AGREEMENT REGARDING DISPOSITION OF ASSETS AND LEASE AMENDMENTS

AGREEMENT REGARDING DISPOSITION

OF ASSETS AND LEASE AMENDMENTS

THIS AGREEMENT REGARDING DISPOSITION OF ASSETS AND LEASE AMENDMENTS (this “Agreement”) is entered into as of July 29, 2016, by and between SABRA HEALTH CARE REIT, INC., a Maryland corporation (“Sabra”), and GENESIS HEALTHCARE INC., a Delaware corporation (“Genesis”), with reference to the following Recitals:

RECITALS

A.Subsidiaries of Sabra, as landlord (collectively, “Landlord”) and subsidiaries of Genesis, as tenant, (collectively, “Tenant”) are parties to certain Leases and Master Leases (as amended from time to time, collectively, the “Leases”) with respect to inter alia, those certain healthcare facilities identified on Schedule 1 attached hereto (each a “Subject Facility” and, collectively, the “Subject Facilities”).

B.Subject to the terms and conditions set forth herein, the parties mutually desire to cause the Subject Facilities to be sold to unaffiliated third parties and to provide for the early termination of the applicable Lease with respect to each Subject Facility concurrently with the consummation of each such sale.

C.As a condition to Sabra’s willingness to execute and deliver this Agreement, the parties have also included the provisions of Section 5 below with respect to the Leases, Transferred Facilities and guaranties of leases relating thereto.

NOW, THEREFORE, in consideration of the recitals set forth above (which by this reference are incorporated herein) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.Agreement to Market for Sale. Tenant intends to enter into brokerage agreements with Blueprint Healthcare Real Estate Advisors (“Blueprint”) and/or other commercial real estate brokers reasonably acceptable to Landlord for the sale of the Subject Facilities. Landlord hereby agrees to use commercially reasonable efforts to cooperate with the sale of the Subject Facilities; provided, however, that Tenant hereby acknowledges and agrees that Landlord shall have no obligation to sell any Subject Facility unless the net sales proceeds to be delivered to Landlord upon the closing of such sale are acceptable to Landlord and Tenant in their reasonable, discretion. The parties acknowledge that each sale of a Subject Facility or group of Subject Facilities under a PSA (as defined below) is intended to be an independent transaction and not contingent upon the closing of the sale of another Subject Facility outside of the subject PSA.

2.Tenant’s and Landlord’s Agreement to Cooperate in Sale. Tenant hereby agrees to use its commercially reasonable efforts to facilitate the sale of the Subject Facilities, including, without limitation, by (a) entering into, and faithfully complying with, commercially reasonable purchase and sale agreements (each a “PSA”) and operations transfer agreements (each an “OTA”) with any proposed purchaser thereof (or its designee, and in such capacity, the “New Operator”),

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which are reasonably acceptable to Tenant and shall, inter alia, (i) provide for the proration of operational revenues and expenses, (ii) include commercially reasonable and customary representations and warranties from Tenant as to physical plant and operational matters and reasonable and customary post-closing indemnities for operational liabilities, including improper xxxxxxxx, from a net-worth entity reasonably acceptable to the New Operator (iii) provide for the conveyance to the New Operator of Tenant’s interest in the personal property at the Subject Facilities as of the closing thereunder (but specifically excluding any IT equipment and any personal property owned by third parties or affiliates of Genesis other than Tenant) for value agreed by Tenant; and (iv) grant the New Operator reasonable access to the Premises and Tenant’s books and records relating to the operations thereof (but specifically excluding the policies and procedure manuals and other proprietary information of Tenant); (b) reasonably cooperating (at New Operator’s sole cost and expense) with the New Operator in connection with its efforts to obtain the licenses, permits and other authorizations needed to operate the applicable Subject Facilities for their current use from and after the sale thereof, including, without limitation, by filing, submitting or otherwise distributing such applications and notices as the New Operator may reasonably request; (c) in Tenant’s capacity as the party in possession of the Subject Facilities, delivering such customary affidavits as the title company handling the sale of the Subject Facilities may reasonably require in order to issue the title policy required under the applicable PSA; and (d) continuing to operate the Subject Facilities in material compliance with all legal and licensing requirements as set forth in the Leases. Tenant also agrees to promptly reimburse Landlord for its reasonable out of pocket legal fees and costs incurred in connection the execution and delivery of this Agreement and the sale of the Subject Facilities. Subject to the provisions of Section 1 above, Landlord hereby agrees to use its commercially reasonable efforts to cooperate with, and assist where necessary, Tenant with its facilitation of the sale of the Subject Facilities, including, without limitation, by (a) joining in the execution and delivery of each PSA for purposes of agreeing to convey title to the Subject Facilities and related landlord personal property to the prospective purchasers of the Subject Facilities (“Purchasers”) at closing, (b) cooperating with the due diligence investigations of any such Purchasers, and (c) providing Purchasers and their representatives, subject to the terms of commercially reasonable confidentiality agreements, access to all books, records, files, reports, and information that are (I) in Landlord’s control or possession, (II) relate to the applicable Subject Facilities, and (III) would typically be disclosed in connection with the sale of a commercial healthcare facility as contemplated hereunder.

3.Agreement to Amend the Leases; Base Rent Reduction. Landlord and Tenant hereby agree that on and subject to the terms and conditions set forth herein, the applicable Lease shall be amended to release therefrom any and all rights, duties and obligations, including, without limitation, rights of occupancy and use and duties and obligations for certain rent and other payment obligations, solely with respect to the applicable Subject Facility on and as of 11:59 p.m. on the date immediately prior to the date on which the closing of the sale of such Subject Facility occurs (as applicable to each Subject Facility, the “Termination Date”). Effective as of the applicable Termination Date, the annual Base Rent payable under the Lease shall be reduced by the product of (a) the net sales proceeds payable to Landlord in connection with the sale of such Subject Facility (after deducting closing and transaction costs incurred, but without regard to operating prorations (which shall be to the benefit or cost of Tenant)), and (b) Seven and one-half percent (7.5%) (the applicable “Rent Credit Amount”). Rent Credit Amounts attributable to the sales of Subject

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Facilities that (i) are leased under the Arden, Kentucky and Ohio Leases shall be applied to each such applicable Lease, (ii) are leased under any other Lease shall be applied to the Connecticut, Other Centers and Revolver Leases (the “Allocated Leases”) in the following percentages: (A) Connecticut = 16.62%; (B) Other Centers = 21.42%; and (C) Revolver = 61.96%. Tenant acknowledges that it is anticipated that the annual Base Rent payable by Tenant under the terms of the applicable Leases immediately prior to the Termination Date that is attributable to any Subject Facility (in each case, a “Subject Facility Base Rent Amount”) that is sold will be greater than the applicable Rent Credit Amount associated with such Subject Facility (in each case, the “Subject Facility Rent Credit Amount”) and that Landlord is not willing to release Tenant from its obligation to pay the amount equal to the difference between the Subject Facility Base Rent Amount and the Subject Facility Rent Credit Amount (such difference, the “Subject Facility Excess Rent”). Within thirty (30) days following the execution and delivery of this Agreement, Landlord and Tenant shall enter into amendments to each of the applicable Leases as are necessary to effectuate the changes to the expiration dates of the Initial Terms and Base Rent amounts set forth in the first five (5) columns of the lease amendment summary attached hereto as Schedule 2 (“Lease Amendment Summary”). As further reflected in the Lease Amendment Summary, at such time as a sale of the last Subject Facility leased under the applicable Arden, Kentucky and Ohio Leases occurs all Subject Facility Excess Rent with respect thereto shall be reallocated to the Base Rent payment obligations under the Allocated Leases in the following percentages: (A) Connecticut = 16.62%; (B) Other Centers = 21.42%; and (C) Revolver = 61.96%. The Base Rent payable under such Allocated Leases shall also be subject to such reductions at the time periods and in such amounts as are specified in the column entitled “Additional Provisions” set forth in the Lease Amendment Summary (the “Base Rent Reductions”). The parties agree to cooperate with one another and execute such lease amendments as are necessary from time to time to evidence the reallocation of the Subject Facility Excess Rent and Base Rent Reductions described above.

4.HUD Debt. The parties hereto acknowledge that certain of the Subject Facilities are subject to HUD debt (the “HUD Facilities”) and that the repayment or assumption of such debt will be necessary to effectuate the sale of such HUD Facilities. Nevertheless, the parties desire to market such HUD Facilities for sale under mutually acceptable terms with the understanding that (a) such HUD Facilities are pledged under a Lease that includes properties other than the HUD Facilities and it will be necessary to amend the HUD loan documents and such Lease in order to consummate a sale, and (b) the additional costs and expenses incurred in connection with the sale of the HUD Facilities (including, without limitation, any loan assumption and/or prepayment fee) shall be borne by Genesis.

5.Remaining Leases; Cooperation regarding Transferred Facilities. The parties hereto acknowledge that, in addition to the sale of the Subject Facilities contemplated hereunder, Sabra is considering the sale or joint venture of the ownership interest in other facilities subject to the Leases, as amended in accordance with the terms hereinabove. In connection with any such sale or joint venture, it may be necessary to (a) create a separate lease or master lease governing Tenant’s lease obligations with respect to such sold or joint ventured property, and/or (b) reallocate the Base Rent payable under the Leases to more appropriately reflect the economic performance of the assets thereunder. Accordingly, Landlord shall have the right from time to time during the applicable lease term, by notice to Tenant, to require that Tenant execute an amendment to the

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applicable Lease pursuant to which one or more facilities (individually, a “Transferred Facility” or collectively, “Transferred Facilities”) are separated and removed from the applicable Lease, and, in such event, simultaneously with the execution of such amendment, Landlord (or the subsequent owner) and Tenant (or its affiliate) shall execute a substitute lease with respect to such Transferred Facilities (each a “Substitute Lease”), provided, however, that in no event shall Landlord seek to amend any Lease to include the Eagle Crest facility (formerly known as the Carmichael facility) located at 0000 Xxxx Xxxx Xxxx., Xxxxxxxxxx, XX (“Eagle Crest”). The economic terms of any such amendment to such Lease, the related Substitute Lease and any other Lease impacted thereby shall be subject to good faith negotiations and mutually acceptable to Landlord and Tenant; provided, however, in no event shall such economic terms increase Tenant’s overall payment obligations from the obligations due under the applicable Leases prior to such transaction. In connection with any such transaction, Genesis hereby agrees to execute and deliver (a) a new guaranty of lease with respect to the obligations due under the Substitute Lease, and (b) an amended and restated guaranty of lease with respect to the obligations due under any Leases amended in connection therewith.

6.Term of this Agreement; Default. Unless extended in writing by the parties hereto, this Agreement, and all rights and obligations hereunder, shall automatically terminate with respect to any remaining Subject Facilities if a contract for the sale of such Subject Facilities has not been executed and consummated on or before October 31, 2017. For the avoidance of doubt, if a material default occurs hereunder and such default is not cured within sixty (60) days following written notice thereof, the same shall constitute an Event of Default under the subject Leases and the non-defaulting party’s rights and remedies under such Leases in connection with such default shall survive the expiration of this Agreement.

7.Sale of Additional Facilities. Landlord acknowledges that Tenant may elect to market, or cause Blueprint to market, the Subject Facilities for sale along with certain other healthcare facilities which Genesis and/or its direct or indirect affiliates currently lease from third party landlords (such landlords the “Third Party Landlords” and each such sale, a “Combined Sale”). Landlord acknowledges that any consummation of a Combined Sale shall be subject in all respects to the mutual consent of Landlord and the applicable Third Party Landlords. Landlord agrees to negotiate in good faith with Tenant regarding a sale of Eagle Crest and the reallocation of the rent allocated to Eagle Crest among the Connecticut and Other Centers Leases.

8.Miscellaneous.

(a)This Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof, and no variation or modification thereof shall be valid and enforceable, except by an agreement in writing, executed and approved in the same manner as this Agreement.

(b)If any party commences an action against another other to interpret or enforce any of the terms of this Agreement or because of the breach by another party of any of the terms hereof, the losing party shall pay to the prevailing party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment.

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(c)This Agreement shall inure solely to the benefit of the parties hereto and their respective successors and assigns. No third party shall have the right to derive or claim any benefit hereunder and shall have no right to enforce or rely upon any provision of this Agreement.

(d)This Agreement shall be governed by and construed and enforced in accordance with the applicable laws of the state of California, without regard to the conflict of laws rules thereof; provided that that the law of the applicable state or commonwealth shall govern procedures for enforcing, in the respective state or commonwealth, provisional and other remedies directly related to each Subject Facility.

(e)Each party will, whenever and as often as it shall be reasonably requested so to do by another party, cause to be executed, acknowledged or delivered, any and all such further instruments and documents as may be necessary or proper, in the reasonable opinion of the requesting party, in order to carry out the intent and purpose of this Agreement.

(f)This Agreement may be executed and delivered (including by facsimile or Portable Document Format (pdf) transmission) in counterparts, all of which executed counterparts shall together constitute a single document. Signature pages may be detached from the counterparts and attached to a single copy of this document to physically form one document. Any such facsimile documents and signatures shall have the same force and effect as manually-signed originals and shall be binding on the parties hereto.

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first set forth above.

GENESIS:

GENESIS HEALTHCARE, INC.,
a Delaware corporation

By:    /s/ Xxxxxxx Xxxxxxx                

Name:    Xxxxxxx Xxxxxxx                

Title:    Senior Vice President                

[SIGNATURES CONTINUE ON NEXT PAGE]

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SABRA:

SABRA HEALTH CARE REIT, INC.,
a Maryland corporation

By:    /s/ Xxxxx Xxxx-Xxxxxxx            

Name:    Xxxxx Xxxx-Xxxxxxx                

Title:    Chief Investment Officer            

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SCHEDULE 1

SCHEDULE OF SUBJECT FACILITIES

Facility Name	Facility Address	Type of Facility	Licensed Beds
Bradford Square Care and Rehabilitation Center	0000 X.X. 000 Xxxxx Xxxxxxxxx, XX 00000	SNF	100
Klondike Care and Rehabilitation Center	0000 Xxxxxxxx Xxxx Xxxxxxxxxx, XX 00000	SNF	62
Regency Care and Rehabilitation Center	0000 Xxxxxxx Xxxxx Xxxxxxxxxx, XX 00000	SNF	110
Kensington Manor Care and Rehabilitation Center	000 Xx. Xxxx Xxxx Xxxxxxxxxxxxx, XX 00000	SNF	82
Countryside Care and Rehabilitation Center	00 Xxxxx Xxxxxx Xxxxxxxx, XX 00000	SNF	61
Xxxxxxx Care and Rehabilitation Center	000 Xxxxx Xxxxxxx Xxxxxx Xxxxxxxx, XX 00000	SNF	50
Heartland Villa Care and Rehabilitation Center	0000 X.X. Xxxxxxx 00 Xxxx Xxxxxxxxx, XX 00000	SNF	69
Xxxxxxxx Care and Rehabilitation Center	000 Xxxxx Xxxx Xxxxxx Xxxxxxxxxxx, XX 00000	SNF	94
Colonial Manor Care and Rehabilitation Center	0000 Xxxxxxxxx Xxxx Xxxxxxx Xxxxx, XX 00000	SNF	48
Xxxxxxx Center	0000 Xxxxx Xxxxxxx Xxxxx Xxxxxxx, XX 00000	SNF	86
Magnolia Village Care and Rehabilitation Center	0000 Xxxxxxxx Xxxx Xxxxxxx Xxxxx, XX 00000	SNF	60
Hillside Villa Care and Rehabilitation Center	0000 Xxxxx Xxxxxx Xxxxxxxxxxxx, XX 00000	SNF	00
Xxxxxxxx Xxxxx Assisted Living Center	0000 Xxxxxxxx Xxxxxx Xxxxxxxxx, XX 00000	SNF	00
Xxxxxx Xxxxx Care and Rehabilitation Center	0000 Xxxxxxxxxx Xxxxx Xxxxxxxx, XX 00000	SNF	151

Schedule 1-1

Facility Name	Facility Address	Type of Facility	Licensed Beds
Sylvania Care and Rehabilitation Center	0000 Xxxxxxxxx Xxxx Xxxxxxxx, XX 00000	SNF	000
Xxx Xxxxxxxxx Care and Rehabilitation Center	000 Xxxxx Xxxx Xxxxxx Xxx Xxxxxxxxx, XX 00000	SNF	000
Xxxxx Xxxxx Care and Rehabilitation Center	0000 Xxxxx Xxxxxx Xxxxxx, XX 00000	SNF	98
Perrysburg Care and Rehabilitation Center	00000 Xxxxxxxxxx Xxxxxxxxx Xxxxxxxxxx, XX 00000	SNF	93
Xxxxx Care and Rehabilitation Center	0000 Xxxxxx Xxxxxx Xxxxx, XX 00000	SNF	159
Twin Rivers Care and Rehabilitation Center	000 Xxxxxxx Xxxxxx Xxxxxxxx, XX 00000	SNF	00
Xxx Xxxxxxx Care and Rehabilitation Center	000 Xxxxx Xxxxx Xxx Xxxxxxx, XX 00000	SNF	120
Butte Care and Rehabilitation Center	0000 Xxxxxxxxxxx Xxxxx Xxxxx, XX 00000	SNF	100
Whitefish Care and Rehabilitation Center	0000 X. Xxxxxxx Xxxxxx Xxxxxxxxx, XX 00000	SNF	100
Deer Lodge Care and Rehabilitation Center	0000 Xxxxx Xxxxxx Xxxx Xxxxx, XX 00000	SNF (HUD Facility)	60
Missouri River Care and Rehabilitation Center	0000 Xxxxxxxxxxx Xxx. X. Xxxxx Xxxxx, XX 00000	SNF (HUD Facility)	000
Xxxxxxx Xxxxxxxx Care and Rehabilitation Center	0000 Xxxxxxx Xxxx Xxxxxxxxxxxx, XX 00000	SNF	88
Fountain City Care and Rehabilitation Center	0000 Xxxx Xxxxxxx Xxxx Xxxxxxxx, XX 00000	SNF	000
Xxxxxx Xxxxxxx Care and Rehabilitation Center	000 Xxxxx Xxxxx Xxxxxx Xxxx, XX 00000	SNF	000
Xxxxx Xxxxx	000 Xxx Xxxxxx Xxxxxx, Xxxxxxxxxxx	SNF (HUD Facility)	360

Schedule 1-2

SCHEDULE 2

LEASE AMENDMENT SUMMARY

Schedule 2-1