Document:

exv10w2

 

EXHIBIT 10.2

GUARANTY OF LEASE

          This Guaranty of Lease (this “Guaranty”), dated as of January 1, 2008, is made by Assisted
Living Concepts, Inc., a Nevada corporation (“ALC”) (together with its successors and assigns,
including without limitation any entity succeeding thereto by consolidation, merger or acquisition
of its assets substantially as an entirety, “Guarantor”), for the benefit of VENTAS REALTY, LIMITED
PARTNERSHIP, a Delaware limited partnership (together with its successors and assigns, “Landlord”).

          Concurrently herewith, Landlord is entering into an Amended and Restated Master Lease
Agreement dated the date hereof (as such lease may be amended or extended from time to time, “the
Lease”) for those properties described in Exhibit A to the Lease (collectively, the “Property”)
with those entities identified on Exhibit B attached hereto (collectively and individually, as the
context may indicate, “Tenant”). Initially capitalized terms used but not defined herein shall have
the meaning ascribed to such terms in the Lease. Landlord is unwilling to enter into the Lease
unless Guarantor enters into this Guaranty. This Guaranty is a material inducement to Landlord to
enter into the Lease. ALC owns all of the membership interests in each Tenant. The lease of the
Property to Tenant is of direct benefit to the Guarantor.

          NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor, intending
to be legally bound, covenants and agrees with Landlord as follows:

          1. Guarantor unconditionally and irrevocably guarantees to Landlord that (a) all fixed rent,
real estate taxes and assessments, operating expenses, insurance premiums and costs of maintenance
and repair, and all other sums due under the Lease and payable by Tenant, whether due by
acceleration or otherwise, including costs and expenses of collection, including without
limitation, reasonable legal fees and expenses (collectively, the “Monetary Obligations”) will be
promptly paid in full when due, in accordance with the provisions thereof and (b) Tenant will
perform and observe each and every covenant, agreement, term and condition of Tenant in the Lease
(the “Performance Obligations” and together with the Monetary Obligations, the “Guaranteed
Obligations”). If for any reason any Monetary Obligations shall not be paid promptly when due
after receipt of required notice to Tenant under the Lease, if any, and after the expiration of any
applicable grace period therefor, if any, Guarantor shall, one (1) Business Day after demand
therefor, pay the same to Landlord with interest and late fees due thereon, if any, as stated in
the Lease. In addition to the foregoing, Guarantor hereby becomes surety to Landlord for the due
and punctual payment and performance of the Guaranteed Obligations and Guarantor hereby waives all
defenses that may be available to Guarantor as a surety and guarantor other than the defenses of
indefeasible payment of the Monetary Obligations and performance of the Performance Obligations.

          2. Landlord may enforce this Guaranty against Guarantor without first having recourse against
Tenant or exhausting Landlord’s rights or remedies under the Lease; provided, that nothing herein
shall prohibit Landlord from exercising its rights against Guarantor
and Tenant simultaneously. This Guaranty and the obligations of Guarantor hereunder are
present, primary, direct, continuing, unconditional, irrevocable and absolute and independent of

 

 

any obligations of Tenant. This Guaranty is a guaranty of payment and performance and not merely
of collection.

          3. Guarantor represents, warrants and covenants to Landlord that (a) all reports, statements
(financial or otherwise), certificates and other data furnished by or on behalf of Guarantor to
Landlord in connection with this Guaranty or the Lease, are true and correct in all material
respects, do not omit to state any material fact or circumstance necessary to make the statement
contained therein not misleading and fairly represent the financial condition of Guarantor as of
the respective date thereof, and no material adverse change has occurred in the financial condition
of Guarantor since the date of the most recent of such financial statements; (b) Guarantor has
derived or expects to derive financial and other advantages and benefits, directly or indirectly,
from the making of this Guaranty and the Guaranteed Obligations; (c) no representations or
agreements of any kind have been made by any Person to Guarantor that would limit or qualify in any
way the terms of this Guaranty; (d) Landlord has made no representation to Guarantor as to the
creditworthiness of Tenant; (e) Guarantor has established adequate means of obtaining from Tenant
on a continuing basis information regarding Tenant’s financial condition; (f) Guarantor will keep
adequately informed of any facts, events or circumstances that might in any way affect Guarantor’s
risks under this Guaranty; (g) Landlord shall have no obligation to disclose to Guarantor any
information or documents (financial or otherwise) heretofore or hereafter acquired by Landlord in
the course of its relationship with Tenant; (h) there shall be no conveyance, sale, assignment,
transfer, pledge, hypothecation, encumbrance or other disposition (collectively, a “Disposition”)
of the direct or indirect ownership interests in Guarantor such that after such Disposition any
Person, together with its Affiliates, owns or controls, directly or indirectly, in the aggregate
fifty percent (50%) or more of the beneficial ownership interests of Guarantor or possesses,
directly or indirectly, the power to direct or cause the direction of the management or policies of
Guarantor, whether through the ability to exercise voting power, by contract or otherwise (a
"Change of Control”), unless (i) such Person, together with its Affiliates, owns or controls such
interests, or possesses such power, as of the date hereof, (ii) following such Change of Control
the Net Worth of Guarantor (determined in accordance with GAAP) is not less than $150,000,000 (the
“Net Worth Requirement”); or (iii) if neither of the foregoing conditions set forth in (i) and (ii)
is satisfied, Guarantor delivers to Landlord an unconditional irrevocable standby letter of credit
from a financial institution and in form and substance, all of the foregoing reasonably acceptable
to the Landlord, for Landlord’s benefit in an amount determined from year to year in accordance
with attached Schedule 1 (the “Letter of Credit”) and maintains such Letter of Credit in full force
and effect until the earlier of the termination of this Guaranty in accordance with Section 19
hereof (the “Termination Date”) or such time as the Net Worth Requirement is satisfied; provided in
each case Landlord has received at least 30 days advance written notice; (i) Guarantor shall not
merge or consolidate with any other Person unless Guarantor is the surviving entity or, if not, the
Person that is the surviving entity has a Net Worth (determined in accordance with GAAP) of at
least $150,000,000 and assumes Guarantor’s obligations hereunder or Guarantor delivers the Letter
of Credit to Landlord and maintains such Letter of Credit in full force and effect until the
earlier of the Termination Date or such time as the Net Worth Requirement is satisfied; provided

that Landlord received at least 30 days advance
written notice; (j) Guarantor shall not sell all or substantially all of its assets to any
other Person without Landlord’s consent, which shall not be unreasonably withheld, unless (x) such
Person

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has a Net Worth immediately following such sale of at least $150,000,000 (determined in
accordance with GAAP), or (y) Guarantor delivers the Letter of Credit to Landlord and maintains the
Letter of Credit in full force and effect until the earlier of the Termination Date and in either
case, such Person assumes Guarantor’s obligations hereunder Landlord receives at least 30 days
advance written notice; (k) Guarantor is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Guarantor’s organization; (l) Guarantor has the power
and authority to execute, deliver and perform this Guaranty and to incur the obligations herein
provided for; (m) Guarantor has taken all requisite actions necessary to authorize the execution,
deliver and performance of this Guaranty; (n) this Guaranty constitutes a legal, valid and binding
obligation of Guarantor enforceable in accordance with its terms; (o) the execution, delivery and
performance of this Guaranty will not require any consent, approval, authorization, order or
declaration of or filing or registration with any court, any Governmental Authority or any other
Person; (p) the execution, delivery and performance of this Guaranty do not and will not conflict
with, and do not and will not result in a breach of, any organizational document of Guarantor or
any order, writ, injunction, decree, statute, rule or regulation applicable to Guarantor; and (q)
Guarantor is an Affiliate of Tenant. “Net Worth” means the total assets of an entity less the
total liabilities of the entity as presented on the entity’s balance sheet, with total assets and
total liabilities determined in accordance with GAAP.

          4. The obligations, covenants, agreements and duties of Guarantor under this Guaranty shall in
no way be discharged, affected or impaired by any of the following, and Landlord may at any time
and from time to time, with or without consideration, without prejudice to any claim against
Guarantor hereunder, without in any way changing, releasing or discharging Guarantor from its
liabilities and obligations hereunder and without notice to or the consent of Guarantor, waive,
release or consent to any of the following:

          (a) the waiver or release by Landlord of the performance or observance by Tenant or Guarantor
of any of the agreements, covenants, terms or conditions contained in the Lease;

          (b) the extension, in whole or in part, of the time for payment by Tenant of any sums owing or
payable under the Lease, or of any other sums or obligations under or arising out of or on account
of the Lease, or the renewal or extension of the Lease;

          (c) any assignment of the Lease by Tenant or any sublease of any or all of the Property by
Tenant to any other Person except as otherwise provided in Section 24.5 of the Lease with respect
to Guarantor;

          (d) any assumption by any Person of any or all of Tenant’s obligations under, or Tenant’s
assignment of any or all of its interest in the Lease except as otherwise provided in Section 24.5
of the Lease with respect to Guarantor;

          (e) the waiver or amendment (whether material or otherwise) of any provision of the Lease;

          (f) any failure, omission or delay on the part of Landlord to enforce, assert or exercise any
right, power or remedy conferred on or available to Landlord in or by the Lease or

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this Guaranty,
or any action on the part of Landlord granting indulgence or extension in any form whatsoever;

          (g) the voluntary or involuntary liquidation, dissolution, sale of all or substantially all of
the assets, marshaling of assets and liabilities, receivership, conservatorship, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization or other similar proceeding
affecting Landlord, any Tenant or Guarantor or any of their assets or any impairment, modification,
release or limitation of liability of Landlord, any Tenant or Guarantor or any of their estates in
bankruptcy or of any remedy for the enforcement of such liability resulting from the operation of
any present or future provision of the U.S. Bankruptcy Code or other similar statute of any other
state or nation or from the decision of any court;

          (h) the release of Tenant from the performance or observance of any of the agreements,
covenants, terms or conditions contained in the Lease by operation of law;

          (i) the power or authority or lack thereof of Tenant to execute, acknowledge, deliver or
perform the Lease;

          (j) the legality or illegality, validity or invalidity, or lack of enforceability of the Lease
or this Guaranty;

          (k) the existence or non-existence of Tenant as a legal entity or the existence or
non-existence of any corporate or other business relationship between Tenant and Guarantor;

          (l) any sale or assignment by a Landlord of this Guaranty and/or the Lease (including any
assignment by Landlord to any Facility Mortgagee);

          (m) any default by Guarantor under this Guaranty or any right of setoff, counterclaim or
defense (other than indefeasible payment in full of the Monetary Obligations in accordance with the
terms of the Lease) that Tenant or Guarantor may or might have to their respective undertakings,
liabilities and obligations under the Lease and this Guaranty, each and every such defense being
hereby waived by Guarantor;

          (n) the rejection or assumption of the Lease by or on behalf of any Tenant or any other party
in any bankruptcy or reorganization proceeding or otherwise pursuant to any state or federal law;

          (o) the inability of Landlord, Facility Mortgagee or Tenant, respectively, to enforce any
provision of the Lease or this Guaranty, for any reason;

          (p) any change in the relationship between any Tenant and Guarantor or any termination of such
relationship, including, without limitation, any consolidation or merger of any Tenant with or into
any other entity, any sale, lease or other disposition of any of Tenant’s properties as an entirety
or substantially as an entirety to any other entity or any sale or other disposition by Guarantor
of any or all of the membership interests in any Tenant;

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          (q) any action or inaction by Landlord or a Facility Mortgagee which results in any impairment
or destruction of any subrogation rights of Guarantor against Tenant or any rights of Guarantor to
proceed against Tenant for reimbursement;

          (r) the lack of value received by Guarantor for this Guaranty or by the Tenant for the Lease;

          (s) any defect in title, or damage or casualty to or interruption of the use by Tenant of the
Premises;

          (t) the acceptance or release by Landlord or any Facility Mortgagee of any security interest,
lien or encumbrance in or on any property and/or collateral as security for the obligations of
Tenant under the Lease or of Guarantor hereunder;

          (u) any other defense whatsoever Tenant might have to the payment of any of its obligations
under the Lease or to the performance or observance of any of the provisions of the Lease, other
than the defense of indefeasible payment in full of all sums due and payable under the Lease, the
actual performance of all Performance Obligations under the Lease under the Lease, as applicable;
or

          (v) any other cause, whether similar or dissimilar to any of the foregoing, that might
constitute a legal or equitable discharge of Guarantor (whether or not Guarantor shall have
knowledge or notice thereof) other than indefeasible payment in full of the Monetary Obligations.

          Without in any way limiting the generality of the foregoing, Guarantor specifically agrees
that if Tenant’s obligations under the Lease are amended with the express written consent of
Landlord, this Guaranty shall extend to such obligations as so amended, even if such amendment
results in materially increasing Guarantor’s obligations under this Guaranty.

          5. Guarantor hereby waives notice of (a) Landlord’s acceptance of this Guaranty or its
intention to act or its actions in reliance hereon; (b) the present existence or future incurring
of any Guaranteed Obligations or any terms or amounts thereof or any change therein; (c) any
default by Tenant or any surety or guarantor; (d) the obtaining of any guaranty or surety agreement
(in addition to this Guaranty); (e) the obtaining of any pledge, assignment or other security for
any Guaranteed Obligations; (f) the release of Tenant or any surety or guarantor (including
Guarantor); (g) the release of any collateral; (h) any other demands or notices whatsoever with
respect to the Guaranteed Obligations or this Guaranty; (i) presentment, demand, protest,
nonpayment, intent to accelerate, and protest in relation to any instrument or agreement evidencing
any Guaranteed Obligation. Guarantor hereby further waives (j) promptness and diligence; (k) all
other notices, demands and protests, and all other formalities of every kind, in connection with
the enforcement of the Lease or of the obligations of Guarantor hereunder, the omission of or delay
in which, but for the provisions of this paragraph, might constitute grounds for relieving
Guarantor of its obligations hereunder; and (l) any requirement that Landlord protect, secure,
perfect or insure any lien or security interest or other encumbrance or any property subject
thereto or pursue or exhaust any right or take any action against or with

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respect to Tenant or any other person or entity or any collateral (including any rights
relating to marshalling of assets).

          6. Guarantor expressly waives any and all rights to defenses arising by reason of (a) any
“one-action” or “anti-deficiency” law or any other law that may prevent Landlord from bringing any
action, including a claim for deficiency against Guarantor, before or after Landlord’s commencement
or completion of any action against Tenant; (b) ANY ELECTION OF REMEDIES BY LANDLORD (INCLUDING
WITHOUT LIMITATION ANY TERMINATION OF THE LEASE) THAT DESTROYS OR OTHERWISE ADVERSELY AFFECTS
GUARANTOR’S SUBROGATION RIGHTS OR GUARANTOR’S RIGHTS TO PROCEED AGAINST TENANT FOR REIMBURSEMENT;
(c) any disability or other defense of Tenant, of any other guarantor, or of any other Person, or
by reason of the cessation of Tenant’s liability from any cause whatsoever, other than full and
final indefeasible payment in legal tender of the Guaranteed Obligations; (d) any right to claim
discharge of the Guaranteed Obligations on the basis of unjustified impairment of any collateral
for the Guaranteed Obligations; (e) any change in the relationship between Guarantor and Tenant or
any termination of such relationship; (f) any irregularity, defect or unauthorized action by
Landlord, Tenant, Guarantor or any other guarantor or surety or any of their respective officers,
directors or other agents in executing and delivering any instrument or agreements relating to the
Guaranteed Obligations or in carrying out or attempting to carry out the terms of any such
agreements; (g) any receivership, insolvency, bankruptcy, reorganization or similar proceeding by
or against any Tenant, Landlord, Guarantor or any other surety or guarantor; (h) any setoff,
counterclaim, recoupment, deduction, defense or other right that Guarantor may have against
Landlord, Tenant or any other Person for any reason whatsoever whether related to the Guaranteed
Obligations or otherwise; (i) any assignment, endorsement or transfer, in whole or in part, of the
Guaranteed Obligations, whether made with or without notice to or consent of Guarantor; (j) if the
recovery from Tenant or any other Person (including without limitation any other guarantor) becomes
barred by any statute of limitations or is otherwise prevented; or (k) any neglect, delay,
omission, failure or refusal of Landlord to take or prosecute any action for the collection of any
of the Guaranteed Obligations or to foreclose or take or prosecute any action in connection with
any lien or right of security (including perfection thereof) existing or to exist in connection
with, or as security for, any of the Guaranteed Obligations, it being the intention hereof that
Guarantor shall remain liable as a principal on the Guaranteed Obligations notwithstanding any act,
omission or event that might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor. Guarantor hereby waives all defenses of a surety or guarantor to
which it may be entitled by statute or otherwise, including without limitation, any statute or rule
of law which provides that the obligation of a surety must be neither larger in amount nor more
burdensome in any other respect than that of a principal.

          7. Guarantor agrees that, in the event of the rejection or disaffirmance of the Lease by any
Tenant or such Tenant’s trustee in bankruptcy pursuant to bankruptcy law or any other law affecting
creditors rights, Guarantor will, if Landlord so requests, assume all obligations and liabilities
of such Tenant under the Lease, to the same extent as if Guarantor was a party to such document and
there had been no such rejection or disaffirmance; and Guarantor will confirm such assumption in
writing at the request of Landlord upon or after such rejection or disaffirmance. Guarantor, upon
such assumption, shall have all rights of such Tenant under the Lease to the fullest extent
permitted by law.

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          8. The following events are sometimes referred to as an “Event of Default”:

          (a) If default shall be made in the payment of any sum required to be paid by Guarantor under
this Guaranty;

          (b) If default shall be made in the observance or performance of any of the other covenants in
this Guaranty which Guarantor is required to observe and perform;

          (c) If any material representation or warranty made by Guarantor herein or in any certificate,
demand or request proves to be incorrect in any material respect when made;

          (d) If Guarantor (i) admits in writing its inability to pay its debts generally as they become
due; (ii) files a petition in bankruptcy or a petition to take advantage of any bankruptcy,
reorganization or insolvency act; (iii) makes an assignment for the benefit of its creditors; (iv)
consents to the appointment of a receiver for itself or for the whole or any substantial part of
its property; (v) files a petition or answer seeking reorganization or arrangement under federal
bankruptcy laws or any other applicable law or statute of the united States of America or any state
thereof; or (vi) takes any action to authorize or effect any of the actions set forth in this
paragraph 8(d);

          (e) If any petition is filed against Guarantor under federal bankruptcy laws, or any other
proceeding is instituted against Guarantor seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, reorganization, arrangement, adjustment or composition of its or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking
the entry of an order for relief or the appointment of a receiver, trustee, custodian or other
similar official for Guarantor, and such proceeding is not dismissed within sixty (60) days after
institution thereof;

          (f) If, without Landlord’s prior written consent, a Change of Control shall occur or Guarantor
shall fail to comply with paragraph 3 of this Guaranty;

          (g) If there is a consolidation, merger or transfer of all or substantially all of the assets
of Guarantor without the prior written consent of Landlord unless the same is permitted under the
terms of this Guaranty;

          (h) If any receiver, trustee, custodian or other similar official shall be appointed for
Guarantor and any such appointment is not dismissed within sixty (60) days after the date of such
appointment and prior to the entry of a final, unappealable order approving such appointment;

          (i) If Guarantor is liquidated or dissolved or begins proceedings towards such liquidation or
dissolution;

          (j) The failure of ALC to maintain the minimum Fixed Charge Coverage Ratio required under
paragraph 28 of this Guaranty; or

          (k) Any Letter of Credit delivered to Landlord expires in less than 30 days.

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Upon the occurrence of any such Event of Default, Landlord shall have whatever rights at law or
equity it might have to enforce this Guaranty, including, without limitation, the right to draw the
full amount under the Letter of Credit pursuant to its terms.

          9. Guarantor agrees that any claim or claims or liens or security interests it may now have or
may in the future have against any Tenant are or shall be subordinate to Tenant’s obligations to
Landlord under the Lease until Tenant’s obligations under the Lease have been fully performed and
any payments thereunder are not subject to recovery by a trustee in bankruptcy. Guarantor shall not
accept any payment or distribution of any sort from Tenant during the continuance of any “Event of
Default” (as defined in the Lease) or any other Event of Default hereunder; and any payment or
distribution received by Guarantor in breach of this sentence shall be held in trust by Guarantor
and immediately paid to Landlord to apply against any Guaranteed Obligations. Guarantor waives all
rights of subrogation or contribution against each Tenant and any other Person for any amounts
expended by Guarantor under this Guaranty until Tenant’s obligations under the Lease have been
fully performed and any payments thereunder are not subject to recovery by a trustee in bankruptcy.

          10. If Landlord incurs any expenses in the enforcement of this Guaranty, including reasonable
attorneys’ fees and disbursements, whether or not legal action be instituted, Guarantor shall pay
the same immediately upon demand by Landlord which shall be accompanied by evidence of such
expenses.

          11. Landlord shall not by any act of omission or commission be deemed to waive any of its
rights or remedies hereunder unless such waiver be in writing and signed by Landlord, and then only
to the extent specifically set forth therein; a waiver of one event shall not be construed as
continuing or as a bar to or waiver of such right or remedy on a subsequent event.

          12. Guarantor shall deliver to Landlord and to any lender or purchaser designated by Landlord,

          (a) as soon as available, and in any event within forty-five (45) days after the end of each
fiscal quarter (based on the fiscal year of Gurantor), in electronic format, quarterly and
year-to-date unaudited financial statements of ALC prepared for such fiscal quarter, including a
balance sheet and operating statement as of the end of such fiscal quarter, together with related
statements of income for such fiscal quarter and for the portion of such fiscal year ending with
such fiscal quarter. Each such quarterly financial statement shall be accompanied by the
following: (i) an Officer’s Certificate certifying that the same are true and correct in all
material respects and were prepared in accordance with GAAP (except for the absence of footnotes),
applied on a consistent basis, subject to changes resulting from audit and normal year-end audit
adjustments and (ii) an Officer’s Certificate certifying as of the date thereof whether, to the
best of such Guarantor’s knowledge, there exists an event or circumstance that constitutes an Event
of Default or that, with the giving of notice or the passage of time, or both, would constitute an
Event of Default under this Guaranty and if such Event of Default or latent Event of Default
exists, the nature thereof, the period of time it has existed and the action then being taken to
remedy the same. So long as Guarantor is a public company, the requirements of this Paragraph
12(a) may be satisfied by the filing by Guarantor of Guarantor’s Form 10Q.

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          (b) as soon as available, and in any event within one hundred twenty (120) days after the end
of each fiscal year of ALC, in electronic format, financial statements prepared for such year with
respect to such Guarantor, including a balance sheet and operating statement as of the end of such
year, together with related statements of income for such fiscal year. Guarantor shall furnish to
Landlord an Officer’s Certificate certifying as of the date thereof whether, to the best of such
Guarantor’s knowledge, there exists any event or circumstance that constitutes an Event of Default
or that, with the giving of notice or the passage of time, or both, would constitute an Event of
Default under this Guaranty, and if such Event of Default or latent Event of Default exists, the
nature thereof, the period of time it has existed and the action then being taken to remedy the
same. So long as Guarantor is a public company, the requirements of this Paragraph 12(b) may be
satisfied by the filing by Guarantor of Guarantor’s Form 10K.

          13. Guarantor shall transmit to Landlord, within five (5) Business Days after receipt thereof,
any Actuarial Correspondence and material communication affecting one or more Facilities, any
Tenant, Guarantor, any Affiliate of any Tenant, this Guaranty, the Lease, the Legal Requirements,
the Insurance Requirements, the Facility Provider Agreements (if any) or the Authorizations, and
Guarantor shall promptly respond to inquiries with respect to such information. Guarantor shall
notify Landlord in writing promptly after Guarantor obtains knowledge of any threatened or existing
material litigation or proceeding against, or investigation of, any Tenant, Guarantor, any
Affiliate of any Tenant or any Facility that may affect the right to operate one or more of the
Facilities, any Facility Provider Agreements, any of the Authorizations, Landlord’s title to any
Facility or Tenant’s interest therein or, if any Tenant or Facility participates in Medicare,
Medicaid or any other Third Party Payor Program, the right to receive regular reimbursement under
Medicare, Medicaid or any other Third Party Payor Program. All information shall be subject to the
same obligations pertaining to confidentiality and disclosure that apply under Section 46.1 of the
Lease to Information (as defined in the Lease) provided by Tenant to Landlord. As soon as
reasonably available, Guarantor shall deliver to Landlord copies of any Forms 10K, 10Q and 8K, and
any other annual, quarterly, monthly or other reports, copies of all registration statements and
any other public information that Guarantor or any Affiliate of Guarantor files with the SEC or any
other Governmental Authority. Promptly upon the furnishing thereof to the stockholders of
Guarantor, copies of all statements, reports, notices and proxy statements shall be so furnished.

          14. On a quarterly basis, Guarantor shall permit, and upon reasonable request by Landlord,
shall make appropriate arrangements for, Landlord and/or Landlord’s Representatives to discuss the
affairs, operations, finances and accounts of Tenant or Guarantor with senior officers of Guarantor
(and such of Guarantor’s financial advisors (other than independent accountants) as would be
relevant to the topic(s) of the particular meeting), all as Landlord may reasonably deem
appropriate for the purpose of verifying any report(s) delivered by Guarantor to Landlord under
this Guaranty or delivered by Tenant to Landlord under the Lease or for otherwise ascertaining
compliance with this Guaranty by Guarantor or with the Lease by Tenant or the business, operational
or financial condition of Tenant, Guarantor and/or any of the Facilities. Without limitation of
the foregoing, from time to time within a reasonable time following receipt of written notice from
Landlord to Guarantor, Guarantor shall permit, and shall make appropriate arrangements for,
Landlord and/or Landlord’s Representatives to discuss the business, operational and financial
condition of specific Facility(ies) designated by Landlord with, and be advised as to the same by,
appropriate personnel of Guarantor, Tenant and/or their

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respective Affiliates which are entities having operational and accounting responsibilities
for the Facility(ies) so specified by Landlord and to review, and make abstracts from and copies
of, the books, accounts and records of Guarantor and Tenant relative to any such Facility(ies), in
each case provided, and on the condition, that any such discussions or reviews, abstracting or
copying shall not materially interfere with Guarantor’s business operations relative to any
affected Facility(ies) and that all information shall be subject to the same obligations pertaining
to confidentiality and disclosure that apply under Section 46.1 of the Lease to Information (as
defined in the Lease) provided by Tenant to Landlord. Unless otherwise agreed in writing by
Landlord and Guarantor, all of the discussions, reviews, abstracting and copying referenced in this
paragraph 14 shall occur during normal business hours.

          15. Intentionally omitted.

          16. Guarantor and its Affiliates shall be subject to and agree to comply with the restrictive
covenants and conditions governing the ownership, leasing, management or operation of additional
independent and assisted living and Alzheimer’s care facilities contained in Exhibit F attached to
the Lease.

          17. Intentionally omitted.

          18. All notices, demands, requests, consents, approvals and other communications hereunder
shall be in writing and delivered by certified mail, return receipt requested, in which case such
notice shall be deemed received three (3) Business Days after its deposit, by confirmed facsimile,
in which case such notice shall be deemed received the same day, or by reputable nationally
recognized overnight courier service, in which case such notice shall be deemed received the next
Business Day, addressed to the respective parties, as follows:

To Guarantor:

Assisted Living Concepts, Inc.

W140 N8981 Lilly Road

Menomonee Falls, WI 53051

Attention: Chief Financial Officer

Facsimile: (262) 502-3714

With a copy to:

Assisted Living Concepts, Inc.

W140 N8981 Lilly Road

Menomonee Falls, Wisconsin 53051

Attention: General Counsel

Facsimile: (262) 251-7627

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To Landlord:

Ventas Realty, Limited Partnership

c/o Ventas, Inc.

111 South Wacker Drive

Suite 4800

Chicago, Illinois 60606

Attention: Asset Manager

Facsimile: (312) 596-3850

With a copy to:

Ventas, Inc.

10350 Ormsby Park Place

Suite 300

Louisville, Kentucky 40223

Attention: General Counsel

Facsimile: (502) 357-9001

or to such other address as the parties hereto may hereunder designate in writing.

          19. (a) The obligations of Guarantor under this Guaranty shall automatically terminate 368
days after Landlord has received, and not been required to disgorge any part of, payment of all
Monetary Obligations and all other sums due and owing under this Guaranty. If payment is made by
Tenant or Guarantor, whether voluntarily or otherwise, or by any other Person, on the Guaranteed
Obligations and thereafter Landlord is forced to remit, rescind or restore the amount of that
payment under any federal or state bankruptcy law or law for the relief of debtors or for any other
reason, (i) the amount of such payment shall be considered to have been unpaid at all times for the
purposes of enforcement of this Guaranty and (ii) the obligations of Tenant guaranteed herein shall
be automatically reinstated to the extent of such payment.

               (b) In addition and notwithstanding any other provisions of this Guaranty to the contrary, the
obligations of Guarantor under this Guaranty as to Inverness shall terminate upon the effective
date of the assignment by Tenant to a Substitute Tenant under Section 24.5 of the Lease with
respect to obligations related only to Inverness under the Lease that arise and accrue after the
effective date of such assignment.

          20. If Landlord proposes to grant a Facility Mortgage on or refinance any Facility Mortgage on
any of the Property, Guarantor shall cooperate in the process, and shall permit Landlord and the
proposed Facility Mortgagee, at Landlord’s or such Facility Mortgagee’s expense, to meet with
officers of Guarantor at Guarantor’s offices and to discuss the Guarantor’s business and finances.
On request of Landlord, Guarantor agrees to provide any such prospective Facility Mortgagee the
information to which Landlord is entitled hereunder, provided that if any such information is not
publicly available, such nonpublic information shall be made available on a confidential basis.
Guarantor agrees to execute, acknowledge and deliver documents requested by the prospective
Facility Mortgagee (such as a consent to the financing

- 11 -

 

(without encumbering Guarantor’s or Tenant’s assets), a consent to assignment of lease and of
this Guaranty, an estoppel certificate, and a subordination, non-disturbance and attornment
agreement), customary for tenants and their guarantors to sign in connection with mortgage loans to
landlords, so long as such documents are in form then customary among institutional lenders (and
provided further that the same do not materially and adversely change Tenant’s rights or
obligations under the Lease or materially and adversely change Guarantor’s rights and obligations
under this Guaranty).

          21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS, OTHER THAN ITS DOCTRINE REGARDING CONFLICTS OF LAWS. GUARANTOR IRREVOCABLY SUBMITS TO
THE PERSONAL JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN THE STATE OF ILLINOIS WITH
RESPECT TO ANY MATTER ARISING UNDER THIS GUARANTY. GUARANTOR CONSENTS TO JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE FEDERAL COURTS SITTING IN THE STATE OF ILLINOIS, AND
CONSENTS TO VENUE IN THE STATE OF ILLINOIS, AND GUARANTOR WAIVES ANY RIGHT TO STAY, REMOVE, OR
OTHERWISE DIRECTLY OR INDIRECTLY INTERFERE WITH SUCH ACTION BASED ON SUCH JURISDICTION.

          22. This Guaranty may not be modified or amended except by a written agreement duly executed
by Guarantor and Landlord and the Facility Mortgagee of the Property from time to time, if any.
This Guaranty shall be binding upon Guarantor and shall inure to the benefit of Landlord and its
successors and assigns as permitted hereunder, including, without limitation, any Facility
Mortgagee of Landlord’s interest in the Property. In the event any one or more of the provisions
contained in this Guaranty shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect any other provision
of this Guaranty, but this Guaranty shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. As used herein, the term “Tenant” includes their
successors and assigns with respect to the Lease.

          23. The rights of Landlord under this Guaranty may be assigned in whole or in part by
Landlord, its successors and assigns, whether directly or by way of a grant of a security interest
herein, without the consent of Guarantor.

          24. Within ten (10) Business Days after request by Landlord, Guarantor shall deliver a
certificate confirming that this Guaranty is in full force and effect and unamended (or, if
amended, specifying such amendment), and whether, to the actual knowledge of Guarantor, any default
exists under the Lease or under this Guaranty.

          25. Intentionally omitted.

          26. THE WAIVERS SET FORTH IN THIS GUARANTY ARE KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE
BY GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON ACTING ON ITS BEHALF,
HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THESE WAIVERS OR IN ANY WAY TO MODIFY OR NULLIFY

- 12 -

 

THEIR EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THESE WAIVERS
BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THESE WAIVERS WITH COUNSEL.

          27. Intentionally omitted.

          28. ALC shall maintain throughout the term of the Lease (as it may be extended pursuant to the
provisions thereof) a Fixed Charge Coverage Ratio of not less than 1.0. Fixed Charge Coverage
Ratio shall be determined by Landlord as of the end of each calendar quarter for the twelve (12)
month period then ended. Guarantor shall provide Landlord with such financial information
(certified as to be true and correct in all material respects by ALC) as Landlord may reasonably
request in order to calculate the Fixed Charge Coverage Ratio as of the end of each calendar
quarter, to the extent Landlord reasonably determines such financial information is needed for such
calculation after Landlord’s review of the financial information delivered to Landlord pursuant to
paragraph 12 above. “Fixed Charge Coverage Ratio” means (i) EBITDAR for ALC and any entities it
owns on a consolidated basis for the period in question, divided by (ii) the Fixed Charges of ALC
and such other entities for the same period. “EBITDAR” means “EBITDARM” (as defined in the Lease)
minus the provision for management fees from the applicable income statement(s) and as to entities
rather than facilities. “Fixed Charges” means the sum of (i) all interest accrued during the period
in question, (ii) all regularly scheduled payments of principal coming due during the period in
question, except any principal portion of any such indebtedness that is repaid or refinanced at
maturity with additional indebtedness, (iii) all rent coming due during the period in question,
(iv) all lease payments for personal property coming due during the period in question and (v) any
dividends or distributions to shareholders or members, if any, which are required to be made during
the period in question pursuant to the terms of the stock or articles of incorporation or by-laws
of a corporate entity or the terms of the articles of formation (or similar documents), the
operating agreement (or similar document) or any certificate representing a membership interest in
an entity that is a limited liability company (provided, dividends and distributions actually paid
but not so required to be made shall not be included for purposes of this clause.

- 13 -

 

          IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed and its corporate seals
to be hereunto affixed and attested by its officers thereunto duly authorized.

GUARANTORS:

Assisted Living Concepts, Inc. a Nevada corporationexv10w1

 

Exhibit 10.1

LOAN AGREEMENT

This Agreement dated as of January 2, 2008, is between Bank of America, N.A. (the “Bank”) and
Newport Corporation (the “Borrower”).

	1.	 	FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
	 
	1.1	 	Line of Credit Amount.
	 
	(a)	 	During the availability period described below, the Bank will provide a line of credit to the
Borrower. The amount of the line of credit (the “Facility No. 1 Commitment”) is Five Million
and 00/100 Dollars ($5,000,000.00).
	 
	(b)	 	This is a revolving line of credit. During the availability period, the Borrower may repay
principal amounts and reborrow them.
	 
	(c)	 	The Borrower agrees not to permit the principal balance outstanding to exceed the Facility
No. 1 Commitment. If the Borrower exceeds this limit, the Borrower will immediately pay the
excess to the Bank upon the Bank’s demand.

1.2    Availability Period. The line of credit is available between the date of this
Agreement and December 1, 2008, or such earlier date as the availability may terminate as provided
in this Agreement (the “Expiration Date”).

The availability period for this line of credit will be considered renewed if and only if the Bank
has sent to the Borrower a written notice of renewal effective as of the Expiration Date for the
line of credit (the “Renewal Notice”). If this line of credit is renewed, it will continue to be
subject to all the terms and conditions set forth in this Agreement . If this line of credit is
renewed, the term “Expiration Date” shall mean the date set forth in the Renewal Notice as the
Expiration Date and the same process for renewal will apply to any subsequent renewal of this line
of credit. A renewal fee may be charged at the Bank’s option. The amount of the renewal fee, if
any, will be mutually agreed upon by the parties and specified in the Renewal Notice.

	1.3	 	Repayment Terms.
	 
	(a)	 	The Borrower will pay interest on January 1, 2008, and then on the same day of each month
thereafter until payment in full of any principal outstanding under this facility.
	 
	(b)	 	The Borrower will repay in full any principal, interest or other charges outstanding under
this facility no later than the Facility No. 1 Expiration Date. Any interest period for an
optional interest rate (as described below) shall expire no later than the Facility No. 1
Expiration Date.
	 
	(c)	 	Prepayments of any principal outstanding for which the interest rate is the Prime
Rate (as defined below) may be made in whole or in part at any time with no prepayment fee.
Prepayments of any Portion (as defined below) will be subject to a prepayment fee as set forth
in Sections 2.2(f) and 2.2(g) below.
	 
	1.4	 	Interest Rate.
	 
	(a)	 	The interest rate is a rate per year equal to the Bank’s Prime Rate.
	 
	(b)	 	The Prime Rate is the rate of interest publicly announced from time to time by the Bank as
its Prime Rate. The Prime Rate is set by the Bank based on various factors, including the
Bank’s costs and desired return, general economic conditions and other factors, and is used as
a reference point for pricing some loans. The Bank may price loans to its customers at,
above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening
of business on the day specified in the public announcement of a change in the Bank’s Prime
Rate.

1.5    Optional Interest Rates. Instead of the interest rate based on the rate stated in the
paragraph entitled “Interest Rate” above, the Borrower may elect the optional interest rates listed
below for this Facility No. 1 during interest periods agreed to by the Bank and the Borrower. The
optional interest rates shall be subject to the terms and conditions

1

 

described later in this Agreement. Any principal amount bearing interest at an optional rate under this Agreement is
referred to as a “Portion.” The following optional interest rates are available:

	(a)	 	The LIBOR Rate plus 1.25 percentage point(s).
	 
	1.6	 	Letters of Credit.
	 
	(a)	 	During the availability period, at the request of the Borrower, the Bank will issue:

	 	(i)	 	commercial letters of credit with a maximum maturity of ninety (90) days but not
to extend more than ninety (90) days beyond the Facility No. 1 Expiration Date. Each
commercial letter of credit will require drafts payable at sight.
	 
	 	(ii)	 	standby letters of credit with a maximum maturity of three hundred sixty-five
(365) days but not to extend more than three hundred sixty-five (365) days beyond the
Facility No. 1 Expiration Date. The standby letters of credit may include a provision
providing that the maturity date will be automatically extended each year for an
additional year unless the Bank gives written notice to the contrary; provided, however,
that each letter of credit must include a final maturity date which will not be subject
to automatic extension.

	(b)	 	The amount of the letters of credit outstanding at any one time (including the drawn and
unreimbursed amounts of the letters of credit) may not exceed Five Million and 00/100 Dollars
($5,000,000).
	 
	(c)	 	In calculating the principal amount outstanding under the Facility No. 1 Commitment, the
calculation shall include the amount of any letters of credit outstanding, including amounts
drawn on any letters of credit and not yet reimbursed.
	 
	(d)	 	The following letters of credit are outstanding from the Bank for the account of the
Borrower:

	 	 	 	 	 
	Letter of Credit Number	 	Amount
	3051504 

	 	$1,000,000.00	 

As of the date of this Agreement, these letters of credit shall be deemed to be outstanding under
this Agreement, and shall be subject to all the terms and conditions stated in this Agreement.

	(e)	 	The Borrower agrees:

	 	(i)	 	Any sum drawn under a letter of credit may, at the option of the Bank, be added
to the principal amount outstanding under this Agreement. The amount will bear interest
and be due as described elsewhere in this Agreement.
	 
	 	(ii)	 	If there is a default under this Agreement, to immediately prepay and make the
Bank whole for any outstanding letters of credit.
	 
	 	(iii)	 	The issuance of any letter of credit and any amendment to a letter of credit is
subject to the Bank’s written approval and must be in form and content satisfactory to
the Bank and in favor of a beneficiary acceptable to the Bank.
	 
	 	(iv)	 	To sign the Bank’s form Application and Agreement for Commercial Letter of Credit
or Application and Agreement for Standby Letter of Credit, as applicable.
	 
	 	(v)	 	To pay any issuance and/or other fees that the Bank notifies the Borrower will be
charged for issuing and processing letters of credit for the Borrower.
	 
	 	(vi)	 	To allow the Bank to automatically charge its checking account for applicable
fees, discounts, and other charges.

2

 

	 	(vii)	 	To pay the Bank a non-refundable fee equal to 1.25% per annum of the outstanding
undrawn amount of each standby letter of credit, payable quarterly in advance,
calculated on the basis of the face amount outstanding on the day the fee is calculated.
	 
	 	(viii)	 	with respect to any letter of credit that remains outstanding after the Facility No. 1
Expiration Date, promptly to pledge cash collateral in an amount to fully secure the Borrower’s
reimbursement obligations, under documentation acceptable to the Bank.

	2.	 	OPTIONAL INTEREST RATES

2.1    Optional Rates. Each optional interest rate is a rate per year. Interest will be paid
on January 1, 2008, and then on the same day of each month thereafter until payment in full of any
principal outstanding under this Agreement. No Portion will be converted to a different interest
rate during the applicable interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest rates for interest periods
commencing after the default occurs. At the end of each interest period, the interest rate will
revert to the rate stated in the paragraph(s) entitled “Interest Rate” above, unless the Borrower
has designated another optional interest rate for the Portion.

	2.2	 	LIBOR Rate. The election of LIBOR Rates shall be subject to the following terms and
requirements:
	 
	(a)	 	The interest period during which the LIBOR Rate will be in effect will be one month, two
months or three months. The first day of the interest period must be a day other than a
Saturday or a Sunday on which banks are open for business in New York and London and dealing
in offshore dollars (a “LIBOR Banking Day”). The last day of the interest period and the
actual number of days during the interest period will be determined by the Bank using the
practices of the London inter-bank market.
	 
	(b)	 	Each LIBOR Rate portion will be for an amount not less than One Hundred Thousand and 00/100
Dollars ($100,000.00).
	 
	(c)	 	The “LIBOR Rate” means the interest rate determined by the following formula. (All amounts
in the calculation will be determined by the Bank as of the first day of the interest period.)

	 	 	 	 	 	 	 
	 

	 	LIBOR Rate =
	 	London Inter-Bank Offered Rate
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(1.00 — Reserve Percentage)	 	 

	 	 	Where,

	 	(i)	 	“London Inter-Bank Offered Rate” means for any applicable interest period, 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 selected by the Bank from time to time) at approximately 11:00 a.m. London time
two (2) London Banking Days before the commencement of the interest period for U.S.
Dollar deposits (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 rate for that interest period will be determined by such alternate
method as reasonably selected by the Bank. A “London Banking Day” is a day on which
banks in London are open for business and dealing in offshore dollars.
	 
	 	(ii)	 	“Reserve Percentage” means the total of the maximum reserve percentages for
determining the reserves to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded
upward to the nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.

	(d)	 	The Borrower shall irrevocably request a LIBOR Rate Portion no later than 12:00 noon Pacific
time on the LIBOR Banking Day preceding the day on which the London Inter-Bank Offered Rate
will be set, as specified above. For example, if there are no intervening holidays or weekend
days in any of the relevant locations, the request must be made at least three days before the
LIBOR Rate takes effect.
	 
	(e)	 	The Bank will have no obligation to accept an election for a LIBOR Rate Portion if any of the
following described events has occurred and is continuing:

3

 

	 	(i)	 	Dollar deposits in the principal amount, and for periods equal to the interest
period, of a LIBOR Rate Portion are not available in the London inter-bank market; or
	 
	 	(ii)	 	The LIBOR Rate does not accurately reflect the cost of a LIBOR Rate Portion.

	(f)	 	Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason of acceleration or
otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a
prepayment fee as described below. A “prepayment” is a payment of an amount on a date earlier
than the scheduled payment date for such amount as required by this Agreement.
	 
	(g)	 	The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost
or expense incurred by it as a result of the prepayment, including any loss of anticipated
profits and any loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the deposits from which such
funds were obtained. The Borrower shall also pay any customary administrative fees charged by
the Bank in connection with the foregoing. For purposes of this paragraph, the Bank shall be
deemed to have funded each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so funded.
	 
	3.	 	COLLATERAL

3.1    Personal Property. The personal property listed below now owned or owned in the future
by the parties listed below will secure the Borrower’s obligations to the Bank under this
Agreement. The collateral is further defined in security agreement(s) executed by the owners of
the collateral. In addition, all personal property collateral owned by the Borrower securing this
Agreement shall also secure all other present and future obligations of the Borrower to the Bank
arising under this Agreement (excluding any consumer credit covered by the federal Truth in Lending
law, unless the Borrower has otherwise agreed in writing or received written notice thereof). All
personal property collateral securing any other present or future obligations of the Borrower to
the Bank shall also secure this Agreement.

	(a)	 	Securities and other investment property owned by the Borrower as described in the Commercial
Pledge Agreement dated August 12, 2005 between the borrower and the Bank.

Regulation U of the Board of Governors of the Federal Reserve System places certain restrictions on
loans secured by margin stock (as defined in the Regulation). The Bank and the Borrower shall
comply with Regulation U. If any of the collateral is margin stock, the Borrower shall provide to
the Bank a Form U-1 Purpose Statement.

	4.	 	FEES AND EXPENSES
	 
	4.1	 	Fees.
	 
	(a)	 	Unused Commitment Fee. The Borrower agrees to pay a fee on any difference between
the Facility No. 1 Commitment and the amount of credit it actually uses, determined by the
average of the daily amount of credit outstanding during the specified period. The fee will
be calculated at 0.25% per year. The calculation of credit outstanding shall include the
undrawn amount of letters of credit.
	 
	 	 	This fee is due on December 31, 2007, and on the same day of each following quarter until the
expiration of the availability period.
	 
	(b)	 	Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any terms of
this Agreement, the Borrower will, at the Bank’s option, pay the Bank a fee for each waiver or
amendment in an amount advised by the Bank and agreed upon by the Borrower at the time the
Borrower requests the waiver or amendment. Nothing in this paragraph shall imply that the
Bank is obligated to agree to any waiver or amendment requested by the Borrower. The Bank may
impose additional requirements as a condition to any waiver or amendment.
	 
	(c)	 	Late Fee. To the extent permitted by law, the Borrower agrees to pay a late fee in
an amount not to exceed four percent (4%) of any payment that is more than fifteen (15) days
late. The imposition and payment of a late fee shall not constitute a waiver of the Bank’s
rights with respect to the default.

4.2    Expenses. The Borrower agrees to immediately repay the Bank for reasonable expenses
that include, but are not limited to, filing, recording and search fees, appraisal fees, title
report fees, and documentation fees.

4

 

	5.	 	DISBURSEMENTS, PAYMENTS AND COSTS
	 
	5.1	 	Disbursements and Payments.
	 
	(a)	 	Each payment by the Borrower will be made in U.S. Dollars and immediately available funds by
direct debit to a deposit account as specified below or, for payments not required to be made
by direct debit, by mail to the address shown on the Borrower’s statement or at one of the
Bank’s banking centers in the United States.
	 
	(b)	 	Each disbursement by the Bank and each payment by the Borrower will be evidenced by records
kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign
one or more promissory notes.
	 
	5.2	 	Telephone and Telefax Authorization.
	 
	(a)	 	The Bank may honor telephone or telefax instructions for advances or repayments or for the
designation of optional interest rates and telefax requests for the issuance of letters of
credit given, or purported to be given, by any one of the individuals authorized to sign loan
agreements on behalf of the Borrower, or any other individual designated by any one of such
authorized signers.
	 
	(b)	 	Advances will be deposited in and repayments will be withdrawn from account number CA -
14592-06005 owned by the Borrower or such other of the Borrower’s accounts with the Bank as
designated in writing by the Borrower.
	 
	(c)	 	The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions the Bank reasonably
believes are made by any individual authorized by the Borrower to give such instructions.
This paragraph will survive this Agreement’s termination, and will benefit the Bank and its
officers, employees, and agents.
	 
	5.3	 	Direct Debit (Pre-Billing).
	 
	(a)	 	The Borrower agrees that the Bank will debit deposit account number CA — 14592-06005 owned by
the Borrower or such other of the Borrower’s accounts with the Bank as designated in writing
by the Borrower (the “Designated Account”) on the date each payment of principal and interest
and any fees from the Borrower becomes due (the “Due Date”).
	 
	(b)	 	Prior to each Due Date, the Bank will mail to the Borrower a statement of the amounts that
will be due on that Due Date (the “Billed Amount”). The bill will be mailed a specified
number of calendar days prior to the Due Date, which number of days will be mutually agreed
from time to time by the Bank and the Borrower. The calculations in the bill will be made on
the assumption that no new extensions of credit or payments will be made between the date of
the billing statement and the Due Date, and that there will be no changes in the applicable
interest rate.
	 
	(c)	 	The Bank will debit the Designated Account for the Billed Amount, regardless of the actual
amount due on that date (the “Accrued Amount”). If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy will be treated as
follows:

	 	(i)	 	If the Billed Amount is less than the Accrued Amount, the Billed Amount for the
following Due Date will be increased by the amount of the discrepancy. The Borrower
will not be in default by reason of any such discrepancy.
	 
	 	(ii)	 	If the Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the discrepancy.
	 
	 	Regardless of any such discrepancy, interest will continue to accrue based on the actual
amount of principal outstanding without compounding. The Bank will not pay the Borrower
interest on any overpayment.

	(d)	 	The Borrower will maintain sufficient funds in the Designated Account to cover each debit.
If there are insufficient funds in the Designated Account on the date the Bank enters any
debit authorized by this Agreement, the Bank may reverse the debit.
	 
	(e)	 	The Borrower may terminate this direct debit arrangement at any time by sending written
notice to the Bank at the address specified at the end of this Agreement. If the Borrower
terminates this arrangement, then the principal

5

 

	 	 	amount outstanding under this Agreement will at the option of the Bank bear interest at a
rate per annum which is 0.5 percentage point(s) higher than the rate of interest otherwise
provided under this Agreement.

5.4    Banking Days. Unless otherwise provided in this Agreement, a banking day is a day
other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or
are in fact closed, in the state where the Bank’s lending office is located, and, if such day
relates to amounts bearing interest at an offshore rate (if any), means any such day on which
dealings in dollar deposits are conducted among banks in the offshore dollar interbank market. All
payments and disbursements which would be due on a day which is not a banking day will be due on
the next banking day. All payments received on a day which is not a banking day will be applied to
the credit on the next banking day.

5.5    Interest Calculation. Except as otherwise stated in this Agreement, all interest and
fees, if any, will be computed on the basis of a 360-day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365-day year is used.
Installments of principal which are not paid when due under this Agreement shall continue to bear
interest until paid.

5.6    Default Rate. Upon the occurrence of any default or after maturity or after judgment
has been rendered on any obligation under this Agreement, all amounts outstanding under this
Agreement, including any interest, fees, or costs which are not paid when due, will at the option
of the Bank bear interest at a rate which is 6.0 percentage point(s) higher than the rate of
interest otherwise provided under this Agreement. This may result in compounding of interest.
This will not constitute a waiver of any default.

	6.	 	CONDITIONS

Before the Bank is required to extend any credit to the Borrower under this Agreement, it must
receive, in form and content acceptable to the Bank, the items specifically listed below.

6.1    Authorizations. If the Borrower or any guarantor is anything other than a natural
person, evidence that the execution, delivery and performance by the Borrower and/or such guarantor
of this Agreement and any instrument or agreement required under this Agreement have been duly
authorized.

6.2    Governing Documents. If required by the Bank, a copy of the Borrower’s organizational
documents.

6.3    Security Agreements. Signed original security agreements covering the personal
property collateral which the Bank requires.

6.4    Perfection and Evidence of Priority. Evidence that the security interests and liens in
favor of the Bank are valid, enforceable, properly perfected in a manner acceptable to the Bank and
prior to all others’ rights and interests, except those the Bank consents to in writing. All title
documents for motor vehicles which are part of the collateral must show the Bank’s interest.

	6.5	 	Payment of Fees. Payment of all fees and other amounts due and owing to the Bank.
	 
	6.6	 	Good Standing. Certificates of good standing for the Borrower from its state of formation.
	 
	6.7	 	Insurance. Evidence of insurance coverage, as required in the “Covenants” section of this Agreement.
	 
	7.	 	REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes
the following representations and warranties. Each request for an extension of credit constitutes
a renewal of these representations and warranties as of the date of the request:

7.1    Formation. If the Borrower is anything other than a natural person, it is duly formed
and existing under the laws of the state or other jurisdiction where organized.

7.2    Authorization. This Agreement, and any instrument or agreement required hereunder, are
within the Borrower’s powers, have been duly authorized, and do not conflict with any of its
organizational papers.

6

 

7.3    Enforceable Agreement. This Agreement is a legal, valid and binding agreement of the
Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable.

7.4    Good Standing. In each state in which the Borrower does business, it is properly
licensed, in good standing, and, where required, in compliance with fictitious name statutes,
except in such states in which failure to be licensed, in good standing and/or in compliance with
fictitious name states would not have a material adverse effect on the Borrower’s business or
financial condition.

7.5    No Conflicts. This Agreement does not conflict with any law, agreement, or obligation
by which the Borrower is bound.

7.6    Financial Information. All financial and other information that has been or will be
supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of the Borrower’s
(and any guarantor’s) financial condition, including all material contingent liabilities that would
be required to be disclosed under Generally Accepted Accounting Principals. Since the date of the
most recent financial statement provided to the Bank, there has been no material adverse change in
the financial condition of the Borrower (or any guarantor). If the Borrower is comprised of the
trustees of a trust, the foregoing representations shall also pertain to the trustor(s) of the
trust.

7.7    Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened
against the Borrower which, if lost, would materially impair the Borrower’s ability to repay the
loan.

7.8    Collateral. All collateral required in this Agreement is owned by the grantor of the
security interest free of any title defects or any liens or interests of others, except those which
have been approved by the Bank in writing.

7.9    Permits, Franchises. The Borrower possesses all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade name rights, patent rights,
copyrights and fictitious name rights necessary to enable it to conduct the business in which it is
now engaged, except in cases in which failure to possess the same would not have a material adverse
effect on the Borrower’s business or financial condition.

7.10    Other Obligations. The Borrower is not in default on any material obligation for
borrowed money, any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation, except as have been disclosed in writing to the Bank, and except for any
such default that would not materially impair the Borrower’s ability to repay the loan.

7.11    Tax Matters. To the best of the Borrower’s knowledge, all of the Borrower’s tax
returns and reports that are or were required to be filed have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those presently being or
to be contested by the Borrower in good faith in the ordinary course of business for which adequate
reserves have been provided

7.12    No Event of Default. There is no event which is, or with notice or lapse of time or
both would be, a default under this Agreement.

7.13    Insurance. The Borrower has obtained, and maintained in effect, the insurance
coverage required in the “Covenants” section of this Agreement.

	8.	 	COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and until the Bank is
repaid in full:

	8.1	 	Use of Proceeds.
	 
	(a)	 	To use the proceeds of Facility No. 1 only for the Borrower’s business operations, unless
otherwise consented to by the Bank in writing.
	 
	(b)	 	The proceeds of the credit extended under this Loan Agreement may not be used directly or
indirectly to purchase or carry any “margin stock” as that term is defined in Regulation U of
the Board of Governors of the Federal Reserve System, or extend credit to or invest in other
parties for the purpose of purchasing or carrying any such “margin stock,” or to reduce or
retire any indebtedness incurred for such purpose.

7

 

8.2    Financial Information. Upon the Bank’s request, to provide the following financial
information and statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time. Copies of the Borrower’s Annual Reports on
Form 10-K and Quarterly Reports on Form 10-Q will satisfy the following requirements.

	(a)	 	Within one hundred twenty (120) days of the fiscal year end, the annual financial statements
of the Borrower. These financial statements must be audited (with an opinion satisfactory to
the Bank) by a Certified Public Accountant acceptable to the Bank. The statements shall be
prepared on a consolidated basis.
	 
	(b)	 	Within forty five (45) days of the period’s end, quarterly financial statements of the
Borrower, certified and dated by an authorized financial officer. These financial statements
may be company-prepared.
	 
	8.3	 	Additional Negative Covenants. Not to do any of the following, without the Bank’s
written consent:

	 	(a)	 	Liquidate or dissolve the Borrower’s business.
	 
	 	(c)	 	Voluntarily suspend the Borrower’s business for more than seven (7) days in any
thirty (30) day period.

	8.6	 	Notices to Bank. To promptly notify the Bank in writing of:
	 
	(a)	 	Any lawsuit against the Borrower (or any guarantor or, if the Borrower is comprised of the
trustees of a trust, any trustor), which, if lost, is expected by the Borrower, in its
reasonable judgment, to materially impair the Borrower’s ability to repay the loan.
	 
	(b)	 	Any substantial dispute between any governmental authority and the Borrower (or any guarantor
or, if the Borrower is comprised of the trustees of a trust, any trustor), which is expected
by the Borrower, in its reasonable judgment, to materially impair the Borrower’s ability to
repay the loan.
	 
	(c)	 	Any event of default under this Agreement, or any event which, with notice or lapse of time
or both, would constitute an event of default.
	 
	(d)	 	Any material adverse change in the Borrower’s (or any guarantor’s, or, if the Borrower is
comprised of the trustees of a trust, any trustor’s) financial condition or ability to repay
the credit.
	 
	(e)	 	Any change in the Borrower’s name, legal structure, place of business, or chief executive
office if the Borrower has more than one place of business.
	 
	8.7	 	Insurance.
	 
	(a)	 	General Business Insurance. To maintain insurance that is customary in the
Borrower’s business and adequate to protect against risks to the Borrower’s operations as to
amount, nature and carrier covering property damage (including loss of use and occupancy) to
any of the Borrower’s properties, business interruption, public liability including coverage
for contractual liability, product liability and workers’ compensation, and any other
insurance which is usual for the Borrower’s business. Each policy shall provide for at least
30 days prior notice to the Bank of any cancellation thereof.

8.8    Compliance with Laws. To comply with the laws (including any fictitious or trade name
statute), regulations, and orders of any government body with authority over the Borrower’s
business, except in cases in which failure to comply with such laws, regulations and orders would
not have a material adverse effect on the Borrower’s business or financial condition. The Bank
shall have no obligation to make any advance to the Borrower except in compliance with all
applicable laws and regulations and the Borrower shall fully cooperate with the Bank in complying
with all such applicable laws and regulations.

	8.9	 	Books and Records. To maintain adequate books and records.

8.10  Perfection of Liens. Upon the Bank’s request, to execute and deliver such documents,
agreements or instruments reasonably required for the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its security interests
and liens.

8

 

	8.11	 	Cooperation. To take any action reasonably requested by the Bank to carry out the
intent of this Agreement.

	9.	 	DEFAULT AND REMEDIES

If any of the following events of default occurs, the Bank may do one or more of the following:
declare the Borrower in default, stop making any additional credit available to the Borrower, and
require the Borrower to repay its entire debt immediately and without prior notice. If an event
which, with notice or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional credit under this
Agreement. In addition, if any event of default occurs, the Bank shall have all rights, powers and
remedies available under any instruments and agreements required by or executed in connection with
this Agreement, as well as all rights and remedies available at law or in equity. If an event of
default occurs under the paragraph entitled “Bankruptcy,” below, with respect to the Borrower,
then the entire debt outstanding under this Agreement will automatically be due immediately.

9.1    Failure to Pay. The Borrower fails to make a payment under this Agreement within five
(5) business days of the date due.

9.2    Other Bank Agreements. Any default occurs (subject to any applicable grace periods)
under any other agreement the Borrower (or any Obligor) has with the Bank. For purposes of this
Agreement, “Obligor” shall mean any guarantor, any party pledging collateral to the Bank, or, if
the Borrower is comprised of the trustees of a trust, any trustor.

9.3    Cross-default. Any default occurs (subject to any applicable grace periods) under any
agreement in connection with any credit the Borrower (or any Obligor) has obtained from anyone else
or which the Borrower (or any Obligor) has guaranteed that may materially affect the Borrower’s
ability to repay the loan or perform its obligations under this Agreement.

9.4    False Information. Any warranty, representation or statement made or furnished to the
Bank by the Borrower under this Agreement is false or misleading in any material respect, either
now or at the time made or furnished or becomes fake or misleading at any time thereafter.

9.5    Bankruptcy. The Borrower, any Obligor, or any general partner of the Borrower or of
any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the
foregoing parties, or the Borrower, any Obligor, or any general partner of the Borrower or of any
Obligor makes a general assignment for the benefit of creditors.

9.6    Receivers. A receiver or similar official is appointed for a substantial portion of
the Borrower’s or any Obligor’s business, or the business is terminated, or, if any Obligor is
anything other than a natural person, such Obligor is liquidated or dissolved.

9.7    Lien Priority. The Bank fails to have an enforceable first lien (except for any prior
liens to which the Bank has consented in writing) on or security interest in any property given as
security for this Agreement (or any guaranty).

9.9    Material Adverse Change. A material adverse change occurs, or is reasonably likely to
occur, in the Borrower’s (or any Obligor’s) financial condition or ability to repay the credit.

9.10  Government Action. Any government authority takes action that the Bank reasonably
believes materially adversely affects the Borrower’s or any Obligor’s financial condition or
ability to repay.

9.11  Default under Related Documents. Any default occurs under any guaranty, subordination
agreement, security agreement, deed of trust, mortgage, or other document required by or delivered
in connection with this Agreement or any such document is no longer in effect, or any guarantor
purports to revoke or disavow the guaranty.

9.12  Other Breach Under Agreement. A default occurs under any other term or condition of
this Agreement not specifically referred to in this Article and such default is not cured within
thirty (30) days following written notice from the Bank of such default This includes any failure
or anticipated failure by the Borrower (or any other party named in the Covenants section) to
comply with the financial covenants set forth in this Agreement, whether such failure is evidenced
by financial statements delivered to the Bank or is otherwise known to the Borrower or the Bank.

9

 

	10.	 	ENFORCING THIS AGREEMENT; MISCELLANEOUS

10.1  GAAP. Except as otherwise stated in this Agreement, all financial information
provided to the Bank and all financial covenants will be made under generally accepted accounting
principles, consistently applied.

10.2  California Law. This Agreement is governed by California law.

10.3  Successors and Assigns. This Agreement is binding on the Borrower’s and the Bank’s
successors and assignees. The Borrower agrees that it may not assign this Agreement without the
Bank’s prior consent. The Bank may sell participations in or assign this loan, and may exchange
information about the Borrower (including, without limitation, any information regarding any
hazardous substances) with actual or potential participants or assignees. If a participation is
sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower.

10.4  Dispute Resolution Provision. This paragraph, including the subparagraphs below, is
referred to as the “Dispute Resolution Provision.” This Dispute Resolution Provision is a material
inducement for the parties entering into this agreement.

	(a)	 	This Dispute Resolution Provision concerns the resolution of any controversies or claims
between the parties, whether arising in contract, tort or by statute, including but not
limited to controversies or claims that arise out of or relate to: (i) this agreement
(including any renewals, extensions or modifications); or (ii) any document related to this
agreement (collectively a “Claim”). For the purposes of this Dispute Resolution Provision
only, the term “parties” shall include any parent corporation, subsidiary or affiliate of the
Bank involved in the servicing, management or administration of any obligation described or
evidenced by this agreement.
	 
	(b)	 	At the request of any party to this agreement, any Claim shall be resolved by binding
arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).
The Act will apply even though this agreement provides that it is governed by the law of a
specified state.
	 
	(c)	 	Arbitration proceedings will be determined in accordance with the Act, the then-current rules
and procedures for the arbitration of financial services disputes of the American Arbitration
Association or any successor thereof (“AAA”), and the terms of this Dispute Resolution
Provision. In the event of any inconsistency, the terms of this Dispute Resolution Provision
shall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or
(ii) enforce any provision of this arbitration clause, the Bank may designate another
arbitration organization with similar procedures to serve as the provider of arbitration.
	 
	(d)	 	The arbitration shall be administered by AAA and conducted, unless otherwise required by law,
in Orange County, California. All Claims shall be determined by one arbitrator; however, if
Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims
shall be decided by three arbitrators. All arbitration hearings shall commence within ninety
(90) days of the demand for arbitration and close within ninety (90) days of commencement and
the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the
hearing. However, the arbitrator(s), upon a showing of good cause, may extend the
commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall
provide a concise written statement of reasons for the award. The arbitration award may be
submitted to any court having jurisdiction to be confirmed and have judgment entered and
enforced.
	 
	(e)	 	The arbitrator(s) will give effect to statutes of limitation in determining any Claim and may
dismiss the arbitration on the basis that the Claim is barred. For purposes of the application
of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of
Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the arbitrator(s), except as
set forth at subparagraph (j) of this Dispute Resolution Provision. The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this agreement.
	 
	(f)	 	The procedure described above will not apply if the Claim, at the time of the proposed
submission to arbitration, arises from or relates to an obligation to the Bank secured by real
property. In this case, all of the parties to this agreement must consent to submission of
the Claim to arbitration.
	 
	(g)	 	To the extent any Claims are not arbitrated, to the extent permitted by law the Claims shall
be resolved in court by a judge without a jury, except any Claims which are brought in
California state court shall be determined by judicial reference as described below.

10

 

	(h)	 	Any Claim which is not arbitrated and which is brought in California state court will be
resolved by a general reference to a referee (or a panel of referees) as provided in
California Code of Civil Procedure Section 638. The referee (or presiding referee of the
panel) shall be a retired Judge or Justice. The referee (or panel of referees) shall be
selected by mutual written agreement of the parties. If the parties do not agree, the referee
shall be selected by the Presiding Judge of the Court (or his or her representative) as
provided in California Code of Civil Procedure Section 638 and the following related sections.
The referee shall determine all issues in accordance with existing California law and the
California rules of evidence and civil procedure. The referee shall be empowered to enter
equitable as well as legal relief, provide all temporary or provisional remedies, enter
equitable orders that will be binding on the parties and rule on any motion which would be
authorized in a trial, including without limitation motions for summary judgment or summary
adjudication . The award that results from the decision of the referee(s) will be entered as a
judgment in the court that appointed the referee, in accordance with the provisions of
California Code of Civil Procedure Sections 644(a) and 645. The parties reserve the right to
seek appellate review of any judgment or order, including but not limited to, orders
pertaining to class certification, to the same extent permitted in a court of law.
	 
	(i)	 	This Dispute Resolution Provision does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial
foreclosure against any real or personal property collateral; (iii) exercise any judicial or
power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but
not limited to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies. The filing of a court action is not intended to
constitute a waiver of the right of any party, including the suing party, thereafter to
require submittal of the Claim to arbitration or judicial reference.
	 
	(j)	 	Any arbitration, judicial reference or trial by a judge of any Claim will take place on an
individual basis without resort to any form of class or representative action (the “Class
Action Waiver”). Regardless of anything else in this Dispute Resolution Provision, the
validity and effect of the Class Action Waiver may be determined only by a court or referee
and not by an arbitrator. The parties to this Agreement acknowledge that the Class Action
Waiver is material and essential to the arbitration of any disputes between the parties and is
nonseverable from the agreement to arbitrate Claims. If the Class Action Waiver is limited,
voided or found unenforceable, then the parties’ agreement to arbitrate shall be null and void
with respect to such proceeding, subject to the right to appeal the limitation or invalidation
of the Class Action Waiver. The Parties acknowledge and agree that under no circumstances
will a class action be arbitrated.
	 
	(k)	 	By agreeing to binding arbitration or judicial reference, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury as permitted by law in respect of
any Claim. Furthermore, without intending in any way to limit this Dispute Resolution
Provision, to the extent any Claim is not arbitrated or submitted to judicial reference, the
parties irrevocably and voluntarily waive any right they may have to a trial by jury to the
extent permitted by law in respect of such Claim. This waiver of jury trial shall remain in
effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE
CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE, THE PARTIES
AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO
TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

10.5  Severability; Waivers. If any part of this Agreement is not enforceable, the rest of
the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default.
If the Bank waives a default, it may enforce a later default. Any consent or waiver under this
Agreement must be in writing.

10.6  Attorneys’ Fees. The Borrower shall reimburse the Bank for any reasonable costs and
attorneys’ fees incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in connection with this
Agreement, and in connection with any amendment, waiver, “workout” or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys’ fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator. In the event that any case is
commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code) or
any similar or successor statute, the Bank is entitled to recover costs and reasonable attorneys’
fees incurred by the Bank related to the preservation, protection, or enforcement of any rights of
the Bank in such a case. As used in this paragraph, “attorneys’ fees” includes the allocated costs
of the Bank’s in-house counsel.

10.7  One Agreement. This Agreement and any related security or other agreements required
by this Agreement, collectively:

11

 

	(a)	 	represent the sum of the understandings and agreements between the Bank and the Borrower
concerning this credit;
	 
	(b)	 	replace any prior oral or written agreements between the Bank and the Borrower concerning
this credit; and
	 
	(c)	 	are intended by the Bank and the Borrower as the final, complete and exclusive statement of
the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this
Agreement, this Agreement will prevail. Any reference in any related document to a “promissory
note” or a “note” executed by the Borrower and dated as of the date of this Agreement shall be
deemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.

10.8  Notices. Unless otherwise provided in this Agreement or in another agreement between
the Bank and the Borrower, all notices required under this Agreement shall be personally delivered
or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the
signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature
page, or to such other addresses as the Bank and the Borrower may specify from time to time in
writing. Notices and other communications shall be effective (i) if mailed, upon the earlier of
receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, (ii) if
telecopied, when transmitted, or (iii) if hand-delivered, by courier or otherwise (including
telegram, lettergram or mailgram), when delivered.

10.9  Headings. Article and paragraph headings are for reference only and shall not affect
the interpretation or meaning of any provisions of this Agreement.

10.10 Counterparts. This Agreement may be executed in as many counterparts as necessary or
convenient, and by the different parties on separate counterparts each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but one and the same
agreement.

10.11 Borrower Information; Reporting to Credit Bureaus. The Borrower authorizes the Bank
at any time to verify or check any information given by the Borrower to the Bank, check the
Borrower’s credit references, verify employment, and obtain credit reports. The Borrower agrees
that the Bank shall have the right at all times to disclose and report to credit reporting agencies
and credit rating agencies such information pertaining to the Borrower and/or all guarantors as is
consistent with the Bank’s policies and practices from time to time in effect.

10.12 Prior Agreement Superseded. This Agreement supersedes the Business Loan Agreement
and Promissory Note entered into as of September 25, 2002, and as amended between the Bank and the
Borrower, and any credit outstanding thereunder shall be deemed to be outstanding under this
Agreement.

12

 

This Agreement is executed as of the date stated at the top of the first page.

	 	 	 	 	 	 	 	 	 
	Borrower:	 	 	 	Bank:
	 
	 	 	 	 	 	 	 	 
	Newport Corporation	 	 	 	Bank of America, N.A.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Charles F. Cargile
	 	 	 	By:
	 	/s/ Erich Bollinger
	 

	 	 
	 	 	 	 	 	 
	 

	 	Charles F. Cargile, Senior Vice President and

Chief Financial Officer
	 	 	 	 	 	Erich Bollinger, SVP/CM
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jeffrey B. Coyne	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Jeffrey B. Coyne , Senior Vice President and

General Counsel	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address where notices to Newport Corporation are to be	 	 	 	Address where notices to the Bank are to be sent:
	sent:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	1791 Deere Ave.

Irvine, CA 92606-4814	 	 	 	Pasadena — Attn: Notice Desk

CA9-702-05-71

101 S. Marengo Avenue, 5th Floor

Pasadena, CA 91101-2428

Affiliate Sharing Notice. Notice to Individual Borrowers, Guarantors and Pledgors
(“Obligors”): From time to time Bank of America, N.A. (the “Bank”) may share information about the
Obligor’s experience with Bank of America Corporation (or any successor company) and its
subsidiaries and affiliated companies (the “Affiliates”). The Bank may also share with the
Affiliates credit-related information contained in any applications, from credit reports and
information it may obtain about the Obligor from outside sources. If the Obligor is an individual,
the Obligor may instruct the Bank not to share this information with the Affiliates. The Obligor
can make this election by (1) calling the Bank at 1.888.341.5000, (2) visiting the Bank online at
www.bankofamerica.com, selecting “Privacy & Security,” and then selecting “Set Your Privacy
Preferences,” or (3) contacting the Obligor’s client manager or local banking center. To help the
Bank complete the Obligor’s request, the Obligor should include the Obligor’s name, address, phone
number, account number(s) and social security number. If the Obligor makes this election, certain
products or services may not be made available to the Obligor. This request will apply to
information from applications, consumer reports and other outside sources only, and may take six to
eight weeks to be fully effective. Through the normal course of doing business, including
servicing the Obligor’s accounts and better serving the Obligor’s financial needs, the Bank will
continue to share transaction and account experience information, as well as other general
information among the Affiliates. The Bank may change this policy from time to time. Visit our
website, www.bankofamerica.com, for the latest policy.

USA Patriot Act Notice. Federal law requires all financial institutions to obtain, verify
and record information that identifies each person who opens an account or obtains a loan. The
Bank will ask for the Borrower’s legal name, address, tax ID number or social security number and
other identifying information. The Bank may also ask for additional information or documentation
or take other actions reasonably necessary to verify the identity of the Borrower, guarantors or
other related persons.

13

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