Document:

exv10w1

 

Exhibit 10.1

CREDIT AGREEMENT

$250,000,000

Dated as of December 2, 2005

among

SUNRISE SENIOR LIVING, INC.,

and

CERTAIN SUBSIDIARIES

as Borrowers,

THE SUBSIDIARIES OF THE BORROWER

IDENTIFIED HEREIN, as Guarantors

BANK OF AMERICA, N.A.,

as Administrative Agent, Swing Line Lender

and

L/C Issuer,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as

Syndication Agent

and

The Other Lenders Party Hereto

BANC OF AMERICA SECURITIES LLC,

as

Sole Lead Arranger and Sole Book Manager

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Section	 	Page	 
	 
	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	Section 1.1 Defined Terms
	 	 	1	 
	Section 1.2 Other Interpretive Provisions
	 	 	24	 
	Section 1.3 Accounting Terms
	 	 	24	 
	Section 1.4 Exchange Rates; Currency Equivalents
	 	 	25	 
	Section 1.5 Additional Alternative Currencies
	 	 	25	 
	Section 1.6 Change of Currency
	 	 	26	 
	Section 1.7 Times of Day
	 	 	27	 
	Section 1.8 Letter of Credit Amounts
	 	 	27	 
	 
	 	 	 	 
	ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS
	 	 	27	 
	Section 2.1 Committed Loans
	 	 	27	 
	Section 2.2 Borrowings, Conversions and Continuations of Committed Loans
	 	 	29	 
	Section 2.3 Letters of Credit
	 	 	32	 
	Section 2.4 Swing Line Loans
	 	 	40	 
	Section 2.5 Prepayments
	 	 	43	 
	Section 2.6 Termination or Reduction of Commitments
	 	 	44	 
	Section 2.7 Repayment of Loans
	 	 	44	 
	Section 2.8 Interest
	 	 	45	 
	Section 2.9 Fees
	 	 	46	 
	Section 2.10 Computation of Interest and Fees
	 	 	46	 
	Section 2.11 Evidence of Debt
	 	 	46	 
	Section 2.12 Payments Generally; Administrative Agent’s Clawback
	 	 	47	 
	Section 2.13 Sharing of Payments by Lenders
	 	 	49	 
	Section 2.14 Designated Borrowers
	 	 	50	 
	Section 2.15 Extension of Maturity Date
	 	 	51	 
	Section 2.16 Increase in Commitments
	 	 	51	 
	Section 2.17 Collateral
	 	 	52	 
	 
	 	 	 	 
	ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	53	 
	Section 3.1 Taxes
	 	 	53	 
	Section 3.2 Illegality
	 	 	55	 
	Section 3.3 Inability to Determine Rates
	 	 	56	 
	Section 3.4 Increased Costs; Reserves on Eurocurrency Rate Loans
	 	 	56	 
	Section 3.5 Compensation for Losses
	 	 	58	 
	Section 3.6 Mitigation Obligations; Replacement of Lenders
	 	 	59	 
	Section 3.7 Survival
	 	 	59	 
	 
	 	 	 	 
	ARTICLE IV GUARANTY
	 	 	59	 
	Section 4.1 The Guaranty
	 	 	59	 
	Section 4.2 Obligations Unconditional
	 	 	60	 
	Section 4.3 Reinstatement
	 	 	61	 
	Section 4.4 Certain Additional Waivers
	 	 	61	 
	Section 4.5 Remedies
	 	 	61	 
	Section 4.6 Rights of Contribution
	 	 	62	 
	Section 4.7 Guarantee of Payment; Continuing Guarantee
	 	 	63	 
	 
	 	 	 	 
	ARTICLE V CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
	 	 	63	 

 i

 

 

TABLE OF CONTENTS (continued)

	 	 	 	 	 
	Section	 	Page	 
	 
	Section 5.1 Conditions of Initial Credit Extension
	 	 	63	 
	Section 5.2 Conditions to all Credit Extensions
	 	 	65	 
	 
	 	 	 	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES
	 	 	66	 
	Section 6.1 Existence, Qualification and Power; Compliance with Laws
	 	 	66	 
	Section 6.2 Authorization; No Contravention
	 	 	66	 
	Section 6.3 Governmental Authorization; Other Consents
	 	 	67	 
	Section 6.4 Binding Effect
	 	 	67	 
	Section 6.5 Financial Statements; No Material Adverse Effect; No Internal Control Event
	 	 	67	 
	Section 6.6 Litigation
	 	 	67	 
	Section 6.7 No Default
	 	 	68	 
	Section 6.8 Ownership of Property; Liens
	 	 	68	 
	Section 6.9 Environmental Compliance
	 	 	68	 
	Section 6.10 Insurance
	 	 	68	 
	Section 6.11 Taxes
	 	 	68	 
	Section 6.12 ERISA Compliance
	 	 	68	 
	Section 6.13 Subsidiaries; Equity Interests
	 	 	69	 
	Section 6.14 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act
	 	 	69	 
	Section 6.15 Disclosure
	 	 	70	 
	Section 6.16 Compliance with Laws
	 	 	70	 
	Section 6.17 Intellectual Property; Licenses, Etc.
	 	 	70	 
	Section 6.18 Representations as to Foreign Obligors
	 	 	70	 
	Section 6.19 Projected Financial Statements
	 	 	71	 
	Section 6.20 Employee Relations
	 	 	71	 
	Section 6.21 Management Agreements
	 	 	72	 
	 
	 	 	 	 
	ARTICLE VII AFFIRMATIVE COVENANTS
	 	 	72	 
	Section 7.1 Financial Statements
	 	 	72	 
	Section 7.2 Certificates; Other Information
	 	 	73	 
	Section 7.3 Notices
	 	 	74	 
	Section 7.4 Payment of Obligations
	 	 	75	 
	Section 7.5 Preservation of Existence, Etc.
	 	 	76	 
	Section 7.6 Maintenance of Properties
	 	 	76	 
	Section 7.7 Maintenance of Insurance
	 	 	76	 
	Section 7.8 Compliance with Laws
	 	 	76	 
	Section 7.9 Books and Records
	 	 	76	 
	Section 7.10 Inspection Rights
	 	 	76	 
	Section 7.11 Use of Proceeds
	 	 	77	 
	Section 7.12 Conduct of Business and Compliance with Laws; Licensure
	 	 	77	 
	Section 7.13 Additional Guarantors
	 	 	78	 
	Section 7.14 Financial Covenants
	 	 	78	 
	 
	 	 	 	 
	ARTICLE VIII NEGATIVE COVENANTS
	 	 	78	 
	Section 8.1 Liens
	 	 	79	 
	Section 8.2 Certain Investments
	 	 	79	 
	Section 8.3 Indebtedness
	 	 	80	 
	Section 8.4 Fundamental Changes
	 	 	80	 
	Section 8.5 Dispositions
	 	 	80	 
	Section 8.6 Restricted Payments
	 	 	81	 

 ii

 

 

TABLE OF CONTENTS (continued)

	 	 	 	 	 
	Section	 	Page	 
	 
	Section 8.7 Change in Nature of Business
	 	 	81	 
	Section 8.8 Transactions with Affiliates
	 	 	81	 
	Section 8.9 Burdensome Agreements
	 	 	82	 
	Section 8.10 Use of Proceeds
	 	 	82	 
	 
	 	 	 	 
	ARTICLE IX EVENTS OF DEFAULT AND REMEDIES
	 	 	82	 
	Section 9.1 Events of Default
	 	 	82	 
	Section 9.2 Remedies Upon Event of Default
	 	 	84	 
	Section 9.3 Application of Funds
	 	 	85	 
	 
	 	 	 	 
	ARTICLE X ADMINISTRATIVE AGENT
	 	 	86	 
	Section 10.1 Appointment and Authority
	 	 	86	 
	Section 10.2 Rights as a Lender
	 	 	86	 
	Section 10.3 Exculpatory Provisions
	 	 	86	 
	Section 10.4 Reliance by Administrative Agent
	 	 	87	 
	Section 10.5 Delegation of Duties
	 	 	88	 
	Section 10.6 Resignation of Administrative Agent
	 	 	88	 
	Section 10.7 Non-Reliance on Administrative Agent and Other Lenders
	 	 	89	 
	Section 10.8 No Other Duties, Etc.
	 	 	89	 
	Section 10.9 Administrative Agent May File Proofs of Claim
	 	 	89	 
	Section 10.10 Collateral and Guaranty Matters
	 	 	90	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS
	 	 	90	 
	Section 11.1 Amendments, Etc.
	 	 	90	 
	Section 11.2 Notices; Effectiveness; Electronic Communication
	 	 	92	 
	Section 11.3 No Waiver; Cumulative Remedies
	 	 	93	 
	Section 11.4 Expenses; Indemnity; Damage Waiver
	 	 	94	 
	Section 11.5 Payments Set Aside
	 	 	95	 
	Section 11.6 Successors and Assigns
	 	 	96	 
	Section 11.7 Treatment of Certain Information; Confidentiality
	 	 	99	 
	Section 11.8 Right of Setoff
	 	 	100	 
	Section 11.9 Interest Rate Limitation
	 	 	100	 
	Section 11.10 Counterparts; Integration; Effectiveness
	 	 	101	 
	Section 11.11 Survival of Representations and Warranties
	 	 	101	 
	Section 11.12 Severability
	 	 	101	 
	Section 11.13 Replacement of Lenders
	 	 	101	 
	Section 11.14 Tax Forms
	 	 	102	 
	Section 11.15 Governing Law
	 	 	104	 
	Section 11.16 USA PATRIOT Act Notice
	 	 	104	 
	Section 11.17 Dispute Resolution
	 	 	104	 
	Section 11.18 Time of the Essence
	 	 	106	 
	Section 11.19 Waiver of Right to Trial by Jury
	 	 	106	 
	Section 11.20 Judgment Currency
	 	 	107	 

 iii

 

 

CREDIT AGREEMENT

     This CREDIT AGREEMENT (“Agreement”) is entered into as of December 2, 2005, among
SUNRISE SENIOR LIVING, INC., a Delaware corporation (the “Company”), certain Subsidiaries
of the Company party hereto pursuant to Section 2.14 (each a “Designated Borrower”
and, together with the Company, the “Borrowers” and, each a “Borrower”), each
lender from time to time party hereto (collectively, the “Lenders” and individually, a
“Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C
Issuer.

     The Company has requested that the Lenders provide a revolving credit facility, and the
Lenders are willing to do so on the terms and conditions set forth herein.

     In consideration of the mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

     “AAA” means the American Arbitration Association.

     “Administrative Agent” means Bank of America in its capacity as administrative agent
under any of the Loan Documents, or any successor administrative agent.

     “Administrative Agent’s Office” means, with respect to any currency, the
Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.2
with respect to such currency, or such other address or account with respect to such currency as
the Administrative Agent may from time to time notify to the Company and the Lenders.

     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

     “Affiliate” means, with respect to any designated Person, any other Person, (a)
directly or indirectly owning or holding forty-one percent (41%) or more of any equity interest in
such designated Person, or (c) forty-one percent (41%) or more of whose stock or other equity
interest is directly or indirectly owned or held by such designated Person.

     “Aggregate Commitments” means the Commitments of all the Lenders.

     “Agreement” means this Credit Agreement.

     “Agreement Currency” has the meaning set forth in Section 11.20.

     “Alternative Currency” means each of Euro, Sterling, and each other currency (other
than Dollars) that is approved in accordance with Section 1.5.

1

 

     “Alternative Currency Loan” means a Committed Loan in an Alternative Currency.

     “Alternative Currency Non-Qualified Lender” means Chevy Chase Bank, F.S.B., Farmers &
Mechanics Bank and First Horizon Bank, a division of First Tennessee Bank, N.A., or their
successors.

     “Alternative Currency Equivalent” means, at any time, with respect to any amount
denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as
determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the
basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase
of such Alternative Currency with Dollars.

     “Alternative Currency Sublimit” means an amount equal to the lesser of the Aggregate
Commitments and $50,000,000. The Alternative Currency Sublimit is part of, and not in addition to,
the Aggregate Commitments.

     “Applicable
Foreign Obligor Documents” has the meaning set forth in Section 6.18 hereof.

     “Applicable Percentage” means with respect to any Lender at any time, the percentage
(carried out to the ninth (9th) decimal place) of the Aggregate Commitments represented
by such Lender’s Commitment at such time. If the commitment of each Lender to make Loans and the
obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 9.2 or if the Aggregate Commitments have expired, then the Applicable Percentage of
each Lender shall be determined based on the Applicable Percentage of such Lender most recently in
effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each
Lender is set forth opposite the name of such Lender on Schedule 2.1 or in the Assignment
and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

     “Applicable Rate” means the following percentages per annum, based upon the
Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the
Administrative Agent pursuant to Section 7.2:

	 	 	 	 	 	 	 
	 	 	 	 	Eurodollar Rate Loans	 	Base Rate Loans
	Pricing	 	 	 	Margin	 	Margin
	Level	 	Leverage Ratio	 	(bps)	 	(bps)
	I

	 	< 2.25x
	 	170
	 	0
	 	 	 	 	 	 	 
	II
	 	3 2.25x but < 3.00x
	 	185
	 	25
	 	 	 	 	 	 	 
	III
	 	3 3.00x but < 3.75x
	 	200
	 	50
	 	 	 	 	 	 	 
	IV
	 	3 3.75x
	 	225
	 	75

2

 

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated
Adjusted Leverage Ratio shall become effective as of the first Business Day immediately following
the date a Compliance Certificate is delivered pursuant to Section 7.2; provided,
however, that if a Compliance Certificate is not delivered when due in accordance with such
Section and such failure continues for ten (10) days after written notice thereof to the Company,
then Pricing Level IV shall apply as of the first Business Day after the date on which such
Compliance Certificate was required to have been delivered. The Applicable Rate in effect from the
Closing Date through the date a Compliance Certificate is required to be delivered pursuant to
Section 7.2(a) for the fiscal quarter ending December 31, 2005 shall be determined based upon
Pricing Level I.

     “Applicable Time” means, with respect to any borrowings and payments in any
Alternative Currency, the local time in the place of settlement for such Alternative Currency as
may be determined by the Administrative Agent or the L/C Issuer, as the case may be, to be
necessary for timely settlement on the relevant date in accordance with normal banking procedures
in the place of payment.

     “Applicant Borrower” has the meaning specified in Section 2.14.

     “Arranger” means Banc of America Securities LLC, in its capacity as sole lead arranger
and sole book manager.

     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.

     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 11.6(b), and accepted by the Administrative Agent, in substantially the form of
Exhibit E or any other form approved by the Administrative Agent.

     “Audited Financial Statements” means the audited consolidated balance sheet of the
Company and its Subsidiaries for the fiscal year ended December 31, 2004, and the related
consolidated statements of income or operations, shareholders’ equity and cash flows for such
fiscal year of the Company and its Subsidiaries, including the notes thereto.

     “Auto Extension Letter of Credit” has the meaning specified in Section 2.3
hereof.

     “Availability Period” means the period from and including the Closing Date to the
earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments
pursuant to Section 2.6, and (c) the date of termination of the commitment of each Lender
to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to
Section 9.2.

     “Bank of America” means Bank of America, N.A. and its successors.

     “BAS” means Banc of America Securities, LLC and its successors.

3

 

     “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a)
the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as
publicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a
rate set by Bank of America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced rate. Any change in
such rate announced by Bank of America shall take effect at the opening of business on the day
specified in the public announcement of such change.

     “Base Rate Committed Loan” means a Committed Loan that is a Base Rate Loan.

     “Base Rate Loan” means a Loan that bears interest based on the Base Rate. All Base
Rate Loans shall be denominated in Dollars.

     “Borrower” and “Borrowers” each has the meaning specified in the introductory
paragraph hereto.

     “Borrower Materials” has the meaning specified in Section 7.2.

     “Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the context may
require.

     “Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the state
where the Administrative Agent’s Office with respect to Obligations denominated in Dollars is
located and:

     (a) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan
denominated in Dollars, any fundings, disbursements, settlements and payments in Dollars in respect
of any such Eurocurrency Rate Loan, or any other dealings in Dollars to be carried out pursuant to
this Agreement in respect of any such Eurocurrency Rate Loan, means any such day on which dealings
in deposits in Dollars are conducted by and between banks in the London interbank eurodollar
market;

     (b) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan
denominated in Euro, any fundings, disbursements, settlements and payments in Euro in respect of
any such Eurocurrency Rate Loan, or any other dealings in Euro to be carried out pursuant to this
Agreement in respect of any such Eurocurrency Rate Loan, means a TARGET Day;

     (c) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan
denominated in a currency other than Dollars or Euro, means any such day on which dealings in
deposits in the relevant currency are conducted by and between banks in the London or other
applicable offshore interbank market for such currency; and

     (d) if such day relates to any fundings, disbursements, settlements and payments in a currency
other than Dollars or Euro in respect of a Eurocurrency Rate Loan denominated in a currency other
than Dollars or Euro, or any other dealings in any currency other than Dollars or Euro to be
carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan

4

 

(other than any interest rate settings), means any such day on which banks are open for
foreign exchange business in the principal financial center of the country of such currency.

     “Capitalized Cash Interest Expense” means capitalized interest on construction or
development loans, to the extent not funded from an interest reserve as part of third party
construction financing.

     “Cash Collateralize” has the meaning specified in Section 2.3(g).

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change
in any law, rule, regulation or treaty or in the administration, interpretation or application
thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or
directive (whether or not having the force of law) by any Governmental Authority.

     “Change of Control” means an event or series of events by which:

     (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary
or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to
have “beneficial ownership” of all securities that such person or group has the right to acquire
(such right, an “option right”), whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of thirty percent (30%) or more of the equity
securities of such Person entitled to vote for members of the board of directors or equivalent
governing body of such Person on a fully-diluted basis (and taking into account all such securities
that such person or group has the right to acquire pursuant to any option right);

     (b) any Person or two or more Persons acting in concert shall have acquired by contract or
otherwise, directly or indirectly, a controlling influence over the management or policies of the
Company, or control over the equity securities of the Company entitled to vote for members of the
board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking
into account all such securities that such Person or group has the right to acquire pursuant to any
option right) representing thirty percent (30%) or more of the combined voting power of such
securities.

     “Closing Date” means the first date on which all the conditions precedent in
Section 5.1 are satisfied or waived in accordance with Section 11.1 (or in the case
of Section 5.1(b) waived by the person entitled to receive the applicable payment).

     “Collateral” means the Collateral as defined in the Security Agreements.

     “Code” means the Internal Revenue Code of 1986.

     “Commitment” means, as to each Lender, its obligation to (a) make Committed Loans to
the Borrowers pursuant to Section 2.1, (b) purchase participations in L/C Obligations, and
(c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time

5

 

outstanding not to exceed the Dollar amount set forth opposite such Lender’s name on
Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a
party hereto, as applicable, as such amount may be adjusted from time to time in accordance with
this Agreement.

     “Committed Borrowing” means a Borrowing consisting of simultaneous Committed Loans of
the same Type, in the same currency and, in the case of Eurocurrency Rate Loans, having the same
Interest Period made by each of the Lenders pursuant to Section 2.1.

     “Committed Loan” has the meaning specified in Section 2.1.

     “Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion
of Committed Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans,
pursuant to Section 2.2(a), which, if in writing, shall be substantially in the form of
Exhibit A.

     “Company” has the meaning specified in the introductory paragraph hereto.

     “Company Guaranty” means the Company Guaranty made by the Company in favor of the
Administrative Agent and the Lenders, substantially in the form of Exhibit F.

     “Compliance Certificate” means a certificate substantially in the form of Exhibit
D.

     “Consolidated EBITDA” means the sum of: (a) (i) net income; (ii) Consolidated Interest
Expense; (iii) income taxes; (iv) depreciation and amortization; (v) the non-cash component of any
unusual or non-recurring item of loss or expense which was deducted in determining net income (in
accordance with GAAP), and (vi) income (or loss) in respect of minority interest (assuming it was
deducted in the calculation of net income); minus (b) “other income – operating properties” as
shown on the Company’s financial statements in accordance with GAAP as of the date hereof (or as
such category may be categorized in future financial statements) in each case for the Borrower and
its Subsidiaries on a consolidated basis. For purposes of calculating the Leverage Ratio only,
Consolidated EBITDA will be adjusted to reflect actual transition costs (post-closing) or
pre-closing on a pro forma basis to reflect (i) material acquisitions and dispositions of property
and (ii) material acquisitions and dispositions of management contracts, provided that
documentation of such acquisitions and dispositions satisfactory to the Administrative Agent in its
sole discretion is delivered to the Administrative Agent. Transition costs shall be subject to the
approval of the Administrative Agent.

     “Consolidated EBITDAR” means the sum of: (a) Consolidated EBITDA plus (b) rent paid or
payable under all operating leases as determined in accordance with GAAP.

     “Consolidated Fixed Charges” means the sum of: (a) Consolidated Interest Expense, (b)
Capitalized Cash Interest Expense (c) scheduled payments of principal on Total Funded Indebtedness
(excluding balloon payments), (d) rent payable under all operating leases (other than capital
leases) as determined in accordance with GAAP, and (e) dividends payable on stock.

6

 

     “Consolidated Interest Expense” means total interest expense (whether paid or
accrued), including the amortization of debt discounts and premiums as well as the interest
component under capital leases, on a consolidated basis in accordance with GAAP.

     “Consolidated Net Worth” means Shareholders’ Equity of the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.

     “Continuing Care Retirement Community” means a Senior Living Facility which provides
or arranges housing and health-related services that are effective for the life of the resident or
for an extended, specified period in excess of one year, including mutually terminable contracts,
in consideration for the payment of an entrance fee, which services are provided on a comprehensive
continuum of care basis which includes a skilled nursing facility.

     “Contractual Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.

     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. “Controlling” and “Controlled”
have meanings correlative thereto.

     “Convertible Debt” means the $125,000,000 convertible subordinated notes of the
Borrower due February 1, 2009.

     “Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit
Extension.

     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.

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

     “Default Rate” means (a) when used with respect to Obligations other than Letter of
Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if
any, applicable to Base Rate Loans plus (iii) two percent (2%) per annum; provided,
however, that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an
interest rate equal to the interest rate (including any Applicable Rate and any Mandatory Cost)
otherwise applicable to such Loan plus two percent (2%) per annum, and (b) when used with respect
to Letter of Credit Fees, a rate equal to the Applicable Rate plus two percent (2%) per
annum.

     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the
Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required
to be funded by it hereunder within one Business Day of the date required to be funded

7

 

by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other
Lender any other amount required to be paid by it hereunder within one Business Day of the date
when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become
the subject of a bankruptcy or insolvency proceeding.

     “Designated Borrower” has the meaning set forth in Section 2.14 hereof.

     “Designated Borrower Notice” has the meaning specified in Section 2.14(a).

     “Designated Borrower Request and Assumption Agreement” has the meaning specified in
Section 2.14(a).

     “Development Joint Venture” means an entity which owns a Development Joint Venture
Investment.

     “Development Joint Venture Investments” means (a) Investments which are (i) less than
fifty percent (50%) owned and unconsolidated by any of the Loan Parties and (ii) have a ratio of
EBITDAR to Fixed Obligations of less than 1.20 to 1.0 for any fiscal quarter plus (b) any amounts
funded by any of the Loan Parties under operating deficit guaranties or construction completion
guaranties.

     “Dispute” means any controversy, claim or dispute between or among the parties to this
Agreement, including any such controversy, claim or dispute arising out of or relating to (a) this
Agreement, (b) any other Loan Document, (c) any related agreements or instruments, or (d) the
transaction contemplated herein or therein (including any claim based on or arising from an alleged
personal injury or business tort).

     “Dollar” and “$” mean lawful money of the United States.

     “Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in
Dollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency,
the equivalent amount thereof in Dollars as determined by the Administrative Agent or the L/C
Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of
the most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency.

     “Domestic Subsidiary” means any Subsidiary that is organized under the Laws of any
political subdivision of the United States.

     “Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved
Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative
Agent, the L/C Issuer and the Swing Line Lender, and (ii) unless an Event of Default has occurred
and is continuing, the Company (each such approval not to be unreasonably withheld or delayed);
provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the
Company or any of the Company’s Affiliates or Subsidiaries; and provided further,
however, that an Eligible Assignee shall include only a Lender, an Affiliate of a Lender or
another Person, which, through its Lending Offices, is capable of lending the applicable
Alternative Currencies to the relevant Borrowers without the imposition of any additional
Indemnified Taxes.

8

 

     “EMU” means the economic and monetary union in accordance with the Treaty of Rome
1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam
Treaty of 1998.

     “EMU Legislation” means the legislative measures of the European Council for the
introduction of, changeover to or operation of a single or unified European currency.

     “Environmental Laws” means any and all Federal, state, local, and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the environment, including those
related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

     “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Company, any other Loan Party or any of their respective Subsidiaries directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure
to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.

     “Equity Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of capital stock of (or
other ownership or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person
or warrants, rights or all of options for the purchase or acquisition from such Person of such
shares (or such other interests), the other ownership or profit interests in such Person (including
partnership, member or trust interests therein), whether voting or nonvoting, and whether or not
such shares, warrants, options, rights or other interests are outstanding on any date of
determination and participating or mezzanine loans made by the Company or a Subsidiary where such
loans are treated under GAAP as investments.

     “ERISA” means the Employee Retirement Income Security Act of 1974.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with the Company within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the
Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e)
of ERISA; (c) a complete or partial withdrawal by the Company or any

9

 

ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.

     “Euro” and “EUR” mean the lawful currency of the Participating Member States
introduced in accordance with the EMU Legislation.

     “Eurocurrency Rate” means, (a) for any Interest Period with respect to a Eurocurrency
Rate Loan other than any Alternative Currency Loan denominated in Euro, the rate per annum equal to
the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as designated by the Administrative
Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to
the commencement of such Interest Period, for deposits in the relevant currency (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest Period. If such
rate is not available at such time for any reason, then the “Eurocurrency Rate” for such Interest
Period shall be the rate per annum determined by the Administrative Agent to be the rate at which
deposits in the relevant currency for delivery on the first day of such Interest Period in Same Day
Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted by
Bank of America and with a term equivalent to such Interest Period would be offered by Bank of
America’s London Branch (or other Bank of America branch or Affiliate) to major banks in the London
or other offshore interbank market for such currency at their request at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the commencement of such Interest Period.

     (b) any Eurocurrency Rate Loan denominated in Euro for any Interest Period, the rate per annum
equal to the offered quotation which appears on the Reuters Screen which displays the rate of the
Banking Federation of the European Union for the Euro (being currently page “EURIBORO1”) for such
Interest Period at approximately 11:00 a.m., Brussels time, two (2) Business Days prior to the
commencement of such Interest Period for deposits in the relevant currency (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest Period or, if such page
shall cease to be available, such other page or such other service for the purpose of displaying an
average rate of the Banking Federation of the European Union as the Administrative Agent, shall
select. If such rate is not available at such time for any reason, and the Administrative Agent
has not selected an alternative service on which a quotation is displayed, then the “Eurocurrency
Rate” for such Interest Period shall be the rate at which the Administrative Agent was offering to
prime banks in the European interbank market for deposits in Euro for the relevant Interest Period
at approximately 11:00 a.m. Brussels time, two (2) Business Days prior to the commencement of such
Interest Period.

     “Eurocurrency Rate Loan” means a Committed Loan that bears interest at a rate based on
the Eurocurrency Rate. Eurocurrency Rate Loans may be denominated in Dollars or in an

10

 

Alternative Currency. All Committed Loans denominated in an Alternative Currency must be
Eurocurrency Rate Loans.

     “Event of Default” has the meaning specified in Section 9.1.

     “Excess Payment” has the meaning specified in Section 4.6.

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C
Issuer or any other recipient of any payment to be made by or on account of any obligation of any
Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which its applicable
Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which such Borrower is located and (c) except as provided
in the following sentence, in the case of a Foreign Lender (other than an assignee pursuant to a
request by the Company under Section 11.13), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or
designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability
(other than as a result of a Change in Law) to comply with Section 3.1(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation
of a new Lending Office (or assignment), to receive additional amounts from the applicable Borrower
with respect to such withholding tax pursuant to Section 3.1(a). Notwithstanding anything
to the contrary contained in this definition, Excluded Taxes shall not include any withholding tax
imposed at any time on payments made by or on behalf of a Foreign Obligor to any Lender hereunder
or under any other Loan Document, provided that such Lender shall have complied with the
last paragraph of Section 3.1(e).

     “Existing Credit Agreement” means that certain Credit Agreement dated as of September
23, 2003 among the Company, the Administrative Agent, as agent, and a syndicate of lenders.

     “Existing Letters of Credit” means the Letters of Credit listed on Schedule
1.1 attached hereto.

     “Extension Effective Date” has the meaning specified in Section 2.15.

     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day; provided that (a) if such day is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Bank of America on such day on such transactions as determined by the Administrative
Agent.

11

 

     “Fee Letter” means the letter agreement, dated September 27, 2005, among the Company,
the Administrative Agent and the Arranger.

     “Financial Projections” has the meaning specified in Section 6.19.

     “Foreign Lender” has the meaning set forth in Section 11.14(a).

     “Foreign Obligor” means a Loan Party that is a Foreign Subsidiary.

     “Foreign Subsidiary” means any Subsidiary that is organized under the laws of a
jurisdiction other than the United States, a State thereof or the District of Columbia.

     “FRB” means the Board of Governors of the Federal Reserve System of the United States.

     “Fronting Lender” means Bank of America in its capacity as Lender fronting for the
Applicable Percentage of each Alternative Currency Non-Qualifying Lender for any Alternative
Currency Loan.

     “Fronting Lender’s Applicable Percentage” means to any Alternative Currency Loan, the
percentage (carried out to the ninth (9th) decimal place) of the Fronting Lender’s
Applicable Percentage of such Alternative Currency Loan plus the aggregate of what would have been
the Alternative Currency Non-Qualified Lender’s Applicable Percentages of such Alternative Currency
Loan as determined by the Administrative Agent. If the commitment of each Lender to make Loans and
the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 9.2 or if the Aggregate Commitments have expired, then the Applicable Percentage of each
Fronting Lender shall be determined based on the Fronting Lender’s Applicable Percentage most
recently in effect, giving effect to any subsequent assignments.

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

     “Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business.

     “GAAP” means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the circumstances as of the date
of determination, consistently applied.

     “Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to

12

 

government (including any supra-national bodies such as the European Union or the European
Central Bank).

     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other
obligation payable or performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services for the purpose of
assuring the obligee in respect of such Indebtedness or other obligation of the payment or
performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in
respect of such Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any
assets of such Person securing any Indebtedness or other obligation of any other Person, whether or
not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or
otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning. The term “Guarantee” shall not include agreements to complete construction
or agreement to loan or advance funds to cover operating deficits. “Guarantee” will not include an
obligation of a person (unless such Person is one of the Guarantors) where such Person has minimal
capital, and such minimally-capitalized Person’s obligation is not supported by the guarantee of
another Person with substantial capital.

     “Guarantors” means, collectively, Sunrise Senior Living Management, Inc. (f/k/a
Sunrise Assisted Living Management, Inc.), a Virginia corporation, Sunrise Senior Living
Investments, Inc. (f/k/a Sunrise Assisted Living Investments, Inc.), a Virginia corporation,
Sunrise Development, Inc., a Virginia corporation and Sunrise Senior Living Services, Inc. (f/k/a
Marriott Senior Living Services, Inc.), a Delaware corporation and such other Material Subsidiaries
of the Borrower as may be added as Guarantors from time to time in compliance with the covenants
set forth in Section 6.13 hereof.

     “Guaranty” means the Guaranty made by the Guarantors in favor of the Administrative
Agent on behalf of the Lenders, pursuant to Article V hereof.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.

     “Honor Date” has the meaning set forth in Section 2.3 hereof.

13

 

     “Increase Effective Date” has the meaning set forth in Section 2.16 hereof.

     “Indebtedness” means, as to any Person at a particular time, without duplication, all
of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

     (a) obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

     (b) all direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and
similar instruments;

     (c) indebtedness (excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;

     (d) capital leases and Synthetic Lease Obligations; and

     (e) all Guarantees of such Person which can be quantified under GAAP in respect of any
of the foregoing.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Indemnitee” has the meaning specified in Section 11.4(b).

     “Information” has the meaning specified in Section 11.7.

     “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan and the Maturity Date; provided,
however, that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the
respective dates that fall every three months after the beginning of such Interest Period shall
also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the
last Business Day of each March, June, September and December and the Maturity Date.

     “Interest Period” means, as to each Eurocurrency Rate Loan, the period commencing on
the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency
Rate Loan and ending on the date seven (7) days or one (1), two (2), three (3) or six (6) months
thereafter (or as otherwise permitted pursuant to the terms of Section 2.2(a) hereof, as selected
by the Company in its Committed Loan Notice; provided that:

     (a) any Interest Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day;

     (b) any Interest Period other than a seven-day Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such

14

 

Interest Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period;

     (c) no Interest Period shall extend beyond the Maturity Date;

     (d) a seven-day Interest Period may not be selected for Eurocurrency Rate Loan
made in an Alternative Currency.

     “Internal Control Event” means a material weakness in, or fraud that involves
management or other employees who have a significant role in, the Company’s internal controls over
financial reporting, in each case as described in the Securities Laws.

     “Investment” means, as to any Person, any direct or indirect acquisition or investment
by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other
securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or
assumption of debt of, or purchase or other acquisition of any other debt or equity participation
or interest in, another Person, including any partnership or joint venture interest in such other
Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions)
of assets of another Person that constitute a business unit. For purposes of covenant compliance,
the carrying value of such Investment determined in accordance with GAAP.

     “IP Rights” has the meaning set forth in Section 6.17.

     “IRS” means the United States Internal Revenue Service.

     “ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law & Practice (or such later
version thereof as may be in effect at the time of issuance).

     “Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit
Application, and any other document, agreement and instrument entered into by the L/C Issuer and
the Company (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of
Credit.

     “Judgment Currency” has the meaning set forth in Section 11.20.

     “Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.

     “L/C Advance” means, with respect to each Lender, such Lender’s funding of its
participation in any L/C Borrowing in accordance with its Applicable Percentage. All L/C Advances
shall be denominated in Dollars.

15

 

     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter
of Credit which has not been reimbursed on the date when made or refinanced as a Committed
Borrowing. All L/C Borrowings shall be denominated in Dollars.

     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the amount thereof.

     “L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit hereunder.

     “L/C Obligations” means, as at any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit plus the aggregate of all
Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available
to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in
accordance with Section 1.8. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may still be drawn
thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be
deemed to be “outstanding” in the amount so remaining available to be drawn.

     “Lender” has the meaning specified in the introductory paragraph hereto and, as the
context requires, includes the Swing Line Lender.

     “Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other office or offices as
a Lender may from time to time notify the Company and the Administrative Agent.

     “Letter of Credit” means any standby letter of credit issued hereunder and shall
include the Existing Letters of Credit. Letters of Credit may be issued in Dollars or in an
Alternative Currency.

     “Letter of Credit Application” means an application and agreement for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

     “Letter of Credit Expiration Date” means the day that is seven (7) days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business
Day).

     “Letter of Credit Fee” has the meaning specified in Section 2.3(i).

     “Letter of Credit Sublimit” means an amount equal to fifty percent (50%) of the
Aggregate Commitments. The Letter of Credit Sublimit is part of, and not in addition to, the
Aggregate Commitments.

     “Licenses” means any and all licenses, certificates of need, operating permits,
franchises, and other licenses, authorizations, certifications, permits, or approvals, other than
local zoning, development, subdivision, site plan and similar construction permits, issued by, or
on behalf of, any Governmental Authority now existing or at any time hereafter issued, with respect
to the acquisition, construction, renovation, expansion, leasing, management, ownership and/or

16

 

operation of any and all Senior Living Facilities, accreditation of any Senior Living
Facility, and/or the participation or eligibility for participation in any third party payment or
reimbursement programs to the extent any of the Borrowers are participating in such programs (but
specifically excluding any and all Participation Agreements to the extent required by law), any and
all operating licenses issued by any state Governmental Authority, any and all pharmaceutical
licenses and other licenses related to the purchase, dispensing, storage, prescription or use of
drugs, medications, and other “controlled substances,” any and all licenses relating to the
operation of food or beverage facilities or amenities, if any, and any and all certifications and
eligibility for participation in Medicare, Medicaid, Blue Cross and/or Blue Shield, or any of the
Managed Care Plans, private insurer, employee assistance programs or other third party payment or
reimbursement programs as the same may from time to time be amended, renewed, restated, reissued,
restricted, supplemented or otherwise modified.

     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or other security interest
or preferential arrangement in the nature of a security interest of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any easement, right of way or
other encumbrance on title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).

     “Lifecare Bond” means a surety bond, irrevocable letter of credit or other financial
assurance required by a Governmental Authority as evidence of the financial responsibility of the
owner or operator of a Continuing Care Retirement Community.

     “Loan” means an extension of credit by a Lender to a Borrower under Article II
in the form of a Committed Loan or a Swing Line Loan.

     “Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, the Security Agreements, and the Guaranty.

     “Loan Parties” means, collectively, the Company, each Subsidiary Guarantor, and each
Designated Borrower.

     “Mandatory Cost” means, with respect to any period, the percentage rate per annum
determined in accordance with Schedule 1.2.

     “Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual or contingent),
condition (financial or otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its
obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability against any Loan Party of any Loan
Document to which it is a party.

     “Material Subsidiary” means any direct or indirect Domestic Subsidiary of the Borrower
which earns ten percent (10%) or more of the Consolidated EBITDA or which holds, controls or
constitutes ten percent (10%) or more of the consolidated assets of the Borrower.

17

 

     “Maturity Date” means the later of (a) December 2, 2009 and (b) if maturity is
extended pursuant to Section 2.15, such extended maturity date as determined pursuant to
such Section.

     “Maximum Rate” has the meaning set forth in Section 11.9.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been obligated to make
contributions.

     “Non-Extension Notice Date” has the meaning set forth in Section 2.3.

     “Non-Reinstatement Deadline” has the meaning set forth in Section 2.3.

     “Note” means a promissory note made by a Borrower in favor of a Lender evidencing
Loans made by such Lender to such Borrower, substantially in the form of Exhibit C.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants
and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any
Loan, Letter of Credit or Swap Contract, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or hereafter arising and
including interest and fees that accrue after the commencement by or against any Loan Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor
in such proceeding, regardless of whether such interest and fees are allowed claims in such
proceeding.

     “Organization Documents” means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents
with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement; and (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or organization with
the applicable Governmental Authority in the jurisdiction of its formation or organization and, if
applicable, any certificate or articles of formation or organization of such entity.

     “Other Taxes” means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.

     “Outstanding Amount” means (i) with respect to Committed Loans on any date, the Dollar
Equivalent amount of the aggregate outstanding principal amount thereof after giving effect to any
borrowings and prepayments or repayments of such Committed Loans occurring on such date; (ii) with
respect to Swing Line Loans on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowings and prepayments or repayments of such Swing Line Loans occurring on
such date; and (iii) with respect to any L/C Obligations on any

18

 

date, the Dollar Equivalent amount of the aggregate outstanding amount of such L/C Obligations
on such date after giving effect to any L/C Credit Extension occurring on such date and any other
changes in the aggregate amount of the L/C Obligations as of such date, including as a result of
any reimbursements by the Company of Unreimbursed Amounts.

     “Overnight Rate” means, for any day, (a) with respect to any amount denominated in
Dollars, the greater of (i) the Federal Funds Rate and (ii) an overnight rate determined by the
Administrative Agent, the L/C Issuer, or the Swing Line Lender, as the case may be, in accordance
with banking industry rules on interbank compensation, and (b) with respect to any amount
denominated in an Alternative Currency, the rate of interest per annum at which overnight deposits
in the applicable Alternative Currency, in an amount approximately equal to the amount with respect
to which such rate is being determined, would be offered for such day by a branch or Affiliate of
Bank of America in the applicable offshore interbank market for such currency to major banks in
such interbank market.

     “Participant” has the meaning specified in Section 11.6(d).

     “Participating Member State” means each state so described in any EMU Legislation.

     “Participation Agreements” means any and all third party payor participation or
reimbursement agreements now or at any time hereafter existing for the benefit of any of the Loan
Parties relating to rights to payment or reimbursement from, and claims against, private insurers,
managed care plans, material employee assistance programs, Blue Cross and/or Blue Shield, federal,
state and local Governmental Authorities, including without limitation, Medicare and Medicaid, and
other third party payors, as the same may from time to time be amended, restated, extended,
supplemented or modified.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and
is sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any
ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time
during the immediately preceding five plan years.

     “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.

     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by the Company or, with respect to any such plan that is subject to Section 412
of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Platform” has the meaning specified in Section 7.2.

     “Public Lender” has the meaning specified in Section 7.2.

     “Ratable Shares” has the meaning specified in Section 4.6.

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     “Register” has the meaning specified in Section 11.6(c).

     “REIT Mezz Debt” has the meaning specified in Section 8.3.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,
other than events for which the thirty (30) day notice period has been waived.

     “Request for Credit Extension” means (a) with respect to a Borrowing, conversion or
continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit
Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line
Loan Notice.

     “Required Lenders” means, as of any date of determination, Lenders having more than
fifty percent (50%) of the Aggregate Commitments or, if the commitment of each Lender to make Loans
and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 9.2, Lenders holding in the aggregate more than fifty percent (50%) of the Total
Outstandings (with the aggregate amount of each Lender’s risk participation and funded
participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for
purposes of this definition); provided that the Commitment of, and the portion of the Total
Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making
a determination of Required Lenders.

     “Responsible Officer” means the chief executive officer, president, chief financial
officer, treasurer or assistant treasurer of a Loan Party. Any document delivered hereunder that
is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been
authorized by all necessary corporate, partnership and/or other action on the part of such Loan
Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such
Loan Party.

     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity Interest of the
Company or any Subsidiary, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on
account of any return of capital to the Company’s stockholders, partners or members (or the
equivalent Person thereof).

     “Revaluation Date” means (a) with respect to any Loan, each of the following: (i)
each date of a Borrowing of a Eurocurrency Rate Loan denominated in an Alternative Currency, (ii)
each date of a continuation of a Eurocurrency Rate Loan denominated in an Alternative Currency
pursuant to Section 2.2, and (iii) such additional dates as the Administrative Agent shall
determine or require; and (b) with respect to any Letter of Credit, each of the following: (i)
each date of issuance of a Letter of Credit denominated in an Alternative Currency, (ii) each date
of an amendment of any such Letter of Credit having the effect of increasing the amount thereof
(solely with respect to the increased amount), (iii) each date of any payment by the L/C Issuer
under any Letter of Credit denominated in an Alternative Currency, and (iv) such additional

20

 

dates as the Administrative Agent or the L/C Issuer shall determine or the Required Lenders
shall require.

     “Same Day Funds” means (a) with respect to disbursements and payments in Dollars,
immediately available funds, and (b) with respect to disbursements and payments in an Alternative
Currency, same day or other funds as may be determined by the Administrative Agent or the L/C
Issuer, as the case may be, to be customary in the place of disbursement or payment for the
settlement of international banking transactions in the relevant Alternative Currency.

     “Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

     “SEC” means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.

     “Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of
1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and
practices promulgated, approved or incorporated by the SEC or the Public Company Accounting
Oversight Board, as each of the foregoing may be amended and in effect on any applicable date
hereunder.

     “Security Agreements” means, the Pledge, Assignment and Security Agreement of even
date herewith by and between the Borrowers and the Administrative Agent on behalf of the Lenders
and any other assignment, pledge agreement, security agreement, mortgage, deed of trust, leasehold
mortgage, leasehold deed of trust, deed to secure debt, financing statement, initial transaction
statement and any similar instrument, document or agreement under or pursuant to which a Lien is
now or hereafter granted to, or for the benefit of, the Lenders on any collateral to secure the
Obligations, as the same may from time to time be amended, restated, supplemented or otherwise
modified.

     “Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Company and its Subsidiaries as of that date determined in accordance
with GAAP.

     “Special Notice Currency” means at any time an Alternative Currency, other than the
currency of a country that is a member of the Organization for Economic Cooperation and Development
at such time located in North America or Europe.

     “Spot Rate” for a currency means the rate determined by the Administrative Agent or
the L/C Issuer, as applicable, to be the rate quoted by the Person acting in such capacity as the
spot rate for the purchase by such Person of such currency with another currency through its
principal foreign exchange trading office at approximately 11:00 a.m. on the date two (2) Business
Days prior to the date as of which the foreign exchange computation is made; provided that
the Administrative Agent or the L/C Issuer may obtain such spot rate from another financial
institution designated by the Administrative Agent or the L/C Issuer if the Person acting in such
capacity does not have as of the date of determination a spot buying rate for any such currency;
and provided further that the L/C Issuer may use such spot rate quoted on the date
as of which

21

 

the foreign exchange computation is made in the case of any Letter of Credit denominated in an
Alternative Currency.

     “Sterling” and “£” mean the lawful currency of the United Kingdom.

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other governing body (other
than securities or interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary
or Subsidiaries of the Company.

     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest
rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or any other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or governed by, any
form of master agreement published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including any such
obligations or liabilities under any Master Agreement.

     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after
taking into account the effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Contracts (which may include a
Lender or any Affiliate of a Lender).

     “Swing Line” means the revolving credit facility made available by the Swing Line
Lender pursuant to Section 2.4.

     “Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section
2.4.

     “Swing Line Lender” means Bank of America in its capacity as provider of Swing Line
Loans, or any successor swing line lender hereunder.

22

 

     “Swing Line Loan” has the meaning specified in Section 2.4(a).

     “Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to
Section 2.4(b), which, if in writing, shall be substantially in the form of Exhibit
B.

     “Swing Line Sublimit” means an amount equal to ten percent (10%) of the Aggregate
Commitments. The Swing Line Sublimit is part of, and not in addition to, the Aggregate
Commitments.

     “Synthetic Lease Obligation” shall have the meaning provided by GAAP.

     “TARGET Day” means any day on which the Trans-European Automated Real-time Gross
Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be
operative, such other payment system (if any) determined by the Administrative Agent to be a
suitable replacement) is open for the settlement of payments in Euro.

     “Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.

“Threshold Amount” means $10,000,000.

     “Total Funded Indebtedness” means all indebtedness and guarantees including recourse
and non-recourse mortgage debt, capitalized leases, letters of credit, unsecured debt, guarantees
(including all debt guarantees, but excluding all development completion guarantees and operating
deficit guarantees which will be captured in the limitation on Development Joint Ventures),
purchase obligations treated as liabilities per GAAP, subordinated debt, unfunded obligations
(including total Lifecare Bond obligations at GAAP book value, subject to certain exclusions as
discussed below), all as defined in accordance with GAAP. Total Funded Indebtedness shall not
include security deposits, accounts payable, accrued liabilities, any prepaid rent and any
outstanding balance under the Convertible Debt only to the extent that the Company’s common stock
market price remains at least $2.50 per share above the Convertible Debt conversion price.
Furthermore, certain Lifecare Bond obligations may be excluded from Total Funded Indebtedness to
the extent the Borrower is not obligated to refund these obligations prior to receiving proceeds of
new Lifecare Bonds. Total Funded Indebtedness will be reduced by unrestricted cash balances, cash
equivalents and short-term marketable securities in excess of $50,000,000.

     “Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C
Obligations.

     “Type” means, with respect to a Committed Loan, its character as a Base Rate Loan or a
Eurocurrency Rate Loan.

     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets,
determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section
412 of the Code for the applicable plan year.

23

 

     “United States” and “U.S.” mean the United States of America.

     “Unreimbursed Amount” has the meaning specified in Section 2.3(c)(i).

     “Unused Fee” has the meaning specified in Section 2.9(a).

     Section 1.2 Other Interpretive Provisions. With reference to this Agreement and each other
Loan Document, unless otherwise specified herein or in such other Loan Document:

     (a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word
“will” shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document (including any Organization Document) shall be construed as referring
to such agreement, instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements or modifications
set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (iii) the words “herein,”
“hereof” and “hereunder,” and words of similar import when used in any Loan
Document, shall be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall
include all statutory and regulatory provisions consolidating, amending, replacing or interpreting
such law and any reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time, and (vi) the words
“asset” and “property” shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

     (b) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including;” the words “to” and “until”
each mean “to but excluding;” and the word “through” means “to and
including.”

     (c) Section headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.

     Section 1.3 Accounting Terms.

     (a) Generally. All accounting terms not specifically or completely defined herein
shall be construed in conformity with, and all financial data (including financial ratios and other
financial calculations) required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the Audited Financial Statements, except as
otherwise specifically prescribed herein.

24

 

     (b) Changes in GAAP. If at any time any change in GAAP would affect the computation
of any financial ratio or requirement set forth in any Loan Document, and either the Company or the
Required Lenders shall so request, the Administrative Agent, the Lenders and the Company shall
negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof
in light of such change in GAAP (subject to the approval of the Required Lenders); provided
that, until so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Company shall provide to the
Administrative Agent and the Lenders financial statements and other documents required under this
Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations
of such ratio or requirement made before and after giving effect to such change in GAAP.

     (c) Consolidation of Variable Interest Entities. All references herein to
consolidated financial statements of the Company and its Subsidiaries or to the determination of
any amount for the Company and its Subsidiaries on a consolidated basis or any similar reference
shall, in each case, be deemed to include each variable interest entity that the Company is
required to consolidate pursuant to FASB Interpretation No. 46 – Consolidation of Variable Interest
Entities: an interpretation of ARB No. 51 (January 2003) as if such variable interest entity were a
Subsidiary as defined herein.

     Section 1.4 Exchange Rates; Currency Equivalents.

     (a) The Administrative Agent or the L/C Issuer, as applicable, shall determine the Spot Rates
as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Credit
Extensions and Outstanding Amounts denominated in Alternative Currencies. Such Spot Rates shall
become effective as of such Revaluation Date and shall be the Spot Rates employed in converting any
amounts between the applicable currencies until the next Revaluation Date to occur. Except for
purposes of financial statements delivered by Loan Parties hereunder or calculating financial
covenants hereunder or except as otherwise provided herein, the applicable amount of any currency
(other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as
so determined by the Administrative Agent or the L/C Issuer, as applicable.

     (b) Wherever in this Agreement in connection with a Committed Borrowing, conversion,
continuation or prepayment of a Eurocurrency Rate Loan or the issuance, amendment or extension of a
Letter of Credit, an amount, such as a required minimum or multiple amount, is expressed in
Dollars, but such Committed Borrowing, Eurocurrency Rate Loan or Letter of Credit is denominated in
an Alternative Currency, such amount shall be the relevant Alternative Currency Equivalent of such
Dollar amount (rounded to the nearest unit of such Alternative Currency, with 0.5 of a unit being
rounded upward), as determined by the Administrative Agent or the L/C Issuer, as the case may be.

     Section 1.5 Additional Alternative Currencies.

     (a) The Company may from time to time request that Eurocurrency Rate Loans be made and/or
Letters of Credit be issued in a currency other than those specifically listed in the definition of
“Alternative Currency”; provided that such requested currency is a lawful currency

25

 

(other than Dollars) that is readily available and freely transferable and convertible into
Dollars. In the case of any such request with respect to the making of Alternative Currency Rate
Loans, such request shall be subject to the approval of all Lenders other than the Alternative
Currency Non-Qualified Lenders; and in the case of any such request with respect to the issuance of
Letters of Credit, such request shall be subject to the approval of the Administrative Agent and
the L/C Issuer.

     (b) Any such request shall be made to the Administrative Agent not later than 11:00 a.m.,
twenty (20) Business Days prior to the date of the desired Credit Extension (or such other time or
date as may be agreed by the Administrative Agent and, in the case of any such request pertaining
to Letters of Credit, the L/C Issuer, in its or their sole discretion). In the case of any such
request pertaining to Alternative Currency Rate Loans, the Administrative Agent shall promptly
notify each Lender thereof; and in the case of any such request pertaining to Letters of Credit,
the Administrative Agent shall promptly notify the L/C Issuer thereof. The Lenders other than the
Alternative Currency Non-Qualified Lenders (in the case of any such request pertaining to
Eurocurrency Rate Loans) or the L/C Issuer (in the case of a request pertaining to Letters of
Credit) shall notify the Administrative Agent, not later than 11:00 a.m., ten (10) Business Days
after receipt of such request whether they consent, in their sole discretion, to the making of
Alternative Currency Rate Loans or the issuance of Letters of Credit, as the case may be, in such
requested currency.

     (c) Any failure by a Lender or the L/C Issuer, as the case may be, to respond to such request
within the time period specified in the preceding sentence shall be deemed to be a refusal by such
Lender or the L/C Issuer, as the case may be, to permit Eurocurrency Rate Loans to be made or
Letters of Credit to be issued in such requested currency. If the Lenders other than the
Alternative Currency Non-Qualified Lenders consent to making Eurocurrency Rate Loans in such
requested currency, the Administrative Agent shall so notify the Company and such currency shall
thereupon be deemed for all purposes to be an Alternative Currency hereunder for purposes of any
Committed Borrowings of Alternative Currency Rate Loans; and if the Administrative Agent and the
L/C Issuer consent to the issuance of Letters of Credit in such requested currency, the
Administrative Agent shall so notify the Company and such currency shall thereupon be deemed for
all purposes to be an Alternative Currency hereunder for purposes of any Letter of Credit
issuances. If the Administrative Agent shall fail to obtain consent to any request for an
additional currency under this Section 1.5, the Administrative Agent shall promptly so
notify the Company. Any specified currency of an Existing Letter of Credit that is neither Dollars
nor one of the Alternative Currencies specifically listed in the definition of “Alternative
Currency” shall be deemed an Alternative Currency with respect to such Existing Letter of Credit
only.

     Section 1.6 Change of Currency.

     (a) Each obligation of the Borrowers to make a payment denominated in the national currency
unit of any member state of the European Union that adopts the Euro as its lawful currency after
the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with
the EMU Legislation). If, in relation to the currency of any such member state, the basis of
accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent
with any convention or practice in the London interbank market for the basis of

26

 

accrual of interest in respect of the Euro, such expressed basis shall be replaced by such
convention or practice with effect from the date on which such member state adopts the Euro as its
lawful currency; provided that if any Committed Borrowing in the currency of such member
state is outstanding immediately prior to such date, such replacement shall take effect, with
respect to such Committed Borrowing, at the end of the then current Interest Period.

     (b) Each provision of this Agreement shall be subject to such reasonable changes of
construction as the Administrative Agent may from time to time specify to be appropriate to reflect
the adoption of the Euro by any member state of the European Union and any relevant market
conventions or practices relating to the Euro.

     (c) Each provision of this Agreement also shall be subject to such reasonable changes of
construction as the Administrative Agent may from time to time specify to be appropriate to reflect
a change in currency of any other country and any relevant market conventions or practices relating
to the change in currency.

     Section 1.7 Times of Day. Unless otherwise specified, all references herein to times of day
shall be references to Eastern time (daylight or standard, as applicable).

     Section 1.8 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a
Letter of Credit at any time shall be deemed to be the Dollar Equivalent of the stated amount of
such Letter of Credit in effect at such time; provided, however, that with respect
to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto,
provides for one or more automatic increases in the stated amount thereof, the amount of such
Letter of Credit shall be deemed to be the Dollar Equivalent of the maximum stated amount of such
Letter of Credit after giving effect to all such increases, whether or not such maximum stated
amount is in effect at such time.

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

     Section 2.1 Committed Loans.

     (a) Subject to the terms and conditions set forth herein, each Lender (except as hereinafter
provided regarding Alternative Currency Loans) severally agrees to make loans (each such loan, a
“Committed Loan”) to the Borrowers in Dollars or in one or more Alternative Currencies from
time to time, on any Business Day during the Availability Period, in an aggregate amount not to
exceed at any time outstanding the amount of such Lender’s Commitment; provided,
however, that after giving effect to any Committed Borrowing, (i) the Total Outstandings
shall not exceed the Aggregate Commitments, (ii) the aggregate Outstanding Amount of the Committed
Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of
all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of
all Swing Line Loans shall not exceed such Lender’s Commitment, and (iii) the aggregate Outstanding
Amount of all Committed Loans denominated in Alternative Currencies shall not exceed the
Alternative Currency Sublimit. Within the limits of each Lender’s Commitment, and subject to the
other terms and conditions hereof, the Borrowers may borrow under this Section 2.1, prepay
under Section 2.5, and reborrow under this Section 2.1.

27

 

Committed Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

     (b)   (i) Upon a request for an Alternative Currency Loan, the Fronting Lender agrees subject to
the limitations set forth herein, to fund the Fronting Lender’s Applicable Percentage of such
Alternative Currency Loan in the requested currency with respect to such Committed Borrowing (each
a “Fronting Loan”), notwithstanding the fact that such Fronting Loan when aggregated with
the Fronting Lender’s Applicable Percentage of other Committed Loans may exceed the amount of such
Fronting Lender’s Commitment. The Fronting Lender at any time in its sole and absolute discretion
may request that each Alternative Currency Non-Qualified Lender, and each Alternative Currency
Non-Qualified Lender hereby irrevocably and unconditionally agrees to, purchase from such Fronting
Lender a risk participation in such Alternative Currency Non-Qualified Lender’s Applicable
Percentage of such Fronting Loan in the Dollar Equivalent of such Fronting Loan. Such request
shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for
purposes hereof) and in accordance with the requirements of Section 2.2, without regard to the
minimum and multiples specified therein for the principal amount of Eurodollar Rate Loans, but
subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in
Section 4.2.

          (ii) Each Alternative Currency Non-Qualified Lender shall make an amount equal to its
Applicable Percentage of the amount specified in such Committed Loan Notice available to the
Administrative Agent in Same Day Funds for the account of the Fronting Lender at the Administrative
Agent’s Office for Dollar-denominated payments not later than 1:00 p.m. on the day specified in
such Committed Loan Notice. The Administrative Agent shall remit the funds so received to the
Fronting Lender. The purchase of such risk participation in each Alternative Currency Loan by such
Alternative Currency Non-Qualified Lender shall satisfy such Alternative Currency Non-Qualified
Lender funding requirements under this Section 2.1(b).

          (iii) If any Alternative Currency Non-Qualified Lender fails to make available to the
Administrative Agent for the account of the Fronting Lender any amount required to be paid by such
Alternative Currency Non-Qualified Lender pursuant to the foregoing provisions of this Section
2.1(b) by the time specified in Section 2.2, the Fronting Lender shall be entitled to
recover from such Alternative Currency Non-Qualified Lender (acting through the Administrative
Agent), on demand, such amount with interest thereon for the period from the date such payment is
required to the date on which such payment is immediately available to such Fronting Lender at a
rate per annum equal to the applicable Overnight Rate from time to time in effect. A certificate
of the Fronting Lender submitted to any Alternative Currency Non-Qualified Lender (through the
Administrative Agent) with respect to any amounts owing under this clause (c) shall be conclusive
absent manifest error.

          (iv) Each Alternative Currency Non-Qualified Lender’s obligation to purchase and fund
participations in Alternative Currency Loans pursuant to this Section 2.1(b) shall be
absolute and unconditional and shall not be affected by any circumstance, including (A) any
set-off, counterclaim, recoupment, defense or other right which such Alternative Currency
Non-Qualified Lender may have against the Fronting Lender, the Company or any other Person for any
reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence,
event or condition, whether or not similar to any of the foregoing. No such funding

28

 

 of risk participations shall relieve or otherwise impair the obligation of the Company to
repay Alternative Currency Loans, together with interest as provided herein.

          (v) Repayment of Participations.

                    (A) At any time after any Alternative Currency Non-Qualified Lender has purchased and funded a
risk participation in a Alternative Currency Loan, if the Administrative Agent receives any payment
on account of such Alternative Currency Loan, the Administrative Agent will distribute to such
Alternative Currency Non-Qualified Lender its Applicable Percentage of such payment (appropriately
adjusted, in the case of interest payments, to reflect the period of time during which such
Alternative Currency Non-Qualified Lender’s risk participation was funded) in the Dollar Equivalent
of the same funds as those received by the Administrative Agent.

                    (B) If any payment received by the Administrative Agent in respect of principal or interest on
any Alternative Currency Loan is required to be returned by the Administrative Agent under any of
the circumstances described in Section 11.5 (including pursuant to any settlement entered
into by the Administrative Agent in its discretion), each Alternative Currency Non-Qualified Lender
shall pay to the Administrative Agent its Applicable Percentage thereof on demand of the
Administrative Agent, plus interest thereon from the date of such demand to the date such amount is
returned, at a rate per annum equal to the applicable Overnight Rate. The Administrative Agent
will make such demand upon the request of the Fronting Lender. The obligations of the Alternative
Currency Non-Qualified Lenders under this clause shall survive the payment in full of the
Obligations and the termination of this Agreement.

                    (C) Interest for Account of Fronting Lender. The Administrative Agent shall be
responsible for invoicing the Company for interest on the Alternative Currency Loans. Until each
Alternative Currency Non-Qualified Lender funds its risk participation pursuant to this Section
2.1 to refinance such Alternative Currency Non-Qualified Lender’s Applicable Percentage of any
Alternative Currency Loan, interest in respect of such Applicable Percentage shall be solely for
the account of the Fronting Lender.

     (c) Payments to Administrative Agent. The Company shall make all payments of
principal and interest in respect of the Alternative Currency Loans to the Administrative Agent.

     Section 2.2 Borrowings, Conversions and Continuations of Committed Loans.

     (a) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other,
and each continuation of Eurocurrency Rate Loans shall be made upon the Company’s irrevocable
notice to the Administrative Agent, which may be given by telephone. Each such notice must be
received by the Administrative Agent not later than 11:00 a.m. (i) three (3) Business Days prior to
the requested date of any Borrowing of, conversion to or continuation of Eurocurrency Rate Loans
denominated in Dollars or of any conversion of Eurocurrency Rate Loans denominated in Dollars to
Base Rate Committed Loans, (ii) four (4) Business Days (or five (5) Business Days in the case of a
Special Notice Currency) prior to the requested date of any Borrowing or continuation of
Eurocurrency Rate Loans denominated in Alternative Currencies, and (iii) on the requested date of
any Borrowing of Base Rate Committed Loans;

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provided, however, that if the Company wishes to request Eurocurrency Rate
Loans having an Interest Period other than seven (7) days or one (1), two (2), three (3) or six (6)
months in duration as provided in the definition of “Interest Period”, the applicable notice must
be received by the Administrative Agent not later than 11:00 a.m. (i) four (4) Business Days prior
to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans
denominated in Dollars, or (ii) five (5) Business Days (or six (6) Business days in the case of a
Special Notice Currency) prior to the requested date of such Borrowing, conversion or continuation
of Eurocurrency Rate Loans denominated in Alternative Currencies, whereupon the Administrative
Agent shall give prompt notice to the Lenders of such request and determine whether the requested
Interest Period is acceptable to the Required Lenders. Not later than 11:00 a.m., (i) three (3)
Business Days before the requested date of such Borrowing, conversion or continuation of
Eurocurrency Rate Loans denominated in Dollars, or (ii) four (4) Business Days (or five (5)
Business days in the case of a Special Notice Currency) prior to the requested date of such
Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Alternative
Currencies, the Administrative Agent shall notify the Company (which notice may be by telephone)
whether or not the requested Interest Period has been consented to by the Required Lenders. Each
telephonic notice by the Company pursuant to this Section 2.2(a) must be confirmed promptly
by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed
and signed by a Responsible Officer of the Company. Each Borrowing of, conversion to or
continuation of Eurocurrency Rate Loans shall be in a principal amount of $1,000,000 or a whole
multiple of $500,000 in excess thereof. Except as provided in Section 2.3(c) and
Section 2.4(c), each Committed Borrowing of or conversion to Base Rate Committed Loans
shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each
Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Company is
requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a
continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or
continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of
Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be
borrowed or to which existing Committed Loans are to be converted, (v) if applicable, the duration
of the Interest Period with respect thereto, (vi) the currency of the Committed Loans to be
borrowed, and (vii) if applicable, the Designated Borrower. If the Company fails to specify a
currency in a Committed Loan Notice requesting a Borrowing, then the Committed Loans so requested
shall be made in Dollars. If the Company fails to specify a Type of Committed Loan in a Committed
Loan Notice or if the Company fails to give a timely notice requesting a conversion or
continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate
Loans; provided, however, that in the case of a failure to timely request a
continuation of Committed Loans denominated in an Alternative Currency, such Loans shall be
continued as Eurocurrency Rate Loans in their original currency with an Interest Period of one
month. Any automatic conversion to Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If the
Company requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate
Loans in any
such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have
specified an Interest Period of one month. No Committed Loan may be converted into or continued as
a Committed Loan denominated in a different currency, but instead must be prepaid in the original
currency of such

30

 

 Committed Loan and reborrowed in the other currency. A seven-day Interest Period may not be
selected for any Alternative Currency Loan.

     (b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly
notify each Lender of the amount (and currency) of its Applicable Percentage of the applicable
Committed Loans, and if no timely notice of a conversion or continuation is provided by the
Company, the Administrative Agent shall notify each Lender of the details of any automatic
conversion to Base Rate Loans or continuation of Committed Loans denominated in a currency other
than Dollars, in each case as described in the preceding subsection. In the case of a Committed
Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative
Agent in Same Day Funds in the applicable currency at the Administrative Agent’s Office for the
applicable currency (i) not later than 1:00 p.m., in the case of any Committed Loan denominated in
Dollars, and (ii) not later than the Applicable Time specified by the Administrative Agent in the
case of any Committed Loan in an Alternative Currency, in each case on the Business Day specified
in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth
in Section 5.2 (and, if such Borrowing is the initial Credit Extension, Section
5.1), the Administrative Agent shall make all funds so received available to the Company or the
other applicable Borrower in like funds as received by the Administrative Agent either by (i)
crediting the account of such Borrower on the books of Bank of America with the amount of such
funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to
(and reasonably acceptable to) the Administrative Agent by the Company; provided,
however, that if, on the date the Committed Loan Notice with respect to such Borrowing
denominated in Dollars is given by the Company, there are L/C Borrowings outstanding, then the
proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C
Borrowings, and, second, shall be made available to the applicable Borrower as provided
above.

     (c) Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or
converted only on the last day of an Interest Period for such Eurocurrency Rate Loan but any such
Eurocurrency Rate Loan may be prepaid at any time, subject to any applicable breakage charges.
During the existence of a Default, no Loans may be requested as, converted to or continued as
Eurocurrency Rate Loans (whether in Dollars or any Alternative Currency) without the consent of the
Required Lenders, and the Required Lenders may demand that any or all of the then outstanding
Eurocurrency Rate Loans denominated in an Alternative Currency be prepaid, or redenominated into
Dollars in the amount of the Dollar Equivalent thereof, on the last day of the then current
Interest Period with respect thereto.

     (d) The Administrative Agent shall promptly notify the Company and the Lenders of the interest
rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such
interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall
notify the Company and the Lenders of any change in Bank of America’s prime rate used in
determining the Base Rate promptly following the public announcement of such change.

     (e) After giving effect to all Committed Borrowings, all conversions of Committed Loans from
one Type to the other, and all continuations of Committed Loans as the same Type, there shall not
be more than seven (7) Interest Periods in effect with respect to Committed Loans.

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     Section 2.3 Letters of Credit.

     (a) The Letter of Credit Commitment.

          (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in
reliance upon the agreements of the Lenders set forth in this Section 2.3, (1) from time to
time on any Business Day during the period from the Closing Date until the Letter of Credit
Expiration Date, to issue Letters of Credit denominated in Dollars or in one or more Alternative
Currencies in any amount greater than or equal to $10,000 for the account of the Company, and to
amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below,
and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to
participate in Letters of Credit issued for the account of the Company and any drawings thereunder;
provided that after giving effect to any L/C Credit Extension with respect to any Letter of
Credit, (x) the Total Outstandings shall not exceed the Aggregate Commitments, (y) the aggregate
Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s
Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of
Credit Sublimit; and provided further that the Outstanding Amount of the L/C
Obligations in an Alternative Currency plus the outstanding Alternative Currency Loans shall not
exceed the Alternative Currency Sublimit. Each request by the Company for the issuance or
amendment of a Letter of Credit shall be deemed to be a representation by the Company that the L/C
Credit Extension so requested complies with the conditions set forth in the provisos to the
preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof,
the Company’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the
Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit
that have expired or that have been drawn upon and reimbursed. All Existing Letters of Credit
shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be
subject to and governed by the terms and conditions hereof.

          (ii) If the expiry date of any requested Letter of Credit would occur after the Letter of
Credit Expiration Date, the Company shall not later than thirty (30) days prior to the Maturity
Date then in effect Cash Collateralize the then Outstanding Amount of all L/C Obligations.

          (iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

               (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its
terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law
applicable to the L/C Issuer or any request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request
that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon

32

 

the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the L/C Issuer in good faith deems material to it;

                         (B) the issuance of such Letter of Credit would violate one or more policies of the L/C
Issuer;

                         (C) except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of
Credit is to be denominated in a currency other than Dollars or an Alternative Currency;

                         (D) the L/C Issuer does not as of the issuance date of such requested Letter of Credit issue
Letters of Credit in the requested currency;

                         (E) such Letter of Credit contains any provisions for automatic reinstatement of the stated
amount after any drawing thereunder; or

                         (F) a default of any Lender’s obligations to fund under Section 2.3(c) exists or any
Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into
satisfactory arrangements with the Company, such Lender or the other Lenders to eliminate the L/C
Issuer’s risk with respect to such Lender.

          (iv) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C
Issuer would have no obligation at such time to issue such Letter of Credit in its amended form
under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the
proposed amendment to such Letter of Credit.

          (v) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit
issued by it and the documents associated therewith, and the L/C Issuer shall have all of the
benefits and immunities (A) provided to the Administrative Agent in Article X with respect
to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit
issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of
Credit as fully as if the term “Administrative Agent” as used in Article X included the L/C
Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect
to the L/C Issuer.

     (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of
Credit.

          (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of
the Company delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a
Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the
Company. Such Letter of Credit Application must be received by the L/C Issuer and the
Administrative Agent not later than 11:00 a.m. at least two (2) Business Days (or such later date
and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their
sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In
the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit
Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed
issuance date of the requested Letter of Credit (which shall be a

33

 

Business Day); (B) the amount and currency thereof; (C) the expiry date thereof; (D) the name
and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in
case of any drawing thereunder; (F) the full text of any certificate to be presented by such
beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may
require. In the case of a request for an amendment of any outstanding Letter of Credit, such
Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A)
the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a
Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C
Issuer may require. Additionally, the Company shall furnish to the L/C Issuer and the
Administrative Agent such other documents and information pertaining to such requested Letter of
Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the
Administrative Agent may require.

          (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm
with the Administrative Agent (by telephone or in writing) that the Administrative Agent has
received a copy of such Letter of Credit Application from the Company and, if not, the L/C Issuer
will provide the Administrative Agent with a copy thereof. Unless the L/C Issuer has received
written notice from any Lender, the Administrative Agent or any Loan Party, at least one (1)
Business Day prior to the requested date of issuance or amendment of the applicable Letter of
Credit, that one or more applicable conditions contained in Article IV shall not then be
satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested
date, issue a Letter of Credit for the account of the Company or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary
business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a
risk participation in such Letter of Credit in an amount equal to the product of such Lender’s
Applicable Percentage times the amount of such Letter of Credit.

          (iii) If the Company so requests in any applicable Letter of Credit Application, the L/C
Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has
automatic extension provisions (each, an “Auto-Extension Letter of Credit”);
provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to
prevent any such extension at least once in each twelve-month period (commencing with the date of
issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than
a day (the “Non-Extension Notice Date”) in each such twelve (12) month period to be agreed
upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the
Company shall not be required to make a specific request to the L/C Issuer for any such extension.
Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have
authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at
any time to an expiry date not later than the Letter of Credit Expiration Date; provided,
however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has
determined that it would not be permitted, or would have no obligation, at such time to issue such
Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the
provisions of clause (ii) or (iii) of Section 2.3(a) or otherwise), or (B) it has received
notice (which may be by telephone or in writing) on or before the day that is five (5) Business
Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required
Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender
or the Company that one or

34

 

more of the applicable conditions specified in Section 5.2 is not then satisfied, and
in each such case directing the L/C Issuer not to permit such extension.

          (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of
Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will
also deliver to the Company and the Administrative Agent a true and complete copy of such Letter of
Credit or amendment.

     (c) Drawings and Reimbursements; Funding of Participations.

          (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under
such Letter of Credit, the L/C Issuer shall notify the Company and the Administrative Agent
thereof. In the case of a Letter of Credit denominated in an Alternative Currency, the Company
shall reimburse the L/C Issuer in such Alternative Currency, unless (A) the L/C Issuer (at its
option) shall have specified in such notice that it will require reimbursement in Dollars, or (B)
in the absence of any such requirement for reimbursement in Dollars, the Company shall have
notified the L/C Issuer promptly following receipt of the notice of drawing that the Company will
reimburse the L/C Issuer in Dollars. In the case of any such reimbursement in Dollars of a drawing
under a Letter of Credit denominated in an Alternative Currency, the L/C Issuer shall notify the
Company of the Dollar Equivalent of the amount of the drawing promptly following the determination
thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of
Credit to be reimbursed in Dollars, or the Applicable Time on the date of any payment by the L/C
Issuer under a Letter of Credit to be reimbursed in an Alternative Currency (each such date, an
“Honor Date”), the Company shall reimburse the L/C Issuer through the Administrative Agent
in an amount equal to the amount of such drawing and in the applicable currency. If the Company
fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify
each Lender of the Honor Date, the amount of the unreimbursed drawing (expressed in Dollars in the
amount of the Dollar Equivalent thereof in the case of a Letter of Credit denominated in an
Alternative Currency) (the “Unreimbursed Amount”), and the amount of such Lender’s
Applicable Percentage thereof. In such event, the Company shall be deemed to have requested a
Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the
Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.2
for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of
the Aggregate Commitments and the conditions set forth in Section 5.2 (other than the
delivery of a Committed Loan Notice). Any notice given by the L/C Issuer or the Administrative
Agent pursuant to this Section 2.3(c)(i) may be given by telephone if immediately confirmed
in writing; provided that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.

          (ii) Each Lender shall upon any notice pursuant to Section 2.3(c)(i) make funds
available to the Administrative Agent for the account of the L/C Issuer, in Dollars, at the
Administrative Agent’s Office for Dollar-denominated payments in an amount equal to its Applicable
Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in
such notice by the Administrative Agent, whereupon, subject to the provisions of Section
2.3(c)(iii), each Lender that so makes funds available shall be deemed to have made a

35

 

Base Rate Committed Loan to the Company in such amount. The Administrative Agent shall remit
the funds so received to the L/C Issuer in Dollars.

          (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Committed
Borrowing of Base Rate Loans because the conditions set forth in Section 5.2 cannot be
satisfied or for any other reason, the Company shall be deemed to have incurred from the L/C Issuer
an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C
Borrowing shall be due and payable on demand (together with interest) and shall bear interest at
the Default Rate. In such event, each Lender’s payment to the Administrative Agent for the account
of the L/C Issuer pursuant to Section 2.3(c)(ii) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in
satisfaction of its participation obligation under this Section 2.3.

          (iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section
2.3(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in
respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of
the L/C Issuer.

          (v) Each Lender’s obligation to make Committed Loans or L/C Advances to reimburse the L/C
Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.3(c),
shall be absolute and unconditional and shall not be affected by any circumstance, including (A)
any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the
L/C Issuer, the Company, any Subsidiary or any other Person for any reason whatsoever; (B) the
occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or
not similar to any of the foregoing; provided, however, that each Lender’s
obligation to make Committed Loans pursuant to this Section 2.3(c) is subject to the
conditions set forth in Section 5.2 (other than delivery by the Company of a Committed Loan
Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the
Company to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any
Letter of Credit, together with interest as provided herein.

          (vi) If any Lender fails to make available to the Administrative Agent for the account of the
L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of
this Section 2.3(c) by the time specified in Section 2.3(c)(ii), the L/C Issuer
shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand,
such amount with interest thereon for the period from the date such payment is required to the date
on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the
applicable Overnight Rate from time to time in effect. A certificate of the L/C Issuer submitted
to any Lender (through the Administrative Agent) with respect to any amounts owing under this
clause (vi) shall be conclusive absent manifest error.

     (d) Repayment of Participations.

          (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has
received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with
Section 2.3(c), if the Administrative Agent receives for the account of the L/C Issuer any
payment in respect of the related Unreimbursed Amount or interest thereon

36

 

(whether directly from the Company or otherwise, including proceeds of Cash Collateral applied
thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its
Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Lender’s L/C Advance was outstanding) in Dollars and in the
same funds as those received by the Administrative Agent.

          (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer
pursuant to Section 2.3(c)(i) is required to be returned under any of the circumstances
described in Section 11.6 (including pursuant to any settlement entered into by the L/C
Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the
L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest
thereon from the date of such demand to the date such amount is returned by such Lender, at a rate
per annum equal to the applicable Overnight Rate from time to time in effect. The obligations of
the Lenders under this clause shall survive the payment in full of the Obligations and the
termination of this Agreement.

     (e) Obligations Absolute. The obligation of the Company to reimburse the L/C Issuer
for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following:

          (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any
other Loan Document;

          (ii) the existence of any claim, counterclaim, set-off, defense or other right that the
Company or any Subsidiary may have at any time against any beneficiary or any transferee of such
Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be
acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;

          (iii) any draft, demand, certificate or other document presented under such Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under such Letter of Credit;

          (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft
or certificate that does not strictly comply with the terms of such Letter of Credit; or any
payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee
in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or
other representative of or successor to any beneficiary or any transferee of such Letter of Credit,
including any arising in connection with any proceeding under any Debtor Relief Law;

37

 

          (v) any adverse change in the relevant exchange rates or in the availability of the relevant
Alternative Currency to the Company or any Subsidiary or in the relevant currency markets
generally; or

          (vi) any other circumstance or happening whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might otherwise constitute a defense available to,
or a discharge of, the Company or any Subsidiary.

     The Company shall promptly examine a copy of each Letter of Credit and each amendment thereto
that is delivered to it and, in the event of any claim of noncompliance with the Company’s
instructions or other irregularity, the Company will within five (5) business days of receipt
thereof notify the L/C Issuer. The Company shall be conclusively deemed to have waived any such
claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

     (f) Role of L/C Issuer. Each Lender and the Company agree that, in paying any drawing
under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document
(other than any sight draft, certificates and documents expressly required by the Letter of Credit)
or to ascertain or inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the L/C Issuer, the Administrative
Agent, any of their respective Related Parties nor any correspondent, participant or assignee of
the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable;
(ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii)
the due execution, effectiveness, validity or enforceability of any document or instrument related
to any Letter of Credit or Issuer Document. The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not, preclude
the Company’s pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent,
any of their respective Related Parties nor any correspondent, participant or assignee of the L/C
Issuer shall be liable or responsible for any of the matters described in clauses (i) through (vi)
of Section 2.3(e); provided, however, that anything in such clauses to the
contrary notwithstanding, the Company may have a claim against the L/C Issuer, and the L/C Issuer
may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which the Company proves were caused by
the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear
on their face to be in order, without responsibility for further investigation, regardless of any
notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity
or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.

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     (g) Cash Collateral.

          (i) Upon the request of the Administrative Agent, (A) if the L/C Issuer has honored any full
or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C
Borrowing, or (B) if, as of thirty (30) days prior to the Maturity Date, any L/C Obligation for any
reason remains outstanding, the Company shall, in each case, on or before the date which is thirty
(30) days prior to the Maturity Date, Cash Collateralize the then Outstanding Amount of all L/C
Obligations.

          (ii) In addition, if the Administrative Agent notifies the Company at any time that the
Outstanding Amount of all L/C Obligations at such time exceeds 105% of the Letter of Credit
Sublimit then in effect, then, within five (5) Business Days after receipt of such notice, the
Company shall Cash Collateralize the L/C Obligations in an amount equal to the amount by which the
Outstanding Amount of all L/C Obligations exceeds the Letter of Credit Sublimit.

          (iii) The Administrative Agent may, at any time and from time to time after the initial
deposit of Cash Collateral, request that additional Cash Collateral be provided in order to protect
against the results of exchange rate fluctuations in amounts based upon the then-current market
conditions; provided that any excess Cash Collateral will be returned if exchange rates thereafter
become favorable to the Company or if outstanding L/C Obligations are reduced below the Letter of
Credit Sublimit.

          (iv) Section 2.5 and Section 9.2(c) sets forth certain additional requirements
to deliver Cash Collateral hereunder. For purposes of this Section 2.3, and Section
2.5 and Section 9.2(c), “Cash Collateralize” means to pledge and deposit with
or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in
form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are
hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The
Company hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the
Lenders, a security interest in all such cash, deposit accounts and all balances therein and all
proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing
deposit accounts at Bank of America.

     (h) Applicability of ISP. Unless otherwise expressly agreed by the L/C Issuer and the
Company when a Letter of Credit is issued (including any such agreement applicable to an Existing
Letter of Credit), the rules of the ISP shall apply to each standby Letter of Credit.

     (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the
account of each Lender, in accordance with its Applicable Percentage, a Letter of Credit fee for
each standby Letter of Credit equal to 200 basis points per annum if the Leverage Ratio is greater
than 3.75 to 1.0 as of the most recent quarterly financial statement and 150 basis points per annum
if the Leverage Ratio is less than or equal to 3.75 to 1.0 times the daily maximum amount
available to be drawn under such Letter of Credit (whether or not such maximum amount is then in
effect under such Letter of Credit) (collectively, “Letter of Credit Fees”). Such Letter
of Credit Fees shall be computed on a quarterly basis in arrears. Such letter of credit fees shall
be due and payable on the first Business Day after the end of each March, June, September and

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December prorated for the number of days in such preceding quarter such Letter of Credit was
outstanding, commencing with the first such date to occur after the issuance of such Letter of
Credit and on the Letter of Credit Expiration Date and thereafter on demand. If there is any
change in the Applicable Rate during any quarter, the daily maximum amount of each standby Letter
of Credit shall be computed and multiplied by the Applicable Rate separately for each period during
such quarter that such Applicable Rate was in effect. The initial Letter of Credit Fee in effect
from the Closing Date through the date a Compliance Certification is required to be delivered
pursuant to Section 7.2(a) for the fiscal quarter endings December 31, 2005 shall be 150 basis
points per annum.

     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The
Company shall pay directly to the L/C Issuer for its own account, in Dollars, a fronting fee in the
amount of $1,500 per annum with respect to each Letter of Credit payable on the date of issuance of
such Letter of Credit and on each anniversary thereafter. In addition, the Company shall pay
directly to the L/C Issuer for its own account, in Dollars, the customary issuance, presentation,
amendment and other processing fees, and other standard costs and charges, of the L/C Issuer
relating to letters of credit as from time to time in effect. Such customary fees and standard
costs and charges are due and payable on demand and are nonrefundable.

     (k) Conflict with Issuer Documents. In the event of any conflict between the terms
hereof and the terms of any Issuer Document, the terms hereof shall control.

     Section 2.4 Swing Line Loans.

     (a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing
Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this
Section 2.4, to make loans in Dollars (each such loan, a “Swing Line Loan”) to the
Company from time to time on any Business Day during the Availability Period in an aggregate amount
not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the
fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding
Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed
the amount of such Lender’s Commitment; provided, however, that after giving effect
to any Swing Line Loan, (i) the Total Outstandings shall not exceed the Aggregate Commitments, and
(ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such
Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such
Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed
such Lender’s Commitment, and provided, further, that (i) the Company shall not use
the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the
foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow
under this Section 2.4, prepay under Section 2.5, and reborrow under this
Section 2.4. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making
of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally
agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an
amount equal to the product of such Lender’s Applicable Percentage times the amount of such
Swing Line Loan.

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     (b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Company’s
irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by
telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent
not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be
borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall
be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing
Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately
completed and signed by a Responsible Officer of the Company. Promptly after receipt by the Swing
Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the
Administrative Agent (by telephone or in writing) that the Administrative Agent has also received
such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent
(by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received
notice (by telephone or in writing) from the Administrative Agent (including at the request of any
Lender) prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing
Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the
proviso to the first sentence of Section 2.4(a), or (B) that one or more of the applicable
conditions specified in Article IV is not then satisfied, then, subject to the terms and
conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date
specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the
Company at its office by crediting the account of the Company on the books of the Swing Line Lender
in Same Day Funds.

     (c) Refinancing of Swing Line Loans.

          (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on
behalf of the Company (which hereby irrevocably authorizes the Swing Line Lender to so request on
its behalf), that each Lender make a Base Rate Committed Loan in an amount equal to such Lender’s
Applicable Percentage of the amount of Swing Line Loans then outstanding. Such request shall be
made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes
hereof) and in accordance with the requirements of Section 2.2, without regard to the
minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to
the unutilized portion of the Aggregate Commitments and the conditions set forth in Section
4.2. The Swing Line Lender shall furnish the Company with a copy of the applicable Committed
Loan Notice promptly after delivering such notice to the Administrative Agent. Each Lender shall
make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan
Notice available to the Administrative Agent in Same Day Funds for the account of the Swing Line
Lender at the Administrative Agent’s Office for Dollar-denominated payments not later than 1:00
p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section
2.4(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate
Committed Loan to the Company in such amount. The Administrative Agent shall remit the funds so
received to the Swing Line Lender.

          (ii) If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing
in accordance with Section 2.4(c)(i), the request for Base Rate Committed Loans submitted
by the Swing Line Lender as set forth herein shall be deemed to be a request by

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the Swing Line Lender that each of the Lenders fund its risk participation in the relevant
Swing Line Loan and each Lender’s payment to the Administrative Agent for the account of the Swing
Line Lender pursuant to Section 2.4(c)(i) shall be deemed payment in respect of such
participation.

          (iii) If any Lender fails to make available to the Administrative Agent for the account of the
Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.4(c) by the time specified in Section 2.4(c)(i), the
Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative
Agent), on demand, such amount with interest thereon for the period from the date such payment is
required to the date on which such payment is immediately available to the Swing Line Lender at a
rate per annum equal to the applicable Overnight Rate from time to time in effect. A certificate
of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to
any amounts owing under this clause (iii) shall be conclusive absent manifest error.

          (iv) Each Lender’s obligation to make Committed Loans or to purchase and fund risk
participations in Swing Line Loans pursuant to this Section 2.4(c) shall be absolute and
unconditional and shall not be affected by any circumstance, including (A) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line
Lender, the Company or any other Person for any reason whatsoever, (B) the occurrence or
continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar
to any of the foregoing; provided, however, that each Lender’s obligation to make
Committed Loans pursuant to this Section 2.4(c) is subject to the conditions set forth in
Section 4.2. No such funding of risk participations shall relieve or otherwise impair the
obligation of the Company to repay Swing Line Loans, together with interest as provided herein.

     (d) Repayment of Participations.

          (i) At any time after any Lender has purchased and funded a risk participation in a Swing Line
Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing
Line Lender will distribute to such Lender its Applicable Percentage of such payment (appropriately
adjusted, in the case of interest payments, to reflect the period of time during which such
Lender’s risk participation was funded) in the same funds as those received by the Swing Line
Lender.

          (ii) If any payment received by the Swing Line Lender in respect of principal or interest on
any Swing Line Loan is required to be returned by the Swing Line Lender under any of the
circumstances described in Section 11.5 (including pursuant to any settlement entered into
by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its
Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the
date of such demand to the date such amount is returned, at a rate per annum equal to the
applicable Overnight Rate. The Administrative Agent will make such demand upon the request of the
Swing Line Lender. The obligations of the Lenders under this clause shall survive the payment in
full of the Obligations and the termination of this Agreement.

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          (iii) Interest for Account of Swing Line Lender. The Swing Line Lender shall be
responsible for invoicing the Company for interest on the Swing Line Loans. Until each Lender
funds its Base Rate Committed Loan or risk participation pursuant to this Section 2.4 to
refinance such Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such
Applicable Percentage shall be solely for the account of the Swing Line Lender.

     (e) Payments Directly to Swing Line Lender. The Company shall make all payments of
principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

     Section 2.5 Prepayments.

     (a) Each Borrower may, upon notice from the Company to the Administrative Agent, at any time
or from time to time voluntarily prepay Committed Loans in whole or in part without premium or
penalty; provided that (i) such notice must be received by the Administrative Agent not
later than 11:00 a.m. (A) three (3) Business Days prior to any date of prepayment of Eurocurrency
Rate Loans denominated in Dollars, (B) four (4) Business Days (or five (5), in the case of
prepayment of Loans denominated in Special Notice Currencies) prior to any date of prepayment of
Eurocurrency Rate Loans denominated in Alternative Currencies, and (C) on the date of prepayment of
Base Rate Committed Loans; (ii) any prepayment of Eurocurrency Rate Loans denominated in Dollars
shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof;
(iii) any prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies shall be in a
minimum principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof except
that Eurocurrency Rate Loans may be paid down to zero or to a multiple of $500,000 if the dollar
amount thereof has varied due to exchange rate changes; and (iv) any prepayment of Base Rate
Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in
excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.
Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed
Loans to be prepaid and, if Eurocurrency Loans are to be prepaid, the Interest Period(s) of such
Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such
notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such
notice is given by the Company, the applicable Borrower shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified therein. Any
prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest on the amount
prepaid, together with any additional amounts required pursuant to Section 3.5. Each such
prepayment shall be applied to the Committed Loans of the Lenders in accordance with their
respective Applicable Percentages.

     (b) The Company may, upon notice to the Swing Line Lender (with a copy to the Administrative
Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part
without premium or penalty; provided that (i) such notice must be received by the Swing
Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment,
and (ii) any such prepayment shall be in a minimum principal amount of $100,000. Each such notice
shall specify the date and amount of such prepayment. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein.

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     (c) If the Administrative Agent notifies the Company at any time that the Total Outstandings
at such time exceed an amount equal to 105% of the Aggregate Commitments then in effect, then,
within two Business Days after receipt of such notice, the Borrowers shall prepay Loans and/or the
Company shall Cash Collateralize the L/C Obligations in an aggregate amount sufficient to reduce
such Outstanding Amount as of such date of payment to an amount not to exceed 100% of the Aggregate
Commitments then in effect; provided, however, that, subject to the provisions of
Section 2.3(g)(ii), the Company shall not be required to Cash Collateralize the L/C
Obligations pursuant to this Section 2.5(c) unless after the prepayment in full of the
Loans the Total Outstandings exceed the Aggregate Commitments then in effect. The Administrative
Agent may, at any time and from time to time after the initial deposit of such Cash Collateral,
request that additional Cash Collateral be provided in order to protect against the results of
further exchange rate fluctuations in the amounts based upon then-current market conditions;
provided that any excess Cash Collateral will be returned if exchange rates thereafter become
favorable to the Company, or if outstanding L/C Obligations are reduced below the Letter of Credit
Sublimit.

     (d) If the Administrative Agent notifies the Company at any time that the Outstanding Amount
of all Loans denominated in Alternative Currencies at such time exceeds an amount equal to 105% of
the Alternative Currency Sublimit then in effect, then, within five (5) Business Days after receipt
of such notice, the Borrowers shall prepay Loans in an aggregate amount sufficient to reduce such
Outstanding Amount as of such date of payment to an amount not to exceed 100% of the Alternative
Currency Sublimit then in effect.

     Section 2.6 Termination or Reduction of Commitments. The Company may, upon notice to the
Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce
the Aggregate Commitments; provided that (i) any such notice shall be received by the
Administrative Agent not later than 11:00 a.m. five (5) Business Days prior to the date of
termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of
$10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Company shall not
terminate or reduce the Aggregate Commitments if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings plus the Alternative Currency Reserve (if any) would
exceed the Aggregate Commitments, and (iv) if, after giving effect to any reduction of the
Aggregate Commitments, the Alternative Currency Sublimit, the Letter of Credit Sublimit or the
Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such Sublimit shall be
automatically reduced by the amount of such excess. The Administrative Agent will promptly notify
the Lenders of any such notice of termination or reduction of the Aggregate Commitments. The
amount of any such Aggregate Commitment reduction shall not be applied to the Alternative Currency
Sublimit or the Letter of Credit Sublimit unless otherwise specified by the Company. Any reduction
of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its
Applicable Percentage. All fees accrued until the effective date of any termination of the
Aggregate Commitments shall be paid on the effective date of such termination.

     Section 2.7 Repayment of Loans.

     (a) Each Borrower shall repay to the Lenders on the Maturity Date the aggregate principal
amount of Committed Loans made to such Borrower outstanding on such date.

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     (b) At the request of the Administrative Agent, the Company shall repay each Swing Line Loan
on the earlier to occur of (i) the date ten (10) Business Days after such Loan is made and (ii) the
Maturity Date.

     Section 2.8 Interest.

     (a) Subject to the provisions of subsection (b) below, (i) each Eurocurrency Rate Loan shall
bear interest on the outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the Eurocurrency Rate for such Interest Period plus the Applicable Rate
plus (in the case of a Eurocurrency Rate Loan of any Lender which is lent from a Lending
Office in the United Kingdom or a Participating Member State) the Mandatory Cost; (ii) each Base
Rate Committed Loan shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable
Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount
thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus
the Applicable Rate.

     (b)      (i) If any amount of principal of any Loan is not paid when due, whether at stated
maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.

          (ii) If any amount (other than principal of any Loan) payable by any Borrower under any Loan
Document is not paid when due, whether at stated maturity, by acceleration or otherwise, then upon
the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.

          (iii) Upon the request of the Required Lenders, while any Event of Default exists, the
Borrowers shall pay interest on the principal amount of all outstanding Obligations hereunder at a
fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.

          (iv) Accrued and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.

     (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein. Interest hereunder shall be
due and payable in accordance with the terms hereof before and after judgment, and before and after
the commencement of any proceeding under any Debtor Relief Law.

     (d) For the purposes of the Interest Act (Canada), (i) whenever a rate of interest or fee rate
hereunder is calculated on the basis of a year (the “deemed year”) that contains fewer days than
the actual number of days in the calendar year of calculation, such rate of interest or fee rate
shall be expressed as a yearly rate by multiplying such rate of interest or fee rate by the actual
number of days in the calendar year of calculation and dividing it by the number of days in the
deemed year, (ii) the principle of deemed reinvestment of interest shall not apply to any interest

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calculation hereunder and (iii) the rates of interest stipulated herein are intended to be
nominal rates and not effective rates or yields.

     Section 2.9 Fees. In addition to certain fees described in subsections (i) and (j) of
Section 2.3:

     (a) Unused Fee. The Company shall pay to the Administrative Agent for the account of
each Lender in accordance with its Applicable Percentage, a fee (the “Unused Fee”) in Dollars equal
to twenty-five (25) basis points per annum times the average actual daily amount by which
the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of Committed Loans and (ii)
the Outstanding Amount of L/C Obligations. The Unused Fee shall accrue at all times during the
Availability Period, including at any time during which one or more of the conditions in
Article IV is not met, and shall be due and payable quarterly in arrears on the last
Business Day of each March, June, September and December, commencing with the first such date to
occur after the Closing Date, and on the Maturity Date. Swingline Borrowings are not taken into
account as usage in calculating the Unused Fee.

     (b) Other Fees.

          (i) The Company shall pay to the Arranger and the Administrative Agent for their own
respective accounts, in Dollars, fees in the amounts and at the times specified in the Fee Letter.
Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

          (ii) The Company shall pay to the Lenders, in Dollars, such fees as shall have been separately
agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully
earned when paid and shall not be refundable for any reason whatsoever.

     Section 2.10 Computation of Interest and Fees. All computations of interest for Base Rate
Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations
of fees and interest shall be made on the basis of a 360-day year and actual days elapsed, or, in
the case of interest in respect of Committed Loans denominated in Alternative Currencies as to
which market practice differs from the foregoing, in accordance with such market practice.
Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a
Loan, or any portion thereof, for the day on which the Loan or such portion is paid,
provided that any Loan that is repaid on the same day on which it is made shall, subject to
Section 2.12(a), bear interest for one (1) day. Each determination by the Administrative
Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.

     Section 2.11 Evidence of Debt.

     (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender and by the Administrative Agent in the ordinary course of
business. The accounts or records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the
Borrowers and the interest and payments thereon. Any failure to so record or

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any error in doing so shall not, however, limit or otherwise affect the obligation of the
Borrowers hereunder to pay any amount owing with respect to the Obligations. In the event of any
conflict between the accounts and records maintained by any Lender and the accounts and records of
the Administrative Agent in respect of such matters, the accounts and records of the Administrative
Agent shall control in the absence of manifest error. Upon the request of any Lender to a Borrower
made through the Administrative Agent, such Borrower shall execute and deliver to such Lender
(through the Administrative Agent) a Note, which shall evidence such Lender’s Loans to such
Borrower in addition to such accounts or records. Each Lender may attach schedules to a Note and
endorse thereon the date, Type (if applicable), amount, currency and maturity of its Loans and
payments with respect thereto.

     (b) In addition to the accounts and records referred to in subsection (a), each Lender and the
Administrative Agent shall maintain in accordance with its usual practice accounts or records
evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing
Line Loans. In the event of any conflict between the accounts and records maintained by the
Administrative Agent and the accounts and records of any Lender in respect of such matters, the
accounts and records of the Administrative Agent shall control in the absence of manifest error.

     Section 2.12 Payments Generally; Administrative Agent’s Clawback.

     (a) General. All payments to be made by the Borrowers shall be made without condition
or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly
provided herein and except with respect to principal of and interest on Loans denominated in an
Alternative Currency, all payments by the Borrowers hereunder shall be made to the Administrative
Agent, for the account of the respective Lenders to which such payment is owed, at the applicable
Administrative Agent’s Office in Dollars and in Same Day Funds not later than 2:00 p.m. on the date
specified herein. Except as otherwise expressly provided herein, all payments by the Borrowers
hereunder with respect to principal and interest on Loans denominated in an Alternative Currency
shall be made to the Administrative Agent, for the account of the respective Lenders to which such
payment is owed, at the applicable Administrative Agent’s Office in such Alternative Currency and
in Same Day Funds not later than the Applicable Time specified by the Administrative Agent on the
dates specified herein. Without limiting the generality of the foregoing, the Administrative Agent
may require that any payments due under this Agreement be made in the United States. If, for any
reason, any Borrower is prohibited by any Law from making any required payment hereunder in an
Alternative Currency, such Borrower shall make such payment in Dollars in the Dollar Equivalent of
the Alternative Currency payment amount. The Administrative Agent will promptly distribute to each
Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in
like funds as received by wire transfer to such Lender’s Lending Office. All payments received by
the Administrative Agent (i) after 2:00 p.m., in the case of payments in Dollars, or (ii) after the
Applicable Time specified by the Administrative Agent in the case of payments in an Alternative
Currency, shall in each case be deemed received on the next succeeding Business Day and any
applicable interest or fee shall continue to accrue. If any payment to be made by any Borrower
shall come due on a day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing interest or fees, as the
case may be.

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     (b) Funding by Lenders; Presumption by Administrative Agent. Unless the
Administrative Agent shall have received notice from a Lender prior to the proposed date of any
Committed Borrowing of Eurocurrency Rate Loans (or, in the case of any Committed Borrowing of Base
Rate Loans, prior to 12:00 noon on the date of such Committed Borrowing) that such Lender will not
make available to the Administrative Agent such Lender’s share of such Committed Borrowing, the
Administrative Agent may assume that such Lender has made such share available on such date in
accordance with Section 2.2 (or, in the case of a Committed Borrowing of Base Rate Loans,
that such Lender has made such share available in accordance with and at the time required by
Section 2.2) and may, in reliance upon such assumption, make available to the applicable
Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the
applicable Committed Borrowing available to the Administrative Agent, then the applicable Lender
and the applicable Borrower severally agree to pay to the Administrative Agent forthwith on demand
such corresponding amount in Same Day Funds with interest thereon, for each day from and including
the date such amount is made available to such Borrower to but excluding the date of payment to the
Administrative Agent, at (A) in the case of a payment to be made by such Lender, the Overnight Rate
and (B) in the case of a payment to be made by such Borrower, the interest rate applicable to Base
Rate Loans. If such Borrower and such Lender shall pay such interest to the Administrative Agent
for the same or an overlapping period, the Administrative Agent shall promptly remit to such
Borrower the amount of such interest paid by such Borrower for such period. If such Lender pays
its share of the applicable Committed Borrowing to the Administrative Agent, then the amount so
paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing. Any
payment by such Borrower shall be without prejudice to any claim such Borrower may have against a
Lender that shall have failed to make such payment to the Administrative Agent.

          (i) Payments by Borrowers; Presumptions by Administrative Agent. Unless the
Administrative Agent shall have received notice from a Borrower prior to the date on which any
payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer
hereunder that such Borrower will not make such payment, the Administrative Agent may assume that
such Borrower has made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due.
In such event, if such Borrower has not in fact made such payment, then each of the Lenders or the
L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or the L/C Issuer, in Same Day Funds with interest
thereon, for each day from and including the date such amount is distributed to it to but excluding
the date of payment to the Administrative Agent, at the Overnight Rate.

     A notice of the Administrative Agent to any Lender or Borrower with respect to any amount
owing under this subsection (b) shall be conclusive, absent manifest error.

     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the
Administrative Agent funds for any Loan to be made by such Lender to any Borrower as provided in
the foregoing provisions of this Article II, and such funds are not made available to such
Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set
forth in Article IV are not satisfied or waived in accordance with the terms hereof,

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the Administrative Agent shall return such funds (in like funds as received from such Lender)
to such Lender, without interest.

     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make
Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make
payments pursuant to Section 11.4(c) are several and not joint. The failure of any Lender
to make any Committed Loan, to fund any such participation or to make any payment under Section
11.4(c) on any date required hereunder shall not relieve any other Lender of its corresponding
obligation to do so on such date, and no Lender shall be responsible for the failure of any other
Lender to so make its Committed Loan, to purchase its participation or to make its payment under
Section 11.4(c).

     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain
the funds for any Loan in any particular place or manner or to constitute a representation by any
Lender that it has obtained or will obtain the funds for any Loan in any particular place or
manner.

     Section 2.13 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of
setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on
any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line
Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate
amount of such Committed Loans or participations and accrued interest thereon greater than its
pro rata share thereof as provided herein, then the Lender receiving such greater
proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at
face value) participations in the Committed Loans and subparticipations in L/C Obligations and
Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so
that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Committed Loans and other
amounts owing them, provided that:

          (i) if any such participations or subparticipations are purchased and all or any portion of
the payment giving rise thereto is recovered, such participations or subparticipations shall be
rescinded and the purchase price restored to the extent of such recovery, without interest; and

          (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by
a Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any
payment obtained by a Lender as consideration for the assignment of or sale of a participation in
any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any
assignee or participant, other than to the Company or any Subsidiary thereof (as to which the
provisions of this Section shall apply).

     Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation.

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     Section 2.14 Designated Borrowers.

     (a) The Company may at any time, upon not less than fifteen (15) Business Days’ notice from
the Company to the Administrative Agent (or such shorter period as may be agreed by the
Administrative Agent in its sole discretion), designate any Subsidiary of the Company
(an “Applicant Borrower”) as a Designated Borrower to receive Loans in an Alternative
Currency hereunder by delivering to the Administrative Agent (which shall promptly deliver
counterparts thereof to each Lender) a duly executed notice and agreement in substantially the form
of Exhibit G (a “Designated Borrower Request and Assumption Agreement”). The
parties hereto acknowledge and agree that prior to any Applicant Borrower becoming entitled to
utilize the credit facilities provided for herein the Administrative Agent and the Lenders shall
have received such supporting resolutions, incumbency certificates, opinions of counsel and other
documents or information, in form, content and scope reasonably satisfactory to the Administrative
Agent, as may be required by the Administrative Agent or the Required Lenders in their sole
discretion, and Notes signed by such new Borrowers to the extent any Lenders so require. If the
Administrative Agent and the Required Lenders agree that an Applicant Borrower shall be entitled to
receive Loans in an Alternative Currency hereunder, then promptly following receipt of all such
requested resolutions, incumbency certificates, opinions of counsel and other documents or
information, the Administrative Agent shall send a notice in substantially the form of Exhibit
H (a “Designated Borrower Notice”) to the Company and the Lenders specifying the
effective date upon which the Applicant Borrower shall constitute a Designated Borrower for
purposes hereof, whereupon each of the Lenders agrees to permit such Designated Borrower to receive
Loans hereunder, on the terms and conditions set forth herein, and each of the parties agrees that
such Designated Borrower otherwise shall be a Borrower for all purposes of this Agreement;
provided that no Committed Loan Notice or Letter of Credit Application may be submitted by
or on behalf of such Designated Borrower until the date five (5) Business Days after such effective
date. For any Designated Borrower established under the Laws of the United Kingdom or any other
Foreign Obligor, if Administrative Agent so requires, the Company shall complete the Administrative
Agent’s customary forms before any borrowing by such Designated Borrower.

     (b) The Obligations of the Company and each Designated Borrower that is a Domestic Subsidiary
shall be joint and several in nature. The Obligations of all Designated Borrowers that are Foreign
Subsidiaries shall be several in nature.

     (c) Each Subsidiary of the Company that becomes a “Designated Borrower” pursuant to this
Section 2.14 hereby irrevocably appoints the Company as its agent for all purposes relevant
to this Agreement and each of the other Loan Documents, including (i) the giving and receipt of
notices, (ii) the execution and delivery of all documents, instruments and certificates
contemplated herein and all modifications hereto, and (iii) the receipt of the proceeds of any
Loans made by the Lenders, to any such Designated Borrower hereunder. Any acknowledgment, consent,
direction, certification or other action which might otherwise be valid or effective only if given
or taken by all Borrowers, or by each Borrower acting singly, shall be valid and effective if given
or taken only by the Company, whether or not any such other Borrower joins therein. Any notice,
demand, consent, acknowledgement, direction, certification or other communication delivered to the
Company in accordance with the terms of this Agreement shall be deemed to have been delivered to
each Designated Borrower.

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     (d) The Company may from time to time, upon not less than fifteen (15) Business Days’ notice
from the Company to the Administrative Agent (or such shorter period as may be agreed by the
Administrative Agent in its sole discretion), terminate a Designated Borrower’s status as such,
provided that there are no outstanding Loans payable by such Designated Borrower, or other
amounts payable by such Designated Borrower on account of any Loans made to it, as of the effective
date of such termination. The Administrative Agent will promptly notify the Lenders of any such
termination of a Designated Borrower’s status.

     (e) Prior to any advance of a Loan for a Designated Borrower, the Company shall execute and
deliver to the Administrative Agent a Company Guaranty guarantying all obligations of such
Designated Borrower for the benefit of the Lenders.

     Section 2.15 Extension of Maturity Date.

     (a) Not earlier than two (2) years prior to, nor later than thirty (30) days prior to, the
Maturity Date set forth herein, the Borrower may, upon notice to the Administrative Agent (which
shall promptly notify the Lenders), request a one-year extension of the Maturity Date then in
effect.

     (b) The Maturity Date shall be extended only if no Default has occurred and is continuing
under the Loan Documents. If so extended, the Maturity Date shall be extended to the same date in
the following year effective as of the Maturity Date then in effect (such existing Maturity Date
being the “Extension Effective Date”). The Administrative Agent and the Borrower shall promptly
confirm to the Lenders such extension and the Extension Effective Date. As a condition precedent
to such extension, the Borrower shall deliver to the Administrative Agent a certificate of each
Loan Party dated as of the Extension Effective Date (in sufficient copies for each Lender) signed
by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by
such Loan Party approving or consenting to such extension and (ii) in the case of the Borrower,
certifying that, before and after giving effect to such extension, (A) the representations and
warranties contained in Article VI and the other Loan Documents are true and correct on and
as of the Extension Effective Date, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they are true and correct as of such earlier
date, and except that for purposes of this Section 2.14, the representations and warranties
contained in subsections (a) and (b) of Section 6.5 shall be deemed to refer to the most
recent statements furnished pursuant to subsections (a) and (b), respectively, of Section
7.1, and (B) no Default exists.

     (c) As an additional condition precedent to the extension of the Maturity Date, the Borrower
shall pay to the Administrative Agent for the benefit of the Lenders an extension fee of
twenty-five (25) basis points on the then applicable Aggregate Commitments.

     (d) This Section shall supersede any provisions in Section 2.13 or Section
11.1 to the contrary.

     Section 2.16 Increase in Commitments.

     (a) Provided there exists no Default, upon notice to the Administrative Agent (which shall
promptly notify the Lenders), the Borrower may up to two (2) times within three (3) years

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from the date of this Agreement, request an increase in the Aggregate Commitments in a minimum
of $25,000,000 and in multiples of $10,000,000 for each increase and by an amount not exceeding
$100,000,000 in the aggregate. At the time of sending such a notice, the Borrower (in consultation
with the Administrative Agent) shall specify the time period within which each Lender is requested
to respond (which shall in no event be less than ten (10) Business Days from the date of delivery
of such notice to the Lenders). Each Lender shall notify the Administrative Agent within such time
period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal
to, greater than, or less than its Applicable Percentage of such requested increase. Any Lender
not responding within such time period shall be deemed to have declined to increase its Commitment.
The Administrative Agent shall notify the Borrower and each Lender of the Lenders’ responses to
each request made hereunder. To achieve the full amount of a requested increase, the Borrower may
also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form
and substance satisfactory to the Administrative Agent and its counsel.

     (b) If the Aggregate Commitments are increased in accordance with this Section, the
Administrative Agent and the Borrower shall determine the effective date (the “Increase Effective
Date”) and the final allocation of such increase. The Administrative Agent shall promptly notify
the Borrower and the Lenders of the final allocation of such increase and the Increase Effective
Date. As a condition precedent to such increase, the Borrower shall deliver to the Administrative
Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient
copies for each Lender) signed by a Responsible Officer of such Loan Party (i) certifying and
attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and
(ii) in the case of the Borrower, certifying that, before and after giving effect to such increase,
(A) the representations and warranties contained in Article VI and the other Loan Documents
are true and correct on and as of the Extension Effective Date, except to the extent that such
representations and warranties specifically refer to an earlier date, in which case they are true
and correct as of such earlier date, and except that for purposes of this Section 2.15, the
representations and warranties contained in subsections (a) and (b) of Section 6.5 shall be
deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b),
respectively, of Section 7.1, and (B) no Default exists. The Borrower shall prepay any
Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required
pursuant to Section 3.5) to the extent necessary to keep the outstanding Committed Loans
ratable with any revised Applicable Percentages arising from any nonratable increase in the
Commitments under this Section.

     (c) Alternatively, any portion of the increase described in Section 2.16(a) may be
structured as a separate, pari passu term loan under terms and conditions mutually satisfactory to
the Company and the Administrative Agent. However, the principal amount of any such term loan will
not be included in the Letter of Credit and the Swing Line Sublimits.

     (d) Conflicting Provisions. This Section shall supersede any provisions in
Section 2.13 or Section 11.1 to the contrary.

     Section 2.17 Collateral. As security for the payment of any and all of the Obligations and
for the Borrower’s performance of, and compliance with, all of the terms, covenants, conditions,
stipulations and agreements contained in the Loan Documents, the Company and the

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other Loan parties hereby assign, grant and convey to the Lenders, and agree that the Lenders
shall have, to the extent permitted by law a perfected, continuing security interest in, all of the
Collateral pursuant to the Security Agreements. The Company and the other Loan Parties further
agree that the Lenders shall have in respect of the Collateral all of the rights and remedies of a
secured party under the Virginia Uniform Commercial Code and under other applicable Laws as well as
those rights and provided in this Agreement and the other Loan Documents. The Company covenants
and agrees to execute and deliver or to cause the other Loan Parties to execute and deliver such
financing statements and other instruments and filings as are necessary in the opinion of the
Administrative Agent to perfect such security interest. Notwithstanding the fact that the proceeds
of the Collateral constitute a part of the Collateral, the Loan parties may not dispose of the
Collateral, or any part thereof, other than in the ordinary course of their business or as
otherwise may be permitted by this Agreement or other Security Agreements. The Company and the
other Loan Parties will supplement the Security Agreements at any time the Loan Parties create any
new Material Subsidiary, pledging to the Lenders their ownership interests.

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

     Section 3.1 Taxes.

     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of the respective Borrowers hereunder or under any other Loan Document shall be made free and clear
of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided
that if the applicable Borrower shall be required by applicable law to deduct any Indemnified Taxes
(including any Other Taxes) from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or L/C Issuer, as the
case may be, receives an amount equal to the sum it would have received had no such deductions been
made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall timely pay the
full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) Payment of Other Taxes by the Borrowers. Without limiting the provisions of
subsection (a) above, each Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

     (c) Indemnification by the Borrowers. Each Borrower shall indemnify the
Administrative Agent, each Lender and the L/C Issuer, within ten (10) days after demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or liability delivered to a
Borrower by a Lender or the L/C Issuer (with a copy to the

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Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a
Lender or the L/C Issuer, shall be conclusive absent manifest error.

     (d) Evidence of Payments. As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by any Borrower to a Governmental Authority, such Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which a Borrower is resident for
tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Company (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by
the Company or the Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Company or the
Administrative Agent, shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Company or the Administrative Agent as will enable the Company or the
Administrative Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements.

     Without limiting the generality of the foregoing, in the event that a Borrower is resident for
tax purposes in the United States, any Foreign Lender shall deliver to Company and the
Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior
to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the request of the Company or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is applicable:

          (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party,

          (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

          (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender
is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent
shareholder” of the applicable Borrower within the meaning of section 881(c)(3)(B) of the Code, or
(C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly
completed copies of Internal Revenue Service Form W-8BEN, or

          (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with such supplementary
documentation as may be prescribed by applicable law to permit the Company to determine the
withholding or deduction required to be made.

     Without limiting the obligations of the Lenders set forth above regarding delivery of certain
forms and documents to establish each Lender’s status for U.S. withholding tax purposes,

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each Lender agrees promptly to deliver to the Administrative Agent or the Company, as the
Administrative Agent or the Company shall reasonably request, on or prior to the Closing Date, and
in a timely fashion thereafter, such other documents and forms required by any relevant taxing
authorities under the Laws of any other jurisdiction, duly executed and completed by such Lender,
as are required under such Laws to confirm such Lender’s entitlement to any available exemption
from, or reduction of, applicable withholding taxes in respect of all payments to be made to such
Lender outside of the U.S. by the Borrowers pursuant to this Agreement or otherwise to establish
such Lender’s status for withholding tax purposes in such other jurisdiction. Each Lender shall
promptly (i) notify the Administrative Agent of any change in circumstances which would modify or
render invalid any such claimed exemption or reduction, and (ii) take such steps as shall not be
materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement
of applicable Laws of any such jurisdiction that any Borrower make any deduction or withholding for
taxes from amounts payable to such Lender. Additionally, each of the Borrowers shall promptly
deliver to the Administrative Agent or any Lender, as the Administrative Agent or such Lender shall
reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such
documents and forms required by any relevant taxing authorities under the Laws of any jurisdiction,
duly executed and completed by such Borrower, as are required to be furnished by such Lender or the
Administrative Agent under such Laws in connection with any payment by the Administrative Agent or
any Lender of Taxes or Other Taxes, or otherwise in connection with the Loan Documents, with
respect to such jurisdiction.

     (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C
Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by any Borrower or with respect to which any Borrower has
paid additional amounts pursuant to this Section, it shall pay to such Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such
Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as
the case may be, and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that each Borrower, upon the request of
the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to
such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the
Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such
Governmental Authority. This subsection shall not be construed to require the Administrative
Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information
relating to its taxes that it deems confidential) to any Borrower or any other Person.

     Section 3.2 Illegality. If any Lender determines that any Law has made it unlawful, or that
any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund Eurocurrency Rate Loans (whether denominated in Dollars or
an Alternative Currency), or to determine or charge interest rates based upon the Eurocurrency
Rate, or any Governmental Authority has imposed material restrictions on the authority of such
Lender to purchase or sell, or to take deposits of, Dollars or

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any Alternative Currency in the applicable interbank market, then, on notice thereof by such
Lender to the Company through the Administrative Agent, any obligation of such Lender to make or
continue Eurocurrency Rate Loans in the affected currency or currencies or, in the case of
Eurocurrency Rate Loans in Dollars, to convert Base Rate Committed Loans to Eurocurrency Rate
Loans, shall be suspended until such Lender notifies the Administrative Agent and the Company that
the circumstances giving rise to such determination no longer exist. Upon receipt of such notice,
the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay
or, if applicable and such Loans are denominated in Dollars, convert all such Eurocurrency Rate
Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if
such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans.
Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount
so prepaid or converted.

     Section 3.3 Inability to Determine Rates. If the Required Lenders determine that for any
reason in connection with any request for a Eurocurrency Rate Loan or a conversion to or
continuation thereof that (a) deposits (whether in Dollars or an Alternative Currency) are not
being offered to banks in the applicable offshore interbank market for such currency for the
applicable amount and Interest Period of such Eurocurrency Rate Loan, (b) adequate and reasonable
means do not exist for determining the Eurocurrency Rate for any requested Interest Period with
respect to a proposed Eurocurrency Rate Loan (whether denominated in Dollars or an Alternative
Currency), or (c) the Eurocurrency Rate for any requested Interest Period with respect to a
proposed Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such Lenders of
funding such Eurocurrency Rate Loan, the Administrative Agent will promptly so notify the Company
and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurocurrency Rate
Loans in the affected currency or currencies shall be suspended until the Administrative Agent
(upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice,
the Company may revoke any pending request for a Borrowing of, conversion to or continuation of
Eurocurrency Rate Loans in the affected currency or currencies or, failing that, will be deemed to
have converted such request into a request for a Committed Borrowing of Base Rate Loans in the
amount specified therein.

     Section 3.4 Increased Costs; Reserves on Eurocurrency Rate Loans.

     (a) Increased Costs Generally. If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the account of, or credit
extended or participated in by, any Lender (except (A) any reserve requirement contemplated by
Section 3.4(e), and (B) the requirements of the Bank of England and the Financial Services
Authority or the European Central Bank reflected in the Mandatory Cost, other than as set forth
below) or the L/C Issuer;

          (ii) subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to
this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurocurrency
Rate Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer
in respect thereof (except for Indemnified Taxes or Other Taxes covered by

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Section 3.1 and the imposition of, or any change in the rate of, any Excluded Tax
payable by such Lender or the L/C Issuer);

          (iii) the Mandatory Cost, as calculated hereunder, does not represent the cost to any Lender
of complying with the requirements of the Bank of England and/or the Financial Services Authority
or the European Central Bank in relation to its making, funding or maintaining Eurocurrency Rate
Loans; or

          (iv) impose on any Lender or the L/C Issuer or the London interbank market any other
condition, cost or expense affecting this Agreement or Eurocurrency Rate Loans made by such Lender
or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurocurrency Rate Loan (or of maintaining its obligation to make any such Loan), or
to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining
any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of
Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer
hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or
the L/C Issuer, the Company will pay (or cause the applicable Designated Borrower to pay) to such
Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate
such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction
suffered.

     (b) Capital Requirements. If any Lender or the L/C Issuer determines that any Change
in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such
Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on
the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this
Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of
Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below
that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could
have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C
Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with
respect to capital adequacy), then from time to time the Company will pay (or cause the applicable
Designated Borrower to pay) to such Lender or the L/C Issuer, as the case may be, such additional
amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C
Issuer’s holding company for any such reduction suffered.

     (c) Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer
setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its
holding company, as the case may be, as specified in subsection (a) or (b) of this Section and
delivered to the Company shall be conclusive absent manifest error. The Company shall pay (or
cause the applicable Designated Borrower to pay) such Lender or the L/C Issuer, as the case may be,
the amount shown as due on any such certificate within ten (10) days after receipt thereof.

     (d) Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer
to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a

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waiver of such Lender’s or the L/C Issuer’s right to demand such compensation,
provided that no Borrower shall be required to compensate a Lender or the L/C Issuer
pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions
suffered more than six (6) months prior to the date that such Lender or the L/C Issuer, as the case
may be, notifies the Company of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if
the Change in Law giving rise to such increased costs or reductions is retroactive, then the six
(6) month period referred to above shall be extended to include the period of retroactive effect
thereof).

     (e) Additional Reserve Requirements. The Company shall pay (or cause the applicable
Designated Borrower to pay) to each Lender, (i) as long as such Lender shall be required to
maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency
funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the
unpaid principal amount of each Eurocurrency Rate Loan equal to the actual costs of such reserves
allocated to such Loan by such Lender (as determined by such Lender in good faith, which
determination shall be conclusive), and (ii) as long as such Lender shall be required to comply
with any reserve ratio requirement or analogous requirement of any central banking or financial
regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the
Eurocurrency Rate Loans, such additional costs (expressed as a percentage per annum and rounded
upwards, if necessary, to the nearest five (5) decimal places) equal to the actual costs allocated
to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which
determination shall be conclusive), which in each case shall be due and payable on each date on
which interest is payable on such Loan, provided the Company shall have received at least
fifteen (15) days’ prior notice (with a copy to the Administrative Agent) of such additional
interest or costs from such Lender. If a Lender fails to give notice fifteen (15) days prior to
the relevant Interest Payment Date, such additional interest or costs shall be due and payable
fifteen (15) days from receipt of such notice.

     Section 3.5 Compensation for Losses. Upon demand of any Lender (with a copy to the
Administrative Agent) from time to time, the Company shall promptly compensate (or cause the
applicable Designated Borrower to compensate) such Lender for and hold such Lender harmless from
any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate
Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise);

     (b) any failure by any Borrower (for a reason other than the failure of such Lender to make a
Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in
the amount notified by the Company or the applicable Designated Borrower;

     (c) any failure by any Borrower to make payment of any Loan or drawing under any Letter of
Credit (or interest due thereon) denominated in an Alternative Currency on its scheduled due date
or any payment thereof in a different currency; or

     (d) any assignment of a Eurocurrency Rate Loan on a day other than the last day of the
Interest Period therefor as a result of a request by the Company pursuant to Section 11.13;

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including any loss of anticipated profits, any foreign exchange losses and any loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain such Loan, from
fees payable to terminate the deposits from which such funds were obtained or from the performance
of any foreign exchange contract. The Company shall also pay (or cause the applicable Designated
Borrower to pay) any customary administrative fees charged by such Lender in connection with the
foregoing.

For purposes of calculating amounts payable by the Company (or the applicable Designated Borrower)
to the Lenders under this Section 3.5, each Lender shall be deemed to have funded each
Eurocurrency Rate Loan made by it at the Eurocurrency Rate for such Loan by a matching deposit or
other borrowing in the offshore interbank market for such currency for a comparable amount and for
a comparable period, whether or not such Eurocurrency Rate Loan was in fact so funded.

     Section 3.6 Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 3.4, or any Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section 3.1, or if
any Lender gives a notice pursuant to Section 3.2, then such Lender shall use reasonable
efforts to designate a different Lending Office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 3.1 or 3.4, as the case may be, in the future,
or eliminate the need for the notice pursuant to Section 3.2, as applicable, and (ii) in
each case, would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Company hereby agrees to pay (or to cause the
applicable Designated Borrower to pay) all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section
3.4, or if any Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.1, the Company
may replace such Lender in accordance with Section 11.13 or may eliminate the Lender and
reduce the Loan by the amount of such Lender’s Commitment.

     Section 3.7 Survival. All of the Borrowers’ obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

ARTICLE IV

GUARANTY

     Section 4.1 The Guaranty.

     Each of the Guarantors hereby jointly and severally guarantees to each Lender, each Affiliate
of a Lender that enters into a Swap Contract, and the Administrative Agent as hereinafter provided,
as primary obligor and not as surety, the prompt payment of the

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Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the
terms thereof. The Guarantors hereby further agree that if any of the Obligations are not paid in
full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally,
promptly pay the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Obligations, the same will be promptly paid
in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of such extension or
renewal.

     Notwithstanding any provision to the contrary contained herein or in any other of the Loan
Documents or Swap Contracts, the obligations of each Guarantor under this Agreement and the other
Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not
render such obligations subject to avoidance under the Debtor Relief Laws or any comparable
provisions of any applicable state law.

     Section 4.2 Obligations Unconditional.

     The obligations of the Guarantors under Section 4.1 are joint and several, absolute
and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability
of any of the Loan Documents or Swap Contracts, or any other agreement or instrument referred to
therein, or any substitution, release, impairment or exchange of any other guarantee of or security
for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of
any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge
or defense of a surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation,
indemnity, reimbursement or contribution against the Borrower or any other Guarantor for amounts
paid under this Article IV until such time as the Obligations have been paid in full and
the Commitment have expired or terminated. Without limiting the generality of the foregoing, it is
agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder, which shall remain
absolute and unconditional as described above:

          (i) at any time or from time to time, without notice to any Guarantor, the time for any
performance of or compliance with any of the Obligations shall be extended, or such performance or
compliance shall be waived;

          (ii) any of the acts mentioned in any of the provisions of any of the Loan Documents, any Swap
Contract between any Loan Party and any Lender, or any Affiliate of a Lender, or any other
agreement or instrument referred to in the Loan Documents or such Swap Contracts shall be done or
omitted;

          (iii) the maturity of any of the Obligations shall be accelerated, or any of the Obligations
shall be modified, supplemented or amended in any respect, or any right under any of the Loan
Documents, any Swap Contract between any Loan Party and any Lender, or any

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	 	 	Affiliate of a Lender, or any other agreement or instrument referred to in the Loan Documents
or such Swap Contracts shall be waived or any other guarantee of any of the Obligations or any
security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt
with;

          (iv) any Lien granted to, or in favor of, the Administrative Agent or any Lender or Lenders as
security for any of the Obligations shall fail to attach or be perfected; or

          (v) any of the Obligations shall be determined to be void or voidable (including, without
limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the
claims of any Person (including, without limitation, any creditor of any Guarantor).

          (vi) With respect to its obligations hereunder, each Guarantor hereby expressly waives
diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement
that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against
any Person under any of the Loan Documents, any Swap Contract between any Loan Party and any
Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Loan
Documents or such Swap Contracts, or against any other Person under any other guarantee of, or
security for, any of the Obligations.

     Section 4.3 Reinstatement.

     The obligations of the Guarantors under this Article IV shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf of any Person in
respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the
Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise,
and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand
for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel)
incurred by the Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against any claim alleging
that such payment constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.

     Section 4.4 Certain Additional Waivers.

     Each Guarantor hereby further agrees that such Guarantor shall have no right of recourse to
security for the Obligations, except through the exercise of rights of subrogation pursuant to
Section 4.2 and through the exercise of rights of contribution pursuant to Section
4.6.

     Section 4.5 Remedies.

     The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors,
on the one hand, and the Administrative Agent and the Lenders, on the other hand, the Obligations
may be declared to be forthwith due and payable as provided in Section 9.2 (and shall be
deemed to have become automatically due and payable in the circumstances provided in said
Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing the Obligations from becoming

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automatically due and payable) as against any other Person and that, in the event of such
declaration (or the Obligations being deemed to have become automatically due and payable), the
Obligations (whether or not due and payable by any other Person) shall forthwith become due and
payable by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and
agree that their obligations hereunder are secured in accordance with the terms of the Collateral
Documents and that the Lenders may exercise their remedies thereunder in accordance with the terms
thereof.

     Section 4.6 Rights of Contribution.

     The Guarantors hereby agree as among themselves that, if any Guarantor shall make an Excess
Payment (as defined below), such Guarantor shall have a right of contribution from each other
Guarantor in an amount equal to such other Guarantor’s Contribution Share (as defined below) of
such Excess Payment. The payment obligations of any Guarantor under this Section 4.6 shall
be subordinate and subject in right of payment to the Obligations until such time as the
Obligations have been paid in full and the Commitments have expired or terminated, and none of the
Guarantors shall exercise any right or remedy under this Section 4.6 against any other
Guarantor until such Obligations have been paid in full and the Commitments have expired or
terminated. For purposes of this Section 4.6, (a) “Excess Payment” shall mean the
amount paid by any Guarantor in excess of its Ratable Share of any Guaranteed Obligations; (b)
“Ratable Share” shall mean, for any Guarantor in respect of any payment of Obligations, the
ratio (expressed as a percentage) as of the date of such payment of Guaranteed Obligations of (i)
the amount by which the aggregate present fair salable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such
Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all
assets and other properties of all of the Loan Parties exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but
excluding the obligations of the Loan Parties hereunder) of the Loan Parties; provided,
however, that, for purposes of calculating the Ratable Shares of the Guarantors in respect
of any payment of Obligations, any Guarantor that became a Guarantor subsequent to the date of any
such payment shall be deemed to have been a Guarantor on the date of such payment and the financial
information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized
for such Guarantor in connection with such payment; (c) “Contribution Share” shall mean, for any
Guarantor in respect of any Excess Payment made by any other Guarantor, the ratio (expressed as a
percentage) as of the date of such Excess Payment of (i) the amount by which the aggregate present
fair salable value of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which
the aggregate present fair salable value of all assets and other properties of the Loan Parties
other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Loan Parties) of the Loan Parties other than the maker of such Excess Payment;
provided, however, that, for purposes of calculating the Contribution Shares of the
Guarantors in respect of any Excess Payment, any Guarantor that became a Guarantor subsequent to
the date of any such Excess Payment shall be deemed to have been a Guarantor on the date of such
Excess Payment and the financial

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information for such Guarantor as of the date such Guarantor became a Guarantor shall be
utilized for such Guarantor in connection with such Excess Payment; and (d) “Guaranteed
Obligations” shall mean the Obligations guaranteed by the Guarantors pursuant to this Article
IV. This Section 4.6 shall not be deemed to affect any right of subrogation,
indemnity, reimbursement or contribution that any Guarantor may have under Law against the Borrower
in respect of any payment of Guaranteed Obligations. Notwithstanding the foregoing, all rights of
contribution against any Guarantor shall terminate from and after such time, if ever, that such
Guarantor shall be relieved of its obligations in accordance with Section 10.10.

     Section 4.7 Guarantee of Payment; Continuing Guarantee.

     The guarantee in this Article IV is a guaranty of payment and not of collection, is a
continuing guarantee, and shall apply to all Obligations whenever arising.

ARTICLE V

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     Section 5.1 Conditions of Initial Credit Extension. The obligation of the L/C Issuer and each
Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following
conditions precedent:

     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date) and each in form and
substance satisfactory to the Administrative Agent, its legal counsel and each of the Lenders:

          (i) executed counterparts of this Agreement, the Guaranty, the Security Agreements and the
other Loan Documents, sufficient in number for distribution to the Administrative Agent, each
Lender and the Company;

          (ii) a Note executed by the Borrowers in favor of each Lender requesting a Note;

          (iii) such certificates of resolutions or other action, incumbency certificates and/or other
certificates of Responsible Officers of each Loan Party as the Administrative Agent may require
evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to
act as a Responsible Officer in connection with this Agreement and the other Loan Documents to
which such Loan Party is a party;

          (iv) such documents and certifications as the Administrative Agent may reasonably require to
evidence that each Loan Party is duly organized or formed, and that each of the Company and the
Guarantors is validly existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the conduct of its business
requires such qualification;

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          (v) a favorable opinion of Watt Tieder Hoffar & Fitzgerald counsel to the Loan Parties,
addressed to the Administrative Agent and each Lender as to the matters set forth in Exhibit
I and such other matters concerning the Loan Parties and the Loan Documents as the Required
Lenders may reasonably request;

          (vi) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of
all consents, licenses and approvals required in connection with the execution, delivery and
performance by such Loan Party and the validity against such Loan Party of the Loan Documents to
which it is a party, and such consents, licenses and approvals shall be in full force and effect,
or (B) stating that no such consents, licenses or approvals are so required;

          (vii) a certificate signed by a Responsible Officer of the Company certifying (A) that the
conditions specified in Section 5.2(a) and (b) have been satisfied (B) that there
has been no event or circumstance since the date of the Audited Financial Statements that has had
or could be reasonably expected to have, either individually or in the aggregate, a Material
Adverse Effect; and (C) a calculation of the Consolidated Net Worth, the ratio of Total Funded
Indebtedness to Consolidated EBITDA and the ratio of Consolidated EBITDAR to Fixed Charges as of
the last day of the fiscal quarter of the Company most recently ended prior to the Closing Date;

          (viii) evidence that all insurance required to be maintained pursuant to the Loan Documents
has been obtained and is in effect;

          (ix) evidence that the Existing Credit Agreement has been or concurrently with the Closing
Date is being terminated and all Liens securing obligations under the Existing Credit Agreement
have been or concurrently with the Closing Date are being released;

          (x) all existing original stock certificates and four (4) stock powers executed in blank for
each share of stock pledged to the Lender’ as part of the Collateral and copies of any shareholders
agreements related to such stock;

          (xi) a list of all management agreements to which Sunrise Senior Living Management, Inc.,
Sunrise Senior Living Services, Inc. or any other Loan Party is a party as manager or operator of
any Senior Living Facility and a written certification by the Borrower stating which management
agreements are currently assigned to a lender or prohibit assignment to a lender by their terms
(the Borrower agrees that it will provide copies of any management agreements requested by the
Administrative Agent); and

          (xii) such other assurances, certificates, documents, consents or opinions as the
Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may
require.

     (b) Any fees required to be paid on or before the Closing Date shall have been paid.

     (c) Unless waived by the Administrative Agent, the Company shall have paid all fees, charges
and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements incurred or to be

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incurred by it through the closing proceedings (provided that such estimate shall not
thereafter preclude a final settling of accounts between the Company and the Administrative Agent).

     (d) The Closing Date shall have occurred on or before November 30, 2005.

     (e) There shall not have occurred any material disruption of or material adverse change in
conditions in the financial banking or capital markets which the Administrative Agent and BAS, in
their sole discretion, deem material in connection with syndication of the Credit Facility.

     (f) There shall not have occurred a Material Adverse Effect on the business, assets,
operations, condition (financial or otherwise) of the Borrower or any other Loan Party or their
respective Affiliates or Subsidiaries or in the statements or information provided to the
Administrative Agent regarding such entities.

     (g) There shall not have occurred any action, suit, investigation or proceeding, pending or
threatened, in any court or before any arbitrator or governmental authority that purports to affect
the Borrower, the other Loan Parties or their respective Affiliates or Subsidiaries in a materially
adverse manner or any transaction contemplated hereby, or that could reasonably be expected to have
a Material Adverse Effect on the Borrower, the other Loan Parties or their respective affiliates or
subsidiaries or any transaction contemplated hereby or on the ability of the Borrower, the other
Loan Parties or their respective Affiliates or Subsidiaries to perform their obligations under the
documents to be executed in connection with the Credit Facility.

     Without limiting the generality of the provisions of Section 10.3, for purposes of
determining compliance with the conditions specified in this Section 5.1, each Lender that
has signed this Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

     Section 5.2 Conditions to all Credit Extensions. The obligation of each Lender to honor any
Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of
Committed Loans to the other Type, or a continuation of Eurocurrency Rate Loans) is subject to the
following conditions precedent:

     (a) The representations and warranties of (i) the Borrowers contained in Article VI
and (ii) each Loan Party contained in each other Loan Document or in any document furnished at any
time under or in connection herewith or therewith, shall be true and correct on and as of the date
of such Credit Extension, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and correct as of such
earlier date, and except that for purposes of this Section 5.2, the representations and
warranties contained in subsections (a) and (b) of Section 6.5 shall be deemed to refer to
the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section
7.1.

     (b) No Default shall exist, or would result from such proposed Credit Extension or the
application of the proceeds thereof.

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     (c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall
have received a Request for Credit Extension in accordance with the requirements hereof.

     (d) If the applicable Borrower is a Designated Borrower, then the conditions of Section
2.14 to the designation of such Borrower as a Designated Borrower shall have been met to the
satisfaction of the Administrative Agent.

     (e) In the case of a Credit Extension to be denominated in an Alternative Currency, there
shall not have occurred any change in national or international financial, political or economic
conditions or currency exchange rates or exchange controls which in the reasonable opinion of the
Administrative Agent, the Required Lenders to include the Administrative Agent (in the case of any
Loans to be denominated in an Alternative Currency) or the L/C Issuer (in the case of any Letter of
Credit to be denominated in an Alternative Currency) would make it impracticable for such Credit
Extension to be denominated in the relevant Alternative Currency.

     Each Request for Credit Extension (other than a Committed Loan Notice requesting only a
conversion of Committed Loans to the other Type or a continuation of Eurocurrency Rate Loans)
submitted by the Company shall be deemed to be a representation and warranty that the conditions
specified in Section 5.2(a) and (b) have been satisfied on and as of the date of
the applicable Credit Extension.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

     Except as otherwise provided in Section 6.18, each Borrower represents and warrants to
the Administrative Agent and the Lenders that:

     Section 6.1 Existence, Qualification and Power; Compliance with Laws. Each Loan Party and
each Subsidiary thereof (a) is duly organized or formed, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite
power and authority and all requisite governmental licenses, authorizations, consents and approvals
to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its
obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed
and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification or license, and (d) is in
compliance with all Laws; except in each case referred to in clause (b)(i), (c) or (d), to the
extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

     Section 6.2 Authorization; No Contravention. The execution, delivery and performance by each
Loan Party of each Loan Document to which such Person is party, have been duly authorized by all
necessary corporate or other organizational action, and do not and will not (a) contravene the
terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, or require any payment to be made under (i)
any Contractual Obligation to which such Person is a party or affecting such Person or the
properties of such Person or any of its Subsidiaries or (ii) any order,

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injunction, writ or decree of any Governmental Authority or any arbitral award to which such
Person or its property is subject; or (c) violate any Law. Each Loan Party and each Subsidiary
thereof is in compliance with all Contractual Obligations referred to in clause (b)(i), except to
the extent that failure to do so could not reasonably be expected to have a Material Adverse
Effect.

     Section 6.3 Governmental Authorization; Other Consents. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person is necessary or required in connection with the execution, delivery or performance by,
or enforcement against, any Loan Party of this Agreement or any other Loan Document.

     Section 6.4 Binding Effect. This Agreement has been, and each other Loan Document, when
delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party
thereto. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan
Party that is party thereto in accordance with its terms.

Section 6.5 Financial Statements; No Material Adverse Effect; No Internal Control Event.

     (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii)
fairly present the financial condition of the Company and its Subsidiaries as of the date thereof
and their results of operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly noted therein; and
(iii) show all material indebtedness and other liabilities, direct or contingent, of the Company
and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments
and Indebtedness.

     (b) The unaudited consolidated financial statements of the Company and its Subsidiaries dated
June 30, 2005 and the related consolidated statements of income or operations, Shareholders’ Equity
and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise expressly noted
therein, and (ii) fairly present the financial condition of the Company and its Subsidiaries as of
the date thereof and their results of operations for the period covered thereby, subject, in the
case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.
Schedule 6.5 sets forth all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the date of such financial
statements, including liabilities for taxes, material commitments and Indebtedness.

     (c) Since the date of the Audited Financial Statements, there has been no event or
circumstance, either individually or in the aggregate, that has had or could reasonably be expected
to have a Material Adverse Effect.

     Section 6.6 Litigation. Except as specifically disclosed in Schedule 6.6, there are
no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Company
after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration
or

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before any Governmental Authority, by or against the Company or any of its Subsidiaries or
against any of their properties or revenues that (a) purport to affect or pertain to this Agreement
or any other Loan Document, or any of the transactions contemplated hereby, or (b) either
individually or in the aggregate, if determined adversely, could reasonably be expected to have a
Material Adverse Effect.

     Section 6.7 No Default. Neither the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation that could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No Default has occurred and is
continuing or would result from the consummation of the transactions contemplated by this Agreement
or any other Loan Document.

     Section 6.8 Ownership of Property; Liens. Each of the Company and each Subsidiary has good
record and marketable title in fee simple to, or valid leasehold interests in, all real property
necessary or used in the ordinary conduct of its business, except for such defects in title as
could not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect. The property of the Company and its Subsidiaries is subject to no Liens, other than Liens
permitted by Section 8.1.

     Section 6.9 Environmental Compliance. The Company and its Subsidiaries conduct in the
ordinary course of business a review of the effect of existing Environmental Laws and claims
alleging potential liability or responsibility for violation of any Environmental Law on their
respective businesses, operations and properties, and as a result thereof the Company has
reasonably concluded that except as specifically disclosed in Schedule 6.9, such
Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

     Section 6.10 Insurance. The properties of the Company and its Subsidiaries are insured with
insurance companies having an A.M. Best Rating of at least A- and not Affiliates of the Company, in
such amounts with such deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where the Company or the
applicable Subsidiary operates. Without limiting the generality of the foregoing, such insurance
shall include coverage for acts of terrorism.

     Section 6.11 Taxes. The Company and its Subsidiaries have filed all Federal, state and other
material tax returns and reports required to be filed, and have paid all Federal, state and other
material taxes, assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings diligently conducted and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse Effect.

Section 6.12 ERISA Compliance.

     (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under

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Section 401(a) of the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with respect thereto and, to
the best knowledge of the Company, nothing has occurred which would prevent, or cause the loss of,
such qualification. The Company and each ERISA Affiliate have made all required contributions to
each Plan subject to Section 412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code has been made with respect
to any Plan.

     (b) There are no pending or, to the best knowledge of the Company, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan that could
reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Effect.

     (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan
has any Unfunded Pension Liability; (iii) neither the Company nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the
Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to
Sections 4069 or 4212(c) of ERISA.

     Section 6.13 Subsidiaries; Equity Interests. As of the Closing Date, the Borrower has no
Subsidiaries other than those specifically disclosed in Part (a) of Schedule 6.13, has no
equity investments in any other corporation or entity other than those specifically disclosed in
Part (b) of Schedule 6.13. As of the Closing Date, the existing Guarantors are the only
Material Subsidiaries of the Loan Parties. Any Subsidiary which becomes a Material Subsidiary
during the term of this Agreement will be added as a Guarantor. The number of shares of stock
issued to the owner of each Material Subsidiary is fully and accurately listed on Schedule
6.13.

Section 6.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act.

     (a) No Borrower is engaged or will engage, principally or as one of its important activities,
in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued
by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.

     (b) None of the Company, any Person Controlling the Company, or any Subsidiary (i) is a
“holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a
“holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the
Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an
“investment company” under the Investment Company Act of 1940.

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     Section 6.15 Disclosure. The Company has disclosed to the Administrative Agent and the
Lenders all agreements, instruments and corporate or other restrictions to which it or any of its
Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. No report, financial
statement, certificate or other information furnished (whether in writing or orally) by or on
behalf of any Loan Party to the Administrative Agent or any Lender in connection with the
transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or
under any other Loan Document (in each case, as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial information, the Company
represents only that such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.

     Section 6.16 Compliance with Laws. Each of the Company and each Subsidiary is in compliance
in all material respects with the requirements of all Laws and all orders, writs, injunctions and
decrees applicable to it or to its properties, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply therewith, either
individually or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

     Section 6.17 Intellectual Property; Licenses, Etc. The Company and its Subsidiaries own, or
possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents,
patent rights, franchises, licenses and other intellectual property rights (collectively, “IP
Rights”) that are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person. To the best knowledge of the Company, no
slogan or other advertising device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company or any Subsidiary infringes upon any
rights held by any other Person. Except as specifically disclosed in Schedule 6.17, no
claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the
Company, threatened, which, either individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

     Section 6.18 Representations as to Foreign Obligors. Each of the Company and each Foreign
Obligor represents and warrants to the Administrative Agent and the Lenders that:

     (a) Such Foreign Obligor is subject to civil and commercial Laws with respect to its
obligations under this Agreement and the other Loan Documents to which it is a party (collectively
as to such Foreign Obligor, the “Applicable Foreign Obligor Documents”), and the execution,
delivery and performance by such Foreign Obligor of the Applicable Foreign Obligor Documents
constitute and will constitute private and commercial acts and not public or governmental acts.
Neither such Foreign Obligor nor any of its property has any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction in which
such Foreign Obligor is organized and existing in respect of its obligations under the Applicable
Foreign Obligor Documents.

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     (b) The Applicable Foreign Obligor Documents are in proper legal form under the Laws of the
jurisdiction in which such Foreign Obligor is organized and existing for the enforcement thereof
against such Foreign Obligor under the Laws of such jurisdiction, and to ensure the legality,
validity, enforceability, priority or admissibility in evidence of the Applicable Foreign Obligor
Documents. It is not necessary to ensure the legality, validity, enforceability, priority or
admissibility in evidence of the Applicable Foreign Obligor Documents that the Applicable Foreign
Obligor Documents be filed, registered or recorded with, or executed or notarized before, any court
or other authority in the jurisdiction in which such Foreign Obligor is organized and existing or
that any registration charge or stamp or similar tax be paid on or in respect of the Applicable
Foreign Obligor Documents or any other document, except for (i) any such filing, registration,
recording, execution or notarization as has been made or is not required to be made until the
Applicable Foreign Obligor Document or any other document is sought to be enforced and (ii) any
charge or tax as has been timely paid.

     (c) There is no tax, levy, impost, duty, fee, assessment or other governmental charge, or any
deduction or withholding, imposed by any Governmental Authority in or of the jurisdiction in which
such Foreign Obligor is organized and existing either (i) on or by virtue of the execution or
delivery of the Applicable Foreign Obligor Documents or (ii) on any payment to be made by such
Foreign Obligor pursuant to the Applicable Foreign Obligor Documents, except as has been disclosed
to the Administrative Agent.

     (d) The execution, delivery and performance of the Applicable Foreign Obligor Documents
executed by such Foreign Obligor are, under applicable foreign exchange control regulations of the
jurisdiction in which such Foreign Obligor is organized and existing, not subject to any
notification or authorization except (i) such as have been made or obtained or (ii) such as cannot
be made or obtained until a later date (provided that any notification or authorization
described in clause (ii) shall be made or obtained as soon as is reasonably practicable).

     Section 6.19 Projected Financial Statements. The Borrower has furnished to the Lender a
projected combined balance sheet, income and cash flow statement of the Company and its
Subsidiaries, together with covenant compliance projections for the period through 2008 (the
“Financial Projections”). The Financial Projections are correct and complete and represent
the Company’s best estimate of the consolidated financial condition of the Company and its
Subsidiaries for the period covered thereby. The Financial Projections are based upon available
information and assumptions that management of the Company believes are reasonable.

     Section 6.20 Employee Relations. Except as disclosed on Schedule 6.20 attached hereto
and made a part hereof, (a) neither the Borrower nor any Subsidiary thereof nor any of the
Borrower’s or Subsidiary’s employees is subject to any collective bargaining agreement, (b) no
petition for certification or union election is pending with respect to the employees of the
Borrower or any Subsidiary and no union or collective bargaining unit has sought such certification
or recognition with respect to the employees of the Borrower, (c) there are no strikes, slowdowns,
work stoppages or controversies pending or, to the best knowledge of the Borrower after due
inquiry, threatened between the Borrower and its employees, and (d) neither the Borrower nor any of
its Subsidiaries is subject to an employment contract, severance agreement, commission contract,
consulting agreement or bonus agreement. Hours worked and

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payments made to the employees of the Borrower have not been in violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters. All payments due from the
Borrower or for which any claim may be made against the Borrower, on account of wages and employee
and retiree health and welfare insurance and other benefits have been paid or accrued as a
liability on its books. The consummation of the transactions contemplated by this Agreement or any
of the other Financing Documents will not give rise to a right of termination or right of
re-negotiation on the part of any union under any collective bargaining agreement to which the
Borrower is a party or by which it is bound.

     Section 6.21 Management Agreements. All of the existing agreements for management or
operation of a Senior Living Facility by any Loan Party or any of their Subsidiaries, are listed on
a list provided to the Administrative Agent. Except as disclosed to the Administrative Agent, the
negative pledge for the benefit to the Administrative Agent on behalf of the Lenders with respect
to such management agreements as set forth in Section 8.1 hereof is not prohibited by any
financing arrangements or by the terms of the management agreements themselves.

ARTICLE VII

AFFIRMATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the
Company shall, and shall (except in the case of the covenants set forth in Sections 6.1,
6.2, and 6.3) cause each Subsidiary to:

     Section 7.1 Financial Statements. Deliver to the Administrative Agent and each Lender, in
form and detail satisfactory to the Administrative Agent and the Required Lenders:

     (a) within ten (10) Business Days after the same are available or filed with the SEC, but in
any event within ninety-one (91) days after the end of each fiscal year of the Company a
consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year,
and the related consolidated statements of income or operations, shareholders’ equity and cash
flows for such fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and
accompanied by (i) a report and opinion of an independent certified public accountant of nationally
recognized standing reasonably acceptable to the Administrative Agent, which report and opinion
shall be prepared in accordance with generally accepted auditing standards and applicable
Securities Laws and shall not be subject to any “going concern” or like qualification or exception
or any qualification or exception as to the scope of such audit and (ii) an attestation report of
such Registered Public Accounting Firm as to the Borrower’s internal controls pursuant to Section
404 of Sarbanes-Oxley expressing a conclusion to which the Required Lenders do not object; and

     (b) within ten (10) Business Days after the same are available or filed with the SEC, but in
any event within forty-six (46) days after the end of each of the first three (3) fiscal quarters
of each fiscal year of the Company, a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of

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income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the
portion of the Company’s fiscal year then ended, setting forth in each case in comparative form the
figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, all in reasonable detail, certified by a Responsible Officer
of the Company as fairly presenting the financial condition, results of operations, shareholders’
equity and cash flows of the Company and its Subsidiaries in accordance with GAAP, subject only to
normal year-end audit adjustments and the absence of footnotes.

As to any information contained in materials furnished pursuant to Section 7.2(b), the
Company shall not be separately required to furnish such information under clause (a) or (b) above,
but the foregoing shall not be in derogation of the obligation of the Company to furnish the
information and materials described in clauses (a) and (b) above at the times specified therein.

     (c) Within forty-five (45) days after the end of each fiscal year, financial projections for
the new fiscal year by fiscal quarters.

     Section 7.2 Certificates; Other Information. Deliver to the Administrative Agent and each
Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

     (a) concurrently with the delivery of the financial statements referred to in Section
7.1(a) and (b) a duly completed Compliance Certificate signed by a Responsible Officer
of the Company;

     (b) promptly after any request by the Administrative Agent or any Lender, copies of any
detailed audit reports, management letters or recommendations submitted to the board of directors
(or the audit committee of the board of directors) of the Company by independent accountants in
connection with the accounts or books of the Company or any Subsidiary, or any audit of any of
them;

     (c) promptly after the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of the Company, and copies of
all annual, regular, periodic and special reports and registration statements which the Company may
file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act
of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (d) promptly, and in any event within ten (10) Business Days after receipt thereof by any Loan
Party or any Subsidiary thereof, copies of each notice or other correspondence received from the
SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or
possible investigation or other inquiry by such agency regarding financial or other operational
results of any Loan Party or any Subsidiary thereof; and

     (e) promptly, such additional information regarding the business, financial or corporate
affairs of the Company or any Subsidiary, or compliance with the terms of the Loan Documents, as
the Administrative Agent or any Lender may from time to time reasonably request.

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     Documents required to be delivered pursuant to Section 7.1(a) or Section
7.1(b) or Section 7.2(d) (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed
to have been delivered on the date (i) on which the Company posts such documents, or provides a
link thereto on the Company’s website on the Internet at the website address listed on Schedule
11.2; or (ii) on which such documents are posted on the Company’s behalf on an Internet or
intranet website, if any, to which each Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative Agent); provided
that: (i) the Company shall deliver paper copies of such documents to the Administrative Agent or
any Lender that requests the Company to deliver such paper copies until a written request to cease
delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Company
shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the
posting of any such documents and provide to the Administrative Agent by electronic mail electronic
versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein,
in every instance the Company shall be required to provide paper copies of the Compliance
Certificates required by (a)(a) to the Administrative Agent. Except for such Compliance
Certificates, the Administrative Agent shall have no obligation to request the delivery or to
maintain copies of the documents referred to above, and in any event shall have no responsibility
to monitor compliance by the Company with any such request for delivery, and each Lender shall be
solely responsible for requesting delivery to it or maintaining its copies of such documents.

     Each Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will
make available to the Lenders and the L/C Issuer materials and/or information provided by or on
behalf of such Borrower hereunder (collectively, “Borrower Materials”) by posting the
Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and
(b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive
material non-public information with respect to any Borrower or its securities) (each, a
“Public Lender”). Each Borrower hereby agrees that so long as such Borrower is the issuer
of any outstanding debt or equity securities that are registered or issued pursuant to a private
offering or is actively contemplating issuing any such securities (w) all Borrower Materials that
are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC”
which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page
thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrowers shall be deemed to have
authorized the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat such
Borrower Materials as not containing any material non-public information with respect to the
Borrowers or their respective securities for purposes of United States Federal and state securities
laws (provided, however, that to the extent such Borrower Materials constitute
Information, they shall be treated as set forth in Section 11.7); (y) all Borrower
Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor;” and (z) the Administrative Agent and the Arranger shall be entitled
to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on
a portion of the Platform not designated “Public Investor.”

     Section 7.3 Notices. Promptly notify the Administrative Agent who will thereafter forward a
copy of such notice to each Lender:

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     (a) of the occurrence of any Default;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual
Obligation of the Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or
(iii) the commencement of, or any material development in, any litigation or proceeding affecting
the Company or any Subsidiary, including pursuant to any applicable Environmental Laws;

     (c) of the occurrence of any ERISA Event;

     (d) of any material change in accounting policies or financial reporting practices by the
Company or any Subsidiary;

     (e) of the occurrence of any Internal Control Event;

     (f) of any judicial, administrative or arbitral proceeding pending against any of the
Borrowers or any judicial or administrative proceeding known by the Borrowers to have been
threatened against any of them in a written communication which threatened proceeding, if adversely
decided, could cause a Material Adverse Effect in the Loan Parties taken in the aggregate; and

     (g) of the revocation, suspension, probation, restriction, limitation or refusal to renew, or
any administrative procedure then in process for the revocation, suspension, probation,
restriction, limitation, or refusal to renew, of any License, or the decertification, revocation,
suspension, probation, restriction, limitation, or refusal to renew, or the pending,
decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew or
any administrative procedure then in process for any participation or eligibility in any third
party payor program in which the Borrower or any of its subsidiaries elects to participate,
including, without limitation, Medicare, Medicaid or other private insurer programs or any
accreditation of the Borrower or any of its subsidiaries, or the issuance or pending issuance of
any License for a period of less than twelve (12) months, as a consequence of sanctions imposed by
any Governmental Authority, or the assessment or pending assessment, of any civil or criminal
penalties by any Government Authority, any third party payor or any accreditation organization or
Person, which in any such case would cause a Materially Adverse Effect on the financial condition
or operations of the Borrower or any of its Subsidiaries or an Affiliate as determined by the
Administrative Agent, in its sole but reasonable discretion.

     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible
Officer of the Company setting forth details of the occurrence referred to therein and stating what
action the Company has taken and proposes to take with respect thereto. Each notice pursuant to
Section 7.3(a) shall describe with particularity any and all provisions of this Agreement
and any other Loan Document that have been breached.

     Section 7.4 Payment of Obligations. Pay and discharge as the same shall become due and
payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the same are being

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contested in good faith by appropriate proceedings diligently conducted and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful
claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as
and when due and payable, but subject to any subordination provisions contained in any instrument
or agreement evidencing such Indebtedness.

     Section 7.5 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force
and effect its legal existence and good standing under the Laws of the jurisdiction of its
organization except in a transaction permitted by Section 7.4 or 7.5; (b) take all
reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its
registered patents, trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.

     Section 7.6 Maintenance of Properties. (a) Maintain, preserve and protect all of its material
properties and equipment necessary in the operation of its business in good working order and
condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation
and maintenance of its facilities.

     Section 7.7 Maintenance of Insurance. Maintain with companies having an A.M. Best Rating of
at least A- which are not Affiliates of the Borrower, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by Persons engaged in the
same or similar business, of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons and providing that the insurer will endeavor to give
not less than thirty (30) days’ prior notice to the Administrative Agent of termination, lapse or
cancellation of such insurance. Without limiting the generality of the foregoing, such insurance
shall include coverage for acts of terrorism.

     Section 7.8 Compliance with Laws. Comply in all material respects with the requirements of
all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or
property, except in such instances in which (a) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b)
the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect
on the Loan Parties taken in the aggregate.

     Section 7.9 Books and Records. (a) Maintain proper books of record and account, in which
full, true and correct entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the Company or such
Subsidiary, as the case may be; and (b) maintain such books of record and account in material
conformity with all applicable requirements of any Governmental Authority having regulatory
jurisdiction over the Company or such Subsidiary, as the case may be.

     Section 7.10 Inspection Rights. Permit representatives and independent contractors of the
Administrative Agent to visit and inspect any of its properties or any Senior Living Facility

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managed by a Loan Party accompanied by a representative of the Borrower or other Loan Party or
the owner of the Senior Living Facility, to examine its corporate, financial and operating records,
and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts
with its directors, officers, and independent public accountants, all at the expense of the
Borrower and all at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Borrower sufficient, in the case of a
visit to a Senior Living Facility to coordinate such visit with a representative (which
coordination will not be unreasonably delayed or denied); provided, however, that when an Event of
Default exists the Administrative Agent or any Lender (or any of their respective representatives
or independent contractors) may do any of the foregoing at the expense of the Borrower at any time
during normal business hours and without advance notice.

     Section 7.11 Use of Proceeds. Use the proceeds of the Credit Extensions for general corporate
purposes not in contravention of any Law or of any Loan Document.

     Section 7.12 Conduct of Business and Compliance with Laws; Licensure. Do or cause to be done
all things necessary to obtain, enter into, preserve and to keep in full force and effect its
Licenses, Participation Agreements, and operating agreements and management contracts which are
necessary for the operation of the Senior Living Facilities as contemplated by the Loan Parties,
engage in and continue to engage substantially only in the business of owning and operating Senior
Living Facilities and related services in compliance with all applicable laws of the state in which
the applicable Senior Living Facility is located or any other Governmental Authority having
jurisdiction over such Senior Living Facility, and comply with all applicable Laws, including,
without limitation, regulations issued under the Omnibus Budget Reconciliation Act of 1987
(OBRA’87) (Pub.L.No. 100-203), as amended, and observe the valid requirements of Governmental
Authorities, and perform the terms of all Participation Agreements to which it is a party, the
noncompliance with or the nonobservance of which might materially interfere with the performance of
its Obligations or the proper or prudent conduct of its business or the applicable Property. In
addition, the Borrowers covenant and agree that it will:

     (a) obtain and maintain in full force and effect all Licenses necessary to the acquisition
and/or ownership and/or operation of the Senior Living Facilities including, without limitation,
Licenses and other approvals related to the storage, dispensation, use, prescription and disposal
of drugs, medications and other “controlled substances” and, to the extent offered by the Borrower
or its subsidiaries, the maintenance of cafeteria and other food and beverage facilities or
services, the failure to so obtain and maintain would result in a Material Adverse Effect on the
Borrower, its Subsidiaries or Affiliates, in the aggregate;

     (b) administer, maintain and operate (or cause to be administered, maintained and operated)
each Senior Living Facility as a revenue-producing facility;

     (c) to the extent the Borrower or its Subsidiaries participate in any such programs, maintain
and operate each Senior Living Facility to meet the standards and requirements and to provide
healthcare of such quality and in such manner as would enable the Borrower or its Subsidiaries to
participate in, and provide services in connection with, recognized medical and healthcare
insurance programs;

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     (d) obtain, maintain and comply with all conditions for the continuance of, all Licenses,
including without limitation, Licenses which may at any time be required by the state in which the
applicable Senior Living Facility is located or other appropriate governmental entity, necessary or
desirable for the operation of each Senior Living Facility as contemplated by the Loan Parties, the
failure to so obtain or maintain which would result in a Material Adverse Effect on the Borrower,
its Subsidiaries or Affiliates, in the aggregate; and

     (e) to the extent the Borrower or its Subsidiaries presently participate or in the future will
participate in such programs, obtain, maintain and comply with all conditions for the continuance
of certification from each applicable Governmental Authority that the Borrower or its Subsidiaries
meet all conditions for participation in the Medicare and Medicaid programs.

     Section 7.13 Additional Guarantors. Notify the Administrative Agent at the time that any
Person becomes a Material Subsidiary, and promptly thereafter (and in any event within 30 days),
cause such Person to (a) become a Guarantor by executing and delivering to the Administrative Agent
a counterpart of the Guaranty or such other document as the Administrative Agent shall deem
appropriate for such purpose, and (b) deliver to the Administrative Agent documents of the types
referred to in clauses (iii) and (iv) of Section 5.1(a) and favorable opinions of counsel
to such Person (which shall cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a)), all in form, content and scope
reasonably satisfactory to the Administrative Agent. The foregoing notwithstanding, if the
Administrative Agent confirms in its sole discretion that a Material Subsidiary is prohibited from
guarantying the Credit Facility pursuant to the terms of other financing arrangements, no such
Guaranty shall be required by the Lenders.

     Section 7.14 Financial Covenants. Each of the following financial covenants will be measured
as of the periods ending on the dates indicated below:

     (a) Consolidated Net Worth. The Borrower will at all times maintain, tested as of the
end of each of the Borrower’s fiscal quarters beginning with the quarter ending September 30, 2005,
a Consolidated Net Worth of not less than the sum of $450,000,000 (which is eighty percent (80%) of
Consolidated GAAP shareholder equity as of the date hereof) plus seventy-five percent (75%) of the
net proceeds to the Borrower of any equity capital transaction received during any subsequent
quarter (except for all exercises of employee stock options, issuance or sale of restricted stock
and operation of the employee stock purchase program), less $110,000,000 associated with stock
repurchases.

     (b) Leverage Ratio. The Borrower will maintain, tested as of the end of each of the
Borrower’s fiscal quarters beginning with the quarter ending September 30, 2005, a ratio of Total
Funded Indebtedness to Consolidated EBITDA so that it is not more than 4.25 to 1.0.

     (c) Fixed Charge Coverage Ratio. The Borrower will maintain, tested as of the end of
each of the Borrower’s fiscal quarters beginning with the quarter ending September 30, 2005, a
ratio of Consolidated EBITDAR to Consolidated Fixed Charges of not less than 1.75 to 1.0.

ARTICLE VIII

NEGATIVE COVENANTS

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     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the
Company shall not, nor shall it permit any Subsidiary to, directly or indirectly:

     Section 8.1 Liens. Create, incur, assume or suffer to exist any Lien upon any asset of the
Loan Parties, any Subsidiary, Affiliate or any entity which is the subject of a Development Joint
Venture Investment except for the following permitted Liens:

     (a) Liens pursuant to any Loan Document;

     (b) Liens for taxes not yet due or which are being contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP;

     (c) Liens securing judgments for the payment of money not constituting an Event of Default
under Section 9.1(h) or securing appeal or other surety bonds related to such judgments;

     (d) Liens on real property and improvements constituting Senior Living Facilities arising from
the financing of such Senior Living Facility or Facilities in the ordinary course of business
including but not limited to financing of construction or development which do not result in a
default under any financial covenant of the Borrower;

     (e) Assignment of an agreement for the management or operation of a Senior Living Facility by
any Loan Party, including Sunrise Senior Living Management, Inc. or Sunrise Senior Living Services,
Inc. in connection with the financing of such Senior Living Facility; and

     (f) Liens listed on Schedule 7.1 attached hereto.

Section 8.2 Certain Investments.

     (a) Purchase, acquire hold or otherwise make Investments in the following in excess of 40% of
the Company’s consolidated total assets as determined under GAAP:

          (i) Investments held by the Borrower or any Subsidiary consisting of unimproved land held on
its balance sheet for a period in excess of eighteen (18) months;

          (ii) Investments held by the Borrower or any Subsidiary consisting of Senior Living Facilities
held on its balance sheet that are under construction or for which a certificate of occupancy has
not been issued or operations have not commenced for a period in excess of eighteen (18) months;

          (iii) Development Joint Venture Investments;

     (b) The investments described in Section 8.2(a)(i) may not exceed ten percent (10%) of
the Borrower’s consolidated total assets as determined under GAAP.

     (c) Purchase, acquire or hold Investments in marketable securities other than marketable
securities rated A or better (or equivalent) with maturities of one (1) year or less.

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     Section 8.3 Indebtedness. The following restrictions on indebtedness shall apply:

     (a) Excluding REIT Mezz Debt (as hereinafter defined) unsecured indebtedness may not exceed
$25,000,000; and

     (b) REIT Mezz Debt may not exceed $65,000,000. “REIT Mezz Debt” means indebtedness
incurred to the Sunrise REIT covering a portion of the development costs of projects to be built by
the Company or its Subsidiary expressly subordinate to the Loan and subject to a call option in
favor of the Company upon issuance of Certificate of Occupancy for the applicable project.

     Section 8.4 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another
Person, or Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any
Person, except that, so long as no Default exists or would result therefrom:

     (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall
be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided
that when any Guarantor is merging with another Subsidiary, the Guarantor shall be the continuing
or surviving Person; and

     (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the
transferor in such a transaction is a Guarantor, then the transferee must either be the Borrower or
a Guarantor.

     Section 8.5 Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:

     (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in
the ordinary course of business;

     (b) Dispositions of inventory in the ordinary course of business;

     (c) Dispositions of equipment or real property to the extent that (i) such property is
exchanged for credit against the purchase price of similar replacement property or (ii) the
proceeds of such Disposition are reasonably promptly applied to the purchase price of such
replacement property;

     (d) Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned
Subsidiary; provided that if the transferor of such property is a Guarantor, the transferee
thereof must either be the Borrower or a Guarantor;

     (e) Dispositions permitted by Section 8.4;

     (f) non-exclusive licenses of IP Rights in the ordinary course of business and substantially
consistent with past practice for terms not exceeding five years;

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     (g) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this
Section 8.5; provided that (i) at the time of such Disposition, no Default shall
exist or would result from such Disposition and (ii) the aggregate book value of all property
Disposed of in reliance on this clause (g) in any fiscal year shall not exceed $5,000,000; and

     (h) Dispositions of real property to a Development Joint Venture;

     provided, however, that any Disposition pursuant to clauses (a) through (h)
shall be for fair market value, except that the Company may cause a Subsidiary to contribute the
real property to a Development Joint Venture at cost.

     Section 8.6 Restricted Payments.

     Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so, except that:

     (a) each Subsidiary may make Restricted Payments to the Borrower and to wholly-owned
Subsidiaries (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the
Borrower and any Subsidiary and to each other owner of capital stock or other Equity Interests of
such Subsidiary on a pro rata basis based on their relative ownership interests);

     (b) the Borrower and each Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity Interests of such Person;

     (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire shares of its
common stock or other common Equity Interests or warrants or options to acquire any such shares
with the proceeds received from the substantially concurrent issue of new shares of its common
stock or other common Equity Interests;

     (d) the Borrower may declare or pay cash dividends to its stockholders provided such
dividends and redemptions do not exceed $50,000,000 in the aggregate in any twelve-month period and
purchase, redeem or otherwise acquire shares of its capital stock or warrants, rights or options to
acquire any such shares for cash and provided that immediately after giving effect to such
proposed action, no Default would exist and provided that the Borrower may redeem, retire,
issue a tender offer for or otherwise acquire any or all of its Convertible Debt so long as
immediately after giving effect to such proposed action, no Default would exist.

     Section 8.7 Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by the Company and its Subsidiaries
on the date hereof or any business substantially related or incidental thereto.

     Section 8.8 Transactions with Affiliates. Enter into any transaction of any kind with any
Affiliate of the Company, whether or not in the ordinary course of business, other than on fair and
reasonable terms substantially as favorable to the Company or such Subsidiary as would be
obtainable by the Company or such Subsidiary at the time in a comparable arm’s length transaction
with a Person other than an Affiliate, provided that the foregoing restriction shall not

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apply to transactions between or among the Company and any of its wholly-owned Subsidiaries or
between and among any wholly-owned Subsidiaries.

     Section 8.9 Burdensome Agreements. Enter into any Contractual Obligation (other than this
Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make
Restricted Payments to the Company, any Designated Borrower or any Guarantor or to otherwise
transfer property to the Company, any Designated Borrower or any Guarantor, (ii) of any Subsidiary
to Guarantee the Indebtedness of the Company or (iii) of the Company or any Subsidiary to create,
incur, assume or suffer to exist Liens on property of such Person; provided,
however, that this clause (iii) shall not prohibit any negative pledge incurred or provided
in favor of any holder of Indebtedness permitted under Section 8.3 solely to the extent any
such negative pledge relates to the property financed by or the subject of such Indebtedness; or
(b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to
secure another obligation of such Person.

     Section 8.10 Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock
(within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

ARTICLE IX

EVENTS OF DEFAULT AND REMEDIES

     Section 9.1 Events of Default. Any of the following shall constitute an Event of Default:

     (a) Non-Payment. Any Borrower or any other Loan Party fails to pay (i) when and as
required to be paid herein, and in the currency required hereunder, any amount of principal of any
Loan or any L/C Obligation, or (ii) within three (3) days after written notice that the same has
become due, any interest on any Loan or on any L/C Obligation, or any Unused Fees, L/C Fee or other
fee due hereunder, or (iii) within five (5) days after written notice that the same has become due,
any other amount payable hereunder or under any other Loan Document; or

     (b) [INTENTIONALLY DELETED]

     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or
agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part
to be performed or observed and such failure continues for thirty (30) days after written notice
thereof; or

     (d) Representations and Warranties. Any representation, warranty, certification or
statement of fact made or deemed made by or on behalf of the Company or any other Loan Party
herein, in any other Loan Document, or in any document delivered in connection herewith or
therewith shall be incorrect or misleading when made or deemed made; or

     (e) Cross-Default. (i) The Company or any Subsidiary (A) fails to make any payment
when due (whether by scheduled maturity, required prepayment, acceleration, demand, or

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otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and
Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors under any combined or
syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or
perform any other agreement or condition relating to any such Indebtedness or Guarantee or
contained in any instrument or agreement evidencing, securing or relating thereto, or any other
event occurs, the effect of which default or other event is to cause, or to permit the holder or
holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such
Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there
occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract)
resulting from (A) any event of default under such Swap Contract as to which the Company or any
Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event
(as so defined) under such Swap Contract as to which the Company or any Subsidiary is an Affected
Party (as so defined) and, in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than the Threshold Amount; or

     (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries institutes
or consents to the institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or
for all or any material part of its property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the application or consent of
such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or
any proceeding under any Debtor Relief Law relating to any such Person or to all or any material
part of its property is instituted without the consent of such Person and continues undismissed or
unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

     (g) Inability to Pay Debts; Attachment. (i) The Company or any Subsidiary becomes
unable or admits in writing its inability or fails generally to pay its debts as they become due,
or (ii) any writ or warrant of attachment or execution or similar process is issued or levied
against all or any material part of the property of any such Person and is not released, vacated or
fully bonded within forty-five (45) days after its issue or levy; or

     (h) Judgments. There is entered against the Company or any Subsidiary (i) a final
judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount
(to the extent not covered by independent third-party insurance as to which the insurer does not
dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in
either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order,
or (B) there is a period of 10 consecutive days during which a stay of enforcement of such
judgment, by reason of a pending appeal or otherwise, is not in effect; or

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     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer
Plan which has resulted or could reasonably be expected to result in liability of the Company under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of the Threshold Amount, or (ii) the Company or any ERISA Affiliate fails to pay when due,
after the expiration of any applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount
in excess of the Threshold Amount; or

     (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution
and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full
of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other
Person contests in any manner the validity or enforceability of any Loan Document; or any Loan
Party denies that it has any or further liability or obligation under any Loan Document, or
purports to revoke, terminate or rescind any Loan Document; or

     (k) Change of Control. There occurs any Change of Control with respect to the
Company.

     (l) Licenses. There occurs any (a) involuntary, imposed or required revocation,
suspension, probation, restriction, limitation or refusal to renew, or the pending revocation,
suspension, probation, restriction, limitation, of, or refusal to renew, of any license required
for the operation; other than in the ordinary course of business or to the extent that the Loan
Parties deem such action to be, in the exercise of prudent business judgment, in the best interest
of if any of the occurrences described in (a), (b) or (c) would have a Material Adverse Effect on
the business or financial condition of any of the Loan Parties, any (b) decertification,
revocation, suspension, probation, restriction, limitation, or refusal to renew, or the pending
decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew
any participation or eligibility in any third party payor program in which the Loan Parties elect
to participate, including, without limitation, the Medicaid or Medicare programs; or (c) any
issuance or pending issuance of any such license for a period of less than twelve (12) months as a
consequence of any sanctions imposed by any Governmental Authority; or the assessment or pending
assessment, of any civil or criminal penalties by any Governmental Authority, any third party payor
or any accreditation organization or person if any such occurrence will result in a Material
Adverse Effect on the Borrower, its Subsidiaries or Affiliates, in the aggregate. Without limiting
the generality of the foregoing, the failure of the Borrowers to obtain an operating license for
any Facility within sixty (60) days of the issuance of the certificate of occupancy for such Senior
Living Facility if such failure would have a Material Adverse Effect on the business or financial
condition of any of the Loan Parties.

     Section 9.2 Remedies Upon Event of Default. If any Event of Default occurs and is continuing,
the Administrative Agent shall, at the request of, or may, with the consent of, the Required
Lenders, take any or all of the following actions:

     (a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer
to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be
terminated;

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     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrowers;

     (c) require that the Company Cash Collateralize the L/C Obligations (in an amount equal to the
then Outstanding Amount thereof); and

     (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to any Borrower under the Bankruptcy Code of the United States, the
obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit
Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and
all interest and other amounts as aforesaid shall automatically become due and payable, and the
obligation of the Company to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case without further act of the Administrative Agent or any
Lender.

     Section 9.3 Application of Funds. After the exercise of remedies provided for in Section
9.2 (or after the Loans have automatically become immediately due and payable and the L/C
Obligations have automatically been required to be Cash Collateralized as set forth in the proviso
to Section 9.2), any amounts received on account of the Obligations shall be applied by the
Administrative Agent in the following order:

     First, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of counsel to the
Administrative Agent and amounts payable under Article III) payable to the Administrative
Agent in its capacity as such;

     Second, to payment of that portion of the Obligations constituting fees, indemnities
and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders
and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders
and the L/C Issuer and amounts payable under Article III), ratably among them in proportion
to the respective amounts described in this clause Second payable to them;

     Third, to payment of that portion of the Obligations constituting accrued and unpaid
Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations, ratably
among the Lenders and the L/C Issuer in proportion to the respective amounts described in this
clause Third payable to them;

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of
the Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuer in proportion to the
respective amounts described in this clause Fourth held by them;

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     Fifth, to the Administrative Agent for the account of the L/C Issuer, to Cash
Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters
of Credit; and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Company or as otherwise required by Law.

Subject to Section 2.3(c), amounts used to Cash Collateralize the aggregate undrawn amount
of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings
under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral
after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be
applied to the other Obligations, if any, in the order set forth above.

ARTICLE X

ADMINISTRATIVE AGENT

Section 10.1 Appointment and Authority.

     Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on
its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes
the Administrative Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto. The provisions of this Article are solely for the
benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither any Borrower nor
any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

     Section 10.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder
shall have the same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise requires, include the
Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and
its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with the Borrowers or any
Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder
and without any duty to account therefor to the Lenders.

     Section 10.3 Exculpatory Provisions. The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Administrative Agent:

     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;

     (b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be

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expressly provided for herein or in the other Loan Documents), provided that the
Administrative Agent shall not be required to take any action that, in its opinion or the opinion
of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan
Document or applicable law; and

     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
any of the Borrowers or any of their respective Affiliates that is communicated to or obtained by
the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in Section 11.1 and Section 11.2) or
(ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent
shall be deemed not to have knowledge of any Default unless and until notice describing such
Default is given to the Administrative Agent by the Company, a Lender or the L/C Issuer.

     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article V or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.

     Section 10.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing (including any electronic message,
Internet or intranet website posting or other distribution) believed by it to be genuine and to
have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of
Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the
Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C
Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender
or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel (who may be counsel for the Company),
independent accountants and other experts selected by it, and shall not be liable for any action
taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

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     Section 10.5 Delegation of Duties. The Administrative Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan Document by or through
any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any
such sub-agent may perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions of this Article shall apply
to any such sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Administrative Agent.

     Section 10.6 Resignation of Administrative Agent. The Administrative Agent may at any time
give notice of its resignation to the Lenders, the L/C Issuer and the Company. Upon receipt of any
such notice of resignation, the Required Lenders shall have the right, in consultation with the
Company (and if no Event of Default has occurred and is continuing, with the consent of the
Company, to appoint a successor from among the Lenders, which shall be a bank with an office in the
United States, or an Affiliate of any such bank with an office in the United States. If no such
successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the Lenders and the L/C
Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above;
provided that if the Administrative Agent shall notify the Company and the Lenders that no
qualifying Person has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan Documents (except
that in the case of any Collateral held by the Administrative Agent on behalf of the Lenders or the
L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to
hold such Collateral until such time as a successor Administrative Agent is appointed) and (2) all
payments, communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until
such time as the Required Lenders appoint a successor Administrative Agent as provided for above in
this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder,
such successor shall succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent
shall be discharged from all of its duties and obligations hereunder or under the other Loan
Documents (if not already discharged therefrom as provided above in this Section). The fees
payable by the Company to a successor Administrative Agent shall be the same as those payable to
its predecessor unless otherwise agreed between the Company and such successor. After the retiring
Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of
this Article and Section 10.4 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as
Administrative Agent.

     Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also
constitute its resignation as L/C Issuer and Swing Line Lender. Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties of the retiring

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L/C Issuer and Swing Line Lender, (b) the retiring L/C Issuer and Swing Line Lender shall be
discharged from all of their respective duties and obligations hereunder or under the other Loan
Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the
Letters of Credit, if any, outstanding at the time of such succession or make other arrangements
satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C
Issuer with respect to such Letters of Credit.

     Section 10.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the L/C
Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent
or any other Lender or any of their Related Parties and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Lender or any of their Related Parties and based on such
documents and information as it shall from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this Agreement, any other Loan
Document or any related agreement or any document furnished hereunder or thereunder.

     Section 10.8 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of
the Bookrunners, Arrangers or other titles as necessary listed on the cover page hereof shall have
any powers, duties or responsibilities under this Agreement or any of the other Loan Documents,
except in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C Issuer
hereunder.

     Section 10.9 Administrative Agent May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable
as herein expressed or by declaration or otherwise and irrespective of whether the Administrative
Agent shall have made any demand on any Borrower) shall be entitled and empowered, by intervention
in such proceeding or otherwise

     (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid
and to file such other documents as may be necessary or advisable in order to have the claims of
the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the
Administrative Agent and their respective agents and counsel and all other amounts due the Lenders,
the L/C Issuer and the Administrative Agent under Section 2.3(i), and Section
2.3(j), Section 2.9 and Section 10.4) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such
payments to the Administrative Agent and, in the event that the Administrative Agent shall

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consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and
advances of the Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 2.9 and Section 11.4.

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

     Section 10.10 Collateral and Guaranty Matters. The Lenders and the L/C Issuer irrevocably
authorize the Administrative Agent, at its option and in its discretion,

     (a) to release any Lien on any property granted to or held by the Administrative Agent under
any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all
Obligations (other than contingent indemnification obligations) and the expiration or termination
of all Letters of Credit, (ii) that is sold or to be sold as part of or in connection with any sale
permitted hereunder or under any other Loan Document, or (iii) subject to Section 11.1, if
approved, authorized or ratified in writing by the Required Lenders;

     (b) to subordinate any Lien on any property granted to or held by the Administrative Agent
under any Loan Document to the holder of any Lien on such property that is permitted by Section
8.1; and

     (c) to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty if
such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its interest in particular
types or items of property, or to release any Subsidiary Guarantor from its obligations under the
Guaranty pursuant to this Section 10.10.

ARTICLE XI

MISCELLANEOUS

     Section 11.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement or
any other Loan Document, no consent to any departure by the Borrower or any other Loan Party
therefrom, no release of Collateral or subordination of Liens thereon and no consent to Liens on
assets of a Loan Party or as otherwise restricted by the provisions of Section 9.1 hereof
shall be effective unless in writing signed by the Required Lenders and the Borrower or the
applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each
such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment, waiver or
consent shall:

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     (a) waive any condition set forth in Section 5.1(a) without the written consent of
each Lender;

     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 2.6) without the written consent of such Lender;

     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment of
principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under
any other Loan Document without the written consent of each Lender directly affected thereby;

     (d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C
Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.1) any fees
or other amounts payable hereunder or under any other Loan Document without the written consent of
each Lender directly affected thereby; provided, however, that only the consent of
the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive
any obligation of any Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii)
to amend any financial covenant hereunder (or any defined term used therein) or the method of
computation of any financial ratio even if the effect of such amendment would be to reduce the rate
of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

     (e) change Section 2.13 or Section 8.3 in a manner that would alter the pro
rata sharing of payments required thereby without the written consent of each Lender;

     (f) amend Section 1.5, Section 1.6 or the definition of “Alternative Currency”
without the written consent of each Lender;

     (g) change any provision of this Section or the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any consent hereunder
without the written consent of each Lender; or

     (h) release any Guarantor without the written consent of each Lender;

and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights
or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of
Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in addition to the Lenders required above,
affect the rights or duties of the Administrative Agent under this Agreement or any other Loan
Document; and (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a
writing executed only by the parties thereto. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent
hereunder, except that the Commitment of such Lender may not be increased or extended without the
consent of such Lender.

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Section 11.2 Notices; Effectiveness; Electronic Communication.

     (a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subsection (b) below), all
notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:

          (i) if to the Borrowers, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to
the address, telecopier number, electronic mail address or telephone number specified for such
Person on Schedule 11.2; and

          (ii) if to any other Lender, to the address, telecopier number, electronic mail address or
telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next business day for the recipient).
Notices delivered through electronic communications to the extent provided in subsection (b) below,
shall be effective as provided in such subsection (b).

     (b) Electronic Communications. Notices and other communications to the Lenders and
the L/C Issuer hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative
Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C
Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified
the Administrative Agent that it is incapable of receiving notices under such Article by electronic
communication. The Administrative Agent or the Company may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be limited to
particular notices or communications.

     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function, as available,
return e-mail or other written acknowledgement), provided that if such notice or other
communication is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on the next business day
for the recipient, and (ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as
described in the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE

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ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY
OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In
no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent
Parties”) have any liability to any Borrower, any Lender, the L/C Issuer or any other Person
for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or
otherwise) arising out of any Borrower’s or the Administrative Agent’s transmission of Borrower
Materials through the Internet, except to the extent that such losses, claims, damages, liabilities
or expenses are determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of such Agent Party;
provided, however, that in no event shall any Agent Party have any liability to any
Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental,
consequential or punitive damages (as opposed to direct or actual damages).

     (d) Change of Address, Etc. Each of the Borrowers, the Administrative Agent, the L/C
Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices
and other communications hereunder by notice to the other parties hereto. Each other Lender may
change its address, telecopier or telephone number for notices and other communications hereunder
by notice to the Company, the Administrative Agent, the L/C Issuer and the Swing Line Lender. In
addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that
the Administrative Agent has on record (i) an effective address, contact name, telephone number,
telecopier number and electronic mail address to which notices and other communications may be sent
and (ii) accurate wire instructions for such Lender.

     (e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative
Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including
telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of
any Borrower even if (i) such notices were not made in a manner specified herein, were incomplete
or were not preceded or followed by any other form of notice specified herein, or (ii) the terms
thereof, as understood by the recipient, varied from any confirmation thereof. The Company shall
indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of
them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on
each notice purportedly given by or on behalf of any Borrower. All telephonic notices to and other
telephonic communications with the Administrative Agent may be recorded by the Administrative
Agent, and each of the parties hereto hereby consents to such recording.

     Section 11.3 No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative
Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,

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remedies, powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

Section 11.4 Expenses; Indemnity; Damage Waiver.

     (a) Costs and Expenses. The Company shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent), in connection with the
syndication of the credit facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket
expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees,
charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C
Issuer), in connection with the enforcement or protection of its rights (A) in connection with this
Agreement and the other Loan Documents, including its rights under this Section, or (B) in
connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable
out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of
such Loans or Letters of Credit.

     (b) Indemnification by the Company. The Company shall indemnify the Administrative
Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of
the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related
expenses (including the reasonable fees, charges and disbursements of any counsel for any
Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by
any Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or
thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related
Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or
Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the
L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii)
any actual or alleged presence or release of Hazardous Materials on or from any property owned or
operated by any Borrower or any of its Subsidiaries, or any Environmental Liability related in any
way to any Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by the Company or any other
Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or willful misconduct
of such Indemnitee or (y) result from a claim brought by the

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Company or any other Loan Party against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Loan Document, if the Company or such other
Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined
by a court of competent jurisdiction.

     (c) Reimbursement by Lenders. To the extent that the Company for any reason fails to
indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it
to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any
of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender’s Applicable
Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment
is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified
loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent (or any such sub-agent) or the L/C Issuer in its capacity as such,
or against any Related Party of any of the foregoing acting for the Administrative Agent (or any
such sub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders
under this subsection (c) are subject to the provisions of Section 2.12(d).

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, no Borrower shall assert, and hereby waives, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive damages (as opposed to
direct or actual damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the transactions
contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.
No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the
use by unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

     (e) Payments. All amounts due under this Section shall be payable not later than ten
Business Days after demand therefor.

     (f) Survival. The agreements in this Section shall survive the resignation of the
Administrative Agent and the L/C Issuer, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

     Section 11.5 Payments Set Aside. To the extent that any payment by or on behalf of any
Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative
Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds
of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement entered into by the
Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect

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as if such payment had not been made or such setoff had not occurred, and (b) each Lender and
the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share
(without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made at a rate per annum
equal to the applicable Overnight Rate from time to time in effect, in the applicable currency of
such recovery or payment. The obligations of the Lenders and the L/C Issuer under clause (b) of
the preceding sentence shall survive the payment in full of the Obligations and the termination of
this Agreement.

Section 11.6 Successors and Assigns.

     (a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Administrative Agent and
each Lender and no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of
this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of
this Section, or (iii) by way of pledge or assignment of a security interest subject to the
restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by
any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their respective successors
and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section
and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative
Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

     (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans (including for purposes of this subsection (b),
participations in L/C Obligations and in Swing Line Loans) at the time owing to it);
provided that:

          (i) except in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a
Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate
amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the
Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment, determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000
unless each of the Administrative Agent and, so long as no Event of Default has occurred and is
continuing, the Company otherwise consents (each such consent not to be unreasonably withheld or
delayed); provided, however, that concurrent assignments to members of an Assignee
Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee
(or to an Eligible Assignee and

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members of its Assignee Group) will be treated as a single assignment for purposes of
determining whether such minimum amount has been met;

          (ii) each partial assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the
Commitment assigned, except that this clause (ii) shall not apply to rights in respect of Swing
Line Loans;

          (iii) any assignment of a Commitment must be approved by the Administrative Agent, the L/C
Issuer and the Swing Line Lender unless the Person that is the proposed assignee is itself a Lender
(whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and

          (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Assumption, together with a processing and recordation fee in the amount, if any,
required as set forth in Schedule 11.6, and the Eligible Assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)
of this Section, from and after the effective date specified in each Assignment and Assumption, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations
under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be
entitled to the benefits of Sections 3.1, 3.4, 3.5, and 11.4 with
respect to facts and circumstances occurring prior to the effective date of such assignment. Upon
request, each Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.
Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not
comply with this subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with subsection (d) of this
Section.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”). The entries
in the Register shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by each of the Borrowers and the L/C Issuer at any
reasonable time and from time to time upon reasonable prior notice. In addition, at any time that
a request for a consent for a material or substantive change to the Loan Documents

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is pending, any Lender may request and receive from the Administrative Agent a copy of the
Register.

     (d) Participations. Any Lender may at any time, without the consent of, or notice to,
any Borrower or the Administrative Agent, sell participations to any Person (other than a natural
person or the Company or any of the Company’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i)
such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of such obligations and
(iii) the Borrowers, the Administrative Agent, the Lenders and the L/C Issuer shall continue to
deal solely and directly with such Lender in connection with such Lender’s rights and obligations
under this Agreement.

     Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in the first proviso to
Section 10.1 that affects such Participant. Subject to subsection (e) of this Section,
each Borrower agrees that each Participant shall be entitled to the benefits of Sections
3.1, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 11.8 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.13 as though it
were a Lender.

     (e) Limitation upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.1 or 3.4 than the applicable Lender
would have been entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the Company’s prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to
the benefits of Section 3.1 unless the Company is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with
Section 3.1(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Note(s), if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender
from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.

     (g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of

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a paper-based recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and National Commerce
Act, the New York State Electronic Signatures and Records Act, or any other similar state laws
based on the Uniform Electronic Transactions Act.

     (h) Resignation as L/C Issuer or Swing Line Lender after Assignment. Notwithstanding
anything to the contrary contained herein, if at any time Bank of America assigns all of its
Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon thirty (30)
days’ notice to the Company and the Lenders, resign as L/C Issuer and/or (ii) upon thirty (30)
days’ notice to the Company, resign as Swing Line Lender. In the event of any such resignation as
L/C Issuer or Swing Line Lender, the Company shall be entitled to appoint from among the Lenders a
successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no
failure by the Company to appoint any such successor shall affect the resignation of Bank of
America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C
Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder
with respect to all Letters of Credit outstanding as of the effective date of its resignation as
L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders
to make Base Rate Committed Loans or fund risk participations in Unreimbursed Amounts pursuant to
Section 2.3(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the
rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it
and outstanding as of the effective date of such resignation, including the right to require the
Lenders to make Base Rate Committed Loans or fund risk participations in outstanding Swing Line
Loans pursuant to Section 2.4(c). Upon the appointment of a successor L/C Issuer and/or
Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be,
and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory
to Bank of America to effectively assume the obligations of Bank of America with respect to such
Letters of Credit.

     Section 11.7 Treatment of Certain Information; Confidentiality. Each of the Administrative
Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents, advisors and
representatives (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the same as those of
this Section, to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction relating to a
Borrower and its obligations, (g) with the consent of the Company or (h) to the

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extent such Information (x) becomes publicly available other than as a result of a breach of
this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or
any of their respective Affiliates on a nonconfidential basis from a source other than the Company.

     For purposes of this Section, “Information” means all information received from the
Company or any Subsidiary relating to the Company or any Subsidiary or any of their respective
businesses, other than any such information that is available to the Administrative Agent, any
Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Company or any
Subsidiary, provided that, in the case of information received from the Company or any
Subsidiary after the date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

     Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the
Information may include material non-public information concerning the Company or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of material
non-public information and (c) it will handle such material non-public information in accordance
with applicable Law, including Federal and state securities Laws.

     Section 11.8 Right of Setoff. In addition to any rights and remedies of the Lenders provided
by law, upon the occurrence and during the continuance of any Event of Default, each Lender is
authorized at any time and from time to time, without prior notice to the Borrower or any other
Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each
Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender to or for the credit or the account of the
respective Loan Parties against any and all Obligations owing to such Lender hereunder or under any
other Loan Document, now or hereafter existing, irrespective of whether or not the Administrative
Agent or such Lender shall have made demand under this Agreement or any other Loan Document and
although such Obligations may be contingent or unmatured or denominated in a currency different
from that of the applicable deposit or indebtedness. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.

     Section 11.9 Interest Rate Limitation. Notwithstanding anything to the contrary contained in
any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed
the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”).
If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the
Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds
such unpaid principal, refunded to the Company. In determining whether the interest contracted
for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such
Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not
principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments
and the effects thereof, and (c) amortize, prorate, allocate,

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and spread in equal or unequal parts the total amount of interest throughout the contemplated
term of the Obligations hereunder.

     Section 11.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.1, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof
that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.

     Section 11.11 Survival of Representations and Warranties. All representations and warranties
made hereunder and in any other Loan Document or other document delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by the Administrative
Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and
shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

     Section 11.12 Severability. If any provision of this Agreement or the other Loan Documents is
held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.

     Section 11.13 Replacement of Lenders. If any Lender requests compensation under Section
3.4, or if any Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.1, if any Lender
is a Defaulting Lender or if any other circumstance exists hereunder that gives the Company the
right to replace a Lender as a party hereto, then the Company may, at its sole expense and effort,
upon notice to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 11.6), all of its interests, rights and obligations under
this Agreement and the related Loan Documents to an assignee that shall assume such obligations
(which assignee may be another Lender, if a Lender accepts such assignment), provided that:

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     (a) the Company shall have paid (or caused a Designated Borrower to pay) to the Administrative
Agent the assignment fee specified in Section 11.6(b);

     (b) such Lender shall have received payment of an amount equal to the outstanding principal of
its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder and under the other Loan Documents (including any amounts under Section 3.5)
from the assignee (to the extent of such outstanding principal and accrued interest and fees) or
the Company or applicable Designated Subsidiary (in the case of all other amounts);

     (c) in the case of any such assignment resulting from a claim for compensation under
Section 3.4 or payments required to be made pursuant to Section 3.1, such
assignment will result in a reduction in such compensation or payments thereafter; and

     (d) such assignment does not conflict with applicable Laws.

     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to
require such assignment and delegation cease to apply.

     Section 11.14 Tax Forms.

     (a) (i) Each Lender that is not a “United States person” within the meaning of Section
7701(a)(30) of the Code (a “Foreign Lender”) shall deliver to the Administrative Agent,
prior to receipt of any payment subject to withholding under the Code (or upon accepting an
assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or
any successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or
reduction of, withholding tax on all payments to be made to such Foreign Lender by the Borrower
pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments
to be made to such Foreign Lender by the Borrower pursuant to this Agreement) or such other
evidence satisfactory to the Borrower and the Administrative Agent that such Foreign Lender is
entitled to an exemption from, or reduction of, U.S. withholding tax, including any exemption
pursuant to Section 881(c) of the Code. Thereafter and from time to time, each such Foreign Lender
shall (A) promptly submit to the Administrative Agent such additional duly completed and signed
copies of one of such forms (or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to the Borrower and the
Administrative Agent of any available exemption from or reduction of, United States withholding
taxes in respect of all payments to be made to such Foreign Lender by the Borrower pursuant to this
Agreement, (B) promptly notify the Administrative Agent of any change in circumstances which would
modify or render invalid any claimed exemption or reduction, and (C) take such steps as shall not
be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement
of applicable Laws that the Borrower make any deduction or withholding for taxes from amounts
payable to such Foreign Lender.

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          (ii) Each Foreign Lender, to the extent it does not act or ceases to act for its own account
with respect to any portion of any sums paid or payable to such Lender under any of the Loan
Documents (for example, in the case of a typical participation by such Lender), shall deliver to
the Administrative Agent on the date when such Foreign Lender ceases to act for its own account
with respect to any portion of any such sums paid or payable, and at such other times as may be
necessary in the determination of the Administrative Agent (in the reasonable exercise of its
discretion), (A) two (2) duly signed completed copies of the forms or statements required to be
provided by such Lender as set forth above, to establish the portion of any such sums paid or
payable with respect to which such Lender acts for its own account that is not subject to U.S.
withholding tax, and (B) two (2) duly signed completed copies of IRS Form W-8IMY (or any successor
thereto), together with any information such Lender chooses to transmit with such form, and any
other certificate or statement of exemption required under the Code, to establish that such Lender
is not acting for its own account with respect to a portion of any such sums payable to such
Lender.

          (iii) The Borrower shall not be required to pay any additional amount to any Foreign Lender
under Section 3.1 (A) with respect to any Taxes required to be deducted or withheld on the
basis of the information, certificates or statements of exemption such Lender transmits with an IRS
Form W-8IMY pursuant to this Section 11.14(a) or (B) if such Lender shall have failed to
satisfy the foregoing provisions of this Section 11.14(a); provided that if such
Lender shall have satisfied the requirement of this Section 11.14(a) on the date such
Lender became a Lender or ceased to act for its own account with respect to any payment under any
of the Loan Documents, nothing in this Section 11.14(a) shall relieve the Borrower of its
obligation to pay any amounts pursuant to Section 3.1 in the event that, as a result of any
change in any applicable law, treaty or governmental rule, regulation or order, or any change in
the interpretation, administration or application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a subsequent date establishing the
fact that such Lender or other Person for the account of which such Lender receives any sums
payable under any of the Loan Documents is not subject to withholding or is subject to withholding
at a reduced rate.

          (iv) The Administrative Agent may, without reduction, withhold any Taxes required to be
deducted and withheld from any payment under any of the Loan Documents with respect to which the
Borrower is not required to pay additional amounts under this Section 11.14(a).

     (b) Upon the request of the Administrative Agent, each Lender that is a “United States person”
within the meaning of Section 7701(a)(30) of the Code shall deliver to the Administrative Agent two
duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the
Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to
the applicable back-up withholding tax imposed by the Code, without reduction.

     (c) If any Governmental Authority asserts that the Administrative Agent did not properly
withhold or backup withhold, as the case may be, any tax or other amount from payments made to or
for the account of any Lender, such Lender shall indemnify the Administrative Agent therefor,
including all penalties and interest, any taxes imposed by any

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jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs
and expenses (including Attorney Costs) of the Administrative Agent. The obligation of the Lenders
under this Section shall survive the termination of the Aggregate Commitments, repayment of all
other Obligations hereunder and the resignation of the Administrative Agent.

     Section 11.15 Governing Law.

     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
COMMONWEALTH OF VIRGINIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.

     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF VIRGINIA SITTING IN FAIRFAX COUNTY OR OF THE
UNITED STATES FOR THE EASTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE
ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN
DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY THE LAW OF SUCH STATE.

     Section 11.16 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter
defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies
the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and
record information that identifies the Borrowers, which information includes the name and address
of each Borrower and other information that will allow such Lender or the Administrative Agent, as
applicable, to identify such Borrower in accordance with the Act.

     Section 11.17 Dispute Resolution.

     (a) Arbitration. Except to the extent expressly provided below, any Dispute shall,
upon the request of any party, be determined by binding arbitration in accordance with the Federal
Arbitration Act, Title 9, United States Code (or if not applicable, the applicable state law), the
then-current rules for arbitration of financial services disputes of AAA and the “Special Rules”
set forth below. In the event of any inconsistency, the Special Rules shall control. The filing
of a court action is not intended to constitute a waiver of the right of the Borrower or the
Lenders, including the suing party, thereafter to require submittal of the Dispute to arbitration.

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Any party to this Agreement may bring an action, including a summary or expedited proceeding,
to compel arbitration of any Dispute in any court having jurisdiction over such action. For the
purposes of this Section 11.17 only, the terms “party” and “parties” shall include any
parent corporation, subsidiary or affiliate of any Lender involved in the servicing, management or
administration of any obligation described in or evidenced by this Agreement, together with the
officers, employees, successors and assigns of each of the foregoing.

     (b) Special Rules.

          (i) The arbitration shall be conducted in any U.S. state where real or tangible personal
property collateral is located, or if there is no such collateral, in the City and County where
Lender is located pursuant to its address for notice purposes in this Agreement.

          (ii) The arbitration shall be administered by AAA, who will appoint an arbitrator. If AAA is
unwilling or unable to administer the arbitration, or if AAA is unwilling or unable to enforce or
legally precluded from enforcing any and all provisions of this Dispute Resolution Section, then
any party to this Agreement may substitute another arbitration organization that has similar
procedures to AAA and that will observe and enforce any and all provisions of this Dispute
Resolution Section.. All Disputes shall be determined by one arbitrator; however, if the amount in
controversy in a Dispute exceeds Five Million Dollars ($5,000,000), upon the request of any party,
the Dispute shall be decided by three arbitrators (for purposes of this Agreement, referred to
collectively as the “arbitrator”).

          (iii) All arbitration hearings will be commenced within ninety (90) days of the demand for
arbitration and completed within ninety (90) days from the date of commencement; provided, however,
that upon a showing of good cause, the arbitrator shall be permitted to extend the commencement of
such hearing for up to an additional sixty (60) days.

          (iv) The judgment and the award, if any, of the arbitrator shall be issued within thirty (30)
days of the close of the hearing. The arbitrator shall provide a concise written statement setting
forth the reasons for the judgment and for the award, if any. The arbitration award, if any, may
be submitted to any court having jurisdiction to be confirmed and enforced, and such confirmation
and enforcement shall not be subject to arbitration.

          (v) The arbitrator will give effect to statutes of limitations and any waivers thereof in
determining the disposition of any Dispute and may dismiss one or more claims in the arbitration on
the basis that such claim or claims is or are barred. For purposes of the application of the
statute of limitations, the service on AAA under applicable AAA rules of a notice of Dispute is the
equivalent of the filing of a lawsuit.

          (vi) Any dispute concerning this arbitration provision, including any such dispute as to the
validity or enforceability of this provision, or whether a Dispute is arbitrable, shall be
determined by the arbitrator; provided, however, that the arbitrator shall not be permitted to vary
the express provisions of these Special Rules or the Reservation of Rights in subsection (c) below.

          (vii) The arbitrator shall have the power to award legal fees and costs pursuant to the terms
of this Agreement.

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          (viii) The arbitration will take place on an individual basis without reference to, resort to,
or consideration of any form of class or class action.

     (c) Reservations of Rights. Nothing in this Agreement shall be deemed to (i) limit
the applicability of any otherwise applicable statutes of limitation and any waivers contained in
this Agreement, or (ii) apply to or limit the right of Lender (A) to exercise self help remedies
such as (but not limited to) setoff, or (B) to foreclose judicially or nonjudicially against any
real or personal property collateral, or to exercise judicial or nonjudicial power of sale rights,
(C) to obtain from a court provisional or ancillary remedies such as (but not limited to)
injunctive relief, writ of possession, prejudgment attachment, or the appointment of a receiver, or
(D) to pursue rights against a party to this Agreement in a third-party proceeding in any action
brought against Lender in a state, federal or international court, tribunal or hearing body
(including actions in specialty courts, such as bankruptcy and patent courts). Lender may exercise
the rights set forth in clauses (A) through (D), inclusive, before, during or after the pendency of
any arbitration proceeding brought pursuant to this Agreement. Neither the exercise of self help
remedies nor the institution or maintenance of an action for foreclosure or provisional or
ancillary remedies shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the Dispute occasioning resort to such remedies. No
provision in the Loan Documents regarding submission to jurisdiction and/or venue in any court is
intended or shall be construed to be in derogation of the provisions in any Loan Document for
arbitration of any Dispute.

     (d) Conflicting Provisions for Dispute Resolution. If there is any conflict between
the terms, conditions and provisions of this Section and those of any other provision or agreement
for arbitration or dispute resolution, the terms, conditions and provisions of this Section shall
prevail as to any Dispute arising out of or relating to (i) this Agreement, (ii) any other Loan
Document, (iii) any related agreements or instruments, or (iv) the transaction contemplated herein
or therein (including any claim based on or arising from an alleged personal injury or business
tort). In any other situation, if the resolution of a given Dispute is specifically governed by
another provision or agreement for arbitration or dispute resolution, the other provision or
agreement shall prevail with respect to said Dispute.

     Section 11.18 Time of the Essence. Time is of the essence of the Loan Documents.

     Section 11.19 Waiver of Right to Trial by Jury.

     EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN
DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND THAT ANY PARTY TO THIS AGREEMENT
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE SIGNATORIES HERETO TO ARBITRATION AND TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.

106

 

     Section 11.20 Judgment Currency. If, for the purposes of obtaining judgment in any court, it
is necessary to convert a sum due hereunder or any other Loan Document in one currency into another
currency, the rate of exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the first currency with such other currency on
the Business Day preceding that on which final judgment is given. The obligation of each Borrower
in respect of any such sum due from it to the Administrative Agent or the Lenders hereunder or
under the other Loan Documents shall, notwithstanding any judgment in a currency (the “Judgment
Currency”) other than that in which such sum is denominated in accordance with the applicable
provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent
that on the Business Day following receipt by the Administrative Agent of any sum adjudged to be so
due in the Judgment Currency, the Administrative Agent may in accordance with normal banking
procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the
Agreement Currency so purchased is less than the sum originally due to the Administrative Agent
from any Borrower in the Agreement Currency, such Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Administrative Agent or the Person to whom such
obligation was owing against such loss. If the amount of the Agreement Currency so purchased is
greater than the sum originally due to the Administrative Agent in such currency, the
Administrative Agent agrees to return the amount of any excess to such Borrower (or to any other
Person who may be entitled thereto under applicable law).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

107

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered under seal by their duly authorized representatives as of the date and year first written
above.

	 	 	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	SUNRISE SENIOR LIVING, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Bradley B. Rush
	 	(Seal)
	 

	 	 	 	 	 	 
	 

	 	 	 	Bradley B. Rush	 	 
	 

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTORS:
	 
	 	 	 	 	 	 
	 	 	SUNRISE SENIOR LIVING MANAGEMENT, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Bradley B. Rush
	 	(Seal)
	 

	 	 	 	 	 	 
	 

	 	 	 	Bradley B. Rush	 	 
	 

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	SUNRISE SENIOR LIVING INVESTMENTS, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Bradley B. Rush
	 	(Seal)
	 

	 	 	 	 	 	 
	 

	 	 	 	Bradley B. Rush	 	 
	 

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	SUNRISE DEVELOPMENT, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Bradley B. Rush
	 	(Seal)
	 

	 	 	 	 	 	 
	 

	 	 	 	Bradley B. Rush	 	 
	 

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	SUNRISE SENIOR LIVING SERVICES, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Bradley B. Rush
	 	(Seal)
	 

	 	 	 	 	 	 
	 

	 	 	 	Bradley B. Rush	 	 
	 

	 	 	 	Vice President	 	 

S-1

 

	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as
Administrative Agent
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Kristine Thennes	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Kristine Thennes
	 	 
	 

	 	 	 	Title: Vice President	 	 

S-2

 

	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as a Lender, L/C Issuer and
Swing Line Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Michael J. Landini	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michael J. Landini	 	 
	 

	 	 	 	Title: Senior Vice President	 	 

S-3

 

	 	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION, as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Frank S. Kaulback III	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Frank S. Kaulback III	 	 
	 

	 	 	 	Title: Senior Vice President	 	 

S-4

 

	 	 	 	 	 	 	 
	 	 	LASALLE BANK NATIONAL ASSOCIATION, as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Sam L. Dendrinos	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Sam L. Dendrinos	 	 
	 

	 	 	 	Title: First Vice President	 	 

S-5

 

	 	 	 	 	 	 	 
	 	 	HSBC BANK USA, N.A., as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Jeffrey M. Henry	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jeffrey M. Henry	 	 
	 

	 	 	 	Title: Vice President	 	 

S-6

 

	 	 	 	 	 	 	 
	 	 	MANUFACTURERS AND TRADERS TRUST COMPANY, as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Sharon P. O’Brien	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Sharon P. O’Brien	 	 
	 

	 	 	 	Title: Vice President	 	 

S-7

 

	 	 	 	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION, as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Michael J. Elehwany	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michael J. Elehwany	 	 
	 

	 	 	 	Title: Vice President	 	 

S-8

 

	 	 	 	 	 	 	 
	 	 	CHEVY CHASE BANK, F.S.B., as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Ellen-Elizabeth B. Lee	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Ellen-Elizabeth B. Lee	 	 
	 

	 	 	 	Title: Assistant Vice President	 	 

S-9

 

	 	 	 	 	 	 	 
	 	 	FARMERS & MECHANICS BANK, as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ William W. Drummond	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: William W. Drummond	 	 
	 

	 	 	 	Title: Vice President	 	 

S-10

 

	 	 	 	 	 	 	 
	 	 	FIRST HORIZON BANK a division of FIRST TENNESSEE
BANK, N.A., as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Blake Bowers	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Blake Bowers	 	 
	 

	 	 	 	Title: Vice President	 	 

S-11

 

EXHIBIT A

FORM OF COMMITTED LOAN NOTICE

Date:                     , 200__

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of December 2, 2005 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined), among Sunrise
Senior Living, Inc., a Delaware corporation (the “Company”), the Designated Borrowers from
time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A.,
as Administrative Agent, L/C Issuer and Swing Line Lender.

     The Company hereby requests, on behalf of itself or, if applicable, the Designated Borrower
referenced in item 6 below (the “Applicable Designated Borrower”) (select one):

	 	 	 
	o A Borrowing of Committed Loans
	 	o A conversion or continuation of Loans

     1. On
________ (a Business Day).

     2. In the amount of                     .

     3. Comprised of                     .

          [Type of Committed Loan requested]

4. In the following currency:                                                             

     5. For
Eurocurrency Rate Loans: with an Interest Period of ________ days/months or Cost of Funds Loan
 — (Loan in currency other than Dollars for a seven-day Interest Period.

     6. On behalf of                                                             [insert name of applicable Designated Borrower].

     The Committed Borrowing, if any, requested herein complies with the provisos to the first
sentence of Section 2.1 of the Agreement.

	 	 	 	 	 
	 

	 	SUNRISE SENIOR LIVING, INC.
	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

Exhibit A

Page 1

 

 

EXHIBIT B

FORM OF SWING LINE LOAN NOTICE

Date:                     , 200___

	 	 	 
	To:

	 	Bank of America, N.A., as Swing Line Lender
	 

	 	Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of December 2, 2005 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined), among Sunrise
Senior Living, Inc., a Delaware corporation (the “Company”), the Designated Borrowers from
time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A.,
as Administrative Agent, L/C Issuer and Swing Line Lender.

     The undersigned hereby requests a Swing Line Loan:

     1. On                                        (a Business Day).

     2. In the amount of $                                        .

     The Swing Line Borrowing requested herein complies with the requirements of the provisos to
the first sentence of Section 2.4(a) of the Agreement.

	 	 	 	 	 
	 

	 	SUNRISE SENIOR LIVING, INC.
	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

Exhibit B

Page 1

 

 

EXHIBIT C

FORM OF NOTE

     FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to
                                                             or registered assigns (the “Lender”), in accordance with the
provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time
to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of
December 2, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing
from time to time, the “Agreement;” the terms defined therein being used herein as therein
defined), among Sunrise Senior Living, Inc. the Designated Borrowers from time to time party
thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative
Agent, L/C Issuer and Swing Line Lender.

     The Borrower promises to pay interest on the unpaid principal amount of each Loan from the
date of such Loan until such principal amount is paid in full, at such interest rates and at such
times as provided in the Agreement. Except as otherwise provided in Section 2.4(e) of the
Agreement with respect to Swing Line Loans, all payments of principal and interest shall be made to
the Administrative Agent for the account of the Lender in the currency in which such Committed Loan
was denominated and in Same Day Funds at the Administrative Agent’s Office for such currency. If
any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be
paid upon demand, from the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in the Agreement.

     This Note is one of the Notes referred to in the Agreement, is entitled to the benefits
thereof and may be prepaid in whole or in part subject to the terms and conditions provided
therein. This Note is also entitled to the benefits of the Guaranty and is secured by the
Collateral. Upon the occurrence and continuation of one or more of the Events of Default specified
in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender
shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary
course of business. The Lender may also attach schedules to this Note and endorse thereon the date,
amount, currency and maturity of its Loans and payments with respect thereto.

     The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment,
protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

Exhibit C

Page 1

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF VIRGINIA.

	 	 	 	 	 
	 

	 	SUNRISE SENIOR LIVING, INC.
	 	 
	 
	 	 	 	 
	 

	 	OR	 	 
	 
	 	 	 	 
	 

	 	[APPLICABLE DESIGNATED BORROWER]	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

Exhibit C

Page 2

 

 

LOANS AND PAYMENTS WITH RESPECT THERETO

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Amount of	 	 	 	 
	 	 	 	 	Currency	 	 	 	Principal or	 	Outstanding	 	 
	 	 	 	 	and	 	End of	 	Interest	 	Principal	 	 
	 	 	Type of	 	Amount of	 	Interest	 	Paid This	 	Balance	 	Notation
	Date	 	Loan Made	 	Loan Made	 	Period	 	Date	 	This Date	 	Made By
	 
	 	 	 	 	 	 	 	 	 	 	 	 

Exhibit C

Page 3

 

 

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                                         , 200__,

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of December 2, 2005 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined), among Sunrise
Senior Living, Inc., a Delaware corporation (the “Company”), the Designated Borrowers from
time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A.,
as Administrative Agent, L/C Issuer and Swing Line Lender.

     The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the
                                                                                of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to
the Administrative Agent on the behalf of the Company, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

     1. Attached hereto as Schedule 1 are the year-end audited financial statements
required by Section 7.1(a) of the Agreement for the fiscal year of the Company ended as of
the above date, together with the report and opinion of an independent certified public accountant
required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

     1. Attached hereto as Schedule 1 are the unaudited financial statements required by
Section 7.1(b) of the Agreement for the fiscal quarter of the Company ended as of the above
date. Such financial statements fairly present the financial condition, results of operations and
cash flows of the Company and its Subsidiaries in accordance with GAAP as at such date and for such
period, subject only to normal year-end audit adjustments and the absence of footnotes.

     2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made,
or has caused to be made under his/her supervision, a detailed review of the transactions and
condition (financial or otherwise) of the Company during the accounting period covered by the
attached financial statements.

     3. A review of the activities of the Company during such fiscal period has been made under the
supervision of the undersigned with a view to determining whether during such fiscal period the
Company performed and observed all its Obligations under the Loan Documents, and

[select one:]

Exhibit D

Page 1

 

 

     [to the best knowledge of the undersigned during such fiscal period, the Company performed and
observed each covenant and condition of the Loan Documents applicable to it, and no Default has
occurred and is continuing.]

—or—

     [the following covenants or conditions have not been performed or observed and the following
is a list of each such Default and its nature and status:]

     4. The representations and warranties of (i) the Borrowers contained in Article V of
the Agreement and (ii) each Loan Party contained in each other Loan Document or in any document
furnished at any time under or in connection with the Loan Documents, are true and correct on and
as of the date hereof, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct as of such earlier date, and
except that for purposes of this Compliance Certificate, the representations and warranties
contained in subsections (a) and (b) of Section 6.5 of the Agreement shall be deemed to
refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of
Section 7.1 of the Agreement, including the statements in connection with which this
Compliance Certificate is delivered.

     5. The financial covenant analyses and information set forth on Schedule 2 attached
hereto are true and accurate on and as of the date of this Certificate.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                                         , 200 ___.

	 	 	 	 	 
	 

	 	SUNRISE SENIOR LIVING, INC.
	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

Exhibit D

Page 2

 

 

For the Quarter/Year ended                     , 200___(“Statement Date”)

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

	I.	 	Consolidated Net Worth.

	 	A.	 	Actual Consolidated Net Worth at Statement Date:

	 	1.	 	Shareholders’ Equity (as of the last day
of preceding quarter):     $

	 	B.	 	75% of increases in Shareholders’ Equity after date of
Agreement from issuance and sale of capital stock or other equity
interests (including from conversion of debt securities excluding
all exercises of employee stock options, issuance or sale of
restricted stock and operations of employee stock purchase
program):                $
	 
	 	C.	 	Minimum required Consolidated Net Worth

(Lines I.A.1 + I.B):           $
	 
	 	D.	 	Excess (deficient) for covenant compliance (Line I.A –
I.C):           $

	II.	 	Fixed Charge Coverage Ratio.

	 	A.	 	Consolidated EBITDAR for four consecutive fiscal quarters (or
such shorter period as provided in Section 6.13 of the Credit
Agreement) ending on above date (“Subject Period”):

	 	1.	 	Consolidated Net Income for Subject Period:            $
	 
	 	2.	 	Consolidated Interest Expense for Subject Period:     $
	 
	 	3.	 	Provision for income taxes for Subject Period:           $
	 
	 	4.	 	Depreciation expenses for Subject Period:    $
	 
	 	5.	 	Amortization expenses for intangibles for Subject Period:           $
	 
	 	6.	 	Rent Expense                 $
	 
	 	7.	 	Consolidated EBITDAR (Lines II.A.1 + 2 + 3 + 4
+ 5+6):          $

	 	B.	 	Consolidated Interest Expense for Subject Period:     $

	 	 	 	 	 	 	 
	 

	 	C.
	 	Consolidated Interest Coverage Ratio (Line II.A.6  ̧

Line II.B):
	 	                     to 1.0
	 
	 	 	 	 	 	 
	 

	 	 	 	Minimum required:
	 	1.75 to 1.0

Exhibit D

Page 3

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Minimum	 	 
	 	 	 	 	Consolidated	 	 
	 	 	 	 	Interest Coverage	 	 
	 	 	Four Fiscal Quarters Ending	 	Ratio	 	 
	 

	 	Closing Date through                     , ___
	 	 
	 	 
	 

	 	                    , ___through                     , ___	 	 	 	 
	 

	 	                    , ___and each fiscal quarter	 	 	 	 
	 

	 	thereafter	 	 	 	 

	III.	 	Leverage Ratio.

	 	A.	 	Consolidated EBITDA for Subject Period

(Lines II.A.1+ 2+3+4+5 above):       $
	 
	 	B.	 	Total Funded Indebtedness at Statement Date:       $

	 	 	 	 	 	 	 
	 

	 	C.
	 	Leverage Ratio (Line III.A  ̧ Line III.B):
	 	                     to 1.0
	 
	 	 	 	 	 	 
	 

	 	 	 	Maximum permitted:
	 	4.25 to 1.0

Exhibit D

Page 4

 

 

EXHIBIT E

ASSIGNMENT AND ASSUMPTION

     This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the
“Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used
but not defined herein shall have the meanings given to them in the Credit Agreement identified
below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed
to and incorporated herein by reference and made a part of this Assignment and Assumption as if set
forth herein in full.

     For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to
and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the
Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s
rights and obligations as a Lender under the Credit Agreement and any other documents or
instruments delivered pursuant thereto to the extent related to the amount and percentage interest
identified below of all of such outstanding rights and obligations of the Assignor under the
respective facilities identified below (including, without limitation, the Letters of Credit and
the Swing Line Loans included in such facilities) and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right of the Assignor (in
its capacity as a Lender) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto
or the loan transactions governed thereby or in any way based on or related to any of the
foregoing, including, but not limited to, contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity related to the rights and obligations
sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned
pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “Assigned
Interest”). Such sale and assignment is without recourse to the Assignor and, except as
expressly provided in this Assignment and Assumption, without representation or warranty by the
Assignor.

	1.	 	Assignor:                                                             
	 
	2.	 	Assignee:                                                              [and is an
Affiliate/Approved Fund of [identify Lender]]
	 
	3.	 	Borrower(s):                                                             
	 
	4.	 	Administrative Agent: Bank of America, N.A., as the administrative agent under the
Credit Agreement
	 
	5.	 	Credit Agreement: Credit Agreement, dated as of December 2, 2005, among Sunrise
Senior Living, Inc., the Designated Borrowers from time to time party thereto, the Lenders
from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C
Issuer and Swing Line Lender

Exhibit E

Page 1

 

 

     6. Assigned Interest :

	 	 	 	 	 	 	 
	 	 	Aggregate	 	 	 	 
	 	 	Amount of	 	Amount of	 	Percentage
	 	 	Commitment/Loans	 	Commitment/Loans	 	Assigned of
	Facility Assigned	 	for all Lenders*	 	Assigned*	 	Commitment/Loans
	 
	 	 	 	 	 	 
	                    

	 	$                    
	 	$                     
	 	                     %
	 
	 	 	 	 	 	 
	                    

	 	$                    
	 	$                     
	 	                     %
	 
	 	 	 	 	 	 
	                    

	 	$                    
	 	$                     
	 	                     %

	7.	 	Trade Date:                                         ]

Effective Date:                                         , 20___[TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE
THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ASSIGNOR	 	 
	 	 	 	 	 	 	[NAME OF ASSIGNOR]	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Title:
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ASSIGNEE	 	 
	 	 	 	 	 	 	[NAME OF ASSIGNEE]	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Title:
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Consented to and Accepted:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BANK OF AMERICA, N.A., as	 	 	 	 	 	 	 	 
	Administrative Agent	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Consented to:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SUNRISE SENIOR LIVING, INC.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 

Exhibit E

Page 2

 

 

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

[___________________]

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

          1. Representations and Warranties.

          1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any
lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the Credit Agreement or any
other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Company, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the Company, any of its
Subsidiaries or Affiliates or any other Person of any of their respective obligations under any
Loan Document.

          1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power
and authority, and has taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby and to become a Lender under the
Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement
(subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender
thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section ___thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit analysis and decision
to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached hereto is any
documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

          2. Payments. From and after the Effective Date, the Administrative Agent shall make
all payments in respect of the Assigned Interest (including payments of principal, interest,

Annex 1

Page 1

 

 

fees and other amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and after the Effective
Date.

          3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and assigns. This
Assignment and Assumption may be executed in any number of counterparts, which together shall
constitute one instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a manually executed
counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the Commonwealth of Virginia.

Annex 1

Page 2

 

 

EXHIBIT F

FORM OF COMPANY GUARANTY

[TO BE PROVIDED UPON IDENTIFICATION OF ANY DESIGNATED BORROWER]

Exhibit F

Page 1

 

 

EXHIBIT G

FORM OF DESIGNATED BORROWER

REQUEST AND ASSUMPTION AGREEMENT

Date: ___________, _____

	 	 	 
	To:

	 	Bank of America, N.A., as Administrative Agent
	 
	 	 
	 

	 	Ladies and Gentlemen:

     This Designated Borrower Request and Assumption Agreement is made and delivered pursuant to
Section 2.14 of that certain Credit Agreement, dated as of December 2, 2005 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to time, the
“Credit Agreement”), among Sunrise Senior Living, Inc. a Delaware corporation (the
“Company”), the Designated Borrowers from time to time party thereto, the Lenders from time
to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing
Line Lender, and reference is made thereto for full particulars of the matters described therein.
All capitalized terms used in this Designated Borrower Request and Assumption Agreement and not
otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.

     Each of                                          (the “Designated Borrower”) and the Company hereby
confirms, represents and warrants to the Administrative Agent and the Lenders that the Designated
Borrower is a Subsidiary of the Company.

     The documents required to be delivered to the Administrative Agent under Section 2.14
of the Credit Agreement will be furnished to the Administrative Agent in accordance with the
requirements of the Credit Agreement.

     The parties hereto hereby confirm that with effect from the date hereof, the Designated
Borrower shall have obligations, duties and liabilities toward each of the other parties to the
Credit Agreement identical to those which the Designated Borrower would have had if the Designated
Borrower had been an original party to the Credit Agreement as a Borrower. The Designated Borrower
confirms its acceptance of, and consents to, all representations and warranties, covenants, and
other terms and provisions of the Credit Agreement.

     The parties hereto hereby request that the Designated Borrower be entitled to receive Loans
under the Credit Agreement, and understand, acknowledge and agree that neither the Designated
Borrower nor the Company on its behalf shall have any right to request any Loans for its account
unless and until the date five Business Days after the effective date designated by the
Administrative Agent in a Designated Borrower Notice delivered to the Company and the Lenders
pursuant to Section 2.14 of the Credit Agreement.

     This Designated Borrower Request and Assumption Agreement shall constitute a Loan Document
under the Credit Agreement.

Exhibit G

Page 1

 

 

     THIS DESIGNATED BORROWER REQUEST AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.

     IN WITNESS WHEREOF, the parties hereto have caused this Designated Borrower Request and
Assumption Agreement to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	[DESIGNATED BORROWER]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	SUNRISE SENIOR LIVING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

Exhibit G

Page 2

 

 

EXHIBIT H

FORM OF DESIGNATED BORROWER NOTICE

Date: ___________, _____

	 	 	 
	To:

	 	Sunrise Senior Living, Inc.
	 
	 	 
	 

	 	The Lenders party to the Credit Agreement referred to below
	 
	 	 
	 

	 	Ladies and Gentlemen:

     This Designated Borrower Notice is made and delivered pursuant to Section 2.14 of that
certain Credit Agreement, dated as of December 2, 2005 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Credit Agreement”),
among Sunrise Senior Living, Inc., a Delaware corporation (the “Company”), the Designated
Borrowers from time to time party thereto, the Lenders from time to time party thereto, and Bank of
America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender, and reference is made
thereto for full particulars of the matters described therein. All capitalized terms used in this
Designated Borrower Notice and not otherwise defined herein shall have the meanings assigned to
them in the Credit Agreement.

     The Administrative Agent hereby notifies Company and the Lenders that effective as of the date
hereof [                                        ] shall be a Designated Borrower and may receive Loans for its
account on the terms and conditions set forth in the Credit Agreement.

     This Designated Borrower Notice shall constitute a Loan Document under the Credit Agreement.

	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.,	 	 
	 	 	as Administrative Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

Exhibit H

Page 1

 

 

EXHIBIT I

OPINION MATTERS

     The matters contained in the following Sections of the Credit Agreement should be covered by
the legal opinion on behalf of each Borrower:

	 	•	 	Section 6.1(a), (b) and (c)
	 
	 	•	 	Section 6.2
	 
	 	•	 	Section 6.3
	 
	 	•	 	Section 6.4
	 
	 	•	 	Section 6.6
	 
	 	•	 	Section 6.14(b)

     Additionally, if as of the Closing Date, any Foreign Subsidiary shall have been designated as
a Designated Borrower pursuant to the Credit Agreement, the legal opinion on behalf of such Foreign
Subsidiary should cover such additional matters as the Administrative Agent shall reasonably
request.

Exhibit I

Page 1exv10w1

 

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

NATIONAL ENERGY GROUP, INC.,

A DELAWARE CORPORATION,

AREP OIL & GAS LLC,

A DELAWARE LIMITED LIABILITY COMPANY

AND

NEG IPOCO, INC.

A DELAWARE CORPORATION

DATED: DECEMBER 7, 2005

 

 

Execution Copy

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 1 THE MERGER	 	 	2	 
	Section 1.1.
	 	The Merger	 	 	2	 
	Section 1.2.
	 	Effective Time	 	 	2	 
	Section 1.3.
	 	Closing of the Merger	 	 	2	 
	Section 1.4.
	 	Effects of the Merger	 	 	2	 
	Section 1.5.
	 	Organizational Documents	 	 	2	 
	Section 1.6.
	 	Directors, Officers, Managers, etc.	 	 	2	 
	Section 1.7.
	 	Conversion of Shares	 	 	3	 
	Section 1.8.
	 	Dissenters’ Rights	 	 	5	 
	Section 1.9.
	 	Exchange of Certificates	 	 	5	 
	ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	8	 
	Section 2.1.
	 	Organization	 	 	8	 
	Section 2.2.
	 	Capitalization	 	 	9	 
	Section 2.3.
	 	Authority	 	 	10	 
	Section 2.4.
	 	SEC Reports; Financial Statements	 	 	10	 
	Section 2.5.
	 	Information Supplied	 	 	11	 
	Section 2.6.
	 	Consents and Approvals; No Violations	 	 	12	 
	Section 2.7.
	 	No Default	 	 	12	 
	Section 2.8.
	 	No Undisclosed Liabilities; Absence of Changes	 	 	12	 
	Section 2.9.
	 	Litigation	 	 	13	 
	Section 2.10.
	 	Compliance with Applicable Law	 	 	13	 
	Section 2.11.
	 	Vote Required; Record Date	 	 	13	 
	Section 2.12.
	 	Tax Treatment	 	 	13	 
	Section 2.13.
	 	Opinion of Financial Adviser	 	 	14	 
	Section 2.14.
	 	Brokers	 	 	14	 
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AREP OIL & GAS	 	 	14	 
	Section 3.1.
	 	Organization	 	 	14	 
	Section 3.2.
	 	Ownership	 	 	15	 
	Section 3.3.
	 	Authority	 	 	16	 
	Section 3.4.
	 	Financial Statements	 	 	16	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 3.5.
	 	Information Supplied	 	 	17	 
	Section 3.6.
	 	Consents and Approvals; No Violations	 	 	17	 
	Section 3.7.
	 	Litigation	 	 	17	 
	Section 3.8.
	 	Tax Treatment	 	 	18	 
	Section 3.9.
	 	Brokers	 	 	18	 
	Section 3.10.
	 	No Prior Activities	 	 	18	 
	Section 3.11.
	 	No Undisclosed Liabilities; Absence of Changes	 	 	18	 
	Section 3.12.
	 	Compliance with Applicable Law	 	 	18	 
	Section 3.13.
	 	Capitalization	 	 	19	 
	ARTICLE 4 COVENANTS	 	 	19	 
	Section 4.1.
	 	Conduct of Business of the Company	 	 	19	 
	Section 4.2.
	 	Conduct of Business of AREP Oil & Gas	 	 	21	 
	Section 4.3.
	 	Preparation of S-4, the Information Statement and the S-1	 	 	24	 
	Section 4.4.
	 	No Solicitation or Negotiation	 	 	24	 
	Section 4.5.
	 	Comfort Letters	 	 	25	 
	Section 4.6.
	 	Written Consent	 	 	25	 
	Section 4.7.
	 	Stock Exchange Listing	 	 	25	 
	Section 4.8.
	 	Access to Information	 	 	25	 
	Section 4.9.
	 	Public Announcements	 	 	26	 
	Section 4.10.
	 	Notification of Certain Matters	 	 	27	 
	Section 4.11.
	 	Affiliates	 	 	27	 
	Section 4.12.
	 	Additions to and Modification of Disclosure Schedules	 	 	27	 
	Section 4.13.
	 	Access to Company Employees	 	 	28	 
	Section 4.14.
	 	Company Compensation and Benefit Plans	 	 	28	 
	Section 4.15.
	 	Certain Financing and Other Transactions	 	 	28	 
	Section 4.16.
	 	Directors’ and Officers’ Indemnification and Insurance	 	 	28	 
	ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER	 	 	29	 
	Section 5.1.
	 	Conditions to Each Party’s Obligations to Effect the Merger	 	 	29	 
	Section 5.2.
	 	Conditions to the Obligations of the Company	 	 	30	 
	Section 5.3.
	 	Conditions to the Obligations of AREP Oil & Gas	 	 	30	 
	ARTICLE 6 TERMINATION; AMENDMENT; WAIVER	 	 	31	 
	Section 6.1.
	 	Termination	 	 	31	 
	Section 6.2.
	 	Effect of Termination	 	 	32	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 6.3.
	 	Fees and Expenses	 	 	32	 
	Section 6.4.
	 	Amendment	 	 	32	 
	Section 6.5.
	 	Extension; Waiver	 	 	32	 
	ARTICLE 7 MISCELLANEOUS	 	 	32	 
	Section 7.1.
	 	Nonsurvival of Representations, Warranties and Agreements	 	 	32	 
	Section 7.2.
	 	Entire Agreement; Assignment	 	 	32	 
	Section 7.3.
	 	Validity	 	 	33	 
	Section 7.4.
	 	Notices	 	 	33	 
	Section 7.5.
	 	Governing Law and Venue; Waiver of Jury Trial	 	 	34	 
	Section 7.6.
	 	Descriptive Headings	 	 	35	 
	Section 7.7.
	 	Parties in Interest	 	 	35	 
	Section 7.8.
	 	Certain Definitions	 	 	36	 
	Section 7.9.
	 	Personal Liability	 	 	37	 
	Section 7.10.
	 	Counterparts	 	 	37	 

Company Disclosure Schedule

AREP Oil & Gas Disclosure Schedule

Exhibit A — Affiliate Letter

Exhibit B — Certain Financing and Other Transactions

Exhibit C — Form of Certificate of Incorporation of IPO Co.

Schedule 1.7 — Calculation of Percentage

Schedule 4.11 — Affiliates

iii

 

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of December 7, 2005, is by and among
NATIONAL ENERGY GROUP, INC., a Delaware corporation (the “Company”), AREP OIL & GAS LLC, a Delaware
limited liability company (“AREP Oil & Gas”), NEG IPOCO, INC., a Delaware corporation (“IPO Co.”)
wholly owned by AREH (as hereafter defined), and, solely for purposes of Sections 3.2, 3.3 and 4.16
of this Agreement, AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP, a Delaware limited
partnership (“AREH”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in Section 7.8 of this Agreement.

WHEREAS, AREP Oil & Gas owns an aggregate of 5,597,824 shares of common stock, par value $.01
share, of the Company (the “Company Common Stock”), constituting approximately 50.1% of the total
outstanding capital stock of the Company, and wishes to include the Company in a series of
transactions, including a business combination and concurrent initial public offering, all as
contemplated herein.

WHEREAS, the Board of Directors of the Company (the “Company Board”), based on the recommendation
of a special committee thereof consisting solely of Robert H. Kite (the “Special Committee”), has
(a) determined that the merger of the Company with and into IPO Co. (the “Merger”), with IPO Co.
continuing as the surviving corporation, whereby each Share (as defined below) will, upon the terms
and subject to the conditions set forth herein, be converted into the right to receive a number of
fully paid and nonassessable shares of IPO Co. Common Stock (as defined below) equal to the
Exchange Ratio (as defined below), is fair to, and in the best interests of, holders of such Shares
(other than AREP Oil & Gas and its affiliates), and (b) approved and adopted this Agreement and the
transactions contemplated hereby and declared their advisability.

WHEREAS, AREP Oil & Gas has advised the Company that (i) it is a buyer, and not a seller, as
regards its interest in the Company and its affiliates and (ii) it is willing to support the Merger
and has no interest in supporting, as a stockholder of the Company, a transaction for the sale of
its stock, or any merger or other disposition of the Company or its assets, to a third party.

WHEREAS, the Board of Directors of AREP Oil & Gas and the Board of Directors of IPO Co. have
approved this Agreement and have determined that the Agreement and the Merger are advisable and in
the best interests of their respective members and stockholders, as the case may be, and AREH, as
the sole stockholder of IPO Co., will, immediately following the execution hereof by the parties
hereto, approve and adopt this Agreement.

WHEREAS, for Federal income tax purposes it is intended that the Merger qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”).

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties,
covenants and agreements herein contained, and intending to be legally bound hereby, the Company,
AREP Oil & Gas and IPO Co. hereby agree as follows:

 

 

ARTICLE I

THE MERGER

          Section 1.1 The Merger. At the Effective Time (as defined below) and upon the terms
and subject to the conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the “DGCL”), the Company shall be merged with and into IPO Co. (the “Merger”).
Following the Merger, IPO Co. shall continue as the surviving corporation (the “Surviving
Corporation”) and the separate corporate existence of the Company shall cease. The Merger is
intended to qualify as a tax free reorganization under Section 368(a) of the Code.

          Section 1.2 Effective Time. Subject to the terms and conditions set forth in this
Agreement, on the Closing Date (as defined in Section 1.3), the parties hereto shall (a) cause the
Merger to be consummated by filing a duly executed and acknowledged Certificate of Merger (the
“Certificate of Merger”) with the Secretary of State of the State of Delaware pursuant to Section
251 of the DGCL and (b) make such other filings with the Secretary of State of the State of
Delaware as shall be necessary to effect the Merger. The Merger shall become effective at such time
as a properly executed copy of the Certificate of Merger is duly filed with the Secretary of State
of the State of Delaware in accordance with Section 251 of the DGCL, or such later time as AREP Oil
& Gas and the Company may agree upon and as may be set forth in the Certificate of Merger (the time
the Merger becomes effective being referred to herein as the “Effective Time”).

          Section 1.3 Closing of the Merger. The closing of the Merger (the “Closing”) will
take place substantially contemporaneously with the consummation of the IPO Transaction (the
“Closing Date”), at the offices of AREP Oil & Gas, located at 100 South Bedford Road, Mt. Kisco,
NY, unless another time, date or place is agreed to in writing by the parties hereto.

          Section 1.4 Effects of the Merger. The Merger shall have the effects set forth in the
DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time,
all the properties, rights, privileges, powers and franchises of the Company and IPO Co. shall vest
in the Surviving Corporation, and all debts, liabilities, obligations, restrictions and duties of
the Company and IPO Co. shall become the debts, liabilities, obligations, restrictions and duties
of the Surviving Corporation.

          Section 1.5 Organizational Documents. The certificate of incorporation and bylaws of
IPO Co. in effect at the Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation until amended in accordance with Applicable Law; provided, however, that at
the Effective Time, the certificate of incorporation of IPO Co. will be amended to change the name
of IPO Co. to a name specified by AREP Oil & Gas. The certificate of incorporation of IPO Co. in
effect at the Effective Time shall be substantially in the form attached hereto as Exhibit
C.

          Section 1.6 Directors, Officers, Managers, etc. The directors, officers and/or
managers of IPO Co. at the Effective Time shall be the initial directors, officers and/or managers
of the Surviving Corporation, each to hold office in accordance with the organizational

2

 

documents of the Surviving Corporation until the earlier of their resignation or removal or
until their respective successors are duly elected or appointed and qualified.

          Section 1.7 Conversion of Shares.

     (a) At the Effective Time, each share of Company Common Stock (individually a “Share”
and collectively the “Shares”) issued and outstanding immediately prior to the Effective
Time (other than Shares held in the Company’s treasury or by any of the Company’s
subsidiaries) shall, by virtue of the Merger and without any action on the part of AREP Oil
& Gas, IPO Co., the Company or the holder thereof, be converted into the right to receive
that fraction of a fully-paid and non-assessable share of common stock, par value $.01 per
share, of IPO Co. (“IPO Co. Common Stock”) equal to the Exchange Ratio (as defined below)
(the “Merger Consideration”).

     (b) The “Exchange Ratio” shall be determined by multiplying 0.00000008936 [i.e., 1 /
11,190,650 (the number of outstanding Shares)] by the Share Amount (as hereafter defined).
The “Share Amount” shall mean that number of shares of IPO Co. Common Stock which results in
the holders of the Shares receiving, in the aggregate, a 7.990% (the “Percentage”) economic
interest in the entire equity of the Enterprise (as hereafter defined) immediately prior to
consummation of the IPO Transaction; provided, however, that the parties
acknowledge and agree that: (i) the Percentage is based upon the assumption that the
Enterprise will be subject to $500 million of net indebtedness (i.e., total indebtedness
minus cash) immediately prior to or simultaneously with consummation of the IPO Transaction
(after all incurrences and repayments of debt contemplated in Exhibit B hereto and excluding
intercompany notes of the members of the Enterprise and their subsidiaries); (ii) to the
extent that the Enterprise is subject to less than $500 million of net indebtedness at such
time (after all incurrences and repayments of debt contemplated in Exhibit B hereto and
excluding intercompany notes of the members of the Enterprise and their subsidiaries), the
Percentage will be reduced by subtracting the Adjustment Amount (as hereafter defined) from
the Percentage; and (iii) to the extent that the Enterprise is subject to in excess of $500
million of net indebtedness at such time (after all incurrences and repayments of debt
contemplated in Exhibit B hereto and excluding intercompany notes of the members of the
Enterprise and their subsidiaries), the Percentage will be increased by adding the
Adjustment Amount to the Percentage. The “Adjustment Amount” shall mean the product of (x)
0.6322% and (y) that fraction obtained by dividing the positive difference between $500
million and the actual net indebtedness of the Enterprise immediately prior to or
simultaneously with consummation of the IPO Transaction (after all incurrences and
repayments of debt contemplated in Exhibit B hereto and excluding intercompany notes of the
members of the Enterprise and their subsidiaries) by $100 million. Set forth on Schedule
1.7 hereto is an example of how the Percentage shall be calculated. At Closing, the
remaining economic interest in the Enterprise will be held, directly or indirectly, by AREH.
The term “Enterprise” shall mean a combination or consolidation of entities which includes
100% of the equity interests in each of AREP Oil & Gas, National Onshore, National Offshore
and the Company.

3

 

     (c) Each of the parties acknowledge and agree that the structure of the IPO Transaction
and the transactions described in Exhibit B have not been determined as of the date of this
Agreement but the parties will work together in good faith to ensure that, regardless of the
structure of such transactions, the holders of the Shares will receive in the Merger, in the
aggregate, the Percentage, it being understood that the percentage interests of such holders
in the Enterprise shall be reduced as a result of the issuance of shares of IPO Co. Common
Stock pursuant to the IPO Transaction. The dilution resulting from the issuance of shares of
IPO Co. Common Stock pursuant to the IPO Transaction will be borne equally by all holders of
the IPO Co. Common Stock prior to the IPO Transaction (based upon the number of shares
held). Attached as Schedule 1.7 is an example of the proportionate economic interests based
on the assumptions set forth therein.

     (d) The parties acknowledge and agree that, following consummation of the IPO
Transaction, there will be no restrictions or limitations, other than as imposed by
applicable law, on any transactions by IPO Co., including, without limitation, any issuances
of securities by IPO Co. (whether involving the issuance of shares of IPO Co. Common Stock
pursuant to any employee or executive option plan or other equity incentive plan adopted by
IPO Co., the issuance of shares of IPO Co. Common Stock in connection with any secondary
equity offering, the issuance of shares of IPO Co. Common Stock upon conversion of any
convertible equity or debt securities that IPO Co. may issue in the future, or otherwise),
or any adjustment, antidilution protection or preemptive right in respect thereof. The
receipt of the Percentage is only for purposes of determining the Merger Consideration and
is not an ongoing obligation, and neither IPO Co. nor any other person shall have any duty
to cause the Percentage to be maintained following the Merger.

     (e) The parties further acknowledge and agree that: (i) the structure of the IPO
Transaction may involve IPO Co. owning an equity interest in AREP Oil & Gas, with the
remaining interest (the “Interest”) as of the Closing owned by AREH or affiliates of AREH
which would be convertible into shares of IPO Co. Common Stock based upon AREH’s pro rata
ownership in the Enterprise (subject to typical anti-dilution protections) (the “Convertible
Option”) as a result of the Interest; (ii) initial capital accounts in AREP Oil & Gas will
be set at fair market value; and (iii) at the formation of IPO Co., AREH will be issued a
share or shares of non-redeemable Class B Common Stock of IPO Co. which will provide AREH
with that percentage of the outstanding voting power of IPO Co. Common Stock equivalent to
the number of shares of IPO Co. Common Stock it would obtain upon exercise of the
Convertible Option; provided, however, that such Class B Common Stock shall not be entitled
to any dividends or liquidation preference (other than a nominal preference not to exceed
$1,000 in the aggregate) over the shares of IPO Co. Common Stock. Attached as Schedule 1.7
is an example of AREH’s conversion and voting rights.

     (f) At the Effective Time, each Share held in the treasury of the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any action on the
part of any party, be canceled, retired and cease to exist, and no shares of IPO Co. Common
Stock shall be delivered with respect thereto.

4

 

     (g) At the Effective Time, each share of common stock and Class B Common Stock of IPO
Co. issued and outstanding immediately prior to the Effective Time shall remain outstanding.

          Section 1.8 Dissenters’ Rights. In accordance with Section 262 of the DGCL, the
holders of the Shares shall not be entitled to dissenters’ or appraisal rights.

          Section 1.9 Exchange of Certificates.

     (a) From time to time following the Effective Time, as required by subsections (b) and
(c) below, the Surviving Corporation shall deliver to a depository or trust institution of
recognized standing selected by AREP Oil & Gas and reasonably acceptable to the Company (the
“Exchange Agent”) for the benefit of the holders of Shares for exchange in accordance with
this Article I: (i) certificates representing the appropriate number of shares of IPO Co.
Common Stock issuable pursuant to Section 1.7 as of the Effective Time; and (ii) cash to be
paid in lieu of fractional shares of IPO Co. Common Stock (such shares of IPO Co. Common
Stock and such cash, together with any dividends or distributions with respect thereto, are
hereinafter referred to as the “Exchange Fund”) pursuant to Section 1.9(f) below, in
exchange for outstanding Shares.

     (b) Not later than two (2) Business Days after the Effective Time, AREP Oil & Gas shall
cause the Exchange Agent to mail to each holder of record of a certificate or certificates
that immediately prior to the Effective Time represented outstanding Shares (the
“Certificates”) and whose shares were converted into the right to receive shares of IPO Co.
Common Stock pursuant to Section 1.7: (i) a letter of transmittal (which shall be in
customary form and shall specify that delivery shall be effected and risk of loss and title
to the Certificates shall pass only upon delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions as AREP Oil & Gas and the Company
may reasonably specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of IPO Co. Common Stock,
together with any dividends or distributions with respect thereto, and, if applicable, cash
to be paid for fractional shares of IPO Co. Common Stock. Upon surrender of a Certificate
for exchange and cancellation to the Exchange Agent together with such letter of transmittal
duly executed and completed in accordance with the instructions thereto, the holder of such
Certificate shall be issued a certificate representing that number of whole shares of IPO
Co. Common Stock and, if applicable, a check representing the cash consideration to which
such holder is entitled on account of a fractional share of IPO Co. Common Stock that such
holder has the right to receive pursuant to the provisions of this Article I and any
dividends or other distributions to which such holder is entitled pursuant to Section
1.9(c), and the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of IPO Co. Common Stock and
a check representing the amount of consideration payable in lieu of fractional shares and
any dividends or other distributions to which such holder is entitled pursuant to Section
1.9(c), shall be issued to a transferee if the Certificate representing such Shares is
presented to the Exchange Agent accompanied by all documents required to evidence and effect
such transfer and

5

 

by evidence that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 1.9, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the certificate
representing shares of IPO Co. Common Stock and cash in lieu of any fractional shares of IPO
Co. Common Stock as contemplated by this Section 1.9 and any other distributions to which
such holder is entitled pursuant to Section 1.9(c).

     (c) No dividends or other distributions declared or made after the Effective Time with
respect to IPO Co. Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of IPO Co. Common
Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 1.9(f), until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect of Applicable Law, following
surrender of any such Certificate there shall be paid to the record holder of the
certificates representing whole shares of IPO Co. Common Stock issued in exchange therefor
without interest (i) promptly, the amount of any cash payable in lieu of a fractional share
of IPO Co. Common Stock to which such holder is entitled pursuant to Section 1.9(f) and the
amount of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such number of whole shares of IPO Co. Common Stock and
(ii) at the appropriate payment date the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of IPO Co. Common Stock.

     (d) In the event that any Certificate for Shares shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange therefor upon the making of an
affidavit of that fact by the holder of such shares of IPO Co. Common Stock and cash in lieu
of fractional shares, if any, as may be required pursuant to this Agreement; provided,
however, that AREP Oil & Gas or the Exchange Agent may, in its discretion, require the
delivery of a suitable bond or indemnity.

     (e) All shares of IPO Co. Common Stock issued upon the surrender for exchange of Shares
in accordance with the terms hereof (including any cash paid pursuant to Section 1.9(c) or
1.9(f)) shall be deemed to have been issued in full satisfaction of all rights pertaining to
such Shares; subject, however, to IPO Co.’s obligation to pay any dividends or make any
other distributions with a record date prior to the date of this Agreement that remain
unpaid at the Effective Time, and there shall be no further registration of transfers on the
stock transfer books of IPO Co. of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to IPO Co. for any
reason, they shall be canceled and exchanged as provided in this Article I.

     (f) No fractions of a share of IPO Co. Common Stock shall be issued in the Merger but
in lieu thereof each holder of Shares otherwise entitled to a fraction of a share of IPO Co.
Common Stock (based upon the aggregate number of shares of IPO Co. Common Stock that would
have been issued to such holder absent this provision) shall upon surrender of his or her
Certificate or Certificates be entitled to receive an amount of

6

 

cash (without interest) determined by multiplying the closing price for IPO Co. Common
Stock, as reported by the securities exchange or quotation service on which shares of IPO
Co. Common Stock are traded or quoted, on the first Business Day immediately following the
Effective Time that such a quote is available, by the fractional share interest to which
such holder would otherwise be entitled. For example, if a holder would receive, in the
aggregate 100.25 shares of IPO Co. Common Stock in exchange for his aggregate holdings of
Company Common Stock, then he would be entitled to receive cash in respect of 0.25 shares of
IPO Co. Common Stock. The parties acknowledge that payment of the cash consideration in lieu
of issuing fractional shares was not separately bargained for consideration, but merely
represents a mechanical rounding off for purposes of simplifying the corporate and
accounting complexities that would otherwise be caused by the issuance of fractional shares.
From time to time after the Effective Time, as promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional share
interests who have surrendered their Certificates to the Exchange Agent, the Exchange Agent
shall so notify IPO Co., and IPO Co. shall deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional share
interests subject to and in accordance with the terms of Sections 1.9(b) and (c).

     (g) Any portion of the Exchange Fund that remains undistributed to the holders of
Shares upon the expiration of one (1) year after the Effective Time shall be delivered to
IPO Co. upon demand and any holders of Shares who have not theretofore complied with this
Article 1 shall thereafter look only to IPO Co. as general creditors for payment of their
claim for IPO Co. Common Stock and cash in lieu of fractional shares, as the case may be,
and any applicable dividends or distributions with respect to IPO Co. Common Stock.

     (h) Neither the Surviving Corporation nor IPO Co. shall be liable to any holder of
Shares or IPO Co. Common Stock for such shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Applicable Law.

     (i) Each of IPO Co. and the Exchange Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any holder of Shares
such amounts as it is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state or local tax Law. To the extent that
amounts are so withheld by IPO Co. or the Exchange Agent, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made by IPO Co.
or the Exchange Agent, as the case may be.

7

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to AREP Oil & Gas and IPO Co., subject to the exceptions
set forth in the Disclosure Schedule (the “Company Disclosure Schedule”) delivered by the Company
to AREP Oil & Gas and IPO Co. in accordance with Section 4.10 (which exceptions shall specifically
identify a Section, Subsection or clause of a single Section or Subsection hereof, as applicable,
to which such exception relates) that:

          Section 2.1 Organization.

     (a) Each of the Company and its subsidiaries is duly organized, validly existing and,
except as set forth in Section 2.1 of the Company Disclosure Schedule, in good standing
under the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted. Except as set forth in Section 2.1(a) of the Company
Disclosure Schedule, the Company has no operating subsidiaries other than those incorporated
in a state of the United States.

     (b) Except as set forth in Section 2.1(b) of the Company Disclosure Schedule, each of
the Company and its subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. When used in connection with the Company or its subsidiaries, the term
“Material Adverse Effect on the Company” means any circumstance, change in, or effect on the
Company and its subsidiaries, taken as a whole, that is, or is reasonably likely in the
future to be, materially adverse to the operations, financial condition, earnings or results
of operations, or the business (financial or otherwise), of the Company and its
subsidiaries, taken as a whole, provided that none of the following shall be deemed, either
alone or in combination, to constitute a Material Adverse Effect on the Company: (i) a
change in the market price or trading volume of the Company Common Stock; (ii) a failure by
the Company to meet internal earnings or revenue projections or the revenue or earnings
predictions of equity analysts, or any other revenue or earnings predictions or
expectations, for any period ending (or for which earnings are released) on or after the
date of this Agreement and prior to the Effective Date, provided further that this Section
2.1(b)(ii) shall not exclude any underlying change, effect, event, occurrence, state of
facts or developments which resulted in such failure to meet such estimates, predictions or
expectations; (iii) conditions affecting the oil and gas industry as a whole or the U.S.
economy as a whole; or (iv) any disruption of customer or supplier relationships arising
primarily out of or resulting primarily from actions contemplated by the parties in
connection with the announcement of this Agreement and the transactions contemplated hereby,
to the extent so attributable.

8

 

          Section 2.2 Capitalization.

     (a) The authorized capital stock of the Company consists of Fifteen Million
(15,000,000) Shares, of which, as of the date of this Agreement, 11,190,650 Shares were
issued and outstanding and One Million (1,000,000) shares of preferred stock, no shares of
which are outstanding. All of the outstanding Shares have been validly issued and are fully
paid, nonassessable and free of preemptive rights. As of the date of this Agreement, there
are outstanding (i) no shares of capital stock or other voting securities of the Company,
except as set forth above, (ii) no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for shares of capital stock or other
securities of the Company, (iii) no options, preemptive or other rights to acquire from the
Company or any of its subsidiaries, and, except as described in the Company SEC Reports (as
defined below), no obligations of the Company or any of its subsidiaries to issue any
capital stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or other securities of the Company and (iv) no equity
equivalent interests in the ownership or earnings of the Company or its subsidiaries or
other similar rights other than as set forth in the limited liability company operating
agreement of NEG Holding LLC (collectively “Company Securities”). Except as set forth in
Section 2.2(a) of the Company Disclosure Schedule, as of the date of this Agreement, there
are no outstanding rights or obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which the Company is a
party or by which it is bound relating to the voting or registration of any shares of
capital stock of the Company.

     (b) All of the outstanding capital stock of the Company’s subsidiaries owned by the
Company is owned, directly or indirectly, free and clear of any Lien or any other limitation
or restriction (including any restriction on the right to vote or sell the same except as
may be provided as a matter of Applicable Law). Except as set forth in Section 2.2(b) of the
Company Disclosure Schedule, there are no (i) securities of the Company or any of its
subsidiaries convertible into or exchangeable or exercisable for, (ii) options to acquire or
(iii) other rights to acquire from the Company or any of its subsidiaries, any capital stock
or other ownership interests in or any other securities of any subsidiary of the Company,
and there exists no other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of any such capital
stock. There are no outstanding contractual obligations of the Company or its subsidiaries
to repurchase, redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Company. For purposes of this Agreement, “Lien”
means, with respect to any asset (including any security), any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset; provided,
however, that the term “Lien” shall not include (i) statutory liens for taxes that are not
yet due and payable or are being contested in good faith by appropriate proceedings and are
disclosed in Section 2.2(b) of the Company Disclosure Schedule or that are otherwise not
material, (ii) statutory or common law liens to secure obligations to landlords, lessors or
renters under leases or rental agreements confined to the premises rented, (iii) deposits or
pledges made in connection with, or to secure payment of, workers’ compensation,
unemployment

9

 

insurance, old age pension or other social security programs mandated under Applicable
Laws, (iv) statutory or common law liens in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and other like liens, and (v)
restrictions on transfer of securities imposed by applicable state and federal securities
laws.

     (c) The Shares constitute the only class of equity securities of the Company or its
subsidiaries registered or required to be registered under the Securities Exchange Act of
1934, as amended (the “Exchange Act”).

          Section 2.3 Authority.

     (a) The Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations under this Agreement, and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement by the
Company, and the consummation by the Company of the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement, or to
consummate the transactions contemplated hereby, except (i) the adoption of this Agreement
by the affirmative vote of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon and (ii) the filing and recordation of appropriate merger documents
as required. This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by AREP Oil & Gas and IPO Co.,
constitutes the valid, legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to (i) any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws now or hereafter in effect
relating to creditors’ rights generally, (ii) fiduciary obligations under the laws of the
jurisdiction of its incorporation, or (iii) general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).

     (b) Without limiting the generality of the foregoing, the Special Committee, at a
meeting duly called and held, has approved and declared this Agreement and the transactions
contemplated hereby advisable and has determined that the Merger is fair to, and in the best
interests of, holders of the Shares (other than AREH and its affiliates). The Board of
Directors of the Company, based on the recommendation of the Special Committee, has (i)
determined that the Merger, upon the terms and subject to the conditions set forth herein,
is fair to, and in the best interests of, holders of the Shares (other than AREH and its
affiliates), and (ii) approved and adopted this Agreement and the transactions contemplated
hereby and declared their advisability.

          Section 2.4 SEC Reports; Financial Statements.

     (a) The Company has filed all required forms, reports and documents (“Company SEC
Reports”) with the Securities and Exchange Commission (the “SEC”) since January 1, 2004,
each of which complied at the time of filing in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the “Securities Act”),

10

 

and the Exchange Act, each law as in effect on the dates such forms, reports and
documents were filed. None of such Company SEC Reports, including any financial statements
or schedules included or incorporated by reference therein, contained when filed any untrue
statement of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements therein in
light of the circumstances under which they were made not misleading, except to the extent
superseded by a Company SEC Report filed subsequently and prior to the date of this
Agreement. The audited consolidated financial statements of the Company included in the
Company SEC Reports fairly present, in conformity in all material respects with generally
accepted accounting principles (“GAAP”) applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended. Notwithstanding
the foregoing, the Company shall not be deemed to be in breach of any of the representations
or warranties in this Section 2.4(a) as a result of any changes to the Company SEC Reports
that the Company may make in response to comments received from the SEC on the S-4, the
Information Statement or the S-1 (each as defined below).

     (b) The Company has heretofore made, and hereafter will make, available to AREP Oil &
Gas a complete and correct copy of any amendments or modifications that are required to be
filed with the SEC but have not yet been filed with the SEC to agreements, documents or
other instruments that previously had been filed by the Company with the SEC pursuant to the
Exchange Act.

          Section 2.5 Information Supplied. None of the information supplied or to be supplied
by the Company in writing for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by the Surviving Corporation in connection with the
issuance of shares of IPO Co. Common Stock in the Merger (the “S-4”) will, at the time it becomes
effective under the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) the information statement relating to the written consent of AREP Oil & Gas,
as the holder of a majority of the outstanding Shares, approving the Merger (the “Information
Statement”) will, at the date mailed to stockholders of the Company, contain any untrue statement
of a material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which they are made not
misleading, or (iii) the registration statement on Form S-1 to be filed with the SEC by the
Surviving Corporation in connection with the IPO Transaction (the “S-1”) will, at the time it
becomes effective under the Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements
therein not misleading. The Information Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, the Company makes no representation, warranty or covenant with respect to any
information supplied or required to be supplied by AREP Oil & Gas or IPO Co. that is contained in
or omitted from any of the foregoing documents.

11

 

          Section 2.6 Consents and Approvals; No Violations. Except for filings, permits,
authorizations, consents and approvals as may be required under applicable requirements of the
Securities Act, the Exchange Act, state securities or blue sky laws, and the filing and recordation
of the Certificate of Merger as required by the DGCL, no material filing with or notice to and no
material permit, authorization, consent or approval of any United States (federal, state or local)
or foreign court or tribunal, or administrative, governmental or regulatory body, agency or
authority (a “Governmental Entity”) is necessary for the execution and delivery by the Company of
this Agreement or the consummation by the Company of the transactions contemplated hereby. Neither
the execution, delivery and performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the respective Certificate of Incorporation or bylaws (or similar governing
documents) of the Company or any of its subsidiaries, (ii) except as set forth in Section 2.6 of
the Company Disclosure Schedule, result in a violation or breach of or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under any of the terms, conditions or provisions
of any material note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a party or by which any
of them or any of their respective properties or assets are bound or (iii) except as set forth in
Section 2.6 of the Company Disclosure Schedule, violate any material order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its subsidiaries or
any of their respective properties or assets.

          Section 2.7 No Default. Except as set forth in Section 2.7 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in breach, default or violation (and
no event has occurred that with notice or the lapse of time or both would constitute a breach,
default or violation) of any term, condition or provision of (i) its Certificate of Incorporation
or bylaws (or similar governing documents), (ii) any material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which the Company or any
of its subsidiaries is now a party or by which it or any of its properties or assets are bound or
(iii) any material order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Company or any of its subsidiaries or any of its properties or assets.

          Section 2.8 No Undisclosed Liabilities; Absence of Changes. Except as set forth in
Section 2.8 of the Company Disclosure Schedule, as of the date of this Agreement, neither the
Company nor any of its subsidiaries has any material liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on
a consolidated balance sheet of the Company (including the notes thereto), other than as publicly
disclosed by the Company in the Company SEC Reports. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, between the date of filing of the latest Company SEC Report and the
date of this Agreement, there have been no events, changes or effects with respect to the Company
or its subsidiaries that, individually or in the aggregate, have had or reasonably would be
expected to have had a Material Adverse Effect on the Company. Without limiting the generality of
the foregoing, except as set forth in Section 2.8 of the Company Disclosure Schedule, between the
date of filing of the latest Company SEC Report and the date of this Agreement, the Company and its
subsidiaries have conducted their respective businesses in all material respects only in, and have
not engaged in any material transaction other

12

 

than according to, the ordinary and usual course of such businesses consistent with past
practices. Except for increases in the ordinary course of business consistent with past practices
or as set forth in Section 2.8 of the Company Disclosure Schedule, between the date of filing of
the latest Company SEC Report and the date of this Agreement, there has not been any material
increase in the compensation payable or that could become payable by the Company or any of its
subsidiaries to (a) officers of the Company or any of its subsidiaries or (b) any employee of the
Company or any of its subsidiaries.

          Section 2.9 Litigation. Except as publicly disclosed by the Company in the Company
SEC Reports or as set forth in Section 2.9 of the Company Disclosure Schedule, there is no suit,
claim, action, arbitration, proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries or any of their respective
properties or assets before any Governmental Entity or brought by any person that is material or
would reasonably be expected to prevent or delay the consummation of the transactions contemplated
by this Agreement beyond the Final Date. Except as publicly disclosed by the Company in the Company
SEC Reports, neither the Company nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree that would reasonably be expected to be material or would reasonably be
expected to prevent or delay the consummation of the transactions contemplated hereby.

          Section 2.10 Compliance with Applicable Law. Except as publicly disclosed by the
Company in the Company SEC Reports, the Company and its subsidiaries hold all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the “Company Permits”). Except as publicly
disclosed by the Company in the Company SEC Reports, the Company and its subsidiaries are in
material compliance with the terms of the Company Permits. Except as publicly disclosed by the
Company in the Company SEC Reports, to the knowledge of the Company, the businesses of the Company
and its subsidiaries have been and are being conducted in material compliance with all material
Applicable Laws. Except as publicly disclosed by the Company in the Company SEC Reports, no
investigation or review by any Governmental Entity with respect to the Company or any of its
subsidiaries is pending or, to the knowledge of the Company, threatened, nor, to the knowledge of
the Company, has any Governmental Entity indicated an intention to conduct the same.

          Section 2.11 Vote Required; Record Date. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class or series of the
Company’s capital stock necessary to approve and adopt this Agreement. The record date for
determining the stockholders of record entitled to take the action described in Section 4.6 will,
pursuant to Section 213(b) of the DGCL, be December 7, 2005.

          Section 2.12 Tax Treatment. This Agreement shall constitute a plan of reorganization
for purposes of Sections 354 and 368 of the Code. Neither the Company (including any of its
subsidiaries) nor, to the knowledge of the Company, any of its affiliates has taken or agreed to
take action that would prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code.

13

 

          Section 2.13 Opinion of Financial Adviser. Energy Spectrum Advisors, Inc. (the
“Company Financial Adviser”) has delivered to the Special Committee its written opinion dated the
date of this Agreement to the effect that, subject to the assumptions set forth therein, as of such
date the Merger Consideration is fair, from a financial point of view, to the holders of Shares
(other than affiliates of the Company). Such opinion has not been withdrawn, revoked or modified. A
true and complete copy of such opinion has been delivered to AREH.

          Section 2.14 Brokers. No broker, finder or investment banker (other than the Company
Financial Adviser, a true and correct copy of whose engagement agreement has been provided to AREP
Oil & Gas) is entitled to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or on behalf of the
Company.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

AREP OIL & GAS AND IPO CO.

AREP Oil & Gas and IPO Co., subject to the exceptions set forth in the Disclosure Schedule (the
“AREP Disclosure Schedule”) delivered by AREP Oil & Gas and IPO Co. to the Company in accordance
with Section 4.10 (which exceptions shall specifically identify a Section, Subsection or clause of
a single Section or Subsection hereof, as applicable, to which such exception relates) hereby
jointly and severally represent and warrant to the Company as follows:

          Section 3.1 Organization.

     (a) Each of AREP Oil & Gas and IPO Co. is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as now being
conducted.

     (b) Each of AREP Oil & Gas and IPO Co. is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect on AREP Oil & Gas.
When used in connection with AREP Oil & Gas or IPO Co. the term “Material Adverse Effect on
AREP Oil & Gas” means any circumstance, change in, or effect on AREP Oil & Gas and its
subsidiaries, taken as a whole, that is, or is reasonably likely in the future to be,
materially adverse to the operations, financial condition, assets, earnings, or results of
operations, or the business (financial or otherwise) of AREP Oil & Gas and its subsidiaries,
taken as a whole, provided that none of the following shall be deemed, either alone or in
combination, to constitute a Material Adverse Effect on AREP Oil & Gas: (i) a change in the
market price or trading volume of the depositary units representing limited partner
interests in American Real Estate Partners, L.P. (“AREP”);

14

 

(ii) a failure by AREP or AREP Oil & Gas to meet internal earnings or revenue
projections or the revenue or earnings predictions of equity analysts, or any other revenue
or earnings predictions or expectations, for any period ending (or for which earnings are
released) on or after the date of this Agreement and prior to the Effective Date, provided
further that this Section 3.1(b)(ii) shall not exclude any underlying change, effect, event,
occurrence, state of facts or developments which resulted in such failure to meet such
estimates, predictions or expectations; (iii) conditions affecting the oil & gas industry as
a whole or the U.S. economy as a whole; or (iv) any disruption of customer or supplier
relationships arising primarily out of or resulting primarily from actions contemplated by
the parties in connection with or resulting primarily from actions contemplated by the
parties in connection with, or which is primarily attributable to, the announcement of this
Agreement and the transactions contemplated hereby, to the extent so attributable.

          Section 3.2 Ownership.

     (a) AREH owns 100% of the issued and outstanding membership interests in AREP Oil &
Gas; such membership interests have been duly authorized and validly issued in accordance
with the limited liability company agreement of AREP Oil & Gas (the “AREP Oil & Gas
Operating Agreement”) and are fully paid (to the extent required under the AREP Oil & Gas
Operating Agreement) and nonassessable (except as such nonassessability may be affected by
Section 18-607 of the Delaware LLC Act); and AREH owns its membership interests free and
clear of all liens, encumbrances, security interests, equities, charges or claims.

     (b) AREH owns 100% of the issued and outstanding capital stock of IPO Co.; such capital
stock has been duly authorized and validly issued and is fully paid and nonassessable; and
AREH owns such capital stock free and clear of all liens, encumbrances, security interests,
equities, charges or claims.

     (c) AREP Oil & Gas owns 5,597,824 shares of the issued and outstanding shares of
Company Common Stock, which constitutes approximately 50.1% of the issued and outstanding
shares of Company Common Stock (the “NEG Interest”); and AREP Oil & Gas owns such capital
stock free and clear of all liens, encumbrances, security interests, equities, charges or
claims.

     (d) AREP Oil & Gas owns a membership interests in NEG Holding LLC (“NEG Holding”)
calculated in accordance with the limited liability company agreement of NEG Holding (the
“NEG Holding Operating Agreement”); such membership interest (the “NEG Holding Membership
Interest”) has been duly authorized and validly issued in accordance with the NEG Holding
Operating Agreement and is fully paid (to the extent required under the NEG Holding
Operating Agreement) and nonassessable (except as such nonassessability may be affected by
Section 18-607 of the Delaware LLC Act); and AREP Oil & Gas owns its membership interest
free and clear of all liens, encumbrances, security interests, equities, charges or claims.

     (e) AREP Oil & Gas wholly owns the sole general partner of each of National Onshore,
LP, a Delaware limited partnership (“National Onshore”), and National

15

 

Offshore, LP, a Delaware limited partnership (“National Offshore”). Such general
partner interests have been duly authorized and validly issued in accordance with the
Agreement of Limited Partnership of National Onshore, as amended (the “National Onshore
Partnership Agreement”) and the Agreement of Limited Partnership of National Offshore, as
amended (the “National Offshore Partnership Agreement”); and AREP Oil & Gas owns such
general partner interests free and clear of all liens, encumbrances, security interests,
equities, charges or claims.

     (f) AREP Oil & Gas wholly owns the sole limited partner of each of National Onshore and
National Offshore; such limited partner interests represented thereby have been duly
authorized and validly issued in accordance with each of the National Onshore Partnership
Agreement and the National Offshore Partnership Agreement and are fully paid (to the extent
required under the National Onshore Partnership Agreement and the National Offshore
Partnership Agreement) and nonassessable (except as such nonassessability may be affected by
matters described in Section 17-607 of the Delaware LP Act).

          Section 3.3 Authority. Each of AREP Oil & Gas and IPO Co. has all necessary power and
authority to execute and deliver this Agreement, to perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been duly and validly
authorized by the board of directors of AREP Oil & Gas, and the board of directors of IPO Co., and
AREH, as the sole stockholder of IPO Co., will, immediately following the execution hereof by the
parties hereto, approve and adopt this Agreement, and no other proceedings on the part of AREH,
AREP Oil & Gas or IPO Co. are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly executed and delivered
by each of, AREP Oil & Gas and IPO Co. and constitutes, assuming the due authorization, execution
and delivery hereof by the Company, a valid, legal and binding agreement of each of AREP Oil & Gas
and IPO Co. enforceable against each of AREP Oil & Gas and IPO Co. in accordance with its terms,
subject to any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or similar laws now or hereafter in effect relating to creditors’ rights generally or to general
principles of equity (regardless of whether enforcement is considered in a proceeding at law or in
equity).

          Section 3.4 Financial Statements. AREP Oil & Gas has delivered to the Company
unaudited consolidated balance sheets and unaudited statements of operations as of and for the year
ended December 31, 2004 and the nine months ended September 30, 2005 (the “AREP Oil & Gas Financial
Statement”). The AREP Oil & Gas Financial Statements fairly present in all material respects the
financial position and results of operations of AREP Oil & Gas as of the dates and for the periods
indicated. The AREP Oil & Gas Financial Statements have been prepared in accordance with GAAP
consistently applied (except that the AREP Oil & Gas Financial Statements do not contain all of the
financial statements or the notes required under GAAP). The balance sheet for the nine months ended
September 30, 2005 continues to reflect the financial condition of AREP Oil & Gas as of the date of
this Agreement in all material respects (subject to the occurrence of the Minden Field acquisition
and related borrowings and changes occurring in the ordinary course of business).

16

 

          Section 3.5 Information Supplied. None of the information supplied or to be supplied
by AREP Oil & Gas or IPO Co. in writing for inclusion or incorporation by reference to (i) the S-4
will at the time the S-4 is filed with the SEC and at the time it becomes effective under the
Securities Act contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not misleading, (ii) the
Information Statement will at the date mailed to stockholders contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which they are made not
misleading, or (iii) the S-1 will at the time the S-1 is filed with the SEC and at the time it
becomes effective under the Securities Act contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements
therein not misleading. The S-4 and the S-1 will comply as to form in all material respects with
the provisions of the Securities Act and the rules and regulations thereunder. Notwithstanding the
foregoing, none of AREP Oil & Gas or IPO Co. makes any representation, warranty or covenant with
respect to any information supplied or required to be supplied by the Company that is contained in
or omitted from any of the foregoing documents.

          Section 3.6 Consents and Approvals; No Violations. Except for filings, permits,
authorizations, consents and approvals as may be required under and other applicable requirements
of the Securities Act, the Exchange Act, state securities or blue sky laws, and the filing and
recordation of the Certificate of Merger as required by the DGCL, no material filing with or notice
to, and no material permit, authorization, consent or approval of any Governmental Entity is
necessary for the execution and delivery by AREP Oil & Gas or IPO Co. of this Agreement or the
consummation by AREP Oil & Gas or IPO Co. of the transactions contemplated hereby. Neither the
execution, delivery and performance of this Agreement by AREP Oil & Gas or IPO Co. nor the
consummation by AREP Oil & Gas or IPO Co. of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective Certificates of Incorporation or
bylaws (or similar governing documents) of AREP Oil & Gas or IPO Co., (ii) result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which AREP Oil & Gas or IPO Co. is a party
or by which any of them or any of their respective properties or assets are bound or (iii) violate
any material order, writ, injunction, decree, law, statute, rule or regulation applicable to AREP
Oil & Gas or IPO Co. or any of their respective properties or assets.

          Section 3.7 Litigation. There is no suit, claim, action, proceeding or investigation
pending or, to the knowledge of AREP Oil & Gas threatened, against AREP Oil & Gas or any of its
subsidiaries or any of their respective properties or assets before any Governmental Entity that
could reasonably be expected to prevent or delay the consummation of the transactions contemplated
by this Agreement beyond the Final Date. Neither AREP Oil & Gas nor any of its subsidiaries is
subject to any outstanding order, writ, injunction or decree that could reasonably be expected to
prevent or delay the consummation of the transactions contemplated hereby.

17

 

          Section 3.8 Tax Treatment. This Agreement shall constitute a plan of reorganization
for purposes of Sections 354 and 368 of the Code. None of AREP Oil & Gas or IPO Co. nor, to the
knowledge of AREP Oil & Gas, any of their affiliates has taken, proposes to take, or has agreed to
take any action that would prevent the Merger from constituting a reorganization qualifying under
the provisions of Section 368(a) of the Code.

          Section 3.9 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of AREP Oil & Gas or IPO Co.

          Section 3.10 No Prior Activities. Except for obligations incurred in connection with
its incorporation or organization or the negotiation and consummation of this Agreement and the
transactions contemplated hereby, IPO Co. has not incurred any obligation or liability nor engaged
in any business or activity of any type or kind or entered into any agreement or arrangement with
any person.

          Section 3.11 No Undisclosed Liabilities; Absence of Changes. Except as set forth in
Section 3.11 of the AREP Disclosure Schedule, as of the date of this Agreement, neither AREP Oil &
Gas nor any of its subsidiaries has any material liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of AREP Oil & Gas (including the notes thereto), other than (i) as
publicly disclosed by AREP in any reports or documents filed by AREP with the SEC (the “AREP SEC
Reports”), (ii) as set forth in the AREP Oil & Gas Financial Statements and (iii) liabilities or
obligations incurred since the date of the AREP Oil & Gas Financial Statements in the ordinary
course of business and consistent with past practice. Except as set forth in Section 3.11 of the
AREP Disclosure Schedule, between the date of filing of the latest AREP SEC Report and the date of
this Agreement, there have been no events, changes or effects with respect to AREP Oil & Gas or its
subsidiaries that, individually or in the aggregate, have had or reasonably would be expected to
have had a Material Adverse Effect on AREP Oil & Gas. Without limiting the generality of the
foregoing, except as set forth in Section 3.11 of the AREP Disclosure Schedule, between the date of
filing of the latest AREP SEC Report and the date of this Agreement, AREP Oil & Gas and its
subsidiaries have conducted their respective businesses in all material respects only in, and have
not engaged in any material transaction other than according to, the ordinary and usual course of
such businesses consistent with past practices. Except for increases in the ordinary course of
business consistent with past practices or as set forth in Section 3.11 of the AREP Disclosure
Schedule, between the date of filing of the latest AREP SEC Report and the date of this Agreement,
there has not been any material increase in the compensation payable or that could become payable
by AREP Oil & Gas or any of its subsidiaries to (a) officers of AREP Oil & Gas or any of its
subsidiaries or (b) any employee of AREP Oil & Gas or any of its subsidiaries.

          Section 3.12 Compliance with Applicable Law. Except as publicly disclosed by AREP in
the AREP SEC Reports, AREP Oil & Gas and its subsidiaries hold all material permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the “AREP Oil & Gas Permits”). Except as publicly disclosed
by AREP in the AREP SEC Reports, AREP Oil & Gas and its subsidiaries are

18

 

in material compliance with the terms of AREP Oil & Gas Permits. Except as publicly disclosed
by AREP in the AREP SEC Reports, to the knowledge of AREP Oil & Gas, the businesses of AREP Oil &
Gas and its subsidiaries have been and are being conducted in material compliance with all material
Applicable Laws. Except as publicly disclosed by AREP in the AREP SEC Reports, no investigation or
review by any Governmental Entity with respect to AREP Oil & Gas or any of its subsidiaries is
pending or, to the knowledge of AREP Oil & Gas, threatened, nor, to the knowledge of AREP Oil &
Gas, has any Governmental Entity indicated an intention to conduct the same.

          Section 3.13 Capitalization. The authorized capital stock of IPO Co. consists of Fifty
Million (50,000,000) shares of common stock, of which, as of the date of this Agreement, 1 share
was issued and outstanding, One (1) share of Class B Common Stock, of which, as of the date of this
Agreement, 1 share was issued and outstanding, and One Million (1,000,000) shares of preferred
stock, no shares of which are outstanding. All of the outstanding shares of common stock and Class
B Common Stock have been validly issued and are fully paid, nonassessable and free of preemptive
rights. As of the date of this Agreement, except as contemplated by this Agreement (including the
schedules and exhibits hereto), there are outstanding (i) no shares of capital stock or other
voting securities of IPO Co., except as set forth above, (ii) no securities of IPO Co. or any of
its subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or
other securities of IPO Co., (iii) no options, preemptive or other rights to acquire from the IPO
Co. or any of its subsidiaries, and no obligations of IPO Co. or any of its subsidiaries to issue
any capital stock, voting securities or securities convertible into or exchangeable or exercisable
for capital stock or other securities of IPO Co. and (iv) no equity equivalent interests in the
ownership or earnings of IPO Co. or its subsidiaries or other similar rights (collectively “IPO Co.
Securities”). As of the date of this Agreement, there are no outstanding rights or obligations of
IPO Co. or any of its subsidiaries to repurchase, redeem or otherwise acquire any IPO Co.
Securities. There are no stockholder agreements, voting trusts or other agreements or
understandings to which the IPO Co. is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of IPO Co.

ARTICLE IV

COVENANTS

          Section 4.1 Conduct of Business of the Company. Except as contemplated by this
Agreement or in connection with the IPO Transaction or as described on Exhibit B or in
Section 4.1 of the Company Disclosure Schedule, during the period from the date of this Agreement
to the Effective Time, the Company will and will cause each of its subsidiaries to conduct its
operations in the ordinary course of business consistent with past practice and, to the extent
consistent therewith, with no less diligence and effort than would be applied in the absence of
this Agreement, use commercially reasonable efforts to preserve intact its current business
organizations, keep available the service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors, creditors, employees, contractors
and others having business dealings with it with the intention that its goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the generality of

19

 

the foregoing, except as otherwise expressly provided in this Agreement and except as
contemplated by this Agreement or in connection with the IPO Transaction or as described on
Exhibit B or in Section 4.1 of the Company Disclosure Schedule, prior to the Effective
Time, neither the Company nor any of its subsidiaries will, without the prior written consent of
AREP Oil & Gas:

     (a) amend its Certificate of Incorporation or bylaws (or other similar governing
instrument);

     (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any other debt or
equity securities or equity equivalents (including any stock options or stock appreciation
rights);

     (c) split, combine or reclassify any shares of its capital stock, declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, make any other actual, constructive or
deemed distribution in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any of its securities
or any securities of any of its subsidiaries;

     (d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the Company or any
of its subsidiaries (other than the Merger);

     (e) alter through merger, liquidation, reorganization, restructuring or any other
fashion the corporate structure of any subsidiary;

     (f) (i) incur or assume any long-term or short-term debt or issue any debt securities
in each case, except for borrowings under lines of credit in the ordinary course of
business, or modify or agree to any amendment of the terms of any of the foregoing; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except for obligations of
subsidiaries of the Company incurred in the ordinary course of business; (iii) make any
loans, advances or capital contributions to or investments in any other person (other than
to subsidiaries of the Company or customary loans or advances to employees in each case in
the ordinary course of business consistent with past practice); (iv) pledge or otherwise
encumber shares of capital stock of the Company or any of its subsidiaries; or (v) mortgage
or pledge any of its material assets, tangible or intangible, or create or suffer to exist
any material Lien thereupon;

     (g) except as may be required by Applicable Law, enter into, adopt or amend or
terminate any bonus, special remuneration, compensation, severance, stock option, stock
purchase agreement, retirement, health, life, or disability insurance, severance or other
employee benefit plan agreement, trust, fund or other arrangement for the benefit or welfare
of any director, officer, employee or consultant in any manner or increase in any

20

 

manner the compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the date of this
Agreement (including the granting of stock appreciation rights or performance units);

     (h) grant any severance or termination pay to any director, officer, employee or
consultant, except payments made pursuant to written agreements outstanding on the date of
this Agreement, the terms of which are in all material respects completely and correctly
disclosed on Schedule 4.1(h) or as required by applicable federal, state or local law or
regulations;

     (i) acquire, sell, lease, license, transfer, distribute or otherwise dispose of any
material assets in any single transaction or series of related transactions, other than in
the ordinary course of business consistent with past practices;

     (j) except as may be required as a result of a change in law or in GAAP, materially
change any of the accounting principles, practices or methods used by it;

     (k) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other entity or division thereof or any equity interest therein;

     (l) make any material tax election or settle or compromise any material income tax
liability or permit any material insurance policy naming it as a beneficiary or loss-payable
to expire, or to be canceled or terminated, unless a comparable insurance policy reasonably
acceptable to AREP Oil & Gas is obtained and in effect;

     (m) fail to file any tax returns when due (or, alternatively, fail to file for
available extensions) or fail to cause such tax returns when filed to be complete and
accurate in all material respects;

     (n) fail to pay any taxes or other material debts when due;

     (o) settle or compromise any pending or threatened suit, action or claim that (i)
relates to the transactions contemplated hereby or (ii) the settlement or compromise of
which would be material to the Company;

     (p) take any action or fail to take any action that could reasonably be expected to
limit the utilization of any of the net operating losses, built-in losses, tax credits or
other similar items of the Company or its subsidiaries under Section 382, 383, 384 or 1502
of the Code and the Treasury Regulations thereunder; or

     (q) take or agree in writing or otherwise to take any of the actions described in
Sections 4.1(a) through 4.1(p) (and it shall use all reasonable efforts not to take any
action that would make any of the representations or warranties of the Company contained in
this Agreement (including the exhibits hereto) untrue or incorrect).

          Section 4.2 Conduct of Business of AREP Oil & Gas and IPO Co.. Except as contemplated
by this Agreement or in connection with the IPO Transaction or as described on Exhibit B or
in Section 4.2 of the AREP Oil & Gas Disclosure Schedule, during the period from

21

 

the date of this Agreement to the Effective Time, each of AREP Oil & Gas and IPO Co. will and
will cause each of its subsidiaries to conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, use commercially reasonable efforts
to preserve intact its current business organizations, keep available the service of its current
officers and employees and preserve its relationships with customers, suppliers, distributors,
lessors, creditors, employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, except as otherwise expressly provided in this
Agreement and except as contemplated by this Agreement or in connection with the IPO Transaction or
as described on Exhibit B or in Section 4.2 of the AREP Oil & Gas Disclosure Schedule,
prior to the Effective Time, neither AREP Oil & Gas, IPO Co. nor any of their subsidiaries will,
without the prior written consent of the Company:

     (a) amend its Certificate of Incorporation or bylaws (or other similar governing
instrument);

     (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any other debt or
equity securities or equity equivalents (including any stock options or stock appreciation
rights);

     (c) split, combine or reclassify any shares of its capital stock, declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, make any other actual, constructive or
deemed distribution in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any of its securities
or any securities of any of its subsidiaries;

     (d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of AREP Oil & Gas,
IPO Co. or any of their subsidiaries (other than the Merger);

     (e) alter through merger, liquidation, reorganization, restructuring or any other
fashion the corporate structure of any subsidiary;

     (f) (i) incur or assume any long-term or short-term debt or issue any debt securities
in each case, except for borrowings under lines of credit in the ordinary course of
business, or modify or agree to any amendment of the terms of any of the foregoing; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except for obligations of
subsidiaries of AREP Oil & Gas or IPO Co. incurred in the ordinary course of business; (iii)
make any loans, advances or capital contributions to or investments in any other person
(other than to subsidiaries of AREP Oil & Gas or IPO Co. or customary loans or advances to
employees in each case in the ordinary course of business consistent with past practice);
(iv) pledge or otherwise encumber shares of capital stock of AREP

22

 

Oil & Gas, IPO Co. or any of their subsidiaries; or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any material Lien
thereupon;

     (g) except as may be required by Applicable Law, enter into, adopt or amend or
terminate any bonus, special remuneration, compensation, severance, stock option, stock
purchase agreement, retirement, health, life, or disability insurance, severance or other
employee benefit plan agreement, trust, fund or other arrangement for the benefit or welfare
of any director, officer, employee or consultant in any manner or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date of this Agreement
(including the granting of stock appreciation rights or performance units);

     (h) grant any severance or termination pay to any director, officer, employee or
consultant, except payments made pursuant to written agreements outstanding on the date of
this Agreement, the terms of which are in all material respects completely and correctly
disclosed on Schedule 4.2(h) or as required by applicable federal, state or local law or
regulations;

     (i) acquire, sell, lease, license, transfer, distribute or otherwise dispose of any
material assets in any single transaction or series of related transactions, other than in
the ordinary course of business consistent with past practices;

     (j) except as may be required as a result of a change in law or in GAAP, materially
change any of the accounting principles, practices or methods used by it;

     (k) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other entity or division thereof or any equity interest therein;

     (l) make any material tax election or settle or compromise any material income tax
liability or permit any material insurance policy naming it as a beneficiary or loss-payable
to expire, or to be canceled or terminated, unless a comparable insurance policy reasonably
acceptable to the Company is obtained and in effect;

     (m) fail to file any tax returns when due (or, alternatively, fail to file for
available extensions) or fail to cause such tax returns when filed to be complete and
accurate in all material respects;

     (n) fail to pay any taxes or other material debts when due;

     (o) settle or compromise any pending or threatened suit, action or claim that (i)
relates to the transactions contemplated hereby or (ii) the settlement or compromise of
which would be material to AREP Oil & Gas or IPO Co.;

     (p) take any action or fail to take any action that could reasonably be expected to
limit the utilization of any of the net operating losses, built-in losses, tax credits or
other similar items of AREP Oil & Gas, IPO Co. or their subsidiaries under Section 382, 383,
384 or 1502 of the Code and the Treasury Regulations thereunder; or

23

 

     (q) take or agree in writing or otherwise to take any of the actions described in
Sections 4.2(a) through 4.2(p) (and it shall use all reasonable efforts not to take any
action that would make any of the representations or warranties of AREP Oil & Gas or IPO Co.
contained in this Agreement (including the exhibits hereto) untrue or incorrect).

          Section 4.3 Preparation of S-4, the Information Statement and the S-1. The Company
and AREP Oil & Gas shall diligently work together and promptly prepare and file with the SEC the
Information Statement, the S-4 and the S-1, respectively. Each of AREP Oil & Gas and the Company
shall use all reasonable efforts to have the S-4 and the S-1 declared effective under the
Securities Act as promptly as practicable after such filing. AREP Oil & Gas shall also take any
action (other than qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in connection with the
issuance of IPO Co. Common Stock in the Merger, and the Company shall furnish all information
concerning the Company and the holders of Shares as may be reasonably requested in connection with
any such action.

          Section 4.4 No Solicitation or Negotiation.

     (a) The Company, its affiliates (as reasonably determined by the Company) and their
respective officers and other employees with managerial responsibilities, directors,
representatives (including the Financial Advisor or any other investment banker and any
attorneys and accountants) and agents shall immediately cease any discussions or
negotiations with any parties with respect to any Third Party Acquisition (as defined
below). The Company also agrees promptly to request each person that has heretofore executed
a confidentiality agreement in connection with its consideration of acquiring (whether by
merger, acquisition of stock or assets or otherwise) the Company or any of its subsidiaries,
if any, to return all confidential information heretofore furnished to such person by or on
behalf of the Company or any of its subsidiaries. Neither the Company nor any of its
affiliates shall, nor shall the Company authorize or permit any of its or their respective
officers, directors, employees, representatives or agents to, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with or provide
any non-public information to any person or group (other than AREP Oil & Gas and IPO Co. or
any designees of AREP Oil & Gas and IPO Co.) concerning any Third Party Acquisition.

     (b) The Company Board shall not approve or recommend, or cause or permit the Company to
enter into any agreement or obligation with respect to, any Third Party Acquisition.

     (c) For the purposes of this Agreement, “Third Party Acquisition” means the occurrence
of any of the following events: (i) the acquisition of the Company by merger or otherwise by
any person (which includes a “person” as such term is defined in Section 13(d)(3) of the
Exchange Act) other than AREP Oil & Gas, IPO Co. or any affiliate thereof (a “Third Party”);
(ii) the acquisition by a Third Party of any material portion (which shall include fifteen
percent (15%) or more) of the assets of the Company and its subsidiaries taken as a whole,
other than the sale of its products in the ordinary course of business consistent with past
practices; (iii) the acquisition by a Third Party of fifteen

24

 

percent (15%) or more of the outstanding Shares; (iv) the adoption by the Company of a
plan of liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by the Company or any of its subsidiaries of more than ten percent (10%) of the
outstanding Shares; or (vi) the acquisition (or any group of acquisitions) by the Company or
any of its subsidiaries by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business (or businesses)
whose annual revenues, net income or assets is equal or greater than ten percent (10%) of
the annual revenues, net income or assets of the Company.

          Section 4.5 Comfort Letters.

     (a) The Company shall use all reasonable efforts to cause Grant Thornton LLP to deliver
a letter dated not more than five days prior to the date on which each of the S-4 and the
S-1 shall become effective and addressed to itself and AREP Oil & Gas and their respective
Boards of Directors in form and substance reasonably satisfactory to AREP Oil & Gas and
customary in scope and substance for agreed-upon procedures letters delivered by independent
public accountants in connection with registration statements and information statements
similar to the S-4, the Information Statement and the S-1.

     (b) AREP Oil & Gas shall use all reasonable efforts to cause Grant Thornton LLP to
deliver a letter dated not more than five days prior to the date on which each of the S-4
and the S-1 shall become effective and addressed to itself and the Company and their
respective Boards of Directors in form and substance reasonably satisfactory to the Company
and customary in scope and substance for agreed-upon procedures letters delivered by
independent accountants in connection with registration statements and information
statements similar to the S-4, the Information Statement and the S-1.

          Section 4.6 Written Consent. AREP Oil & Gas agrees that immediately following the
execution and delivery of this Agreement by the parties hereto, it shall deliver to the Company at
its principal place of business a duly executed and dated written consent (the “Written Consent”)
with respect to all Shares owned by it approving and adopting the Agreement as required by Section
251 of the DGCL. Following such delivery of the Written Consent, the Company shall provide to its
stockholders the notice required pursuant to Section 228(e) of the DGCL.

          Section 4.7 Stock Exchange Listing. AREP Oil & Gas shall use all reasonable efforts
to cause the shares of IPO Co. Common Stock to be issued in the Merger to be approved for listing
on a national securities exchange or inter-dealer quotation system (an “Exchange”), subject to
official notice of issuance, prior to the Effective Time.

          Section 4.8 Access to Information.

     (a) Between the date of this Agreement and the Effective Time, the Company will give
AREP Oil & Gas and its authorized representatives reasonable access during normal business
hours to all employees, plants, offices, warehouses and other facilities, to all books and
records and all personnel files of current employees of the Company and its subsidiaries as
AREP Oil & Gas may reasonably require, and will cause its officers and

25

 

those of its subsidiaries to furnish AREP Oil & Gas with such financial and operating
data and other information with respect to the business and properties of the Company and
its subsidiaries as AREP Oil & Gas may from time to time reasonably request. Notwithstanding
the foregoing, access to the Company’s personnel files shall be only permitted to AREP Oil &
Gas’s employees for which access is reasonably necessary to facilitate the consummation of
the Merger and the transactions contemplated thereby. Without limiting any of AREP Oil &
Gas’s other confidentiality obligations, AREP Oil & Gas shall maintain all information
contained in the Company’s personnel files in strictest confidence, will not use such
information in violation of any applicable laws, and shall not disclose such information to
any third party whatsoever without the prior written consent of the Company and the
applicable employee or employees. Between the date of this Agreement and the Effective Time,
AREP Oil & Gas shall make available to the Company, as reasonably requested by the Company,
a designated officer of AREP Oil & Gas to answer questions and make available such
information regarding AREP Oil & Gas and its subsidiaries as is reasonably requested by the
Company taking into account the nature of the transactions contemplated by this Agreement.

     (b) Between the date of this Agreement and the Effective Time, the Company shall
furnish to AREP Oil & Gas (1) within two (2) Business Days following preparation thereof
(and in any event within twenty (20) Business Days after the end of each fiscal quarter) an
unaudited balance sheet as of the end of such quarter and the related statements of
earnings, stockholders’ equity (deficit) and cash flows for the quarter then ended, and (3)
within two (2) Business Days following preparation thereof (and in any event within ninety
(90) calendar days after the end of each fiscal year) an audited balance sheet as of the end
of such year and the related statements of earnings, stockholders’ equity (deficit) and cash
flows, all of such financial statements referred to in clauses (1), (2) and (3) to prepared
in accordance with GAAP in conformity with the practices consistently applied by the Company
with respect to such financial statements. All the foregoing shall be in accordance with the
books and records of the Company and shall fairly present its financial position (taking
into account the differences between the monthly, quarterly and annual financial statements
prepared by the Company in conformity with its past practices) as of the last day of the
period then ended.

     (c) Each of the parties hereto will hold, and will cause its consultants and advisers
to hold, in confidence all documents and information furnished to it by or on behalf of
another party to this Agreement in connection with the transactions contemplated by this
Agreement.

          Section 4.9 Public Announcements. Neither AREP Oil & Gas and IPO Co., on the one
hand, nor the Company, on the other hand, shall issue any press release or otherwise make any
public statements with respect to the transactions contemplated by this Agreement, including the
Merger, or any Third Party Acquisition, without the prior consent of AREP Oil & Gas and IPO Co. (in
the case of the Company) or the Company (in the case of AREP Oil & Gas and IPO Co.), which consent
shall not be unreasonably withheld, except as may be required by Applicable Law, or by the rules
and regulations of, or pursuant to any agreement with, the New York Stock Exchange or the OTC
Bulletin Board. The first public announcement of this

26

 

Agreement and the Merger shall be a joint press release agreed upon by AREP Oil & Gas, IPO Co.
and the Company.

          Section 4.10 Notification of Certain Matters. The Company shall give prompt notice to
AREP Oil & Gas and IPO Co., and AREP Oil & Gas and IPO Co. shall give prompt notice to the Company,
of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which has
caused or would be likely to cause any representation or warranty contained in this Agreement by
such first party to be untrue or inaccurate such that the conditions in Section 5.2(a) or 5.3(a)
would not be satisfied at or prior to the Effective Time and (ii) any material failure by such
first party to comply with or satisfy in any material respect any covenant condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 4.10 shall not cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such notice.

          Section 4.11 Affiliates.

     (a) The Company shall use all reasonable efforts to obtain from a person that may be
deemed to be affiliates of the Company under Rule 145 of the Securities Act (“Company
Affiliates”), each of which is listed in Schedule 4.11 hereto and from any person who may be
deemed to have become a Company Affiliate, after the date of this Agreement and on or prior
to the Effective Time, a letter agreement substantially in the form of Exhibit A
hereto as soon as practicable.

     (b) IPO Co. shall not be required to maintain the effectiveness of the S-4 for the
purpose of resale of shares of IPO Co. Common Stock by stockholders of the Company who may
be affiliates of the Company or AREP Oil & Gas pursuant to Rule 145 under the Securities
Act.

          Section 4.12 Additions to and Modification of Disclosure Schedules. Concurrently with
the execution and delivery of this Agreement, the Company has delivered the Company Disclosure
Schedule and AREP Oil & Gas has delivered the AREP Oil & Gas Disclosure Schedule, each of which
includes all of the information required by the relevant provisions of this Agreement. In addition,
the Company shall deliver to AREP Oil & Gas and IPO Co., and AREP Oil & Gas and IPO Co. shall
deliver to the Company, such additions to or modifications of any Sections of the Company
Disclosure Schedule or the AREP Oil & Gas Disclosure Schedule, as the case may be, necessary to
make the information set forth therein true, accurate and complete in all material respects as soon
as practicable after such information is available to the Company or AREP Oil & Gas, as the case
may be, after the date of execution and delivery of this Agreement; provided, however, that such
disclosure shall not be deemed to constitute an exception to its representations and warranties
under Article 2, nor limit the rights and remedies of (i) AREP Oil & Gas and IPO Co. under this
Agreement for any breach by the Company of such representation and warranties or (ii) the Company
under this Agreement for any breach by AREP Oil & Gas of such representation and warranties;
provided, further, that failure to comply with the disclosure obligations required hereunder shall
not be deemed to constitute a failure of the conditions set forth in Sections 5.2(b) or 5.3(b)
unless the information

27

 

to be disclosed would constitute a breach of representations or warranties that would cause a
failure of the conditions set forth in Section 5.2(a) or 5.3(a) as the case may be.

          Section 4.13 Access to Company Employees. The Company agrees to provide AREP Oil &
Gas with, and to cause each of its subsidiaries to provide AREP Oil & Gas with, reasonable access
to its employees during normal working hours following the date of this Agreement, to among other
things, deliver offers of continued employment and to provide information to such employees about
AREP Oil & Gas. All communications by AREP Oil & Gas with Company employees shall be conducted in a
manner that does not disrupt or interfere with the Company’s efficient and orderly operation of its
business.

          Section 4.14 Company Compensation and Benefit Plans. The Company agrees to take all
actions necessary to amend, merge, freeze or terminate all compensation and benefit plans,
effective at the Closing Date, as requested in writing by AREP Oil & Gas.

          Section 4.15 Certain Financing and Other Transactions. Notwithstanding any covenants
or other agreements contained herein to the contrary which are applicable to the Company, AREP Oil
& Gas or IPO Co., each of the parties: (i) acknowledges and agrees that the IPO Transaction and one
or more of the transactions, agreements, events or matters described or contemplated on Exhibit
B attached hereto (or similar transactions) may occur prior to, contemporaneously with or
following the Effective Time; (ii) hereby consents to the IPO Transaction and each of such
transactions, agreements, events and matters; and (iii) agrees that the foregoing shall in no event
give rise to any right by any party to (a) assert that any other party has breached any
representation, warranty, covenant or other agreement contained herein or that any condition to
Closing has failed to occur or (ii) terminate this Agreement pursuant to Article VI.

          Section 4.16 Directors’ and Officers’ Indemnification and Insurance.

     (a) From and after the Effective Time, the Surviving Corporation shall, to an extent no
less favorable than the certificate of incorporation, bylaws, indemnification agreements or
other indemnification rights of the Company in effect as of the date of this Agreement (the
“Existing Indemnification Agreements”), indemnify and hold harmless each present and former
director and officer of the Company and its subsidiaries (collectively, the “Indemnified
Parties”) against all costs and expenses (including, to the extent contemplated in the
Existing Indemnification Agreements, attorneys’ fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim, action, suit,
proceeding or investigation (whether arising before or after the Effective Time), based on
the fact that such person is or was a director or officer of the Company or any subsidiary
of the Company and arising out of or pertaining to any action or omission occurring at or
before the Effective Time (and, to the extent that the Existing Indemnification Agreements
so provide, shall pay any expenses in advance of the final disposition of such action or
proceeding to each Indemnified Party to the fullest extent permitted under DGCL, upon
receipt from the Indemnified Party to whom expenses are advanced of an undertaking to repay
such advances if required under DCGL).

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     (b) The Surviving Corporation or, at AREH’s option, AREH or its affiliate, shall add as
additional insured persons under its directors’ and officers’ liability insurance policy
those persons who are currently covered by the Company’s directors’ and officers’ liability
insurance policy, and the Surviving Corporation or, at AREH’s option, AREH, shall use its
reasonable best efforts to maintain such coverage in effect for a period of six years from
and after the Effective Time; provided, however, that in no event shall the Surviving
Corporation or AREH or its affiliate be required to expend pursuant to this Section 4.16(b)
more than an amount per year equal to 100% of the current annual premiums paid by the
Company for such insurance. Notwithstanding the foregoing, in lieu of providing any person
coverage under a directors’ and officers’ liability insurance policy, AREH may elect (the
“Election”) to indemnify such person, in which event (i) such person shall have the same
rights against AREH (and no greater rights) that such person would have had under the
Company’s directors’ and officers’ liability insurance policy in effect immediately prior to
the Effective Time had such insurance policy been maintained in accordance with the previous
sentence and (ii) AREH will make such person whole with respect to any tax liabilities
incurred by such person as a result of any such indemnification payments to the extent, if
any, that tax liabilities arising from such payments exceed any tax liabilities that would
have been incurred if such payments had been made in respect of an insurance policy and
related indemnification provisions had the Election not been exercised.

     (c) In the event that the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the Surviving
Corporation or, at AREH’s option, AREH, shall assume the obligations set forth in this
Section 4.16.

ARTICLE V

CONDITIONS TO CONSUMMATION OF THE MERGER

          Section 5.1 Conditions to Each Party’s Obligations to Effect the Merger. The
respective obligations of each party hereto to effect the Merger are subject to the satisfaction at
or prior to the Effective Time of the following conditions:

     (a) this Agreement shall have been approved and adopted by the requisite vote or
written consent of the stockholders of the Company;

     (b) no statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or enforced by any United States federal or state
court or United States federal or state Governmental Entity that prohibits, restrains,
enjoins or restricts the consummation of the Merger;

29

 

     (c) the IPO Transaction shall have been consummated substantially contemporaneously
with the Closing;

     (d) any governmental or regulatory notices, approvals or other requirements necessary
to consummate the transactions contemplated hereby and to operate the Business after the
Effective Time in all material respects as it was operated prior thereto shall have been
given, obtained or complied with, as applicable; and

     (e) each of the S-4 and the S-1 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop order, and IPO
Co. shall have received all state securities laws or “blue sky” permits and authorizations
necessary to issue shares of IPO Co. Common Stock in exchange for Shares in the Merger.

          Section 5.2 Conditions to the Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction at or prior to the Effective Time of
the following conditions:

     (a) the representations and warranties of AREP Oil & Gas and IPO Co. contained in this
Agreement shall be true and correct (except to the extent that the aggregate of all breaches
thereof would not have a Material Adverse Effect on AREP Oil & Gas) at and as of the
Effective Time with the same effect as if made at and as of the Effective Time (except to
the extent such representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date, and in any event, subject
to the foregoing Material Adverse Effect qualification) and, at the Closing, AREP Oil & Gas
and IPO Co. shall have delivered to the Company a certificate to that effect, executed by an
executive officer of AREP Oil & Gas and IPO Co.;

     (b) each of the covenants and obligations of AREP Oil & Gas and IPO Co. to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall have been duly
performed in all material respects at or before the Effective Time and, at the Closing, AREP
Oil & Gas and IPO Co. shall have delivered to the Company a certificate to that effect,
executed by an executive officer of AREP Oil & Gas and IPO Co.; and

     (c) the shares of IPO Co. Common Stock issuable to the holders of the Shares pursuant
to this Agreement and such other shares required to be reserved for issuance in connection
with the Merger shall have been approved for listing on an Exchange, upon official notice of
issuance.

          Section 5.3 Conditions to the Obligations of AREP Oil & Gas and IPO Co.. The
respective obligations of AREP Oil & Gas and IPO Co. to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:

     (a) the representations and warranties of the Company contained in this Agreement shall
be true and correct (except to the extent that the aggregate of all breaches thereof would
not have a Material Adverse Effect on the Company) at and as of the Effective Time with the
same effect as if made at and as of the Effective Time (except

30

 

to the extent such representations specifically relate to an earlier date, in which
case such representations shall be true and correct as of such earlier date, and in any
event, subject to the foregoing Material Adverse Effect qualification), and, at the Closing,
the Company shall have delivered to AREP Oil & Gas and IPO Co. a certificate to that effect,
executed by an executive officer of the Company;

     (b) each of the covenants and obligations of the Company to be performed at or before
the Effective Time pursuant to the terms of this Agreement shall have been duly performed in
all material respects at or before the Effective Time and, at the Closing, the Company shall
have delivered to AREP Oil & Gas and IPO Co. a certificate to that effect, executed by an
executive officer of the Company; and

     (c) AREP Oil & Gas shall have received from each affiliate of the Company referred to
in Section 4.11(a) an executed copy of the letter attached hereto as Exhibit A.

ARTICLE VI

TERMINATION; AMENDMENT; WAIVER

          Section 6.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time whether before or after approval and adoption of
this Agreement by the Company’s stockholders:

     (a) by mutual written consent duly authorized by each of AREP Oil & Gas and IPO Co. and
the Company (acting at the direction of the Special Committee);

     (b) by AREP Oil & Gas and IPO Co. or the Company (with the prior approval of the
Special Committee) if (i) any court of competent jurisdiction in the United States or other
United States federal or state Governmental Entity shall have issued a final order, decree
or ruling, or taken any other final action, restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have become
nonappealable or (ii) the Merger has not been consummated by December 1, 2006 (the “Final
Date”); provided that no party may terminate this Agreement pursuant to this clause (ii) if
such party’s failure to fulfill any of its obligations under this Agreement shall have been
a principal reason that the Effective Time shall not have occurred on or before said date;

     (c) by the Company (acting at the direction of the Special Committee), upon a breach of
any representation, warranty, covenant or agreement on the part of AREP Oil & Gas or IPO Co.
set forth in this Agreement such that the conditions set forth in Section 5.2(a) or Section
5.2(b) shall have become incapable of fulfillment and such breach shall not have been waived
by the Company; or

     (d) by AREP Oil & Gas or IPO Co.., upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement such that the
conditions set forth in Section 5.3(a) or Section 5.3(b) shall have become

31

 

incapable of fulfillment and such breach shall not have been waived by the AREP Oil &
Gas or IPO Co..

          Section 6.2 Effect of Termination. In the event of the termination and abandonment of
this Agreement pursuant to Section 6.1, this Agreement shall forthwith become void and have no
effect without any liability on the part of any party hereto or its affiliates, directors, officers
or stockholders other than the provisions of this Section 6.2, Section 6.3 and Article VII hereof.
Nothing contained in this Section 6.2 shall relieve any party from liability for any breach of this
Agreement prior to such termination.

          Section 6.3 Fees and Expenses. Each party shall bear its own expenses in connection
with this Agreement and the transactions contemplated hereby, whether or not the Merger is
consummated.

          Section 6.4 Amendment. This Agreement may be amended by action taken by the Company,
AREP Oil & Gas and IPO Co. at any time before or after approval of the Merger by the stockholders
of the Company but after any such approval no amendment shall be made that requires the approval of
such stockholders under Applicable Law without such approval. This Agreement (including, subject to
Section 4.12, the Company Disclosure Schedule) may be amended only by an instrument in writing
signed on behalf of the parties hereto.

          Section 6.5 Extension; Waiver. At any time prior to the Effective Time, each party
hereto may (i) extend the time for the performance of any of the obligations or other acts of the
other party, (ii) waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained herein. Any
agreement on the part of any party hereto to any such extension or waiver shall be valid only if
set forth in an instrument, in writing, signed on behalf of such party. The failure of any party
hereto to assert any of its rights hereunder shall not constitute a waiver of such rights.

ARTICLE VII

MISCELLANEOUS

          Section 7.1 Nonsurvival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements made herein and in any certificate delivered
pursuant hereto shall terminate at the Effective Time or upon the termination of this Agreement.
This Section 7.1 shall not limit any covenant or agreement of the parties hereto that by its terms
requires performance after the Effective Time.

          Section 7.2 Entire Agreement; Assignment. This Agreement (including the Company
Disclosure Schedule) (a) constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all other prior and contemporaneous agreements and
understandings both written and oral between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise; provided, however, that each of
AREP Oil & Gas and IPO Co. may assign any or all of its rights and obligations under this Agreement
to any directly or indirectly wholly owned subsidiary of

32

 

AREH, but no such assignment shall relieve AREP Oil & Gas or IPO Co. of its obligations
hereunder if such assignee does not perform such obligations.

          Section 7.3 Validity. If any term or other provision of this Agreement or the
application thereof to any person or circumstance is held invalid or unenforceable, the remainder
of this Agreement and the application of such provision to other persons or circumstances shall not
be affected thereby and to such end the provisions of this Agreement are agreed to be severable.
Upon such determination that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually acceptable manner in order
that the Merger be consummated as originally contemplated to the fullest extent possible.

          Section 7.4 Notices. All notices, requests, claims, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the addresses set forth below
or to such other address as the party to whom notice is to be given may have furnished to the other
parties hereto in writing in accordance herewith. Any such notice or communication shall be deemed
to have been delivered and received (A) in the case of personal delivery, on the date of such
delivery, (B) in the case of telecopier, on the date sent if confirmation of receipt is received
and such notice is also promptly mailed by registered or certified mail (return receipt requested),
(C) in the case of a nationally-recognized overnight courier in circumstances under which such
courier guarantees next business day delivery, on the next Business Day after the date when sent
and (D) in the case of mailing, on the third Business Day following that on which the piece of mail
containing such communication is posted:

(a) if to AREP Oil & Gas or IPO Co.:

c/o American Real Estate Holdings Limited Partnership

100 South Bedford Road

Mt. Kisco, New York 10549

Phone: (914) 242-7700

Fax: (914) 242-9282

Attention: Felecia Buebel Esq.

with a copy (which shall not constitute notice) to:

Keith Schaitkin, Esq.

Assistant General Counsel

Icahn Associates Corp.

767 Fifth Avenue, 47th floor

New York, New York 10153

Phone: (212) 702-4300

Fax: (212) 688-1158

(b) if to the Company to:

33

 

National Energy Group, Inc.

4925 Greenville Avenue, Suite 1400

Dallas, Texas 75206

Phone: (214) 692-9211

Fax: (214) 692-9310

Attention: Phillip D. Devlin, Esq.

with a copy (which shall not constitute notice) to:

Baker Botts LLP

2001 Ross Avenue, Suite 700

Dallas, Texas 75201

Phone: (214) 953-6500

Fax: (214) 953-6503

Attention: Neel Lemon, Esq.

(c) if to the Special Committee to:

Robert H. Kite

6910 E. 5th Avenue

Scottsdale, Arizona 85251

Phone: (480) 946-3000

Fax: (480) 946-9000

with a copy (which shall not constitute notice) to:

Bracewell & Giuliani LLP

711 Louisiana Street, Suite 2300

Houston, Texas 77002-2781

Phone: (713) 221-1315

Fax: (713) 221-1212

Attention: Edgar J. Marston III

or to such other address as the person to whom notice is given may have previously furnished to the
others in writing in the manner set forth above.

          Section 7.5 Governing Law and Venue; Waiver of Jury Trial.

     (a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby
irrevocably submit to the jurisdiction of the courts of the State of Delaware and the
Federal courts of the United States of America located in the State of Delaware solely in
respect of the interpretation and enforcement of the provisions of this

34

 

Agreement and of the documents referred to in this Agreement, and in respect of the
transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to such action
or proceeding shall be heard and determined in such a Delaware State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner provided in
Section 7.4 or in such other manner as may be permitted by Applicable Law, shall be valid
and sufficient service thereof.

     (b) The parties agree that irreparable damage would occur and that the parties would
not have any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any Federal court located in the State of Delaware or in
Delaware state court, this being in addition to any other remedy to which they are entitled
at law or in equity.

     (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.5.

          Section 7.6 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.

          Section 7.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and its successors and permitted assigns and, except as
expressly provided herein, nothing in this Agreement is intended to or shall confer

35

 

upon any other person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement nor shall any such person be entitled to assert any claim hereunder. In no
event shall this Agreement constitute a third party beneficiary contract.

          Section 7.8 Certain Definitions. For the purposes of this Agreement the term:

     (a) “affiliate” means (except as otherwise provided in Section 4.11) a person that,
directly or indirectly, through one or more intermediaries controls, is controlled by or is
under common control with the first-mentioned person. Notwithstanding the foregoing, for the
purpose of this agreement, (i) affiliates of the Company shall be deemed to include NEG
Holding LLC and its subsidiaries and (ii) neither the Company nor any of its subsidiaries
(including NEG Holding LLC and its subsidiaries) shall be deemed to be affiliates of AREP
Oil & Gas, IPO Co. or the Surviving Corporation.

     (b) “Applicable Law” means, with respect to any person, any domestic or foreign,
federal, state or local statute, law, ordinance, rule, regulation, order, writ, injunction,
judgment, decree or other requirement of any Governmental Entity existing as of the date of
this Agreement or as of the Effective Time applicable to such Person or any of its
respective properties, assets, officers, directors, employees, consultants or agents.

     (c) “Business Day” means any day other than a day on which the New York Stock Exchange
is closed;

     (d) “capital stock” means common stock, preferred stock, partnership interests, limited
liability company interests or other ownership interests entitling the holder thereof to
vote with respect to matters involving the issuer thereof;

     (e) “IPO Co.” shall have the meaning given such term in the Recitals of this Agreement
but shall be broadly construed to mean the entity (which may be AREP Oil & Gas, an entity
which owns an equity interest in AREP Oil & Gas or an affiliate of AREP Oil & Gas) that
issues shares of common stock or other equity units pursuant to the S-1 in connection with
the IPO Transaction.

     (f) “IPO Transaction” means a transaction or series of related transactions pursuant to
which: (i) AREP Oil & Gas or an affiliate of AREP Oil & Gas will, directly or indirectly, be
and become the owner of 100% of the equity interests in each of National Onshore, National
Offshore and the Company; (ii) IPO Co. will acquire an equity interest in AREP Oil & Gas or
such affiliate; and (iii) IPO Co. will issue shares of common stock or other equity units
pursuant to the S-1.

     (g) “knowledge” or “known” means, with respect to any fact, circumstance, event or
other matter in question, the actual knowledge of such fact, circumstance, event or other
matter of any executive officer of the Company or AREP Oil & Gas, as the case may be.

     (h) “include” or “including” means “include, without limitation” or “including, without
limitation,” as the case may be, and the language following “include” or “including” shall
not be deemed to set forth an exhaustive list.

36

 

     (i) “person” means an individual, corporation, partnership, limited liability company,
association, trust, unincorporated organization or other legal entity including any
Governmental Entity;

     (j) “subsidiary” or “subsidiaries” of the Company, AREP Oil & Gas, IPO Co., the
Surviving Corporation or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal entity of
which the Company, AREP Oil & Gas, IPO Co., the Surviving Corporation or any such other
person, as the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the capital stock the holders of which are
generally entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity. Notwithstanding the foregoing, for the
purpose of this agreement, (i) subsidiaries of the Company shall be deemed to include NEG
Holding LLC and its subsidiaries and (ii) neither the Company nor any of its subsidiaries
(including NEG Holding LLC and its subsidiaries) shall be deemed to be subsidiaries of AREP
Oil & Gas, IPO Co. or the Surviving Corporation.

          Section 7.9 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any direct or indirect
stockholder of the Company or AREP Oil & Gas or IPO Co. or any officer, director, employee, agent,
representative or investor of any party hereto.

          Section 7.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which shall constitute one
and the same agreement.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

37

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf
as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	NATIONAL ENERGY GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Bob G. Alexander	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Bob G. Alexander	 	
	 

	 	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	AREP OIL & GAS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	American Real Estate Holdings
Limited Partnership, sole member
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	American Property Investors,
its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Keith Meister	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Keith Meister	 	 
	 

	 	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	NEG IPOCO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Keith Meister	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Keith Meister	 	 
	 

	 	 	 	Title: Chief Executive Officer	 	 

Solely for purposes of Sections 3.2, 3.3 and 4.16:

	 	 	 	 	 
	AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP
	By: American Property Investors, Inc.
	 
	 	 	 	 
	By:
	 	/s/ Keith Meister	 	 
	 

	 	 

Name: Keith Meister
	 	 
	 

	 	Title: Chief Executive Officer	 	 

[Signature Page to Agreement and Plan of Merger re National Energy Group]

38

 

EXHIBIT A

Form of Affiliate Letter

National Energy Group, Inc.

4925 Greenville Avenue, Suite 1400

Dallas, Texas 75206

[DATE]

Ladies and Gentlemen:

The undersigned, a holder of shares of common stock, par value $0.01 per share, of National Energy
Group, Inc., a Delaware corporation (the “Company”), is entitled to receive in exchange for such
shares, in connection with the merger (the “Merger”) of the Company with and into NEG IPOCO, INC.,
a Delaware corporation (“IPO Co.”), shares of Common Stock, par value $.01 per share, of IPO Co.
(“IPO Co. Common Stock”). The undersigned acknowledges that the undersigned may be deemed an
“affiliate” of the Company as that term is defined for purposes of Rule 145 (“Rule 145”)
promulgated under the Securities Act of 1933, as amended (the “Act”), although nothing contained
herein should be construed as an admission of such fact or as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such an affiliate on or after
the date of this letter.

If in fact the undersigned is an “affiliate” of the Company under the Act, the undersigned’s
ability to sell, assign or transfer the IPO Co. Common Stock received by the undersigned pursuant
to the Merger may be restricted unless such transaction is registered under the Act or an exemption
from such registration is available. The undersigned understands that such exemptions are limited
and the undersigned has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale of such securities
of Rules 144 and 145(d) promulgated under the Act. The undersigned understands that, except as set
forth in the Agreement and Plan of Merger, dated as of December 7, 2005, among AREP Oil & Gas, IPO
Co. and the Company, IPO Co. is under no obligation to register the sale, transfer or other
disposition of the IPO Co. Common Stock by, or on behalf of, the undersigned or to take any other
action necessary in order to make compliance with an exemption from such registration available;
provided, however, that IPO Co. will use commercially reasonable efforts to file the reports
required to be filed by it under the Securities Exchange Act of 1934, as amended, to the extent
required to enable the undersigned to sell IPO Co. Common Stock in accordance with Rules 144 and
145 promulgated under the Act.

The undersigned hereby represents to and covenants with IPO Co. that the undersigned will not sell,
assign, transfer or otherwise dispose of any of the IPO Co. Common Stock received by the
undersigned pursuant to the Merger except (i) pursuant to an effective registration statement under
the Act, (ii) in conformity with the volume and other applicable limitations of Rules 144 and 145
promulgated under the Act or (iii) in a transaction which, in the opinion of counsel reasonably
satisfactory to IPO Co. or as described in a “no-action” or interpretive letter from the Staff of
the Securities and Exchange Commission, is not required to be registered under the Act.

39

 

In the event of a sale or other disposition by the undersigned of IPO Co. Common Stock received by
the undersigned in the Merger pursuant to Rule 145, the undersigned will supply IPO Co. with
evidence reasonably satisfactory to IPO Co. of compliance with Rule 145. The undersigned
understands that IPO Co. may instruct its transfer agent to withhold the transfer of shares of IPO
Co. Common Stock sold or disposed of by the undersigned, subject to receipt of such evidence of
compliance. Following such receipt, IPO Co. shall instruct the transfer agent to effectuate the
transfer of the IPO Co. Common Stock sold or disposed of by the undersigned.

The undersigned acknowledges and agrees that there will be placed on certificates representing IPO
Co. Common Stock (or on confirmations and account statements for shares of IPO Co. Common Stock
held in book-entry form) received by the undersigned in the Merger or held by a transferee thereof
a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT
UNDER THAT ACT OR AN EXEMPTION FROM SUCH REGISTRATION.”

The undersigned acknowledges and agrees that the legend and stop orders set forth above will be
removed (i) upon receipt of evidence or representations satisfactory to IPO Co. that the IPO Co.
Common Stock represented by such certificates are being or have been sold in a transaction made in
conformity with the provisions of Rule 145 (as such rule may be hereafter amended) or if such
certificates are being or have been sold in a transfer registered under the Act or (ii) upon
receipt of an opinion in form and substance reasonably satisfactory to IPO Co. from counsel
reasonably satisfactory to IPO Co. to the effect that such legends are no longer required for
purposes of the Act.

The undersigned acknowledges that (i) the undersigned has carefully read this letter and
understands the requirements hereof and the limitations imposed upon the distribution, sale,
transfer or other disposition of securities and (ii) the receipt by AREP Oil & Gas of this letter
is an inducement and a condition to AREP Oil & Gas’s obligations to consummate the Merger.

Very truly yours,

[STOCKHOLDER]

ACKNOWLEDGED AND AGREED

as of the date first written above:

NEG IPOCO, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Name:	 	 
	Title:	 	 

40

 

EXHIBIT B

Certain Financing and Other Transactions

THE
FOLLOWING LIST IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DEBT
FINANCING TERM SHEETS PREVIOUSLY DELIVERED BY AREP OIL & GAS TO
THE COMPANY (THE “TERM SHEETS”), THE CONTENTS OF WHICH ARE
INCORPORATED HEREIN AND MADE A PART OF THIS EXHIBIT B.

	1.	 	Prior to the Effective Time of the Merger, the shares of common stock of the Company held by
AREP Oil & Gas will be distributed to AREH. The lien on such shares in favor of the Lenders
(as defined below) will be released immediately following the conversion of such shares into
IPO Co. Common Stock in the Merger.

	2.	 	Immediately following the Effective Time of the Merger, the Company’s membership interest in
NEG Holding LLC will be contributed to AREP Oil & Gas LLC.

	3.	 	On the day prior to consummation of the IPO Transaction, AREP Oil and Gas shall have the
right to surrender to the Company for cancellation all of the Company’s 10.75% Senior Notes
due November 2006, in exchange for which the Company will transfer to AREP Oil & Gas the
Company’s right to receive the “NEG Priority Amount” (as such term is defined in the limited
liability company operating agreement of NEG Holding LLC) from NEG Holding LLC.

	4.	 	Prior to or simultaneously with consummation of the IPO Transaction, AREP Oil & Gas may enter
into a $500,000,000 Senior Secured Revolving Credit Agreement with Citicorp USA, Inc., Bear
Stearns & Co., Inc. and certain financial institutions. **

	5.	 	Prior to or simultaneously with consummation of the IPO Transaction, AREP Oil & Gas may enter
into (i) a $200,000,000 Second Lien Senior Secured Term Loan Agreement with Citicorp USA,
Inc., Bear Stearns & Co., Inc. and certain financial institutions or (ii) a $200,000,000 high
yield bond offering. **

	6.	 	The proceeds of the loans described in items (4) and (5) above (and the footnotes thereto)
(the “Loans”) will be used as follows:

	 	(a)	 	A portion of the initial Loans (in an amount equal to the face amount of the
purchased notes) will be used by AREP Oil & Gas to purchase the notes (and mortgages
securing such notes) made by NEG Operating, LLC, a Delaware limited liability company
(“NEGO”), under that certain Credit Agreement dated as of December 29, 2003 among NEGO
and certain financial institutions

 

			
	**	 	AREP Oil & Gas , IPO Co. or their affiliates
may, in their discretion, enter into other debt financing transactions, whether
in the form of secured or unsecured indebtedness, as “bank debt”,
bonds or other arrangements, and in any amount, so long as the adjustment set
forth in Section 1.7(b) of the Agreement is made to reflect such indebtedness.

 

 

	 	 	 	presently providing for aggregate commitments of $145 million (the “Mizuho
Facility”). The credit facility so purchased shall be restated by an intercompany
credit facility from NEGO to AREP Oil & Gas in the same or a greater amount (the
“Restated Mizuho Note”).
	 
	 	(b)	 	A portion of the initial Loans (anticipated to be approximately $85 million)
will be lent by AREP Oil & Gas to National Onshore to enable it to repay its
indebtedness incurred in or about November 2005 to an affiliate to enable it to make an
acquisition of oil and gas properties.
	 
	 	(c)	 	The remainder of the proceeds of the initial Loans (after payment of all fees
associated with the Loans), together with all other cash and cash equivalents held by
AREP Oil & Gas, National Onshore and National Offshore (except for such reserves
required to be retained by AREP Oil & Gas pursuant to the terms of the Loans), may be
used by AREP Oil & Gas to pay a dividend or distribution to AREH or any of its
subsidiaries that is an owner of AREP Oil & Gas.

	7.	 	There will be a distribution of some or all of the intercompany notes given to AREP Oil & Gas
by the Company, National Onshore and National Offshore (but excluding the Restated Mizuho
Note), provided that the notes so distributed have first been pledged to the Collateral Agent
under the Loans, the notes so distributed are immediately contributed by AREH to a new
subsidiary of AREH (“Debt Holdco”) whose sole permitted business and purpose is to hold such
notes as investments, Debt Holdco expressly acknowledges that such notes are subject to
pledges and also guaranties the Loans, and all rights to receive interest payments (rather
than principal) on such notes are retained by AREP Oil & Gas.

	8.	 	In connection with closing of the Loans, the existing hedges of National Onshore, National
Offshore and the Company will be novated to provide that the counterparties thereto will be
AREP Oil & Gas and various lenders under the Loans (the “Lenders”) rather than National
Onshore, National Offshore and the Company and counterparties that do not become Lenders. All
cash collateral supporting these hedges will be distributed to AREH or affiliates of AREH. The
novated hedge transactions, together with any additional hedges entered into by AREP Oil & Gas
and any Lender will be secured pro rata with the Loans.

	9.	 	AREP Oil & Gas may use the funds it receives in the IPO Transaction for the following
purposes:

	 	(a)	 	AREP Oil & Gas may lend up to $210 million to the Company, National Onshore and
National Offshore under new intercompany notes, who will use the funds so lent to
prepay their notes owing to Debt Holdco, including accrued but unpaid interest.
	 
	 	(b)	 	AREP Oil & Gas will repay the lesser of the remaining net proceeds after
payment of the above or $125 million on the revolving Loan, which repayment

 

 

	 	 	 	will not reduce the commitments or the Borrowing Base under the revolving Loan then
in effect but will instead provide additional liquidity to AREP Oil & Gas.
	 
	 	(c)	 	AREP Oil & Gas may lend any remaining proceeds to the Company, National Onshore
and National Offshore under new intercompany notes, to allow them to prepay in full
their notes owing to Debt Holdco.
	 
	 	(d)	 	AREP Oil & Gas may use any remaining proceeds from the IPO Transaction (after
payment of all fees associated with the IPO Transaction), together with all other cash
and cash equivalents held by AREP Oil & Gas, National Onshore and National Offshore
(except for such reserves required to be retained by AREP Oil & Gas pursuant to the
terms of the Loans) to pay a dividend or distribution to AREH.

 

 

EXHIBIT C

Form of Certificate of Incorporation of IPO Co.

CERTIFICATE OF INCORPORATION

OF

NEG IPOCO, INC.

     The undersigned, American Real Estate Holdings Limited Partnership, a Delaware limited
partnership, for the purposes of organizing a corporation for conducting the business and promoting
the purposes hereinafter stated, under the provisions and subject to the requirements of the laws
of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and generally known as the “General Corporation Law of
the State of Delaware”), hereby certifies that:

     FIRST:     The name of the corporation (hereinafter called the “Corporation”) is NEG
IPOCO, INC.

            SECOND:      The address, including street, number, city, and county,
of the registered office of the Corporation in the State of Delaware is Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808; and the name of the
registered agent of the Corporation in the State of Delaware at such address is Corporation
Service Company. 

     THIRD:     The nature of the business and the purposes to be conducted and promoted by the
Corporation shall be any lawful business, to promote any lawful purpose, and to engage in any
lawful act or activity for which corporations may be organized under the General Corporation Law of
the State of Delaware.

     FOURTH:     The total number of shares which the Corporation shall have authority to issue
is 51,000,001, consisting of 50,000,000 shares of Common Stock, all of a par value of one cent
($.01) each (“Common Stock”), 1 share of Class B Common Stock, with a par value of one cent ($.01)
(“Class B Common Stock”), and 1,000,000 shares of Preferred Stock, all of a par value of one cent
($.01) each (“Preferred Stock”). The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications, limitations or
restrictions thereof, in respect of the classes of stock of the Corporation are as follows:

   I.     Preferred Stock 

                         A.     The Preferred Stock of the Corporation may be issued from time to time in one or more
series of any number of shares, provided that the aggregate number of shares issued and not
canceled in any and all such series shall not exceed the total number of shares of preferred stock
hereinabove authorized.

                         B.     To the fullest extent permitted by law, authority is hereby vested in the Board of
Directors from time to time to authorize the issuance of one or more series of preferred stock and,
in connection with the creation of such series, to fix by resolution or resolutions providing for
the issuance of shares thereof the rights, preferences and powers of each such series including,
without limitation, the following:

 

 

                                   1.     the number of shares to constitute such series, which may subsequently be increased or
decreased (but not below the number of shares of that series then outstanding) by resolution of the
Board of Directors, the distinctive designation thereof and the stated value thereof if different
than the par value thereof;

                                   2.     whether the shares of such series shall have voting rights or powers, full or limited, or
no voting rights or powers, and if any, the terms of such voting rights or powers;

                                   3.     the dividend rate, if any, on the shares of such series, the conditions and dates upon
which such dividends shall be payable, the preference or relation which such dividends shall bear
to the dividends payable on any other class or classes or on any other series of capital stock and
whether such dividend shall be cumulative or noncumulative;

                                   4.     whether the shares of such series shall be subject to redemption by the Corporation, and,
if made subject to redemption, the times, prices and other terms, limitations, restrictions or
conditions of such redemption;

                                   5.     the relative amounts, and the relative rights or preference, if any, of payment in respect
of shares of such series, which the holders of shares of such series shall be entitled to receive
upon the liquidation, dissolution or winding-up of the Corporation;

                                   6.     whether or not the shares of such series shall be subject to the operation of a retirement
or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund
shall be applied to the purchase or redemption of the shares of such series for retirement or to
other corporate purposes and the terms and provisions relative to the operation thereof;

                                   7.     whether or not the shares of such series shall be convertible into, or exchangeable for,
shares of any other class, classes or series, or other securities, whether or not issued by the
Corporation, and if so convertible or exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting same;

                                   8.     the limitations and restrictions, if any, to be effective while any shares of such series
are outstanding upon the payment of dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the Common Stock (as defined
below) or any other class or classes of stock of the Corporation ranking junior to the shares of
such series either as to dividends or upon liquidation, dissolution or winding-up;

                                   9.     the conditions or restrictions, if any, upon the creation of indebtedness of the
Corporation or upon the issuance of any additional stock (including additional shares of such
series or of any other series or of any other class) ranking on a parity with or prior to the
shares of such series as to dividends or distributions of assets upon liquidation, dissolution or
winding-up; and

 

 

                                   
10.     any other preference and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, as shall not be inconsistent with law,
this Article Fourth or any resolution of the Board of Directors pursuant hereto.

   II.     Common Stock and Class B Common Stock. Except as otherwise provided in this
Section II or as otherwise required by applicable law, all shares of Common Stock and Class B
Common Stock shall be identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and restrictions. 

                         A.     Unless expressly provided by the Board of Directors of the Corporation in fixing the voting
rights and powers of any series of Preferred Stock, the holders of the outstanding shares of Common
Stock and Class B Common Stock together shall exclusively possess all voting rights and power for
the election of directors and for all other purposes. Each holder of record of shares of Common
Stock shall be entitled to one vote for each share of such stock standing in his name on the books
of the Corporation. Except as set forth in Article Eleventh or as otherwise required by law, the
Common Stock and the Class B Common Stock shall vote together as a single class on all matters, and
shall not be entitled to vote as a separate class on any matter submitted to a vote of the
shareholders of the Corporation.

                                   
1.     At such time as there are no shares of Common Stock outstanding, the holders of Class B
Common Stock shall be entitled to one vote for each share of Class B Common Stock.

                                   2.     At such time as there are shares of Common Stock outstanding, the holder of Class B Common
Stock shall be entitled, with respect to the Class B Common Stock held by such holder, to such
number of votes equal to (i) the total number of shares of Common Stock from time to time issuable
upon conversion of all membership interests in AREP Oil & Gas LLC held by such holder at the close
of business on the record date for the vote on the matter in question, divided by (ii) the number
of shares of Class B Common Stock held by such holder.

                         B.     Subject to the prior rights of the holders of Preferred Stock now or hereafter granted
pursuant to this Article Fourth, the holders of Common Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of funds legally available for that purpose, dividends
payable either in cash, stock or otherwise. The holders of Class B Common Stock are not entitled to
the payment of dividends.

                         C.     In the event of any liquidation, dissolution or winding-up of the Corporation, either
voluntary or involuntary, after payment shall have been made in full to the holders of Preferred
Stock of any amounts to which they may be entitled and subject to the rights of the holders of
Preferred Stock now or hereafter granted pursuant to this Article Fourth, the holders of Common
Stock and Class B Common Stock shall be entitled, to the exclusion of the holders of Preferred
Stock of any and all series, to share, ratably accordingly to the number of

 

 

shares held by each such holder, an amount equal to the par value per share (adjusted to reflect
stock splits, combinations and dividends since the original date of issuance). After the payment in
full of the amount described in the immediately preceding sentence to the holders of Common Stock
and Class B Common Stock, the holders of the Common Stock shall be entitled to receive ratably, in
accordance with the number of shares held by each such holder, all of the remaining assets of the
Corporation available for distribution to the holders of Common Stock, and the holders of Class B
Common Stock shall not be entitled to share in the distribution of such remaining assets.

     FIFTH:     The name and the mailing address of the incorporator is as follows:

	 	 	 
	Name	 	Address
	American Real Estate Holdings

	 	100 South Bedford Rd.
	Limited Partnership

	 	Mt. Kisco, NY 10549

     SIXTH:     The Corporation shall have perpetual existence.

     SEVENTH:     For the management of the business and for the conduct of the affairs of the
Corporation, and in further definition, limitation and regulation of the powers of the Corporation
and of its directors and of its stockholders or any class thereof, as the case may be, it is
further provided that:

                                   1.     The business of the Corporation shall be conducted by the officers of the Corporation under
the supervision of the Board of Directors.

                                   2.     The number of directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the Bylaws. No election of Directors need be by written ballot.

                                   3.     Subject to the limitations set forth in this Certificate of Incorporation, the Board of
Directors of the Corporation may adopt, amend or repeal the Bylaws of the Corporation at any time
after the original adoption of the Bylaws according to Section 109 of the General Corporation Law
of the State of Delaware.

                                   4.     The Corporation shall not adopt or approve the classification of directors of the
Corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware other than by an amendment to this Certificate of
Incorporation duly adopted by the stockholders of the Corporation.

     EIGHTH:     No director shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by such director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for breach of the director’s duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct

 

 

or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of
the State of Delaware or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Article Eighth shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation for or with respect
to any acts or omissions of such Director occurring prior to such amendment.

     NINTH:     The Corporation may, to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed exclusive of any other
rights to which a person indemnified may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall continue as to a person
who has ceased to be director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

     TENTH:     Provisions Relating to the Founding Stockholders.

                         1.     Founding Stockholders. In anticipation that the Founding Stockholders and the
Corporation may engage, directly or indirectly, in the same or similar activities or lines of
business and have an interest in the same areas of corporate opportunities, and in recognition of
the benefits to be derived by the Corporation through its continued contractual, corporate and
business relations with the Founding Stockholders (including potential service of officers,
directors, members, stockholders, partners or employees of the Founding Stockholders as officers,
directors and employees of the Corporation), the provisions of this Article Tenth are set forth to
regulate, define and guide, to the fullest extent permitted by the General Corporation Law of the
State of Delaware, the conduct of certain affairs of the Corporation as they may involve the
Founding Stockholders and their respective officers, directors, members, partners, stockholders and
employees and the powers, rights and duties of the Corporation and the Founding Stockholders and
their respective officers, directors, members, partners, stockholders and employees in connection
therewith. The following provisions shall be applicable to the maximum extent permitted by
applicable Delaware law.

                         2.     Competition and Corporate Opportunities. None of the Founding Stockholders or any
director, officer, member, partner, stockholder or employee of any Founding Stockholder (each,
acting in such capacity, a “ Specified Party ”), independently or with others, shall have
any duty to refrain from engaging directly or indirectly in the same or similar business activities
or lines of business as the Corporation and that might be in direct or indirect competition with
the Corporation. In the event that any Founding Stockholder or Specified Party acquires knowledge
of a potential transaction or matter that may be a corporate opportunity for any Founding
Stockholder or Specified Party, as applicable, and the Corporation, none of the Founding
Stockholders or Specified Parties shall have any duty to communicate or offer such corporate
opportunity to the Corporation, and any Founding Stockholder and Specified Party shall be entitled
to pursue or acquire such corporate opportunity for itself or to direct such corporate opportunity
to another person or entity and the Corporation shall have no right in or to such corporate
opportunity or to any income or proceeds derived therefrom.

 

 

                         3.     Allocation of Corporate Opportunities. 

                                   a.     To the maximum extent permitted by applicable Delaware law, in the event that a director,
officer or employee of the Corporation who is also a Founding Stockholder or Specified Party
acquires knowledge of a potential transaction or matter that may be a corporate opportunity or
otherwise is then exploiting any corporate opportunity, subject to Section 3(b) of this Article
Tenth, the Corporation shall have no interest in such corporate opportunity and no expectation that
any corporate opportunity be offered to the Corporation, any such interest or expectation being
hereby renounced, so that, as a result of such renunciation, and for the avoidance of doubt, such
Founding Stockholder or Specified Party (i) shall have no duty to communicate or present such
corporate opportunity to the Corporation, (ii) shall have the right to hold any such corporate
opportunity for its own account or to recommend, sell, assign or transfer such corporate
opportunity to persons other than the Corporation and (iii) shall not breach any fiduciary duty to
the Corporation by reason of the fact that such Founding Stockholder or Specified Party pursues or
acquires any such corporate opportunity for itself or directs, sells, assigns or transfers such
corporate opportunity to another person or does not communicate information regarding such
corporate opportunity to the Corporation.

                                   b.     Notwithstanding the provisions of Sections 2 and 3(a) of this Article Tenth, the
Corporation does not renounce any interest or expectation it may have in any corporate opportunity
that is offered to any Founding Stockholder or Specified Party, if such opportunity is expressly
offered to such Founding Stockholder or Specified Party solely in, and as a direct result of, his
or her capacity as a director, officer or employee of the Corporation.

                                   c.     No amendment or repeal of this Section 3 of this Article Tenth shall apply to or have any
effect on the liability or alleged liability of any Founding Stockholder or Specified Party for or
with respect to any corporate opportunity of which such Founding Stockholder or Specified Party
becomes aware prior to such amendment or repeal.

                         4.     Certain Matters Deemed Not Corporate Opportunities. In addition to and
notwithstanding the foregoing provisions of this Article Tenth, a corporate opportunity shall not
be deemed to belong to the Corporation, and the Corporation hereby renounces any interest therein,
if it is a business opportunity that the Corporation is not financially able, contractually
permitted or legally able to undertake, or that is, from its nature, not in the line of the
Corporation’s business or is of no practical advantage to it or that is one in which the
Corporation has no interest or reasonable expectation.

                         5.     Certain Definitions. For purposes of this Article Tenth only, (i) the term
“Corporation” shall mean the Corporation and all corporations, limited liability companies,
partnerships, joint ventures, associations and other entities in which the Corporation beneficially
owns (directly or indirectly) fifty percent (50%) or more of the outstanding voting stock, voting
power or similar voting interests, except that for purposes of determining those persons
who are directors of the Corporation, such term shall mean the Corporation without regard to any
other entities in which it may hold an interest, (ii) the term “Founding Stockholder” shall
mean

 

 

American Real Estate Partners, L.P. (“AREP”) and its affiliates (other than the Corporation)
and any other persons in which AREP or any such affiliate has any direct or indirect voting or economic
interest, (iii) the term “affiliate”, when used with reference to any person, shall mean a
person that directly, or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such person, (iv) the term “control” (including the
terms controlling, controlled by and under common control with) means the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract, or otherwise, and (v) the term
“person” shall mean an individual, partnership, limited partnership, limited liability
company, corporation, trust, estate, association or any other entity.

                         6.     Expiration of Certain Provisions. Notwithstanding anything in this Certificate of
Incorporation to the contrary, the provisions of this Article Tenth shall expire as to any
Specified Party on the date that such person ceases to be a Specified Party. Neither the
alteration, amendment, change or repeal of any provision of this Article Tenth nor the adoption of
any provision of this Certificate of Incorporation inconsistent with any provision of this Article
Tenth shall eliminate or reduce the effect of this Article Tenth in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article Tenth, would accrue or
arise prior to such alteration, amendment, repeal or adoption.

                         7.     Deemed Notice. Any person or entity purchasing or otherwise acquiring any interest
in any shares of the Corporation shall be deemed to have notice of and to have consented to the
provisions of this Article Tenth.

     ELEVENTH:     From time to time any of the provisions of this Certificate of Incorporation
may be amended, altered or repealed, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this Article Eleventh;
provided, however, that so long as both shares of Common Stock and Class B Common Stock remain
outstanding, the Class B Common Stock and the rights of the holders thereof shall not be subject to
redemption, change, modification or amendment (whether by merger, consolidation or otherwise),
whether directly or indirectly, without the affirmative vote of the holders of 100% of the
outstanding shares of Class B Common Stock. Without limiting the foregoing, in addition to any
other approval required by applicable law or this Certificate of Incorporation, any issuance of
Class B Common Stock (other than the initial issuance thereof) and any change to (i) Section II of
Article Fourth, (ii) this Article Eleventh or (iii) any definitions pertaining thereto, shall
require the affirmative vote of 100% of the outstanding shares of Class B Common Stock.

     TWELFTH:     The Corporation expressly elects not be governed by Section 203 of the
General Corporation Law of the State of Delaware.

 

 

     Signed on the 6th day of December, 2005.

	 	 	 	 	 
	 	AMERICAN REAL ESTATE HOLDINGS

LIMITED PARTNERSHIP 	 
	 	By:  	     American Property Investors, Inc.
 	 
	 	 	 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	     /s/ Keith Meister
 	 
	 	 	Name:  	Keith Meister 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

 

 

Schedule 1.7

Calculation of Percentage

all numbers below are hypothetical assumptions used solely for the purpose of this example

Assumptions for Merger

1. Following the Merger, capital accounts in AREP Oil & Gas will be reflected at Fair Market Value.

2. Assume that, following the Merger, (i) the NEG Holding LLC interest is contributed to AREP Oil &
Gas and (ii) capital accounts in AREP Oil & Gas are as follows: (x) AREH, $920, and (y) IPO Co.,
$80.

3. Assume that net indebtedness of the Enterprise is $500 million immediately prior to or
simultaneously with the consummation of the IPO Transaction.

Result

Stock held in IPO Co. would be as follows: (i) AREH, 25,050,001 common; (ii) NEG public holders,
24,949,999 common; and (iii) AREH, 1 Class B Common.

Assumptions for IPO

IPO Co. raises $380 and contributes this amount to AREP Oil & Gas and issues 232,485,878 shares of
common stock to its new public stockholders (the “New Holders”).

Result

A. The capital accounts in AREP Oil & Gas are as follows: (i) AREH, $920; and (ii) IPO Co., $460.
Following $250 distribution to AREH, AREH’s capital account is reduced to $670.

B. The holders of IPO Co. stock are as follows:

(i) AREH, 25,050,001 common

(ii) NEG public holders, 24,949,999 common

(iii) New Holders, 232,485,878 common

(iv) AREH, 1 Class B Common

C. The interest of AREH in AREP Oil & Gas is convertible into 411,432,340 shares of IPO Co. Common
Stock (the “Convertible Amount”). The Class B Common share is entitled to a number of votes as a
common holder equal to the Convertible Amount.

 

 

Debt Adjustment

If net indebtedness of the Enterprise is not $500 million immediately prior to or simultaneously
with the consummation of the IPO Transaction, then the Percentage shall be adjusted in accordance
with the following examples:

Example 1

If net indebtedness of the Enterprise is $500 million immediately prior to or simultaneously with
consummation of the IPO Transaction, then the Percentage shall be 7.990%

Example 2

If net indebtedness of the Enterprise is $430 million immediately prior to or simultaneously with
consummation of the IPO Transaction, then the Percentage shall be calculated as follows:

7.990
- (0.6322 x 70/100) = 7.54746%

Example 3

If net indebtedness of the Enterprise is $350 million immediately prior to or simultaneously with
consummation of the IPO Transaction, then the Percentage shall be calculated as follows:

7.990
- (0.6322 x 150/100) = 7.0417%

Example 4

If net indebtedness of the Enterprise is $570 million immediately prior to or simultaneously with
consummation of the IPO Transaction, then the Percentage shall be calculated as follows:

7.990 + (0.6322 x 70/100) = 8.43254%

Example 5

If net indebtedness of the Enterprise is $650 million immediately prior to or simultaneously with
consummation of the IPO Transaction, then the Percentage shall be calculated as follows:

7.990 + (0.6322 x 150/100) = 8.9383%

 

 

Schedule 4.11

Affiliates

Bob G. Alexander

AREP Oil & Gas LLC

Randall D. Cooley

Philip D. Devlin

Martin L. Hirsch

Robert H. Kite

Robert J. Mitchell

Jack G. Wasserman

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