Document:

Exhibit 10.67

 

Exhibit 10.67

FIRST AMENDMENT TO AMENDED AND RESTATED

TERM LOAN AND SECURITY AGREEMENT

     This First Amendment to Amended and Restated Term Loan and Security Agreement (this
“Amendment”), dated as of June 30, 2004, is made by and between Tandem Health Care of Florida,
Inc., a Florida corporation (the “Borrower”), and LaSalle Bank National Association, a national
banking association (together with its successors and assigns, the “Lender”).

RECITALS

     A. The Borrower and the Lender are parties to that certain Amended and Restated Term Loan and
Security Agreement, dated as of April 1, 2003 (as the same may be further amended, modified or
restated from time to time, the “Loan Agreement”).

     B. The parties hereto desire to amend certain of the terms and provisions of the Loan
Agreement as hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises herein contained, and for other good and
valuable consideration (the receipt, sufficiency and adequacy of which are hereby acknowledged),
the parties hereto (intending to be legally bound) hereby agree as follows:

     1.
Definitions. Terms capitalized herein and not otherwise defined herein shall have
the meanings ascribed to such terms in the Loan Agreement, as amended hereby.

     2. Amendments
to Loan Agreement. Subject to the terms and conditions contained herein,
the Borrower and the Lender hereby amend the Loan Agreement as follows:

          (a) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of “Amended
and Restated Term Loan Note” in its entirety.

          (b) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of
“Applicable Base Rate Margin” in its entirety and replacing it with the following:

          “Applicable Base Rate Margin” means with respect to any part of the (i) Term Loan A that is a
Base Rate Loan, an amount equal to fifty (50) basis points and (ii) Term Loan B that is a Base Rate
Loan, an amount equal to one hundred (100) basis points.

          (c) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of
“Applicable Libor Margin” in its entirety and replacing it with the following:

	 	 	    “Applicable Libor Margin” means with respect to any part of the (i) Term Loan
A that is a Libor Loan, an amount equal to three hundred fifty (350) basis points and (ii)
Term Loan B that is a Libor Loan, an amount equal to four hundred (400) basis points.

          (d) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of “Base
Rate Loan” in its entirety and replacing it with the following:

 

 

          “Base
Rate Loan” means a part of the Term Loan A or the Term Loan B, as the case may
be, that bears interest at an interest rate based on the Base Rate.

          (e) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of
“Borrowing Date” in its entirety and replacing it with the following:

          “Borrowing Date” means a date on which Borrower requests a Libor Rate on all or a portion of
the Term A Loan or the Term Loan B, as applicable.

          (f) Section 1.1 of the Loan Agreement is hereby amended by deleting the term “Term Loan
Commitment” and replacing such term with “Term Loan Commitments” contained in the definition of
“Credit Termination Date.”

          (g) Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the term “Amended and
Restated Term Loan Note” and replacing such term with “Amended and Restated Term Loan A Note” and
(ii) inserting the term “Term Loan B Note” immediately after the term “Mortgages” each contained in
the definition of “Financing Agreements.”

          (h) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of “Junior
Mortgages” in its entirety.

          (i) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of “Libor
Loan” in its entirety and replacing it with the following:

          “Libor
Loan” means all or part of the Term Loan A or the Term Loan B, as applicable, which
bears interest at a Libor Rate.

          (j) Section 1.1 of the Loan Agreement is hereby amended by deleting the term “Term Loan”
contained in the definition of “Prepayment Premium” and replacing such term with “Term Loan A”.

          (k) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of “Stated
Maturity Date” in its entirety and replacing it with the following:

          “Stated Maturity Date” means November 30, 2009.

          (l) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of
“Subordinated Debt” in its entirety and replacing it with the following:

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

          (m) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of
“Subordination Agreement” in its entirety.

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          (n) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of
“Term Loan” in its entirety.

          (o) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of “Term
Loan Commitment” in its entirety.

          (p) Section 1.1 of the Loan Agreement is hereby amended by adding the following definitions
to appear in correct alphabetical order therein to read as follows:

          “Amended and Restated Term Loan A Note” shall have the meaning ascribed to such term
in Section 2.1 hereof.

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

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

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

          “Term Loans” shall mean collectively the Term Loan A and the Term Loan B.

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

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

          “Term Loan Commitments” shall mean collectively the Term Loan A Commitment and the
Term Loan B Commitment.

          “Term Loan Notes” means collectively the Amended and Restated Term Loan A Note, the
Future Advance Note and the Term Loan B Note.

          (q) The heading set forth in Section 2 of the Loan Agreement entitled “Term Loan Commitment;
Interest; Fees” is hereby amended by deleting such title in its entirety and replacing it with
“Term Loan Commitments; Interest, Fees”.

          (r) Section 2.1 of the Loan Agreement is hereby amended by deleting the term “Term Loan” used
throughout such section and replacing such term with “Term Loan A.”

          (s) Section 2.1(a) of the Loan Agreement is hereby amended by adding the following annual
principal payments and monthly principal payments for years 6 and 7, respectively:

          Year 6 (Principal Annual)- $650,000 (Principal Monthly) -$54,166.67

          Year 7 (Principal Annual)- $700,000 (Principal Monthly)-$58,333.33

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          (t) The Loan Agreement is hereby amended by adding a new Section 2.1A to appear
immediately after Section 2.1 to read as follows:

          2.1A Term Loan B. (i) 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 that certain First Amendment to Amended and Restated
Term Loan and Security Agreement dated as of June 30, 2004, by and between the Borrower and the
Lender, extend in one (1) advance a term loan (the “Term Loan B”) to the Borrower in an aggregate
principal amount equal to Three Million Seven Hundred Thousand and
No/100 Dollars ($3,700,000.00).
The principal balance of the Term Loan B shall be amortized over a twenty (20) year period and
shall be repaid in consecutive monthly installments as follows:

	 	 	 	 	 	 	 	 	 
	 	 	Principal
Annual	 	 	Principal
Monthly	 
	Year l
	 		$84,000	 	 		$7,000.00	 
	Year 2
	 		$96,000	 	 		$8,000.00	 
	Year 3
	 		$108,000	 	 		$9,000.00	 
	Year 4
	 		$120,000	 	 		$10,000.00	 
	Year 5
	 		$132,000	 	 		$11,000.00	 

together with interest accrued thereon, each payable on the first day of each calendar month,
commencing on the first day of the first month commencing with
August 1, 2004, and otherwise in
accordance with Section 2.4 hereof, with a final installment of the aggregate unpaid
principal balance of the Term Loan B, together with interest accrued thereon, payable on the
Credit Termination Date. Monthly interest payments on the Term Loan B shall be computed using the
interest rate then in effect and based on the outstanding principal balance of the Term Loan B.
Any amounts paid or applied to the principal balance of the Term Loan B (whether by mandatory
prepayment or otherwise) may not be reborrowed hereunder. The Lender’s commitment hereunder to
make the Term Loan B is hereinafter called the “Term Loan B Commitment”. Upon maturity,
the outstanding principal balance of the Term Loan B shall be immediately due and payable,
together with any remaining accrued interest thereon, to Lender by Borrower.

     The Term Loan B 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 B Note”), duly
executed and delivered by the Borrower, substantially in the form set
forth in Exhibit A-3 attached hereto, with appropriate insertions, dated June 30, 2004, payable to the order of
the Lender in the principal amount of Three Million Seven Hundred Thousand and No/100 Dollars
($3,700,000.00). THE PROVISIONS OF THE TERM LOAN B NOTE NOTWITHSTANDING, THE TERM LOAN B 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.

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          (u) Section 2.2 of the Loan Agreement is hereby amended by (i) deleting the term “Term
Loan” used throughout such section and replacing such term with “Term Loans” and (ii) deleting the
term “Amended and Restated Term Loan Note” used throughout such section and replacing such term
with “Term Loan Notes.”

          (v) Section 2.3 of the Loan Agreement is hereby amended by deleting the term “Term Loan” used
throughout such section and replacing such term with “Term Loans.”

          (w) Section 2.4 of the Loan Agreement is hereby amended by (i) deleting the term “Term Loan”
used throughout such section and replacing such term with “Term Loans” and (ii) deleting the term
“Amended and Restated Term Loan Note” used throughout such section and replacing such term with
“Term Loan Notes.”

          (x) Section 2.5 of the Loan Agreement is hereby amended by deleting the term “Term Loan” used
throughout such section and replacing such term with “Term Loans.”

          (y) Section 2.7 of the Loan Agreement is hereby amended by deleting such section in its
entirety and replacing it with the following:

          2.7 Optional Prepayment; Prepayment Premium. The Borrower may, at its option,
permanently prepay, at any time during the term of this Agreement all or any portion of the Term
Loan A or the Term Loan B, subject to the following conditions: (a) not less than ten

(10) days prior to the date upon which the Borrower desires to make such prepayment, Borrower shall
deliver to the Lender a written notice of its intention to prepay all or such portion of the Term
Loan A or the Term Loan B, which notice shall be irrevocable and state the amount of the prepayment
and the prepayment date and (b) with respect solely to prepayment of the Term Loan A, the Borrower
shall pay to the Lender, concurrently with such prepayment, the Prepayment Premium (in view of the
impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Lender’s lost profits), as well as any amounts charged in
accordance with Section 3.4 hereof. Prepayments of the Term Loan A and the Term Loan B
shall be applied against installments payable under the Term Loan A Note and the Term Loan B Note,
as applicable, in the inverse order of maturity. Amounts prepaid on account of the Term Loan A
and the Term Loan B may not be reborrowed.

          (z) Section 2.9 of the Loan Agreement is hereby amended by deleting the term “Term Loan” used
throughout such section and replacing such term with “Term Loan A or Term Loan B, as the case may
be.”

          (aa) Section 2.11 of the Loan Agreement is hereby amended by (i) deleting the term “Term
Loan” used throughout such section and replacing such term with “Term Loans” and

(ii) deleting the term “Term Loan Commitment” used throughout such section and replacing such term
with “Term Loan Commitments.”

          (bb) Article 3 of the Loan Agreement is hereby amended by deleting the term “Term Loan” used
throughout such article and replacing such term with “Term Loans.”

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          (cc) The Loan Agreement is hereby amended by adding a new Section 8.13 to read as
follows:

          8.13 USA Patriot Act. Borrower warrants and represents to Lender that neither the
Borrower nor any of its Affiliate is identified in any list of known or suspected terrorist
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. Borrower
covenants to Lender that if Borrower becomes aware that it or any of its Affiliates is identified
on any Blocked Persons List, Borrower shall immediately notify Lender in writing of such
information. Borrower further agrees that in the event any of them or any Affiliate is at any time
identified on any Blocked Persons List, such event shall be an Event of Default, and shall entitle
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.

          (dd) Section 9.7 of the Loan Agreement is hereby amended by deleting such section in its
entirety and replacing such section with the following:

          9.7 Use of Proceeds. The Borrower shall not use the proceeds of the (a) Term Loan A
for any purpose other than to consummate the refinancing of its existing debt facility with the
Existing Lender; provided, however, that the Borrower may apply any excess proceeds after giving
effect to such refinancing towards capital expenditures or other corporate purposes so long as (i)
no Default or Event of Default shall exist or be continuing and (ii) the Lender shall have given
the Borrower the prior written consent to apply such excess proceeds, which consent shall be given
by the Lender in its reasonable discretion and (b) Term Loan B for any purpose other than to
consummate the repayment in full of its current Indebtedness owed to the Seller pursuant to the
Seller Note.

          (ee) Section 9.10 of the Loan Agreement is hereby amended by deleting such section in its
entirety and replacing such section with the following:

          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 periodic payments of principal and interest to Tandem in repayment of
unsecured intercompany loans made by Tandem to Borrower to be used solely by Borrower for ordinary
working capital purposes, which intercompany loans in the aggregate for the Borrower and the
Operating Companies shall not at any time exceed Three Million Dollars ($3,000,000) in any twelve
(12) month period as long as the Operating Companies and the Borrower are in compliance with
Section 9.12(i) of the Revolving Loan and Security Agreement 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

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payments no Default or Event of Default shall exist or have occurred or result therefrom.

          (ff) Section 9.15 of the Loan Agreement is hereby amended by deleting such section in its
entirety and replacing such section with “Intentionally Omitted.”

          (gg) Section 10.1 (a) of the Loan Agreement is hereby amended by deleting the term “Amended
and Restated Term Loan Note” used throughout such section and replacing such term with “Term Loan
Notes.”

          (hh) Sections 10.1(q) and (s) of the Loan Agreement are hereby amended by deleting such
sections in their entirety and replacing such sections with “intentionally omitted.”

          (ii) Section 10.2 of the Loan Agreement is hereby amended by deleting the term “Term Loan
Commitment” used throughout such section and replacing such term with “Term Loan Commitments.”

          (jj) Each of Sections 11.2, 11.5 and 11.16 of the Loan Agreement is hereby amended by
deleting the term “Term Loan” used throughout each such section and replacing such term with “Term
Loans.”

          (kk) The Loan Agreement is further amended by attaching a new Exhibit A-3 to the Loan
Agreement, which shall be made a part thereof, and shall read as set forth on Exhibit A attached
to this Amendment.

     3. Conditions Precedent. The amendments contained in Section 2 hereof are
subject to, and contingent upon, the prior or contemporaneous satisfaction of the following
conditions precedent:

          (a) The Borrower and the Lender shall have executed and delivered to each other this
Amendment,

          (b) The Borrower shall have executed and delivered to Lender that certain Term Loan B Note,
dated of even date herewith (the “Term Loan B Note”), made payable to the order of the Lender in
the original principal amount of $3,700,000,

          (c) The Borrower and the Lender shall have executed and delivered to each other (i) that
certain First Modification to Amended and Restated Term Loan A Note dated of even date herewith and
(ii) that certain First Modification to Future Advance Note dated of even date herewith
(collectively, the “Note Modifications”),

          (d) Tandem shall have executed and delivered to Lender that certain Reaffirmation of Limited
Guaranty dated of even date herewith (the “Reaffirmation”),

          (e) The Borrower and the Lender shall have executed and delivered to each other that certain
First Modification to Mortgages of even date herewith (the “Mortgage Modification”),

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          (f) The Lender shall have received date down endorsements and increased title insurance
coverage in the aggregate principal amount of the Term Loans on terms satisfactory to the Lender,

          (g) The Borrower shall have delivered to the Lender copies of the Borrower’s Articles of
Incorporation certified by the Florida Secretary of State as of a recent date, together with an
active status certificate from such Secretary of State and, if 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, as well as a true, correct and
complete copy of the Bylaws of the Borrower, certified by the Borrower’s Secretary,

          (h) The Borrower shall have delivered to the Lender a Secretary’s Certificate of the Borrower
certifying as to the adoption of the resolutions of the Board of Directors of the Borrower
authorizing this Amendment and the transactions contemplated hereby, as well as a copy of the
Resolutions of the Board of Directors of the Borrower,

          (i) The Lender shall have received a legal opinion from Buchanan Ingersoll Professional
Corporation, the legal counsel to Borrower, concerning the enforceability of this Amendment, in
form and substance reasonably satisfactory to the Lender,

          (j) The Borrower shall have paid to the Lender (i) an extension fee in consideration of
extending the Stated Maturity Date of the Term Loan A from November 30, 2007 to November 30, 2009
and (ii) a closing fee in consideration of the Lender making the Term Loan B to the Borrower,
which fees shall be deemed fully-earned and non refundable on the date of payment,

          (k) The
Lender shall have received from the Borrower UCC, tax lien, pending suit, bankruptcy
and judgment searches for the Borrower dated a recent date in all jurisdictions deemed necessary
by the Lender and its counsel, and

          (l) The Lender shall have received evidence of payoff of the Seller Note in full and the
release of the Junior Mortgages and release of any and all Liens of the Seller against the
Borrower and any and all other documentation evidencing the same as requested by the Lender.

     4. Reference to and Effect on the Loan Agreement.

          (a) Except as expressly provided herein, the Loan Agreement and all of the Financing
Agreements shall remain unmodified and continue in full force and effect and are hereby ratified
and confirmed.

          (b) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver
of: (i) any right, power or remedy of the Lender under the Loan Agreement or any of the Financing
Agreements, or (ii) any Default or Event of Default under the Loan Agreement.

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     5. Costs, Expenses and Taxes. Without limiting the obligation of the Borrower to
reimburse the Lender for costs, fees, disbursements and expenses incurred by the Lender as
specified in the Loan Agreement, the Borrower agrees to pay on demand all reasonable costs, fees,
disbursements and expenses of the Lender in connection with the preparation, execution and delivery
of this Amendment and the other agreements, instruments and documents contemplated hereby,
including, without limitation, reasonable attorneys’ fees and
out-of-pocket expenses.

     6. Representations and Warranties of the Borrower. The Borrower hereby
represents and warrants to the Lender that on and as of the date hereof and after giving effect to
this Amendment:

          (a) The Borrower has the requisite power and authority to execute, deliver and perform its
obligations under this Amendment. This Amendment has been duly authorized by all necessary
corporate action of the Borrower. This Amendment constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject
to the effect of any applicable bankruptcy, insolvency, reorganization or similar law affecting
creditors’ rights generally and general principles of equity;

          (b) The Borrower’s representations set forth in the Loan Agreement and in the Financing
Agreements are true, correct and complete on and as of the date hereof; and

          (c) No Default or Event of Default has occurred and is continuing.

     7. Release by the Borrower. In further consideration of the Lender’s execution of
this Amendment, the Borrower (on behalf of itself and its directors, officers, employees,
successors and assigns) hereby forever remises, releases, acquits, satisfies and forever discharges
the Lender and its successors, assigns, affiliates, officers, employees, directors, agents and
attorneys (collectively, the “Releasees”) from any and all claims, demands, liabilities, disputes,
damages, suits, controversies, penalties, fees, costs, expenses, actions and causes of action
(whether at law or in equity) and obligations of every nature whatsoever, whether liquidated or
unliquidated, known or unknown, matured or unmatured, fixed or contingent, that the Borrower (or
any of its directors, officers, employees, successors and assigns) ever had, now has, or may have
against or seek from any or all of the Releasees, that arise from or relate to any actions,
omissions, conditions, events or circumstances prior to the date hereof, including, without
limitation, with respect to the Liabilities, any Collateral, the Loan Agreement and any of the
Financing Agreements, other than for the Lender’s gross negligence or willful misconduct. The
Borrower acknowledges that the Lender is specifically relying upon the representations, warranties
and agreements contained herein and that such representations, warranties and agreements constitute
a material inducement to the Lender in entering into this Amendment.

     8. Reference to Loan Agreement; No Waiver.

          (a) Upon the effectiveness of this Amendment, each reference in the Loan Agreement to
“this Loan Agreement,” “this Agreement”, “hereunder,” “hereof,” “herein” or

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words of like import shall mean and be a reference to the Loan Agreement as amended hereby.
The term “Financing Agreements” as defined in
Section 1.1 of the Loan Agreement shall include (in
addition to the Financing Agreements described in the Loan Agreement) this Amendment, the Note
Modifications, the Mortgage Modification, the Term Loan B Note, the Reaffirmations and any other
agreements, instruments or other documents executed in connection herewith.

          (b) The Lender’s failure, at any time or times hereafter, to require strict performance by
the Borrower of any provision or term of the Loan Agreement, this Amendment or the other Financing
Agreements shall not waive, affect or diminish any right of the Lender hereafter to demand strict
compliance and performance herewith or therewith. Any suspension or waiver by the Lender of a
breach of this Amendment or any Event of Default under the Loan Agreement shall not, except as
expressly set forth herein, suspend, waive or affect any other breach of this Amendment or any
Event of Default under the Loan Agreement, 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 Amendment, shall be
deemed to have been suspended or waived by the Lender unless such suspension or waiver is: (i) in
writing and signed by the Lender, and (ii) delivered to the Borrower. In no event shall the
Lender’s execution and delivery of this Amendment establish a course of dealing among the Lender,
the Borrower or any other obligor or in any other way obligate the Lender to hereafter provide any
amendments or waivers with respect to the Loan Agreement. The terms and provisions of this
Amendment shall be limited precisely as written and shall not be deemed: (A) to be a consent to a
modification (except as expressly provided herein) or waiver of any other term or condition of the
Loan Agreement or of any other Financing Agreement, or (B) to prejudice any right or remedy that
the Lender may now have under or in connection with the Loan Agreement or any of the other
Financing Agreements.

     9. Successors and Assigns. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns; provided,
 however, the Borrower may not assign this Amendment or any of the Borrower’s rights hereunder
without the Lender’s prior written consent. Any prohibited assignment of this Amendment shall be
absolutely null and void. This Amendment may only be amended or modified by a writing signed by
the Lender and the Borrower.

     10. Severability. Wherever possible, each provision of this Amendment shall be
interpreted in such a manner so as to be effective and valid under applicable law, but if any
provision of this Amendment is held to be prohibited by or invalid under applicable law, such
provision or provisions shall be ineffective only to the extent of such provision and invalidity,
without invalidating the remainder of this Amendment.

     11. Governing Law. This Amendment shall be deemed to be a contract made under the laws
of the State of Illinois, and the rights and obligations of the parties hereunder shall be
construed in accordance with and be enforced and governed by the internal laws of the State of
Illinois, without regard to conflict of law or choice of law principles.

     12. Counterparts; Facsimile. This Amendment may be executed in one or more
counterparts, each of which taken together shall constitute one and
the same instrument.

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Delivery of an executed counterpart of this Amendment by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Amendment. Any party delivering
an executed counterpart of this Amendment by telefacsimile shall also deliver a manually executed
counterpart of this Amendment, but the failure to deliver a manually executed counterpart shall
not affect the validity, enforceability or binding effect of this Amendment.

     13. 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
AMENDMENT 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 IN THE LOAN AGREEMENT 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

-11-

 

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.

     14, 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 AMENDMENT, 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 AMENDMENT 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 AMENDMENT AND THE OTHER 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]

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     IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Amended and
Restated Term Loan and Security Agreement to be duly executed and delivered as of the date first
above written.

	 	 	 	 	 
	 	TANDEM HEALTH CARE OF 

FLORIDA,INC.

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

	 	 	 	 	 
	 	LASALLE BANK NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Peter J. Kane
 	 
	 	 	Peter J. Kane  	 
	 	 	First Vice PresidentExhibit 10.68

 

Exhibit
10.68

LOAN AGREEMENT

for loans in the aggregate amount of

$31,800,000

MADE BY AND AMONG

Tandem Health Care of North Strabane, LLC,

a Pennsylvania limited liability company,

Tandem Health Care of Miami, Inc.,

a Florida corporation,

RE Kissimmee, Inc.,

a Florida corporation, and

RE Winter Haven, Inc.,

a Florida corporation,

Each
As “Borrower”

AND

MERRILL LYNCH CAPITAL,

a Division of Merrill Lynch Business Financial Services Inc.,

a Delaware corporation

222 North LaSalle Street — 18th Floor

Chicago, Illinois 60601

As “Lender”

Dated as of February 2, 2004

 

 

LOAN AGREEMENT

     THIS
LOAN AGREEMENT (“Agreement”) is made as of February 2, 2004, by and among Tandem Health
Care of North Strabane, LLC (“Tandem North
Strabane”), a Pennsylvania limited liability company,
Tandem Health Care of Miami, Inc. (“Tandem Miami”), a Florida corporation, RE Kissimmee, Inc.
(“Tandem Kissimmee”), a Florida corporation, RE
Winter Haven, Inc., a Florida corporation (“Tandem
Winter Haven” and, together with Tandem North Strabane, Tandem Miami and Tandem Kissimmee, each a
“Borrower” and collectively, the “Borrower”) and MERRILL LYNCH CAPITAL, a Division of Merrill
Lynch Business Financial Services Inc., a Delaware corporation (collectively, with its successors
and assigns, “Lender”).

RECITALS

A. Tandem North Strabane is and on the Closing Date will be the owner in fee simple of land located
at 100 and 200 Tandem Village Road, in the City of Canonsburg, County of Washington, Commonwealth
of Pennsylvania, commonly known as “Tandem Health Care of North Strabane” and “Tandem Retirement
Village of North Strabane” and legally described on
Exhibit A-l attached hereto (the “North
Strabane, Land”). Such North Strabane Land contains improvements generally consisting of (i) an
assisted living, skilled nursing and Alzheimer living facility containing in the aggregate 167 beds
and (ii) approximately 97 parking spaces (collectively, the “North Strabane Improvements”).
The North Strabane Land, together with all buildings, structures and improvements located or to be
located thereon, including the North Strabane Improvements, (ii) all rights, privileges,
easements and hereditaments relating or appertaining thereto, and (iii) the Personal Property (as
defined herein) relating to the North Strabane Land or North Strabane Improvements are collectively
referred to herein as the “North Strabane Real Property”.

B. Tandem Miami is and on the Closing Date will be the owner in fee simple of land located at 800
NW 95th Street, in the City of Miami, County of Dade, State of Florida, commonly known as “Tandem
Health Care of Miami” and legally described on
Exhibit A-2 attached hereto (the “Miami
Land”). Such Miami Land contains improvements generally consisting of (i) a skilled nursing
facility containing in the aggregate 120 beds and (ii) approximately 83 parking spaces
(collectively, the “Miami Improvements”). The Miami Land, together with all buildings,
structures and improvements located or to be located thereon, including the Miami Improvements,
(ii) all rights, privileges, easements and hereditaments relating or appertaining thereto, and
(iii) the Personal Property relating to the Miami Land or Miami Improvements are collectively
referred to herein as the “Miami Real Property”.

C. Tandem Kissimmee is and on the Closing Date will be the owner in fee simple of land located at
2511 North John Young Parkway, in the City of Kissimmee, County of Osceola, State of Florida,
commonly known as “Tandem Health Care of Kissimmee” and legally described on Exhibit A-3
attached hereto (the “Kissimmee Land”). Such Kissimmee Land contains improvements generally
consisting of (i) a skilled nursing facility containing in the aggregate 120 beds and (ii)
approximately 109 parking spaces (collectively, the “Kissimmee Improvements”). The Kissimmee Land,
together with all buildings, structures and improvements located or to be located thereon,
including the Kissimmee Improvements, (ii) all rights, privileges, easements and hereditaments
relating or appertaining thereto, and (iii) the Personal Property relating to the Kissimmee Land or
Kissimmee Improvements are collectively referred to herein as the
“Kissimmee Real
Property”.

D. Tandem Winter Haven is and on the Closing Date will be the owner in fee simple of land located
at 2701 Lake Alfred Road, in the City of Winter Haven, County of Polk, State of Florida, commonly
known as “Tandem Health Care of Winter Haven” and legally described on Exhibit A-4 attached
hereto (the “Winter Haven Land” and, together with the North Strabane Land, the Miami Land
and the Kissimmee Land, the “Land”). Such Winter Haven Land contains improvements generally
consisting of (i) a skilled nursing facility containing in the aggregate 120 beds and (ii)
approximately 109 parking spaces (collectively, the “Winter Haven Improvements” and,
together with the North Strabane Improvements, the Miami Improvements and the
Kissimmee Improvements, the “Improvements”). The Winter Haven Land, together with all
buildings, structures and improvements located or to be located thereon, including the
Winter Haven Improvements, (ii) all rights, privileges, easements and hereditaments
relating or appertaining thereto, and (iii) the Personal Property relating to the Winter Haven Land
or Winter Haven Improvements are collectively referred to herein as the “Winter Haven Real
Property”. The Winter

 

 

Haven Real Property, together with the North Strabane Real Property, the Miami Real
Property and the Kissimmee Real Property are each referred to herein
as a “Real Property” and
collectively, as the “Real Property”.

E. Borrower has applied to Lender for loans in the aggregate amount of up to Thirty One Million
Eight Hundred Thousand and NO/100 DOLLARS ($31,800,000.00) (the
“Loans”) for certain refinancing
costs of the Real Property, and Lender is willing to make the Loans on the terms and conditions
hereinafter set forth. The Loans are evidenced by (1) that certain Promissory Note, of even date
herewith, made by Borrower in the original principal amount of Twenty Nine Million Six Hundred
Thousand and NO/100 DOLLARS ($29,600,000.00) and payable to Lender (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 “Term A Note”) and (2) that certain Promissory Note, of even date herewith, made by the Borrower in the
original principal amount of Two Million Two Hundred Thousand and NO/100 DOLLARS ($2,200,000,00)
and payable to Lender (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 “Term B Note” and,
collectively with the Term A Notes, each a “Note”
and collectively the “Notes”). The terms and
provisions of the Notes are hereby incorporated by reference in this Agreement.

F. Borrower’s obligations under the Loans will be secured by, among other items, a first priority
(with respect to Term Loan A), and a second priority (with respect to Term Loan B) Mortgage,
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 each of the Real Property and granting Lender a first and second priority security
interest in certain assets of Borrower. This Agreement, the Notes, the Mortgages, and any other
documents evidencing or securing the Loans or executed in connection therewith, and any
modifications, renewals and extensions thereof, are referred to
herein collectively as the “Loan
Documents”.

ARTICLE I

DEFINITIONS

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

     Account. means collectively (a) any right to payment of a monetary obligation, whether
or not earned by performance, (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 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. 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.

     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 (i) owns or controls, directly or
indirectly, five percent (5%) or more of the Stock of such corporation or

2

 

entity or (ii) 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
documents evidencing, securing and/or governing any financing provided by Lender or Lender’s
Affiliates to Borrower/Guarantor or any Affiliate of Borrower/or Guarantor, as the same may be
amended, modified, increased, renewed or restated from time to time. The Affiliated Loan Documents
shall include, without limitation, all documents evidencing, securing and/or governing that
certain revolving loan in the original principal amount of $3,200,000 made by Lender to Tandem
Health Care of North Strabane, Inc., Tandem Health Care of Miami, Inc., OP Kissimmee. Inc., OP
Winter Haven, Inc. and OP Miami, Inc. pursuant to that certain Loan Agreement dated the date
hereof.

     Agreement. “Agreement” means this 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.

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

     Applicable Margin. “Applicable Margin” has the meaning given it in Article II.

     Appraisal. “Appraisal” means a complete, self-contained appraisal of the Real
Property performed in accordance with FIRREA and Lender’s appraisal requirements by an independent
appraiser MAI licensed in the state in which the each Land is located and selected and retained by
Lender. Borrower may provide to Lender a copy of any FIRREA appraisal prepared for another lender
within the past six (6) months. 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 (a) for any Credit Facility
in the form of a revolving credit facility, working capital and other costs of Borrower arising in
the ordinary course of Borrower’s business; provided, however, that the initial advance of Loan
proceeds on the Closing Date shall be used by Borrower to refinance on the Closing Date certain
outstanding indebtedness of Borrower for Borrowed Money as provided
in Section 3.1 (m), and (b) for
any Credit Facility in the form of a term loan facility, application of the proceeds of the Credit
Facility to refinance on the Closing Date certain outstanding indebtedness of Borrower for Borrowed
Money as provided in Section 3.1(m) or to fund the acquisition of Real Property encumbered by the
Loan Documents.

     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.

3

 

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

     Borrower Agent. “Borrower Agent” means the following Credit Party: Tandem Health
Care, Inc.

     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.

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

     Control. “Control” means, as such term is used with respect to any person or entity,
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 or entity, 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 Facility or Credit Facilities. “Credit Facility” or Credit Facilities have the
meanings set forth in Section 2.1.

     Credit Party. “Credit Party” means each Borrower, each other Person that has executed
and delivered to Lender a guaranty of the Obligations of Borrower (or any portion thereof) to
Lender 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.

     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 Lender, among Lender, Borrower and each bank in
which Borrower maintains a Deposit Account, which agreement provides that (x) such bank shall
comply with instructions originated by Lender directing disposition of the funds in such Deposit
Account without further consent by Borrower, and (y) such 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
Lender, and containing such other terms and conditions as Lender 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.);

4

 

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.

     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 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.

5

 

     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 to Borrower or
its business, operations or assets.

     Healthcare Laws. “Healthcare Laws” has the meaning set forth in Article IX.

     Highest Lawful Rate. “Highest Lawful Rate” means the maximum lawful rate of interest
referred to in Section 2.9 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.

     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.

     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.

     Leases;
Commercial Leases; Operating 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. “Commercial Leases” means the collective reference to all Leases other than admission
agreements. “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.

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

     LIBOR Rate. “LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) equal to (i) the rate of interest which is identified and normally published by
Bloomberg Professional Service Page BBAM 1 as the offered rate, for the first day of each calendar
month, for loans in U.S. dollars for the period of one (1) month under the caption British Bankers
Association LIBOR Rates as of 11:00 a.m. (London time); divided by (ii) the sum of one minus the
daily average during the preceding month of the aggregate maximum reserve requirement (expressed as
a decimal) then imposed under Regulation D of the Board of Governors of the Federal Reserve System
(or any successor thereto) for “Eurocurrency Liabilities” (as defined therein); provided that, for
the calendar month of the initial funding of any Loan, LIBOR will float daily and be determined
based on the offered rate, for each day of such calendar month, for loans in U.S. dollars for the
period of one (1) month under the caption British Bankers Association LIBOR Rates as of 11:00 a.m.
(London time). If Bloomberg Professional Service no longer reports the LIBOR or Lender determines
in good faith that the rate so reported no longer accurately reflects the rate available to Lender
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, Lender 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” or “Loans” means, collectively, the Credit Facilities contemplated
hereunder, and includes, without limitation, the Credit Facilities defined in the Recitals as
Loans.

6

 

     Loan Documents. “Loan Documents” means and includes this Agreement, the Notes,
any Guaranty and each and every other document now or hereafter delivered by Borrower or any
Guarantor in connection with this Agreement, as any of them may be amended, modified, increased,
renewed or restated from time to time.

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

     Manager. “Manager” or “Managers” means, collectively, the managers identified on
Schedule 1.1 (a) of the Information Certificate as managers of the Locations.

     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: (i) 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, (ii) a material adverse change in, or a material adverse effect
upon, the rights and remedies of 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, (iii) a material adverse change in, or a material adverse effect upon, the
legality, validity or enforceability of any Loan Document, (iv) 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, (v) the termination of
Borrower’s continued participation in a Governmental Reimbursement Program, or (vi) 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 $250,000.00.

     Maturity
Date. “Maturity Date” means
February      , 2009, 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 Borrower, including, but not limited to, medical and health care services provided
to a Patient and performed by Borrower which are covered by a policy of insurance issued by an
Insurer, and includes physician services, nurse and therapist services, dental services, hospital
services, skilled nursing facility services, comprehensive outpatient rehabilitation services,
home health care services, residential and out-patient behavioral healthcare services, and
medicine or health care equipment provided by Borrower to a Patient for a necessary or
specifically requested valid and proper medical or health purpose.

     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.

     Minimum Liquid Net Worth. “Minimum Liquid Net Worth” shall mean collectively, a
Tangible Net Worth of no less than $2,000,000 and the ownership of assets in the form of Cash
Equivalents in an amount no less than $2,000,000 which are subject to no Lien. “Tangible Net
Worth” means assets (excluding intangible assets) less liabilities. “Intangible assets” means all
intangible assets (determined in conformity with GAAP) including, without limitation, goodwill,
intellectual property, licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds, “Cash Equivalents” means any investment in (i) direct
obligations of the United States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof, (ii) commercial paper rated at least A-l by Standard & Poor’s
Ratings Service and P-l by Moody’s Investors Services, Inc., (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any State thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000 and which issues (or the
parent of which issues) certificates of deposit or commercial paper with a rating described in
clause (ii) above, (iv) repurchase agreements with respect to securities described in clause (i)
above entered into with an office of a bank or trust

7

 

company meeting the criteria specified in clause (iii) above, provided in each case that
such investment matures within one year from the date of acquisition thereof by the Guarantor, or
(v) any money market or mutual fund which invests only in the foregoing types of investments and
the liquidity of which is satisfactory to Agent.

     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
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, charges and expenses due or payable under this Agreement or the other Loan
Documents, (b) all agreements and covenants with and obligations to Lender arising under, out of,
or as a result of or in connection with the Loan Documents, (c) all amounts advanced by Lender to
preserve, protect, defend, and enforce its rights under this Agreement and the other Loan
Documents or in the Collateral, and all expenses incurred by Lender in connection therewith, and
(d) any and all other present and future indebtedness, liabilities and obligations of every kind
and nature whatsoever of the Borrower to the Lender, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, joint or several, both now and hereafter
existing, or due or to become due, whether as borrower, guarantor, surety, indemnitor, assignor,
pledgor or otherwise.

     OFAC Lists. “OFAC Lists” means, collectively, the specially Designated Nationals and
Blocked Persons List maintained by the Office of Foreign Asset Control, 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 Office of Foreign Asset Control, Department of the Treasury or pursuant to any other applicable
Executive Orders.

     Operator. “Operator” or “Operators” means, collectively, the operators of the
Locations, licensed under all applicable Healthcare Laws as the operators of the Location, as
identified on Schedule 1.1 (b) of the Information Certificate,

     Patient. “Patient” means any Person receiving Medical Services from Borrower and all
Persons legally liable to pay Borrower 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 Lender’s Lien in the Collateral 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 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 6.6 of
this Agreement; (d) Liens and encumbrances in favor of Lender; (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; (h) encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of Real Property set forth on Schedule B of the title insurance policies
accepted by Lender 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, 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 7.1.

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

     Prohibited Transaction. “Prohibited Transaction” means a “prohibited transaction”
within the meaning of Section 406 of ERISA or Section 4975(c)(l) 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

8

 

by the U.S. Department of Labor.

     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 $600,000 (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.

     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 defined in the Recitals as Real Property.

     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.

     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 3al1-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange
Act of 1934).

     Subsidiary. “Subsidiary” shall mean, with respect to any Person, (i) any corporation
of which an aggregate of more than 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 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 50% or of which any such Person is a general partner or manager or may
exercise the powers of a general partner or manager.

     Uniform Commercial Code. “Uniform Commercial Code” means the Uniform Commercial Code
as the same may, from to time, be in effect in the State of Illinois; provided that in the event
that, by reason of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender’s Lien on the Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, the term
“Uniform Commercial Code” 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

9

 

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 computed, unless
otherwise specifically provided therein, in accordance with GAAP consistently applied; provided,
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 Lender 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.

     Section 1.3 As used in this Agreement, the following terms shall have the meanings
set forth below:

     Excess Cash Flow. “Excess Cash Flow” for any period means the Net Cash Flow for such
period less current principal and interest payments due on the Loan for such period.

     Improvements. “Improvements” has the meaning given it in Recital A, but including all
buildings, structures, improvements and fixtures now or in the future located or to be constructed
on any Real Property.

     Land. “Land” has the meaning given it in Recital A.

     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.

     Miami
Transfer Date. “Miami Transfer Date” shall have the meaning set forth in
Section 5.39.

     Net Cash Flow. “Net Cash Flow” for any period means, all revenues of Borrower,
determined on a cash basis, derived from the ownership, operation, use, leasing and occupancy of
the Real Property during such period including rents, lease termination fees, expense
reimbursements, interest income and forfeited security and other deposits for such period
less the actual, customary and reasonable expenses actually paid in connection with
operating the Real Property paid during such period (including a management fee which shall be
deemed to be the greater of five percent (5%) of effective gross income or the actual fee charged
by the Manager), and deposits made into reserves approved by Lender or required by the Loan
Documents (provided, however, that amounts included in such reserves shall not also be
included as an expense upon disbursement from such reserves), excluding: (A) any loan
proceeds, (B) proceeds or payments under insurance policies (but including proceeds of business
interruption

10

 

insurance); (C) condemnation proceeds; (D) any security deposits received from Tenants in
the Real Property, unless and until the same are applied to rent or other obligations in
accordance with the Tenant’s Lease; (E) any interest or principal payments on the Loan; or (F) any
other extraordinary items, in Lender’s sole discretion.

     Rating
Agency. “Rating Agency” shall mean, prior to the final Securitization of the
Loans, each of S&P, Moody’s and Fitch, or any other nationally-recognized statistical rating
agency which has been designated by Lender and, after the final Securitization of the Loans, shall
mean any of the foregoing that have rated any of the Securities.

     Single Purpose Entity.“Single Purpose Entity” mean an entity which 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 in Schedule
1-SPE.

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

     Section 1.4 Reserved

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, Lender agrees to make available to Borrower the
credit facility or facilities hereinafter provided for (collectively, the “Credit Facilities” or
individually a “Credit Facility”; if there is only one credit facility provided for hereunder, then
all references herein to “Credit Facilities” shall be interpreted to refer to such sole credit
facility). At Closing, Borrower shall execute and deliver to Lender the Notes evidencing Borrower’s
unconditional obligation to repay Lender for all advances and other extensions of credit made under
or in respect of the Credit Facilities, payable to the order of Lender 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 that after the occurrence and during the continuance of an Event of Default such rate may,
in Lender’s discretion, be increased to the Default Rate. Each determination by Lender of an
interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. In
the event that Lender has the right to declare an Event of Default hereunder, but elects not to do
so, Lender will be entitled, in addition to exercising any other rights and remedies 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 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. Reserved.

     Section 2.3 Term Facility.

          (a) The term “Maximum Term A Facility Amount” means an amount equal to Twenty-Nine Million Six
Hundred Thousand and No/100 Dollars ($29,600,000.00). The term “Maximum Term B Facility Amount”
means an amount equal to Two Million Two Hundred Thousand and No/100 Dollars ($2,200,000.00). The
Maximum Term A Facility Amount together with the Maximum Term B Facility Amount are referred to
collectively and in the aggregate as the “Maximum Term Facility Amount”.

          (b) Subject to the terms and conditions set forth herein, Lender hereby agrees to make the
following term loans (the “Term Facility”) in the maximum aggregate principal amount of the Maximum
Term Facility Amount to Borrower on the Closing Date:

11

 

               (i) a term loan in an original principal amount equal to the Maximum Term A
Facility Amount (“Term Loan A Facility”); and

               (ii) a term loan in an original principal amount equal to Maximum Term B Facility Amount
(“Term Loan B Facility”).

          (c) Until an Event of Default shall have occurred, for all advances made in respect of Term
Loan A Facility and all amounts outstanding thereunder, the Applicable Margin is a rate of interest
equal to Three and 75/100 Percent (3.75%) per annum (provided, however, that in no event shall the
Applicable Base Rate for the Term Loan A Facility fall below six percent (6%) per annum at any
time). Until an Event of Default shall have occurred, for all advances made in respect of Term Loan
B Facility and all amounts outstanding thereunder, the Applicable Margin is a rate of interest
equal to Six and No/100 Percent (6.00%) per annum (provided, however, that in no event shall the
Applicable Base Rate for the Term Loan B Facility fall below eight
and 50/100 percent (8.50%) per
annum at any time).

          (d) The Term Facility shall not be in the nature of a revolving line of credit, but
shall include sums advanced and other credit extended by Agent and Lender 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 Facility shall be made or declined in Agent’s discretion. To the extent any
Term Facility 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 Facility shall be payable by Borrower to Lender
in the amounts and at the times set forth in the amortization schedule attached as or described in
Schedule B hereto (or sooner upon the acceleration of the Obligations in accordance with
the terms of this Agreement). Interest accrued on the Term Facility shall be due on the earliest
of (x) the first day of each month (for the immediately preceding month), computed on the last
calendar day of the preceding month, (y) during the continuance of an Event of Default, the day
such interest accrues, or (z) the Maturity Date; provided, however, that if any portion of the Term
Facility is funded on a date other than the first day of a calendar month, then Borrower shall pay
to Lender, on the date of such funding, interest which will accrue on the entire Term Facility (or
such lesser portion as shall be funded on such date) during the calendar month of such funding.

          (f) As an inducement to Lender to make the Term Facility available to Borrower, Borrower
hereby agrees to pay to Lender a commitment fee equal to the sum of (i) one percent (1.0%) of the
Maximum Term A Facility Amount, plus (ii) one percent (1.0%) of the Maximum Term B Facility
Amount (such sum, the “Term Facility Commitment Fee”). The Term Facility Commitment Fee shall be
due and payable upon Borrower’s execution of this Agreement. In lieu of a higher Term Facility
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) any prepayment of
the Term Facility, or (iii) any Event of Default, Borrower shall pay Lender a deferred commitment
fee (such amount, together with any other deferred commitment fee payable under Section 2.2 above,
is herein referred to as the “Deferred Commitment Fee”) in the amount of $318,000, provided
however, that, provided that no Event of Default shall have occurred, such Deferred Commitment Fee
shall be waived in the event the Term Facility is refinanced with the Lender.

          (g) [Intentionally Deleted]

          (h) The Term Facility may not be voluntarily prepaid in full or in part prior to February    , 2005 (the “Lockout Expiration Date”). Thereafter, Borrower shall have the right to make prepayments
of the Term Facility, in whole only, and not in part, on any regularly scheduled payment date;
provided, however, that Borrower (i) gives Lender at least thirty (30) days’ prior written
notice, (ii) pays all fees and costs due from Borrower to Lender including, without limitation, any
attorneys’ fees and disbursements incurred by Lender as a result of the prepayment and all Deferred
Commitment Fees or any other fees payable upon any termination of this Agreement, and (iii) pays
and performs in full all other Obligations under this Agreement; and provided further,
however, that the borrowers under the Affiliated Loan Documents (i) give Lender 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

12

 

Affiliated Loan Documents to Lender including, without limitation, any attorneys’
fees and disbursements incurred by Lender 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. No prepayment fee or premium (other than the
Deferred Commitment Fee) shall be due or payable in connection with any prepayment of the Term
Facility made after the Lockout Expiration Date designated in this Section.

          (i) Partial prepayments of the Term Facility shall not be permitted, except partial
prepayments resulting from Lender applying insurance proceeds or condemnation awards to reduce the
outstanding principal balance of the Term Facility as provided in the Loan Documents, in which
event no prepayment 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
Facility 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
Lender’s determination to apply insurance proceeds or condemnation awards to the partial
prepayment of the outstanding principal balance of the Term Facility, and no notice of such
prepayment shall be required.

          (j) For purposes of Section 2.10(b), the Applicable Termination Amount for the Term
Facility is one percent (1.0%) of the outstanding balance of the Term Facility on the date of
prepayment.

     Section 2.4. Intentionally Blank.

     Section 2.5. Loan Administration.

          (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 Lender’s Lien upon all of
the Collateral.

          (b) Lender shall enter all advances of proceeds under a Credit Facility 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 indefeasibly paid to Lender, 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 Lender 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 Credit Facilities in such order
of application as Lender 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 Lender for
the account of Borrower shall be applied to the Obligations in such order as Lender shall elect in
its discretion.

          (d) Lender will account to Borrower monthly with a statement of loans, charges and payments
made pursuant to this Agreement, and such accounting rendered by Lender shall be deemed final,
binding and conclusive upon Borrower, absent manifest error, unless Lender 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 2.6. Additional Fees and General Terms Relating to Fees.

          (a) Borrower shall pay to Lender all fees and expenses in connection with audits of Borrower’s
books and records and appraisals of the Collateral and such other matters as Lender shall deem
appropriate, which shall be due and payable on the first Business Day of the month following the
date of issuance by Lender of a request for payment thereof to Borrower.

          (b) Borrower shall pay to Lender, on demand, any and all fees, costs or expenses which Lender
or any participant pays to a bank or other similar institution (including, without limitation, any
fees paid by Lender to any participant) arising out of or in connection with (i) the forwarding to
Borrower or any other Person on

13

 

behalf of Borrower, by Lender, of proceeds of the Credit Facilities made by Lender to
Borrower pursuant to this Agreement, and (ii) the depositing for collection, by Lender or any
participant, of any check or item of payment received or delivered to Lender or any participant on
account of Obligations.

          (c) For so long as any of the Collateral consists of Real Property, Borrower unconditionally
shall pay to Lender an annual Real Property collateral inspection fee (the “Real Property
Collateral Fee”) equal to $2,500 for each Location representing costs incurred or to be incurred by
Lender for annual inspections of the Real Property. The Real Property Collateral Fee for each
Location shall be due and payable upon completion of each inspection and upon submission of proof
of such inspection to Borrower.

          (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 2.7. Payments.

          (a) Except to the extent otherwise set forth in this Agreement, all payments of principal and
of interest on the Credit Facilities, all other charges and any other obligations of Borrower under
this Agreement, shall be made to Lender 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) In the event that any payment required hereunder is not actually received by the Lender
within five (5) calendar days of the date such payment is due, Borrower agrees to pay 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 automatically, without any notice to
the Borrower or any other person, but not more often than once a month.

     Section 2.8. Use of Proceeds. The proceeds of Lender’s advances under the Loan shall
be used solely for the Approved Use of Proceeds.

     Section 2.9. 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 Credit Facilities.
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 Lender (or, to the extent that such
consideration shall have been paid, such excess shall be promptly refunded to Borrower by Lender);
(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 Credit Facilities 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 Lender for the use, forbearance, and detention of the debt of
Borrower to Lender 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
thereof. If at any time the rate of interest under the applicable portion of the Credit Facilities
exceeds the Highest Lawful Rate, the rate of interest to accrue pursuant to this Agreement under
such portion of the Credit Facilities 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 Lender 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

14

 

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 2.10. Term; Prepayment Fees.

     (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
Lender to make any advances in respect of Credit Facilities shall terminate ten (10) days prior to
the Maturity Date.

     (b) (i) If prior to any Lockout Expiration Date defined in Sections 2.3 Borrower shall tender
payment of an amount sufficient to satisfy all (or any portion) of any Credit Facility described in
Section 2.3, if there shall occur any default beyond any applicable notice and/or grace period
hereunder prior to any Lockout Expiration Date, then Borrower shall pay, in addition to the amounts
payable hereunder and under the other Loan Documents, a prepayment fee in an amount equal to one
percent (1.0%) of the amount prepaid plus the greater of (A) the sum of the Required Yield
Maintenance Amounts for each Credit Facility or (B) the sum of the Applicable Termination Amounts
for each Credit Facility. For purposes hereof, “Required Yield Maintenance Amount” shall
mean an amount (in any event not less than zero) equal to the present value as of the date of
prepayment of the remaining scheduled (or estimated as set forth below for revolving credit
facilities) payments of principal and interest (assuming a constant Applicable Base Rate equal to
the Applicable Base Rate in effect on the date of prepayment) from the date of prepayment through
the Maturity Date (including an amount equal to the outstanding principal balance of the
Obligations on the Maturity Date) determined by discounting such payments at the Discount Rate (as
hereinafter defined) less the amount of principal being prepaid. For purposes of calculating,
pursuant to the preceding sentence, scheduled payments of principal and interest and the final
principal amount prepaid under any Credit Facility which is a revolving credit facility, Lender
shall calculate the average principal amount outstanding under such Credit Facility during the six
(6) months preceding prepayment, and shall assume that such amount shall have remained outstanding
as principal through the Maturity Date, with no principal payments, that interest shall have
accrued thereon at the applicable rate hereunder and that such amount is the principal amount
prepaid. The “Discount Rate” is the rate which, when compounded monthly, is equivalent to the
Treasury Rate (as hereinafter defined), when compounded semi-annually. The “Treasury Rate” is the
yield calculated by the linear interpolation of the yields, as reported in the Federal Reserve
Statistical Release H.15 Selected Interest Rates (the “Release”) under the heading “U.S.
Government Securities” and the subheading “Treasury constant maturities” for the week ending prior
to the date of prepayment, of U.S. Treasury constant maturities with maturity dates (one longer and
one shorter) most nearly approximating the Maturity Date. In the event the Release is no longer
published, Lender shall select a comparable publication to determine the Treasury Rate in its
reasonable discretion. Lender shall not be obligated to accept any prepayment of the principal
balance of the Term Facility unless it is accompanied by the prepayment consideration due in
connection therewith.

          (ii) Lender shall deliver to Borrower a statement setting forth the amount and determination
of the prepayment fee, and, provided that Lender shall have in good faith applied the formula
described above, Borrower shall not have the right to challenge the calculation or the method of
calculation set forth in any such statement in the absence of manifest error, which calculation
may be made by Lender on any day during the thirty (30) day period preceding the date of such
prepayment. Lender shall not be obligated or required to have actually reinvested the prepaid
principal balance at the treasury constant maturity yield or otherwise as a condition to receiving
the prepayment fee. With regard to any prepayment made hereunder (except for a prepayment
resulting from the application of condemnation awards or insurance proceeds by Lender), Borrower
shall be required to give Lender at least thirty (30) days prior written notice of such prepayment
and if such notice has not been received by Lender within such time period, then, the prepayment
amount shall be increased by an amount equal to the lesser of (x) thirty (30) days’ unearned
interest computed on the outstanding principal balance of the Credit Facilities so prepaid and (y)
unearned interest computed on the outstanding principal balance of the Credit Facilities so
prepaid for the period from, and including, the date of prepayment through the Maturity Date.

     (c) Except (i) as otherwise expressly provided in the preceding subsection and (ii) for
prepayments made by the Borrower after the applicable Lockout Expiration Date in accordance with
the terms of this Agreement, the prepayment fees provided above shall be due, to the extent
permitted by applicable law, under any and all circumstances where all or any portion of any Credit
Facility which is a term loan facility is paid prior to the

15

 

Lockout Expiration Date, whether such prepayment is voluntary or involuntary, even if such
prepayment results from Lender’s exercise of its rights upon Borrower’s default and acceleration
of the Maturity Date of the Credit Facilities (irrespective of whether foreclosure or other
enforcement proceedings have been commenced), and shall be in addition to any other sums due
hereunder or under any of the other Loan Documents. No tender of a prepayment of a Credit Facility
with respect to which a prepayment fee is due shall be effective unless such prepayment is
accompanied by the prepayment fee.

          BY INITIALING BELOW, BORROWER WAIVES ANY RIGHT TO PREPAY OR TERMINATE THE CREDIT FACILITIES
EXCEPT UNDER THE TERMS AND CONDITIONS AS SET FORTH IN SECTIONS 2.2, 2.3 AND 2.10 AND
ACKNOWLEDGES AND AGREES THAT IF ANY CREDIT FACILITY IS PREPAID OR TERMINATED IN WHOLE OR IN PART,
BORROWER WILL PAY THE PREPAYMENT CHARGES SET FORTH HEREIN (EXCEPT WITH RESPECT TO A PREPAYMENT
MADE AFTER THE LOCKOUT EXPIRATION DATE OR A PREPAYMENT RESULTING FROM THE APPLICATION OF
CONDEMNATION OR INSURANCE PROCEEDS BY LENDER) AND ALL COSTS AND EXPENSES INCURRED BY LENDER AS A
RESULT OF SUCH PREPAYMENT (BORROWER HEREBY EXPRESSLY ACKNOWLEDGES THAT SUCH PREPAYMENT CHARGES
(INCLUDING, BUT NOT LIMITED TO, THE REQUIRED YIELD MAINTENANCE AMOUNT) ARE REASONABLE AND WILL
FAIRLY COMPENSATE THE LENDER FOR ANY COSTS AND CHARGES INCURRED BY LENDER AS A RESULT OF THE
PREPAYMENT OR TERMINATION OF THE CREDIT FACILITIES). FURTHERMORE, BY INITIALING BELOW, BORROWER
HEREBY ACKNOWLEDGES THAT THE INCLUSION OF THIS WAIVER OF PREPAYMENT RIGHTS AND AGREEMENT TO PAY
THE PREPAYMENT CHARGES (INCLUDING, BUT NOT LIMITED TO, THE REQUIRED YIELD MAINTENANCE AMOUNT) FOR
THE RIGHT TO PREPAY OR TERMINATE THE CREDIT FACILITIES WAS SEPARATELY NEGOTIATED WITH LENDER, THAT
THE ECONOMIC VALUE OF THE VARIOUS ELEMENTS OF THIS WAIVER AND AGREEMENT WAS DISCUSSED, THAT THE
CONSIDERATION GIVEN BY BORROWER FOR THE CREDIT FACILITIES WAS ADJUSTED TO REFLECT THE SPECIFIC
WAIVER AND AGREEMENT NEGOTIATED BETWEEN BORROWER AND LENDER AND CONTAINED HEREIN, AND THAT THIS
WAIVER IS INTENDED TO COMPLY WITH ALL APPLICABLE LAWS IN THE STATE OF ILLINOIS. BORROWER FURTHER
SPECIFICALLY COVENANTS AND AGREES THAT NO CREDIT FACILITY HEREUNDER MAY BE TERMINATED WITHOUT
PAYMENT IN FULL OF ALL OBLIGATIONS UNDER ALL CREDIT FACILITIES UNDER THE AFFILIATED LOAN
DOCUMENTS, IRRESPECTIVE OF WHETHER BORROWER HAS PAID THE APPLICABLE PREPAYMENT FEES ASSOCIATED
WITH TERMINATION OF THE SUCH CREDIT FACILITIES, IT BEING THE INTENTION OF BORROWER AND LENDER THAT
LENDER SHALL HAVE NO OBLIGATION TO RELEASE ANY LIENS OR COLLATERAL SECURING ANY CREDIT FACILITY
HEREUNDER UNTIL SUCH TIME AS ALL OBLIGATIONS HEREUNDER (INCLUDING ALL OBLIGATIONS ARISING IN
RESPECT OF ALL CREDIT FACILITIES) AND ALL OBLIGATIONS UNDER THE AFFILIATED LOAN DOCUMENTS
(INCLUDING ALL OBLIGATIONS ARISING IN RESPECT OF ALL CREDIT FACILITIES UNDER THE AFFILIATED LOAN
DOCUMENTS) SHALL HAVE BEEN PAID AND PERFORMED IN FULL.

	 	 	 
	Borrower’s Initials

	 	                                        (Tandem North Strabane)
	 
	 

	 	                                        (Tandem Miami)
	 
	 

	 	                                        (Tandem Kissimee)
	 
	 

	 	                                        (Tandem Winter Haven)

     (d) All undertakings, agreements, covenants, warranties, and representations of Borrower
contained in the Loan Documents shall survive any termination of the Lender’s obligation to make
any advances in respect of Credit Facilities hereunder and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Lender, in full, in immediately available
funds.

     (e) Notwithstanding any provision of this Agreement which makes reference to the continuance
of an

16

 

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 Lender.

     Section 2.11. Deposit Accounts.

          (a) If Borrower maintains a Deposit Account with any bank, Borrower shall, at the request of
Lender, execute with each such bank a Deposit Account Control Agreement and such other agreements
related to such Deposit Account as Lender may require.

          (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 Lender shall have no liability therefor. Borrower agrees to
indemnify and hold 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 Lender 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 Lender will 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 Lender. In the event that Lender has the right to declare
an Event of Default hereunder, but elects not to do so, Lender will be entitled, in addition to
exercising any other rights and remedies 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.

ARTICLE III

CLOSING AND CONDITIONS OF LENDING

     Section 3.1. Conditions Precedent to Agreement. The obligation of Lender to enter
into and perform this Agreement and to make advances under any Credit Facility is subject to the
satisfaction of each and every one of the following conditions precedent:

          (a) Lender shall have received two (2) originals of this Agreement, any Guaranty and all other
Loan Documents required to be executed and delivered at or before Closing (other than the Note, as
to which Lender shall receive only one (I) original), executed by Borrower and any other required
Persons, as applicable.

          (b) Lender shall have received all searches required by Section 5.34.

          (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.

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

          (f) Lender shall have received copies of all board of directors resolutions, consents of
members and managers and consents of partners 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 of Borrower and Guarantor
authorized to execute documents on its behalf in

17

 

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 Lender may require.

          (g) Lender 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 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) Lender 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 Lender.

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

          (j) Lender 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.

          (1) If any of the Credit Facilities is a revolving credit facility, Lender shall have received an
estoppel certificate, in form and substance satisfactory to Lender, from Borrower’s landlord or
sublandlord. as the case may be, with respect to each of the Locations identified on Schedule
3.1(1) of the Information Certificate.

          (m) 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 Credit
Facilities 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;

          (n) Lender shall have received evidence satisfactory to it that the insurance policies
required under Article V are in full force and effect, together with written evidence showing loss
payable or additional insured clauses or endorsements in favor of Lender as required under such
section;

          (o) [Intentionally Deleted];

          (p) Lender 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; and

          (q) 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 Lender and Lender’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 Lender. Such title insurance policy shall be on an American Land Title Association
(“ALTA”) form designated by Lender, 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
Lender 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 Lender (including, but not limited to,
endorsements covering zoning (ALTA 3.1), variable interest rates,

18

 

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 Lender, 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 Lender, shall be insured under the mortgagee’s title insurance policy issued
to Lender 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 liens which are expressly permitted under this Agreement.

               (2) Lender shall have received the following, all in form and substance satisfactory to Lender
in its sole and absolute discretion, prior to any disbursement of the Term Facility:

                    (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 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, physical and structural inspection reports and other
third party reports as Lender 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 Lender 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 Lender 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) Lender shall have received evidence satisfactory to Lender 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 Lender subordination and attornment agreements and estoppel certificates in form and
substance satisfactory to Lender and all Commercial Leases shall be in full force and effect
without default, defense, recoupment or setoff.

19

 

               (7) Lender shall have received and approved an Appraisal of the Real Property (including the personal property and business value of the Location thereon) confirming an
appraised value of no less than $40,332,746.

     Section 3.2. Conditions Precedent to Advances. Notwithstanding any other provision of
this Agreement, no advances or other extensions of credit under the Credit Facilities 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 Lender 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
Credit Facilities 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 Lender’s Liens in the Collateral under the Loan Documents.

          Notwithstanding anything in this Agreement to the contrary, Lender may terminate its funding
obligations under this Agreement without notice upon or after the occurrence of an Event of
Default.

     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 Lender.

     Section 3.4. Waiver of Rights. By completing the Closing under this Agreement, or by
making advances under the Loan, Lender does not waive a breach of any representation or warranty
of Borrower under this Agreement or under any other Loan Document, and all of Lender’s claims and
rights resulting from any breach or misrepresentation by Borrower are specifically reserved by
Lender.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Each entity comprising Borrower represents and warrants to Lender, and shall be deemed to
represent and warrant on each day on which any advance or accommodation in respect of a Credit
Facility 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. Except as set forth in Schedule 4.1 of the Information
Certificate attached hereto (the “Information Certificate), Borrower has no Subsidiaries.

     Section 4.2. Organization and Good Standing. Borrower is a corporation or limited
liability company, as the case may be, duly organized, validly existing, and in good standing under
the Laws of its state of formation, is in good standing as a foreign corporation or limited
liability company, as the case may be, in each jurisdiction in which the character of the
properties owned or leased by it therein or the nature of its business makes

20

 

such qualification necessary, except where the failure to qualify would not have a
Material Adverse Effect, has the corporate or limited liability company (as the case may be) 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 corporate or limited liability company (as
the case may be) 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 Note,
and to incur and perform the obligations provided for in the Loan Documents, all of which have
been duly authorized by all necessary corporate or limited liability company (as the case may be)
action. No consent or approval of shareholders, members or partners of, or lenders to, Borrower
and no consent, approval, filing (other than the recording of the Mortgages and the filing of
UCC-1 financing statements to perfect the Lender’s security interest in the Collateral) or
registration with any 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 Note, 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 Section 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 (i) with
respect to any of the Loan Documents or any of the transactions contemplated thereby or (ii) 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 on the business, properties, condition
(financial or otherwise), prospects, or operations, current or prospective, of Borrower, or upon
its ability to perform its obligations under the Loan Documents. 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 Lender)
under: (a) any provision of Borrower’s articles of incorporation or bylaws, certificate of
formation or operating agreement, as the case may be, (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 delivered to Lender 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 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 Section 4.7 of the Information Certificate.

     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.

21

 

     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 Lender, 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 Lender 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.

          (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
(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) (i) has failed to
meet minimum funding standards established in Section 302 of ERISA, (ii) 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 (iii) 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.

22

 

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, 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, present on or under the Real Property owned or leased by Borrower. To the
best of each Borrower’s knowledge, no other environmental, public health or safety hazards exist
with respect to the Real Property. Borrower has provided to Lender copies of all non-privileged,
existing environmental reports, reviews and audits in Borrower’s possession with respect to the
Real Property 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 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. 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 Lender or for the benefit of Lender, 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, ail holders of such Stock and the
percentage of such holder’s fully diluted ownership of 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 Lender by or on behalf of
Borrower 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.

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     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. Within five years before the date of this
Agreement, neither the business, property or assets, or operations of Borrower has been adversely
affected in any way by any casualty causing damage in excess of $50,000, strike, lockout,
combination of workers, or order of the United States of America or other Governmental Authority,
directed against Borrower. There are no pending or threatened labor disputes, strikes, lockouts, or
similar occurrences or grievances against Borrower or its business.

     Section 4.21. Names. Within five years before the date of this Agreement, Borrower has
not conducted business under or used any other name (whether corporate, partnership or assumed)
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.

     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 4.24. 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 a Credit Facility is made, Borrower and Guarantor are Solvent.

     Section 4.25. Government Contracts. Except as set forth in Schedule 4.25 of the
Information Certificate and except for Government Contracts for which Borrower has given Lender
written notice in accordance with Section 5.34, 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 4.36 OFAC. Neither Borrower, nor any Guarantor, nor any beneficial owner of
Borrower or any Guarantor, is currently listed on the OFAC Lists.

ARTICLE V

AFFIRMATIVE COVENANTS

     Each entity comprising Borrower covenants and agrees that for so long as Borrower may borrow
under this Agreement and until payment and performance in full of the Obligations:

     Section 5.1. Financial Statements and Collateral Reports. Borrower will furnish to
Lender the following financial information and reports:

     (a) if the Credit Facilities including a revolving credit loan, a collections report and
accounts receivable aging schedule on a form acceptable to Lender within forty-five (45) days after
the end of each calendar month or, if earlier, within fifteen (15) days of Lender’s request, which
shall include, but not be limited to, a report of collections received;

     (b) upon request of Lender, payables aging schedules within forty-five (45) days after the end
of each calendar month;

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     (c) within forty-five (45) days of the end of each calendar month, (i) internally
prepared monthly financial statements for Borrower (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 Lender 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) reserved;

     (f) reserved;

     (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 31 st 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) annual audited financial statements for Borrower prepared by a firm of independent public
accountants satisfactory to Lender, within one hundred thirty-five (135) days after the end of
each of Borrower’s fiscal years;

     (j) 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;

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

     (1) promptly upon request by Lender, copies of all cost reports filed with Medicare or Medicaid;

     (m) promptly upon request by Lender, copies of any survey results from any Governmental
Authority;

     (n) within forty five (45) days after the end of every calendar quarter, (i) a Compliance
Certificate in the form attached hereto for such quarter and (ii) if requested by Lender, back-up
documentation (including, without limitation, invoices, receipts and other evidence of costs
incurred during such quarter as Lender shall reasonably require) evidencing the propriety of the
deductions from revenues in determining the Amount Available for Debt Service (as defined in
Schedule A hereto) or any other calculation included on such Compliance Certificate;

     (o) within ten (10) days after Lender’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; and

     (p) such additional information, reports or statements regarding the Borrower or Guarantor as
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 shall be certified in writing by Borrower’s Chief Financial Officer as true, complete
and correct in all respects.

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Borrower shall cause each Guarantor to provide Lender with its (i) annual Federal
Income Tax Returns promptly upon request, (ii) annual audited financial statements within one
hundred thirty-five (135) days after each fiscal year, and (iii) internally prepared quarterly
financial statements within fifteen (15) 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 Lender 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 Lender. To the extent that any sums are received by Lender from
insurance proceeds, condemnation proceeds, or the fulfillment by Borrower of some other covenant
under any Loan Documents, and such sums are applied by Lender 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 will 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 will
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 Credit Facilities and each disbursement or
advance under the Credit Facilities 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. Reserved.

     Section 5.6.
Taxes and Charges. Borrower will 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: (i) Borrower shall have set aside on
its books adequate reserve therefor in accordance with GAAP; (ii) Borrower’s title to, and its
right to use, the Collateral is not adversely affected thereby and Lender’s Lien and priority on
the Collateral are not adversely affected, altered or impaired thereby; (iii) Borrower has given
prior written notice to Lender of Borrower’s intent to so contest or object to any such Charges or
Mechanics Claims; (iv) such contest stays the enforcement or collection of the Charges and
Mechanics Claims or any Lien created; and (v) in the case of real estate taxes or assessments or
Mechanics Claims, Borrower has obtained an endorsement, in form and substance satisfactory to
Lender, to the loan policy of title insurance issued to Lender insuring over any Lien created by
such Charges or Mechanics Claims, or Borrower has deposited with Lender a bond or other security
satisfactory to Lender 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 Lender), 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 Lender
harmless from the cost of the tax. If Borrower fails to commence any contest permitted under this
Section or, having commenced to contest the same,

26

 

and having deposited such security required by Lender 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, Lender 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 Lender shall be deemed to
constitute disbursements of the proceeds of the Credit Facilities hereunder (or such Credit
Facility as Lender shall elect), 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 workmens compensation insurance with responsible
companies reasonably satisfactory to Lender 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. Borrower shall deliver to Lender endorsements to all of its
(a) casualty and business interruption insurance policies naming Lender as sole loss payee (and
mortgagee to the extent the insurance pertains to Real Property), and (b) general liability and
other liability policies naming 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 Lender unless otherwise
permitted hereunder

If any insurance proceeds are paid by check, draft or other instrument payable to Borrower and
Lender jointly, Lender may endorse Borrower’s name thereon and do such other things as Lender may
deem advisable to reduce the same to cash. Lender reserves the right at any time, upon review of
Borrower’s risk profile, to require additional Forms and limits of insurance to adequately protect
Lender’s interests in accordance with Lender’s normal practice for similarly situated borrowers.
Borrower shall, on each anniversary of the Closing Date and from time to time at Lender’s request,
cooperate with Lender in obtaining a report by a reputable insurance broker, satisfactory to
Lender, 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. 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 Lender, premiums prepaid, additional and
renewal insurance policies with companies, coverage and in amounts required hereunder. The Borrower
shall promptly notify Lender of any loss, damage, or destruction to the Collateral, whether or not
covered by insurance. Lender 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. Lender is authorized and empowered, and
Borrower hereby irrevocably appoints Lender as its attorney-in-fact (such appointment is coupled
with an interest), at its option, 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
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 Lender with appropriate evidence of the
insurance coverage required by this Agreement at least thirty (30) days prior to the expiration
thereof, Lender may purchase insurance at Borrower’s expense to protect Lender’s interests in the
Locations and Collateral and to maintain the insurance required by this Agreement and any sums so
expended by Lender shall be deemed advances to Borrower under the Credit Facilities (such Credit
Facility as Lender may elect) and shall be immediately due and payable by Borrower. This insurance
may, but need not, protect Borrower’s interests. The coverage purchased by Lender 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 Lender proof of coverage.
Borrower may later, but only with Lender’s prior written consent, cancel any insurance purchased by
Lender, but only after providing Lender with appropriate evidence, as determined by Lender, that
Borrower has obtained insurance as required by this Agreement.

     Section 5.8. Information; Visits and Inspections. Borrower shall furnish to Lender
such information as 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 Lender, all at such times during regular business hours and as often as Lender
may reasonably require, to (a) visit and inspect any of the properties of

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Borrower, (b) inspect, audit and make copies of or prepare extracts from Borrower’s
minute books, books of account 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, (d) inspect the progress of any
construction relating to any Real Property, and (e) take and remove soil or groundwater samples,
and conduct tests on any part of any Real Property. Lender has no duty, however, to visit or
observe the Borrower or its properties or to conduct tests, and no site visit, observation or
testing by Lender, its officers, employees, agents or representatives shall impose any liability on
any of Lender, its 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 Lender, its officers,
employees, agents or representatives. Neither Lender, its 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. Lender shall give Borrower reasonable notice before any requested site visit,
inspection or other visit. Lender shall make reasonable efforts to avoid interfering with
Borrower’s use of the its properties in exercising any rights provided in this Section.

     Section 5.9. Maintenance of Property. Borrower will 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 will notify Lender upon the occurrence of: (1) any Default; (2) any event, development or
circumstance whereby the financial statements previously furnished to Lender fail in any material
respect to present fairly, in accordance with GAAP, the financial condition and operational
results of Borrower; (3) 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 $100,000 or more; (4) any default claimed by any
other creditor for Borrowed Money of Borrower other than Lender; (5) 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; (6) any Lien
arising against the Collateral (other than Permitted Liens); and (7) 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 (1) and (2)), 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 will (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 Lender, 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 Lender 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 will promptly advise Lender: (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.

     Section 5.12.
Financing Statements. Borrower shall provide to Lender evidence
satisfactory to Lender as to the due recording of termination statements, releases of collateral,
and Forms UCC-3, and shall cause to be recorded financing statements on Form UCC-1 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 Lender’s first
priority Lien and security interest in the Personal Property, as Lender may request.

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     Section 5.13. Financial Records. Borrower shall keep current and accurate
books of records and accounts 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 Lender 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 immediately before 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
Lender of any litigation, arbitration, or other proceeding before any Governmental Authority
against or affecting Borrower if the amount claimed is more than $100,000 or if adversely
determined would reasonably be expected to constitute a Material
Adverse Effect.

     Section 5.18. Bank Accounts. Borrower shall assign to Lender all of its 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 Lender and
Borrower shall not use any such newly opened accounts until such time as the applicable depository
institution, Borrower and Lender have entered into a control agreement satisfactory to Lender and
in any event sufficient to perfect a first lien and security interest in such account in favor of
Lender.

     Section 5.20 [Intentionally Deleted].

     Section 5.21 Post-Closing Obligations. Borrower shall cause to be performed and
completed, to Lender’s satisfaction, all of the obligations set forth on Schedule D hereto within
the time periods set forth on Schedule D.

     Section 5.22. Officer’s Certificates. Together with the monthly and annual financial
statements delivered pursuant to Section 5.1, Borrower shall deliver to Lender a certificate of its
chief financial officer, in form and substance satisfactory to Lender, 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 5.23. Capital Adequacy and Other Adjustments. In the event that 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 Lender or any corporation controlling 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 Lender or any corporation controlling Lender and thereby
reducing the rate of return on 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 Lender pay to Lender additional amounts sufficient to compensate such Lender for
such reduction. A certificate as to the amount of such cost and showing the basis of

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the computation of such cost submitted by such Lender to Borrower shall, absent manifest
error, be final, conclusive and binding for all purposes.

     Section 5.24. Taxes.

          (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
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 Lender, then the sum payable hereunder shall be increased
as may be necessary so that, after making all required deductions, Lender receives an amount equal
to the sum it would have received had no such deductions been made.

          (b) Changes in Tax Laws. In the event that, subsequent to the initial advance under
the Loan, (1) any changes in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (2) any new law, regulation, treaty or directive enacted or
any interpretation or application thereof, or (3) compliance by 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 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 Lender
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 Lender); or

               (B) does or shall impose on Lender 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 Lender 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 Lender, upon its demand, any additional amounts necessary
to compensate Lender, on an after-tax basis, for such additional cost or reduced amount receivable,
as determined by Lender with respect to this Agreement or the other Loan Documents. If Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly
notify Borrower of the event by reason of which Lender 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 Lender to Borrower shall, absent manifest error, be final, conclusive and
binding for all purposes.

     Section 5.25. Further Documentation; Loss of Notes. In the event any further
documentation or information is (a) required by Lender or any prospective transferee in connection
with selling, transferring, delivering, assigning, securitizing or granting a participation in the
Loan (or transferring the servicing of the Loan), or (b) deemed necessary or appropriate by Lender
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 Lender,
at Borrower’s cost and expense, such documentation or information as 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 or incurring costs
greater than the aggregate limitation set forth in Section 11.l(b) hereof in connection with any
sale, transfer, delivery, assignment, securitization or participation in the Loan or correcting
any patent mistake (other than such mistakes which are due to incorrect or incomplete information
provided by Borrower to Lender, in which case the cost limitation set forth in Section 11.l(b)
shall not apply). Upon notice from Lender of the loss, theft, or destruction of any of the Notes
and upon receipt of indemnity reasonably satisfactory to Borrower from 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 5.26.
Compliance with Requirements of Prospective Transferee. Subject to the
limitations of Section 5.25 hereof, Borrower shall reasonably cooperate with any prospective
transferee or servicer of the Loan,

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in order to enable Lender or such transferee to sell, transfer, deliver, assign, securitize
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 5.27. Termination/Default of Contracts. Borrower shall notify Lender 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 Lender). Notwithstanding anything in this Section to the contrary, no provision in
this Section shall modify, reduce or otherwise affect Lender’s rights hereunder or under any other
Loan Document.

     Section 5.28. Landlord Agreements, Mortgagee Agreements and Real Estate Purchases.
Upon the request of the Lender, 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 Lender and Borrower or other agreement or
letter reasonably satisfactory in form and substance to Lender.

     Section 5.29. 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 Lender 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 Lender.

     Section 5.30 Management Fees. Borrower shall cause any manager of any Location to
enter into a subordination agreement, in form and substance satisfactory to Lender, pursuant which
(a) all compensation due to such manager is subordinated in right and time of payment to all
Obligations of Borrower hereunder, and (b) Lender has the right to terminate the engagement of
such manager upon or following any Default hereunder. Borrower shall further assign to Lender,
pursuant to an assignment agreement in form and substance satisfactory to Lender, all of
Borrower’s right, title and interest in and to any management agreement pertaining to any
Location.

     Section 5.31. Government Contracts. For any Government Contract, Borrower
agrees to comply with the following covenants and procedures:

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

     (c) Lender 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 Lender deems
necessary to cause such Account Debtor to recognize the assignment of the Accounts and payment
rights in respect thereof to Lender, 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 Lender in sending and procuring such
notices and acknowledgments; and

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

     Section 5.32. Lien Documents; Collateral Generally.

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          (a) At Closing and thereafter as Lender deems necessary in its discretion,
Borrower shall execute and deliver to Lender, or have executed and
delivered (all in form and
substance reasonably satisfactory to Lender in its discretion) any agreements, documents,
instruments, and writings deemed necessary by Lender or as Lender may otherwise reasonably request
from time to time in its discretion to evidence, perfect, or protect Lender’s Lien and security
interest in the Collateral 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, Lender, a bailee or any other Person.

          (c) Lender 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 Lender to file all financing statements and amendments to financing statements
describing the Collateral in any filing office as Lender, in its discretion may reasonably
determine. Each Borrower agrees to comply with the requirements of all federal and state laws and
requests of Lender in order for Lender to have and maintain a valid and perfected first security
interest in the Collateral including, without limitation, executing and causing any other person to
execute such documents as Lender may require to obtain control (as defined in the UCC) over all
deposit accounts, electronic chattel paper, letter of credit rights, commercial tort claims and
investment property to the extent a Lien is granted to Lender 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 Lender to do anything further that may be lawfully
required by Lender to secure Lender 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 Lender’s request, Borrower shall immediately deliver to Lender all items of Collateral
for which Lender 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 Lender’s demand, deliver to Lender 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 Lender
in notifying the third party of Lender’s security interests and obtaining an acknowledgement from
the third party that it is holding the Collateral for the benefit of Lender;

          (h) Borrower shall cooperate with Lender in obtaining control (pursuant to written agreements
establishing such control in form and substance satisfactory to Lender) with respect to Collateral
consisting of deposit accounts, 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 Lender indicating that Lender has a security interest in the chattel paper;

          (j) If any Loan Document grants or purports to grant to Lender a lien upon commercial tort
claims, Borrower shall promptly, and in any event within two (2) Business Days after the same is
acquired by Borrower, notify Lender of any commercial tort claim acquired by Borrower and unless
otherwise consented to in writing by Lender, Borrower shall enter into a written supplement to this
Agreement (in form and substance satisfactory to Lender) granting to Lender a security interest in
such commercial tort claim as part of the Collateral; and

          (k) Borrower shall promptly notify Lender if an Account becomes evidenced or secured by an
instrument or chattel paper or has been reduced to judgment, and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender and assign such judgment to Lender,
each to the effect that Lender

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shall have a first lien priority perfected security interest and lien upon such instrument,
chattel paper and judgment.

     Section 5.33.
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 5.34. Searches. Before Closing, and thereafter as and when determined by
Lender in its reasonable discretion, Lender shall have the right to perform the searches described
in clauses (a), (b) and (c) below against Borrower 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
Lender’s security interest (conducted immediately post-Closing) or in the event that Lender
downgrades Borrower’s credit or underwriting rating;

          (b) Judgment, 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 Lender becomes aware of the non-payment
of any taxes by Borrower or upon the occurrence of an Event of Default; and

          (c) Not more than once each fiscal quarter, 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 5.35. Power of Attorney. Each of the officers of Lender 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 Lender under this Agreement and which
Borrower fails to deliver promptly upon Lender’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 Lender may deem necessary or
desirable to enforce Lender’s security interest or Lien in any Account or other Collateral or
perfect Lender’s security interest or Lien in any Collateral.

     Section 5.36. 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 Lender 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 Lender) by reason of or arising out of the execution, delivery or performance of this
Agreement, and Lender 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 Lender promptly upon Lender’s reasonable request, the following reports: (i) a
reconciliation of all Accounts; (ii) an aging

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of all Accounts; (iii) trial balances; and (iv) test verifications of such Accounts
as Lender may request. Lender shall be permitted to observe and consult with Borrower’s
accountants in the performance of these tasks.

          (c) For the purpose of enabling Lender to exercise its rights and remedies under the Loan
Documents, Borrower hereby grants to Lender an irrevocable, non-exclusive license (exercisable upon
the occurrence and during the continuance 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, that such license will terminate upon the termination of the Lender’s Liens
in the Collateral.

          (d) Lender shall have no duty of care with respect to the Collateral except that Lender shall
exercise reasonable care with respect to the Collateral in Lender’s custody. Lender shall be
deemed to have exercised reasonable care if such property is accorded treatment substantially equal
to that which Lender accords its own property or if Lender takes such action with respect to the
Collateral as Borrower shall request or agree to in writing provided 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. Lender’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 Lender’s custody. All risk, loss, damage or destruction of the Collateral shall
be borne by Borrower.

     Section 5.37
Compliance With Anti-Terrorism Orders. Borrower will not permit the
transfer of any interest in Borrower to any person or entity (or any beneficial owner of such
entity) who is listed on the OFAC Lists. Borrower will not knowingly enter into a Lease with any
party who is listed on the OFAC Lists. Borrower shall immediately notify Lender 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 (A) is indicted on or (B) arraigned and held over on charges
involving money laundering or predicate crimes to money laundering. Borrower shall immediately
notify Lender 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 5.38 Real Property. If any Borrower or any subsidiary of any Borrower
proposes to acquire a fee ownership interest in Real Property after the Closing Date, it shall
first provide to Lender a mortgage or deed of trust granting Lender a first priority Lien on such
Real Property, together with environmental audits, mortgage title insurance commitment, real
property survey, local counsel opinion(s), and, if required by Lender, supplemental casualty
insurance and flood insurance, and such other documents, instruments or agreements reasonably
requested by Lender, in each case, in form and substance reasonably satisfactory to Lender.
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 Section 5.38
of the Information Certificate.

     Section 5.39 Miami Operations. Tandem Miami shall use all commercially reasonable
efforts to lease the Miami Land and the Miami Improvements (pursuant to an Operating Lease
approved by Lender and otherwise subject to Section 8.4 hereof), and transfer operation of the
Location, all Personal Property and all Licenses related thereto, to OP Miami, Inc. promptly after
Closing; the date on which such lease and transfer takes place is referred to herein as the “Miami
Transfer Date.”

ARTICLE VI

NEGATIVE COVENANTS

     Each entity comprising Borrower covenants and agrees that so long as Borrower may borrow
under this Agreement and until payment and performance in full of the Obligations:

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

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          (a) indebtedness to Lender;

          (b) [reserved];

          (c) borrowings incurred in the ordinary course of its business and not exceeding $10,000.00 in
the aggregate outstanding at any one time;

          (d) indebtedness secured by Permitted Liens; and

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

Borrower will not make prepayments on any existing or future indebtedness for Borrowed Money (x) to
Lender, except to the extent permitted by this Agreement or any subsequent agreement between
Borrower and Lender), or (y) identified in subparagraph (c), (d) or (e) above incurred after the
Closing Date. Borrower will not amend, alter or restate the terms of any Permitted Indebtedness 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 Lender’s prior written consent, which consent may be given or
withheld in Lender’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 will not invest directly or indirectly in any
joint venture for any purpose without the prior written notice to, and the prior written consent
of, Lender, which consent shall not be unreasonably withheld.

     Section 6.3. No Liens and Encumbrances; No Disposition of the Collateral. Lender
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 8.4 hereof, make any sale, exchange,
lease or other disposition of any of the Collateral (other than admission agreements and as
otherwise required under Section 5.39 hereof); 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 or as otherwise required under Section 5.39 hereof), or the Stock
of any Subsidiary of Borrower, 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 as otherwise required
under Section 5.39 hereof);

35

 

          (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 (other than as otherwise required under Section 5.39 hereof);

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

          (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 Lender’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;

          (i) [reserved];

          (j) except as otherwise required by Section 5.39 hereof, change the licensed operator,
manager or property manager for any Real Property without Lender’s prior written consent, which
consent may be given or withheld in Lender’s sole and absolute discretion (and any purported
assignment shall be void); or

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

Borrower agrees that compliance with this Section 6.4 is a material inducement to Lender’s
advancing credit under this Agreement. Borrower further agrees that in addition to all other
remedies available to Lender, Lender 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
Section 6.5 of the Information Certificate or in this Section, Borrower shall not make 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, 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 Lender 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 Lender’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 will 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.

     Section 6.7. Contingent Liabilities. Borrower will not assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of any Person,
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 will not form or acquire any Subsidiary, or make any
investment in or any loan in the nature of an investment to, any other Person.

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     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 will 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. Except as otherwise required by Section 5.39 hereof, Borrower
will 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 Lender.

     Section 6.11. Transactions with Affiliates. Except as otherwise set forth in Schedule
6.11 of the Information Certificate, Borrower will 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, Lender 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 Lender previously
consented thereto.

     Section 6.12.
Use of Lender’s Name/Press Releases. Borrower will not use Lender’s
name (or the name of any of Lender’s Affiliates) in connection with any of its business
operations. Borrower will not and will not permit its Affiliates to, in the future, issue any
press release or other public disclosure using the name of Lender or any of its Affiliates or
referring to this Agreement or the other Loan Documents without at least two (2) Business Days
prior written notice to Lender and without the prior written consent of 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 Lender before issuing such press
release or other public disclosure. Borrower consents to the publication by Lender 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
Lender. Nothing contained in this Agreement is intended to permit or authorize Borrower to make
any contract on behalf of Lender.

     Section 6.13. Contracts and Agreements. Borrower will 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 will 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 will not furnish to
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. Confidentiality. Borrower will 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 law without Lender’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.

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ARTICLE VII

RESERVED

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 herein:

          (a) To the best of each Borrower’s knowledge, (1) no condemnation of any portion of any Real
Property, (2) no condemnation or relocation of any roadways abutting any Real Property, and (3) 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 described in the Recitals hereto) 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 Land. 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. 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 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 Lender in
writing and the admission agreements set forth on the census report delivered by Borrower to Lender
prior to the Closing of the Loans, 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

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admission agreement have been delivered to Lender. 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 Lender in writing any material default by any Tenant under any
Operating Lease and no notice of termination has been issued under any Lease. All rents or other
payments required of any Tenant under any Lease due to date have been collected and 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.

          (f) Reserved.

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

          (m) To Borrower’s knowledge, except for those items designated as “Immediate Repairs” in
those certain Property Condition Reports, each dated as of November 6, 2003, prepared by J.J.
Blake Technical Services, LLC with respect to the Real Property (the “Property Condition
Reports”), 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. Borrower covenants and agrees to complete all items designated
as “Immediate Repairs” in the Property Condition Reports, copies of which are attached as Schedule
8.2(m) of the Information Certificate, within ninety (90) days of Closing. 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:

39

 

(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 Lender 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 Lender a first priority lien on and perfected security
interest in such funds, including all interest accruing thereon, and Borrower shall execute any
other documents and take any other actions necessary to provide Lender with such a perfected
security interest in such funds. If Lender 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 Lender, deposit such additional sums as may be required by Lender. If an
Event of Default exists, Lender may, at its discretion, apply amounts on hand in the reserves or
escrows to cure such Event of Default. Upon demand of Lender, Borrower shall replenish the
applicable reserve or escrow to restore any sums so applied by Lender. 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 Lender or its agent shall, at Lender’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 Lender a sum equal to
one-twelfth (1/12) of the amount estimated by Lender to be sufficient (when aggregated with an
initial deposit to be designated by Lender and paid by Borrower to Lender at Closing or otherwise
upon demand of Lender) 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”). In the event the Real Property or any portion thereof is part of a larger tract for
purposes of taxation and assessments, Lender 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, Lender 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) Reserved.

          (d) Replacement
Reserve. Except as provided below in this subsection (d), at the time
of and in addition to the monthly installments of interest, and if applicable, principal and other
payments due under the Notes and this Agreement, Borrower shall pay to Lender an amount equal to
the product of Twenty Five and 00/100 Dollars ($25.00) multiplied by the aggregate number
of beds in the Real Property (the “Replacement Reserve”). So long as there is no continuing Event
of Default, Borrower may request Lender to disburse funds from the Replacement Reserve (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 Lender. If requested by Lender, each disbursement request will be
accompanied by copies of invoices, lien waivers and other evidence reasonably required by Lender.
Notwithstanding the foregoing, Lender hereby suspends Borrower’s obligation to fund the Replacement
Reserve so long as, commencing no later than forty-five (45) days after the beginning of the second
Loan Year and continuing on the 45th day after each Loan Year thereafter, Borrower demonstrates to
the Lender’s sole satisfaction that capital expenditures for the Real Property equal to or in
excess of $300 per bed for such preceding Loan Year have been made.

          (e) Debt
Service Reserve. A portion of the proceeds of the Term Facility in the
amount of Two Hundred Ten Thousand Six Hundred Eighty Two and 43/100 DOLLARS ($210,682.43) shall be
advanced by Lender on the Closing Date into a reserve to pay interest and principal coming due
under the Term Facility (the “Debt Service Reserve”). All amounts on deposit in the Debt Service
Reserve shall be held by Lender as additional collateral for the Credit Facilities. Borrower
shall have no right to require (or expect) Lender to disburse funds therefrom to pay debt service
and, to the extent Lender elects, in its sole discretion, to disburse funds from the Debt Service
Reserve to pay Borrower’s debt service under the Term Facility or any other portion of the
Obligations, Borrower shall be obligated to promptly re-deposit all such funds into the Debt
Service Reserve upon demand by

40

 

Lender, Nothing in this Section shall be deemed to relieve Borrower of its obligation to timely
pay all interest and principal as it comes due. All sums reserved by Lender in the Debt Service
Reserve may be commingled with the genera! funds of Lender and no such sums shall be deemed to be
held in trust for the benefit of Borrower. Lender shall hold the funds in the Debt Service Reserve
in an interest-bearing account. Borrower hereby grants Lender a first priority lien on and
security interest in any interest Borrower may have in such funds, including all interest accruing
thereon, and all such funds are pledged as additional collateral for the Loan and Borrower shall
execute any other documents and take any other actions necessary to provide Lender with such a
perfected security interest in such funds. Upon the Maturity Date or at any time following an
Event of Default, the moneys then remaining on deposit with Lender or its agent shall, at Lender’s
option, be applied against the Obligations.

	 	Section 8.3	 	Reserved
	 
	 	Section 8.4. 	 	 Real Property Operating Covenants.

               (a) Leasing
and Operational Covenants.

               (i) Without the prior written consent of Lender, Borrower shall not (1) enter into
any Commercial Leases (other than as required pursuant to Section 5.39 hereof), (2) modify
the form of admission agreement previously approved by Lender in any material adverse manner except
as required by Law, (3) modify, amend or terminate any Commercial Lease, (4) accept any rental
payment more than one month in advance of its due date or (5) enter into any ground lease (other
than the Operating Leases existing as of the date hereof) of any Real Property. Borrower shall
provide Lender with a copy of all Commercial Leases promptly following their execution and such
Leases shall be on the form of lease previously approved by Lender (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 Lender consents to any new Commercial Lease or the modification or renewal of any
existing Commercial Lease, at Lender’s request, Borrower shall cause the Tenant thereunder to
execute a subordination and attornment agreement in form and substance satisfactory to Lender.
Borrower shall provide Lender with a copy of the fully executed original of all Commercial Leases
promptly following their execution. 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 Lender 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 Lender except as otherwise required by Section 5.39 hereof. Borrower shall cause the
Real Property at all times to be operated by the Operators identified on the Information
Certificate pursuant to Operating Leases approved by Lender in writing (the “Operating Leases”),
which Operating Leases are identified on the Information Certificate. Each Operating Lease shall
provide Lender the right to terminate it upon Lender’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 Lender promptly in writing in the event a Tenant under a Commercial Lease
commits a material default under a Lease.

          (c) Management
Contracts.

               (i) 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 Lender. 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

41

 

to Lender. Borrower shall cause the Real Property at all times to be managed by the Managers
identified on the Information Certificate pursuant to management agreements approved by Lender in
writing (the “Management Agreements”), which Management Agreements are identified on Schedule
8.4(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 Credit
Facilities and shall not place responsibility for the control, care, management or repair of the
Real Property upon Lender, or make Lender responsible or liable for any negligence in the
management, operation, upkeep, repair or control of the Real Property.

          (d) Furnishing_Notices. Borrower shall provide Lender 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. In addition, Borrower shall promptly provide Lender 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 Lender, 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 Lender’s approval, except for normal repair and maintenance in the ordinary
course of business.

          (h) 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.

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

          (j) 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.

          (k) 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 Lender
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.

42

 

          (l) 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 8.5 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 Lender, 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. Lender shall have the right to obtain a new or updated Appraisal of
any Real Property from time to time. Borrower shall cooperate with Lender 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 Lender’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 1-SPE attached hereto
until after the Obligations have been repaid in full. If the Credit Facility is securitized
pursuant to Article XI hereof, then Borrower shall promptly upon notice from Lender amend its
organizational documents to incorporate the Single Purpose Entity requirements set forth on
Schedule I-SPE, at Borrower’s sole cost and expense, subject to the limitations set forth in
Section 11.1 (b) hereof.

          (d) Reserved.

     Section 8.6 Lender’s Election to Apply Insurance Proceeds on Obligations.

          (a) Subject to the provisions of Section 8.6(b) below, Lender 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 attorneys’ and adjusters’ fees and charges. Any
Insurance Proceeds remaining after repayment of the Obligations shall be paid by Lender to
Borrower.

          (b) Notwithstanding anything in Section 8.6(a) to the contrary, in the event of any casualty
to any Improvements or any condemnation of part of any Real Property, Lender 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 Lender, (iii) in Lender’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) in the event the cost of
restoration exceeds ten percent (10%) of the Term Facility, then only if in Lender’s sole
determination the Term Facility will not exceed seventy five percent (75%) of the fair market value
of the Real Property after completion of restoration, (v) in Lender’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 Lender’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 Facility attributed by Lender to such Real Property as identified on
Schedule 8.6(b) of the Information Certificate.

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          (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 $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 8.7 Borrower’s Obligation to Rebuild and Use of Insurance Proceeds Therefor.

          (a) In case Lender does not elect to apply or does not have the right to apply the Insurance
Proceeds to the Obligations, as provided in Section 8.6 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 Lender;

               (ii) Reserved;

               (iii) In the event the Insurance Proceeds and the available proceeds of the Loans are
insufficient to assure Lender that the all contemplated repairs or construction will be completed,
promptly deposit with Lender any amount necessary to assure that such contemplated repairs or
construction will be completed; and

               (iv) 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 Lender of Insurance Proceeds and funds
deposited by Borrower shall be treated by Lender as if such request were for an advance of the
Loans 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 Loans.

          (c) (i) Notwithstanding anything to the contrary, if the damage to the Real Property does not
exceed $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 Lender and agree with the insurance company or
companies on the amount of Insurance Proceeds to be paid upon the loss, provided 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 8.6 above.

               (ii) If the damage to the Real Property exceeds §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 Lender and agree with the insurance company or companies on the amount of Insurance Proceeds to
be paid upon the loss, provided 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 8.6 above.

               (iii) If a Default has occurred and is continuing, then Lender 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, Lender shall act in a commercially reasonable manner if Lender elects to settle or
adjust any claim under the provisions of this subparagraph (iii); provided, however, that
so long as Lender retains a third party to settle or adjust such claim on behalf of Lender, Lender
shall be deemed to have acted in a commercially reasonable manner. Borrower hereby releases Lender
from any and all liability with respect to the settlement and adjustment by Lender of any claims
in respect of any casualty.

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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
to and covenants with Lender, and shall be deemed to represent, warrant and covenant on each day on
which any advance or accommodation in respect of a Credit Facility 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 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
Lender.

          (c) Licenses. The Licenses: (i) are and shall continue in full force and effect at
all times throughout the term of the Credit Facilities 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 are not and shall not be provisional, probationary, conditional or restricted in
any way; (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 Lender’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 Lender’s prior written consent; or

               (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 Lender’s prior written consent.

          (d) Further Assurances. From time to time, upon the reasonable request of Lender, upon
and during the continuance of an Event of Default, Borrower shall, and shall cause each Borrower to
complete, execute and deliver to Lender any appropriate and applicable applications, notices,
documentation, and other information necessary, in Lender’s reasonable judgment, to permit Lender
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 Lender
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) Lender 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
Lender in accordance with the above provisions to the applicable Governmental Authorities, or to
take such other steps as Lender 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 Lender in connection with the same and (ii) Borrower,
upon demand by Lender, shall take (or cause to be taken) any action necessary or desirable, in
Lender’s sole judgment (acting in accordance with applicable law), to permit Lender or its designee
(including a receiver) to use, operate and maintain

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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 Lender 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 Lender’s sole judgment to permit
Lender 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 Lender or its designee for its current use. The foregoing power of attorney is coupled with an
interest and is irrevocable and Lender may exercise its rights thereunder in addition to any other
remedies which Lender may have against Borrower or Guarantor as a result of a Borrower’s breach of
the obligations contained in this Section.

          (v) Transfer of Licenses. To the Borrower’s knowledge, in the event any Operating
Lease is terminated or in the event of foreclosure or other acquisition of any Real Property by
Lender or its designee or any purchaser at a foreclosure sale, Borrower, Lender, 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 that neither the services offered at the Real Property nor the number of beds
operated would be changed. Borrower shall cooperate with Lender in all respects to cause all
Licenses to be reissued or transferred to Lender or Lender’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) A default in the payment of any principal of or interest on the Notes or the other
Obligations when due and payable, whether at maturity or otherwise, which default 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 Lender 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) A default in the due observance or performance by Borrower or any Guarantor of the
Obligations of any other term, covenant or agreement contained in any of the Loan Documents, which
default shall have continued unremedied for a period of thirty (30) days after written notice of
the default from Lender to Borrower;

          (d) Any representation or warranty 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 $100,000 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;

          (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;

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          (g) Borrower or any Guarantor (j) 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 $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
$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, 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 consent of the Lender;

          (k) There shall occur any uninsured damage to or loss, theft or destruction of any portion of
the Collateral that exceeds $300,000 in the aggregate;

          (1) Reserved;

          (m) Upon the issuance of any execution or distraint process against Borrower or any of its
property or assets, which shall remain undischarged for a period of thirty (30) days;

          (n) Borrower ceases any material portion of its business operations as
currently conducted;

          (o) Borrower is criminally indicted or convicted under any law and such indictment or
conviction, in Lender’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 Lender;

          (q) Reserved;

          (r) An event of default occurs under any of the Affiliated Loan Documents and continues
beyond any applicable grace or cure period or Borrower or any Guarantor breaches or violates the
terms of, or a default or any fact, event or circumstance that could, whether with notice or the
passage of time, or both, constitute a default, occurs and continues beyond any applicable grace
or cure period under any other existing or future agreement (other than the other Loan Documents
or the Affiliated Loan Documents) between Borrower or Guarantor and Lender;

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          (s) Reserved;

          (t) 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;

          (u) 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 60 days or more or pertains to more than one Location) or facility closure;

          (v) 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;

          (w) Any failure of the Borrower to comply with any of the following Sections of this
Agreement: Sections 2.11, 5.29, 6.1, 6.3, 6.4, 6.5 or 9.1 (n);

          (x) The Guarantor shall fail to maintain the Minimum Liquid Net Worth;

          (y) 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 applicable
Operating Lease does not provide a notice and cure period, then the notice and cure period
provided in subsection (b) above will apply to any such monetary default, and the notice and cure
period provided in subsection (c) above will apply to any such non-monetary default (which
respective periods shall commence upon written notice of default from Lender or the applicable
tenant, manager or consultant, whichever occurs first); or

     Section 10.2. Acceleration. Upon the occurrence of any of the foregoing Events of
Default, the Obligations under the Notes shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon the happening of
any event specified in Section 10.1(g),all Obligations (including, without limitation any deferred
commitment fees, exit fees 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, Lender, in addition to all other rights, options, and
remedies granted to Lender 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 Credit Facilities, whereupon all outstanding Obligations
(including, without limitation any Deferred Commitment Fees 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:

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                    (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 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 Lender at any place designated by Lender;

                    (D) The right to reduce the Maximum Term Facility Amount or to use
the Collateral and/or funds in the Concentration Account in amounts up to the Maximum Term Facility
Amount for any reason; 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 Lender’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 Lender without
prior notice to Borrower. At any sale or disposition of Personal
Property, Lender 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 Lender’s exercise of its rights and
remedies with respect to the Collateral. Lender shall have no obligation to clean-up or otherwise
prepare the Collateral for sale. Lender 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. Lender
may sell the Collateral without giving any warranties as to the Collateral. Lender 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 Lender sells any of the
Collateral upon credit, Borrower will be credited only with payments actually made by the
purchaser, received by Lender and applied to the indebtedness of the purchaser. In the event
the purchaser fails to pay for the Collateral, Lender 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 Lender 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 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. Lender 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 or any of its subsidiaries or Affiliates to Lender or any Affiliate of Lender 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 Lender under
the Affiliated Loan Documents. All rights and remedies granted Lender 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 Lender 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

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Lender, 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 Lender, 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 Lender to the any other liabilities and obligations of
Borrower under the Loan Documents and the Affiliated Loan Documents in such order of application
and in such amounts as Lender shall deem appropriate in its discretion. Borrower waives any right
it may have to require Lender 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 waives: (a) 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 Lender on which Borrower may in any way be liable, and hereby ratifies and
confirms whatever Lender may do in this regard; (b) all rights to notice and a hearing prior to
Lender’s taking possession or control of, or to Lender’s replevy, attachment or levy upon, any
Collateral or any bond or security which might be required by any court prior to allowing Lender to
exercise any of its remedies; and (c) the benefit of all valuation, appraisal and exemption Laws.
Borrower acknowledges that it has been advised by counsel of its choices and decisions 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 Lender; (ii) consents to any indulgences and all extensions of time, renewals,
waivers, or modifications that may be granted by Lender with respect to the payment or other
provisions of this Loan Agreement, the Note, 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 Lender contained in this
Agreement and the other Loan Documents may be waived by Lender; provided, however, that to the
extent that Lender may have acquiesced in any noncompliance with any requirements or conditions
precedent to the Closing of the Credit Facilities or to any subsequent disbursement of Credit
Facility proceeds, such acquiescence shall not be deemed to constitute a waiver by Lender of such
requirements with respect to any future disbursements of Loan proceeds and Lender may at any time
after such acquiescence require Borrower to comply with all such requirements. Any forbearance by
Lender 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 Note or as a
reinstatement of the Loan or a waiver of such right of acceleration or the right to insist upon
strict compliance of the terms of the Loan Documents. Lender’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
Lender’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 Lender shall not be a waiver of Lender’s right to accelerate the
maturity of the Loan, nor shall Lender’s receipt of any condemnation awards, insurance proceeds, or
damages under this Agreement of 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) Lender 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 Lender shall remain in full force and effect until Lender has
exhausted all of its remedies against the Collateral and any other

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properties owned by Borrower and the Loan Documents and other security instruments or agreements
securing the Loans 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
Lender 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 Lender
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, Lender shall have the
right from time to time to partially foreclose upon any Collateral in any manner and for any
amounts secured by the Loan Documents then due and payable as determined by Lender in its sole
discretion, including, without limitation, the following circumstances: (i) in the event Borrower
defaults beyond any applicable grace period in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose upon all or any part of the Collateral to recover such
delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire
outstanding principal balance of the Notes, Lender may foreclose all or any part of the Collateral
to recover so much of the principal balance of the Notes as Lender may accelerate and such other
sums secured by one or more of the Security Instrument as Lender 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 Lender 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 consents to and authorizes, at the option of Lender, 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, Lender 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.

     Lender 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 Lender by
any Credit Party.

     Section 10.8. Recourse to Borrower.

     Notwithstanding anything to the contrary contained herein or in any other Loan Document, the
Credit Facilities shall be fully recourse to Borrower, and Lender shall be authorized, in its sole
and absolute discretion, to enforce any or all of its remedies hereunder against Borrower,
including all present and future revenue and assets of Borrower, whether or not such assets have
been pledged as collateral for the Credit Facilities.

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ARTICLE XI

SECURITIZATION PROVISIONS

     Section 11.1 Sale of Mortgages and Securitization.

          (a) Lender shall have the right (i) to sell or otherwise transfer the Loans or any portion
thereof as a whole loan, (ii) to sell participation interests in the Loans, or (iii) to securitize
the Loans or any portion thereof in a single asset securitization or a pooled loan securitization.
(The transactions referred to in clauses (i), (ii) and (iii) shall hereinafter be referred to
collectively as “Secondary Market Transactions” and the transactions referred to in clause
(iii) shall hereinafter be referred to as a
“Securitization”. Any certificates, notes or other
securities issued in connection with a Securitization are hereinafter referred to as
“Securities”.)

          (b) If requested by Lender, Borrower shall assist Lender, at Borrower’s reasonable expense not
to exceed $25,000 in the aggregate, in satisfying the market standards to which Lender customarily
adheres or which may be required in the marketplace or by the Rating Agencies in connection with
any Secondary Market Transactions, including to:

               (i) (A) provide updated (and, if so required by the Rating Agencies, additional)
financial and other information with respect to the Land, the business operated at the Land, the
Real Property, Borrower, Guarantor, and Managers, (B) provide updated budgets relating to the
Location, and (C) provide updated appraisals, market studies, environmental reviews (Phase I’s
and, if appropriate, Phase II’s), property condition reports and other due diligence investigations
of the Location (the “Updated Information”), together, if customary, with appropriate verification
of the Updated Information through letters of auditors or opinions of counsel acceptable to Lender
and the Rating Agencies;

               (ii) provide opinions of counsel, which may be relied upon by Lender, the Rating
Agencies and their respective counsel, agents and representatives, as to non-consolidation,
fraudulent conveyance and true sale or any other opinion customary in Secondary Market
Transactions or required by the Rating Agencies with respect to the Property and Borrower and its
Affiliates, including, without limitation, reissuing opinions delivered on the Closing Date
addressed to Lender’s successors in the Loan, which counsel and opinions shall be satisfactory to
Lender and the Rating Agencies; and

               (iii) provide updated, as of the closing date of the Secondary Market Transaction,
representations and warranties made in the Loan Documents; and

               (iv) execute
amendments to the Loan Documents requested by Lender; provided,
however, that Borrower shall not be required to modify or amend any Loan Document if such
modification or amendment would have the effect of changing any material term of this Agreement.

     Section 11.2
Securitization Indemnification.

          (a) Borrower understands that information provided to Lender by Borrower, Guarantor and their
respective agents, counsel and representatives may be included in disclosure documents in
connection with the Securitization, including an offering circular, a prospectus, prospectus
supplement, private placement memorandum or other offering document
(each, a “Disclosure Document”)
and may also be included in filings with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange Act of
1934, as amended (the “Exchange Act”), and may be made available to investors or prospective
investors in the Securities, the Rating Agencies and service providers relating to the
Securitization.

          (b) Borrower shall provide in connection with each of (i) a preliminary and a final private
placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as
applicable, an agreement (A) certifying that Borrower has examined such Disclosure Documents
specified by Lender and that each such Disclosure Document, as it relates to Borrower or Guarantor,
as applicable (and each of their respective Affiliates), the Land, the Real Property, Manager, and
all other aspects of the Loans, does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading, (B) indemnifying Lender (and for purposes of this
section, Lender hereunder shall include its officers and directors), the Affiliate of Lender that
has filed the registration statement relating to the Securitization
(the “Registration Statement”),
each of its directors, each of its

52

 

officers who have signed the Registration Statement and each person (or entity) that controls such
Affiliate of Lender within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (collectively, the “Lender Group”), and any other placement agent or underwriter with
respect to the Securitization, each of their respective directors and each Person who controls
Lender or any other placement agent or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the “Underwriter Group”)
for any losses, claims, damages or liabilities (collectively, the “Liabilities”) to which Lender,
the Lender Group or the Underwriter Group may become subject insofar as the Liabilities arise out
of, or are based upon, any untrue statement of any material fact contained in such sections or
arise out of, or are based upon, the omission to state therein a material fact required to be
stated in such sections or necessary in order to make the statements in such sections, in light of
the circumstances under which they were made, not misleading, and (C) agreeing to reimburse Lender,
the Lender Group and/or the Underwriter Group for any legal or other expenses reasonably incurred
by Lender, the Lender Group and/or the Underwriter Group in connection with investigating or
defending the Liabilities; provided, however, that Borrower will be liable in any such case
under clauses (B) or (C) above only to the extent that any such Liability arises out of, or is
based upon, any such untrue statement or omission made therein in reliance upon, and in conformity
with, information furnished to Lender by or on behalf of Borrower or Guarantor in connection with
the preparation of the Disclosure Document or in connection with the underwriting or Closing of the
Loans, including, without limitation, financial statements of Borrower or Guarantor, operating
statements and rent rolls with respect to the Property. This indemnity agreement will be in
addition to any liability which Borrower may otherwise have.

          (c) In connection with any Exchange Act Filing, Borrower shall (i) indemnify Lender, the
Lender Group and the Underwriter Group for Liabilities to which Lender, the Lender Group and/or the
Underwriter Group may become subject insofar as the Liabilities arise out of, or are based upon,
the omission to state in the Disclosure Document a material fact required to be stated in the
Disclosure Document in order to make the statements in the Disclosure Document, in light of the
circumstances under which they were made, not misleading, and (ii) reimburse Lender, the Lender
Group and/or the Underwriter Group for any legal or other expenses reasonably incurred by Lender,
the Lender Group and/or the Underwriter Group in connection with defending or investigating the
Liabilities.

          (d) Promptly after receipt by an indemnified party under this Section 11.2 of notice
of the commencement of any action, such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 11.2, notify the indemnifying
party in writing of the commencement thereof, but the omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability which the indemnifying party may have to
any indemnified party hereunder except to the extent that failure to notify causes prejudice to the
indemnifying party. In the event that any action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying party will be
entitled, jointly with any other indemnifying party, to participate therein and, to the extent that
it (or they) may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the defense thereof with
counsel satisfactory to such indemnified party. After notice from the indemnifying party to such
indemnified party under this Section 11.2, such indemnified party shall pay for any legal
or other expenses subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation;
provided, however, that if the
defendants in any such action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party at the cost of the indemnifying party. The indemnifying party
shall not be liable for the expenses of more than one separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to it that are different
from or additional to those available to the indemnifying party.

          (e) In order to provide for just and equitable contribution in circumstances in which the
indemnity agreement provided for in Section 11.2 is for any reason held to be unenforceable
as to an indemnified party in respect of any Liabilities (or action in respect thereof) referred to
therein which would otherwise be indemnifiable under Section 11.2, the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a result of such
Liabilities (or action in respect thereof); provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 1l(f) of the Securities Act) shall be
entitled to

53

 

contribution from any Person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties are entitled, the following
factors shall be considered: (i) Lender’s and Borrower’s relative knowledge and access to
information concerning the matter with respect to which the claim was asserted; (ii) the
opportunity to correct and prevent any statement or omission; and (iii) any other equitable
considerations appropriate in the circumstances. Lender and Borrower hereby agree that it would
not be equitable if the amount of such contribution were determined
by pro rata or
per capita allocation.

          (f) The liabilities and obligations of both Borrower and Lender under this Article 11 shall
survive the termination of this Agreement and the satisfaction and discharge of the Obligations.

     Section 11.3 Rating Surveillance.

     Lender will retain the Rating Agencies to provide rating surveillance services on any
certificates issued in a Securitization. Such rating surveillance will be at the expense of
Borrower, but such expenses shall be included under the expenses which are capped in Section 11.l(b) hereof in the aggregate.

     Section 11.4 Severance Documentation.

     Lender shall have the right, at any time (whether prior to or after any sale, participation or
Securitization of all or any portion of the Loans), to modify the Loans in order to create one or
more senior and subordinate notes (i.e., an A/B or A/B/C structure) and/or one or more additional
components of any Note or Notes, reduce the number of components of any Note or Notes, revise the
interest rate for each component, reallocate the principal balances of the Notes and/or the
components, increase or decrease the monthly debt service payments for each component or eliminate
the component structure and/or the multiple note structure of the Loan (including the elimination
of the related allocations of principal and interest payments); provided, however, that the
outstanding principal balance of all components immediately after the effective date of such
modification equals the outstanding principal balance immediately prior to such modification and
the weighted average of the interest rates for all components immediately after the effective date
of such modification equals the interest rate of the original Note immediately prior to such
modification. At Lender’s election, each Note comprising the Loans may be subject to one or more
Securitizations. Subject to the expense limitation in Section 1l.l(b) hereof, Lender shall have the
right to modify any Note and/or Notes and any components in accordance with this Section 11
and, provided that such modification shall comply with the terms of
this Section 11, it
shall become immediately effective. If requested by Lender, Borrower shall promptly execute one or
more amendments to the Loan Documents to evidence any such modification.

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 Lender 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, subject to the limits set forth in Section 5.25 hereof, Borrower shall
pay all such fees and expenses associated with any amendments, modifications and terminations to
the Loan Documents following Closing. If Lender 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 Lender for the work performed.

          (b) Borrower also agrees to pay all out-of-pocket charges and expenses incurred by Lender
(including the court costs and fees and expenses of Lender’s counsel, advisers and consultants) in
connection with (1) the administration, enforcement, protection or preservation of any right or
claim of Lender (including any

54

 

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), (2) the syndication of any Credit Facility (subject to the limits
set forth in Section 5.25 hereof), (3) recording, filing and registration fees and charges,
mortgage or documentary taxes, UCC searches, title and survey charges, (4) all fees and
disbursements of Lender’s consultants as provided herein, (5) the termination of this Agreement,
(6) the creation, preservation, perfection, maintenance, amendment and termination of any Liens of
Lender on the Collateral, (7) 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 Lender hereunder and (8) the collection of any amounts due under the Loan Documents.
If Lender 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 Lender 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 Lender for the work performed.

          (c) Borrower shall pay all taxes (other than taxes based upon or measured by 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 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. No amendment, supplement or modification
of this Agreement nor any waiver of any provision thereof shall be made except in writing executed
by the party against whom enforcement is sought.

     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 Lender, at:
	 	 	 	 
	 	 	 	Merrill Lynch Capital, a Division of
Merrill Lynch Business Financial Services Inc.
	 	 	 	222 N. LaSalle Street — 17th 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

55

 

	 	 	 	 	 
	 

	 	 	 	Merrill Lynch Business Financial Services Inc.
	 

	 	 	 	222 N. LaSalle Street — 17th Floor
	 

	 	 	 	Chicago, Illinois 60601
	 

	 	 	 	Attention: Health Care Legal
	 

	 	 	 	Telephone: 312-499-3140
	 

	 	 	 	Facsimile: 312-499-3026
	 
	 	 	 	 
	 

	 	(b)
	 	If to Borrower, at:
	 
	 	 	 	 
	 

	 	 	 	Tandem Health Care, Inc.
	 

	 	 	 	800 Concourse Parkway South
	 

	 	 	 	Suite 200
	 

	 	 	 	Maitland, Florida 32751
	 

	 	 	 	Attention: Lawrence R. Deering, CEO
	 

	 	 	 	Telephone: 407-571-1550
	 

	 	 	 	Facsimile: 407-571-1599
	 
	 	 	 	 
	 

	 	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	 	 	Tandem Health Care, Inc.
	 

	 	 	 	One Oxford Centre, 16th Floor
	 

	 	 	 	301 Grant Street
	 

	 	 	 	Pittsburgh, Pennsylvania 15219
	 

	 	 	 	Attention: Rosemary Corsetti, Esq., General Counsel
	 

	 	 	 	Telephone: 412-281-4420
	 

	 	 	 	Facsimile: 412-281-4435

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, Lender 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 and Assigns. This Agreement, the Note, and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower and Lender 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 Lender, which may
be withheld in Lender’s discretion. Lender may, from time to time, without the consent of
Borrower, sell, transfer, pledge, assign and convey the Credit Facilities and the Loan Documents
(or any interest therein) and may grant participations in the Credit Facilities (it being
acknowledged that any successor in interest to all or any interest in the Credit Facilities and
the Loan Documents shall have all the rights of Lender hereunder). Borrower agrees to cooperate
with Lender’s efforts to do any of the foregoing.

     Section 12.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which together shall constitute
but one instrument.

     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

56

 

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 Lender and shall survive the making by Lender of the Credit Facilities contemplated by this
Agreement and the execution and delivery to Lender of the Note, and shall continue in full force
and effect until all liabilities and obligations of Borrower to Lender 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 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.

     Section 12.10. Release of Lender. 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 Lender, and its 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 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), other than any claim as to which a final determination is made in a
judicial proceeding (in which the Lender 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 in actual bad faith. 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 Lender in agreeing to make the Loan
and in making each advance of Loan proceeds hereunder.

     Section 12.11. Time. 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.

     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 Lender and
Borrower acting as principals and without any brokers, agents, or finders being the effective
procuring cause. Borrower represents that it has not committed Lender to the payment of any
brokerage fee, commission, or charge in connection with this transaction. If any such claim is
made on Lender by any broker, finder, or agent or other person, Borrower will indemnify, defend,
and hold Lender harmless from and against the claim and will defend any action to recover on that
claim, at Borrower’s cost and expense, including Lender’s counsel fees. Borrower further agrees
that until any such claim or demand is adjudicated in Lender’s 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. Nothing contained in this Agreement shall be construed as a
delegation to Lender of Borrower’s duty of performance, including without limitation Borrower’s
duties under any account or contract in which Lender has a security interest. Lender 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. Lender
shall not be liable for any debts or claims accruing in favor of any such parties against Borrower
or others or against the

57

 

Collateral. Lender 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 Lender in connection with such matters is for the protection of Lender
only, and neither Borrower nor any third party is entitled to rely thereon.

     Section 12.14. Discharge of Borrower’s Obligations. Lender, in its discretion, shall
have the right at any time, and from time to time, with 3 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 Credit Facilities (to such Credit Facility as Lender shall elect) until reimbursed
to Lender and shall be secured by the Collateral and payable immediately upon demand of Lender.
Any such payments and advances by Lender shall not be construed as a waiver by Lender of an Event
of Default.

     Section 12.15. Information to Participants. Lender shall have the right (but shall be
under no obligation) to make available to any party for the purpose of granting participations in
or selling, transferring, assigning or conveying all or any part of the Credit Facilities
(including any governmental agency or authority and any prospective bidder at any foreclosure sale
of any Collateral) any and all information that Lender 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 that Lender instructs any such party to keep such
information confidential. Borrower and Guarantor agree that Lender 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
Lender 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.

     Section 12.16. Indemnity. Borrower hereby indemnifies and agrees to defend (with
counsel acceptable to Lender) and hold harmless Lender, its partners, officers, agents and
employees (collectively, “Indemnitee”) from and against any liability, loss, cost, expense
(including reasonable attorneys’ fees and expenses for both in-house and outside counsel), claim,
damage, suit, action or proceeding ever suffered or incurred by Lender or in which Lender 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 Lender’s gross negligence or willful misconduct as
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. Reserved

     Section 12.18. Lender Approvals. Unless expressly provided herein to the contrary,
any approval, consent, decision, waiver or satisfaction of 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 Lender in its “commercial credit judgment”. “Commercial
credit judgment” means in its sole and absolute credit judgment

58

 

exercised in a manner consistent with Lender’s commercial business practices, as they may be
in effect or exercised generally by Lender from time to time for borrowers of this type.

     Section 12.19. Further Assurances. Borrower hereby agrees that at any time and from
time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or that Lender may
reasonably request, in order to perfect and protect any security interest granted or purported to
be granted hereby, or to enable Lender or any of its agents to exercise and enforce its rights and
remedies under this Agreement with respect to any portion of such collateral.

     Section 12.20. 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 Lender. Reference to
this Agreement contained in any of the foregoing documents shall be deemed to include all
amendments and supplements to this Agreement.

     Section 12.21. Claims Against Lender. Lender 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 Lender within three (3) months after Borrower first
had knowledge of the occurrence of the event which Borrower alleges gave rise to such claim and
Lender does not remedy or cure the default, if any there be, promptly thereafter. Borrower waives
any claim, set-off or defense against Lender arising by reason of any alleged default by Lender as
to which Borrower does not give such notice timely as aforesaid. Borrower acknowledges that such
waiver is or may be essential to Lender’s ability to enforce its remedies without delay and that
such waiver therefore constitutes a substantial part of the bargain between Lender and 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 12.22. Set-Offs. After the occurrence and during the continuance of an Event
of Default, Borrower hereby irrevocably authorizes and directs Lender from time to time to charge
Borrower’s accounts and deposits with Lender (or its Affiliates), and to pay over to Lender an
amount equal to any amounts from time to time due and payable to Lender hereunder, under the Note
or under any other Loan Document. Borrower hereby grants to Lender a security interest in and to
all such accounts and deposits maintained by Borrower with Lender (or its Affiliates).

     Section 12.23. Relationship. The relationship between Lender and Borrower 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 parties shall be deemed to create any relationship of agency,
partnership or joint venture or any fiduciary duty by Lender to Borrower or any other party.

     Section 12.24. Agents. In exercising any rights under the Loan Documents or taking
any actions provided for therein, Lender may act through its employees, agents or independent
contractors as authorized by Lender.

     Section 12.25
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.
Each Person comprising Borrower shall be jointly and severally liable for all of the obligations
of Borrower under this Agreement and the Borrowers under the Affiliated Loan Documents (the
“Affiliated Borrowers”), regardless of which of the Borrowers or the Affiliated Borrowers actually
receives the proceeds of the Loans or the benefit of any other extensions of credit hereunder or
the Loans or the benefit of any other extension of credit under the Affiliated Loan Documents, or
the manner in which the Borrowers, the Affiliated Borrowers, the Lender 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

59

 

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).

     (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 Credit Facilities hereunder, with the credit support of the other
Borrowers as contemplated by this Agreement and the other Loan Documents and the credit support of
the Affiliated Borrowers as contemplated by the Affiliated Loan
Documents.

     (c) The 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 Credit Facility
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 Credit Facility 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 Credit Facilities
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 Credit Facilities 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 Lender, 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 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.

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     (g) To the extent that any Borrower shall make a payment under this Section of all or
any of the Obligations (other than Loans 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 Commitments, 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) Lender is hereby authorized, without notice or demand and without affecting the liability
of any Borrower hereunder, to, at any time and from time to time, (i) renew, extend or otherwise
increase the time for payment of the Obligations; (ii) with the written agreement of any Borrower
accelerate or otherwise change the terms relating to the Obligations or otherwise modify, amend or
change the terms of any promissory note or other agreement, document or instrument now or
hereafter executed by any Borrower and delivered to Lender; (iii) accept partial payments of the
Obligations; (iv) take and hold security or collateral for the payment of the Obligations or for
the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such
security or collateral; (v) apply such security or collateral and direct the order or manner of
sale thereof Lender, in its sole discretion, may determine; and (vi) settle, release, compromise,
collect or otherwise liquidate the Obligations and any security or collateral therefor in any
manner, without affecting or impairing the obligations of any Borrower. Except as specifically
provided in this Agreement or any of the other Loan Documents or
Affiliated Loan Documents, Lender
shall have the exclusive right to determine the time and manner of application of any payments or
credits, whether received from any Borrower or any other source, and such determination shall be
binding on all Borrowers. Ail such payments and credits may be applied, reversed and reapplied, in
whole or in part, to any of the Obligations Lender shall determine in its sole discretion without
affecting the validity or enforceability of the Obligations of any other Borrower or Affiliated
Borrower.

     (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 Lender 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 Lender; (iii) failure by 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 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 Lender’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 Lender’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 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.

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     (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 Lender or
any Lender 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.

     (1) 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 Loans 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 Credit Facilities hereunder and under the Affiliated Loan
Documents.

     Section 12.26 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 Lender, 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 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 Lender, in its sole discretion, may determine;
	 
	 	v.	 	release, surrender or exchange any deposits or other property securing
the Obligations or on which Lender 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 Lender from any Borrower or any Affiliated
Borrower to any Obligations, in such order as Lender shall determine, in its sole
discretion; and

62

 

	 	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,
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, 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;
	 
	 	iv.	 	any defense based upon the application by any other Borrower or Affiliated
Borrower of the proceeds of the Loans or the loans under the Affiliated Loan Documents
for purposes other than the purposes represented by such other Borrower or Affiliated
Borrower to Lender or intended or understood by Lender or such Borrower;
	 
	 	v.	 	any defense based on such Borrower’s rights, under statute or otherwise, to
require Lender 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 Lender’s failure at any time to require strict performance by
any Borrower of any provision of the Loan Documents or by any Affilated Borrower of any
provisions of the Affilated Loan Documents. Such Borrower agrees that no such failure
shall waive, alter or diminish any right of Lender thereafter to demand strict compliance
and performance therewith. Nothing contained herein shall prevent Lender from foreclosing
on any Lien, or exercising any rights available to Lender 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 Lender which changes the scope of
such Borrower’s risks hereunder;
	 
	 	viii.	 	any defense based upon Lender’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 Lender enforces its remedies;
	 
	 	ix.	 	any defense based on (A) Lender’s surrender, release, exchange, substitution,
dealing with or taking any additional collateral, (B) Lender’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, Lender’s failure to
perfect or maintain a Lien in such collateral;
	 
	 	x.	 	any defense based upon Lender’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;

63

 

	 	xii.	 	any defense based upon Lender’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 Lender’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 Lender in connection with its
administration of the Loans 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 Lender’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 Lender which impairs such Borrower’s prospective subrogation rights;
	 
	 	xix.	 	any defense based on legal prohibition of Lender’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 Lender 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.

     (c) Additional Waivers. Each Borrower authorizes Lender to exercise, in its sole discretion,
any right, remedy or combination thereof which may then be available to Lender, 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.

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	 	 	Section 12.27 Reserved.

     Section 12.28. Choice of Law; Consent to Jurisdiction. 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 LENDER 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 12.29. Reserved.

     Section 12.30. 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 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. LENDER 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 LENDER (INCLUDING LENDER’S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

     Section 12.31. Reserved

     Section 12.32. 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 this
Credit Facility also secures the obligations under the Affiliated Loan Documents.

[SIGNATURES FOLLOW]

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     IN WITNESS WHEREOF, intending to be legally bound, and intending that this 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:	 	TANDEM HEALTH CARE OF NORTH	 	 
	 	 	STRABANE, LLC	 	 
	 	 	By: Tandem Health Care, Inc., its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Lawrence R. Deering	 	 
	 	 	Title: Chairman and Chief Executive Officer	 	 
	 	 	Borrower’s Tax ID No. 25-1831854	 	 
	 
	 	 	 	 	 	 
	 	 	TANDEM HEALTH CARE OF MIAMI, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Lawrence R. Deering
	 	 
	 	 	Title: Chairman and Chief Executive Officer	 	 
	 	 	Borrower’s Tax ID No. 59-3536517	 	 
	 
	 	 	 	 	 	 
	 	 	RE KISSIMMEE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Lawrence R. Deering	 	 
	 	 	Title: Chairman and Chief Executive Officer	 	 
	 	 	Borrower’s Tax ID No. 59-3629262	 	 
	 
	 	 	 	 	 	 
	 	 	RE WINTER HAVEN, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Lawrence R. Deering	 	 
	 	 	Title: Chairman and Chief Executive Officer	 	 
	 	 	Borrower’s Tax ID No. 59-3629275	 	 
	 
	 	 	 	 	 	 
	LENDER:	 	MERRILL LYNCH CAPITAL, a Division of Merrill	 	 
	 	 	Lynch Business Financial Services Inc., a Delaware	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Evan Denner	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Evan Denner	 	 
	 

	 	Title:	 	Director	 	 

66

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}]]