option selected for such Loan; and

          (d) The Libor Interest Period applicable thereto.

     Each Libor Loan shall bear interest from and including the first day of the Libor Interest
Period applicable thereto to (but not including) the last day of such Libor Interest Period at the
interest rate determined as applicable to such Libor Loan. If at the end of an Libor Interest
Period for an outstanding Libor Loan, the Borrower has failed to select a new Rate Option or to pay
such Libor Loan, then such Loan shall be automatically converted to a Base Rate Loan on and after
the last day of such Libor Interest Period until paid or until the effective date of a new Rate
Option with respect thereto selected by the Borrower. An outstanding Base Rate Loan may be
converted to a Libor Loan at any time subject to the notice provisions applicable to the type of
Loan selected. The Borrower may not select a Libor Rate for a Loan if there exists a Default or
Event of Default. The Borrower shall select Libor Interest Periods with respect to Libor Loans so
that such Libor Interest Period does not expire after the end of the Credit Termination Date.

     2.13 Setoff. (a) Borrower agrees that 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 Lender, or (ii) a
Default or an Event of Default shall have occurred and be continuing, then the Lender or the holder
of any promissory note issued hereunder, in its 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 Lender or such holder.

          (b) Without limitation of Section 2.13(a) hereof, the Borrower agrees that, upon and
after the occurrence of any Event of Default or Default, the Lender is hereby authorized, at any
time and from time to time, without prior notice to the Borrower (provided, however, prior to a
Default the Lender shall use reasonable efforts to provide notice of any such action within a
reasonable time thereafter but the 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 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 Lender as Collateral to secure such Liabilities and to dishonor any and all checks
and other items drawn against any deposits so held as the Lender in its sole discretion may elect.

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

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     2.14 Termination of Commitments by the Lender. On the date on which the Commitments
terminate pursuant to Section 10.2 hereof, all Loans and other Liabilities shall become
immediately due and payable, without presentment, demand or notice of any kind.

     2.15 Mandatory Prepayments. (a) Within thirty (30) calendar days of the end of each
Fiscal Year of Borrower, the Borrower shall make an annual prepayment of principal of the Term Loan
in an amount equal to fifty percent (50%) of the Borrower’s Excess Cash Flow for the immediately
preceding Fiscal Year. (b) Upon receipt by Borrower of the proceeds of any asset disposition, the
Borrower shall make a prepayment of principal of the Term Loan in an amount equal to one hundred
percent (100%) of the Net Cash Proceeds of such asset disposition. (c) At Lender’s sole option,
two (2) days after the occurrence of a scheduled initial public offering by Borrower or Tandem
pursuant to an effective registration statement under the Securities Act of 1933, as amended, the
Borrower shall make a prepayment of the entire outstanding amount of the Liabilities. Such
mandatory prepayments shall be applied to outstanding installments of the Term Loan in the inverse
order of maturity. Such mandatory prepayments shall not be subject to any prepayment penalty or
charge. Nothing contained in this Section 2.15 shall be construed to permit the Borrower
to consummate any transaction in violation of any other provision contained in this Agreement.

     2.16 Closing Fee. On the Closing Date, the Borrower shall pay to the Lender a
one-time closing fee in the amount of Four Hundred Seventy-Five Thousand and No/100 Dollars
($475,000.00) 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 Lender 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, 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 the Lender therewith, or Regulation D of the Board of
Governors of the Federal Reserve System,

          (a) subjects the Lender to any tax, duty, charge or withholding on or from payments due from
the Borrower (excluding taxation of the overall net income of the Lender), or changes the basis of
taxation of payments to the Lender in respect of its Loans or other amounts due it hereunder, or

          (b) imposes, modifies, or increases or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of, deposits with or for the account
of, or credit extended by, the Lender (other than reserves and assessments taken into account in
determining the interest rate applicable to Libor Loans), or

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          (c) imposes any other condition the result of which is to increase the cost to the Lender of
making, funding or maintaining advances or reduces any amount receivable by the Lender in
connection with advances, or requires the 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 the Lender, or

          (d) affects the amount of capital required or expected to be maintained by the Lender or any
corporation controlling the Lender and the Lender determines the amount of capital required is
increased by or based upon the existence of this Agreement or its obligation to make Loans
hereunder or of commitments of this type,

     then, within three (3) Business Days of demand by the Lender, the Borrower agrees to pay the
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 the Lender’s policies as to capital adequacy) or reduction in an amount received which the
Lender determines is attributable to making, funding and maintaining the Loans.

     3.2 Availability of Rate Options. If the Lender determines that maintenance of any of
its 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
Lender shall suspend the availability of the Libor Rate option and 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 the Lender determines that (i) deposits of a type or maturity
appropriate to match fund Libor Loans are not available, the Lender 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 Lender shall, at its 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 Lender for any increased cost it 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 the
Lender’s net income or receipts (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:

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

          (b) promptly forward to the Lender an official receipt or other documentation satisfactory to
the Lender evidencing such payment to such authority; and

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

     Moreover, if any Taxes are directly asserted against the Lender with respect to any payment
received by the Lender hereunder, the 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 Lender after the payment of such Taxes
(including, without limitation, any Taxes on such additional amount) shall equal the amount the
Lender would have received had not such Taxes been asserted.

     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. The Lender shall deliver a written statement to the Borrower
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 the 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) Lender reasonably determines (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) Lender determines that the Libor Base Rate will not adequately and fairly reflect the cost
to Lender of maintaining or funding the Term 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 Lender adversely affects
such Loans, then, in either case, so long as such circumstances shall continue: (i) Lender shall
not be under any obligation to make, 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. 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.

     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 Lender or its lending office to make, maintain or fund any Libor Loan,
then the obligation of 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 Lender

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so requests, 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.

     4. ELIGIBILITY REQUIREMENTS; CASH COLLATERAL ACCOUNT; ATTORNEY-IN-FACT.

     4.1 (a) Account Warranties; Schedule of Accounts. The amounts shown on the Schedule
of Accounts and all invoices and statements delivered to the Lender with respect to any Account,
are and will be actually and absolutely owing to the Borrower and are and will not be contingent
for any reason. There are no set-offs, counterclaims or disputes existing or asserted with respect
to any Accounts included on any Schedule of Accounts and the Borrower has not made any agreement
with any Account Debtor for any deduction from such Account, except for discounts or allowances
allowed by the Borrower in the ordinary course of business for prompt payment, all of which
discounts or allowances are reflected in the calculation of the invoice related to such Account.
There are no reserves against the collection of Accounts not set forth in the applicable Schedule
of Accounts or the financial statements delivered pursuant to Section 8.1 hereof and there
are no facts, events or occurrences which in any way impair the validity or enforcement of any of
the Accounts or tend to reduce the amount payable thereunder from the amount of the invoice shown
on any Schedule of Accounts, and on all contracts, invoices and statements delivered to the Lender
with respect thereto.

          (b) Verification of Accounts. The Lender shall have the right, at any time or times
hereafter, in the name of the Lender or a nominee of the Lender, to verify the validity, amount or
any other matter relating to any Accounts of the Borrower, by mail, telephone, facsimile or
otherwise.

     4.2 Account Covenants. The Borrower shall promptly upon its learning thereof: (a)
inform the Lender in writing of any material delay in the Borrower’s performance of any of its
obligations to any Account Debtor or of any assertion of any claims, offsets or counterclaims by
any Account Debtor of the Borrower other than made in the ordinary course of business; (b) furnish
to and inform the Lender of all material adverse information relating to the financial condition of
any Account Debtor of the Borrower; and (c) notify the Lender in writing if any of its then
existing Accounts scheduled to the Lender with respect to which the Lender has made an advance are
no longer Eligible Accounts.

     4.3 Collection of Accounts and Payments. On or prior to the Closing Date, a lock box
account (the “Commercial Lock Box Account”) shall have been established in the Borrower’s
name with Lender, pursuant to which Lender shall have control over the Commercial Lock Box Account
in accordance with the Commercial Lock Box Agreement, pursuant to which the Borrower shall direct
(within fifteen (15) calendar days of the Closing Date) all Account Debtors (other than Account
Debtors obligated on Government Accounts) to directly remit and to which the Borrower shall remit
all payments on Accounts of the Borrower (other than Government Accounts) and in which the Borrower
will immediately deposit all payments made for Inventory of the Borrower, if any, or services
provided by the Borrower and all other proceeds of the Collateral in the identical form in which
such payment was made, whether in cash or by check. In addition, on or prior to the Closing Date,
a lock box account (the

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“Government Lock Box Account”) shall have been established in the Borrower’s name with
Lender, pursuant to which the Borrower shall have control over the Government Lock Box Account in
accordance with the Government Lock Box Agreement, pursuant to which the Borrower shall direct
(within fifteen (15) calendar days of the Closing Date) all Account Debtors obligated on Government
Accounts to directly remit and to which the Borrower shall remit all payments on Government
Accounts of the Borrower and all other proceeds of the foregoing Collateral in the identical form
in which such payment was made, whether in cash or by check. All amounts deposited in the
Commercial Lock Box Account and the Government Lock Box Account will be automatically transferred,
on a daily basis, to a demand deposit account (the “Demand Deposit Account”). The Demand
Deposit Account will be established in the Borrower’s name with the Lender. Notwithstanding the
foregoing, the Borrower hereby irrevocably authorizes the Lender upon the occurrence of a Default
or an Event of Default to cause all amounts deposited in the Commercial Lock Box Account to be
automatically transferred , on a daily basis, to a concentration account at the Lender’s offices in
Chicago, Illinois (the “Cash Collateral Account”) during the period of such Default or
Event of Default. In addition, upon the occurrence of a Default or an Event of Default the
Borrower shall transfer, on a daily basis, all amounts in the Government Lock Box Account to the
Cash Collateral Account during the period of such Default or Event of Default. The Borrower hereby
agrees that all payments made to the Commercial Lock Box Account, received in the Cash Collateral
Account, or otherwise received by the Lender, whether in respect of the Accounts of the Borrower or
as proceeds of other Collateral or otherwise, will be the sole and exclusive property of the Lender
(to the extent of the Liabilities). The Borrower further agrees that all payments made to the
Commercial Lock Box Account and the Government Lock Box Account and transferred to the Cash
Collateral Account will be applied on account of the Liabilities of the Borrower as follows: (a)
each day’s available balance in respect of checks and other instruments received by the Lender in
the Cash Collateral Account or otherwise at its offices in Chicago, Illinois will be credited by
the Lender (conditional upon final collection) to the Borrower’s Loan Account and shall reduce
outstandings on the Revolving Loans two (2) Business Days’ after receipt by the Lender, and (b) all
cash payments received by the Lender in the Cash Collateral Account or otherwise at its offices in
Chicago, Illinois, including, without limitation, payments made by wire transfer of immediately
available funds received by the Lender, will be credited by the Lender to the Borrower’s Loan
Account on the receipt of immediately available funds by the Lender. If the Borrower (or any
director, officer, employee, affiliate, or agent thereof) shall receive any payment from any
Account Debtor (other than an Account Debtor obligated on a Government Account), the Borrower
hereby agrees that all such payments shall be the sole and exclusive property of the Lender (to the
extent of the Liabilities), and the Borrower shall hold such payments in trust as the Lender’s
trustee and immediately deliver said payments to the Cash Collateral Account established pursuant
to this Section and shall be applied in accordance with this Section. The Borrower agrees to pay
to the Lender any and all reasonable fees, costs and expenses which the Lender incurs in connection
with opening and maintaining the Commercial Lock Box Account, the Government Lock Box Account and
the Cash Collateral Account for the Borrower and depositing for collection by the Lender any check
or item of payment received and/or delivered to the Lender on account of the Borrower’s
Liabilities. The Borrower shall cooperate with the Lender in the identification and reconciliation
on a daily basis of all amounts received in the Commercial Lock Box Account and the Government Lock
Box Account. If more than five percent (5%) of the amount of payments on the Accounts since the
date of the most

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recent Revolving Loan is not identified or reconciled to the satisfaction of the Lender within
five (5) Business Days of receipt, the Lender shall not be obligated to make further Revolving
Loans until such amount is identified or is reconciled to the sole and absolute satisfaction of the
Lender. The Lender may utilize its own staff or, if it deems necessary, engage an outside auditor,
in either case at the Borrower’s expense, to make such examination and report as may be necessary
to identify and reconcile such amount.

     4.4 Appointment of the Lender as the Borrower’s Attorney-in-Fact. The Borrower hereby
irrevocably designates, makes, constitutes and appoints the Lender (and all Persons designated by
the Lender in writing to the Borrower) as the Borrower’s true and lawful attorney-in-fact, and
authorizes the Lender, in the Borrower’s or the Lender’s name, 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 Lender’s account on account of the Borrower’s Liabilities, (ii) endorse the Borrower’s
name upon any chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account of the Borrower or any goods pertaining thereto to collect the proceeds
thereof; (iii) sign the Borrower’s name on any verification of Accounts of the Borrower and notices
thereof to Account Debtors (other than Account Debtors obligated on Government Accounts to the
extent that it would otherwise violate applicable law to do so); (iv) take control in any manner of
any item of payment on or proceeds of any Account of the Borrower and apply such item of payment or
proceeds to the Liabilities, and (b) at any time after the occurrence of an Event of Default; (i)
demand payment of any Accounts of the Borrower; (ii) enforce payment of Accounts of the Borrower by
legal proceedings or otherwise; (iii) exercise all of the Borrower’s rights and remedies with
respect to proceedings brought to collect any Account; (iv) sell or assign any Account of the
Borrower upon such terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew any Account of the Borrower; (vi) discharge and
release any Account of the Borrower; (vii) prepare, file and sign the Borrower’s name on any proof
of claim in bankruptcy or other similar document against any Account Debtor (other than Account
Debtors obligated on Government Accounts to the extent that it would otherwise violate applicable
law to do so); (viii) notify the post office authorities to change the address for delivery of the
Borrower’s mail to an address designated by the Lender; (ix) have access to any lock box or postal
box into which the Borrower’s mail is deposited, and open and process all mail addressed to the
Borrower and deposited therein, and (x) do all other acts and things which are necessary, in the
Lender’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 Lender 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 gross
negligence or willful misconduct. The appointment of Lender (and any of the Lender’s officers,
employees or agents designated by the Lender) as Borrower’s attorney, and each and every one of
Lender’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. Notwithstanding anything to the contrary contained in this
Section 4.4, any reference to “any Account of the Borrower” contained in this Section shall
be deemed to exclude any Government Accounts to the extent that the failure to do so would violate
applicable law.

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     4.5 Notice to Account Debtors. Following the occurrence of a Default or Event of
Default, the Lender may, in its sole discretion, at any time or times, without prior notice to the
Borrower, notify any or all Account Debtors of the Borrower (other than Account Debtors obligated
on Government Accounts to the extent that it would otherwise violate applicable law to do so) that
the Accounts of the Borrower have been assigned to the Lender, that the Lender has a Lien therein,
and that all payments upon such Accounts be made directly to the Cash Collateral Account or
otherwise directly to the Lender. Notwithstanding anything to the contrary contained in this
Section 4.5, any reference to “Accounts of the Borrower” contained in this Section shall be
deemed to exclude any Government Accounts to the extent that the failure to do so would violate
applicable law.

     4.6 Equipment Warranties. The Borrower represents and warrants that, (a) all of the
Equipment is owned by the Borrower and is located on one of the premises listed on Schedule
4.6 attached hereto, and such Equipment (other than Motor Vehicles) does not have a fair market
value in the aggregate of more than Ten Thousand Dollars ($10,000) on the date hereof; (b) the
Borrower’s Equipment is not subject to any Lien whatsoever except for the Permitted Liens; and (c)
each item of Equipment that is material to the operations of Borrower is in working condition and
repair, ordinary wear and tear excepted, and is currently used or usable in Borrower’s business.

     4.7 Equipment Records. The Borrower shall at all times hereafter keep correct and
accurate records itemizing and describing the kind, type, age and condition of its Equipment, the
Borrower’s cost therefor and accumulated depreciation thereon, and retirements, sales, or other
dispositions thereof, all of which records shall be available during Borrower’s usual business
hours at the request of the Lender.

     5. CONDITIONS OF LOANS.

     5.1 Conditions to all Loans. Notwithstanding any other term or provision contained in
this Agreement, the making of any Loan provided for in this Agreement shall be conditioned upon the
following:

          (a) The Borrower’s Request. The Lender shall have received, (i) with respect to a
request by Borrower for a Base Rate Loan, by no later than 11:00 a.m. (Chicago time) on the day on
which such Loan is requested to be made hereunder, a telephonic request from any Person who the
Lender reasonably believes is authorized by Borrower to make a borrowing request on behalf of
Borrower, for a Loan in a specific amount, and (ii) with respect to a request by Borrower for a
Libor Loan, by no later than 1:00 p.m. (Chicago time) two (2) Business Days prior to the day on
which a Libor Loan is requested, the Borrowing Notice required under Section 2.12 hereof.
In addition, each request for a Loan shall be accompanied or preceded by all other documents not
previously delivered as required to be delivered to the Lender under Section 5.2 hereof,
and a request for any Revolving Loan shall be accompanied or preceded by a borrowing base
certificate from the Borrower, signed by a Duly Authorized Officer, in form and substance
satisfactory to the Lender. The Lender shall have no liability to the Borrower or any other Person
as a result of acting on any telephonic request that the Lender believes in good faith to have been
made by any Person authorized by Borrower to make a borrowing request on behalf of Borrower.

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          (b) Financial Condition. No Material Adverse Change or material adverse change, as
determined by the Lender in its sole discretion, in the prospects of Borrower shall have occurred
at any time or times subsequent to the most recent request for any Loan under this Agreement.

          (c) No Default. Neither a Default nor an Event of Default shall have occurred and be
continuing.

          (d) Other Requirements. The Lender shall have received, in form and substance
satisfactory to the Lender, all certificates, orders, authorities, consents, affidavits, schedules,
instruments, agreements, financing statements, and other documents which are provided for
hereunder, or which the Lender may at any time reasonably request.

          (e) 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), shall be true and
correct as of the date the request for the Loan is made, as though made on and as of such date.

     5.2 Initial Loans. The Lender’s obligation to make the initial Revolving Loans and
the Term Loan and the Assumed Debt Loan hereunder is, in addition to the conditions precedent
specified in Section 5.1 hereof, subject to the satisfaction of each of the following
conditions precedent:

          (a) Fees and Expenses. The Borrower shall have paid all fees owed to the Lender and
reimbursed the Lender for all costs, disbursements, fees and expenses due and payable hereunder on
or before the Closing Date, including, without limitation, the Lender’s counsel fees provided for
in Section 11.2(a) hereof.

          (b) Documents. The Lender 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 Lender, each in form and substance reasonably satisfactory to the Lender in its sole
determination:

          (1) Financing Agreements. This Agreement, the Revolving Credit Note, the Term Loan
Note, the Assumed Debt Note, the Limited Guaranty, each of the Subordination Agreements, and such
other Financing Agreements as the Lender may require.

          (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

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Directors of Tandem authorizing or ratifying the execution, delivery and performance by Tandem
of the Limited Guaranty.

          (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 Buchanan Ingersoll Professional Corporation,
the legal counsel to the Borrower and Tandem, in form and substance reasonably satisfactory to
Lender, and an opinion of legal counsel to Mobile Medical and Lighthouse delivered in connection
with the Acquisitions that specifically provides that the Lender may rely on such opinion.

          (5) Validity of Accounts. A Warranty of Validity of Accounts, in form and substance
satisfactory to the Lender (the “Warranty of Validity of Accounts”), executed by a Duly
Authorized Officer.

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

          (7) Constitutive Documents. Certified copies of the Borrower’s Articles of
Incorporation, certified by the Michigan Secretary of State (or Michigan Department of Labor and
Economic Growth, Bureau of Commercial Services) as of a recent date, together with a good standing
certificate from such Secretary of State and, if and to the extent applicable, a good standing
certificate from the Secretaries of State (or the equivalent thereof) of each other State in which
the Borrower is required to be qualified to transact business. A true, correct and complete copy
of the Bylaws of Borrower, certified by a Duly Authorized Officer of such entity, shall also be
delivered to the Lender on the Closing Date. Certified copies of Tandem’s Articles of
Incorporation certified by the Secretary of State of its state of incorporation as of a recent
date, together with a good standing certificate from such Secretary of State.

          (8) Commercial Lock Box Agreement and Government Lock Box Agreement. The duly
signed Commercial Lock Box Agreement and the duly signed Government Lock Box Agreement.

          (9) UCC Financing Statements; Termination Statements; UCC Searches. UCC Financing
Statements, as requested by the Lender, naming the Borrower as debtor and the Lender 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 (including
Standard Federal) in any of the Collateral except the Lender, and other documents as the Lender
deems necessary or appropriate, shall have been filed in all jurisdictions that the Lender deems
necessary or advisable. UCC tax, lien, pending suit and judgment searches for (i) the Borrower,
(ii) Mobile Medical, and (iii) Lighthouse (and, if and to the extent applicable, under any of their
respective trade or assumed names, if any), each dated a

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date reasonably near to the Closing Date in all jurisdictions deemed necessary by the Lender,
the results of which shall be satisfactory to the Lender 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 Lender as
“Lender’s Loss Payee” and additional insured thereunder.

          (11) Collateral Report. A Collateral Report, signed on behalf of the Borrower by a
Duly Authorized Officer.

          (12) Pay Off Letters. Pay Off Letter from Standard Federal and any other lienholder
of Mobile Medical and/or Lighthouse, if any, each in form and substance satisfactory to Lender.

          (13) Collateral Assignment of Acquisition Agreements. Fully-executed copies of each
of the Collateral Assignment of Acquisition Agreements.

          (14) Acquisition Documents. True, correct and complete copies of the fully-executed
Acquisition Documents (including all Exhibits and Schedules thereto).

          (15) Mezzanine Debt Documents. True, correct and complete copies of the
fully-executed Mezzanine Debt Documents (including all Exhibits and Schedules thereto).

          (18) Seller Notes. A true, correct and complete copy of each of the fully-executed
Seller Notes.

          (19) Amendments to Affiliate Loan Documents. Fully executed copies of (a) that
certain Second Amendment to Term Loan and Security Agreement dated as of the date hereof by and
among RE Bayonet Point, Inc., RE Jacksonville, Inc., RE Port Charlotte, Inc., RE Sarasota, Inc., RE
Orange Park, Inc., RE St. Petersburg, Inc., and RE Safety Harbor, Inc., and the Lender, (b) that
certain Fourth Amendment to Revolving Loan and Security Agreement dated as of the date hereof by
and among Tandem Health Care of Bayonet Point, Inc., Tandem Health Care of Jacksonville, Inc.,
Tandem Health Care of Port Charlotte, Inc., Tandem Health Care of Sarasota, Inc., Tandem Health
Care of Orange Park, Inc., Tandem Health Care of St. Petersburg, Inc., and Tandem Health Care of
Safety Harbor, Inc., and the Lender, (c) that certain Second Amendment to Amended and Restated Term
Loan and Security Agreement dated as of the date hereof by and between Tandem Health Care of
Florida, Inc., and the Lender, (d) that certain Second Amendment to Revolving Loan and Security
Agreement dated as of the date hereof by and among OP Brandon, Inc., OP Lake Parker, Inc., OP
Melbourne, Inc., OP West Altamonte, Inc., OP Pensacola, Inc., OP Tallahassee, Inc., and the Lender
and (e) that certain Second Amendment to Loan and Security Agreement dated as of the date hereof by
and between LaurelPharm, LLC, and the Lender.

          (20) Other. Such other documents, certificates and instruments as the Lender may
reasonably request.

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

          (d) Certificate. The Lender 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 Sections 5.1 and 5.2 hereof.

          (e) Closing Fee. The Borrower shall have paid the Lender the Closing Fee.

          (f) Miscellaneous. The capitalization of the Borrower shall be satisfactory to the
Lender after consummation of the Acquisitions, and the closing of the Mezzanine Debt Documents and
the transactions contemplated thereby shall have closed and funded concurrently with the
transactions contemplated by this Agreement.

     6. COLLATERAL.

     6.1 Security Interest. As security for the prompt and complete payment and
performance of all of the Liabilities when due or declared due, the Borrower hereby grants,
pledges, conveys and transfers to the Lender a continuing security interest in and to all of the
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 the assets and personal property of the
Borrower, and all of Borrower’s Accounts, including, without limitation, Health-Care-Insurance
Receivables (as defined in the Code), but excluding Government Accounts solely to the extent
Borrower is restricted from granting a security interest in such Government Accounts pursuant to
applicable Federal and Michigan state law, contract rights, General Intangibles, tax refunds,
chattel paper, instruments, notes, letters of credit, bills of lading, warehouse receipts, shipping
documents, documents and documents of title, and all of the Borrower’s Tangible Chattel Paper,
Documents, Electronic Chattel Paper, Letter-of-Credit Rights, Software, Supporting Obligations,
Payment Intangibles, and Goods (each as defined in the Code), and all of the “Purchased Assets” (as
defined in each of the Acquisition Agreements) acquired by the Borrower; (b) all of the Borrower’s
Inventory, motor vehicles, and Equipment; (c) all of Borrower’s Deposit Accounts and other deposit
accounts (general or special) with, and credits and other claims against, the Lender, or any other
financial institution with which the Borrower maintains deposits; (d) 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, Financial Assets, Chattel Paper and Documents (each as defined in the
Code), now or hereafter coming into the actual possession, custody or control of the Lender or any
agent or affiliate of the Lender 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
Lender’s rights of setoff (which the Borrower acknowledges), the balance of any account or any
amount that may be owing from time to time by the Lender to the Borrower; (e) all insurance
proceeds of or relating to any of the foregoing property and interests in property, and all
insurance proceeds relating to any key man life insurance policy covering the life of any officer
or employee of Borrower; (f) all proceeds and profits derived from the operation of the Borrower’s
business (including, without limitation, the

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proceeds of Government Accounts); (g) 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 (h) all accessions, improvements and additions to, substitutions for, and
replacements, products, profits and proceeds of any of the foregoing.

     6.2 Preservation of Collateral and Perfection of Security Interests Therein. The
Borrower agrees that it shall execute and deliver to the Lender, concurrently with the execution of
this Agreement, and at any time or times hereafter at the request of the Lender, all financing
statements (and the Borrower shall pay the cost of filing or recording the same in all public
offices deemed necessary by the Lender) or other instruments and documents as the Lender may
request, in a form satisfactory to the Lender, to perfect and keep perfected the Liens in the
Collateral or to otherwise protect and preserve the Collateral and the Lender’s Liens therein. If
the Borrower fails to do so, the Lender is authorized to sign any such financing statements (or, if
no signature is required in the filing jurisdiction, file such financing statements without the
Borrower’s signature) as the Borrower’s agent. 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 Lender
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 Lender may at any time and from time to time file financing statements,
“in-lieu” initial financing statements, continuation statements and amendments thereto that
describe the Collateral in particular or as “all assets” of the Borrower or words of similar
effect, 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 Lender promptly upon request. Any such financing statements, continuation statements or
amendments may be signed by the Lender 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 Lender. The Lender
agrees to use its reasonable efforts to notify the Borrower of the Lender taking any such action
provided in this Section; provided, however, the Borrower agrees that the failure
of the Lender to so notify the Borrower for any reason shall not in any way invalidate the actions
taken by the Lender 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 Lender may reasonably require for the Lender: (i) to obtain an acknowledgment, in
form and substance reasonably satisfactory to the Lender, of any third party having possession of
any of the Collateral that the third party holds for the benefit of the Lender, (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 Lender, and (iii) otherwise to
ensure the continued perfection and priority of the Lender’s security interest in any of the
Collateral and of the preservation of its rights therein.

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     6.6 All Loans One Obligation. Payment of all sums and indebtedness to be paid by
Borrower to Lender 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 Lender shall constitute one
general obligation secured by Lender’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 Loans. Borrower
agrees that all of the rights of Lender 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 Lender.

     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 Lender of
same in a writing signed by the Borrower (describing such claim in reasonable detail) and grant to
the Lender 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 Lender in its sole and absolute determination.

     7. REPRESENTATIONS AND WARRANTIES.

     The Borrower represents and warrants 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 duly organized, validly existing and in
good standing under the laws of the State of Michigan. The Borrower is duly qualified and in good
standing as a foreign corporation 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 corporate power to carry on its business as now being conducted and as proposed to be
conducted. Tandem legally and beneficially owns all of the issued and outstanding capital stock of
each 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 corporate powers; (ii) are duly authorized
by the board of directors of the Borrower and, if applicable, Tandem; and (iii) are not in
contravention of the terms of its By-laws, 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 Lender, 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.

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     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.

          (a) 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 Lender 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 Lender 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 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”).

          (b) The Seller’s balance sheets as of June 30, 2004, and the related statements of the
Seller’s income and retained earnings for the fiscal periods then ended, respectively, copies of
which have been furnished to the Lender, fairly present in all material respects the Seller’s
financial condition at such date and the results of the Seller’s operations for the periods ended
on such dates, all in accordance with GAAP, consistently applied, except (i) the absence of
footnotes, and (ii) subject to customary year-end adjustments.

          (c) Since its date of incorporation, there has been no Material Adverse Change with respect to
Borrower. Since June 30, 2004, to the best knowledge of Borrower, there has been no material
adverse change in the financial condition, operations, assets, business, or properties of Mobile
Medical or Lighthouse.

     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 with other Equipment with a fair market
value equal to or greater than the Equipment being sold), has been fully paid for and is free and
clear of all Liens. All tangible Collateral is kept only at the location of the Borrower set forth
in Schedule 4.6 attached hereto. 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 Lender as the secured creditor or except for Permitted Liens. The

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organizational number assigned by the Michigan Secretary of State upon such Borrower’s
incorporation is 40118C for Therapy and 40119C for Hospice.

     7.6 Solvency. The Borrower is solvent, is able to pay its debts as they mature or
become due, has capital sufficient to carry on its business and all businesses in which it is about
to engage, and now owns assets and property having a value both at fair valuation and at present
fair saleable value on a going concern basis (as determined in a manner and based upon assumptions
satisfactory to the Lender in its reasonable determination) greater than the amount required to pay
all of its debts and liabilities, including, without limitation, all of the Liabilities. The
Borrower 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. The principal place of
business and chief executive office of Borrower is 800 Concourse Parkway South, Suite 200,
Maitland, Florida 32751. The books and records of the Borrower and all records of account are
located at the principal place of business and chief executive office of the Borrower. Each
Borrower’s state of incorporation is the State of Michigan.

     7.8 Other Names. The Borrower has not used, and shall not hereafter use, any name
(including, without limitation, any tradename, tradestyle, assumed name, division name or any
similar name), other than the following names: The Mobile Medical Group and Lighthouse Hospice. To
the best knowledge of the Borrower after diligent inquiry, Mobile Medical has not used any name
(including, without limitation, any tradename, assumed name, division name or any similar name),
other than the names set forth on Schedule 7.8 attached hereto; and Lighthouse has not used
any name (including, without limitation, any tradename, 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.

     7.11 Margin Securities. The Borrower does not own any margin securities and none of
the Loans advanced hereunder will 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 Subsidiaries. The Borrower has no Subsidiaries.

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     7.13 Litigation and Proceedings. As of the Closing Date (and on any date that a
request for a Revolving Loan is made), no judgments are outstanding against the Borrower, nor is
there as of any such date pending or, to the best of the Borrower’s knowledge after diligent
inquiry, threatened, any litigation, suit, action, contested claim, or federal, state or municipal
governmental proceeding by or against the Borrower or any of its property, in each case involving
an aggregate amount of One Hundred Thousand Dollars ($100,000) or more.

     7.14 Other Agreements. The Borrower is not in default under or in breach of any
material agreement, contract, lease, or commitment to which it is a party or by which it is bound.
The Borrower does not know of any dispute regarding any agreement, contract, instrument, lease or
commitment 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
law, rule or regulation. The Borrower has obtained all licenses, authorizations, approvals,
licenses and permits necessary in connection with the operation of its business (including, without
limitation portable x-ray certifications), 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 and after giving effect to the
Acquisitions, the Borrower does not own or otherwise possess any patents, patent applications,
copyrights, trademarks, trademark applications, trade names, or service marks. To the Borrower’s
best knowledge, none of its intellectual property infringes on the rights of any other Person.

     7.17 Environmental Matters. (a) The Borrower has not Managed Hazardous Substances on
or off its property other than in compliance with Environmental Laws, except to the extent any such
non-compliance could reasonably be expected to not result in a Material Adverse Effect; (b) The
Borrower has complied in all material respects with 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, Managing Hazardous Substances and Responding to
the presence or Release of Hazardous Substances connected with operation of its business or
Property; (c) 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; (d) 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; (e) The
Borrower shall take prompt action in material compliance with Environmental Laws to Respond to the
on-site or off-site Release of Hazardous Substances connected with operation of its business or
Property; and (f) As of the Closing Date (and on any

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date that a request for a Revolving Loan is made), the Borrower has not received any
Environmental Notice. To the best knowledge of the Borrower after diligent inquiry, except as
disclosed in reasonable detail in either Disclosure Schedule to the Acquisition Agreements, the
Mobile Medical and Lighthouse has complied in all material respects with 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, Managing Hazardous Substances and
Responding to the presence or Release of Hazardous Substances connected with operation of its
business or property.

     7.18 Disclosure. 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 Lender
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. The Borrower has disclosed to the Lender 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 Acquisitions or which at any time hereafter might 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 not instituted any proceedings, and there exists no
event or condition caused by the Borrower which would 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 Lender provided pursuant
to Section 6.1 hereof is a valid and perfected first priority security interest in the
Collateral (subject

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only to the Permitted Liens), and all filings and other actions necessary to perfect such Lien
have been duly taken.

     7.21 Acquisition Documents. The Borrower has delivered true, correct and complete
copies of the fully-signed Acquisition Documents to the Lender on or prior to the Closing Date. To
the best of Borrower’s knowledge, no party to the Acquisition Agreements is in default or breach
thereunder.

     7.22 Mezzanine Debt Documents. The Borrower has delivered true, correct and complete
copies of the fully-signed Mezzanine Debt Documents and all instruments, agreements and documents
entered into in connection therewith (including all Exhibits and Schedules thereto) to the Lender
on the Closing Date.

     7.23 Account Debtors. Within fifteen (15) calendar days following the Closing Date,
the Borrower shall instruct and direct each Account Debtor to send all payments with respect to
each Account to the Commercial Lock Box Account and the Government Lock Box Account, as the case
may be, for deposit established pursuant to this Agreement.

     7.24 Broker’s Fees. Except for a one-time broker’s fee in the amount of $780,000 paid
on the Closing Date in connection with the Acquisition, the Borrower does not have any obligation
to any Person in respect of any finder’s, brokers or similar fee in connection with the Loans, the
Acquisition Documents or this Agreement.

     7.25 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.

     7.26 Acquisitions. On the Closing Date and concurrently with the making of the Term
Loan hereunder, the Acquisitions intended to be consummated on the Closing Date will have been
consummated in accordance with the terms of the Acquisition Agreements and the other relevant
Acquisition Documents and in accordance with all applicable laws. All consents and approvals of,
and filings and registrations with, and all other actions by, any governmental entity and (except
where the failure to obtain or make the same could not reasonably be expected to have an adverse
effect on the Acquisitions or any portion thereof or a Material Adverse Effect) each other Person
required in order to make or consummate the Acquisitions have been obtained, given, filed or taken
and are or will be in full force and effect.

     7.27 Representations and Warranties in Acquisition Documents and Mezzanine Debt
Documents. All representations and warranties made by the Borrower in the Acquisition
Documents and the Mezzanine Debt Documents, and, to the best of the Borrower’s knowledge after due
inquiry, or except as disclosed to the Lender in writing, all representations made by each other
Person in such agreements and documents, are true and correct. None of such representations and
warranties are inconsistent in any material respect with the representations and warranties of the
Borrower made herein or in any other Financing Agreement.

     7.28 Offenses and Penalties Under the Medicare/Medicaid Programs.
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

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has the Borrower or any Affiliate or 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. Neither the Borrower nor any Affiliate
and/or 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 employee of the Borrower or any Affiliate currently the subject of any
investigation or proceeding that may result in such payment. Neither Borrower nor any Affiliate
and/or employee of the Borrower or any Affiliate has been excluded from participation in the
Medicare, Medicaid or maternal and Child Health Services Program, or any program funded under the
“Block grants” to States for Social Services (Title XX) Program.

     7.29 Medicaid/Medicare and Private Insurance/Managed Care Contracts.

     (a) The Borrower has:

     (i) Obtained and maintains, where appropriate, Medicaid Certification and Medicare
Certification to the extent required for reimbursement under the Medicaid Regulations or the
Medicare Regulations, as the case may be; and

     (ii) Entered into and maintains in good standing, where appropriate, its Medicaid Provider
Agreement and its Medicare Provider Agreement to the extent required for reimbursement under
Medicaid Regulations or the Medicare Regulations, as the case may be, and its Private
Insurance/Managed Care Contracts.

     (b) There are no proceedings pending, or, to the best knowledge of the Borrower, after due
inquiry, threatened by any governmental authority seeking to modify, revoke or suspend, to the
extent required for reimbursement, any Medicaid Provider Agreement, Medicare Provider Agreement,
Medicare Certification or Medicaid Certification. Since the date of the most recent Medicare
Certification and Medicaid Certification, the Borrower has not taken any action that would have a
material adverse effect on the Certification or the Medicare Provider Agreement or Medicaid
Provider Agreement.

     (c) Neither the Borrower nor any Affiliate of the Borrower nor any 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 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; (iv) knowingly and willfully soliciting or
receiving

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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 party 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.

     (d) The Borrower is not out of material compliance with any applicable conditions of
participation of the Medicare or Medicaid programs nor with any Private Insurance/Managed Care
Contracts, nor does any condition exist or has any event occurred which, in itself, or with the
giving of notice or lapse of time, or both, would result in the suspension, revocation, impairment,
forfeiture or non-renewal of (i) any contract of the Borrower in connection with the Medicare or
Medicaid programs or (ii) any Private Insurance/Managed Care Contracts.

     7.30 Document Delivery. The Borrower has delivered true, correct and complete copies
of the fully-signed Seller Notes to the Lender on or prior to the Closing Date.

     7.31 Consideration. Each Borrower is a wholly-owned subsidiary of Tandem, and are
Affiliates of each other. The Affiliates of the Borrower will derive substantial direct and
indirect benefit (financial and otherwise) from funds made available to the Borrower pursuant to
this Agreement, and it is and will be to such Affiliates’ advantage to assist the Borrower in
procuring such funds from the Lender. Each of the Borrower’s Affiliates desires to induce the
Lender to enter into this Agreement with the Borrower.

     7.32 USA Patriot Act. Borrower represents and warrants to Lender 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.

     7.33 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 any of the Loans 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).

     7.34 HIPAA Compliance. Borrower has not received any notice from any governmental
authority that such governmental authority has imposed or intends to impose any enforcement
actions, fines or penalties for any failure or alleged failure to comply with the Health Insurance
Portability and Accountability act of 1996, as amended (commonly known as “HIPAA”), or its
implementing regulations.

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     7.35 Labor Matters. There are no strikes or other labor disputes pending or, to the
knowledge of Borrower, threatened against any Affiliate of Borrower. Hours worked and payments
made to the employees of the Borrower and Affiliates of Borrower have not been in violation of the
Fair Labor Standards Act or any other applicable Law dealing with such matters. All payments due
from the Borrower or Affiliates of Borrower, or for which any claim may be made against any of
them, on account of wages and employee and retiree health and welfare insurance and other benefits
have been paid or accrued as a liability on their books, as the case may be. The consummation of
the transactions contemplated by the Financing Agreements and the Acquisition Documents will not
give rise to a right of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which it is a party or by which it is bound.

     8. AFFIRMATIVE COVENANTS.

     The Borrower covenants and agrees 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 shall deliver to the
Lender:

          (a) Financial Statements. On or before the ninetieth (90th) day after each of
Tandem’s Fiscal Years, a copy of the annual financial statements on a consolidated basis for
Tandem, 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, together with a certificate from such
accountants containing a computation of, and showing compliance with, the financial ratio contained
in Section 9.12 hereof and to the effect that, in making the examination necessary for the
signing of such annual financial statements by such accountants, they have not become aware of any
Default or Event of Default that has occurred and is continuing or, if they have become aware of
any such event, describing it and the steps, if any, being taken to cure it.

          (b) Monthly Reports and Certificates. On or before the thirtieth (30th) day after the
end of each calendar month, a borrowing base certificate (in form and substance satisfactory to the
Lender), and a copy of internally prepared financial statements of the Borrower prepared in
accordance with GAAP and in a manner substantially consistent with the financial statements
referred to in Section 8.1(a) 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
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.

          (c) Certificates. Contemporaneously with the furnishing of each annual financial
statement and within thirty (30) calendar days of each calendar month, a duly completed compliance
certificate with appropriate insertions, in form and substance satisfactory to the Lender (a
“Compliance Certificate”), dated the date of such annual financial statement or

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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. In addition,
in the case of a Compliance Certificate dated the date of such annual financial statement and each
such calendar month which is also the last month of a Fiscal Quarter of the Borrower, the
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. The computation and
calculation of each financial ratio in each Compliance Certificate shall be in form and substance
acceptable to the Lender.

          (d) Schedule of Accounts. On or before the tenth (10th) day of each calendar month, a
Schedule of Accounts, as of the last day of the immediately preceding calendar month and in form
and substance reasonably satisfactory to the Lender.

          (e) 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, arbitration proceeding or
governmental proceeding in which any injunctive relief is sought or in which money damages in
excess of Two Hundred Fifty Thousand Dollars ($250,000) individually or Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate are sought; (iii) the receipt of any notice form any
governmental agency concerning any violation or potential violation of any regulations, rules or
laws applicable to Borrower; (iv) the occurrence of any personal injury or other action that is
reasonably likely to give rise to a tort claim against the Borrower for an amount equal to or in
excess of Two Hundred Fifty Thousand Dollars ($250,000); or (v) any Material Adverse Change.

          (f) Insurance Reports. (i) At any time after a Default and upon the request of the
Lender, a certificate signed by a Duly Authorized Officer that summarizes the property, casualty,
liability and malpractice insurance policies carried by the Borrower and that certifies that the
Lender is the named additional insured and loss payee of all property, casualty and malpractice
insurance policies (such certificate to be in form and substance satisfactory to the Lender), 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.

          (g) Collateral Report. On each Tuesday of every week, a duly completed Collateral
Report in form and substance satisfactory to the Lender (the “Collateral Report”), relating
to the immediately prior calendar week, in form and substance reasonably satisfactory to
the Lender and signed on behalf of the Borrower by a Duly Authorized Officer. Notwithstanding
the foregoing the initial Collateral Report shall not be required to be delivered to the Lender
until the earlier of (i) the Tuesday immediately preceding the date the Borrower makes a request
for a Revolving Loan and (ii) April 5, 2005.

          (h) Annual Projections. On or before the ninetieth (90th) day after each of
Borrower’s Fiscal Years, an annual projection for the current Fiscal Year showing Borrower’s

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projected operating plan, revenues and expenses on a monthly basis and a balance sheet and cash
flow statement for the Borrower, in form and substance reasonably satisfactory to Lender.

          (i) Affiliate Transactions. Upon the Lender’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 Lender, which shall include,
without limitation, the amount of money either paid or received, as applicable, by the Borrower in
such transactions.

          (j) Health Care. Furnish to the Lender each of the following, to the extent
applicable: (i) within five (5) calendar days of receipt a copy of any healthcare related licensure
and annual or biannual certification survey report and any statement of deficiencies and any survey
(other than the annual or biannual survey) indicating a violation or deficiency, and within the
time period required by the particular agency for submission, a copy of the plan of correction with
respect thereof if such plan of correction is required by such agency issuing the statement of
deficiency or notice of violation, and correct or cause to be corrected any deficiency or violation
within the time period required for cure by such agency, subject to such agency’s normal appeal
process, if such deficiency or violation could adversely affect either the right to continue
participation in Medicare, Medicaid or other reimbursement programs for existing patients or the
right to admit new Medicare patients, Medicaid patients or other reimbursement program patients or
result in the loss or suspension of Borrower’s licenses and permits to operate Borrower’s business;
(ii) within five (5) Business Days of the receipt by the Borrower, any and all notices disclosing
an adverse finding from any licensing, certifying and/or reimbursement agencies that Borrower’s
license, Medicare or Medicaid certification or entitlement to payments pursuant to any
reimbursement contract or program of Borrower is being downgraded to a substandard category,
revoked, or suspended, or that action is pending or being considered to downgrade to a substandard
category, revoke, or suspend any rights pursuant to the Borrower’s license, certification or
reimbursement contract or program; and (iii) within five (5) Business Days of the date of the
required filing of cost reports of Borrower with Medicaid, Medicare or other applicable agency or
pursuant to any reimbursement contract or program, or the date of actual filing of such cost report
of Borrower, whichever is earlier, a complete and accurate copy of the annual Medicaid, Medicare
and other cost reports for Borrower, which will be prepared by an independent certified public
accountant or by an experienced cost report preparer reasonably acceptable to Lender, and promptly
furnish to Lender any amendments filed with respect to such reports and all responses, audit
reports or inquiries with respect to such reports.

          (k) Interim Reports. Promptly upon receipt thereof, copies of any reports submitted
to Parent 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 Parent or
Borrower by independent accountants.

          (l) Purchase Price Adjustments. Promptly upon such information becoming available, a
summary of all purchase price and other monetary adjustments that are made pursuant to any of the
Acquisition Documents.

          (m) Other Information. Such other information, certificates, schedules, exhibits or
documents (financial or otherwise) concerning the Borrower and its operations,

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business,
properties, condition or otherwise as the Lender may reasonably request from time to time.

     8.2 Inspection; Audit Fees. Borrower will 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 will 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 Lender or any Person appointed by Lender to visit and inspect any of their respective
properties, to examine and make abstracts or copies from any of their respective books and records,
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 Lender 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, 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 indemnify and hold the Lender harmless
from and against any and all claims, demands, liabilities, losses, damages, penalties, costs and
expenses (including, without limitation, reasonable attorneys’ fees) relating to or in any way
arising out of the possession, use, operation or control of the Borrower’s property and assets,
including, without limitation, the Collateral. 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.

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     8.5 State of Incorporation. The State of Michigan shall remain the Borrower’s State
of incorporation, unless: (a) the Borrower provides the Lender 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 Lender with, at
Borrower’s sole cost and expense, such financing statements, and if applicable, landlord waivers,
bailee letters and processor letters, and such other agreements and documents as the Lender shall
reasonably request in connection therewith.

     8.6 Liability and Malpractice Insurance. The Borrower shall maintain, at its expense,
general liability insurance in such amounts and with such deductibles as are acceptable to the
Lender in its reasonable determination and shall deliver to the Lender the original (or a
certified) copy of each policy of insurance and evidence of the payment of all premiums therefor.
In addition, the Borrower shall maintain, at its expense, professional malpractice insurance
through commercial insurance in such amounts and with such deductibles as are acceptable to the
Lender in its reasonable determination and shall deliver to the Lender the original (or a
certified) copy of each policy of insurance and evidence of the payment of all premiums therefor.
Such policies of insurance shall contain an endorsement showing the Lender as additional insured
thereunder and providing that the insurance company will give the Lender at least thirty (30) days
prior written notice before any such policy or policies of insurance shall be altered or canceled.

     8.7 Property Insurance. The Borrower shall, at its expense, keep and maintain its
assets insured against loss or damage by fire, theft, explosion, spoilage and all other hazards and
risks ordinarily insured against by other owners or users of such properties in similar businesses
in an amount at least equal to the full insurable value of all such property. All such policies of
insurance shall be in form and substance reasonably satisfactory to the Lender. The Borrower shall
deliver to the Lender the original (or a certified) copy of each policy of insurance and evidence
of payment of all premiums therefor. Such policies of insurance shall contain an endorsement, in
form and substance satisfactory to the Lender, showing the Lender as “Lender’s Loss Payee” and all
loss payable to the Lender, as its interests may appear, as provided in this Section 8.7.
Such endorsement shall provide that such insurance company will give the Lender 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 Lender 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 Lender and the Lender shall, in its reasonable discretion,
either apply such proceeds against the Liabilities (in such order as Lender, in its sole
discretion, may determine) or permit the Borrower to use such proceeds to restore or rebuild the
damaged property; provided, however, any such insurance proceeds attributable to
losses or damages in the amount of Fifty Thousand Dollars ($50,000) or less individually or up to
One Hundred Thousand Dollars ($100,000) in the aggregate at any time shall be paid to the Borrower
for application to either repay a portion of the Liabilities or restore or rebuild the damaged
property, as the Borrower shall determine in its reasonable and good faith determination. Upon
the occurrence of a Default or an Event of Default, the Borrower irrevocably makes,
constitutes and appoints the Lender (and all officers, employees or agents designated by the Lender
in writing to the Borrower) as the Borrower’s true and lawful attorney-in-fact for the purpose of
making, settling and adjusting claims 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

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or
the Lender pursuant to any such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance.

     UNLESS THE BORROWER PROVIDES THE LENDER WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY
THIS AGREEMENT WITHIN THREE BUSINESS DAYS FOLLOWING LENDER’S REQUEST, THE LENDER MAY PURCHASE
INSURANCE AT THE BORROWER’S EXPENSE TO PROTECT THE LENDER’S INTERESTS IN THE COLLATERAL. THIS
INSURANCE MAY, BUT NEED NOT, PROTECT THE INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY
THE LENDER 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 LENDER, BUT ONLY AFTER PROVIDING THE LENDER WITH EVIDENCE THAT THE BORROWER HAS
OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE LENDER PURCHASES INSURANCE FOR THE
COLLATERAL, THE BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST
AND ANY OTHER CHARGES THAT THE LENDER 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 OBLIGATIONS 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 Lender with a copy
of any and all Environmental Notices which are received by it. The Borrower shall take prompt and
appropriate action in response to any and all such Environmental Notices and shall promptly furnish
Lender 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) 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.

     8.9 Banking Relationship. (a) Within thirty (30)calendar days of the Closing Date,
the Borrower shall at all times thereafter maintain all of its primary deposit and operating
accounts with the Lender and the Lender will act as the principal depository and remittance agent
for the Borrower. (b) The Borrower agrees to pay to the Lender a non-refundable fee in the
aggregate amount of Fifteen Thousand Dollars ($15,000) per month for banking services/cash
management services (the “Service Fee”), whether or not that dollar amount of services is
actually utilized by Borrower. If the Borrower utilizes more than that dollar amount of services,
the Borrower acknowledges that Borrower will pay an additional mutually agreeable Service Fee
for such additional services. The Lender shall be and hereby is authorized to charge any deposit
or operating account of the Borrower in respect of the Service Fee. For clarity, the Lender
acknowledges that the $15,000 Service Fee covers and applies to the Borrower, Tandem, and each of
Tandem’s wholly-owned subsidiaries and that payment of the Service Fee by the

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borrowers under the
Affiliate Loan Documents shall satisfy the requirements of this Section 8.9 so long as such
borrowers shall continue to pay 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 Tandem or incorporating the word “Tandem” (or file an application to
attempt to register any of the foregoing), the Borrower shall promptly notify the Lender in writing
of same and execute and deliver any documents or instruments (at the Borrower’s sole cost and
expense) reasonably required by Lender to perfect a security interest in and lien on any such
federally registered intellectual property in favor of the Lender 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 (other than as disclosed to the Lender in writing on the
Closing Date) so long as: (a) the Borrower provides the Lender with at least thirty (30) days
prior written notice, (b) no Event of Default then exists, and (c) the Borrower provides the
Lender 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 Lender 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 Lender. If the
Borrower desires to change its principal place of business and chief executive office, the Borrower
shall notify the Lender thereof in writing no later than thirty (30) days prior to such change and
the Borrower shall provide the Lender with, at Borrower’s sole cost and expense, such financing
statements and other documents as the Lender 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 Lender thereof in writing no later than thirty (30) days
prior to such change.

     8.12 Health Care Related Matters. The Borrower shall continue to be duly licensed by
the State of Michigan to operate portable x-ray and cardiac services and provide certain ancillary
healthcare services and maintain Medicare and Medicaid provider status. 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, Medicare and other applicable reimbursement programs, to remain in full
force and effect. The Borrower shall at all times maintain in full force and effect the Medicare
Certification, the Medicaid Certification, the Medicare Provider Agreement and the Medicaid
Provider Agreement. The Borrower shall comply at all times with the CMS, except to the extent that
such failure to comply would not cause a Material Adverse Effect. The Borrower shall take all
necessary steps to protect personally identifiable health information for each patient
substantially
in accordance with the CMS laws and regulations. The Borrower shall comply at all times with
MDCH, except to the extent that such failure to comply would not cause a Material Adverse Effect.

     8.13 US Patriot Act. Borrower covenants to Lender that if Borrower becomes aware that
it or any of its Affiliates is identified on any Blocked Persons List (as identified in Section
7.32 hereof), Borrower shall immediately notify Lender in writing of such information.

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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 Lender to
exercise any and all remedies provided in any Financing Agreements or otherwise permitted by law.
In addition, Lender may immediately contact the Office of Foreign Assets Control and any other
government agency Lender deems appropriate in order to comply with its obligations under any law,
regulation, order or decree regulating or relating to terrorism and international money laundering.

     8.14 Government Accounts. If the Borrower desires Government Accounts to be
considered Eligible Accounts, the Borrower shall take any and all action reasonably required by the
Lender in order to provide the Lender with a perfected security interest in such Government
Accounts and execute and deliver all documentation reasonably required by the Lender in connection
therewith, including, without limitation, a Government Lock Box Agreement.

     8.15 Motor Vehicle Titles. Within sixty (60) calendar days of the Closing Date,
Borrower shall deliver to the Lender original Certificates of Title for each of the Borrower’s
owned motor vehicles, collaterally assigned to the Lender in writing, together with the odometer
reading for each such motor vehicle.

     8.16 Further Assurances. The Borrower will, 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 Lender may from time to time request in
order to carry out the intent and purposes of this Agreement and the other the Financing Agreements
and the transactions contemplated thereby, including all such actions to establish, create,
preserve, protect and perfect a first-priority Lien in favor of the Lender on the Collateral
(including Collateral acquired after the date hereof), including on any and all assets of Borrower,
whether now owned or hereafter acquired.

     9. NEGATIVE COVENANTS.

     The Borrower covenants and agrees 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 Lender shall give its 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”): (a) 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 Lender’s Lien in the Collateral; (b) deposits under workmen’s compensation,
unemployment insurance, social security and other similar laws; (c) Liens in favor of the Lender;
(d) 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 ten (10) calendar days, that are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been

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established or that are not
yet due and payable; (e) 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: (i) the aggregate indebtedness relating to such purchase money security
interests and Capitalized Lease Obligations does not at any time exceed One Hundred Thousand
Dollars ($100,000) in the aggregate at any time, (ii) each such lien shall only attach to the
property to be acquired; and (iii) the indebtedness incurred shall not exceed one hundred percent
(100%) of the purchase price of the item or items purchased; and (e) Liens in favor of the
Mezzanine Lender, subject in all cases to the provisions of the Subordination Agreements.

     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 (a)
the Liabilities, (b) the Subordinated Debt, (c) trade obligations and normal accruals in the
ordinary course of business not yet due and payable, and (d) the indebtedness not to at any time
exceed One Hundred Thousand Dollars ($100,000) relating to the purchase money security interests
and Capitalized Lease Obligations permitted pursuant to Section 9.1(e) hereof.

     9.3 Consolidations, Mergers or Acquisitions. Other than the Acquisitions, 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, or sell, transfer, convey or lease all or any substantial part of
its assets or property, or sell or assign, with or without recourse, any receivables. The Borrower
shall not form or establish any subsidiary without the Lender’s prior written consent.

     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 (a) investments
in short-term direct obligations of the United States Government, (b) investments in negotiable
certificates of deposit issued by the Lender or by any other bank satisfactory to the Lender,
payable to the order of the Borrower or to bearer, and (c) 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.

     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 endorsements of
negotiable instruments for collection in the ordinary course of business.

     9.6 Disposal of Property. The Borrower shall not sell, assign, lease, transfer or
otherwise dispose of any of its properties, assets and rights 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.

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     9.7 Use of Proceeds. The Borrower shall not use the proceeds of the (i) Revolving
Loan for any purpose other than for working capital and to consummate the Acquisitions, (ii) Term
Loan for any purpose other than to consummate the Acquisitions, and (iii) Assumed Debt Loan for the
refinancing of the debt on the motor vehicles owned by the Borrower on the date hereof.

     9.8 Loans to Officers; Consulting and Management Fees. The Borrower shall not make
any loans to its officers, directors, shareholders, or employees or to any other Person, and the
Borrower shall not pay any consulting, management fees or similar fees to its officers, directors,
shareholders, 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
make advances to its employees in an aggregate amount not to exceed Fifty Thousand Dollars
($50,000) 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;
and; provided, further, that the Borrower shall be permitted to enter into a Services Agreement
with Tandem on terms satisfactory to the Lender in its reasonable discretion; provided, that the
Lender shall not unreasonably withhold or delay its consent so long as the terms of such Service
Agreement are commercially reasonable.

     9.9 Dividends and Stock Redemptions. The Borrower shall not (i) 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, shareholder, director, or any Affiliate; provided,
however, the Borrower shall be permitted to make: (y) distributions or payments to Tandem
only if the Borrower is in compliance with Section 9.12 hereof both immediately before and
after any such contemplated or actual distribution or payment, and (z) solely those payments
expressly permitted pursuant to the terms of the Subordination Agreements, provided, further, in
the case of subsections (y) and (z) above, that both immediately before such contemplated
distribution or payment or after giving effect to any such distribution or payment no Default or
Event of Default shall exist or have occurred or result therefrom (including, without limitation,
any Default or Event of Default arising from a breach of the financial ratios described in
Section 9.12), otherwise any such distribution or payment shall be restricted; or (ii)
purchase or redeem any of the membership interests or units 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.

     9.10 Payments in Respect of Subordinated Debt. 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 the 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 the Subordinations Agreements.

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     9.11 Transactions with Affiliates. Except as expressly permitted under this
Agreement, 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 December 31, 2005
and continuing thereafter, the Borrower (which expressly means, collectively, Therapy and Hospice)
shall not:

          (i) Minimum Debt Service Coverage Ratio. Permit the Debt Service Coverage Ratio to be
less than 1.35 to 1.00, measured as of the last day of each Fiscal Quarter.

          (ii) Maximum Senior Debt to EBITDA. Permit the ratio of (a) the sum of all
Liabilities, to (b) the Borrower’s EBITDA, to be greater than 3.00 to 1.00, measured as of the
last day of each Fiscal Quarter.

          (iii) Maximum Indebtedness to EBITDA. Permit the ratio of (a) the sum of all
Indebtedness (including, without limitation, all Liabilities (but less the amount of the Revolving
Loans outstanding) and Subordinated Debt), to (b) the Borrower’s EBITDA, to be greater than 4.50
to 1.00, measured as of the last day of each Fiscal Quarter.

          (iv) Fixed Charge. Permit its Fixed Charge Coverage Ratio to be less than 1.00 to
1.00, measured as of the last day of each Fiscal Quarter.

          (v) Computation. The Borrower acknowledges and agrees that the calculation and
computation of the foregoing financial ratios and covenants shall be pursuant to and in accordance
with Section 8.1(c) hereof.

     9.13 Change in Nature of Business. The Borrower shall not make any material change in
the nature of Borrower’s business carried on as of the Closing Date.

     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 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 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 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

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modification of
the Borrower’s Bylaws, the Borrower shall furnish a true, correct and complete copy of any such
proposed amendment or modification to the Lender.

     9.15 Lock Box Accounts. The Borrower shall not establish or open any other lockbox
(other than the Commercial Lock Box Account and the Government Lock Box Account) after the Closing
Date. The Borrower shall not amend, modify or otherwise change any terms of the Commercial Lock
Box Agreement or the Government Lock Box Agreement, without the Lender’s prior written consent.

     9.16 Acquisition and Mezzanine Debt Documents. The Borrower shall not amend, modify
or supplement any of the Acquisition Documents or the Mezzanine Debt Documents in any manner that
would or is reasonably likely to adversely affect the Lender’s interests under this Agreement and
the other Financing Agreements to which Borrower is a party, without the Lender’s prior written
consent (including, without limitation, amending or modifying the Mezzanine Debt Documents in order
to (i) increase the rate of interest on or fees payable in respect of the applicable Subordinated
Debt unless such increase is not due and payable prior to the date the Liabilities are repaid in
full, (ii) accelerate the date of any regularly scheduled fees, interest or principal payment on
the applicable Subordinated Debt, (iii) shorten the final maturity date of the applicable
Subordinated Debt, (iv) increase the principal amount of the applicable Subordinated Debt, or (v)
make the covenants or events of default contained in the Mezzanine Debt Documents materially more
restrictive). Within three (3) Business Days after entering into any non-adverse amendment,
modification or supplement to any of the Acquisition Documents or Mezzanine Debt Documents, the
Borrower shall deliver to the Lender a true, complete and correct copy of such amendment,
modification or supplement.

     9.17 State of Incorporation. The Borrower shall not change its state of incorporation
from that of the State of Michigan.

     9.18 Environmental. 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 with all Environmental Laws, or as would not have a
Material Adverse Effect.

     9.19 Seller Notes. The Borrower shall not amend, modify or supplement either of the
Seller Notes in any manner that would or is reasonably likely to adversely affect the Lender’s
interests 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, without the Lender’s prior
written consent
(including, without limitation, amending or modifying the Seller Notes in order to (i)
increase the rate of interest on or fees payable in respect of the applicable Subordinated Debt
unless such increase is not due and payable prior to the date the Liabilities are repaid in full,
(ii) accelerate the date of any regularly scheduled fees, interest or principal payment on the
applicable Subordinated Debt, (iii) shorten the final maturity date of the applicable Subordinated
Debt, (iv) increase the principal amount of the applicable Subordinated Debt, or (v) make the
covenants or events of default contained in the Seller Notes materially more restrictive). Within
three (3) Business Days after entering into any non-adverse amendment, modification or supplement
to the Seller Notes, the Borrower shall deliver to the Lender a true, complete and correct copy of
such amendment, modification or supplement.

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

     10. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.

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

          (a) the Borrower fails to pay (i) any principal or interest payable hereunder or under any of
the Notes 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 Lender under this Agreement or
under any other Financing Agreement to which the Borrower is a party (including, without
limitation, any of the Notes) within five (5) calendar days after the date when any such payment is
due, declared due or demanded;

          (b) the Borrower fails or neglects to perform, keep or observe any of the covenants,
conditions or agreements set forth in Sections 2.4, 4.4, 8.5, 8.6, 8.9(a), 8.11, 8.12 or
Section 8.15 hereof, or any of the Sections of Article 9 hereof;

          (c) the Borrower fails or neglects to perform, keep or observe any of the covenants,
conditions, promises or agreements contained in this Agreement (other than those specified in
Section 10.1(b) hereof) and such failure or neglect shall continue for a period of fifteen
(15) calendar days after the earlier of (i) the date that the Borrower knew or should have known of
such failure or nonobservance, or (ii) notice to the Borrower by the Lender;

          (d) 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
Lender is untrue, misleading or incorrect in any respect, on the date as of which the facts set
forth therein are stated or certified;

          (e) 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 for which the Borrower is fully insured and with respect to which the insurer has
admitted liability;

          (f) 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;

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          (g) any 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;

          (h) 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 Tandem, and any such proceeding is not dismissed within forty-five
(45) 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 Tandem, or the Borrower or any
guarantor of the Liabilities, including Tandem, makes an assignment for the benefit of creditors,
or the Borrower or any guarantor of the Liabilities, including Tandem, takes any action to
authorize any of the foregoing;

          (i) the Borrower or Tandem voluntarily or involuntarily dissolves or is dissolved, or its
existence terminates or is terminated;

          (j) the Borrower or any guarantor of the Liabilities, including Tandem, becomes insolvent or
the Borrower or any guarantor of the Liabilities, including Tandem, fails generally to pay its
debts as they become due;

          (k) the Borrower or any guarantor of the Liabilities, including Tandem, 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;

          (l) 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 will
or is likely to have or create a Material Adverse Effect;

          (m) 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 would be to permit the acceleration of any obligation, liability or indebtedness
in excess of One Hundred Thousand Dollars ($100,000);

          (n) 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;

          (o) Tandem shall at any time after the Closing Date have voting power over less than one
hundred percent (100%) of the issued and outstanding capital stock of the Borrower; or Lawrence R.
Deering, Joseph D. Conte or Gene R. Curcio shall not be senior officers of the Borrower and devote
significant time and energy to the business of the Borrower; provided, however, 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, such individual shall be
promptly replaced by the Borrower with an individual with substantially similar skills and
experience (but in no event later than within ninety (90) calendar days of the

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former individual’s
resignation, termination, permanent disability or death) and otherwise acceptable to the Lender in
its reasonable and good faith determination;

          (p) 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;

          (q) any default or event of default shall occur under or pursuant to either of the Seller
Notes or any of the Mezzanine Debt Documents, or any breach of, noncompliance with or default under
any Subordination Agreement or any Financing Agreement (including, without limitation, the Limited
Guaranty) by any party thereto (other than by the Lender);

          (r) if the Borrower fails, within one (1) Business Day of receipt to forward any collections
it receives with respect to any Accounts to the Commercial Lock Box Account or the Government Lock
Box Account, as the case may be;

          (s) 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 One Hundred Thousand Dollars ($100,000), or (ii) a
contribution failure occurs with respect to any Plan sufficient to give rise to a lien under ERISA;

          (t) a Material Adverse Change shall occur; and/or

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

     10.2 Acceleration. Upon the occurrence of any Event of Default described in
Sections 10.1(h), (i), or (j), the Commitments (if they have 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 Lender
may at its sole option declare the Commitments (if they have not theretofore terminated) to be
terminated and any or all of the Liabilities may, at the sole option of the Lender, 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 Commitments shall
immediately terminate. Upon the occurrence of any Default or Event of Default the Lender may, at
its option, cease making any additional Revolving Loans.

     10.3 Rights and Remedies Generally. Upon the occurrence of any Event of Default, the
Lender 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

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under the
Code or other applicable laws, all of which rights and remedies shall be cumulative, and
non-exclusive, to the extent permitted by law, including, without limitation, the right of Lender
to sell, assign, or lease any or all of the Collateral. 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 Lender and make it available to Lender at any location designated by Lender. 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 Lender 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
Lender after an Event of Default may be for cash, credit or any combination thereof, and the Lender
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 Lender 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 Lender 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 Lender may see fit.

     10.4 Entry Upon Premises and Access to Information. Upon the occurrence of any Event
of Default, the Lender 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 Lender or any agent of the Lender, for such time as the Lender may
desire, in order to effectively collect or liquidate such Collateral. Upon the occurrence of any
Event of Default, the Lender shall have the right to obtain access to the Borrower’s data
processing equipment, computer hardware and software relating to the Collateral and to use all of
the foregoing and the information contained therein in any manner the Lender deems appropriate.
Upon the occurrence of any Event of Default, the Lender shall have the right to notify post office
authorities to change the address for delivery of the Borrower’s mail to an address designated by
the Lender and to receive, open and process all mail addressed to the Borrower.

     10.5 Sale or Other Disposition of Collateral by the Lender. Any notice required to be
given by the Lender of a sale, lease or other disposition or other intended action by the Lender,
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 11.12
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 Lender 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 Lender 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 Lender 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 Lender’s Liens in the Collateral until the Liabilities are fully
paid. The

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Borrower agrees that the Lender has no obligation to preserve rights to the Collateral
against any other Person. If and to the extent applicable, the Lender 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, tradestyles, 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 Lender’s benefit until the
Liabilities of the Borrower are paid in full.

     10.6 Waiver of Demand. Demand, presentment, protest and notice of nonpayment are
hereby waived by the Borrower. The Borrower also waives the benefit of all valuation, appraisal
and exemption laws.

     10.7 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 LENDER OF
ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON
THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.

     10.8 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.

     11. MISCELLANEOUS.

     11.1 Waiver. The Lender’s 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 Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by the Lender 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 Lender unless
such suspension or waiver is in writing signed by an officer of the Lender, and directed to the
Borrower specifying such suspension or waiver.

     11.2 Costs and Attorneys’ Fees.

          (a) The Borrower agrees to pay jointly and severally on demand all of the costs and expenses
of the Lender (including, without limitation, the reasonable fees and out-of-pocket expenses of the
Lender’s counsel, and all UCC filing and lien search fees, and, if applicable, 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, and delivery of:
(i) this Agreement, the Financing Agreements and all other

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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
Financing Agreement or in connection herewith or therewith. The Borrower further agrees that the
Lender, in its sole discretion, may deduct all such unpaid amounts from the aggregate proceeds of
the Loans or debit such amounts from the operating accounts of the Borrower maintained with the
Lender.

          (b) The costs and expenses that the Lender incurs in any manner or way with respect to the
following shall be part of the Liabilities, payable jointly and severally by the Borrower on demand
if at any time after the date of this Agreement the Lender: (i) employs counsel in good faith for
advice or other representation (A) with respect to the amendment, modification or enforcement of
this Agreement or the Financing Agreements, or with respect to any Collateral securing the
Liabilities hereunder, (B) to represent the Lender in any work-out or 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 Lender, the Borrower or any other Person) in any way or
respect relating to this Agreement, the Financing Agreements, the Borrower’s affairs or any
Collateral hereunder or (C) to enforce any of the rights of the Lender with respect to the Borrower
provided in this Agreement, under any of the Financing Agreements, or otherwise (whether at law or
in equity); (ii) takes any action to protect, preserve, store, ship, appraise, prepare for sale,
collect, sell, liquidate or otherwise dispose of any Collateral hereunder; and/or (iii) seeks to
enforce or enforces any of the rights and remedies of the Lender with respect to the 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.

          (c) The Borrower further agrees to pay, and to save the Lender 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
Financing Agreements, the borrowings hereunder, the issuance of the Notes 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 the Borrower shall not be liable for
Lender’s income tax liabilities.

          (d) All of the Borrower’s obligations provided for in this Section 11.2 shall be
Liabilities secured by the Collateral and shall survive repayment of the Loans or any termination
of this Agreement or any Financing Agreements.

     11.3 Expenditures by the Lender. 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 Lender 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

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incurred until
actually paid in full to Lender) and shall be part of the Liabilities of the Borrower, payable on
demand and secured by the Collateral.

     11.4 Custody and Preservation of Collateral. The Lender 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 Lender to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure by the Lender 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.

     11.5 Reliance by the Lender. The Borrower acknowledges that the Lender, in entering
into this Agreement and agreeing to make Loans and otherwise extend credit 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 Lender
in connection herewith (including, without limitation, all financial information and data).

     11.6 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 the Lender. 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 Lender.

     11.7 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.

     11.8 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 Lender from the Borrower or with respect to
any of the Collateral, and the Borrower does hereby irrevocably agree that the Lender shall have
the continuing exclusive right to apply and reapply any and all payments received at any time or
times hereafter, whether with respect to the Collateral or otherwise, against the Liabilities in
such manner as the Lender may deem advisable, notwithstanding any entry by the Lender upon any of
its books and records.

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     11.9 Marshalling; Payments Set Aside. The Lender shall be under no obligation to
marshall any assets in favor of the Borrower or any other Person or against or in payment of any or
all of the Liabilities. To the extent that the Borrower makes a payment or payments to the Lender
or the Lender enforces its Liens or exercises its 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.

     11.10 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 and this Agreement shall terminate in
accordance with its terms, the Lender will, upon Borrower’s written request and at the Borrower’s
cost and expense, promptly sign all UCC termination statements reasonably required by the Borrower
to evidence the termination of the Liens in the Collateral in favor of the Lender.

     11.11 Continuing Effect; Inconsistency. This Agreement, the Lender’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 Lender, 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.

     11.12 Notices. Except as otherwise expressly provided herein, any notice required or
desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have
been validly served, given or delivered upon the earlier of (a) personal delivery to the address
set forth below, (b) in the case of facsimile transmission, when transmitted and (c) in the case
of mailed notice, five (5) days after deposit in the United States mails, with proper postage for
certified mail, return receipt requested, prepaid, or in the case of notice by Federal Express or
other reputable overnight courier service, one (1) Business Day after delivery to such courier
service; provided, however, that 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. Notices to be provided pursuant to this Agreement shall be as
follows: (i) If to the Lender at: LaSalle Bank National Association, 135 South LaSalle
Street, Chicago, Illinois 60603; Attention: Mr. Peter J. Kane; Telephone No. (312) 904-1880;
Facsimile No. (312) 904-4364; with a copy to: Duane Morris LLP, 227 West Monroe Street, Suite 3400,
Chicago, Illinois 60606; Attention: Brian P. Kerwin, Esq.; Telephone No. (312) 499-6737;
Facsimile No. (312) 499-6701; (ii) If to the Borrower at: c/o Tandem Health Care Inc.; 800
Concourse Parkway S., Suite 200, Maitland, Florida 32751; Attention: Mr. Lawrence R. Deering and
Rosemary L. Corsetti, Esq.; Telephone No. (407) 571-1550; Facsimile No. (407) 571-1678; with a copy
to: Buchanan Ingersoll, P.C., One Oxford Center, 301 Grant Street, 20th Floor, Pittsburgh,
Pennsylvania 15219-1410; Telephone No. (412) 281-4420; Facsimile No.

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(412) 281-4435; Attention:
Rosemary Corsetti, Esq; or to such other address as each party designates to the other in the
manner herein prescribed.

     11.13 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 Lender; therefore, the Borrower agrees that
the Lender, if the Lender so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.

     11.14 Entire Agreement. This Agreement, together with the Financing Agreements
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 or commitment
letter). This Agreement may be amended or modified only by mutual agreement of the parties
evidenced in writing and signed by the party to be charged therewith.

     11.15 Participations and Assignments. The Lender shall have the right, without the
consent of the Borrower, to sell participations to one or more banks or other entities in, or
assignments of, all or any portion of its rights, obligations, and interest under this Agreement,
the Liabilities and any of the Financing Agreements. The Lender may furnish any information
concerning the Borrower in the possession of the Lender from time to time to participants
(including prospective participants).

     11.16 Indemnity. The Borrower agrees to jointly and severally defend, protect,
indemnify and hold harmless the Lender and each and all of its 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), which may 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 Loans (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 Loans
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 willful
misconduct or gross negligence 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, 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

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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
11.16 shall survive the satisfaction and payment of the Liabilities of the Borrower and the
termination of this Agreement.

     11.17 Representations and Warranties. Notwithstanding anything to the contrary
contained herein, (a) 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 Loans and the repayment of the Liabilities hereunder,
and (b) each representation and warranty contained in this Agreement and each other Financing
Agreement shall be remade on the date of each Loan made hereunder.

     11.18 Counterparts; Faxes. 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. Fax
signatures shall be deemed as legally effective as a signed original for all purposes.

     11.19 Limitation of Liability of Lender. It is hereby expressly agreed that:

          (a) Lender 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. Lender 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;

          (b) Lender 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 Lender’s gross negligence or
willful misconduct. Without limiting the generality of the foregoing, Lender 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

          (c) Lender 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.

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

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     11.21 Joint and Several Liability. (a) The liability and obligations of each
Borrower for payment and performance of the Liabilities to the Lender under this Agreement or under
any of the Financing Agreements to which the Borrower is a party shall be joint and several. Such
joint and several liability of the Borrower shall to the fullest extent permitted by law remain and
exist regardless of which Borrower actually receives loans or other extensions of credit hereunder
or the amount of such loans received or the manner in which Lender accounts for such loans or other
extensions of credit on its books and records. Each Borrower’s Liabilities with respect to loans
made to it and related fees, costs and expenses, and each Borrower’s Liabilities arising as a
result of the joint and several liability of the Borrowers hereunder, with respect to loans made to
the other Borrower hereunder together with the related fees, costs and expenses, shall be separate
and distinct Liabilities, all of which are primary Liabilities of each Borrower. Each Borrower’s
Liabilities arising as a result of the joint and several liability of the Borrowers hereunder with
respect to loans or other extensions of credit made to the other Borrower hereunder shall, to the
fullest extent permitted by law, be unconditional irrespective of (i) the validity, enforceability,
avoidance or subordination of the Liabilities of the other Borrower or of any promissory note or
other document evidencing all of any part of the Liabilities of the other Borrower, (ii) the
absence of any attempt to collect the Liabilities from the other Borrower, any other guarantor, or
any other security therefor, or the absence of any other action to enforce the same, (iii) the
waiver, consent, extension, forbearance or granting of any indulgence by Lender with respect to any
provision of any instrument evidencing the Liabilities of the other Borrower, or any part thereof,
or any other agreement now or hereafter executed by the other Borrower and delivered to the Lender,
(iv) the failure by the Lender 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 of the other Borrower,
(v) the Lender’s election, in any proceeding instituted under the U.S. Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by the other Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code,
(vii) the disallowance of all or any portion of the Lender’s claims for repayment of the
Liabilities of the other Borrower under Section 502 of the Bankruptcy Code, or (viii) any other
circumstance which might constitute a legal or equitable discharge or defense of a guarantor of the
other Borrower. With respect to each Borrower’s Liabilities arising as a result of the joint and
several liability of the Borrowers hereunder with respect to loans or other extensions of credit
made to the other Borrower hereunder, such Borrower waives, until the Liabilities shall have been
paid in full and this Agreement shall have been terminated in accordance with its terms, any right
to enforce any right of subrogation or any remedy which Lender now has or may hereafter have
against such Borrower, any endorser or any guarantor of all or any part of the Liabilities, and any
benefit of, and any right to participate in, any security or
collateral given to Lender to secure payment of the Liabilities or any other liability of the
Borrower to the Lender, whether any such right arises by way of suretyship or otherwise.

     (b) Any term or provision of this Agreement or any other Financing Agreement to the contrary
notwithstanding, the maximum aggregate amount of the Liabilities for which any of the Borrowers
(which Liabilities are not direct borrowings or direct obligations of such Borrower (the
“Non-Direct Obligations”)) shall be liable shall not exceed the maximum amount for which
such Borrower can be liable without rendering such Non-Direct Obligations, as they relate to such
Borrower, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer.
To the extent that any Borrower shall be required hereunder to pay a portion of its Non-Direct
Obligations which shall exceed the greater of (i) the amount of the economic benefit

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actually
received by such Borrower from any of the loans evidenced hereby in respect of such Non-Direct
Obligations, and (ii) the amount which such Borrower would otherwise have paid if such Borrower had
paid the aggregate amount of the Non-Direct Obligations of such Borrower (excluding the amount
thereof repaid by the other Borrower) in the same proportion as such Borrower’s net worth at the
date of any applicable borrowing hereunder is sought bears to the aggregate net worth of all of the
Borrowers at the date of such applicable borrowing hereunder is sought, then such Borrower shall be
reimbursed by the other Borrower for the amount of such excess, pro rata based on the respective
net worths of the Borrowers at the date of such applicable borrowing with respect hereto is sought.

     (c) Except as expressly provided in Section 9.12 hereof, the term “Borrower” as used
herein shall mean collectively, Therapy and Hospice, and individually, Therapy and Hospice, as the
Lender shall determine in its sole and absolute discretion.

     11.22 Confidentiality. The Lender agrees that material, non-public information
regarding the Borrower, if any, will be treated by the Lender in a confidential manner, and shall
not be disclosed by the Lender to Persons who are not parties to this Agreement, except: (a) to
attorneys for and other advisors, accountants, auditors, and consultants to the Lender or its
Affiliates, (b) as may be required by statute, decision, or judicial or administrative order, rule,
or regulation, (c) as may be agreed to in advance by the Borrower or as requested or required by
any governmental agency, department or other authority pursuant to any subpoena or other legal
process, (d) as to any such information that is or becomes generally available to the public (other
than as a result of prohibited disclosure by the Lender), (e) in connection with any assignment,
prospective assignment, sale, prospective sale, participation or prospective participations, or
pledge or prospective pledge of the Lender’s interest under this Agreement, provided that any such
assignee, prospective assignee, purchaser, prospective purchaser, participant, prospective
participant, pledgee, or prospective pledgee has agreed to receive such information hereunder
subject to the terms of this Section, and (f) in connection with any litigation or other adversary
proceeding involving parties hereto which such litigation or adversary proceeding involves claims
related to the rights or duties of such parties under this Agreement or the other Financing
Agreements. Anything contained herein or in any other Financing Agreement to the contrary
notwithstanding, the obligations of confidentiality contained herein and therein, as they relate to
the transactions contemplated hereby, shall not apply to the federal tax structure or federal tax
treatment of any such transactions, and each party hereto (and any employee, representative, or
agent of any party hereto) may disclose to any and all Persons, without limitation of any kind, the
federal tax structure and federal tax treatment of such transactions (including all written
materials related to such tax structure and tax treatment), if and as applicable. The
preceding sentence is intended to cause the transactions contemplated hereby to not be treated as
having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under Section 6011 of the Internal
Revenue Code, and shall be construed in a manner consistent with such purpose. In addition, each
party hereto acknowledges that it has no proprietary or exclusive rights to, to the extent
applicable, the tax structure of the transactions contemplated hereby or any tax matter or tax idea
related thereto.

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

          (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT AND THE OTHER 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;

          (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 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

          (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 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 LENDER’S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR LIMIT THE LENDER’S RIGHT TO BRING PROCEEDINGS
AGAINST THE BORROWER OR ITS PROPERTY IN ANY COURT OR ANY OTHER JURISDICTION.

 - 67 -

 

     11.24 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.

     11.25 JURY TRIAL. THE BORROWER AND THE LENDER 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 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 LENDER AND THE BORROWER AGREE
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY.

[Signature Page Follows]

 - 68 -

 

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

	 	 	 	 	 
	 	BORROWER:

OP THERAPY, INC.

OP HOSPICE, INC.

 	 
	 	By:  	/s/ Lawrence R. Deering
 	 
	 	 	Lawrence R. Deering 	 
	 	 	Chairperson and CEO 	 

	 	 	 	 	 
	 	LENDER:

LASALLE BANK NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Peter J. Kane
 	 
	 	 	Peter J. Kane 	 
	 	 	First Vice President 	 
	 

 - 69 -Exhibit 10.72

 

Exhibit 10.72

TERM LOAN AGREEMENT

for a term loan in the aggregate amount of up to

$70,000,000

made by and among

Certain Affiliates of Tandem Health Care, Inc. Identified Herein

each, as Borrower

and

MERRILL LYNCH CAPITAL,

a Division of Merrill Lynch Business Financial Services Inc.,

a Delaware corporation

222 North LaSalle Street – 16th Floor

Chicago, Illinois 60601

as the Administrative Agent and as a Lender

and

LASALLE BANK NATIONAL ASSOCIATION,

a national banking association

135 South LaSalle Street

Chicago, Illinois 60603

as the Syndication Agent, the Documentation Agent, and as a Lender

and

The Additional Lenders From Time To Time Party Hereto

Dated as of April 29, 2005

 

 

TERM LOAN AGREEMENT

     THIS TERM LOAN AGREEMENT (this “Agreement”) is made and dated as of April 29, 2005, by
and among RE Selinsgrove, LLC, RE Mifflin, LLC, RE Pottsville, LLC, RE New Bloomfield, LLC, RE
Millersburg, LLC, RE Everett, LLC, and RE Hazleton, LLC, each a Pennsylvania limited liability
company, and RE Frostburg, LLC and RE Salisbury, LLC, each a Maryland limited liability company
(each of the foregoing, a “Borrower”, and collectively, the “Borrower”), Merrill
Lynch Capital, a Division of Merrill Lynch Business Financial Services Inc., a Delaware
corporation, in its capacity as Administrative Agent and as a Lender (“Merrill Lynch”), LaSalle
Bank National Association, in its capacity as Syndication Agent and Documentation Agent and as
Lender (“LaSalle Bank”), and the additional financial institutions from time to time parties
hereto, each as a Lender.

RECITALS

     A. RE Selinsgrove, LLC is and on the Closing Date will be the owner in fee simple of land
located at 800 Broad Street in the City of Selinsgrove, County of Snyder, Commonwealth of
Pennsylvania and 801 Broad Street in the City of Selinsgrove, County of Snyder, Commonwealth of
Pennsylvania, commonly known as “Penn Lutheran Village” and legally described on Exhibit A-1
attached hereto (the “Selinsgrove Land”). Such Selinsgrove Land contains improvements generally
consisting of (i) an assisted living and/or skilled nursing facility containing in the aggregate
223 beds and (ii) approximately 186 parking spaces (collectively, the “Selinsgrove Improvements”).
The Selinsgrove Land together with all buildings, structures and improvements located or to be
located thereon, including the Selinsgrove Improvements, (i) all rights, privileges, easements and
hereditaments relating or appertaining thereto, and (ii) the Personal Property (as defined herein)
relating to the Selinsgrove Land or Selinsgrove Improvements are collectively referred to herein as
the “Selinsgrove Location.”

     B. RE Mifflin, LLC is and on the Closing Date will be the owner in fee simple of land located
at HCR 67, Box 7 in the City of Mifflin, County of Juaniata, Commonwealth of Pennsylvania, commonly
known as “Locust Grove Retirement Village” and legally described on Exhibit A-2 attached hereto
(the “Mifflin Land”). Such Mifflin Land contains improvements generally consisting of (i) an
assisted living and/or skilled nursing facility containing in the aggregate 93 beds and (ii)
approximately 68 parking spaces (collectively, the “Mifflin Improvements”). The Mifflin Land
together with all buildings, structures and improvements located or to be located thereon,
including the Mifflin Improvements, (i) all rights, privileges, easements and hereditaments
relating or appertaining thereto, and (ii) the Personal Property (as defined herein) relating to
the Mifflin Land or Mifflin Improvements are collectively referred to herein as the “Mifflin
Location.”

     C. RE Hazleton, LLC is and on the Closing Date will be the owner in fee simple of land located
at 1711 East Broad Street in the City of Hazleton, County of Luzerne, Commonwealth of Pennsylvania
and 1000 Stacie Drive in the City of Hazleton, County of Luzerne, Commonwealth of Pennsylvania,
commonly known as “St. Luke’s Village” and legally described on Exhibit A-3 attached hereto (the
“Hazleton Land”). Such Hazleton Land contains improvements generally consisting of (i) an assisted
living and/or skilled nursing facility

 

 

containing
in the aggregate 252 beds and (ii) approximately 153 parking spaces (collectively,
the “Hazleton Improvements”). The Hazleton Land together with all buildings, structures and
improvements located or to be located thereon, including the Hazleton Improvements, (i) all rights,
privileges, easements and hereditaments relating or appertaining thereto, and (ii) the Personal
Property (as defined herein) relating to the Hazleton Land or Hazleton Improvements are
collectively referred to herein as the “Hazleton Location.”

     D. RE Pottsville is and on the Closing Date will be the owner in fee simple of land located at
160 Red Horse Road in the City of Pottsville, County of Schuykill, Commonwealth of Pennsylvania,
commonly known as “Lutheran Ridge at Seiders” and legally described on Exhibit A-4 attached hereto
(the “Pottsville Land”). Such Pottsville Land contains improvements generally consisting of (i) an
assisted living and/or skilled nursing facility containing in the aggregate 104 beds and (ii)
approximately 40 parking spaces (collectively, the “Pottsville Improvements”). The Pottsville Land
together with all buildings, structures and improvements located or to be located thereon,
including the Pottsville Improvements, (i) all rights, privileges, easements and hereditaments
relating or appertaining thereto, and (ii) the Personal Property (as defined herein) relating to
the Pottsville Land or Pottsville Improvements are collectively referred to herein as the
“Pottsville Location.”

     E. RE New Bloomfield, LLC is and on the Closing Date will be the owner in fee simple of land
located at 213 East Main Street in the City of New Bloomfield, County of Perry, Commonwealth of
Pennsylvania, commonly known as “Perry Village “ and legally described on Exhibit A-5 attached
hereto (the “New Bloomfield Land”). Such New Bloomfield Land contains improvements generally
consisting of (i) an assisted living and/or skilled nursing facility containing in the aggregate
123 beds and (ii) approximately 91 parking spaces (collectively, the “New Bloomfield
Improvements”). The New Bloomfield Land together with all buildings, structures and improvements
located or to be located thereon, including the New Bloomfield Improvements, (i) all rights,
privileges, easements and hereditaments relating or appertaining thereto, and (ii) the Personal
Property (as defined herein) relating to the New Bloomfield Land or New Bloomfield Improvements are
collectively referred to herein as the “New Bloomfield Location.”

     F. RE Millersburg, LLC is and on the Closing Date will be the owner in fee simple of land
located at 990 Medical Road in the City of Millersburg, County of Dauphin, Commonwealth of
Pennsylvania, commonly known as “Sysquehanna Lutheran Village” and legally described on Exhibit A-6
attached hereto (the “Millersburg Land”). Such Millersburg Land contains improvements generally
consisting of (i) an assisted living and/or skilled nursing facility containing in the aggregate
204 beds and (ii) approximately 142 [or 42?] parking spaces (collectively, the “Millersburg
Improvements”). The Millersburg Land together with all buildings, structures and improvements
located or to be located thereon, including the Millersburg Improvements, (i) all rights,
privileges, easements and hereditaments relating or appertaining thereto, and (ii) the Personal
Property (as defined herein) relating to the Millersburg Land or Millersburg Improvements are
collectively referred to herein as the “Millersburg Location.”

     G. RE Everett, LLC is and on the Closing Date will be the owner in fee simple of land located
at 208 Pennknoll Road in the City of Everett, County of Bedford, Commonwealth of

2

 

Pennsylvania, commonly known as “Pennknoll Village” and legally described on Exhibit A-7
attached hereto (the “Everett Land”). Such Everett Land contains improvements generally consisting
of (i) an assisted living and/or skilled nursing facility containing in the aggregate 133 beds and
(ii) approximately 86 parking spaces (collectively, the “Everett Improvements”). The Everett Land
together with all buildings, structures and improvements located or to be located thereon,
including the Everett Improvements, (i) all rights, privileges, easements and hereditaments
relating or appertaining thereto, and (ii) the Personal Property (as defined herein) relating to
the Everett Land or Everett Improvements are collectively referred to herein as the “Everett
Location.”

     H. RE Frostburg, LLC is and on the Closing Date will be the owner in fee simple of land
located at One Kaylor Circle in the City of Frostburg, County of Allegany, State of Maryland,
commonly known as “Frostburg Village” and legally described on Exhibit A-8 attached hereto (the
“Frostburg Land”). Such Frostburg Land contains improvements generally consisting of (i) an
assisted living and/or skilled nursing facility containing in the aggregate 155 beds and (ii)
approximately 131 parking spaces (collectively, the “Frostburg Improvements”). The Frostburg Land
together with all buildings, structures and improvements located or to be located thereon,
including the Frostburg Improvements, (i) all rights, privileges, easements and hereditaments
relating or appertaining thereto, and (ii) the Personal Property (as defined herein) relating to
the Frostburg Land or Frostburg Improvements are collectively referred to herein as the “Frostburg
Location.”

     I. RE Salisbury, LLC is and on the Closing Date will be the owner in fee simple of land
located at 611 Tressler Drive in the City of Salisbury, County of Wicomico, State of Maryland,
commonly known as “The Lutheran Village at Harbor Pointe” and legally described on Exhibit A-9
attached hereto (the “Salisbury Land”). Such Salisbury Land contains improvements generally
consisting of (i) an assisted living and/or skilled nursing facility containing in the aggregate 52
beds and (ii) approximately 32 parking spaces (collectively, the “Salisbury Improvements”). The
Salisbury Land together with all buildings, structures and improvements located or to be located
thereon, including the Salisbury Improvements, (i) all rights, privileges, easements and
hereditaments relating or appertaining thereto, and (ii) the Personal Property (as defined herein)
relating to the Salisbury Land or Salisbury Improvements are collectively referred to herein as the
“Salisbury Location.”

     J. Borrower desires to acquire (the “Acquisition”) the Real Property and substantially
all of the assets and business consisting of skilled nursing and senior housing facilities located
on the Real Property from Diakon Lutheran Social Ministries, a Pennsylvania not-for-profit
corporation, Tressler Lutheran Services, The Lutheran Welfare Service of Northeastern Pennsylvania,
Inc., The Lutheran Home at Tompton, Pennsylvania and Susquehanna Housing, Inc. (collectively, the
“Seller”);

     K. Borrower has applied to Merrill Lynch and LaSalle Bank for a term loan in the aggregate
principal amount of up to Seventy Million and No/100 Dollars ($70,000,000.00) (the “Loan”
or “Term Loan”) to partially finance the Acquisition.

     L. Lenders are willing to make the Loan to Borrower on the terms and provisions and subject to
the conditions hereinafter set forth.

3

 

     M. The Loan is to be evidenced by (1) that certain Promissory Note, of even date herewith,
made by Borrower in the original principal amount of Thirty-Five Million and No/100 Dollars
($35,000,000.00) and payable to the order of LaSalle Bank (such Promissory Note and all amendments,
restatements, modifications, extensions, restatements and consolidations thereto or thereof and
substitutions therefor are hereinafter referred to collectively as the “LaSalle Term
Note”), and (2) that certain Promissory Note, of even date herewith, made by the Borrower in
the original principal amount of Thirty-Five Million and No/100 Dollars ($35,000,000.00) and
payable to the order of Merrill Lynch (such Promissory Note and all amendments, restatements,
modifications, extensions, restatements and consolidations thereto or thereof and substitutions
therefor are hereinafter referred to collectively as the “Merrill Term Note” and,
collectively with the LaSalle Term Note, each a “Note” and collectively the
“Notes”). The terms and provisions of the Notes are hereby incorporated by reference in
this Agreement.

     N. Borrower’s obligations hereunder and to repay the Loan will be secured by, among other
items, as applicable, each first priority Mortgage, Assignment of Leases and Rents and Security
Agreement of even date herewith, a First Leasehold, Assignment of Leases and Rents and Security
Agreement of even date herewith and each First Deed of Trust, Assignment of Leases and Rents and
Security Agreement of even date herewith (together with all amendments, restatements,
modifications, extensions, restatements and consolidations thereto or thereof and substitutions
therefor are hereinafter referred to collectively as the “Mortgages”) encumbering all of
the Real Property, and a first priority security interest in all of the personal property of
Borrower granted to the Administrative Agent (for the benefit of the Lenders) pursuant to that
certain Security Agreement of even date herewith (as the same may be amended or modified from time
to time, the “Security Agreement”).

     NOW, THEREFORE, in consideration of the mutual agreements contained herein, and of any loans
or other financial accommodations now or hereafter made to or for the benefit of the Borrower, 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:

ARTICLE I

DEFINITIONS

     Section 1.1. General Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:

     Account. “Account” means collectively (a) any right to payment of a monetary
obligation, whether or not earned by performance, including, without limitation, all amounts owed
to Borrower pursuant to any Leases, (b) without duplication, any “account” (as that term is defined
in the Uniform Commercial Code now or hereafter in effect), any accounts receivable (whether in the
form of payments for services rendered or goods sold, rents, license fees or otherwise), any
“health-care-insurance receivables” (as that term is defined in the Uniform Commercial Code now or
hereafter in effect), any “payment intangibles” (as that term is defined in the Uniform Commercial
Code now or hereafter in effect) and all other rights to payment and/or reimbursement of every kind
and description, whether or not earned by performance, (c) all accounts, general intangibles,
Intellectual Property, rights, remedies, guarantees, supporting

4

 

obligations, letter of credit rights and security interests in respect of the foregoing, all rights
of enforcement and collection, all books and records evidencing or related to the foregoing, and
all rights under the Loan Documents in respect of the foregoing, (d) all information and data
compiled or derived by any Borrower or to which any Borrower is entitled in respect of or related
to the foregoing, and (e) all proceeds of any of the foregoing.

     Account Debtor. “Account Debtor” means “account debtor” (as that term is
defined in the Uniform Commercial Code now or hereafter in effect), and any other Person obligated
on any Account of a Borrower, including, but not limited to, any tenant under a Lease and any
Governmental Account Debtor.

     Acquisition. “Acquisition” has the meaning set forth in the Recitals.

     Acquisition Agreement. “Acquisition Agreement” means that certain Asset
Purchase Agreement dated as of February 15, 2005 by and among the Borrowers, the Operators and the
Sellers, as amended pursuant to that certain First Amendment to Asset Purchase Agreement dated as
of February 28, 2005, and as further amended pursuant to that certain Second Amendment to Asset
Purchase Agreement dated as of March 15, 2005.

     Acquisition Documents. “Acquisition Documents” means, collectively, the
Acquisition Agreement and the documents, instruments and agreements executed or delivered in
connection therewith or otherwise in connection with the Acquisition, in each case as the same may
be amended or modified in conformity with Section 6.16 of this Agreement.

     Administrative Agent. “Administrative Agent” means Merrill Lynch Capital, a
Division of Merrill Lynch Business Financial Services Inc., a Delaware corporation, in its capacity
as administrative agent hereunder for the Lenders, as such capacity is established and subject to
the provisions of Article XI and the successors of Merrill Lynch in such capacity.

     Affiliate. “Affiliate” means, with respect to a specified Person, any Person
directly or indirectly controlling, controlled by, or under common control with the specified
Person, including, without limitation, their stockholders and any Affiliates thereof. A Person
shall be deemed to control a corporation or other entity if the Person (a) owns or controls,
directly or indirectly, five percent (5%) or more of the Stock of such corporation or entity or (b)
possesses or controls, directly or indirectly, the power to direct or cause the direction of the
management and business of the corporation or other entity, whether through the ownership of voting
securities, by contract, or otherwise.

     Affiliated Loan Documents. “Affiliated Loan Documents” shall mean any and all
instruments, agreements or documents evidencing, securing and/or governing any financing provided
by Administrative Agent and the Lenders to any or all of the Operators, including that certain
Revolving Loan Agreement of even date herewith by and among Lenders, Administrative Agent and the
Operators, as the same may be amended, modified, increased, renewed or restated from time to time.

     Agreement. “Agreement” means this Term Loan Agreement, as it may be amended or
supplemented from time to time, together with all attachments, exhibits, schedules, riders and
addenda, all of which are incorporated herein by this reference and made a part hereof.

5

 

     Applicable Base Rate. “Applicable Base Rate” means, for any given Term Loan
under this Agreement, the LIBOR Rate plus the Applicable Margin.

     Applicable Margin. “Applicable Margin” has the meaning given it in Section
2.2(c).

     Appraisal. “Appraisal” means a complete, self-contained appraisal of the Real
Property performed in accordance with FIRREA and each Lender’s appraisal requirements by an
independent appraiser MAI licensed in the state in which the Real Property is located and selected
and retained by the Administrative Agent. Borrower may provide to Lenders a copy of any FIRREA
appraisal prepared for another lender within the past six (6) months. Each Lender may, in its sole
discretion: (a) accept such appraisal, (b) request an update of such appraisal or (c) retain a
state licensed appraiser to perform a new appraisal.

     Approved Use of Proceeds. “Approved Use of Proceeds” means loan proceeds used
by Borrower to partially finance the Acquisition and pay related transaction costs, expenses and
attorneys’ fees.

     Assignment Agreement. “Assignment Agreement” has the meaning set forth in
Section 12.6(b).

     Borrowed Money. “Borrowed Money” means, with respect to any Person, without
duplication (a) all indebtedness for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily
made, (c) that portion of obligations with respect to capital leases that is properly classified as
a liability on a balance sheet in conformity with GAAP, (d) any obligations of such Person issued
or assumed as the deferred purchase price of property or services purchased by such Person (other
than trade debt and accrued expenses incurred in the ordinary course of business and due within six
(6) months of the incurrence thereof or evidenced by a note or other instrument), (e) all Borrowed
Money of others secured by (or for which the holder of such Borrowed Money has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, any property or asset owned, held or acquired by such Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person, (f) all guaranty obligations of such Person in respect of any Borrowed Money
of any other Person, (g) the maximum amount of all standby letters of credit issued or bankers’
acceptances facilities created for the account of such Person and, without duplication, all drafts
drawn thereunder (to the extent unreimbursed), (h) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet
financing product plus any accrued interest thereon, (i) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable arising and paid in
the ordinary course of business, (j) equity securities of such Person subject to repurchase or
redemption otherwise than at the sole option of such Person, and (k) “earnouts” and similar payment
obligations.

     Borrower. “Borrower” has the meaning set forth in the Preamble.

     Borrower Agent. “Borrower Agent” means Tandem Health Care, Inc., a
Pennsylvania corporation.

6

 

     Business Day. “Business Day” means any day except a Saturday, Sunday or other
day on which either the New York Stock Exchange is closed, or on which commercial banks in Chicago,
Illinois are authorized by law to close.

     Closing; Closing Date. “Closing” and “Closing Date” have the meanings set forth in
Section 3.3.

     CMS. “CMS” means the Centers for Medicare and Medicaid Services.

     Collateral. “Collateral” means, collectively, the Personal Property and the Real
Property.

     Collateral Assignment of Acquisition Agreement. “Collateral Assignment of
Acquisition Agreement” means that certain Collateral Assignment of Acquisition Agreement of
even date herewith by and among the Borrower, the Operators, the Seller, and the Administrative
Agent, in form and substance reasonably acceptable to the Administrative Agent, which shall provide
for an assignment of the rights of the Borrower and the Operators under certain of the Acquisition
Agreements in favor of the Administrative Agent for the benefit of the Lenders (including, without
limitation, rights of indemnification from the Seller).

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

     Concentration Account. “Concentration Account” means an account or accounts owned and
controlled by Administrative Agent as from time to time designated by Administrative Agent.

     Control. “Control” means, as such term is used with respect to any Person,
including the correlative meanings of the terms “controlled by” and “under common control with,”
the possession, directly or indirectly, of the power to direct or cause the direction of the
management policies of such Person, whether through the ownership of voting securities, by contract
or otherwise.

     Controlled Group. “Controlled Group” means all businesses that would be treated as a
single employer under Section 410(b) of ERISA.

     Credit Party. “Credit Party” means each Borrower, each other Person that has
executed and delivered to Administrative Agent (for the benefit of the Lenders) a guaranty of the
Obligations of Borrower (or any portion thereof) to Lenders and each other Person that is or
becomes primarily or secondarily liable for the Obligations, whether as a principal, surety,
guarantor, endorser or otherwise.

     Default. “Default” means any Event of Default or any fact, event, condition
or circumstance that, with the passage of time or the giving of notice or both, would become an
Event of Default.

7

 

     Default Rate.  “Default Rate” means a rate per annum equal to three percent
(3%) per annum above the then applicable rate at which interest accrues in respect of the
applicable Obligations under this Agreement prior to the occurrence of an Event of Default.

     Deposit Account. “Deposit Account” means a “deposit account” (as defined in
Article 9 of the UCC) of Borrower.

     Deposit Account Control Agreement. “Deposit Account Control Agreement” means
an agreement, in form and substance satisfactory to Administrative Agent, among Administrative
Agent, Borrower and LaSalle Bank in which Borrower maintains a Deposit Account, which agreement
provides that (a) LaSalle Bank shall comply with instructions originated by Administrative Agent
(for the ratable benefit of the Lenders) directing disposition of the funds in such Deposit Account
without further consent by Borrower, and (b) LaSalle Bank shall agree that it shall have no Lien
on, or right of setoff or recoupment against, such Deposit Account or the contents thereof, other
than in respect of commercially reasonable fees and other items expressly consented to by
Administrative Agent, and containing such other terms and conditions as Administrative Agent may
require.

     Environmental Laws. “Environmental Laws” shall mean all Laws relating to the
regulation and protection of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species, vegetation and mold). Environmental Laws include the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the
Hazardous Material Transportation Act (49 U.S.C. §§ 1801 et seq.); the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Resource Conservation and Recovery
Act (42 U.S.C. §§ 6901 et seq.) (“RCRA”); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et
seq.); the Clean Air Act (42 U.S.C. §§ 740 et seq.); the Federal Water Pollution Control Act (33
U.S.C. §§1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.) (“OSHA”);
and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all regulations
promulgated thereunder, and all analogous state and local counterparts or equivalents and any
transfer of ownership notification or approval statutes.

     Environmental Liabilities. “Environmental Liabilities” shall mean all
liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand by any Person, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute or common law (including any
thereof arising under any Environmental Law, permit, order or agreement with any Governmental
Authority) and which relate to any health or safety condition regulated under any Environmental
Law, or in connection with any Release, threatened Release, or the presence of a Hazardous
Material.

     ERISA. “ERISA” has the meaning set forth in Section 4.12.

8

 

Event of Default. “Event of Default” and “Events of Default” have the meanings set
forth in Section 10.1.

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

     Fiscal Year. “Fiscal Year” shall mean each twelve month period commencing on
January 1 and ending on December 31 during each year of the term of the Loan.

     GAAP. “GAAP” means generally accepted accounting principles applied in a
consistent manner.

     Government Account Debtor. “Governmental Account Debtor” means any Account
Debtor which is (a) the United States of America acting under the Medicare program established
pursuant to the Social Security Act or any other program established by federal law requiring that
payments for healthcare goods or services be made to the providers or suppliers of such services
(including, without limitation, CHAMPUS as set forth in Title 10 U.S.C. Section 1071 et seq.), (b)
any state or the District of Columbia responsible for administering such state’s (or district’s)
Medicaid program adopted pursuant to Title XIX of the Social Security Act or (c) any agent,
carrier, administrator or intermediary for any of the foregoing.

     Government Contracts. “Government Contracts” means any contract or agreement
(including, but not limited to, any lease) between any Borrower and any Account Debtor that is
subject to the Federal Assignment of Claims Act, as amended (31 U.S.C. Section 3727) or any similar
state or local law.

     Governmental Approvals. “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. “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.

     Guarantor. “Guarantor” means any Person who may from time to time guaranty,
pledge assets or equity as security for or otherwise become obligated in respect of the Obligations
and the Obligations under the Affiliated Loan Documents. “Guarantor” shall include,
without limitation, Tandem Health Care, Inc., a Pennsylvania corporation.

     Guaranty. “Guaranty” means any guaranty of the Obligations from time to time
outstanding, as the same may be amended, modified, or supplemented from time to time. “Guaranty”
shall include, without limitation, the guaranty of Tandem Health Care, Inc. of even date herewith
in favor of the Administrative Agent for the benefit of the Lenders.

     Hazardous Material. “Hazardous Material” means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance,
or similar term, by any Environmental Law or any Governmental Authority applicable

9

 

to Borrower or its business, operations or assets, including, without limitation, reaction by-products,
pesticides, oil and other petroleum products, mold and asbestos.

     Healthcare 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)
HIPAA, (d) Medicare; (e) Medicaid; (f) quality, safety and accreditation standards and requirements
of all applicable state laws or regulatory bodies; (g) all laws, policies, procedures, requirements
and regulations pursuant to which licenses, approvals and accreditation certificates are issued in
order to operate medical or senior housing facilities; and (h) any and all other applicable health
care laws, regulations, manual provisions, policies and administrative guidance, each of (a)
through (g) as may be amended from time to time.

     Highest Lawful Rate. “Highest Lawful Rate” means the maximum lawful rate of
interest referred to in Section 2.8 that may accrue pursuant to this Agreement.

     HIPAA. “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.

     Improvements. “Improvements” means any and all buildings, structures,
improvements and fixtures now or in the future located or to be constructed on any Real Property.

     Information Certificate. “Information Certificate” means that certain
Information Certificate of Borrower attached hereto and made a part hereof.

     Intellectual Property. “Intellectual Property” has the meaning set forth in
Section 4.16.

     Insurer. “Insurer” means a Person that insures a Patient against certain of
the costs incurred in the receipt by such Patient of Medical Services, or that has an agreement
with Borrower to compensate Borrower for providing goods or services to a Patient.

     LaSalle Bank. “LaSalle Bank” means LaSalle Bank National Association, a
national banking association, in its capacity as a Lender, and in its capacity as syndication agent
and documentation agent hereunder, together with its successors and assigns.

     Laws. “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, now or hereafter in effect, and in each case
as amended or supplemented from time to time.

10

 

     Leases. “Leases” means the collective reference to all leases, subleases and
occupancy agreements affecting the Real Property or any part thereof now existing or hereafter
executed (including, without limitation, all Commercial Leases, all Operating Leases and all admission
agreements) and all amendments, modifications or supplements thereto.

     Lender. “Lender” means each of (a) LaSalle Bank, (b) Merrill Lynch, (c) each
other Person that becomes a holder of a Note pursuant to Section 12.6, and (d) the
respective successors and assigns of any or all of the foregoing, and Lenders means all of the
foregoing.

     LIBOR Rate. “LIBOR Rate” means The London Interbank Offered Rate (LIBOR) rate
of interest per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the rate
of interest which is identified and normally published by Bloomberg Professional service Page BBAM
1 (the “Page”) as the offered rate for loans in U.S. Dollars under the caption British
Bankers Association LIBOR Rates at 11:00 A.M. (London time). Throughout the term of the Loan, the
LIBOR Rate will float daily and be determined two (2) Business Days prior to each calendar day
utilizing the one (1) month LIBOR rate set forth on the Page. If Bloomberg Professional service no
longer reports the Base Rent or Lender determines in good faith that the rate so reported no longer
accurately reflects the rate available to Administrative Agent in the London Interbank Market or if
such index no longer exists or if Page BBAM 1 no longer exists or accurately reflects the rate
available to Lender in the London Interbank Market, Administrative Agent may select a replacement
index or replacement page, as the case may be.

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

     Loan. “Loan” means the Term Loan contemplated hereunder.

     Loan Documents. “Loan Documents” means and includes this Agreement, the
Notes, any Guaranty, the Collateral Assignment of Acquisition Agreement, the Mortgages, the
Security Agreement, the Pledge Agreement, the Subordination of Management Agreement, and each and
every other instrument, agreement, and document now or hereafter executed or delivered by or on
behalf of Borrower, any of the Operators, or any Guarantor in connection with this Agreement, as
any of them may be amended, modified, increased, renewed or restated from time to time.

     Loan Year. “Loan Year” means the period from the Closing Date through the last day of
the same month in the following year and thereafter each successive twelve (12) month period.

     Location. “Location” or “Locations” mean one or more of the
healthcare or other facilities owned by the Borrower and operated by the Operator on the Real
Property.

     Manager. “Manager” or “Managers” means, collectively, Tandem Regional
Management of Florida, Inc., a Florida corporation, and if applicable, the other managers
identified on Schedule 1.1(a) of the Information Certificate as managers of the Locations.

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     Material Adverse Effect. “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 Administrative Agent or any Lender under any Loan Document or the
ability of the Credit Parties, taken as a whole, to perform their payment or other obligations
under any Loan Document to which they are parties, (c) a material adverse change in, or a material
adverse effect upon, the legality, validity or enforceability of any Loan Document, (d) a material
adverse change in, or a material adverse effect upon, the existence, perfection or priority of any
security interest granted in any Loan Document or the value of any material Collateral not
resulting from any action or inaction by the Administrative Agent or any Lender, (e) the
termination of Borrower’s continued participation in a Medicare or Medicaid reimbursement program,
or (f) that otherwise gives rise to any liability of any Credit Party with respect to a Location to
any Governmental Authority as a result of a violation of any Healthcare Law in excess of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00).

     Maturity Date. “Maturity Date” means April 30, 2010, unless otherwise
accelerated pursuant to the terms of this Agreement.

     Medicaid. “Medicaid” means the medical assistance programs administered by
state agencies and approved by CMS pursuant to the terms of Title XIX of the Social Security Act,
codified at 42 U.S.C. 1396 et seq.

     Medical Services. “Medical Services” means medical and health care services
provided to a Patient by Operators, including, but not limited to, medically necessary health care
services provided to a Patient and performed by Operators which are covered by a policy of
insurance issued by an Insurer, and including, but not limited to, physician services, nurse and
therapist services, dental services, skilled nursing facility services, rehabilitation services,
home health care services, behavioral health services, hospice services, medical equipment and
pharmaceuticals.

     Medicare. “Medicare” means the program of health benefits for the aged and
disabled administered by CMS pursuant to the terms of Title XVIII of the Social Security Act,
codified at 42 U.S.C. 1395 et seq.

     Merrill Lynch. “Merrill Lynch” means Merrill Lynch Capital, a Division of
Merrill Lynch Business Financial Services, Inc., a Delaware corporation, together with its
successors and assigns.

     Mortgages. “Mortgages” has the meaning set forth in the Recitals.

     Notes. “Note” or “Notes” shall mean any promissory note or notes or
other writing from time to time evidencing Borrower’s obligation to pay the Obligations, as any of
them may be

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amended, modified, increased, renewed or restated from time to time, and includes,
without limitation, the Notes defined in the Recitals as Notes.

     Obligations. “Obligations” means (a) the principal of, and interest on, the
Notes and all other sums, fees, amounts for indemnification, charges, costs and expenses due or
payable under this Agreement or the other Loan Documents, (b) all agreements and covenants with and
obligations to Lenders and Administrative Agent arising under, out of, or as a result of or in
connection with the Loan Documents, (c) all amounts advanced by Administrative Agent or, if
applicable, Lenders to preserve, protect, defend, and enforce their rights under this Agreement and
the other Loan Documents or in the Collateral, and all expenses incurred by Administrative Agent
and Lenders in connection therewith, and (d) any and all indebtedness, liabilities and obligations
of the Operators owing to Administrative Agent and the Lenders under or pursuant to the Affiliated
Loan Documents.

     OFAC Lists. “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 Leases. “Operating Leases” means the collective reference to all
Commercial Leases between the Borrower and the Operators pursuant to which the Operators lease and
operate each Location.

     Operator. “Operator” or “Operators” means, collectively, OP
Selinsgrove, LLC (as operator of the Selinsgrove Location), OP Mifflin, LLC (as operator of the
Mifflin Location), OP Pottsville, LLC (as operator of the Pottsville Location), OP New Bloomfield,
LLC (as operator of the New Bloomfield Location), OP Millersburg, LLC (as operator of the
Millersburg Location), OP Everett, LLC (as operator of the Everett Location), OP Hazleton, LLC and
OP Hazelton II (as operator of the Hazelton Location), each a Pennsylvania limited liability
company, and OP Frostburg, LLC (as operator of the Frostburg Location) and OP Salisbury, LLC (as
operator of the Salisbury Location), each a Maryland limited liability company, all of which are
licensed under all applicable Healthcare Laws as the operators of the respective Location.

     Patient.. “Patient” means any Person receiving Medical Services from the
Operators and all Persons legally liable to pay the Operators for such Medical Services other than
Insurers or Governmental Authorities.

     Permitted Liens. “Permitted Liens” means the following, provided the
same have no superior priority over Administrative Agent’s Lien in the Collateral (for the benefit
of the Lenders) and provided, further, the same do not encumber any Accounts: (a)
deposits or pledges of Personal Property to secure obligations under workmen’s compensation, social
security or similar Laws, or under unemployment insurance; (b) deposits or pledges of Personal
Property to secure bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory

13

 

obligations, surety and appeal bonds and other obligations of like nature arising
in the ordinary course of business; (c) mechanic’s, workmen’s, materialmen’s or other like Liens
arising in the
ordinary course of business with respect to obligations which are not due, or which are being
contested in full compliance with Section 5.6; (d) Liens and encumbrances in favor of
Administrative Agent (for the benefit of Lenders); (e) Purchase Money Liens; (f) Liens set forth on
Schedule 1.1(c) of the Information Certificate; (g) Liens arising as a matter of law for
taxes, assessments, or similar charges, incurred in the ordinary course of business and which are
not yet due and payable or which are being contested in good faith; and (h) encumbrances consisting
of zoning restrictions, easements or other restrictions on the use of Real Property set forth on
the “Schedule B” title insurance policies accepted by Administrative Agent and Lenders at Closing,
none of which materially impairs the use of such Real Property or the value thereof, and none of
which is violated in any material respect by existing structures or land use.

     Person. “Person” means an individual, partnership, corporation, trust,
cooperative, joint venture, joint stock company, limited liability company, association,
unincorporated organization, Governmental Authority, or any other entity.

     Personal Property. “Personal Property” has the meaning set forth in
Section 8.4(a).

     Plan. “Plan” has the meaning set forth in Section 4.12.

     Pledge Agreement. “Pledge Agreement” means that certain Pledge Agreement of
even date herewith made by Guarantor in favor of Administrative Agent for the benefit of the
Lenders, as the same may be amended or modified from time to time.

     Prohibited Transaction. “Prohibited Transaction” means a “prohibited
transaction” within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Internal
Revenue Code that is not exempt under Section 407 or Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Internal Revenue Code or under a class exemption granted by the U.S. Department of
Labor.

     Pro Rata Share. “Pro Rata Share” means (a) with respect to a Lender’s right
to receive payments of principal and interest with respect to the Term Loan, the Term Loan
Commitment Percentage of such Lender, and (b) for all other purposes (including without limitation
the indemnification obligations arising under Section 12.16) with respect to any Lender,
the percentage obtained by dividing (i) such Lender’s then outstanding principal amount of the Term
Loan by (ii) the then outstanding principal amount of the Term Loan.

     Purchase Money Liens. “Purchase Money Liens” means purchase money Liens or
Liens on property leased under capital leases in an aggregate amount not to exceed One Million
Dollars ($1,000,000) (in the aggregate amount for all Borrowers) incurred in connection with
financing the acquisition or lease of equipment acquired or held by a Borrower for use solely at
the Location owned or operated by such Borrower, which Lien is confined solely to the acquired or
leased equipment and the proceeds thereof, provided, the same do not encumber any Accounts,
and provided, further, that the indebtedness incurred shall not exceed one hundred
percent (100%) of the purchase price of the item or items purchased.

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     Real Property. “Real Property” means all real property encumbered by any of
the Loan Documents or otherwise serving as Collateral for the Obligations, and includes, without
limitation, the Real Property described on Exhibit A-1 through Exhibit A-9 attached hereto.

     Release. “Release” shall mean, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such Person, including
the movement of Hazardous Materials through or in the air, soil, surface water, ground water or
property.

     Reportable Event. “Reportable Event” means a “reportable event” as defined in
Section 4043(c) of ERISA for which the notice requirements of Section 4043(a) of ERISA are not
waived.

     Required Lenders. “Required Lenders” means at any time Lenders holding
sixty-six and two thirds percent (66 2/3%) or more of the sum of the outstanding principal balance of
the Term Loan.

     Security Agreement. “Security Agreement” has the meaning set forth in the
Recitals.

     Sellers. “Sellers” has the meaning set forth in the Recitals.

     Single Purpose Entity. “Single Purpose Entity” means an entity that exists solely for
the purpose of owning and operating (directly or through an affiliate) one of the properties
constituting Real Property and conforms with all of the requirements set forth on Schedule E
attached hereto.

     Solvent. “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.

     Stock. “Stock” shall mean all certificated and uncertificated shares,
options, warrants, general or limited partnership interests, membership 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 in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

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     Subordination of Management Agreement. “Subordination of Management Agreement”
has the meaning set forth in Section 5.29.

     Subsidiary. “Subsidiary” shall mean, 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 or manager or may exercise the powers of a general
partner or manager.

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

     Term Loan. “Term Loan” has the meaning set forth in Section 2.1.

     Term Loan Amount. “Term Loan Amount” has the meaning set forth in Section
2.2.

     Term Loan Commitment Percentage. “Term Loan Commitment Percentage” means, as to any
Lender, the percentage set forth opposite such Lender’s name on the Commitment Annex under the
column “Term Loan Commitment Percentage,” or, if different, in the most recent Assignment
Agreement to which such Lender is a party.

     Uniform Commercial Code or UCC. “Uniform Commercial Code” or “UCC” 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 (for the ratable benefit of the Lenders) 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” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions of this Agreement or the other Loan Documents 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 Loan Document 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.

     Section 1.2. Interpretation. 

     (a) All accounting terms used in this Agreement or the other Loan Documents 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

16

 

computed,
unless otherwise specifically provided therein, in accordance with GAAP consistently applied; provided,
however, that all financial covenants and calculations in the Loan Documents
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.

     (b) 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 their respective successors and assigns (to
the extent and only to the extent permitted by the Loan Documents) 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 Loan Document refers to the knowledge (or
an analogous phrase) of Borrower, such words are intended to signify that Borrower has actual
knowledge or awareness of a particular fact or circumstance or that Borrower, if it had exercised
reasonable diligence, would have known or been aware of such fact or circumstance.

ARTICLE II

AMOUNT AND TERMS OF CREDIT

     Section 2.1. General Terms. Subject to the terms and conditions of this Agreement,
from the Closing Date and until the Maturity Date, each Lender severally agrees to make available
to Borrower the term loan credit facility hereinafter provided for (“Term Loan”). At Closing,
Borrower shall execute and deliver to Administrative Agent, for the benefit of the Lenders,
respectively, the Notes evidencing Borrower’s unconditional obligation to repay each Lender for its
Pro Rata Share of all advances and other extensions of credit made under or in respect of the Term
Loan, payable to the order of each Lender, respectively, in accordance with the terms in this
Agreement and the Notes. The Notes shall bear interest on the outstanding principal balance of the
Notes from the date of the Notes until repaid, at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Applicable Base Rate, provided,
however, that after the occurrence and during the continuance of an Event of Default such rate may,
at the election of the Administrative Agent , be increased to the Default Rate. Each determination
by Administrative Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error. If Administrative Agent has the right to declare an Event of
Default hereunder, but elects not to do so, Administrative Agent will be entitled, in addition to
exercising any other rights and remedies

17

 

available to it hereunder, to assess a non-compliance fee
which shall operate to increase the Applicable Base Rate by two percent (2%) per annum during the
continuance of such Event of
Default. The non-compliance fee will not be assessed if the Default Rate is being charged
hereunder. Each advance and, if applicable, other extension of credit hereunder shall be deemed
evidenced by the Notes, which are deemed incorporated into and made a part of this Agreement by
this reference.

     Section 2.2. Term Loan.

     (a) The term “Term Loan Amount” means an amount equal to Seventy Million and No/100
Dollars ($70,000,000.00).

     (b) Subject to the terms and conditions set forth herein, each Lender severally agrees to make
the Term Loan in an original principal amount equal to such Lender’s respective Term Loan
Commitment Percentage of the Term Loan Amount on the Closing Date; provided,
however, that no Lender shall have any obligation to fund any portion of the Term Loan
required to be funded by any other Lender, but not so funded.

     (c) Until an Event of Default shall have occurred, for all advances made in respect of the
Term Loan and all amounts outstanding thereunder, the Applicable Margin is a rate of interest equal
to three and three quarters percent (3.75%) per annum.

     (d) The Term Loan shall not be in the nature of a revolving line of credit, but shall include
sums advanced and, if applicable, other credit extended by Administrative Agent and Lenders to or
for the benefit of Borrower from time to time under this Section. All such advances and extensions
of credit in respect of the Term Loan shall be made or declined in Administrative Agent’s
discretion. To the extent any Term Loan proceeds are repaid for any reason, whether voluntarily or
involuntarily (including repayments from insurance or condemnation proceeds), Lenders shall have no
obligation to re-advance such sums to Borrower.

     (e) Principal payable on account of the Term Loan shall be payable by Borrower to
Administrative Agent for the benefit of the Lenders in the amounts and at the times set forth in
the amortization schedule attached as Schedule B hereto (or sooner upon the acceleration of
the Obligations in accordance with the terms of this Agreement). Interest accrued on the Term Loan
shall be due on the earliest of (i) the first day of each month (for the immediately preceding
month), computed on the last calendar day of the preceding month, (ii) during the continuance of an
Event of Default, the day such interest accrues, or (iii) the Maturity Date; provided,
however, that if any portion of the Term Loan is funded on a date other than the first day
of a calendar month, then Borrower shall pay to Administrative Agent for the Lenders, on the date
of such funding, interest which will accrue on the entire Term Loan (or such lesser portion as
shall be funded on such date) during the calendar month of such funding.

     (f) As an inducement to Lenders to make the Term Loan available to Borrower, Borrower shall
pay to Administrative Agent (for the ratable benefit of Lenders) a commitment fee equal to one
percent (1.0%) of the Term Loan Amount (such amount, the “Term Loan

18

 

Commitment Fee”). The Term Loan Commitment Fee will be paid to Administrative Agent (for the ratable benefit of Lenders)
on the Closing Date.

     (g) In lieu of a higher Term Loan Commitment Fee payable upon execution of this Agreement, on
the earliest to occur of (i) the Maturity Date (as the same may be accelerated pursuant to this
Agreement), (ii) the date of any prepayment of the Term Loan or (iii) the date of any Event of
Default the result of which causes an acceleration of the Term Loan, Borrower shall pay to
Administrative Agent (for the ratable benefit of the Lenders) a deferred commitment fee (such
amount, together with any other commitment fee payable under Section 2.2 above, is herein referred
to as the “Deferred Commitment Fee”) in an amount equal to (y) One Million Four Hundred
Thousand Dollars ($1,400,000) if any of the events described in clauses (i), (ii) or (iii) occur on
or before February 1, 2006, and (z) Seven Hundred Thousand Dollars ($700,000) if any of the events
described in clauses (i), (ii) or (iii) occur at any time after February 1, 2006.

     (h) Borrower shall have the right to make a prepayment of the entire Term Loan, in whole only,
and not in part, on any regularly scheduled payment date; provided, however, that
Borrower (i) gives Lenders at least thirty (30) days’ prior written notice, (ii) pays all fees and
costs due from Borrower to Lenders including, without limitation, any attorneys’ fees and
disbursements incurred by Lenders as a result of the prepayment and any fees payable upon any
termination of this Agreement, and (iii) pays and performs in full all other Obligations under this
Agreement; and provided, further, that the borrowers under the Affiliated Loan
Documents (i) give Lenders at least thirty (30) days’ prior written notice of the termination of
such borrowers’ right to request Revolving Credit Loans (as defined in the Affiliated Loan
Documents) under the Affiliated Loan Documents, (ii) pays all fees and costs due from the borrowers
under the Affiliated Loan Documents to Lenders including, without limitation, any attorneys’ fees
and disbursements incurred by Lenders as a result of the prepayment and all deferred commitment
fees or any other fees payable upon any termination of the Affiliated Loan Documents, and (iii)
pays and performs in full all other Obligations (as defined in the Affiliated Loan Documents) under
the Affiliated Loan Documents.

     (i) Partial prepayments of the Term Loan shall not be permitted, except partial prepayments
resulting from Administrative Agent applying insurance proceeds or condemnation awards to reduce
the outstanding principal balance of the Term Loan as provided in the Loan Documents, in which
event no deferred commitment fee or premium shall be due. No notice of prepayment shall be
required under the circumstance specified in the preceding sentence. No principal amount repaid on
the Term Loan may be reborrowed. In the case of prepayments arising from the application of
condemnation awards or insurance proceeds, partial payments of principal shall be applied to the
unpaid principal balance evidenced hereby on the next succeeding scheduled payment date following
Administrative Agent’s determination to apply insurance proceeds or condemnation awards to the
partial prepayment of the outstanding principal balance of the Term Loan, and no notice of such
prepayment shall be required.

     Section 2.3.
[Reserved]

     Section 2.4.
Loan Administration.

19

 

     (a) All advances and other extensions of credit to or for the benefit of Borrower shall
constitute one general obligation of Borrower, and shall be secured by Administrative Agent’s Lien
upon all of the Collateral (for the ratable benefit of the Lenders).

     (b) Administrative Agent shall enter all advances of proceeds under the Term Loan as debits to
a loan account in the name of Borrower and shall also record in said loan account all payments made
by Borrower on any Obligations which are paid to Administrative Agent for the benefit of the
Lenders, and may record therein, in accordance with customary accounting practice, other debits and
credits, including interest and all charges and expenses properly chargeable to Borrower.

     (c) All sums received by Administrative Agent (for the benefit of the Lenders) for the account
of Borrower shall be applied first to fees, costs and expenses due and owing under the Loan
Documents, then to interest due and owing under the Loan Documents, and then to principal
outstanding with respect to the Term Loan in such order of application as Administrative Agent
shall elect in its discretion. During the continuance of any Event of Default hereunder, or
following the maturity of the Obligations, all sums received by Administrative Agent (for the
benefit of the Lenders) for the account of Borrower shall be applied to the Obligations in such
order as Administrative Agent shall elect in its discretion.

     (d) Administrative Agent will account to Borrower monthly with a statement of loans, charges
and payments made pursuant to this Agreement, and such accounting rendered by Administrative Agent
shall be deemed final, binding and conclusive upon Borrower, absent manifest error, unless
Administrative Agent is notified by Borrower in writing to the contrary within thirty (30) days of
the date each accounting is mailed to Borrower. Such notice shall be deemed an objection only to
those items specifically objected to in the notice.

     Section 2.5. Additional Fees and General Terms Relating to Fees. 

     (a) Borrower shall pay to Administrative Agent (and, as applicable, LaSalle Bank) all fees and
expenses in connection with audits of Borrower’s books and records and appraisals of the Collateral
and such other matters as Administrative Agent shall deem appropriate, which shall be due and
payable on the later of (i) the first Business Day of the month following the date of issuance by
Administrative Agent of a request for payment thereof to Borrower or (ii) ten (10) days after
Borrower has received such payment request.

     (b) Borrower shall pay to Administrative Agent (for the ratable benefit of Lenders), on
demand, any and all fees, costs or expenses which Administrative Agent pays to a bank or other
similar institution arising out of or in connection with (i) the forwarding to Borrower or any
other Person on behalf of Borrower, by Administrative Agent, of proceeds of the Term Loan made by
Lenders to Borrower pursuant to this Agreement, and (ii) the depositing for collection, by
Administrative Agent of any check or item of payment received or delivered to Administrative Agent
on account of the Obligations.

     (c) For so long as any of the Collateral consists of Real Property, Borrower unconditionally
shall pay to Administrative Agent (for the ratable benefit of Lenders) an annual Real Property
collateral inspection fee (the “Real Property Collateral Fee”) equal to Two

20

 

Thousand Six Hundred Sixty-Seven Dollars ($2,667) for each Location representing costs incurred or to be
incurred by Administrative Agent for annual inspections of the Real Property. The Real Property
Collateral Fee for each Location shall be due and payable upon the
anniversary of the Closing Date, except that no such payment shall be required on the Maturity
Date.

     (d) All fees due under this Agreement shall be fully earned when due and shall be
non-refundable. All fees due under this Agreement shall be computed on the basis of the actual
number of days elapsed over a year of 360 days unless otherwise expressly provided.

     Section 2.6. Manner of Payments. 

     (a) Except to the extent otherwise set forth in this Agreement, all payments of principal and
of interest on the Term Loan, all other charges and any other obligations of Borrower under this
Agreement, shall be made to Administrative Agent (for the benefit of Lenders) to the Concentration
Account, in immediately available funds. All payments shall be made without deduction for any
set-off, recoupment, counterclaim or defense that Borrower now has or may have in the future.

     (b) If any payment required hereunder is not actually received by the Administrative Agent
within five (5) calendar days of the date such payment is due, Borrower agrees to pay, upon request
by the Administrative Agent, a late charge equal to three percent (3%) of the total amount of any
delinquent payment as liquidated damages in order to defray the increased cost of collection
occasioned by such late payment and the lost investment opportunity. Such charges shall be imposed
upon written notice to the Borrower or any other Person, but not more often than once a month.

     Section 2.7. Use of Proceeds. The proceeds of each Lender’s advances under the Loan
shall be used solely for the Approved Use of Proceeds.

     Section 2.8. Interest Rate Limitation. The parties intend to conform strictly to the
applicable usury laws in effect from time to time during the term of the Term Loan. Accordingly,
if any transaction contemplated by this Agreement would be usurious under such laws, then
notwithstanding any other provision of this Agreement: (a) the aggregate of all interest that is
contracted for, charged, or received under this Agreement or under any other Loan Document shall
not exceed the maximum amount of interest allowed by applicable law (the “Highest Lawful Rate”),
and any excess shall be promptly credited to Borrower by Administrative Agent (or, to the extent
that such consideration shall have been paid, such excess shall be promptly refunded to Borrower by
Administrative Agent); (b) neither Borrower nor any other Person now or hereafter liable under this
Agreement shall be obligated to pay the amount of such interest to the extent that it is in excess
of the Highest Lawful Rate; and (c) the effective rate of interest for the portion of the Term Loan
that would otherwise be usurious under applicable laws shall be reduced to the Highest Lawful Rate.
All sums paid, or agreed to be paid, to Administrative Agent for the use, forbearance, and
detention of the debt of Borrower to Administrative Agent shall, to the extent permitted by
applicable law, be allocated throughout the full term of the applicable Note until payment is made
in full so that the actual rate of interest does not exceed the Highest Lawful Rate in effect at
any particular time during the full term

21

 

thereof. If at any time the rate of interest under the
applicable portion of the Term Loan exceeds the Highest Lawful Rate, the rate of interest to accrue
pursuant to this Agreement under such portion of the Term Loan shall be limited, notwithstanding
anything to the contrary in this
Agreement, to the Highest Lawful Rate, but any subsequent reductions in the applicable
interest accrual rate shall not reduce the interest to accrue pursuant to this Agreement below the
Highest Lawful Rate until the total amount of interest accrued equals the amount of interest that
would have accrued if the Applicable Base Rate had at all times been in effect. If the total
amount of interest paid or accrued pursuant to this Agreement under the foregoing provisions is
less than the total amount of interest that would have accrued if the Applicable Base Rate had at
all times been in effect, then Borrower agrees to pay to Administrative Agent (for the benefit of
Lenders) an amount equal to the difference between (x) the lesser of (A) the amount of interest
that would have accrued if the Highest Lawful Rate had at all times been in effect, or (B) the
amount of interest that would have accrued if the Applicable Base Rate had at all times been in
effect, and (y) the amount of interest accrued in accordance with the other provisions of this
Agreement.

     Section 2.9. Term.

     (a) Unless due and payable sooner pursuant to this Agreement, all principal, interest and
other sums due under the Loan Documents, and all other Obligations, shall be due and payable in
full on the Maturity Date. Unless sooner terminated pursuant to this Agreement, all obligations of
Administrative Agent and Lenders to make any advances in respect of the Term Loan shall terminate
ten (10) days prior to the Maturity Date.

     (b) All undertakings, agreements, covenants, warranties, and representations of Borrower
contained in the Loan Documents shall survive any termination of the Lenders’ obligation to make
any advances in respect of the Term Loan hereunder and Administrative Agent shall retain its Liens
in the Collateral (for the ratable benefit of the Lenders) and all of its rights and remedies under
the Loan Documents notwithstanding such termination until Borrower has paid the Obligations to
Administrative Agent (for the benefit of the Lenders), in full, in immediately available funds.

     (c) Notwithstanding any provision of this Agreement which makes reference to the continuance
of an Event of Default, nothing in this Agreement shall be construed to permit Borrower to cure an
Event of Default following the lapse of the applicable cure period, and Borrower shall have no such
right in any instance unless specifically granted in writing by Administrative Agent .

     Section 2.10. Deposit Accounts. 

     (a) If Borrower maintains a Deposit Account with any bank, Borrower shall, at the request of
Administrative Agent, execute with each such bank a Deposit Account Control Agreement and such
other agreements related to such Deposit Account as Administrative Agent may require; provided,
that, notwithstanding the foregoing, Borrower shall not be required to enter a Deposit Account
Control Agreement with any such Bank to the extent that the amount on deposit with such Bank,
together with the amount on deposit with any other bank by Borrower or Operator, does not exceed
$100,000.

22

 

     (b) Notwithstanding anything in any Deposit Account Control Agreement to the contrary,
Borrower agrees that it shall be liable for any fees and charges in effect from time to time and
charged by each bank in which Borrower maintains a Deposit Account in connection
with any Deposit Account Control Agreement, and that neither Administrative Agent nor any
Lender shall have any liability therefor. Borrower agrees to indemnify and hold Administrative
Agent and each Lender harmless from any and all liabilities, claims, losses and demands whatsoever,
including reasonable attorneys’ fees and expenses, arising from or relating to actions of
Administrative Agent or any bank in which Borrower maintains a Deposit Account pursuant to this
Section or any Deposit Account Control Agreement.

     (c) Borrower acknowledges and agrees that its compliance with the terms of this Section is
essential, and that Administrative Agent shall suffer immediate and irreparable injury and have no
adequate remedy at law, if Borrower, through its acts or omissions, maintains a Deposit Account not
subject to a Deposit Control Agreement if requested by Administrative Agent. If Administrative
Agent and the Lenders have the right to declare an Event of Default hereunder, but elect not to do
so, Administrative Agent and Lenders will be entitled, in addition to exercising any other rights
and remedies available to Lenders or the Administrative Agent hereunder, to assess a non-compliance
fee which shall operate to increase the Applicable Base Rate by two percent (2%) per annum during
the continuance of such Event of Default. The non-compliance fee will not be assessed if the
Default Rate is being charged hereunder.

ARTICLE III

CLOSING AND CONDITIONS OF LENDING

     Section 3.1. Conditions Precedent to Agreement. The obligation of Administrative
Agent and each of the Lenders to enter into and perform this Agreement and for the Lenders to make
advances under the Term Loan is subject to the satisfaction of each and every one of the following
conditions precedent, each to the satisfaction of Administrative Agent and LaSalle Bank in their
sole discretion (and Administrative Agent’s receipt of any other agreement, document, certificate
and instrument set forth on the Closing Checklist for the transactions contemplated by this
Agreement, each in form and substance satisfactory to Administrative Agent):

     (a) Each Lender shall have received two (2) originals of this Agreement, the Guaranty, the
Security Agreement, the Pledge Agreement, the Collateral Assignment of Acquisition Agreement, the
Subordination of Management Agreement, and all other Loan Documents required to be executed and
delivered at or before Closing (other than the Notes, as to which each Lender shall receive only
one (1) original), executed by Borrower and any other required Persons, as applicable.

     (b) Administrative Agent shall have received all searches required by Section 5.33.

     (c) Borrower and any Guarantor shall have complied and shall then be in compliance with all
the terms, covenants and conditions of the Loan Documents.

     (d) There shall have occurred and be continuing no Default.

23

 

     (e) The representations and warranties contained in Article IV shall be true and
correct.

     (f) Administrative Agent shall have received copies of all board of directors resolutions,
consents of members and managers and consents of partners, as applicable, of each Borrower and
Guarantor, and other action taken by Borrower and any Guarantor to authorize the execution,
delivery and performance of the Loan Documents and the borrowing of the Loan under the Loan
Documents, as well as the names and signatures of the officers of, members and managers of and
partners, as applicable, of Borrower and Guarantor authorized to execute documents on its behalf in
connection with the Loan, all as also certified as of the date of this Agreement by Borrower’s or
Guarantor’s, as applicable, chief financial officer, or equivalent, and such other papers as
Administrative Agent may require.

     (g) Administrative Agent shall have received (i) copies, certified as true, correct and
complete by the applicable state of organization of each Borrower and Guarantor, of the certificate
of incorporation, certificate of formation or certificate of limited liability partnership, as
applicable, of each Borrower and Guarantor, with any amendments to any of the foregoing, (ii)
copies, certified as true, correct and complete by an authorized officer, member or partner of each
Borrower and Guarantor, of all other documents necessary for performance of the obligations of
Borrower and Guarantor under this Agreement and the other Loan Documents, and (iii) certificates of
good standing for each Borrower and Guarantor issued by the state of organization of each Borrower
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.

     (h) Administrative Agent shall have received a written opinion of counsel for Borrower and any
Guarantor, dated the date of this Agreement, in form and substance satisfactory to Administrative
Agent and LaSalle Bank.

     (i) Administrative Agent and LaSalle Bank shall have received such financial statements,
reports, certifications, and other operational information required to be delivered under this
Agreement.

     (j) Administrative Agent (for the benefit of Lenders) shall have received all commitment fees
provided for herein.

     (k) Any lockboxes, lockbox accounts or blocked accounts provided for herein or in any Loan
Document shall have been established.

     (l) All of the obligations of Borrower to any prior lender (other than lenders pursuant to
Borrowed Money permitted under Section 6.1) as in effect immediately prior to the Closing
Date will be performed and paid in full from the proceeds of the initial advances under the Term
Loan on the Closing Date and all Liens of any such prior lender on any property of Borrower in
respect thereof will be terminated immediately upon such payment (pursuant to payoff letter(s) in
form and substance satisfactory to Administrative Agent).

     (m) Administrative Agent and LaSalle Bank shall have received evidence satisfactory to such
Person that the insurance policies required under Article V are in full force and effect,
together with written evidence showing lender’s loss payable or additional insured clauses or

24

 

endorsements in favor of Administrative Agent (and LaSalle Bank, or for the benefit of each Lender)
as required under such section.

     (n) Administrative Agent shall have received a certificate of Borrower’s chief financial
officer, dated the Closing Date, certifying that, and Borrower shall have satisfied, all of the
conditions specified in this Section 3.1 have been fulfilled.

     (o) If Real Property constitutes any portion of the Collateral, Borrower shall have satisfied
all of the following additional conditions:

          (1) The state of title to the Real Property shall be satisfactory to Administrative Agent and
LaSalle Bank and Administrative Agent’s mortgages, deeds to secure debt or deeds of trust shall be
insured by a mortgagee title insurance policy (or binding commitment therefor) in form and
substance and from a title insurer acceptable to Administrative Agent and LaSalle Bank. Such title
insurance policy shall be on an American Land Title Association (“ALTA”) form designated by
Administrative Agent, shall specifically contain no exception as to survey matters or creditors
rights, must contain affirmative coverage against mechanics’, contractors’, suppliers’ and/or
materialmen’s liens, filed or unfiled, must affirmatively insure that the security instrument is a
valid first lien against the fee simple, marketable estate, insuring Administrative Agent (for the
benefit of the Lenders) for a sum not less than the maximum principal amount of all financing
secured thereby and must contain such endorsements as may be required by Administrative Agent and
LaSalle Bank (including, but not limited to, endorsements covering zoning (ALTA 3.1), variable
interest rates, revolving credit, no violations of covenants, conditions and restrictions, street
address, no usury violation, environmental liens, tie-in, access, contiguity, encroachment, tax
parcel, doing business, mortgage tax, first loss and last dollar, each to the extent available
under applicable law). Fee simple title to the Real Property and to the fixtures, equipment,
furniture and personal property encumbered by the Loan Documents shall be marketable, and free and
clear of all defects, liens, encumbrances, security interests, assessments, restrictions and
easements which are not acceptable to and approved in writing by Administrative Agent. If access
to the Real Property is by means of easements or leases, said easements or leases shall be
satisfactory in form and substance to Administrative Agent, shall be insured under the mortgagee’s
title insurance policy issued to Administrative Agent as part of the insured estate and shall not
be subject to any prior liens, encumbrances, covenants or restrictions. All streets necessary to
serve the property for the use represented by Borrower shall have been completed and shall be
serviceable and all streets to be dedicated shall have been dedicated and accepted for public use
and maintenance. A search of the state and local public records shall disclose no conditional
sales contracts, chattel mortgages, leases of personalty, financing statements or title retention
agreements filed and/or recorded against the Borrower or the property other than Permitted Liens.

          (2) Administrative Agent shall have received the following, all in form and substance
satisfactory to Administrative Agent and LaSalle Bank in their sole and absolute discretion, prior
to any disbursement of the Term Loan:

               (a) such property appraisals, property as-built surveys complying in all respects with the
“Minimum Standard Detail requirements for ALTA/ACSM Land Title Surveys,” jointly established and
adopted in 1999 by ALTA, the American Congress

25

 

on Surveying and Mapping and the National Society of
Professional Surveyors, and meeting the accuracy requirements of an urban survey, and including
items 1 through 16 of Table A thereof (except for item 5 relating to contours of the land),
environmental reports (prepared by an
independent professional environmental consultant approved by Administrative Agent), physical
and structural inspection reports and other third party reports as Administrative Agent shall deem
necessary or appropriate;

               (b) evidence that the Real Property and all improvements thereon comply with applicable codes,
regulations and ordinances, are zoned for their current use, are structurally sound, are adequately
served by public utilities, are completed free of mechanics and materialmens liens, are not the
subject to any pending or threatened litigation, are not the subject of any pending or threatened
condemnation proceeding and have not been damaged by fire or other casualty;

               (c) copies of all Commercial Leases pertaining to the Real Property; and

               (d) such other documents and materials as Administrative Agent or LaSalle Bank shall deem
necessary or appropriate.

          (3) The Real Property shall be owned by Borrower and shall not be the subject of any
transaction whereby the legal or beneficial title to all or any part thereof shall be transferred
to anyone other than the Borrower.

          (4) All real estate taxes and assessments, special or otherwise, which are due and payable
must be paid in full on or before Closing. Borrower shall submit to Administrative Agent prior to
Closing copies of all recent real estate tax bills, with proof of payment, together with evidence
that the mortgaged premises is a separately identifiable tax lot.

          (5) Administrative Agent shall have received evidence satisfactory to Administrative Agent
that the Real Property is not within a special flood hazard area and is not eligible for flood
insurance under the U. S. Flood Disaster Protection Act of 1973, as amended.

          (6) All non-residential Tenants of the Real Property shall have executed and delivered to
Administrative Agent subordination and attornment agreements and estoppel certificates in form and
substance satisfactory to Administrative Agent and all Commercial Leases shall be in full force and
effect without default, defense, recoupment or setoff.

          (7) Administrative Agent and LaSalle Bank shall have received and approved one or more
Appraisals of the Real Property (including the personal property and business value of the Location
thereon) confirming an aggregate appraised value of no less than Eighty Seven Million Five Hundred
Thousand Dollars ($87,500,000).

     (p) UCC Financing Statements, as requested by the Administrative Agent, naming each Borrower
as debtor and the Administrative Agent (for the benefit of the Lenders) as secured party with
respect to the Collateral shall have been filed in each jurisdiction reasonably required by
Administrative Agent.

26

 

     (q) True, correct and complete copies of the fully-executed Acquisition Documents (including,
to the extent requested, all Exhibits and Schedules thereto) shall have been delivered to
Administrative Agent and LaSalle Bank.

     (r) The capitalization of the Borrower shall be satisfactory to the Administrative Agent and
LaSalle Bank after consummation of the Acquisitions, and the transactions contemplated by the
Acquisition Agreement shall have closed and funded concurrently with the transactions contemplated
by this Agreement.

     (s) Delivery, performance and satisfaction, in the sole discretion of Administrative Agent and
LaSalle Bank, of all other items set forth in that certain commitment letter dated March 14, 2005
(including, without limitation, each of the terms and conditions set forth in that certain Term
Sheet dated February 4, 2005 and the “Additional Terms and Closing Conditions” attached thereto)
accepted by Tandem Health Care, Inc. on behalf of Borrower and made in favor of each Lender.

     Section 3.2. Conditions Precedent to Advances. Notwithstanding any other provision of
this Agreement, no advances or other extensions of credit under the Term Loan shall be disbursed
under this Agreement unless the following conditions have been satisfied or waived immediately
before such disbursement:

     (a) The representations and warranties on the part of Borrower contained in Article IV
of this Agreement shall be true and correct in all respects at and as of the date of disbursement
or advance, as though made on and as of such date (except to the extent that such representations
and warranties expressly relate solely to an earlier date and except that the references in
Section 4.7 to financial statements shall be deemed to be a reference to the then most
recent annual and interim financial statements of Borrower furnished to Administrative Agent
pursuant to Section 5.1).

     (b) No Default shall have occurred and be continuing or would result from the making of the
disbursement or advance.

     (c) No Material Adverse Effect shall have occurred and be continuing since the date of this
Agreement.

     The request and acceptance by Borrower of the proceeds of any advance in respect of the Term
Loan shall be deemed to constitute, as of the date of such request and as of the date of such
acceptance, (i) a representation and warranty by Borrower that all of the conditions in this
Section 3.2 have been satisfied and (ii) a restatement by Borrower of each and every of the
representations and warranties made by it in any Loan Document and a reaffirmation by Borrower of
the granting and continuance of Administrative Agent’s Liens in the Collateral under the Loan
Documents (for the benefit of the Lenders).

     Notwithstanding anything in this Agreement to the contrary, Administrative Agent may or at the
direction of Required Lenders shall terminate its respective funding obligations under this
Agreement without notice upon or after the occurrence of an Event of Default.

27

 

     Section 3.3. Closing. Subject to the conditions of this Article III, the Loan shall
be made available on the date as is mutually agreed by the parties (the “Closing Date”) at such
time as may be mutually agreeable to the parties upon the execution of this Agreement (the
“Closing”) at such place as may be requested by Administrative Agent .

     Section 3.4. Waiver of Rights. By completing the Closing under this Agreement, or by
making advances under the Loan, no Lender nor Administrative Agent shall be deemed to have waived a
breach of any representation or warranty of Borrower under this Agreement or under any other Loan
Document, and all of Administrative Agent’s and such Lender’s claims and rights resulting from any
breach or misrepresentation by Borrower are specifically reserved by Administrative Agent and the
Lenders.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Each entity comprising Borrower represents and warrants on a joint and several basis to
Administrative Agent and each Lender, and shall be deemed to represent and warrant on each day on
which any advance or accommodation in respect of the Term Loan is requested or made or any
Obligations shall be outstanding under this Agreement, that (and each of the following
representations and warranties shall survive the execution and delivery of this Agreement):

     Section 4.1. Subsidiaries. Borrower has no Subsidiaries.

     Section 4.2. Organization and Good Standing. Borrower is a limited liability company,
duly organized, validly existing, and in good standing under the Laws of its state of formation, is
in good standing as a foreign limited liability company, in each jurisdiction in which the
character of the properties owned or leased by it therein or the nature of its business makes such
qualification necessary, except where the failure to qualify would not have a Material Adverse
Effect, has the limited liability company power and authority to own its assets and transact the
business in which it is engaged, and has obtained all certificates, licenses and qualifications
required under all Laws or orders of public authorities necessary for the ownership and operation
of all of its properties and transaction of all of its business, all of which are in the name of
Borrower, except where the failure to do so would not have a Material Adverse Effect. Borrower’s
jurisdiction of organization and organizational identification number (if any) are listed on
Schedule 4.2 of the Information Certificate and its exact legal name (as set forth on the public
record of such jurisdiction of organization which shows Borrower to have been organized) is as set
forth in the signature blocks to this Agreement.

     Section 4.3. Authority. Borrower has full limited liability company power and
authority to enter into, execute, and deliver this Agreement and to perform its obligations under
this Agreement, to borrow the Loan, to execute and deliver the Notes, and to incur and perform the
obligations provided for in the Loan Documents, all of which have been duly authorized by all
necessary limited liability company action. No consent or approval of members or managers of, or
lenders to, Borrower and no consent, approval, filing (other than the recording of the Mortgages
and the filing of UCC financing statements to perfect the Administrative Agent’s security interest
in the Collateral for the benefit of the Lenders) or registration with any

28

 

Governmental Authority is required as a condition to the validity of the Loan Documents or the
performance by Borrower of its obligations under the Loan Documents, except for such consents or
approvals as have been obtained.

     Section 4.4. Binding Agreement. This Agreement and all other Loan Documents
constitute, and the Notes, when issued and delivered pursuant to this Agreement for value received,
will constitute, the valid and legally binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms.

     Section 4.5. Litigation. Except as disclosed in Schedule 4.5 of the Information
Certificate, there are no actions, suits, proceedings or investigations pending or threatened
against Borrower before any court or arbitrator or before or by any Governmental Authority (a)
with respect to any of the Loan Documents or any of the transactions contemplated thereby, or (b)
which, in any one case or in the aggregate, if determined adversely to the interests of Borrower,
could reasonably be expected to have a Material Adverse Effect. Borrower is not in default with
respect to any order of any court, arbitrator, or Governmental Authority applicable to Borrower or
its properties which default could reasonably be expected to have a Material Adverse Effect.

     Section 4.6. No Conflicts. The execution and delivery by Borrower of this Agreement
and the other Loan Documents do not, and the performance of its obligations under the Loan
Documents will not, violate, conflict with, constitute a default under, or result in the creation
of a Lien or encumbrance upon the property of Borrower (other than for the benefit of
Administrative Agent for the ratable benefit of Lenders) under: (a) any provision of Borrower’s
certificate of formation or operating agreement, (b) any provision of any law, rule, or regulation
applicable to Borrower, (c) any indenture or other material agreement or instrument to which
Borrower is a party or by which Borrower or its property is bound, or (d) any judgment, order or
decree of any court, arbitration tribunal, or Governmental Authority having jurisdiction over
Borrower which is applicable to Borrower.

     Section 4.7. Financial Condition. The financial statements of Borrower which have been
or shall hereafter be delivered or furnished to Administrative Agent and each Lender do and will
fairly present the financial condition of Borrower and the results of its operations and changes in
financial condition as of the dates and for the periods referred to, and have been prepared in
accordance with GAAP. There are no material unrealized or anticipated liabilities, direct or
indirect, fixed or contingent, of Borrower as of the dates of such financial statements which are
not reflected in such financial statements or in the notes to such financial statements. There has
been no Material Adverse Effect since the date of the last financial statement delivered to
Administrative Agent and each Lender. Borrower hereby represents and warrants that the federal tax
identification number and fiscal year of each entity comprising the Borrower is as described on
Schedule 4.7 of the Information Certificate. 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 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

29

 

and accruals in respect of any self insurance program, if applicable, (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 of a reasonable amount payable to certain employees (collectively, the “GAAP Exceptions”).
With respect to the senior housing/skilled nursing homes purchased in the Acquisition, the Seller’s
balance sheets as of December 31, 2004, and the related statements of the Seller’s income and
retained earnings for the fiscal periods then ended, respectively, copies of which have been
furnished to the Administrative Agent and Lenders, to the best of Borrower’s knowledge, fairly
present in all material respects the Seller’s financial condition at such date and the results of
the Seller’s operations for the periods ended on such dates, all in accordance with GAAP,
consistently applied, except for the GAAP Exceptions.

     Section 4.8. No Default. Borrower is not in default under or with respect to any
obligation in any respect which could reasonably be expected to have a Material Adverse Effect. No
Default has occurred and is continuing.

     Section 4.9. Title to Properties. 

     (a) Borrower has good, marketable and indefeasible title to, rights in and the power to
transfer its properties and assets, including the Collateral and the properties and assets
reflected in the financial statements described in Section 4.7 and in any title insurance
policies issued to Administrative Agent (for the benefit of the Lenders), subject to no Lien,
mortgage, pledge, encumbrance or charge of any kind, other than Permitted Liens. Borrower has not
agreed or consented to cause any of its properties or assets whether owned now or hereafter
acquired to be subject in the future (upon the happening of a contingency or otherwise) to any
Lien, mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens. All of the
Collateral, and all other property and assets of Borrower that are necessary to the conduct of
Borrower’s business, is owned by Borrower or the rights to same are held by Borrower in its name,
and none of the Collateral, or any such property or assets are owned or the rights thereto held in
the name of any other entity.

     (b) The Real Property constitutes all of the real property owned, leased or used by Borrower
in its business and Borrower will not execute any material agreement or contract in respect to such
real estate after the date of this Agreement without giving Administrative Agent prompt written
notice thereof.

     Section 4.10. Taxes. Except for any contests complying with the provisions of Section
5.6 hereof, Borrower has filed, or has obtained extensions for the filing of, all federal, state
and other tax returns which are required to be filed, and has paid all taxes shown as due on those
returns and all assessments, fees and other amounts due as of the date of this Agreement. All tax
liabilities of Borrower are adequately provided for on Borrower’s books. No tax liability has been
asserted by the Internal Revenue Service or other taxing authority against Borrower for taxes in
excess of those already paid.

     Section 4.11. Securities and Banking Laws and Regulations. 

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     (a) The use of the proceeds of the Loan and Borrower’s issuance of the Notes will not directly
or indirectly violate or result in a violation of the Securities Act of 1933 or the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including without
limitation Regulations U, T or X of the Board of Governors of the Federal Reserve System. Borrower
is not engaged in the business of extending credit for the purpose of the purchasing or carrying
“margin stock” within the meaning of those regulations. No part of the proceeds of the Loan under
this Agreement will be used to purchase or carry any margin stock or to extend credit to others for
such purpose.

     (b) Borrower is not an investment company within the meaning of the Investment Company Act of
1940, as amended, nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of that Act.

     Section 4.12. ERISA. No employee benefit plan (a “Plan”) subject to the Employee
Retirement Income Security Act of 1974 and the rules and regulations issued pursuant thereto, as
amended (collectively, “ERISA”), that is maintained by Borrower or under which Borrower could have
any material liability under ERISA (other than with respect to a Multi-Employer Plan) (a) has
failed to meet minimum funding standards established in Section 302 of ERISA, (b) has failed to
substantially comply with all applicable requirements of ERISA and of the Internal Revenue Code,
including all applicable rulings and regulations thereunder, or (c) has engaged in or been involved
in a prohibited transaction (as defined in ERISA) under ERISA or under the Internal Revenue Code.
Neither Borrower nor any member of a Controlled Group that includes Borrower has assumed, or
received notice of a claim asserted against Borrower or another member of the Controlled Group for,
withdrawal liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980, as
amended) with respect to any multi-employer pension plan. Borrower has timely made when due all
contributions with respect to any multi-employer pension plan in which it participates and no event
has occurred triggering a material claim against Borrower for withdrawal liability with respect to
any multi-employer pension plan in which Borrower participates.

     Section 4.13. Compliance with Laws. Except as described in Schedule 4.13 of
the Information Certificate, Borrower is not in violation of any Laws (including, without
limitation, Healthcare Laws or any statute, rule or regulation relating to employment practices or
to environmental, occupational and health standards and controls) except for violations which would
not reasonably be expected to have a Material Adverse Effect. Borrower has obtained all licenses,
permits, franchises, and other governmental authorizations necessary for the ownership of its
properties and the conduct of its business except where the failure to do so would not reasonably
be expected to have a Material Adverse Effect. Borrower is current with all reports and documents
required to be filed with any state or federal securities commission or similar Governmental
Authority and is in full compliance with all applicable rules and regulations of such commissions.

     Section 4.14. Environmental Matters. No use, exposure, release, generation,
manufacture, storage, treatment, transportation or disposal of Hazardous Material has occurred or
is occurring on or from any Real Property, or off any Real Property, as a result of any action of
Borrower, except in material compliance with applicable Environmental Laws or except as described
in the Information Certificate. All Hazardous Material used, treated, stored,

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transported to or from, generated or handled at the Real Property, or off the Real Property by
Borrower, has been disposed of on or off the Real Property by or on behalf of Borrower in material
compliance with applicable Environmental Laws. There are no underground storage tanks, except as
described in the Information Certificate or in the Environmental Reports (as herein defined),
present on or under the Real Property owned or leased by Borrower. To the best of each Borrower’s
knowledge except as set forth in the Environmental Reports, no other environmental, public health
or safety hazards exist with respect to the Real Property. Borrower has provided to Administrative
Agent and Lenders copies of all non-privileged, existing environmental reports, reviews and audits
in Borrower’s possession with respect to the Real Property (collectively, the “Environmental
Reports”) and all other non-privileged, written information in Borrower’s possession pertaining to
the actual or potential Environmental Liabilities of Borrower.

     Section 4.15. Places of Business. As of the Closing Date, the only places of business
of Borrower, and the places where it keeps and intends to keep the Collateral and records
concerning the Collateral, are at the addresses set forth in Schedule 4.15 of the Information
Certificate. Schedule 4.15 of the Information Certificate also lists the owner of record
of each such property. Borrower’s Chief Executive Office is located in the state and at the
address shown in the Information Certificate.

     Section 4.16. Intellectual Property. Borrower exclusively owns or possesses all the
patents, patent applications, trademarks, trademark applications, service marks, trade names,
copyrights, copyright applications, franchises, licenses, and rights with respect to the foregoing
(collectively, “Intellectual Property”) necessary for the current and planned future conduct of its
business, without any conflict with the rights of others. A list of all such Intellectual Property
(indicating the nature of Borrower’s interest), as well as all outstanding franchises and licenses
given by or held by Borrower, is set forth in Schedule 4.16 of the Information Certificate.
Borrower is not in default of any obligation or undertaking with respect to such Intellectual
Property or rights except where such default would not reasonably be expected to have a Material
Adverse Effect. Borrower is not infringing on any Intellectual Property rights of others except
where such default would not reasonably be expected to have a Material Adverse Effect and the
Borrower is not aware of any infringement by others of any such rights owned by Borrower.

     Section 4.17. Capitalization. The authorized equity securities (whether capital
stock, partnership or membership interests or otherwise) of each entity comprising Borrower are as
set forth in Schedule 4.17 of the Information Certificate. Tandem Health Care, Inc.
legally and beneficially owns all of the issued and outstanding Stock of each Borrower. All issued
and outstanding equity securities of the Borrower are duly authorized and validly issued, fully
paid, nonassessable, free and clear of all Liens or pledges other than those in favor of
Administrative Agent (for the benefit of Lenders), and such equity securities were issued in
compliance with all applicable state, federal and foreign laws concerning the issuance of
securities. Schedule 4.17 of the Information Certificate accurately states (a) for any of
the Borrower’s Stock that is publicly traded, the holders of such Stock in excess of five percent
(5%) of all such Stock on a fully diluted basis as of the execution date of this Agreement and the
percentage of such holder’s fully diluted ownership of such Stock, and (b) for any of the
Borrower’s Stock that is not publicly traded, all holders of such Stock and the percentage of such
holder’s fully diluted ownership of

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such Stock. No shares of the equity securities of Borrower, other than those described above,
are issued and outstanding. Except as provided in Schedule 4.17 of the Information
Certificate, 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.

     Section 4.18. Material Facts. Neither this Agreement nor any other Loan Document nor
any other agreement, document, certificate, or statement furnished to Administrative Agent or any
Lender by or on behalf of Borrower or any Guarantor in connection with the transactions
contemplated by this Agreement contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained in this Agreement or other Loan Document
not misleading. There is no fact known to Borrower that would reasonably be expected to have a
Material Adverse Effect.

     Section 4.19. Investments, Guarantees, and Certain Contracts. Borrower does not own
or hold any equity or long-term debt investments in, have any outstanding advances (other than to
employees in the ordinary course of business consistent with past practices) to, have any
outstanding guarantees for the obligations of, or have any outstanding borrowings from, any Person,
except as described on Schedule 4.19 of the Information Certificate. Borrower is not a
party to any contract or agreement, or subject to any corporate restriction, which would reasonably
be expected to have a Material Adverse Effect.

     Section 4.20. Business Interruptions. There are no pending or threatened labor
disputes, strikes, lockouts, or similar occurrences or grievances against Borrower or its business
which would reasonably be expected to have a Material Adverse Effect.

     Section 4.21. Names. Within five (5) years before the date of this Agreement,
Borrower has not conducted business under or used any other name (whether corporate name, trade
name or assumed name) other than as shown on Schedule 4.21 of the Information Certificate.
Borrower is the sole owner of all names listed on Schedule 4.21 of the Information
Certificate and any and all business done and invoices issued in such names are Borrower’s sales,
business, and invoices. Each trade name of Borrower represents a division or trading style of
Borrower and not a separate Person or independent Affiliate. To the Borrower’s best knowledge
after due inquiry, the Seller has not used any name (including, without limitation, any tradename,
assumed name, division name or any similar name), other than as set forth on Schedule 4.21
of the Information Certificate.

     Section 4.22. Joint Ventures. Borrower is not engaged in any joint venture or
partnership with any other Person, except as set forth on Schedule 4.22 of the Information
Certificate.

     Section 4.23. Solvency. Both before and after giving effect to the transactions
contemplated by the Loan Documents, and as of the date each advance or other accommodation in
respect of the Term Loan is made, Borrower and Guarantor are Solvent.

     Section 4.24. Government Contracts. Except as set forth in Schedule 4.24 of
the Information Certificate and except for Government Contracts for which Borrower has given

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Administrative Agent or Lenders written notice in accordance with Section 5.30, no Borrower is
a party to any contract or agreement (including, but not limited to, any Lease) that is subject to
the Federal Assignment of Claims Act, as amended (31 U.S.C. Section 3727) or any similar state or
local law.

     Section 4.25. OFAC. Neither Borrower, nor any Guarantor, nor any beneficial owner of
Borrower or any Guarantor, is currently listed on the OFAC Lists.

     Section 4.26 Real Estate Ownership. The sole business of the Borrower is to own the
Real Property and to lease the Real Property to the respective Operators pursuant to the Leases.

     Section 4.27 Document Delivery. The Borrower has delivered true, correct and complete
copies of the fully-signed Acquisition Documents and the Leases to the Administrative Agent on or
prior to the Closing Date. To Borrower’s knowledge, no party to the Acquisition Agreements is in
default or breach thereunder.

     Section 4.28 Acquisition. On the Closing Date and concurrently with the making of the
Term Loan hereunder, the Acquisition intended to be consummated on the Closing Date will have been
consummated in accordance with the terms of the Acquisition Agreements and the other relevant
Acquisition Documents and in accordance with all applicable laws. All consents and approvals of,
and filings and registrations with, and all other actions by, any governmental entity and (except
where the failure to obtain or make the same could not reasonably be expected to have an adverse
effect on the Acquisition or any portion thereof or a Material Adverse Effect) each other Person
required in order to make or consummate the Acquisition have been obtained, given, filed or taken
and are or will be in full force and effect.

     Section 4.29 Representations and Warranties in Acquisition Documents. All
representations and warranties made by the Borrower in the Acquisition Documents and, to the best
of the Borrower’s knowledge after due inquiry, and except as disclosed in the Disclosure Schedules
of the Acquisition Agreement, all representations made by each other Person in such agreements and
documents, are true and correct in all material respects. None of such representations and
warranties are inconsistent in any material respect with the representations and warranties of the
Borrower made herein or in any other Loan Document.

     Section 4.30 Consideration. The Borrower acknowledges that it desires to have this
Agreement and the Loan Documents to which the Borrower is a party cross-collateralized and
cross-defaulted with the Affiliated Loan Documents and have the Collateral and the Mortgages serve
as collateral for the “Obligations” pursuant to the Affiliated Loan Documents as well as the
Obligations hereunder. The Borrower and the Operators are each wholly-owned subsidiaries of
Tandem, and are Affiliates of each other. The Operators will operate certain senior
housing/skilled nursing homes, in part with working capital made available by Administrative Agent
and one or more other Lenders pursuant to the Affiliated Loan Documents. The Operators will pay
certain rent to the Borrower in connection with the lease of the Real Property by the Borrower to
the Operators. The Borrower will derive substantial direct and indirect benefit (financial and
otherwise) from funds made available to the Operators pursuant to the Affiliated Loan Documents,
and it is and will be to the Borrower’s advantage to assist the Operators in

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procuring such funds from such Lenders. The Borrower desires to induce the Lenders and the
Administrative Agent to enter into the Affiliated Loan Documents with the Operators.

ARTICLE V

AFFIRMATIVE COVENANTS

     Each entity comprising Borrower covenants and agrees on a joint and several basis that for so
long as Borrower may borrow under this Agreement and until payment and performance in full of the
Obligations (unless the Administrative Agent shall otherwise expressly consent in advance in
writing):

     Section 5.1. Financial Statements and Collateral Reports. Borrower will furnish to
Administrative Agent and LaSalle Bank the following financial information and reports:

     (a) a collections report and accounts receivable aging schedule for Borrower and the Operators
on a form acceptable to Administrative Agent within forty-five (45) days after the end of each
calendar month or, if earlier, within fifteen (15) days of Administrative Agent’s request, which
shall include, but not be limited to, a report of collections received;

     (b) upon request of Administrative Agent, payables aging schedules of Borrower and the
Operators within forty-five (45) days after the end of each calendar month;

     (c) within forty-five (45) days of the end of each calendar month, (i) internally prepared
monthly financial statements for Borrower prepared in accordance with GAAP (including income
statements, balance sheets and operating cash flow statements for each Location showing actual
sources and uses of cash during the preceding month and fiscal year-to-date, each in comparison to
the same month and year-to-date for the prior fiscal year), accompanied by management analysis and
actual vs. budget variance reports for each Location, and (ii) if the Borrower operates any
Locations which are residence facilities, a census report detailing the number of beds at the
applicable Location which are occupied and paying applicable Medicare, Medicaid or commercial
insurer reimbursable rates for each day during the preceding month, with such additional detail and
information as Administrative Agent shall request;

     (d) within forty-five (45) days of the end of each calendar quarter, each of the statements
and information described in the preceding section, prepared separate for both Borrower and
Guarantor;

     (e) promptly upon request by Administrative Agent, copies of all cost reports filed with
Medicare or Medicaid;

     (f) annual audited financial statements on a consolidated basis for Guarantor (Tandem Health
Care, Inc.) prepared by a firm of independent public accountants of nationally recognized standing
satisfactory to Administrative Agent, together with the supporting consolidating statements for the
individual Borrower, together with a certificate from such accountants to the effect that, in
making the examination necessary for the signing of such annual financial statements by such
accountants, they have not become aware of any Default or Event of

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Default that has occurred and is continuing or, if they have become aware of any such event,
describing it and the steps, if any, being taken to cure it, within one hundred thirty-five (135)
days after the end of each of Borrower’s Fiscal Years;

     (g) to the extent prepared by Borrower, annual projections, profit and loss statements,
balance sheets, and cash flow reports for each fiscal year, fifteen (15) days after preparation of
such projections or statements, but in no event later than January 31st of the same Fiscal Year;

     (h) internally prepared annual financial statements for Borrower within sixty (60) days after
the end of each of Borrower’s Fiscal Years;

     (i) promptly upon receipt thereof, copies of any reports submitted to Borrower by the
independent accountants in connection with any interim audit of the books of Borrower and copies of
each management control letter provided to Borrower by independent accountants;

     (j) promptly upon request by Administrative Agent, evidence satisfactory to Administrative
Agent that all federal and state taxes, including, without limitation payroll taxes, that are due
have been paid in full;

     (k) promptly upon request by Administrative Agent, copies of any survey results from any
Governmental Authority;

     (l) within forty-five (45) days after the end of every calendar quarter, (i) a Compliance
Certificate in the form attached hereto as Schedule F for such quarter and (ii) if requested by
Administrative Agent, back-up documentation (including, without limitation, invoices, receipts and
other evidence of costs incurred during such quarter as Administrative Agent shall reasonably
require) evidencing any calculation included on such Compliance Certificate;

     (m) within ten (10) days after Administrative Agent’s request, a written statement, duly
acknowledged by Borrower and Guarantor, setting forth the sums outstanding hereunder according to
Borrower’s and Guarantor’s books and records and any right of set-off, counterclaim or other
defense that exists against such sums and Borrower’s or Guarantor’s obligations under the Loan
Documents;

     (n) promptly upon such information becoming available, a summary of all purchase price and
other monetary adjustments that are made pursuant to any of the Acquisition Documents; and

     (o) such additional information, reports or statements regarding the Borrower or Guarantor as
Administrative Agent or any Lender may from time to time reasonably request.

     Annual financial statements shall set forth in comparative form figures for the corresponding
periods in the prior fiscal year. All financial statements shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP. All reports required under
this Section 5.1 shall be certified in writing by Borrower’s Chief Financial Officer as
true, complete and correct in all material respects.

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     Borrower shall cause Guarantor to provide Administrative Agent and each Lender with
Guarantor’s (i) annual Federal Income Tax Returns promptly upon request, (ii) for fiscal year 2005
and thereafter, annual audited financial statements within one hundred thirty-five (135) days after
each fiscal year, and (iii), internally prepared quarterly financial statements within forty-five
(45) days following the end of each calendar quarter.

     Section 5.2. Payments Under this Agreement. Borrower will make all payments of
principal, interest, fees, and all other payments required under this Agreement and under the Loan,
and under any other agreements with Administrative Agent (for the ratable benefit of Lenders) to
which Borrower is a party, as and when due. All items required to be furnished under this
Agreement or the other Loan Documents shall be furnished without cost to Administrative Agent and
each Lender, to the extent required hereunder. To the extent that any sums are received by
Administrative Agent from insurance proceeds, condemnation proceeds, or the fulfillment by Borrower
of some other covenant under any Loan Documents, and such sums are applied by Administrative Agent
to the principal balance of the Notes, the amount of the regular monthly payments under the Notes
shall continue to be the amount provided for herein without adjustment for the principal
prepayment, if any.

     Section 5.3. Existence, Good Standing, and Compliance with Laws. Borrower shall comply
with the requirements of all applicable Laws and requirements of governmental authorities
(including Environmental Laws and ERISA and the rules and regulations thereunder), except where the
failure to comply would not reasonably be expected to have a Material Adverse Effect. Borrower
shall do or cause to be done all things necessary (a) to obtain and keep in full force and effect
all corporate, limited liability company or limited liability partnership existence, rights,
licenses, permits, certificates of needs, regulatory approvals, privileges, and franchises
(collectively, “Permits”) of Borrower necessary to the ownership of its or their properties or the
conduct of its or their businesses, and comply with all applicable current and future Laws of any
Governmental Authority having or claiming jurisdiction over any of them, except where the failure
to do so would not reasonably be expected to have a Material Adverse Effect; (b) to maintain and
protect the properties used or useful in the conduct of the operations of Borrower, in a prudent
manner, including without limitation the maintenance at all times of such insurance upon its
insurable property and operations as required by law or by the Loan Documents; and (c) to maintain
all Permits free from restrictions or known conflicts which could materially impair their use or
operation or cause the Permits to be provisional, probationary or restricted in any way.

     Section 5.4. Legality. The making of the Term Loan and each disbursement or advance
under the Term Loan shall not be prohibited by any governmental order or regulation applicable to
Borrower, and shall not violate any rule or regulation of any Governmental Authority, and necessary
consents, approvals and authorizations of any Governmental Authority to or of any such disbursement
or advance shall have been obtained.

     Section 5.5. Compliance With Anti-Terrorism Orders. Administrative Agent hereby
notifies 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 Administrative Agent’s
policies and practices, the Administrative Agent is required to obtain, verify and record certain
information and documentation that identifies each Borrower, which information includes

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the name and address of each Borrower and such other information that will allow the
Administrative Agent 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 if Borrower has knowledge that any Guarantor, Manager 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 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.

     Section 5.6. Taxes and Charges. Borrower shall timely file all tax reports and pay
and discharge all taxes, assessments and governmental charges or levies imposed upon Borrower, or
its income or profits or upon its properties or any part thereof (collectively, “Charges”),
before the same shall be in default and before the date on which penalties attach thereto, as well
as all lawful claims for labor, material, supplies or otherwise (collectively, “Mechanics
Claims”) which, if unpaid, might become a Lien or charge upon the properties or any part
thereof of Borrower. Borrower shall have the right to contest, in good faith by appropriate
proceedings, the amount or validity of any such Charges or Mechanics Claims so long as: (a)
Borrower shall have set aside on its books adequate reserve therefor in accordance with GAAP; (b)
Borrower’s title to, and its right to use, the Collateral is not adversely affected thereby and
Administrative Agent’s Lien and priority on the Collateral (for the benefit of the Lenders) are not
adversely affected, altered or impaired thereby; (c) Borrower has given prior written notice to
Administrative Agent of Borrower’s intent to so contest or object to any such Charges or Mechanics
Claims; (d) such contest stays the enforcement or collection of the Charges and Mechanics Claims or
any Lien created; and (e) in the case of real estate taxes or assessments or Mechanics Claims,
Borrower has obtained an endorsement, in form and substance satisfactory to Administrative Agent,
to the loan policy of title insurance issued to Administrative Agent insuring over any Lien created
by such Charges or Mechanics Claims, or Borrower has deposited with Administrative Agent a bond or
other security satisfactory to Administrative Agent in an amount sufficient to entirely eliminate
any Lien for such Charges or Mechanics Claims as a Lien against the Real Property. Should any stamp
tax, intangible tax, intangible recording tax or other tax (excluding income, franchise, gross
receipts or similar taxes with respect to Administrative Agent or Lenders), now or hereafter become
payable with respect to this Agreement or any of the other Loan Documents, Borrower will pay the
tax before its due date and hold Administrative Agent and Lenders harmless from the cost of the
tax. If Borrower fails to commence any contest permitted under this Section 5.6 or, having
commenced to contest the same, and having deposited such security required by Administrative Agent
for its full amount, shall thereafter fail to prosecute such contest in good faith or with due
diligence, or, upon adverse conclusion of any such contest, shall fail to pay such tax, assessment
or charge,

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Administrative Agent may, at its election (but shall not be required to), pay and discharge
any such tax, assessment or charge, and any interest or penalty thereon, and any amounts so
expended by Administrative Agent shall be deemed to constitute disbursements of the proceeds of the
Term Loan hereunder (or such credit facility as Administrative Agent shall elect, including
pursuant to the Affiliated Loan Documents), even if the total amount of disbursements would exceed
the face amount of the Notes.

     Section 5.7. Insurance. Borrower shall carry adequate casualty, theft (including
burglary, pilferage and loss in transit), business interruption, public liability, professional
liability, automobile, employee dishonesty and workmen’s compensation insurance with responsible
companies reasonably satisfactory to Administrative Agent in such amounts and against such risks as
is customarily maintained by similar businesses and by owners of similar property in the same
general area; provided, however, that Borrower shall, at a minimum, carry insurance of the kind and
in the amounts shown in Schedule C hereto. Borrower shall deliver to Administrative Agent
endorsements to all of its (a) casualty and business interruption insurance policies naming
Administrative Agent (for the benefit of each Lender) as sole lender’s loss payee (and mortgagee to
the extent the insurance pertains to Real Property), and (b) general liability and other liability
policies naming Administrative Agent (for the benefit of each Lender) as an additional insured.
Borrower shall direct all present and future insurers under its casualty policies of insurance to
pay all proceeds payable thereunder (to the extent applicable to the Collateral) directly to
Administrative Agent unless otherwise permitted hereunder.

     If any insurance proceeds are paid by check, draft or other instrument payable to Borrower and
Administrative Agent jointly, Administrative Agent may endorse Borrower’s name thereon and do such
other things as Administrative Agent may deem advisable to reduce the same to cash. Administrative
Agent reserves the right at any time, upon review of Borrower’s risk profile, to require additional
forms and limits of insurance to adequately protect Administrative Agent’s interests in accordance
with Administrative Agent’s normal practice for similarly situated borrowers. Borrower shall, upon
request by the Administrative Agent but no more frequently than once per Loan Year, cooperate with
Administrative Agent in obtaining a report by a reputable insurance broker, satisfactory to
Administrative Agent, with respect to Borrower’s insurance policies. Borrower shall not carry
separate insurance concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 5.7. Borrower shall timely pay all insurance premiums, and
in any event prior to the expiration of any policy of insurance. Borrower shall, at least thirty
(30) days prior to the expiration of any policies of insurance, furnish to Administrative Agent,
premiums prepaid, additional and renewal insurance policies with companies, coverage and in amounts
required hereunder. The Borrower shall promptly notify Administrative Agent of any loss, damage, or
destruction to the Collateral, whether or not covered by insurance. Administrative Agent is hereby
authorized to collect all insurance proceeds in respect of the Collateral directly and to apply the
same to the Obligations whether or not then due and payable unless otherwise set forth to the
contrary herein. Administrative Agent is authorized and empowered, and Borrower hereby irrevocably
appoints Administrative Agent as its attorney-in-fact (such appointment is coupled with an
interest), at its option, but, unless an Event of Default exists, subject to Borrower’s consent not
to be unreasonably withheld, to make or file proofs of loss or damage and to settle and adjust any
claim under insurance policies which insure against such risks, or to direct Borrower, in writing,
to agree with the insurance carrier(s) on the amount to be paid in regard to such loss in

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accordance with the terms set forth in Section 8.6. Borrower shall not bring or keep any
article on any Location or Real Property or cause or allow any condition to exist on it, if that
could invalidate or would be prohibited by any insurance coverage required to be maintained by
Borrower on the Locations or Real Property. Unless Borrower provides Administrative Agent with
appropriate evidence of the insurance coverage required by this Agreement at least thirty (30) days
prior to the expiration thereof, Administrative Agent may purchase insurance at Borrower’s expense
to protect Administrative Agent’s interests in the Locations and Collateral (for the benefit of the
Lenders) and to maintain the insurance required by this Agreement and any sums so expended by
Administrative Agent shall be deemed advances to Borrower under the Term Loan (or such credit
facility as Administrative Agent may elect, including pursuant to the Affiliated Loan Documents)
and shall be immediately due and payable by Borrower. This insurance may, but need not, protect
Borrower’s interests. The coverage purchased by Administrative Agent may not pay any claim made by
Borrower or any claim that is made against Borrower in connection with any Collateral or Location
or any required insurance policy. The effective date of coverage may be the date the prior
coverage lapsed or the date on which Borrower failed to provide Administrative Agent proof of
coverage. Borrower may later, but only with Administrative Agent’s prior written consent, cancel
any insurance purchased by Administrative Agent, but only after providing Administrative Agent with
appropriate evidence, as determined by Administrative Agent, that Borrower has obtained insurance
as required by this Agreement.

     Section 5.8. Information; Visits and Inspections. Borrower shall furnish to
Administrative Agent and each Lender such information as Administrative Agent and each Lender may,
from time to time, reasonably request with respect to the business or financial affairs of
Borrower. Borrower shall also permit any officer, employee, agent or representative of
Administrative Agent and each Lender, all at such times during regular business hours and as often
as Administrative Agent and each Lender may reasonably require, to (a) visit and inspect any of the
properties of Borrower or any other location where any of the Collateral is maintained at any time,
(b) inspect, audit and make copies of or prepare extracts from Borrower’s minute books, books of
account, journals, orders, receipts, correspondence, and other records, including management
letters prepared by Borrower’s auditors, of Borrower, and make copies thereof or extracts
therefrom, (c) discuss the business affairs, finances and accounts of Borrower with, and be advised
as to the same by, the officers, employees and independent accountants Borrower, and (d) inspect
the progress of any construction relating to any Real Property. Neither Administrative Agent nor
any Lender has any duty, however, to visit or observe the Borrower or its properties or to conduct
tests, and no site visit, observation or testing by Administrative Agent, any Lender its respective
officers, employees, agents or representatives shall impose any liability on any of Administrative
Agent, any Lender, its respective officers, employees, agents or representatives. Neither Borrower
nor any other party is entitled to rely on any site visit, observation or testing by any of
Administrative Agent, any Lender, its respective officers, employees, agents or representatives.
Neither Administrative Agent, any Lender, its respective officers, employees, agents nor
representatives owe any duty of care to protect Borrower or any other party against, or to inform
Borrower or any other party of any other adverse condition affecting the Borrower or its
properties. Unless an Event of Default exists, Administrative Agent or, as applicable, such
Lender, shall give Borrower reasonable notice before any requested site visit, inspection or other
visit; provided, however, during the existence of an Event of Default, no such prior notice shall
be required. Administrative Agent and Lenders shall make reasonable

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efforts to avoid interfering with Borrower’s use of the its properties in exercising any
rights provided in this Section 5.8.

     Section 5.9. Maintenance of Property. Borrower shall maintain, keep and preserve all
of its properties in good repair, working order and condition, normal wear and tear excepted, and
from time to time make all necessary repairs, renewals, replacements, betterments and improvements
thereto, so that the business carried on in connection therewith may be properly conducted at all
times.

     Section 5.10. Notification of Events of Default and Adverse Developments. Borrower
promptly shall notify Administrative Agent and LaSalle Bank upon the occurrence of: (a) any
Default; (b) any event, development or circumstance whereby the financial statements previously
furnished to Administrative Agent fail in any material respect to present fairly, in accordance
with GAAP, the financial condition and operational results of Borrower; (c) any judicial,
administrative or arbitration proceeding pending against Borrower, and any judicial or
administrative proceeding known by Borrower to be threatened against it which, if adversely
decided, would reasonably be expected to have a Material Adverse Effect or to expose Borrower to
uninsured liability of Two Hundred Fifty Thousand Dollars ($250,000) or more; (d) any default
claimed by any other creditor for Borrowed Money of Borrower other than Administrative Agent; (e) a
request to produce from, or the production of documents by Borrower with respect to the Real
Property to, a Governmental Authority which would reasonably be expected to have a Material Adverse
Effect; (f) any Lien arising against the Collateral (other than Permitted Liens); and (g) any other
development in the business or affairs of Borrower which would reasonably be expected to cause a
Material Adverse Effect; in each case describing the nature of the event or development. In the
case of notification under clauses (a) and (b)), Borrower should set forth the action Borrower
proposes to take with respect to such event.

     Section 5.11. Employee Benefit Plans. Other than with respect to a Multi-Employer
Plan, Borrower shall (a) comply with the funding requirements of ERISA with respect to the Plans
for its employees, or will promptly satisfy any accumulated funding deficiency that arises under
Section 302 of ERISA; (b) furnish Administrative Agent, promptly after filing the same, with copies
of all reports or other statements filed with the United States Department of Labor, the Pension
Benefit Guaranty Corporation, or the Internal Revenue Service with respect to all Plans, or which
Borrower, or any member of a Controlled Group, may receive from such Governmental Authority with
respect to any such Plans, and (c) promptly advise Administrative Agent of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the action which
Borrower proposes to take with respect thereto. Borrower will make all contributions when due with
respect to any multi-employer pension plan in which it participates and shall promptly advise
Administrative Agent: (x) upon its receipt of notice of the assertion against Borrower of a claim
for withdrawal liability; (y) upon the occurrence of any event that could trigger the assertion of
a claim for withdrawal liability against Borrower; and (z) upon the occurrence of any event that
would place Borrower in a Controlled Group as a result of which any member (including Borrower)
thereof may be subject to a claim for withdrawal liability, whether liquidated or contingent.

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     Section 5.12. Financing Statements. Borrower shall provide to Administrative Agent
evidence satisfactory to Administrative Agent as to the due recording of UCC termination
statements, releases of collateral, and shall cause to be recorded UCC financing statements in all
places necessary to release all existing security interests and other Liens in the Personal
Property (other than as expressly permitted by this Agreement) and to perfect and protect
Administrative Agent’s first priority Lien and security interest in the Personal Property (for the
ratable benefit of the Lenders), as Administrative Agent may request.

     Section 5.13. Financial Records. Borrower shall keep current and accurate books of
records and accounts in all material respects in which full and correct entries will be made of all
of its business transactions, and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP.

     Section 5.14. Collection of Accounts. Borrower shall continue to diligently collect
its Accounts in the ordinary course of business.

     Section 5.15. Places of Business. Borrower shall give thirty (30) days’ prior written
notice to Administrative Agent of any change in the location of any of its places of business, of
the places where its records concerning its Accounts are kept, of the places where the Personal
Property is kept, or of the establishment of any new, or the discontinuance of any existing, places
of business.

     Section 5.16. Business Conducted. Borrower shall continue in the business currently
conducted by it using its commercially reasonable efforts to maintain its customers and goodwill.
Borrower shall not engage, directly or indirectly, in any line of business substantially different
from the business conducted by it as of the Closing Date, or engage in business or lines of
business which are not reasonably related thereto.

     Section 5.17. Litigation and Other Proceedings. Borrower shall give prompt notice to
Administrative Agent of any litigation, arbitration, or other proceeding before any Governmental
Authority against or affecting Borrower if the amount claimed is more than Two Hundred Fifty
Thousand Dollars ($250,000) or if adversely determined would reasonably be expected to constitute a
Material Adverse Effect.

     Section 5.18. Bank Accounts. Borrower shall assign to Administrative Agent (for the
benefit of the Lenders) all of Borrower’s depository and disbursement accounts into which
collections of Accounts are deposited. Borrower shall not open any depository or disbursement
accounts except upon prior written notice to Administrative Agent or as otherwise permitted in the
Guaranty. With respect to Borrower’s principal depository account with LaSalle Bank, Borrower
shall cause LaSalle Bank, Borrower and Administrative Agent to enter into a control agreement
satisfactory to Administrative Agent and in any event sufficient to perfect a first lien and
security interest in such account in favor of Administrative Agent (for the benefit of the
Lenders).

     Section 5.19. Real Property. If any Borrower proposes to acquire a fee ownership
interest in Real Property after the Closing Date, it shall first provide to Administrative Agent a
mortgage or deed of trust granting Administrative Agent a first priority Lien on such Real

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Property (for the benefit of the Lenders), together with environmental audits, mortgage title
insurance commitment, real property survey, local counsel opinion(s), and, if required by
Administrative Agent, supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Administrative Agent, in each case, in
form and substance reasonably satisfactory to Administrative Agent. Borrower hereby represents and
warrants that, as of the date hereof, Borrower has no ownership interests in any Real Property
(other than occupancy leases) other than as stated in Schedule 5.19 of the Information
Certificate. Borrower shall charge rent to the Operators pursuant to the Leases in an amount
sufficient for Borrower at all times to pay the Obligations when due or declared due to the
Administrative Agent and the Lenders as provided under this Agreement.

     Section 5.20. Post-Closing Obligations. If applicable, Borrower shall cause to be
performed and completed, to Administrative Agent’s satisfaction, all of the obligations set forth
on Schedule D hereto within the time periods set forth on Schedule D.

     Section 5.21. Officer’s Certificates. Together with the monthly and annual financial
statements delivered pursuant to Section 5.1, Borrower shall deliver to Administrative Agent a
certificate of its chief financial officer, in form and substance satisfactory to Administrative
Agent, stating that such officer has reviewed the relevant terms of this Agreement, and has made
(or caused to be made under such officer’s supervision) a review of the transactions and conditions
of Borrower from the beginning of the accounting period covered by the income statements being
delivered to the date of the certificate, and that such review has not disclosed the existence
during such period of any fact, event or circumstance that constitutes a Default, and if any such
fact, event or circumstance existed during such period or now exists, specifying the nature and
period of existence thereof and what action Borrower has taken or proposes to take with respect
thereto.

     Section 5.22. Capital Adequacy and Other Adjustments. If Administrative Agent or any
Lender shall have determined that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by Administrative Agent or
any Lender or any corporation controlling such Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) from any central bank or
governmental agency or body having jurisdiction does or shall have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such Lender or any
corporation controlling such Lender and thereby reducing the rate of return on such Lender’s or
such corporation’s capital as a consequence of its obligations hereunder, then Borrower shall from
time to time within fifteen (15) days after notice and demand from Administrative Agent (on behalf
of such Lender(s)) pay to Administrative Agent (for benefit of such Lender(s)) additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the amount of such
cost and showing the basis of the computation of such cost submitted by Administrative Agent or
such Lender to Borrower shall, absent manifest error, be final, conclusive and binding for all
purposes.

     Section 5.23. Taxes.

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     (a) No Deductions. Any and all payments or reimbursements made under the Loan
Documents shall be made free and clear of and without deduction for any and all taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect thereto of any
nature whatsoever imposed by any taxing authority, excluding such taxes to the extent imposed on
any Lender’s net income. If Borrower shall be required by law to deduct any such amounts from or
in respect of any sum payable hereunder to Administrative Agent or Lenders, then the sum payable
hereunder shall be increased as may be necessary so that, after making all required deductions,
Administrative Agent and Lender receive an amount equal to the sum such Person would have received
had no such deductions been made.

     (b) Changes in Tax Laws. If, subsequent to the initial advance under the Loan, (i)
any changes in any existing law, regulation, treaty or directive or in the interpretation or
application thereof, (ii) any new law, regulation, treaty or directive enacted or any
interpretation or application thereof, or (iii) compliance by Administrative Agent or any Lender
with any request or directive (whether or not having the force of law) from any governmental
authority, agency or instrumentality:

               (A) does or shall subject Administrative Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or the other Loan Documents, or change the basis of taxation of
payments to any Lender (or, as applicable, Administrative Agent) of principal, fees, interest or
any other amount payable hereunder (except for net income taxes, or franchise taxes imposed in lieu
of net income taxes, imposed generally by federal, state or local taxing authorities with respect
to interest or commitment fees or other fees payable hereunder or changes in the rate of tax on the
overall net income of Lenders and Administrative Agent); or

               (B) does or shall impose on Lenders or Administrative Agent any other condition or increased
cost in connection with the transactions contemplated hereby or participations herein;

and the result of any of the foregoing is to increase the cost to Lenders of making or continuing
the Loan hereunder, as the case may be, or to reduce any amount receivable hereunder, then, in any
such case, Borrower shall promptly pay to Administrative Agent (for the benefit of Lenders), upon
its demand, any additional amounts necessary to compensate Lenders (and, as applicable,
Administrative Agent), on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Administrative Agent with respect to this Agreement or the other Loan
Documents. If Administrative Agent or Lenders become entitled to claim any additional amounts
pursuant to this subsection, Administrative Agent shall promptly notify Borrower of the event by
reason of which such Lender or Administrative Agent has become so entitled. A certificate as to
any additional amounts payable pursuant to the foregoing sentence (including a calculation of such
amounts) submitted by Administrative Agent (on behalf of Lender) to Borrower shall, absent manifest
error, be final, conclusive and binding for all purposes.

     Section 5.24. Further Documentation; Loss of Notes. If any further documentation or
information is (a) required by Administrative Agent or any Lender or any prospective transferee in
connection with selling, transferring, delivering, assigning, or granting a participation in the
Loan (or transferring the servicing of the Loan), or (b) deemed necessary or appropriate by

44

 

Administrative Agent to correct patent mistakes in the Loan Documents, materials relating to
mortgagee’s land title insurance or the funding of the Loan, Borrower shall provide, or cause to be
provided to Administrative Agent and Lender and, in the case of (b), at Borrower’s cost and
expense, such documentation or information as Administrative Agent and Lender or any prospective
transferee may reasonably request, provided, however, that Borrower shall not be required to do
anything that has the effect of changing any material term of this Agreement. Upon notice from
Administrative Agent of the loss, theft, or destruction of any of the Notes and upon receipt of
indemnity reasonably satisfactory to Borrower from the applicable Lender, or in the case of
mutilation of any of the Notes, upon surrender of the mutilated Note, Borrower shall make and
deliver a new note of like tenor in lieu of the then to be superseded Note.

     Section 5.25. Compliance with Requirements of Prospective Transferee. Borrower shall
reasonably cooperate with any prospective transferee or servicer of the Loan, in order to enable
Administrative Agent or the applicable Lender or such transferee to sell, transfer, deliver,
assign, or grant a participation in the Loan; provided, however, that Borrower shall not be
required to do anything that has the effect of changing any material term of this Agreement.

     Section 5.26. Termination/Default of Contracts. Borrower shall notify Administrative
Agent of any (a) default or event of default under, (b) termination of, or (c) failure of any party
to renew, any of Borrower’s contracts (unless the default or event of default under, termination of
or failure to renew such contract, as the case may be, could not reasonably be expected to have a
Material Adverse Effect) as soon as reasonably possible (other than with respect to any notice of
default, termination or failure to renew that originates with Borrower, which notice shall be sent
concurrently to Administrative Agent). Notwithstanding anything in this Section to the contrary,
no provision in this Section shall modify, reduce or otherwise affect Administrative Agent’s or any
Lender’s rights hereunder or under any other Loan Document.

     Section 5.27. Landlord Agreements, Mortgagee Agreements and Real Estate Purchases.
Upon the request of the Administrative Agent, Borrower shall obtain a landlord’s agreement or
mortgagee agreement, as applicable, from the lessor of each leased property or mortgagee of owned
property with respect to any Location or other location where the Collateral, or the records
relating to any of the Collateral and/or software and equipment relating to such records or
Collateral, is stored or located, in a form mutually acceptable to Administrative Agent and
Borrower or other agreement or letter reasonably satisfactory in form and substance to
Administrative Agent.

     Section 5.28. Financial Covenants. Borrower shall comply with and shall not breach any
of the financial covenants set forth in Schedule A. For purposes of Section 10.1,
a breach of a financial covenant set forth in Schedule A shall be deemed to have occurred
as of any date reasonably determined by Administrative Agent in good faith or as of the last day of
any specified measurement period, regardless of when the financials statements or other reports
reflecting such breach are delivered to Administrative Agent.

     Section 5.29. Management Fees. Borrower shall cause the Manager(s) to enter into a
subordination agreement, in form and substance satisfactory to Administrative Agent
(“Subordination of Management Agreement”), pursuant which (a) all compensation due to such
Manager is subordinated in right and time of payment to all Obligations of Borrower hereunder,

45

 

and (b) Administrative Agent has the right to terminate the engagement of such manager upon or
following any Default hereunder. Borrower shall further assign to Administrative Agent, pursuant
to an assignment agreement in form and substance satisfactory to Administrative Agent, all of
Borrower’s right, title and interest in and to any management agreement pertaining to any Location.

     Section 5.30. Government Contracts. For any Government Contract, Borrower agrees to
comply with the following covenants and procedures:

     (a) The Borrower shall give Administrative Agent written notice of the Borrower’s execution of
or receipt of an award of a Government Contract (within thirty (30) days after such Government
Contract is awarded or executed, whichever is earlier);

     (b) If requested by Administrative Agent, the Borrower shall execute and deliver to
Administrative Agent, within ten (10) days of Administrative Agent’s request, a separate assignment
of the Government Contract in form and content satisfactory to Administrative Agent and using forms
provided by Administrative Agent;

     (c) Administrative Agent shall have the right to send to the Account Debtor in respect of such
Government Contract such notices, and request such acknowledgments of the Account Debtor, as
Administrative Agent deems necessary to cause such Account Debtor to recognize the assignment of
the Accounts and payment rights in respect thereof to Administrative Agent, as the first and only
claim against such Accounts, in accordance with the Federal Assignment of Claims Act, as amended
(31 U.S.C. Section 3727) or any similar state or local law. Borrower shall cooperate with
Administrative Agent in sending and procuring such notices and acknowledgments; and

     (d) No Borrower shall suffer or permit to exist any claim against Accounts under a Government
Contract, other than claims of Administrative Agent.

     Section 5.31. Lien Documents; Collateral Generally. 

     (a) At Closing and thereafter as Administrative Agent deems necessary in its discretion,
Borrower shall execute and deliver to Administrative Agent, or have executed and delivered (all in
form and substance reasonably satisfactory to Administrative Agent in its discretion) any
agreements, documents, instruments, and writings deemed necessary by Administrative Agent or as
Administrative Agent may otherwise reasonably request from time to time in its discretion to
evidence, perfect, or protect Administrative Agent’s Lien and security interest in the Collateral
(for the benefit of the Lenders) required under this Agreement.

     (b) Borrower shall bear the risk of loss on all Collateral, regardless of whether such
Collateral is in the possession or control of Borrower, Administrative Agent, any Lender, a bailee
or any other Person.

     (c) Administrative Agent is hereby authorized to file financing statements naming each
Borrower as debtor, in accordance with the UCC, and if necessary, to the extent applicable, to
otherwise file financing statements without such Borrower’s signature if permitted by law. Each
Borrower hereby authorizes Administrative Agent to file all financing statements and

46

 

amendments to financing statements describing the Collateral in any filing office as
Administrative Agent, in its discretion may reasonably determine. Each Borrower agrees to comply
with the requirements of all federal and state laws and requests of Administrative Agent in order
for Administrative Agent to have and maintain a valid and perfected first security interest in the
Collateral (for the benefit of the Lenders) including, without limitation, executing and causing
any other Person to execute such documents as Administrative Agent may require to obtain control
(as defined in the UCC) over Borrower’s principal deposit account with LaSalle Bank, electronic
chattel paper, letter of credit rights, commercial tort claims and investment property to the
extent a Lien is granted to Administrative Agent on such items under the Loan Documents. Each
Borrower, by joining in the Loan Documents, specifically joins in this Section as if this Section
were a part of each Loan Documents executed by the Borrower.

     (d) Borrower shall do and hereby authorizes Administrative Agent to do anything further that
may be lawfully required by Administrative Agent to secure Administrative Agent and effectuate the
intentions and objects of this Agreement, including but not limited to the execution and delivery
of lockbox agreements, continuation statements, amendments to financing statements, and any other
documents required under this Agreement;

     (e) At Administrative Agent’s request, Borrower shall immediately deliver to Administrative
Agent all items of Collateral for which Administrative Agent must receive possession to obtain a
perfected security interest (in each case, accompanied by stock powers, endorsements, allonges or
other instruments of transfer duly executed in blank);

     (f) Borrower shall, on Administrative Agent’s demand, deliver to Administrative Agent all
notes, certificates, and documents of title, chattel paper, warehouse receipts, instruments, and
any other similar instruments constituting Collateral;

     (g) Borrower shall, where Collateral is in the possession of a third party, join with
Administrative Agent in notifying the third party of Administrative Agent’s security interests and
obtaining an acknowledgement from the third party that it is holding the Collateral for the benefit
of Administrative Agent (for the benefit of the Lenders);

     (h) Borrower shall cooperate with Administrative Agent in obtaining control (pursuant to
written agreements establishing such control in form and substance satisfactory to Administrative
Agent) with respect to Collateral consisting of Borrower’s principal deposit account with LaSalle
Bank, investment property, letter of credit rights, electronic chattel paper and any other portion
of the Collateral for which control is required in order to perfect a security interest;

     (i) Borrower shall not create any chattel paper without placing a legend on the chattel paper
acceptable to Administrative Agent indicating that Administrative Agent has a security interest
(for the benefit of the Lenders) in the chattel paper;

     (j) If any Loan Document grants or purports to grant to Administrative Agent (for the benefit
of the Lenders) a lien upon commercial tort claims, Borrower shall promptly, and in any event
within ten (10) Business Days after the same is acquired by Borrower, notify Administrative Agent
of any commercial tort claim acquired by Borrower and unless otherwise

47

 

consented to in writing by Administrative Agent, Borrower shall enter into a written
supplement to this Agreement (in form and substance satisfactory to Administrative Agent) granting
to Administrative Agent a security interest (for the benefit of the Lenders) in such commercial
tort claim as part of the Collateral; and

     (k) Borrower shall promptly notify Administrative Agent if an Account becomes evidenced or
secured by an instrument or chattel paper or has been reduced to judgment, and upon request of
Administrative Agent, shall promptly deliver any such instrument or chattel paper to Administrative
Agent and assign such judgment to Administrative Agent, each to the effect that Administrative
Agent shall have a first lien priority perfected security interest and lien upon such instrument,
chattel paper and judgment (for the benefit of the Lenders).

     (l) As of the Closing Date, the Borrower does not own motor vehicles the aggregate value of
which is greater than $150,000. If at any time, the Borrower owns motor vehicles the aggregate
value of which exceeds $150,000, then the Borrower shall promptly notify the Administrative Agent
of the same; and upon the request of the Administrative Agent, the Borrower shall execute any
documents in favor of the Administrative Agent in order to permit the Administrative Agent to
obtain a perfected first-priority security interest in such motor vehicles of the Borrower.

     Section 5.32. Payment of Liabilities. Borrower shall pay and discharge all
liabilities to which it is subject (including accounts payable to trade creditors and operating
expenses) as and when the same shall become due and payable and in accordance with past practices,
except to the extent any such liabilities are being contested in good faith and by appropriate
proceedings diligently conducted and for which such reserve or other appropriate provision, if any,
as required by GAAP shall have been made.

     Section 5.33. Searches. Before Closing, and thereafter as and when determined by
Administrative Agent in its reasonable discretion, Administrative Agent shall have the right to
perform the searches described in clauses (a), (b) and (c) below against Borrower, the Seller, and
any Guarantor (the results of which are to be consistent with Borrower’s representations and
warranties under this Agreement and the representations and warranties of any Guarantor under any
Loan Document), all at Borrower’s expense:

     (a) Uniform Commercial Code searches with the Secretary of State and local filing offices of
each jurisdiction where the applicable Person maintains its executive offices, a place of business,
or assets and the jurisdiction in which the applicable Person is organized, provided,
however, that Borrower shall only be required to pay for post-Closing searches to confirm
the priority of the security interest of the Administrative Agent for the benefit of the Lenders
(conducted immediately post-Closing) or in the event that Administrative Agent downgrades
Borrower’s credit or underwriting rating;

     (b) Judgment, pending suit, federal tax lien and corporate and partnership tax lien searches,
in each jurisdiction searched under clause (a) above, provided, however, that
Borrower shall only be required to pay for post-Closing searches in the event that Administrative
Agent becomes aware of the non-payment of any taxes by Borrower or upon the occurrence of an Event
of Default; and

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     (c) Not more than once each fiscal year, searches of applicable corporate, limited liability
company, partnership and related records to confirm the continued existence, organization and good
standing of the applicable Person and the exact legal name under which such Person is organized.

     Section 5.34. Power of Attorney. Each of the officers of Administrative Agent is
hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower
(without requiring any of them to act as such) with full power of substitution to do the following:
(a) endorse the name of Borrower upon any and all checks, drafts, money orders, and other
instruments for the payment of money that are payable to Borrower and constitute collections on
Borrower’s Accounts; (b) execute in the name of Borrower any financing statements, schedules,
assignments, instruments, documents, and statements that Borrower is obligated to give
Administrative Agent under this Agreement and which Borrower fails to deliver promptly upon
Administrative Agent’s request therefor; (c) during the continuance of an Event of Default, take
any action Borrower is required to take under this Agreement; and (d) during the continuance of an
Event of Default, and to the extent permitted by applicable law, do such other and further acts and
deeds in the name of Borrower that Administrative Agent may deem necessary or desirable to enforce
Administrative Agent’s security interest or Lien in any Account or other Collateral or perfect
Administrative Agent’s security interest or Lien in any Collateral (in each case, for the benefit
of the Lenders).

     Section 5.35. Additional Collateral Provisions. 

     (a) It is expressly agreed by Borrower that, notwithstanding anything herein to the contrary,
Borrower shall remain liable under each item of Collateral consisting of a contract, instrument,
permit or license to observe and perform all the conditions and obligations to be observed and
performed by it thereunder, and Administrative Agent shall have no obligation or liability
whatsoever to any Person under any such contract, instrument, permit or license (between Borrower
and any Person other than Administrative Agent) by reason of or arising out of the execution,
delivery or performance of this Agreement, and Administrative Agent shall not be required or
obligated in any manner (i) to perform or fulfill any of the obligations of Borrower, (ii) to make
any payment or inquiry, or (iii) to take any action of any kind to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times under or pursuant to any such contract, instrument, permit or
license.

     (b) After the occurrence and during the continuance of an Event of Default, Borrower, at its
own expense, shall cause the certified public accountant then engaged by Borrower to prepare and
deliver to Administrative Agent promptly upon Administrative Agent’s reasonable request, the
following reports: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii)
trial balances; and (iv) test verifications of such Accounts as Administrative Agent may request.
Administrative Agent shall be permitted to observe and consult with Borrower’s accountants in the
performance of these tasks.

     (c) For the purpose of enabling Administrative Agent to exercise its rights and remedies under
the Loan Documents, Borrower hereby grants to Administrative Agent an irrevocable, non-exclusive
license (exercisable upon the occurrence and during the continuance

49

 

of an Event of Default without payment of royalty or other compensation to Borrower) to use,
transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter
acquired by Borrower, and wherever the same may be located, and including in such license access to
all media in which any of the licensed items may be recorded or stored and to all computer and
automatic machinery software and programs used for the compilation or printout thereof, and
represents, promises and agrees that any such license or sublicense is not and will not be in
conflict with the contractual or commercial rights of any third Person; provided,
however, that such license will terminate upon the termination of the Administrative
Agent’s Liens in the Collateral.

     (d) Administrative Agent shall have no duty of care with respect to the Collateral except that
Administrative Agent shall exercise reasonable care with respect to the Collateral in
Administrative Agent’s custody. Administrative Agent shall be deemed to have exercised reasonable
care if such property is accorded treatment substantially equal to that which Administrative Agent
accords its own property or if Administrative Agent takes such action with respect to the
Collateral as Borrower shall request or agree to in writing provided, however, that
neither failure to comply with any such request nor any omission to do any such act requested by
Borrower shall be deemed a failure to exercise reasonable care. Administrative Agent’s failure to
take steps to preserve rights against any parties or property shall not be deemed to be failure to
exercise reasonable care with respect to the Collateral in Administrative Agent’s custody. All
risk, loss, damage or destruction of the Collateral shall be borne by Borrower.

ARTICLE VI

NEGATIVE COVENANTS

     Each entity comprising Borrower covenants and agrees on a joint and several basis that so long
as Borrower may borrow under this Agreement and until payment and performance in full of the
Obligations (unless the Administrative Agent shall otherwise expressly consent in advance in
writing):

     Section 6.1. Borrowing. Borrower shall not create, incur, assume or suffer to exist
any liability for Borrowed Money, except for the following:

     (a) indebtedness to Lenders under this Agreement, the other Loan Documents and the Affiliated
Loan Documents;

     (b) borrowings incurred in the ordinary course of its business and not exceeding Ten Thousand
Dollars ($10,000) in the aggregate outstanding at any one time;

     (c) indebtedness secured by Permitted Liens; and

     (d) indebtedness existing on the date hereof expressly denoted as permitted indebtedness under
the Schedule 6.1 of the Information Certificate (subparagraphs (a) through (d)
collectively, “Permitted Indebtedness”).

Borrower will not make prepayments on any existing or future indebtedness for Borrowed Money (x) to
Administrative Agent or Lenders, except to the extent permitted by this Agreement

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or any subsequent agreement among Borrower, Administrative Agent and Lenders), or (y) identified in
subparagraph (b), (c) or (d) above incurred after the Closing Date. Borrower shall not amend,
alter or restate the terms of any Permitted Indebtedness described in clause (d) above or grant to
the holders thereof any collateral (other than collateral specifically enumerated on the
Schedule 6.1 of the Information Certificate or permitted under the definition of Permitted
Liens) or other accommodation without Administrative Agent’s prior written consent, which consent
may be given or withheld in Administrative Agent’s discretion. Borrower will not permit to occur
any default by Borrower of its obligations under any Permitted Indebtedness. Except as
specifically permitted pursuant to this Agreement, no Permitted Indebtedness may be secured by any
Lien or security interest upon, or any right or claim or interest in, any of the Collateral.

     Section 6.2. Joint Ventures. Borrower shall not invest directly or indirectly in any
joint venture for any purpose without the prior written notice to, and the prior written consent
of, Administrative Agent, which consent shall not be unreasonably withheld.

     Section 6.3. No Liens and Encumbrances; No Disposition of the Collateral.
Administrative Agent does not authorize, and Borrower agrees not to:

     (a) create, incur, assume or suffer to exist any mortgage, pledge, Lien or other encumbrance
of any kind (including the charge upon property purchased under a conditional sale or other title
retention agreement) upon, or any security interest in, any of the Collateral, whether now owned or
hereafter acquired, except for Permitted Liens;

     (b) except as otherwise permitted under Section 6.4 or Section 8.4(a) hereof,
make any sale, exchange, lease or other disposition of any of the Collateral; or

     (c) license any of the Collateral.

     Section 6.4. Restriction on Fundamental Changes. Borrower shall not:

     (a) enter into any transaction of merger or consolidation;

     (b) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution);

     (c) convey, sell, lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, any of its assets (other than sale of inventory or obsolete equipment in
the ordinary course of business), whether now owned or hereafter acquired;

     (d) acquire by purchase or otherwise all or any substantial part of the business or assets of,
or Stock or other evidence of beneficial ownership of, any Person (other than the Acquisitions);

     (e) transfer, assign, convey or grant to any other Person the right to operate or control such
Location, whether by lease, sublease, management agreement, joint venture agreement or otherwise
except pursuant to the Operating Leases or the Management Agreements;

     (f) without providing Administrative Agent with thirty (30) days’ prior written notice, change
the jurisdiction of its organization or change its legal name;

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     (g) 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, without Administrative
Agent’s prior written consent, Borrower hereby acknowledging that any change in the organizational
documents or governing documents of Borrower prohibited by Section 6.4(a) or (f)
hereof shall be deemed material;

     (h) suffer or permit to occur any pledge, assignment or hypothecation of or Lien or
encumbrance on any of the legal or beneficial equity interests in the Borrower except in favor of
the Administrative Agent on behalf of the Lenders;

     (i) change the licensed operator, manager or property manager for any Real Property without
Administrative Agent’s prior written consent, which consent may be given or withheld in
Administrative Agent’s sole and absolute discretion (and any purported assignment shall be void);
or

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

Borrower agrees that compliance with this Section 6.4 is a material inducement to Lenders’
advancing credit under this Agreement. Borrower further agrees that in addition to all other
remedies available to Administrative Agent, Administrative Agent shall be entitled to specific
enforcement of the covenants in this Section 6.4, including injunctive relief.

     Section 6.5. Distributions and Management Fees. Except as expressly permitted under
Schedule 6.5 of the Information Certificate or in this Section, Borrower shall not declare, make or
pay any “Distributions” (as defined below) to any of its Affiliates, to any shareholder, member,
partner or other Person holding an equity interest in Borrower or to any other Person related to or
affiliated with any of the foregoing; provided, however, that, so long as no Event of Default
exists, notwithstanding the foregoing provisions of this Section 6.5 to the contrary, Borrower may
make Distributions equal to (a) the monthly Excess Cash Flow less (b) any amounts due to
Administrative Agent under the Loan Documents for such month (to the extent not already taken into
account in determining Excess Cash Flow), including, without limitation, amounts required to fund
or replenish Administrative Agent’s reserves and escrow accounts under this Agreement.
“Distributions” shall mean management fees, salaries or other fees or compensation, lease or rental
payments, repayments of or debt service on loans or other indebtedness, dividends or other
distributions with respect to any of its stock, partnership or membership interests (as the case
may be) now or hereafter outstanding, the purchase, redemption or other acquisition for value of
any of its stock, partnership or membership interests (as the case may be) now or hereafter
outstanding, or the return of any capital of its stockholders, partners or members; notwithstanding
the foregoing, salaries paid to employees of Borrower in the ordinary course of business and
consistent with past practices shall not be considered Distributions.

     Section 6.6. Loans. Borrower shall not make loans or advances to any Person, other
than (a) trade credit extended in the ordinary course of its business, and (b) advances for
business travel and similar temporary advances made in the ordinary course of business to officers,
stockholders, directors, and employees.

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     Section 6.7. Contingent Liabilities. Borrower shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of any Person (except
the Operators), except by the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.

     Section 6.8. Subsidiaries. Except as otherwise expressly permitted under Schedule
6.8 of the Information Certificate, Borrower shall not form or acquire any Subsidiary, or make
any investment in or any loan in the nature of an investment to, any other Person.

     Section 6.9. Compliance with ERISA. Except with respect to any Prohibited Transaction
or Reportable Event which would not reasonably be expected to have a Material Adverse Effect,
Borrower shall not permit with respect to any Plan covered by Title IV of ERISA any Prohibited
Transaction or any Reportable Event with respect to which the obligation to report such Reportable
Event to the Pension Benefit Guaranty Corporation has not been waived.

     Section 6.10. Licenses. Borrower shall not amend, alter or suspend or terminate or
make provisional in any material way, any license, certificate of need, provider number or other
qualification or authorization to conduct Borrower’s business without the prior written consent of
Administrative Agent.

     Section 6.11. Transactions with Affiliates. Except as otherwise set forth in
Schedule 6.11 of the Information Certificate, Borrower shall not enter into any
transaction, including without limitation the purchase, sale, lease or exchange of property, or the
loaning or giving of funds to any Affiliate or Subsidiary of Borrower, except in the ordinary
course of business and pursuant to the reasonable requirements of Borrower’s business and upon
terms substantially the same and no less favorable to Borrower as it would obtain in a comparable
arm’s length transaction with any Person not such an Affiliate or Subsidiary, and so long as the
transaction is not otherwise prohibited under this Agreement. Upon the occurrence of any Event of
Default hereunder and acceleration of the Obligations hereunder, Administrative Agent shall have
the right to terminate any lease, management and other intercompany agreements among or between the
Persons constituting the Borrower, any Borrower Affiliates and any Guarantors. All leases,
management agreements and other intercompany agreements among or between the Persons constituting
the Borrower, any Borrower Affiliates and any Guarantors are hereby subordinated in right and time
of payment to the Obligations, regardless of whether such agreement was permitted herein or
Administrative Agent previously consented thereto.

     Section 6.12. Use of Lender’s Name/Press Releases. Borrower shall not use any
Lender’s name (or the name of any Lender’s Affiliates) in connection with any of its business
operations. Borrower shall not and shall not permit its Affiliates to, in the future, issue any
press release or other public disclosure using the name of any Lender, Administrative Agent or any
of their respective Affiliates or referring to this Agreement or the other Loan Documents without
at least two (2) Business Days prior written notice to Administrative Agent and the applicable
Lender and without the prior written consent of Administrative Agent and the applicable Lender
unless (and only to the extent that) Borrower or such Affiliate of Borrower is required to so
disclose under law and then, in any event, such Borrower or Affiliate will consult with
Administrative Agent and the applicable Lender before issuing such press release or other public

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disclosure. Borrower consents to the publication by each Lender and Administrative Agent of a
tombstone or similar advertising material relating to the financing transactions contemplated by
this Agreement. Borrower may disclose to third parties that Borrower has a borrowing relationship
with Lenders. Nothing contained in this Agreement is intended to permit or authorize Borrower to
make any contract on behalf of Administrative Agent or any Lender.

     Section 6.13. Contracts and Agreements. Borrower shall not become or be a party to
any contract or agreement which would breach this Agreement, or breach any other instrument,
agreement, or document to which Borrower is a party or by which it is or may be bound (except for
breaches of any other instrument, agreement or document which would not reasonably be expected to
have a Material Adverse Effect).

     Section 6.14. 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.

     Section 6.15. Truth of Statements and Certificates. Borrower shall not furnish to
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.

     Section 6.16. Acquisition Documents. Borrower shall not amend, modify or supplement
any of the Acquisition Documents in any manner that would or is reasonably likely to adversely
affect the interests or rights of the Administrative Agent or any Lender under this Agreement and
the other Loan Documents to which Borrower is a party or the likelihood that the Obligations will
be paid in full when due, without the Administrative Agent’s prior written consent. Within ten
(10) Business Days after entering into any non-adverse amendment, modification or supplement to any
of such Acquisition Documents, the Borrower shall deliver to the Administrative Agent a true,
complete and correct copy of such amendment, modification or supplement.

     Section 6.17. Fiscal Year. Borrower shall not change its Fiscal Year.

ARTICLE VII

CONFIDENTIALITY

     Section 7.1. Confidentiality. Borrower shall not disclose the contents of this
Agreement and the other Loan Documents to any third party (including, without limitation, any
financial institution or intermediary) unless required by applicable Law without Administrative
Agent’s prior written consent, other than to Borrower’s officers and advisors on a need-to-know
basis. 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.
Notwithstanding the foregoing, any taxpayer (and each employee, representative or other agent of
such taxpayer) may disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the transactions contemplated hereby and all materials of any kind (including

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opinions or other tax analyses) that are provided to such taxpayer relating to such tax
treatment and tax structure; provided that, with respect to any document or similar item that
contains information concerning the tax treatment or tax structure of the transactions contemplated
hereby as well as other information, this authorization shall only apply to such portions of the
document or similar item that relate to the tax treatment or tax structure of such transaction.
The preceding sentences in this Section 7.1 are intended to cause the transactions contemplated
hereby to not be treated as having been offered under conditions of confidentiality for purposes of
Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations promulgated under
Section 6011 of the Internal Revenue Code, as amended, and shall be construed in a manner
consistent with such purpose. In addition, each party hereto acknowledges that it has no
proprietary or exclusive rights to, to the extent applicable, the tax structure of the transactions
contemplated hereby or any tax matter or tax idea related thereto.

ARTICLE VIII

PROVISIONS RELATING TO REAL PROPERTY

     Section 8.1. Real Property Representations and Warranties. Without limiting the
generality of Article IV or any other representation or warranty made in this Agreement:

     (a) To the best of each Borrower’s knowledge, (i) no condemnation of any portion of any Real
Property, (ii) no condemnation or relocation of any roadways abutting any Real Property, and (iii)
no proceeding to deny access to any Real Property from any point or planned point of access to any
Real Property, has commenced or is contemplated by any Governmental Authority.

     (b) The use of any Real Property as an assisted living, Alzheimer living facility and/or
skilled nursing facility, as applicable, and the contemplated accessory uses do not violate,
except where such violation would not reasonably be expected to cause a Material Adverse Effect (i)
any Laws (including subdivision, zoning, building, environmental protection and wetland protection
Laws), or (ii) any building permits, covenants, conditions and restrictions of record, or
agreements affecting any Real Property or any part thereof. Neither the zoning authorizations,
subdivision approvals or variances nor any other right to construct or to use any Real Property is
to any extent dependent upon or related to any real estate other than the Real Property. Except as
set forth in the “Schedule B” title and insurance policies accepted by the Administrative Agent and
Lenders at Closing, no building or other improvement encroaches upon any property line, building
line, set back line, side yard line or any recorded or visible easement (or other easement of which
Borrower is aware or has reason to believe may exist) with respect to any Real Property. No Real
Property is situated in an area designated as having special flood hazards as defined by the Flood
Disaster Protection Act of 1973, as amended, or designated as a wetland by any governmental entity
having jurisdiction over the Real Property. All Governmental Approvals required for the operation
of the Real Property have been obtained except where the failure to obtain would not reasonably be
expected to have a Material Adverse Effect. All Laws relating to the construction of and operation
of the Improvements have been complied with and all permits and licenses required for the
construction of and operation of the
Real Property have been obtained, except where the failure to do so would not reasonably be
expected to cause a Material Adverse Effect. The Real Property is accessible through fully

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improved and dedicated roads, accepted for maintenance and public use by public authority having
jurisdiction. The Real Property has adequate water, gas and electrical supply, storm and sanitary
sewerage facilities, telephone facilities, other required public utilities, fire and police
protection, and means of access between the Real Property and public highways; none of the
foregoing will be foreseeably delayed or impeded by virtue of any requirements under any applicable
Laws. The Real Property includes all property and rights that may be reasonably necessary or
desirable to promote the present and any reasonable future beneficial uses and enjoyment thereof.
To the best of each Borrower’s knowledge, there are no, nor are there any alleged or asserted,
violations of law, regulations, ordinances, codes, permits, licenses, declarations, covenants,
conditions or restrictions of record, or other agreements relating to any Real Property, or the
Improvements, or any part thereof, except for such violations which, in the aggregate, would not
reasonably be expected to cause a Material Adverse Effect.

     (c) The Real Property is taxed separately without regard to any other property and for all
purposes the Real Property may be mortgaged, conveyed and otherwise dealt with as an independent
parcel. There are no unpaid or outstanding real estate or other taxes or assessments on or against
any Real Property or any part thereof, except general real estate taxes for fiscal year 2004 not
yet due or payable. To each Borrower’s knowledge, there is no pending or contemplated action
pursuant to which any special assessment may be levied against any portion of any Real Property.

     (d) Except for the Operating Leases which have been provided to and approved by Administrative
Agent in writing and the admission agreements set forth on the census report delivered by Borrower
to Administrative Agent prior to the Closing of the Loan, which Borrower certifies is true and
correct in all material respects, Borrower has not entered into any Leases, subleases or other
arrangements for occupancy of space within any Real Property that are currently in effect. True,
correct and complete copies of all Operating Leases, as amended, and Borrower’s standard form of
admission agreement have been delivered to Administrative Agent. All Operating Leases are in full
force and effect. Neither Borrower nor, to Borrower’s knowledge, any Tenant is in default under
any Operating Lease. Borrower has disclosed to Administrative Agent in writing any material
default by any Tenant under any Operating Lease and no notice of termination has been issued under
any Operating Lease. All rents or other payments required of any Tenant under any Operating Lease
due to date have been collected and no rent or other payments from any Tenant have been collected
no more than one (1) month in advance, no Tenant under any Commercial Lease has been granted any
rent concession or inducement whatsoever, and no Tenant under any admission agreement has been
granted any rent concession or inducement other than in the ordinary course of business.

     (e) Neither Borrower nor any partner or member, as applicable, in Borrower nor Guarantor is or
shall be, and no legal or beneficial interest of a partner or member, as applicable, in Borrower is
or will be held, directly or indirectly, by a “foreign corporation”, “foreign partnership”,
“foreign trust”, “foreign estate”, “foreign person”, “affiliate” of a “foreign person” or a “United
States intermediary” of a “foreign person” within the meaning of the Internal Revenue Code Sections
897, 1445 or 7701, the Foreign Investments in Real Property Tax Act of 1980, the International
Foreign Investment Survey Act of 1976, the Agricultural Foreign
Investment Disclosure Act of 1978, or the regulations promulgated pursuant to such Acts or any
amendments to such Acts.

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     (f) The Loan Documents create a valid first lien on the marketable, fee simple estate in the
Real Property.

     (g) There has been no damage or destruction of any part of any Real Property by fire or other
casualty that has not been repaired. Except as part of the routine maintenance, there are
presently no existing defects in any Real Property and no repairs or alterations thereof are
reasonably necessary or appropriate.

     (h) Borrower has no employees.

     (i) Except as set forth on Schedule 8.1(i) of the Information Certificate, Borrower
has no interest in any trademarks, copyrights, patents or other intellectual property with respect
to any Real Property.

     (j) Each of the Management Agreements is in full force and effect and Borrower is not in
default thereunder and, to Borrower’s knowledge, no Manager is in default thereunder.

     (k) Borrower: (i) does not hold, directly or indirectly, any ownership interest (legal or
equitable) in any real or personal property other than the interest which it owns in the Real
Property and the Personal Property; (ii) is not a shareholder or partner or member of any other
entity; and (iii) does not conduct any business other than the ownership, management and operation
of the Real Property. Borrower has not commingled the funds related to the Real Property with
funds from any other property except as disclosed on Schedule 8.1(k) of the Information
Certificate.

     (l) To Borrower’s knowledge, the Real Property, including all access roadways, driveways and
any other paving, and all site work, fencing, lighting and other improvements, has been completed
in a good and workmanlike manner in accordance with the plans, specifications and/or site plan
previously approved by the county or city in which the Real Property is situate in all material
respects, is free from filed or unfiled mechanics’ and materialmen’s liens, and has not been
damaged by fire or casualty and there are no deficiencies or problems with the design and/or
construction of the improvements on the Real Property. Final certificates of occupancy or
non-residential use permits have been obtained for all improvements on the Real Property. The
parcels of land comprising each Real Property are contiguous, subdivided parcels and are in full
compliance with applicable subdivision ordinances. No subdivision or resubdivision of such parcels
is required to: (i) convey, transfer, assign or lease such parcels, either individually or as a
whole; or (ii) rebuild after a casualty all or any portion of the improvements on the Real Property
to current size and configuration.

     Section 8.2. Reserves and Escrows.

     (a) Requirements. Borrower agrees to establish and maintain all of the reserves and
escrows required in this Section. Interest shall be payable on any funds reserved or escrowed
hereunder. All sums so reserved or escrowed may be commingled with the general funds of
Administrative Agent and no such sums shall be deemed to be held in trust for the benefit of
Borrower. All sums so reserved or escrowed shall be part of the Collateral and shall stand as
additional security for all of the Obligations. Borrower hereby grants Administrative Agent (for
the benefit of the Lenders) a first priority lien on and perfected security interest in such funds,

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including all interest accruing thereon, and Borrower shall execute any other documents and take
any other actions necessary to provide Administrative Agent (for the benefit of the Lenders) with
such a perfected security interest in such funds. If Administrative Agent at any time determines
that the amount on deposit in any reserve or escrow is insufficient for its intended purposes,
Borrower shall, within ten (10) days following notice from Administrative Agent, deposit such
additional sums as may be required by Administrative Agent. If an Event of Default exists,
Administrative Agent may, at its discretion, apply amounts on hand in the reserves or escrows to
cure such Event of Default. Upon demand of Administrative Agent, Borrower shall replenish the
applicable reserve or escrow to restore any sums so applied by Administrative Agent. Upon the
occurrence of an Event of Default and/or the maturity of any portion of the Obligations, the moneys
then remaining on deposit with Administrative Agent or its agent shall, at Administrative Agent’s
option, be applied against the Obligations.

     (b) Real Property Taxes. At the time of and in addition to the monthly installments
of principal and/or interest due under the Notes, Borrower shall pay to Administrative Agent a sum
equal to one-twelfth (1/12) of the amount estimated by Administrative Agent to be sufficient (when
aggregated with an initial deposit to be designated by Administrative Agent and paid by Borrower to
Administrative Agent at Closing or otherwise upon demand of Administrative Agent) to pay at least
sixty (60) days before they become due and payable, all taxes, assessments and other similar
charges levied against the Real Property (collectively, the “Taxes”). If the Real Property
or any portion thereof is part of a larger tract for purposes of taxation and assessments,
Administrative Agent may require the Borrower to have the Real Property taxed and assessed as a
separate parcel or separate parcels, or, in the alternative, to make the deposits required under
this Section based upon the taxation and assessment of the larger tract. So long as no Event of
Default exists hereunder, Administrative Agent shall apply the escrows sums to pay the Taxes.
Except as set forth in the preceding sentence, the obligation of Borrower to pay the Taxes is not
affected or modified by the provisions of this paragraph.

     (c) Replacement Reserve. Borrower shall make capital expenditures of Twenty-Nine and
17/100 ($29.17) per bed in each facility located on the Real Property each calendar year. To the
extent that such capital expenditures are made in an amount less than $29.17 per bed (as reasonably
detailed by the Borrower and provided to the Administrative Agent), then the difference between the
amount expended and the amount required to be expended shall be paid to the Administrative Agent to
hold in escrow within sixty (60) days after each year end. So long as there is no continuing Event
of Default, Borrower may request Administrative Agent to disburse funds from the escrow (if any)
(which request will include a reasonably detailed description of the capital expenditures at the
Real Property which Borrower intends to pay for with such funds), which request shall not be
unreasonably denied by Administrative Agent. If requested by Administrative Agent, each
disbursement request will be accompanied by copies of invoices, lien waivers and other evidence
reasonably required by Administrative Agent.

     Section 8.3. Real Property Operating Covenants.

     (a) Leasing and Operational Covenants.

          (i) Without the prior written consent of Administrative Agent, Borrower shall not (A)
enter into any Commercial Leases, (B) modify the form of

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admission agreement previously approved by Administrative Agent in any material adverse manner except as required by Law,
(C) modify, amend or terminate any Commercial Lease, (D) accept any rental payment more
than one month in advance of its due date or (E) enter into any ground lease (other than
the Operating Leases existing as of the date hereof) of any Real Property. Borrower shall
provide Administrative Agent with a copy of all Commercial Leases promptly following their
execution and such Leases shall be on the form of lease previously approved by
Administrative Agent (if such form lease does not already contain such a provision,
Borrower shall add an automatic attornment provision to such form lease whereby in the
event of a foreclosure, the tenant automatically shall recognize the successor owner as
landlord and such tenant shall have no right to terminate its lease in the event of such
foreclosure). If Administrative Agent consents to any new Commercial Lease or the
modification or renewal of any existing Commercial Lease, at Administrative Agent’s
request, Borrower shall cause the Tenant thereunder to execute a subordination and
attornment agreement in form and substance satisfactory to Administrative Agent. Borrower
shall provide Administrative Agent with a copy of the fully executed original of all
Commercial Leases promptly following their execution. Except with respect to the twelve
(12) cottages at the Harbor Point Location, Borrower shall not enter into any admission
agreement for a term of more than one (1) year and all such admission agreements shall be
at market rates on the form previously approved by Administrative Agent without material
modification adverse to Borrower except as required by Law.

          (ii) Without in any way limiting the other provisions of this Agreement, Borrower
shall not change the Operator of any Real Property or enter into, modify, amend, terminate
or cancel any Operating Lease with any Operator of any Real Property without the prior
written approval of Administrative Agent. Borrower shall cause the Real Property at all
times to be operated by the Operators, respectively, and the Operators identified on the
Information Certificate pursuant to Operating Leases approved by Administrative Agent in
writing (the “Operating Leases”), which Operating Leases are identified on the
Information Certificate. Each Operating Lease shall provide Administrative Agent the
right to terminate it upon Administrative Agent’s (or its designee’s) taking possession of
any Real Property or acquisition of any Real Property through foreclosure, a deed in lieu
of foreclosure, UCC sale or otherwise.

     (b) Defaults Under Leases. Borrower shall not suffer or permit any material breach or
default to occur in any of Borrower’s obligations under any of the Leases nor suffer or permit the
same to terminate by reason of any failure of Borrower to meet any requirement of any Lease.
Borrower shall notify Administrative Agent promptly in writing in the event a Tenant under a
Commercial Lease commits a material default under a Lease.

     (c) Management Contracts. Borrower shall not change the Manager of any Location or
enter into, modify, amend, terminate or cancel any management contract for any Real Property or
agreements with brokers, without the prior written approval of Administrative Agent. Any
substitute property manager or operator shall be required to enter into an assignment and
subordination of management or operating agreement in form and substance reasonably
satisfactory to Administrative Agent. Borrower shall cause the Real Property at all times to
be managed by the Managers identified on the Information Certificate pursuant to management

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agreements approved by Administrative Agent in writing (the “Management Agreements”), which
Management Agreements are identified on Schedule 8.3(c) of the Information Certificate.
Such restrictions and approval rights are solely for the purposes of assuring that the Real
Property is managed and operated in a first-class manner consistent with the preservation and
protection of the Real Property as security for the Term Loan and shall not place responsibility
for the control, care, management or repair of the Real Property upon Administrative Agent, or make
Administrative Agent responsible or liable for any negligence in the management, operation, upkeep,
repair or control of the Real Property.

     (d) Furnishing Notices. Borrower shall provide Administrative Agent and LaSalle Bank
with copies of all material notices pertaining to Borrower, Guarantor, any Manager or any Operator
or any Real Property received by Borrower or Guarantor or any Manager or Operator, and copies of
all material notices received from any Tenant, Guarantor, Manager, Operator, Governmental Authority
or insurance company within seven (7) days after such notice is received by Borrower, including any
inspection reports from any Governmental Authority if the matters addressed in any such notices or
inspection reports contain information that could reasonably be expected to cause a Material
Adverse Effect. In addition, Borrower shall promptly provide Administrative Agent with written
notice of any material litigation, arbitration, or other proceeding or governmental investigation
pending or, to each Credit Party’s knowledge, threatened against or relating to Borrower (or
Guarantor) or any Real Property.

     (e) Alterations. Without the prior written consent of Administrative Agent, Borrower
shall not make any material alterations to any Real Property. No excavation, construction, earth
work, site work or any other mechanic’s lienable work shall be done to or for the benefit of the
Real Property, without Administrative Agent’s approval, except for normal repair and maintenance in
the ordinary course of business.

     (f) Compliance With Laws. Borrower, Managers (as it relates to any Real Property),
Operators (as it relates to any Real Property) and the Real Property shall comply with all
applicable requirements (including applicable Laws) of any Governmental Authority having
jurisdiction over Borrower or any Real Property including all building, zoning, density, land use,
covenants, conditions and restrictions, subdivision requirements (including parcel maps and
environmental impact and other environmental requirements), employment and compensation of persons
engaged in the operation or maintenance of the Real Property, quality and safety standards,
accreditation standards and requirements of the applicable state department of health or other
applicable state regulatory agency (each a “State Regulator”), including any regulations
with respect to standards of quality and adequacy of medical care, and requirements governing
distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies, additions
to facilities and services and fee splitting, whether now existing or later to be enacted or
promulgated and whether foreseen or unforeseen, except where the failure to comply would not
reasonably be expected to cause a Material Adverse Effect.

     (g) Use of Real Property. Unless required by applicable Law, Borrower shall not
permit changes in the use of any Real Property from the use at the time this Agreement was
executed. Borrower shall neither initiate nor acquiesce in a change in the plat of subdivision, or
zoning classification or use of any Real Property without Administrative Agent’s prior written

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consent nor shall it grant any encumbrances or easements burdening any Real Property (other than
utility easements in the ordinary course of business).

     (h) No Commingling of Funds. Each Borrower shall not commingle (or permit the
commingling of) the funds related to the Real Property with funds from any other property which is
not subject to a Lien of the Loan Documents.

     (i) Maintenance and Preservation of the Real Property. Borrower shall keep the Real
Property in good condition and repair and if all or part of any the Real Property becomes damaged
or destroyed, Borrower shall promptly and completely repair and/or restore such Real Property in a
good and workmanlike manner in accordance with sound building practices, subject to Administrative
Agent disbursing Insurance Proceeds or other sums to pay costs of the work of repair or
reconstruction under this Agreement. Borrower shall not commit or allow waste or permit impairment
or deterioration of any Real Property. Borrower shall perform such acts to preserve the value of
the Real Property and Borrower shall not abandon any Real Property.

     (j) Conversion. Borrower shall not, and shall not permit, the Real Property or any
portion thereof to be converted or take any preliminary actions which could lead to a conversion to
condominium or cooperative form or ownership.

     Section 8.4. Additional Covenants.

     (a) Personal Property. All of Borrower’s personal property, fixtures, attachments and
equipment, including, without limitation, all FFE, delivered upon, attached to, used or required to
be used in connection with the operation of any Real Property (collectively, the “Personal
Property”) shall always be located at such Real Property and shall be kept free and clear of
all liens, encumbrances and security interests except Permitted Liens. Borrower shall not (nor
shall it permit any tenant to), without the prior written consent of Administrative Agent, sell,
assign, transfer, encumber, remove or permit to be removed from any Real Property any of the
Personal Property. So long as no Event of Default exists, Borrower may sell or otherwise dispose
of the Personal Property when obsolete, worn out, inadequate, unserviceable or unnecessary for use
in the operation of the Real Property, but only upon replacing the same with other Personal
Property at least equal in value and utility to the Personal Property that is disposed (to the
extent such replacement property is necessary).

     (b) Appraisals. Administrative Agent shall have the right to obtain a new or updated
Appraisal of any Real Property from time to time. Borrower shall cooperate with Administrative
Agent in this regard. If the Appraisal is obtained to comply with any applicable law or regulatory
requirement, or bank policy promulgated to comply therewith, or if an Event of Default exists,
Borrower shall pay for any such Appraisal upon Administrative Agent’s request.

     (c) Single Purpose Entity. Borrower is, and at all times shall remain, a Single
Purpose Entity and shall comply with the requirements set forth on Schedule E attached
hereto until after the Obligations have been repaid in full.

     Section 8.5. Administrative Agent’s Election to Apply Insurance Proceeds on
Obligations.

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     (a) Subject to the provisions of Section 8.5(b) below, Administrative Agent may elect
to collect, retain and apply upon the Obligations of Borrower under this Agreement or any of the
other Loan Documents, all proceeds of insurance resulting from any loss at any Real Property or
condemnation awards awarded in connection with a condemnation or other taking of any Real Property
or a portion thereof (individually and collectively referred to as “Insurance Proceeds”),
after deduction of all expenses of collection and settlement, including, without limitation,
attorneys’ and adjusters’ fees and charges. Any Insurance Proceeds remaining after repayment of
the Obligations shall be paid by Administrative Agent to Borrower.

     (b) Notwithstanding anything in Section 8.5(a) to the contrary, in the event of any
casualty to any Improvements or any condemnation of part of any Real Property, Administrative Agent
agrees to make available the Insurance Proceeds to restoration of such Improvements if (i) no Event
of Default exists, (ii) all Insurance Proceeds are deposited with Administrative Agent, (iii) in
Administrative Agent’s reasonable judgment, the amount of Insurance Proceeds available for
restoration of such Improvements is sufficient to pay the full and complete costs of such
restoration, (iv) if the cost of restoration exceeds ten percent (10%) of the Term Loan, then only
if in Administrative Agent’s sole determination the Term Loan will not exceed seventy five percent
(75%) of the fair market value of the Real Property after completion of restoration, (v) in
Administrative Agent’s reasonable determination, such Real Property can be restored to an
architecturally and economically viable project in compliance with applicable Laws, (vi) each
Guarantor reaffirms any Guaranty and any other Loan Document to which it is a party, in writing,
(vii) in Administrative Agent’s reasonable determination, such restoration is likely to be
completed not later than six (6) months prior to the Maturity Date, and (viii) the cost of
restoration of the Improvements at such Real Property does not exceed fifty percent (50%) of the
Term Loan attributed by Administrative Agent to such Real Property as identified on Schedule
8.5(b) of the Information Certificate.

     (c) Notwithstanding anything to the contrary in Sections 8.5(a) and 8.5(b)
above, if as a result of any casualty to or condemnation of any Improvements the cost to repair and
restore does not exceed Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), and so long as
no Default has occurred and is continuing, then Borrower shall be entitled to receive the Insurance
Proceeds attributable thereto, provided, however, that Borrower shall use the
Insurance Proceeds to restore or rebuild such Improvements to their condition prior to such
casualty or condemnation.

     Section 8.6. Borrower’s Obligation to Rebuild and Use of Insurance Proceeds Therefor.

     (a) In case Administrative Agent does not elect to apply or does not have the right to apply
the Insurance Proceeds to the Obligations, as provided in Section 8.5 above, Borrower
shall:

          (i) Proceed with diligence to make settlement with insurers or the appropriate governmental
authorities and cause the Insurance Proceeds to be deposited with Administrative Agent;

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          (ii) If the Insurance Proceeds and the available proceeds of the Loan are insufficient to
assure Administrative Agent that the all contemplated repairs or construction will be completed,
promptly deposit with Administrative Agent any amount necessary to assure that such contemplated
repairs or construction will be completed; and

          (iii) Promptly proceed with the assumption of construction of the Improvements, including the
repair of all damage resulting from such fire, condemnation or other cause and restoration to its
former condition.

     (b) Any request by Borrower for a disbursement by Administrative Agent of Insurance Proceeds
and funds deposited by Borrower shall be treated by Administrative Agent as if such request were
for an advance of the Loan hereunder, and the disbursement thereof shall be conditioned upon
Borrower’s compliance with and satisfaction of the same conditions precedent as would be applicable
under this Agreement for an advance of the Loan.

     (c) (i) Notwithstanding anything to the contrary, if the damage to the Real Property does not
exceed Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) and so long as no Default has
occurred and is continuing, Borrower may settle and adjust any claim without the consent of
Administrative Agent and agree with the insurance company or companies on the amount of Insurance
Proceeds to be paid upon the loss; provided, however, that such adjustment is
carried out in a competent and timely manner. Any monies collected under this subsection (c)(i)
shall be applied in accordance with Section 8.5 above.

          (ii) If the damage to the Real Property exceeds Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), and so long as no Default has occurred and is continuing, Borrower may settle and
adjust any claim with the consent of Administrative Agent and agree with the insurance company or
companies on the amount of Insurance Proceeds to be paid upon the loss, provided,
however, that such adjustment is carried out in a competent and timely manner. Any monies
collected under this subsection (c)(ii) shall be applied in accordance with Section 8.5
above.

          (iii) If a Default has occurred and is continuing, then Administrative Agent may elect to file
the respective proof of loss, settle and adjust any claim with respect to any damage to the Real
Property without the consent of Borrower and agree with the insurance company on the amount of the
Insurance Proceeds in the place and stead of Borrower and without the consent of Borrower. In
addition, Administrative Agent shall act in a commercially reasonable manner if Administrative
Agent elects to settle or adjust any claim under the provisions of this subparagraph (iii);
provided, however, that so long as Administrative Agent retains a third party to
settle or adjust such claim on behalf of Administrative Agent, Administrative Agent shall be deemed
to have acted in a commercially reasonable manner. Borrower hereby releases Administrative Agent
from any and all liability with respect to the settlement and adjustment by Administrative Agent of
any claims in respect of any casualty
except to the extent that the Administrative Agent is grossly negligent or exercises willful
misconduct in the settlement or adjustment of such claims.

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ARTICLE IX

HEALTHCARE MATTERS

     Section 9.1. Healthcare Matters. Without limiting the generality of any
representation or warranty made in Article IV or any covenant made in Articles V or
VI, each Borrower represents and warrants on a joint and several basis to and covenants
with Administrative Agent and each Lender, and shall be deemed to represent, warrant and covenant
on each day on which any advance or accommodation in respect of the Term Loan is requested or made
or any Obligations shall be outstanding under this Agreement, that:

     (a) Funds from Restricted Grants. Except as described on Schedule 9.1(a) of
the Information Certificate, none of the Real Property or the Collateral is subject to, and
Borrower shall indemnify and hold Administrative Agent and each Lender harmless from and against,
any liability in respect of amounts received by Borrower or others for the purchase or improvement
of the Real Property or Collateral or any part thereof under restricted or conditioned grants or
donations, including, without limitation, monies received under the Public Health Service Act, 42
U.S.C. Section 291 et seq.

     (b) 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
certificate, license, or approval issued by the State Regulator for the requisite number of beds in
each Real Property. All material required Government Approvals held in Borrower’s name and
necessary for the operation of the Location or the Real Property are listed on Schedule
9.1(b) of the Information Certificate (collectively, together with any CON, the
“Licenses”). Borrower shall cause to be operated the Location and the Real Property in a
manner such that the Licenses shall remain in full force and effect at all times. True and
complete copies of the Licenses have been delivered to Administrative Agent.

     (c) Licenses. The Licenses: (i) are and shall continue in full force and effect at
all times throughout the term of the Term Loan and are and shall be free from restrictions or known
conflicts which would materially impair the use or operation of any Real 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 correct
such Restrictions; (ii) may not be, and have not been, and will not be transferred to any location
other than the Real Property; and (iii) have not been and will not be pledged as collateral
security for any other loan or indebtedness. No Borrower shall do (or suffer to be done) any of
the following:

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

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

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

     (d) Further Assurances. From time to time, upon the reasonable request of
Administrative Agent, upon and during the continuance of an Event of Default, Borrower shall, and
shall cause each Borrower to complete, execute and deliver to Administrative Agent any appropriate
and applicable applications, notices, documentation, and other information necessary, in
Administrative Agent’s reasonable judgment, to permit Administrative Agent or its designee
(including a receiver) to obtain, maintain or renew any one or more of the Licenses for any
Borrower or Location or to become the owner of the existing Licenses for any Borrower or Location
and, to the extent permitted by applicable Laws, to obtain any other provider agreements or
Governmental Approvals then necessary or desirable for the operation of any Location by
Administrative Agent or its designee for their current use (including, without limitation, any
applications for change of ownership of the existing Licenses or change of control of the owner of
the existing Licenses). To the extent permitted by applicable Laws, and only upon and during the
continuance of an Event of Default, (i) Administrative Agent is hereby authorized (without the
consent of Borrower) to submit any such applications, notices, documentation or other information
which Borrower caused to be delivered to Administrative Agent in accordance with the above
provisions to the applicable Governmental Authorities, or to take such other steps as
Administrative Agent may deem advisable to obtain, maintain or renew any License or other
Governmental Approvals in connection with the operation of the Locations for their current use, and
Borrower agrees to cooperate with Administrative Agent in connection with the same and (ii)
Borrower, upon demand by Administrative Agent, shall take (or cause to be taken) any action
necessary or desirable, in Administrative Agent’s sole judgment (acting in accordance with
applicable law), to permit Administrative Agent or its designee (including a receiver) to use,
operate and maintain any Location for its current use. If Borrower fails to comply with the
provisions of this subsection (d) for any reason whatsoever, Borrower hereby irrevocably appoints
Administrative Agent and its designee as Borrower’s attorney-in-fact, with full power of
substitution, to take any action and execute any documents and instruments necessary or desirable
in Administrative Agent’s sole judgment to permit Administrative Agent or its designee to undertake
Borrower’s obligations under this subsection (d), including obtaining any Licenses or Governmental
Approvals then required for the operation of any Location by Administrative Agent or its designee
for its current use. The foregoing power of attorney is coupled with an interest and is
irrevocable and Administrative Agent may exercise its rights thereunder in addition to any other
remedies which Administrative Agent may have against Borrower or Guarantor as a result of a
Borrower’s breach of the obligations contained in this Section.

     (e) Transfer of Licenses. To the Borrower’s knowledge, if any Operating Lease is
terminated or in the event of foreclosure or other acquisition of any Real Property by
Administrative Agent or its designee or any purchaser at a foreclosure sale, Borrower,
Administrative Agent, or any subsequent purchaser need not obtain a CON from any applicable
state healthcare regulatory authority or agency (other than giving such notice required under
the applicable state law or regulation) prior to applying for and receiving a license to operate
the Real Property and certification to receive Medicare and Medicaid payments (and any successor
program) for patients having coverage thereunder, provided, however, that neither
the services

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offered at the Real Property nor the number of beds operated would be changed.
Borrower shall cooperate with Administrative Agent in all respects to cause all Licenses to be
reissued or transferred to Administrative Agent or Administrative Agent’s designee, including,
without limitation, any subsequent manager or any subsequent purchaser.

ARTICLE X

EVENTS OF DEFAULT

     Section 10.1. Events of Default. Each of the following (individually, an “Event
of Default” and collectively, the “Events of Default”) shall constitute an event of
default under this Agreement:

     (a) (i) A default in the payment of any principal of or interest on the Notes on the date due,
declared due or demanded, whether at maturity or otherwise, or (ii) the other Obligations of
Borrower on the date due, declared due or demanded, whether at maturity or otherwise, which default
under this subsection (ii) shall have continued unremedied for a period of five (5) days;

     (b) A default in the payment of any fees, escrow or reserve amounts, or other charges or other
monetary obligations owing to Administrative Agent or any Lender by Borrower arising out of or
incurred in connection with this Agreement or any other Loan Document when such payment is due and
payable, which default shall have continued unremedied for a period of ten (10) days;

     (c) (i) The Borrower fails or neglects to perform, keep or observe any of the covenants,
conditions or agreements set forth in Section 2.9 or Section 5.28 or Article VIor
(ii) the Borrower or any Guarantor of the Obligations fails or neglects to perform, keep or observe
any of the covenants, conditions or agreements of any other term, covenant or agreement contained
herein or in any of the other Loan Documents, which default, for purposes of this subsection (ii),
shall have continued unremedied for a period of thirty (30) days after written notice to the
Borrower by the Administrative Agent or any Lender;

     (d) Any representation or warranty heretofore, now or hereafter made by Borrower in this
Agreement or in any of the other Loan Documents, any financial statement, or any statement or
representation made in any other certificate, report or opinion delivered in connection with this
Agreement or the other Loan Documents proves to have been incorrect or misleading in any material
respect when made;

     (e) Any obligation of Borrower (other than its Obligations under this Agreement) for the
payment of Borrowed Money in excess of Two Hundred Fifty Thousand Dollars ($250,000) is not paid
when due or within any applicable grace period, or such obligation becomes or is declared to be due
and payable before the expressed maturity of the obligation, or there shall
have occurred an event that, with the giving of notice or lapse of time, or both, would cause
any such obligation to become, or allow any such obligation to be declared to be, due and payable;

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     (f) Borrower makes an assignment for the benefit of creditors, offers a composition or
extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets
now or hereafter conducted by Borrower;

     (g) Borrower or any Guarantor (i) files a petition in bankruptcy, (ii) is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver of or any trustee for
itself or any substantial part of its property, (iii) commences any proceeding relating to itself
under any reorganization, arrangement, readjustment or debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect, or any such proceeding is
commenced against Borrower or any Guarantor and such proceeding remains undismissed for a period of
sixty (60) days, (iv) by any act indicates its consent to, approval of, or acquiescence in, any
such proceeding or the appointment of any receiver of or any trustee for a Borrower or Guarantor or
any substantial part of its property, or suffers any such receivership or trusteeship to continue
undischarged for a period of sixty (60) days, or (v) admits in writing its inability to pay its
debts as they become due;

     (h) One or more (i) final judgments against Borrower requiring payment in excess of Two
Hundred Fifty Thousand Dollars ($250,000) shall be rendered by a court, arbitrator, arbitration
panel or mediator with the authority to issue binding judgments against Borrower or (ii) final
settlements requiring payment in excess of Two Hundred Fifty Thousand Dollars ($250,000) by or on
behalf of Borrower of any pending litigation, arbitration or mediation, in any event not fully and
unconditionally covered by insurance (and of which the insurer has acknowledged in writing its
obligation with respect thereto), shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of thirty (30) days;

     (i) A Reportable Event that constitutes grounds for termination of any Plan covered by Title
IV of ERISA or for the appointment by the appropriate United States District Court of a trustee to
administer any such Plan or for the entry of a Lien or encumbrance to secure any deficiency has
occurred and is continuing thirty (30) days after its occurrence, or any such Plan is terminated,
or a trustee is appointed by an appropriate United States District Court to administer any such
Plan, or the Pension Benefit Guaranty Corporation institutes proceedings to terminate any such Plan
or to appoint a trustee to administer any such Plan, or a Lien or encumbrance is entered to secure
any deficiency or claim and, in the case of any of the foregoing, a Material Adverse Effect is
reasonably likely to occur as a result;

     (j) Any outstanding equity interest in Borrower is sold or otherwise transferred by the Person
owning such equity interest on the date of this Agreement without the prior written consent of the
Administrative Agent and the Lenders;

     (k) There shall occur any uninsured damage to or loss, theft or destruction of any portion of
the Collateral that exceeds Five Hundred Thousand Dollars ($500,000) in the aggregate;

     (l) The Guarantor shall fail to maintain any financial ratio or financial covenant contained
in the Guaranty, or any Manager terminates any management agreement with Borrower or its Affiliates
and the Borrower or its Affiliates shall fail to enter into a management

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agreement within 30 days following the termination date with a replacement manager on terms reasonably satisfactory to the
Administrative Agent;

     (m) Upon the issuance of any execution or distraint process against Borrower or any material
portion of the Collateral or any portion of the Real Property, which shall remain undischarged for
a period of thirty (30) days;

     (n) Borrower ceases any material portion of its business operations as currently conducted, or
the Borrower or any Guarantor voluntarily or involuntarily dissolves or is dissolved, or its
existence terminates or is terminated;

     (o) Borrower is criminally indicted or convicted under any law and such indictment or
conviction, in Administrative Agent’s reasonable determination, may result in the forfeiture of any
material portion of the Collateral;

     (p) 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 Loan Documents,
the legality or the enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Administrative Agent (for the benefit of the Lenders), or 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;

     (q) Any Event of Default occurs under or pursuant to (i) any of the Affiliated Loan Documents
or (ii) any other agreement for borrowed money with respect to indebtedness in excess of $250,000
and, in any case, continues beyond any applicable grace or cure period so as to permit the
acceleration of such indebtedness;

     (r) 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;

     (s) There shall occur with respect to the Operator or 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 or (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 sixty (60) days or more or pertains to more than one Location) or facility closure;

     (t) A state or federal regulatory agency shall have revoked any license, permit, certificate
or Medicaid or Medicare qualification pertaining to the Real 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;

     (u) Any material default by Borrower under the terms of its Operating Lease following the
expiration of any applicable notice and cure period; provided, however, that if the

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applicable Operating Lease does not provide a notice and cure period, then the notice and cure
period provided in subsection (b) of this Section 10.1 will apply to any such monetary
default, and the notice and cure period provided in subsection (c) of this Section 10.1
will apply to any such non-monetary default (which respective periods shall commence upon written
notice of default from Administrative Agent or the applicable tenant, manager or consultant,
whichever occurs first); or

     (v) Lawrence R. Deering, Joseph D. Conte or Gene R. Curcio 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 with
an individual with substantially similar skills and experience (but in no event later than within
ninety (90) calendar days of the former individual’s resignation, termination, permanent disability
or death) and otherwise acceptable to the Administrative Agent and the Required Lenders in their
reasonable and good faith determination.

     Section 10.2. Acceleration. Upon the occurrence of any of the foregoing Events of
Default, the Obligations hereunder and under the Notes shall become and be immediately due and
payable upon written notice from Administrative Agent; provided, however, that upon
the happening of any event specified in Section 10.1(g), all Obligations (including,
without limitation, the Deferred Commitment Fee or other fees due upon any termination of this
Agreement) shall be immediately due and payable without declaration or other notice to Borrower.

     Section 10.3. Remedies.

     (a) Upon the occurrence of and during the continuance of an Event of Default under this
Agreement or the other Loan Documents, Administrative Agent, in addition to all other rights,
options, and remedies granted to Administrative Agent under this Agreement or at law or in equity,
may take any of the following steps (which list is given by way of example and is not intended to
be an exhaustive list of all such rights and remedies):

          (i) Terminate the Term Loan, whereupon all outstanding Obligations (including, without
limitation, the Deferred Commitment Fee) or any other fees due upon any termination of this
Agreement shall be immediately due and payable;

          (ii) Exercise all other rights granted to it under this Agreement and all rights under the UCC
in effect in the applicable jurisdiction(s) and under any other applicable law; and

          (iii) Exercise all rights and remedies under all Loan Documents now or hereafter in effect,
including but not limited to:

               (A) The right to take possession of, send notices regarding, and collect directly the
Collateral, with or without judicial process;

               (B) The right to (by its own means or with judicial assistance) enter any of Borrower’s
premises and take possession of the Collateral, or

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render it unusable, or dispose of the Collateral
on such premises in compliance with subsection (C) below, without any liability for rent, storage,
utilities, or other sums, and Borrower shall not resist or interfere with such action;

               (C) The right to require Borrower at Borrower’s expense to assemble all or any part of the
Collateral and make it available to Administrative Agent at any place designated by Administrative
Agent;

               (D) To accelerate the Term Loan Amount or to use the Collateral and/or funds in the
Concentration Account to reduce the Term Loan; and

               (E) The right to enforce Borrower’s rights against Account Debtors and other obligors,
including, but not limited to, the right to collect Accounts directly in Administrative Agent’s own
name and to charge the collection costs and expenses, including attorneys’ fees, to Borrower.

     (b) Borrower agrees that a notice received by it at least ten (10) days before the time of any
intended public sale, or the time after which any private sale or other disposition of the Personal
Property is to be made, shall be deemed to be reasonable notice of such sale or other disposition.
If permitted by applicable law, any perishable Personal Property which threatens to speedily
decline in value or which is sold on a recognized market may be sold immediately by Administrative
Agent without prior notice to Borrower. At any sale or disposition of Personal Property,
Administrative Agent may (to the extent permitted by applicable law) purchase all or any part of
the Personal Property, free from any right of redemption by Borrower, which right is hereby waived
and released. 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.
Administrative Agent shall have no obligation to clean-up or otherwise prepare the Collateral for
sale. Administrative Agent may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral. Administrative Agent may sell
the Collateral without giving any warranties as to the Collateral. Administrative Agent may
specifically disclaim any warranties of title or the like. This procedure will not be considered
to adversely affect the commercial reasonableness of any sale of the Collateral. If Administrative
Agent sells any of the Collateral upon credit, Borrower will be credited only with payments
actually made by the purchaser, received by Administrative Agent and applied to the indebtedness of
the purchaser. If the purchaser fails to pay for the Collateral, Administrative Agent may resell
the Collateral and Borrower shall be credited with the proceeds of the sale. Borrower shall remain
liable for any deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations.

     (c) Without restricting the generality of the foregoing and for the purposes aforesaid,
Borrower hereby appoints and constitutes Administrative Agent its lawful attorney-in-fact with full
power of substitution in the Property to use unadvanced funds remaining under the Notes or which
may be reserved, escrowed or set aside for any purposes hereunder at any time, or to advance funds
in excess of the face amount of the Notes, 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

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name of Borrower prosecute and defend all actions or proceedings in connection with the
Collateral (including any Leases pertaining to Real 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.

     Section 10.4. Nature of Remedies. Administrative Agent shall have the right to
proceed against all or any portion of the Collateral to satisfy in any order (a) the liabilities
and Obligations of Borrower to Administrative Agent and the Lenders under this Agreement or any
other Loan Documents evidencing financings provided to Borrower or (b) the liabilities and
obligations of Borrower, Guarantor and their respective Affiliates to Administrative Agent and the
Lenders under the Affiliated Loan Documents. All rights and remedies granted Administrative Agent
and the Lenders under this Agreement and under any agreement referred to in this Agreement, or
otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not
alternative remedies, and Administrative Agent (for the benefit of the Lenders) may proceed with
any number of remedies at the same time until the Loan, and all other existing and future
liabilities and obligations of Borrower to Administrative Agent and Lenders, are satisfied in full.
The exercise of any one right or remedy shall not be deemed a waiver or release of any other right
or remedy, and Administrative Agent (for the benefit of the Lenders), 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 Administrative Agent to any liabilities and
obligations of Borrower under the Loan Documents and the Affiliated Loan Documents in such order of
application and in such amounts as Administrative Agent shall deem appropriate in its discretion.
Borrower waives any right it may have to require Administrative Agent or Lenders to pursue any
Person for any of the Obligations.

     Section 10.5. Waivers by Borrower. 

     (a) 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 Loan Documents, the Notes or
any other notes, commercial paper, Accounts, contracts, documents, instruments, chattel paper and
guaranties at any time held by Administrative Agent on which Borrower may in any way be liable, and
hereby ratifies and confirms whatever Administrative Agent may do in this regard; (ii) all 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 Loan Documents and the transactions evidenced hereby and thereby.

     (b) 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

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time, renewals, waivers, or modifications that may be granted by Administrative Agent with respect to the
payment or other provisions of this Loan Agreement, the 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.

     (c) Each and every covenant and condition for the benefit of Administrative Agent contained in
this Agreement and the other Loan Documents may be waived by Administrative Agent;
provided, however, that to the extent that Administrative Agent may have acquiesced
in any noncompliance with any requirements or conditions precedent to the Closing of the Term Loan
or to any subsequent disbursement of Term Loan proceeds, such acquiescence shall not be deemed to
constitute a waiver by Administrative Agent of such requirements with respect to any future
disbursements of Loan proceeds and Administrative Agent may at any time after such acquiescence
require Borrower to comply with all such requirements. Any forbearance by Administrative Agent in
exercising any right or remedy under any of the Loan Documents, or otherwise afforded by applicable
law, including any failure to accelerate the 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 Notes 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 Loan Documents. Administrative Agent’s acceptance of payment of any sum
secured by any of the Loan Documents 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
Loan Documents.

     (d) Without limiting the generality of anything contained in this Agreement or the other Loan
Documents, 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 Loan Documents and other security instruments or
agreements securing the Loan has been foreclosed, sold and/or otherwise realized upon in
satisfaction of Borrower’s obligations under the Notes.

     (e) Nothing contained herein or in any other Loan Document 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 Loan Documents 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 Loan
Documents. In addition, Administrative Agent shall have the right from time to time to partially

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foreclose upon any Collateral in any manner and for any amounts secured by the Loan Documents 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 Notes, Administrative Agent may foreclose all or any part of the Collateral to
recover so much of the principal balance of the Notes as Administrative Agent may accelerate and
such other sums secured by one or more of the Loan Documents as Administrative Agent may elect.
Notwithstanding one or more partial foreclosures, any unforeclosed Collateral shall remain subject
to the Loan Documents to secure payment of sums secured by the Loan Documents and not previously
recovered.

     (f) 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 the 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.

     Section 10.6. 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 Loan Documents, 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, including, without limitation,
maintaining the cash management and collection procedure described herein. 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 Credit Party waives the requirement of
the posting of any bond in connection with such injunctive relief.

     Section 10.7. Marshalling.

     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 Obligations or any other obligation owed to
Administrative Agent or Lenders by any Credit Party.

     Section 10.8. Recourse to Borrower.

     Notwithstanding anything to the contrary contained herein or in any other Loan Document, the
Term Loan 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

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against Borrower, including all present and future revenue and assets of Borrower,
whether or not such assets have been pledged as collateral for the Term Loan.

     Section 10.9. Setoff Rights. During the continuance of any Event of Default, each
Lender is hereby authorized by Borrower at any time or from time to time, with reasonably prompt
subsequent notice to Borrower (any prior or contemporaneous notice being hereby expressly waived)
to set off and to appropriate and to apply any and all (a) balances held by such Lender at any of
its offices for the account of Borrower or any of its Subsidiaries (regardless of whether such
balances are then due to Borrower or its Subsidiaries), and (b) other property at any time held or
owing by such Lender to or for the credit or for the account of Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no Lender shall
exercise any such right without the prior written consent of Administrative Agent (which consent
shall not unreasonably be withheld, delayed or conditioned). Any Lender exercising a right to set
off shall purchase for cash (and the other Lenders shall sell) interests in each of such other
Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the
amount so set off with each other Lender in accordance with their respective Pro Rata Share of the
Obligations. Borrower agrees, to the fullest extent permitted by law, that any Lender may exercise
its right to set off with respect to the Obligations as provided in this Section.

ARTICLE XI

AGENCY PROVISIONS

     Section 11.1. Appointment and Authorization. 

     (a) Each Lender hereby irrevocably appoints and authorizes Administrative Agent to enter into
each of the Loan Documents on its behalf and to take such actions as Administrative Agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to Administrative
Agent by the terms hereof and thereof, together with all such powers as are reasonably incidental
thereto. Except as otherwise expressly provided in Section 11.1(b) below or Section
12.2, Administrative Agent is authorized and empowered to amend, modify, or waive any
provisions of this Agreement or the other Loan Documents on behalf of Lenders. The provisions of
this Article XI are solely for the benefit of Administrative Agent and Lenders and neither
Borrower nor any other Credit Party shall have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and duties under this Agreement, Administrative
Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for Borrower or any other
Credit Party. Administrative Agent may perform any of its duties hereunder, or under the Loan
Documents, by or through its agents or employees.

     (b) The consent of Required Lenders and Borrowers will be required to amend, modify or
terminate this Agreement, and the consent of Requisite Lenders will be required to waive any
provision of this Agreement or any of the other Loan Documents in favor of Lenders or to
Administrative Agent for the benefit of the Lenders (unless such provision relates solely to an
Obligation of a single Lender, in which case, such Lender shall be entitled to waive such provision
for itself only), or to amend, modify or terminate any provision of this Agreement or

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any of the other Loan Documents in any material respect, including, without limitation, any of
the following such amendments, modifications or termination:

          (i) consent to allow the Borrower to create, incur, assume or suffer to exist any liability
for subordinate debt, or Lien (other than Permitted Liens) against any of the Collateral;

          (ii) execute and deliver any intercreditor or subordination agreements related to any Debt;

          (iii) accelerate all of the Obligations under the Term Loan pursuant to Section 10.2;

          (iv) commence foreclosure on any of the Collateral (or accept a deed in lieu thereof), seek
appointment of a receiver, or terminate any Operating Lease;

          (v) release of any portion of the Collateral, except as expressly permitted under the
provisions of this Agreement; or

          (vi) consent to the assignment, delegation or other transfer by any Borrower or other Credit
Party of any of its rights and obligations under any Loan Document.

     In addition to and without limiting the foregoing, so long as any Lender holds a Pro Rata
Share of thirty-four percent (34%) or more, Administrative Agent shall not consent to or approve or
determine the following matters without the prior written consent of such Lender:

          (A) imposition of the Default Rate pursuant to Section 2.1 of this Agreement;

          (B) application of proceeds or collections pursuant to Section 2.4(c), Section 10.4, Section
12.25(a)(iv) or Section 12.25(a)(vi) of this Agreement;

          (C) waiver of any covenant set forth in Article V or Article VI of this Agreement;

          (D) declare an Event of Default pursuant to Section 10.1;

          (E) exercise any remedies pursuant to Section 10.3;

          (F) foreclose on any of the Collateral as provided in Section 10.5(e); and

          (G) any change in any insurance requirements with respect to any Borrower.

     In the event Agent requests the consent of a Lender and does not receive a written consent or
denial thereof within ten (10) Business Days after such Lender’s receipt of such request, then such
Lender will be deemed to have denied the giving of such consent.

     Section 11.2. Administrative Agent and Affiliates. Administrative Agent shall have
the same rights and powers under the Loan Documents as any other Lender and may exercise or refrain
from exercising the same as though it were not Administrative Agent, and Administrative

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Agent and its Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Borrower as if it were not Administrative Agent
hereunder.

     Section 11.3. Action by Administrative Agent. The duties of Administrative Agent
shall be mechanical and administrative in nature. Except only as provided by applicable law,
Administrative Agent shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender. Nothing in this Agreement or any of the Loan Documents, express or implied, is
intended to or shall be construed to impose upon Administrative Agent any obligations in respect of
this Agreement or any of the Loan Documents except as expressly set forth herein or therein.

     Section 11.4. Consultation with Experts. Administrative Agent may consult with legal
counsel, independent public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken by it in good faith in accordance with the advice of
such counsel, accountants or experts.

     Section 11.5. Liability of Administrative Agent. Neither Administrative Agent nor any
of its directors, officers, agents or employees shall be liable to any Lender for any action taken
or not taken by it in connection with the Loan Documents, except that Administrative Agent shall be
liable to the extent of its gross negligence or willful misconduct as determined by a court of
competent jurisdiction. Neither Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into or verify (a) any
statement, warranty or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or agreements specified in any
Loan Document; (c) the satisfaction of any condition specified in any Loan Document, except receipt
of items required to be delivered to Administrative Agent; (d) the validity, effectiveness,
sufficiency or genuineness of any Loan Document, any Lien purported to be created or perfected
thereby or any other instrument or writing furnished in connection therewith; (e) the existence or
non-existence of any Default or Event of Default; or (f) the financial condition of any Borrower.
Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex, facsimile or electronic
transmission or similar writing) believed by it to be genuine or to be signed by the proper party
or parties. Administrative Agent shall not be liable for any apportionment or distribution of
payments made by it in good faith and if any such apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Lender to whom payment was due but
not made, shall be to recover from other Lenders any payment in excess of the amount to which they
are determined to be entitled (and such other Lenders hereby agree to promptly return to such
Lender any such erroneous payments received by them).

     Section 11.6. Indemnification. Each Lender shall, in accordance with its Pro Rata
Share, indemnify Administrative Agent (to the extent not reimbursed by Borrower or any other Credit
Party) against any cost, expense (including reasonable counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from Administrative Agent’s gross
negligence or willful misconduct as determined by a court of competent jurisdiction) that
Administrative Agent actually suffers or incurs in connection with the Loan Documents or any

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action taken or omitted by Administrative Agent hereunder or thereunder. 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
obligations of Lenders under this Section 11.6 shall survive the payment in full of the Obligations
and the termination of this Agreement.

     Section 11.7. Right to Request and Act on Instructions. Administrative Agent may at
any time request instructions from Lenders with respect to any actions or approvals which by the
terms of this Agreement or of any of the Loan Documents Administrative Agent is permitted or
desires to take or to grant, and if such instructions are promptly requested, Administrative Agent
shall be absolutely entitled to refrain from taking any action or to withhold any approval and
shall not be under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have received such
instructions from Required Lenders or all or such other portion of the Lenders as shall be
prescribed by this Agreement. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Administrative Agent as a result of Administrative Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents in accordance with
the instructions of Required Lenders and, notwithstanding the instructions of Required Lenders,
Administrative Agent shall have no obligation to take any action if it believes, in good faith
after consultation with legal counsel, that such action exposes Administrative Agent to any
liability for which it has not received satisfactory indemnification in accordance with the
provisions of Section 11.6.

     Section 11.8. Credit Decision. Each Lender acknowledges that it has, independently
and without reliance upon Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and without reliance
upon Administrative Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in taking or not
taking any action under the Loan Documents.

     Section 11.9. Collateral Matters. Lenders irrevocably authorize Administrative Agent,
at its option and in its discretion, to release any Lien granted to or held by Administrative Agent
under any Loan Document (a) upon termination of this Agreement and payment in full of all
Obligations; or (b) constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted under any Loan Document, if any (it being understood and
agreed that Administrative Agent may conclusively rely without further inquiry on a certificate of
a senior officer of Borrowers as to the sale or other disposition of property being made in full
compliance with the provisions of the Loan Documents); or (c) subject to Section 12.2, if
approved, authorized or ratified in writing by the Required Lenders. Upon request by
Administrative Agent at any time, Lenders will confirm in writing Administrative Agent’s authority
to release particular types or items of Collateral pursuant to this Section 11.9.

     Section 11.10. Agency for Perfection. Administrative Agent and each Lender hereby
appoint each other Lender as agent for the purpose of perfecting Administrative Agent’s security

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interest in assets 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, such Lender shall notify
Administrative Agent thereof, and, promptly upon Administrative Agent’s written request therefore,
shall deliver such assets 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 provided herein (including pursuant to
Section 10.9), it will not have any right individually to enforce or seek to enforce any
Loan Document or to realize upon any Collateral for the Loan unless instructed to do so by
Administrative Agent, it being understood and agreed that such rights and remedies may be exercised
only by Administrative Agent.

     Section 11.11. 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 Lenders, unless Administrative Agent shall have received written notice from a
Lender or Borrower or other Credit Party referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a “notice of default” or substantially similar
words. Administrative Agent will promptly notify each Lender in writing 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 Required Lenders in accordance with the terms hereof. 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 interests of Lenders.

     Section 11.12. Successor Administrative Agent. Administrative Agent may resign at any
time by giving reasonable advance written notice thereof to the Lenders and Borrower. Upon any
such resignation, Required Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by Required Lenders, and
shall have accepted such appointment, within thirty (30) days after the retiring Administrative
Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of
Lenders, appoint a successor Administrative Agent, which shall be a financial institution organized
or licensed under the laws of the United States of America or of any State thereof with assets or
capital of at least One Hundred Million Dollars ($100,000,000). Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from
its duties and obligations hereunder. After any retiring Administrative Agent’s resignation
hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent.

     Section 11.13. Term Loan Principal Payment; Return of Payments; Defaulted Lender.

     (a) Payments of principal of the Term Loan will be settled on the date of receipt if received
by Administrative Agent on the first Business Day of a month or on the Business Day

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immediately following the date of receipt if received on any day other than the first Business
Day of a month.

     (b) 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 interest accruing on a daily basis at the
Federal Funds Rate. 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 Loan Document, 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, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided, however, that (i) if such
day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day and (ii) if no such rate is so published on such
next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted
to Administrative Agent on such day on such transactions as determined by Administrative Agent.

     (c) The failure of any Lender (“Defaulted Lender”) to make any Loan, advance or any
payment required by it hereunder shall not relieve any other Lender of its obligations to make such
Loan, advance or payment, but neither any Lender nor Administrative Agent shall be responsible for
the failure of any Defaulted Lender to make a Loan, advance or make any other payment required
hereunder. Notwithstanding anything set forth herein to the contrary, a Defaulted Lender shall not
have any voting or consent rights under or with respect to any Loan Document or constitute a
“Lender” (or be included in the calculation of “Required Lenders” hereunder) for any voting or
consent rights under or with respect to any Loan Document. At Borrower’s written request,
Administrative Agent or a Person reasonably acceptable to Administrative Agent shall have the right
with Administrative Agent’s consent and in Administrative Agent’s sole discretion (but shall have
no obligation) to purchase from any Defaulted Lender, and each Defaulted Lender agrees that it
shall, at Administrative Agent’s request, sell and assign to Administrative Agent or such Person,
all of the lending commitments and commitment interests of that Defaulted Lender for an amount
equal to the principal balance of all Loan held by such Defaulted Lender and all accrued interest
and fees with respect thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.

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ARTICLE XII

MISCELLANEOUS

     Section 12.1. Expenses and Taxes. 

     (a) Borrower agrees to pay, whether or not the Closing occurs, a reasonable documentation
preparation fee, together with actual legal, audit and appraisal fees and all other out-of-pocket
charges and expenses incurred by Administrative Agent and LaSalle Bank in connection with the
negotiation, preparation, legal review and execution of each of the Loan Documents, including, but
not limited to, UCC and judgment lien searches, title, litigation, tax and bankruptcy searches,
title insurance policies, environmental insurance policies and UCC filings and fees for
post-Closing UCC, title and other lien searches. In addition, Borrower shall pay all such fees and
expenses of Administrative Agent associated with any amendments, modifications and terminations to
the Loan Documents following Closing. If Administrative Agent or LaSalle Bank uses in-house counsel
for any of these purposes, Borrower further agrees that its Obligations under the Loan Documents
include reasonable charges for such work commensurate with the fees that would otherwise be charged
by outside legal counsel selected by Administrative Agent for the work performed.

     (b) Borrower also agrees to pay all out-of-pocket charges and expenses incurred by
Administrative Agent and LaSalle Bank (including the court costs and fees and expenses of
Administrative Agent’s and LaSalle Bank’s counsel, advisers and consultants) in connection with (i)
the administration, enforcement, protection or preservation of any right or claim of
Administrative Agent or, as applicable, Lenders (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), (ii)
recording, filing and registration fees and charges, mortgage or documentary taxes, UCC searches,
title and survey charges, (iii) all fees and disbursements of Administrative Agent’s consultants as
provided herein, (iv) the termination of this Agreement, (v) the creation, preservation,
perfection, maintenance, amendment and termination of any Liens of Administrative Agent (for the
benefit of the Lenders) on the Collateral, (vi) the determination of whether or not Borrower has
performed the obligations undertaken by Borrower hereunder or has satisfied any conditions
precedent to the obligations of Administrative Agent and Lenders hereunder, and (vii) the
collection of any amounts due under the Loan Documents. If Administrative Agent uses in-house
counsel for any of these purposes (i.e., for any task in connection with the enforcement,
protection or preservation of any right or claim of Administrative Agent and the collection of any
amounts due under its Loan Documents), Borrower further agrees that its Obligations under the Loan
Documents include reasonable charges for such work commensurate with the fees that would otherwise
be charged by outside legal counsel selected by Administrative Agent for the work performed.

     (c) Borrower shall pay all taxes (other than taxes based upon or measured by Administrative
Agent’s or Lender’s income or revenues or any personal property tax), if any, in connection with
the issuance of the Notes and the recording of any Loan Documents. The

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obligations of Borrower under this clause (c) shall survive the payment of Borrower’s
indebtedness under this Agreement and the termination of this Agreement.

     Section 12.2. Entire Agreement; Amendments. This Agreement and the other Loan
Documents constitute the full and entire understanding and agreement among the parties with regard
to their subject matter and supersede all prior written or oral agreements, understandings,
representations and warranties made with respect thereto. Any provision of this Agreement or the
Notes may be amended, modified or waived if, but only if, such amendment, modification or waiver is
in writing and is signed by Borrower and the Required Lenders, or the Administrative Agent upon the
written consent of the Required Lenders, and then any such amendment, modification or waiver shall
be effective only in the specific instance and for the specific purpose for which given, and, if
(a) any amendment would increase such Lender’s funding obligations in respect of the Term Loan, by
such Lender, and (b) the rights or duties of Administrative Agent are affected thereby, by
Administrative Agent; provided, however, that, notwithstanding anything to the contrary herein, no
such amendment, modification or waiver shall, unless signed by all the Lenders; (i) reduce the
principal of, rate of interest on or any fees with respect to the Term Loan; (ii) postpone the date
fixed for payment of principal of the Term Loan, or of interest on the Term Loan or any fees
hereunder or for any termination of any commitment; (iii) change the definition of the term
Required Lenders or the percentage of Lenders which shall be required for Lenders to take any
action hereunder; (iv) release any Person from its obligations under any Guaranty or pledge
agreement at any time provided in connection with this Agreement; (v) amend or waive this Section
12.2 or the definitions of the terms used in this Section 12.2 insofar as the definitions affect
the substance of this Section 12.2; or (vi) consent to the assignment, delegation or other transfer
by any Borrower of any of its rights and obligations under any Loan Document.

     Section 12.3. No Waiver; Cumulative Rights. No waiver by any party to this Agreement
of any one or more defaults by the other party in the performance of any of the provisions of this
Agreement shall operate or be construed as a waiver of any future default or defaults, whether of a
like or different nature. No failure or delay on the part of any party in exercising any right,
power or remedy under this Agreement, nor acceptance of partial performance or partial payment,
shall operate as a waiver of such right, power or remedy nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise of such right, power or
remedy or the exercise of any other right, power or remedy. The remedies provided for in this
Agreement are cumulative and are not exclusive of any remedies that may be available to any party
to this Agreement at law, in equity or otherwise.

     Section 12.4. Notices. Any notice or other communication required or permitted under
this Agreement shall be in writing and personally delivered, mailed by registered or certified mail
(return receipt requested and postage prepaid), sent by telecopier (with a confirming copy sent by
regular mail), or sent by prepaid 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:

	 	(a)	 	If to Administrative Agent, at:

Merrill Lynch Capital, a Division of

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Merrill Lynch Business Financial Services Inc.

222 N. LaSalle Street – 16th Floor

Chicago, Illinois 60601

Attention: Vice President, Portfolio Manager

Telephone: 312-499-3128

Facsimile: 312-499-3026

With a copy to:

Merrill Lynch Capital, a Division of

Merrill Lynch Business Financial Services Inc.

222 N. LaSalle Street – 16th Floor

Chicago, Illinois 60601

Attention: Health Care Legal

Telephone: 312-499-3140

Facsimile: 312-499-3026

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With a copy to:

Duane Morris LLP

227 West Monroe St. — Suite 3400

Chicago, Illinois 60606

Attention: Brian P. Kerwin, Esq.

Telephone: 312-499-6737

Facsimile: 312-499-6701

	 	(b)	 	If to Borrower, at:

Tandem Health Care, Inc.

800 Concourse Parkway South

Suite 200

Maitland, Florida 32751

Attention: Lawrence R. Deering, CEO, and to Rosemary L. Corsetti, Esq.

Telephone: 407-571-1550

Facsimile: 407-571-1678

     If mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by
personal delivery, telecopier or prepaid courier, notice shall be deemed to be given when
delivered.

     Section 12.5. Severability. If any term, covenant or condition of this Agreement, or
the application of such term, covenant or condition to any party or circumstance shall be found by
a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of
this Agreement and the application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be affected thereby,
and each term, covenant or condition shall be valid and enforced to the fullest extent permitted by
law. Upon determination that any such term is invalid, illegal or unenforceable, Administrative
Agent (on behalf of Lenders) may, but is not obligated to, advance funds to Borrower under this
Agreement until the parties to this Agreement amend this Agreement so as to effect the original
intent of the parties as closely as possible in a valid and enforceable manner.

     Section 12.6. Successors; Assignments; Participations.

     (a) This Agreement, the Notes, and the other Loan Documents shall be binding upon and inure to
the benefit of Borrower, Administrative Agent and Lenders and their respective successors and
assigns and shall bind all Persons who become bound as a debtor to this Agreement. Notwithstanding
the foregoing, Borrower may not assign any of its rights or delegate any of its obligations under
this Agreement without the prior written consent of Administrative Agent, which may be withheld in
Administrative Agent’s discretion.

     (b) Any Lender may at any time assign to one or more Persons (any such Person, an
“Assignee”) all or any portion of such Lender’s Loan and interest in the Term Loan with the
prior consent of Administrative Agent (provided, however, no consent of any kind
from

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Administrative Agent shall be required for an assignment by LaSalle Bank or Merrill Lynch to a
third party financial institution or lender with assets or capital of at least One Hundred Million
Dollars ($100,000,000)) and, so long as no Event of Default exists, Borrower (which consent shall
not be unreasonably withheld, delayed or conditioned and shall not be required for an assignment by
a Lender to a Lender or to an Affiliate of a Lender or by LaSalle Bank or Merrill Lynch to a third
party financial institution or lender with assets or capital of at least One Hundred Million Dollars
($100,000,000)). 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 a mutually acceptable Assignment Agreement
(“Assignment Agreement”) executed, delivered and fully completed by the applicable parties
thereto and a processing fee of Three Thousand Five Hundred Dollars ($3,500), but without payment
of any such fee for an assignment by LaSalle Bank or Merrill Lynch. Any attempted assignment not
made in accordance with this Section shall be treated as the sale of a participation under
Section 12.6(f). 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.

     (c) 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
Note in the aggregate principal amount of the Assignee’s percentage interest in the principal
amount of the Assignee’s Term Loan (and, as applicable, a Note in the principal amount of that
portion of the principal amount of the Term Loan retained by the assigning Lender). Upon receipt
by the assigning Lender of such Note, the assigning Lender shall return to Borrower any prior Note
held by it.

     (d) Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall
maintain at one of its offices a copy of each Assignment Agreement delivered to it and a register
for the recordation of the names and addresses of each Lender, and the commitments of,
and principal amount of the Loan owing to, such Lender pursuant to the terms hereof. The
entries in such register shall be conclusive (absent manifest error), and Borrower, Administrative
Agent and Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
Such register shall be available for inspection by Borrower and any Lender, at any reasonable time
upon reasonable prior notice to Administrative Agent.

     (e) Notwithstanding the foregoing provisions of this Section 12.6 or any other
provision of this Agreement, any Lender may at any time assign all or any portion of its Loan and
its Note as collateral security to a Federal Reserve Bank or, as applicable, to such Lender’s
trustee for the benefit of its investors (but no such assignment shall release any Lender from any
of its obligations hereunder).

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     (f) Any Lender may at any time sell to one or more Persons participating interests in its
portion of the Loan, commitments 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 hereunder shall remain unchanged for all purposes, (b)
Borrower and Administrative Agent shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations hereunder 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 hereunder
except with respect to any event described in Section 12.2 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
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, however, 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 10.9.

     Section 12.7. Counterparts; Fax Signatures. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of which taken together
shall constitute but one instrument. A fax signature hereto shall be as legally binding as a signed
original hereto for all purposes.

     Section 12.8. Interpretation. No provision of this Agreement or any other Loan
Document shall be interpreted or construed against any party because that party or its legal
representative drafted that provision. The titles of the paragraphs of this Agreement are for
convenience of reference only and are not to be considered in construing this Agreement. Any
pronoun used in this Agreement shall be deemed to include singular and plural and masculine,
feminine and neuter gender as the case may be. The words “herein,” “hereof,” and “hereunder” shall
be deemed to refer to this entire Agreement, except as the context otherwise requires.

     Section 12.9. Survival of Terms. All covenants, agreements, representations and
warranties made in this Agreement, any other Loan Document, and in any certificates and other
instruments delivered in connection with this Agreement shall be considered to have been
relied upon by Administrative Agent and shall survive the making by Administrative Agent and
Lenders of the Term Loan contemplated by this Agreement and the execution and delivery to
Administrative Agent of the Notes, and shall continue in full force and effect until all
liabilities and obligations of Borrower to Administrative Agent and Lenders are satisfied in full.
All indemnity obligations of Borrower under any of the Loan Documents shall survive the termination
of such Loan Document. Borrower’s Obligations under this Agreement shall continue to be effective,
and Borrower’s Obligations shall be reinstated, if at any time payment of all or any part of the of
the Obligations is rescinded or must otherwise be returned or restored by the Administrative Agent
or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower, a Guarantor or otherwise, all as though such payment had not been made. Without
limitation of the foregoing, to the extent that the Borrower makes a payment or payments to the
Administrative Agent or Lenders or the Administrative

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Agent enforces its Liens or Administrative
Agent or any Lender exercises its 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.

     Section 12.10. Release of Administrative Agent and Lenders. For and in consideration
of the Loan and each advance or other financial accommodation 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
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 (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 the
applicable 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 Lender’s decision to extend to Borrower the financial
accommodations hereunder and has been relied upon by each Lender in agreeing to make the Loan and
in making each advance of Loan proceeds hereunder.

     Section 12.11. Time; Reliance by Administrative Agent. Whenever Borrower is required
to make any payment or perform any act on a Saturday, Sunday, or a legal holiday under the laws of
the State of Illinois (or other jurisdiction where Borrower is required to make the payment or
perform the act), the payment may be made or the act performed on the next Business Day. Time is
of the essence in Borrower’s performance under this Agreement and all other Loan Documents. The
Borrower acknowledges that the Administrative Agent and Lenders, in entering into this Agreement
and agreeing to make the Term Loan and otherwise extend credit to the Borrower hereunder, have
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).

     Section 12.12. Commissions. Except as disclosed in Schedule 12.12 of the
Information Certificate, the transaction contemplated by this Agreement was brought about by
Administrative

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Agent and Lenders and Borrower acting as principals and without any brokers, agents,
or finders being the effective procuring cause. Borrower represents that it has not committed
Administrative Agent or any Lender to the payment of any brokerage fee, commission, or charge in
connection with this transaction except for fees set forth in this Agreement. If any such claim is
made on Administrative Agent or any Lender by any broker, finder, or agent or other person,
Borrower shall indemnify, defend, and hold Administrative Agent and each Lender harmless from and
against the claim and will defend any action to recover on that claim, at Borrower’s cost and
expense, including, without limitation, attorneys’ fees of Administrative Agent and Lender.
Borrower further agrees that until any such claim or demand is adjudicated in favor of
Administrative Agent and Lenders’ favor, the amount demanded will be deemed a liability of Borrower
under this Agreement, secured by the Collateral.

     Section 12.13. Third Parties. No rights are intended to be created under this
Agreement or under any other Loan Document for the benefit of any third party donee, creditor, or
incidental beneficiary of Borrower or any Guarantor. Nothing contained in this Agreement shall be
construed as a delegation to Administrative Agent of Borrower’s duty of performance, including,
without limitation, Borrower’s duties under any account or contract in which Administrative Agent
has a security interest. Administrative Agent shall not be liable to any contractors,
subcontractors, suppliers, architects engineers, tenants or other party for labor or services
performed or materials supplied in connection with any Collateral. Administrative Agent shall not
be liable for any debts or claims accruing in favor of any such parties against Borrower or others
or against the Collateral. Administrative Agent neither undertakes nor assumes any responsibility
or duty to Borrower to select, review, inspect, supervise, pass judgment upon or inform Borrower of
any matter in connection with the Collateral. Borrower shall rely entirely upon its own judgment
with respect to such matters, and any review, inspection, supervision, exercise of judgment or
supply of information to Borrower by Administrative Agent in connection with such matters is for
the protection of Administrative Agent only, and neither Borrower nor any third party is entitled
to rely thereon.

     Section 12.14. Discharge of Borrower’s Obligations. Administrative Agent, in its
discretion, shall have the right at any time, and from time to time, with ten (10) Business Days
prior notice to Borrower if Borrower fails to do so, to: (a) obtain insurance covering any of the
Collateral as required under this Agreement; (b) pay for the performance of any of Borrower’s
obligations under this Agreement; (c) discharge taxes, Liens, security interests, or other
encumbrances at any time levied or placed on any of the Collateral in violation of this Agreement
unless Borrower is in good faith with due diligence by appropriate proceedings contesting those
items; and (d) pay for the maintenance and preservation of any of the Collateral. Expenses and
advances shall be added to the outstanding balance of the Term Loan (and to such credit facility as
Administrative Agent shall elect, including pursuant to the Affiliated Loan Documents) until
reimbursed to Administrative Agent and shall be secured by the Collateral and payable immediately
upon demand of Administrative Agent. Any such payments and advances by Administrative Agent shall
not be construed as a waiver by Administrative Agent of an Event of Default.

     Section 12.15. Information to Participants. Administrative Agent shall have the right
(but shall be under no obligation, except with respect to Lenders party to this Agreement on the
date hereof or at such other Lender’s reasonable request) to make available to any party for the

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purpose of granting participations in or selling, transferring, assigning or conveying all or any
part of the Term Loan (including any governmental agency or authority and any prospective bidder at
any foreclosure sale of any Collateral) any and all information that Administrative Agent may have
with respect to the Collateral and Borrower, whether provided by Borrower, Guarantor or any third
party or obtained as a result of any environmental assessments, provided, however, that
Administrative Agent instructs any such party to keep such information confidential. Borrower and
Guarantor agree that Administrative Agent shall have no liability whatsoever as a result of
delivering any such information to any third party, and Borrower and Guarantor, on behalf of
themselves and their successors and assigns, hereby release and discharge Administrative Agent from
any and all liability, claims, damages, or causes of action, arising out of, connected with or
incidental to the delivery of any such information to any third party in accordance with this
Section.

     Section 12.16. Indemnity. Borrower hereby indemnifies and agrees to defend (with
counsel acceptable to Administrative Agent and the applicable Lender) and hold harmless
Administrative Agent, each Lender, each of their respective partners, directors, parent companies,
subsidiaries, shareholders, affiliates, officers, agents and employees (collectively, “Indemnitee”)
from and against any liability, loss, cost, expense (including, without limitation, reasonable
attorneys’ fees and expenses for both in-house and outside counsel), claim, damage, suit, action or
proceeding ever suffered or incurred by Administrative Agent or any Lender or other Indemnitee or
in which Administrative Agent or any Lender or other Indemnitee may ever be or become involved
(whether as a party, witness or otherwise) (a) arising from Borrower’s failure to observe, perform
or discharge any of its covenants, obligations, agreements or duties under this Agreement, (b)
arising from the breach of any of the representations or warranties contained in Article IV of this
Agreement, (c) by reason of any third party claim or proceeding arising out of this Agreement, the
other Loan Documents or the transactions contemplated hereby or thereby, or (d) relating to claims
of any Person with respect to the Collateral, except to the extent any of the foregoing are the
result of, as applicable, Administrative Agent’s or Lender’s gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this Section 12.16 shall
survive the payment in full of the Obligations and the termination of this Agreement. NO
INDEMNITEE PERSON SHALL BE RESPONSIBLE OR LIABLE TO THE BORROWER OR TO ANY OTHER PARTY TO ANY LOAN
DOCUMENT, 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 LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER
OR THEREUNDER.

     Section 12.17. Administrative Agent Approvals. Unless expressly provided herein to
the contrary, any approval, consent, decision, waiver or satisfaction of Administrative Agent or
any Lender with respect to any matter that is the subject of this Agreement or the other Loan
Documents (a “Credit Decision”) may be granted, withheld, determined or exercised by
Administrative Agent or the applicable Lender in its “commercial credit judgment”. “Commercial
credit judgment” means in its sole and absolute credit judgment exercised in a

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manner consistent with Administrative Agent’s or the applicable Lender’s commercial business practices, as
they may be in effect or exercised generally by Administrative Agent or such Lender from time to
time for borrowers of this type.

     Section 12.18. Further Assurances. Borrower hereby agrees that at any time and from
time to time, at the expense of Borrower, Borrower shall promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or that
Administrative Agent may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Administrative Agent or any of its agents
to exercise and enforce its rights and remedies under this Agreement with respect to any portion of
such collateral, or to more fully carry out the intent of this Agreement.

     Section 12.19. Definitions Include Amendments. Definitions contained in this
Agreement which identify documents, including, but not limited to, the Loan Documents, shall be
deemed to include all amendments and supplements to such documents from the date hereof, and all
future amendments, modifications, and supplements thereto entered into from time to time to satisfy
the requirements of this Agreement or otherwise with the consent of Administrative Agent.
Reference to this Agreement contained in any of the foregoing documents shall be deemed to include
all amendments and supplements to this Agreement.

     Section 12.20. Claims Against Administrative Agent and Lenders. Administrative Agent
and Lenders shall not be in default under this Agreement, or under any other Loan Documents, unless
a written notice specifically setting forth the claim of Borrower shall have been given to
Administrative Agent and Lenders within three (3) months after Borrower first had knowledge of the
occurrence of the event which Borrower alleges gave rise to such claim and Administrative Agent or
Lenders, as applicable, does not remedy or cure the default, if any there be, promptly thereafter.
Borrower waives any claim, set-off or defense against Administrative Agent and Lenders arising by
reason of any alleged default by Administrative Agent or Lenders as to which Borrower does not give
such notice timely as aforesaid. Borrower acknowledges that such waiver is or may be essential to
Administrative Agent and Lenders’ ability to enforce their respective remedies without delay and
that such waiver therefore constitutes a substantial part of the bargain between, on the one hand,
Administrative Agent and Lenders, and, on the
other hand, Borrower, with regard to the Loan. No Guarantor or Tenant is intended to have any
rights as a third-party beneficiary of the provisions of this Section.

     Section 12.21. Set-Offs. Without limitation of Section 10.9, after the
occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably
authorizes and directs Administrative Agent from time to time to charge Borrower’s accounts and
deposits with Administrative Agent (or its Affiliates), and to pay over to Administrative Agent an
amount equal to any amounts from time to time due and payable to Administrative Agent hereunder,
under the Notes or under any other Loan Document. Borrower hereby grants to Administrative Agent
(for the benefit of the Lenders) a security interest in and to all such accounts and deposits
maintained by Borrower with Administrative Agent (or its Affiliates).

     Section 12.22. Relationship. The relationship between, on the one hand,
Administrative Agent and Lenders, and Borrowers, on the other hand, shall be that of
creditor-debtor only. No term in this Agreement or in the other Loan Documents and no course of
dealing between the

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parties shall be deemed to create any relationship of agency, partnership or
joint venture or any fiduciary duty by Administrative Agent or Lenders to Borrower or any other
party.

     Section 12.23. Agents; Borrower Authorizing Accounting Firm. In exercising any rights
under the Loan Documents or taking any actions provided for therein, Administrative Agent and
Lenders may act through their respective employees, agents or independent contractors as authorized
by Administrative Agent, and as applicable, Lenders. Borrower shall authorize its accounting firm
and/or service bureaus to provide Administrative Agent and each Lender with such information as is
requested by Administrative Agent and such Lender in accordance with this Agreement. Borrower
authorizes Administrative Agent and each Lender to contact directly any such accounting firm and/or
service bureaus to obtain such information.

     Section 12.24. Joint and Several Liability; Binding Obligations.

     (a) 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
Administrative Agent shall make such determination. Each Person comprising Borrower shall be
jointly and severally liable for all of the obligations of Borrower under this Agreement and the
Operators under the Affiliated Loan Documents (the “Affiliated Borrowers”), regardless of which of
the Borrowers or the Affiliated Borrowers actually receives the proceeds of the Loan or the benefit
of any other extensions of credit hereunder or the Loan or the benefit of any other extension of
credit or loans under the Affiliated Loan Documents, or the manner in which the Borrowers, the
Affiliated Borrowers, the Administrative Agent or the Lenders account 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 X 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 X 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”).

     (b) Each Borrower acknowledges that it will enjoy significant benefits from the business
conducted by the other Borrowers and the Affiliated Borrowers because of, inter
alia, their combined ability to bargain with other Persons including, without limitation,
their ability to receive the credit facilities under the Affiliated Loan Documents on favorable
terms granted by this Agreement and other Loan Documents and the Affiliated Loan Documents 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 Term Loan with the credit support of the other
Borrowers as

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contemplated by this Agreement and the other Loan Documents and the credit support of
the Operators as contemplated by the Affiliated Loan Documents.

     (c) The Administrative Agent and each Lender has advised the Borrowers that it is unwilling to
enter into this Agreement, the other Loan Documents and the Affiliated Loan Documents and make
available the Term Loan extended hereby or thereby to any Borrower or Affiliated Borrower unless
each Borrower agrees, among other things, to be jointly and severally liable for the due and proper
payment of the Obligations of each other Borrower under this Agreement and other Loan Documents and
of each Affiliated Borrower under the Affiliated Loan Documents. Each Borrower has determined that
it is in its best interest and in pursuit of its purposes that it so induce the Lender 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 Term Loan and to each Affiliated Borrower of
the credit facilities under the Affiliated Loan Documents and the interest rates and the modes of
borrowing available hereunder and thereunder, (ii) because each Borrower may engage in transactions
jointly with other Borrowers or Affiliated 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 Term 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 and the Affiliated Borrowers, the joint and several liability of
all such Persons, and the cross-collateralization of the collateral of all such Persons hereunder
and under the Affiliated Loan Documents. 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 Term Loan actually borrowed by, advanced to, or
the amount of collateral provided by, any individual Borrower.

     (d) Each Borrower has determined that it has and, after giving effect to the transactions
contemplated by this Agreement, the other Loan Documents and the Affiliated Loan Documents
(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.

     (e) The Borrower Agent (on behalf of each Borrower) shall maintain records specifying (a) all
Obligations incurred by each Borrower, (b) the date of such incurrence, (c) the date and amount
of any payments made in respect of such Obligations 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.

     (f) To the extent that applicable law otherwise would render the full amount of the joint and
several obligations of any Borrower hereunder, under the other Loan Documents and under the
Affiliated Loan Documents invalid or unenforceable, such Borrower’s obligations

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hereunder and under the other Loan Documents and Affiliated Loan Documents 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 Loan Documents and Affiliated Loan
Documents 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.

     (g) To the extent that any Borrower shall make a payment under this Section of all or any of
the Obligations (other than the Loan made to that Borrower for which it is primarily liable) (a
“Joint Liability Payment”) which, taking into 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 Obligations 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 Obligations
and termination of the Term 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.

     (h) [Reserved]

     (i) 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
Obligations 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 Obligations, or
any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower or
Affiliated Borrower and delivered to Administrative Agent; (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 Obligations; (iv) the institution of any
proceeding under the United States Bankruptcy Code, or any similar proceeding, by or against a
Borrower or Affiliated 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 or Affiliated 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 Obligations; or (vii) any other circumstance other than payment in full of the
Obligations which might otherwise constitute a legal or equitable discharge or defense of a
guarantor or surety.

     (j) Until all Obligations have been paid and satisfied in full, no payment made by or for the
account of a Borrower or Affiliated Borrower including, without limitation, (i) a payment

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made by such Borrower or Affiliated Borrower on behalf of the liabilities of any other Borrower or
Affiliated Borrower or (ii) a payment made by any other Person under any guaranty, shall entitle
such Borrower or Affiliated Borrower, by subrogation or otherwise, to any payment from any other
Borrower or Affiliated Borrower or from or out of any other Borrower’s or Affiliated Borrower’s
property and such Borrower or Affiliated Borrower shall not exercise any right or remedy against
any other Borrower or Affiliated Borrower or any property of any other Borrower or Affiliated
Borrower by reason of any performance of such Borrower or Affiliated Borrower of its joint and
several obligations hereunder.

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

     (l) This Section is intended only to define the relative rights of Borrower and Affiliated
Borrowers 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 Loan Documents. 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.

     (m) 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 or Affiliated
Borrowers under this Section shall be exercisable upon the full and indefeasible payment of the
Obligations and the termination of the Term Loan and under the Affiliated Loan Documents.

     Section 12.25. Guarantor Provisions.

     (a) Consents. Each Borrower, as joint and several primary obligor of the Obligations
directly incurred by any other Borrower or by any Affiliated Borrower, authorizes Administrative
Agent (but subject to the rights of the Lenders set forth in this Agreement), without giving notice
to such Borrower or to any other Borrower or any Affiliated Borrower (to the extent permitted
hereunder or under any Affiliated Loan Document) or obtaining such Borrower’s consent or any other
Borrower’s or Affiliated Borrower’s consent (to the extent permitted hereunder or under any
Affiliated Loan Document) and without affecting the liability of such Borrower for the Obligations
directly incurred by the other Borrower or Affiliated Borrower, from time to time to:

	 	i.	 	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

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	 	 	 	or any of the Obligations; grant other indulgences to any Borrower in respect thereof; or
modify in any manner any documents relating to the Obligations;
	 
	 	ii.	 	declare all Obligations due and payable upon the occurrence and during the
continuance of an Event of Default;
	 
	 	iii.	 	take and hold security for the performance of the Obligations of any Borrower
and exchange, enforce, waive and release any such security;
	 
	 	iv.	 	apply and reapply such security and direct the order or manner of sale thereof
as Administrative Agent, in its sole discretion, may determine;
	 
	 	v.	 	release, surrender or exchange any deposits or other property securing the
Obligations 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 Obligations of any
other Borrower or Affiliated 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 Obligations or release, surrender or exchange any
deposits or other property of any such Person;
	 
	 	vi.	 	apply payments received by Administrative Agent from any Borrower or any
Affiliated Borrower to any Obligations, in such order as Administrative Agent shall
determine, in its sole discretion; and
	 
	 	vii.	 	assign this Agreement in whole or in part.

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

	 	i.	 	any defense based upon any legal disability or other defense of any other
Borrower or any Affiliated Borrower, or by reason of the cessation or limitation
of the liability of any other Borrower or any Affiliated Borrower from any cause
(other than full payment of all Obligations), including, but not limited to, failure
of consideration, breach of warranty, statute of frauds, statute of limitations,
accord and satisfaction, and usury;
	 
	 	ii.	 	any defense based upon any legal disability or other defense of any other
guarantor or other Person;
	 
	 	iii.	 	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 Affiliated Borrower or any principal of any other Borrower or
Affiliated Borrower or any defect in the formation of any other Borrower or Affiliated
Borrower or any principal of any other Borrower or Affiliated Borrower;

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	 	iv.	 	any defense based upon the application by any other Borrower or Affiliated
Borrower of the proceeds of the Loan or the loans under the Affiliated Loan Documents
for purposes other than the purposes represented by such other Borrower or Affiliated
Borrower to Administrative Agent or intended or understood by Administrative Agent or
such Borrower;
	 
	 	v.	 	any defense based on such Borrower’s rights, under statute or otherwise, to
require Administrative Agent to sue any other Borrower or Affiliated Borrower or
otherwise to exhaust its rights and remedies against any other Borrower or Affiliated
Borrower or any other Person or against any collateral before seeking to enforce its
right to require such Borrower to satisfy the Obligations of any other Borrower or
Affiliated Borrower;
	 
	 	vi.	 	any defense based on Administrative Agent’s failure at any time to require
strict performance by any Borrower of any provision of the Loan Documents or by any
Affiliated Borrower of any provisions of the Affiliated Loan Documents. Such Borrower
agrees that no such failure shall waive, alter or diminish any right 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;
	 
	 	vii.	 	any defense arising from any act or omission of Administrative Agent which
changes the scope of such Borrower’s risks hereunder;
	 
	 	viii.	 	any defense based upon Administrative Agent’s election of any remedy against
such Borrower or any other Borrower or Affiliated Borrower or any of them; any defense
based on the order in which Administrative Agent enforces its remedies;
	 
	 	ix.	 	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 Obligations, including,
but not limited to, Administrative Agent’s failure to perfect or maintain a Lien in
such collateral;
	 
	 	x.	 	any defense based upon Administrative Agent’s failure to disclose to such
Borrower any information concerning any other Borrower’s or Affiliated Borrower’s
financial condition or any other circumstances bearing on any other Borrower’s or
Affiliated Borrower’s ability to pay the Obligations;
	 
	 	xi.	 	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;

95

 

	 	xii.	 	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;
	 
	 	xiii.	 	any defense based upon any borrowing or any grant of a security interest under
Bankruptcy Code §364;
	 
	 	xiv.	 	any defense based on Administrative Agent’s failure to be diligent or to
satisfy any other standard imposed on a secured party, in exercising rights with
respect to collateral securing the Obligations;
	 
	 	xv.	 	except as otherwise expressly set forth herein: notice of acceptance hereof;
notice of the existence, creation or acquisition of any Obligation; notice of any Event
of Default; notice of the amount of the Obligations 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);
	 
	 	xvi.	 	any defense based on errors and omissions by Administrative Agent in connection
with its administration of the Loan or the loans made under the Affiliated Loan
Documents;
	 
	 	xvii.	 	any defense based on application of fraudulent conveyance or transfer law or
shareholder distribution law to any of the Obligations or the security therefor;
	 
	 	xviii.	 	any defense based on Administrative Agent’s failure to seek relief from stay or
adequate protection in any other Borrower’s or Affiliated Borrower’s bankruptcy
proceeding or any other act or omission by Administrative Agent which impairs such
Borrower’s prospective subrogation rights;
	 
	 	xix.	 	any defense based on legal prohibition of Administrative Agent’s acceleration
of the maturity of the Obligations 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 Obligations and the security therefor;
	 
	 	xx.	 	any defense available to a surety under applicable law; and
	 
	 	xxi.	 	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
or Affiliated Borrower pursuant to any statute presently in force or hereafter enacted.

96

 

     (c) 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 Obligations 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
Obligations, 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 Obligations directly incurred by any other
Borrower or Affiliated Borrower.

     (d) 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 Obligations
of any other Borrower or Affiliated Borrower as fully as if such Obligations were directly incurred
by such Borrower.

     Section 12.26. Choice of Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. WITH RESPECT TO ANY SUIT, ACTION OR
PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), BORROWER IRREVOCABLY (A) SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF
CHICAGO, COUNTY OF COOK AND STATE OF ILLINOIS, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT
ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT
ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT,
WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY.
NOTHING IN THIS AGREEMENT SHALL PRECLUDE ADMINISTRATIVE AGENT FROM BRINGING A PROCEEDING IN ANY
OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE
THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF
PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY ILLINOIS
STATE OR UNITED STATES COURT SITTING IN THE CITY OF CHICAGO AND COUNTY OF COOK MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER AT THE ADDRESS
INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF BORROWER SHALL
REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE
BEEN SO MAILED.

     Section 12.27. Waiver of Trial by Jury. WITH RESPECT TO ANY CLAIMS OR DISPUTES
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS

97

 

AGREEMENT OR ANY OTHER LOAN DOCUMENTS, BORROWER HEREBY (A) COVENANTS AND AGREES NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL
BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT
TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY
TRIAL WOULD OTHERWISE ACCRUE. ADMINISTRATIVE AGENT IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT
THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS
AGREEMENT, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF BORROWER’S WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF ADMINISTRATIVE AGENT
(INCLUDING ADMINISTRATIVE AGENT’S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER
THAT ADMINISTRATIVE AGENT WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

     Section 12.28. Cross Default and Cross Collateralization. As stated under Section
10.1 hereof, an Event of Default under any of the Affiliated Loan Documents shall be an Event
of Default under this Agreement. Borrower acknowledges and agrees that the Collateral securing the
Term Loan also secures the Obligations under the Affiliated Loan Documents.

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     IN WITNESS WHEREOF, intending to be legally bound, and intending that this Term Loan Agreement
constitutes an instrument executed under seal, the parties have caused this Agreement to be
executed under seal as of the date first written above.

	 	 	 	 	 
	BORROWER:	 	RE Selinsgrove, LLC
	 	 	RE Mifflin, LLC
	 	 	RE Pottsville, LLC
	 	 	RE New Bloomfield, LLC
	 	 	RE Millersburg, LLC
	 	 	RE Everett, LLC
	 	 	RE Hazleton, LLC
	 	 	RE Frostburg, LLC
	 	 	RE Salisbury, LLC
	 
	 	 	 	 
	 	 	By: Tandem Health Care, Inc., its sole member
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering
	 

	 	
	 	 
	 

	 	Name:
	 	Lawrence R. Deering
	 

	 	Title:
	 	Chairman and Chief Executive Officer
	 
	 	 	 	 
	ADMINISTRATIVE AGENT:	 	MERRILL LYNCH CAPITAL, a Division of Merrill
Lynch Business Financial Services Inc., a
Delaware corporation
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Brett Robinson
	 

	 	
	 	 
	 

	 	
	 	Brett Robinson, Vice President
	 
	 	 	 	 
	 	 	MERRILL LYNCH CAPITAL, a Division of Merrill
Lynch Business Financial Services Inc., a
Delaware corporation
	LENDERS:	 	 
	 	 
	 

	 	By:
	 	/s/ Brett Robinson
	 

	 	
	 	 
	 

	 	
	 	Brett Robinson, Vice President

 

 

	 	 	 	 	 
	 	 	LASALLE BANK NATIONAL ASSOCIATION, a national
banking association
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Peter J. Kane
	 

	 	
	 	 
	 

	 	
	 	Peter J. Kane, Senior Vice President

2

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