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Exhibit 10.1
 
CASABLANCA OPTION AGREEMENT
 
 
CASABLANCA OPTION AGREEMENT (this “Option Agreement”), dated as of December 22,
2009, by and among CapitalSource Inc., a Delaware corporation (“CapitalSource”),
CSE SLB LLC, a Delaware limited liability company (“CSE SLB”), and Omega
Healthcare Investors, Inc., a Maryland corporation (the “Buyer”).  Capitalized
terms used in this Option Agreement shall have the respective meanings ascribed
to them in Section 13 hereof.  CapitalSource and CSE SLB are collectively
referred to herein as the “Sellers.”
 
R E C I T A L S:
 
WHEREAS, CSE SLB owns 100% of the membership interests (the “Casablanca Units”)
of CSE Casablanca Holdings LLC, a Delaware limited liability company
(“Casablanca Holdings”), which in turn owns, through various direct and indirect
subsidiaries (the “Casablanca Subsidiaries”), the various healthcare properties
identified by the physical addresses listed on Schedule I hereto (each a
“Casablanca Property” and collectively, the “Casablanca Properties”); and
 
WHEREAS, pursuant to that certain Securities Purchase Agreement (the “Purchase
Agreement”) dated as of November 17, 2009, by and among Buyer, the Sellers and
the other parties identified on the signature pages thereto, Buyer has purchased
from the Sellers an option to acquire the Casablanca Units on the terms and
conditions set forth therein and herein.
 
NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements herein contained, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, each intending
to be legally bound, hereby agree as follows:
 
SECTION 1.  GRANT OF OPTION
 
Subject to the terms and conditions of, and on the basis of and in reliance upon
the covenants, agreements and representations and warranties set forth in, this
Option Agreement, (i) for and in consideration of the Casablanca Option Price,
Sellers hereby grant to Buyer the exclusive option (but not the obligation) to
purchase and acquire at any time during the Option Period the Casablanca Units
on the terms and conditions set forth herein (the “Casablanca Option”); and (ii)
in the event Buyer elects to exercise the Casablanca Option as set forth in
Section 3 hereof, then, Sellers, as applicable, shall sell, transfer, convey,
assign and deliver to the Buyer, and the Buyer shall purchase and acquire from
such Sellers, free and clear of all Encumbrances except for Permitted Securities
Encumbrances, the Casablanca Units.
 
SECTION 2.  PURCHASE AND SALE OF OPTION AND CASABLANCA UNITS
 
2.1    Purchase Price for Casablanca Option.
 
The aggregate consideration for the purchase of the Casablanca Option payable by
Buyer to Seller on the date hereof in accordance with Section 2.1 of the
Purchase Agreement, is $25,000,000 (the “Casablanca Option Price”), which such
Casablanca Option Price is payable in the form of a number of shares of Buyer
Common Stock (as defined in the Purchase Agreement) calculated pursuant to
Section 2.1(b) of the Purchase Agreement.
 

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2.2   Purchase Price For Casablanca Units.
 
(a)   In the event Buyer elects to exercise the Casablanca Option, the aggregate
purchase price for the Casablanca Units payable by the Buyer to Sellers shall be
$295,210,829 (the “Base Purchase Price”), consisting of:
 
(i)   an amount in cash equal to $30,510,829 (the “Initial Cash Consideration”),
increased or decreased in accordance with Sections 2.2(b), 2.2(c), 2.3 and, if
applicable, 6.17 (such adjusted Initial Cash Consideration, the “Cash
Consideration” and such adjustments, the “Closing Adjustments”);
 
(ii)   $264,700,000 of Indebtedness of the Casablanca Subsidiaries assumed or
paid off by the Buyer, which such Indebtedness shall be designated in a
certificate delivered from Sellers no later than five (5) Business Days prior to
the Closing Date (the “Assumed Indebtedness”).
 
The Base Purchase Price as adjusted pursuant to this Option Agreement is
referred to as the “Final Purchase Price.”  The allocation of the Final Purchase
Price among the Casablanca Properties is set forth on Schedule 2.1(a) of the
Purchase Agreement.  The Cash Consideration shall be paid to Sellers or their
Affiliates as directed by Sellers in a notice delivered no less than three (3)
Business Days prior to the Closing.
 
(b)   In the event that any of the Casablanca Subsidiaries or Casablanca
Properties are sold between the date hereof and the Closing Date, the Initial
Cash Consideration shall be reduced by the greater of (i) the net proceeds of
such sale or (ii) the purchase price allocated to such Casablanca Property on
Schedule 2.1(a) to the Purchase Agreement; provided, however, that there shall
be no reduction in the Initial Cash Consideration with respect to a sale of CSE
Pittsburg or the Pittsburg Facility.
 
(c)   On the Closing Date, the Initial Cash Consideration shall be (i)
increased, dollar-for-dollar, to the extent the aggregate principal amount of
Assumed Indebtedness is less than $264,700,000 or (ii) decreased,
dollar-for-dollar, to the extent the aggregate principal amount of Assumed
Indebtedness is greater than $264,700,000.
 
(d)   [Intentionally left blank]
 
(e)   Tax Treatment of the Purchase and Sale of Casablanca Units.  Solely for
U.S. federal Income Tax purposes, the Buyer and each Seller, as applicable,
shall treat the purchase and sale of the Casablanca Units pursuant to Buyer’s
exercise of the Casablanca Option under this Option Agreement as a purchase and
sale of each of the Casablanca Properties and other assets owned by the
Casablanca Subsidiaries.  The purchase price for Income Tax purposes of the
Casablanca Properties and other assets shall equal the Final Purchase Price
(plus the Casablanca Option Price and any other items constituting consideration
for purposes of Section 1060 of the Code).  The allocation of such purchase
price to the Casablanca Properties and other assets of the Casablanca
Subsidiaries shall be agreed to by the Buyer and Sellers within ninety (90) days
after the Closing Date.  The Buyer and Sellers and each of their respective
Affiliates shall take all actions and properly and timely file all Tax Returns
(including, but not limited to, IRS Form 8594 (Asset Acquisition Statement)
consistent with such allocation).  None of the Sellers or the Buyer shall take
any position for U.S. federal Income Tax purposes (whether in audits, Tax
Returns or otherwise) that is inconsistent with the allocation unless required
to do so by applicable Law. In the event that any Tax authority disputes such
allocation, Sellers or the Buyer, as the case may be, shall promptly notify the
other party of the nature of such dispute.
 
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2.3   Additional Adjustments and Apportionments.
 
(a)   Sellers and the Buyer hereby acknowledge and agree that, as of the Closing
Date:  (i) certain costs and expenses, including any Taxes (franchise, income or
other), relating to the Casablanca Subsidiaries and the Casablanca Properties,
(A) may have accrued during and be applicable for the period ending at 12:01
a.m. (New York time) on the Closing Date (such period, the “Pre-Closing Period”)
but will not have been paid by Sellers or the applicable Casablanca Subsidiary
prior to the end of the Pre-Closing Period (such accrued expenses, if any, that
are unpaid as of the end of the Pre-Closing Period being hereinafter referred to
as “Accrued Expenses”) or (B) will not accrue until, or may be applicable for,
the period after 12:01 a.m. (New York time) on the Closing Date (the
“Post-Closing Period”) but will have been paid by Sellers or one or more of the
applicable Casablanca Subsidiaries prior to the beginning of the Post-Closing
Period (such unaccrued expenses, if any, that have been prepaid as of the
beginning of the Post-Closing Period being hereinafter referred to as “Prepaid
Expenses”); and (ii) certain items of income and revenue relating to the
Casablanca Subsidiaries and the Casablanca Properties, including, without
limitation, rental income (excluding Past Due Rent), (A) may have accrued during
or be applicable for the Pre-Closing Period but will not have been paid during
the Pre-Closing Period (such accrued income, revenue and other amounts, if any,
that are unpaid as of the end of the Pre-Closing Period, the “Accrued Income”)
or (B) will not accrue until, or may be applicable for, the Post-Closing Period
but will have been paid prior to the Post-Closing Period (such unaccrued income,
revenue and other amounts, if any, that has been prepaid as of the beginning of
the Post-Closing Period being hereinafter referred to as “Prepaid
Income”).  Subject to the other provisions herein contained, the Accrued
Expenses, Prepaid Expenses, Accrued Income and Prepaid Income shall be
apportioned (on the basis of a 365 day year) to Sellers with respect to the
Pre-Closing Period and the Buyer with respect to the Post-Closing
Period.  Notwithstanding the foregoing, “Accrued Income” shall exclude any rent
as to which the Tenant is fifteen (15) days or more past due as of the Closing
Date (“Past Due Rent”), and “Accrued Expenses” shall exclude any accrued, but
unpaid costs or expenses for which a Tenant is obligated to reimburse any of the
Casablanca Subsidiaries pursuant to the terms of a Property Lease; provided,
however, that in the event a Tenant is, as of the Closing Date, in default of
(and all applicable cure periods have expired), or disputing any obligation to
pay such costs or expenses, the amount thereof shall be payable by Sellers for
purposes of calculating the apportionments contemplated by this Section
2.3(a).  Subsequent to the Closing Date, the Buyer shall use its commercially
reasonable efforts to enforce the terms of the applicable Property Lease and
shall remit to Sellers the amount of any such defaulted or disputed costs and
expenses together with any Past Due Rent actually collected by the Buyer less
all fees and expenses incurred by the Buyer in collecting such monies.  In
addition to the foregoing, any deposits reflected on Schedule 4.6(e) of the
Disclosure Schedule held by Sellers or any of the Casablanca Subsidiaries
(excluding any amounts set forth on Schedule 2.3(c)), will be paid (if not
already held in an account of the Casablanca Subsidiaries) over to the Buyer on
the Closing Date or contributed to the Casablanca Subsidiaries on or prior to
the Closing Date.
 
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(b)   Not later than ten Business Days prior to the Closing Date, Sellers shall
prepare and deliver to the Buyer a written statement setting forth, as of the
Closing Date, a reasonably detailed good faith calculation of the Accrued
Expenses, Prepaid Expenses, Accrued Income and Prepaid Income for each of the
Casablanca Subsidiaries and Casablanca Properties.  The Buyer shall have the
right to review such written statement and shall notify Sellers of any objection
thereto within three Business Days after the receipt thereof.  Sellers and the
Buyer shall negotiate in good faith to attempt to resolve any objection made by
the Buyer, provided that if the parties are unable to agree upon a reasonably
detailed calculation of such amounts at least five Business Days prior to the
Closing Date, the Buyer and Sellers shall promptly cause, an independent
accountant to be mutually agreed upon by the Buyer and Sellers (the “Independent
Accountant”), to review this Option Agreement and the disputed amounts for the
purposes of calculating such disputed amounts (it being understood that in
making such calculation, the Independent Accountant shall be functioning as an
expert and not as an arbitrator).  In making such calculation, the Independent
Accountant shall consider only those amounts in the Sellers’ calculation of the
Accrued Expenses, Prepaid Expenses, Accrued Income and Prepaid Income as to
which Buyer has disagreed.  The Independent Accountant shall deliver to the
Buyer and Sellers, as promptly as practicable, a report setting forth its
estimation of each disputed amount.  The fees and expenses of any such
Independent Accountant shall be shared equally between the Buyer and
CapitalSource.  If the Buyer does not notify Sellers of any objection within
such three Business Day period, the Buyer shall be deemed to have agreed with
the apportionments specified in Sellers’ written statement.  If, after the
Closing, an error or omission in the calculation of the Accrued Expenses,
Prepaid Expenses, Accrued Income or Prepaid Income is found by one of the
parties hereto, such error or omission shall be promptly corrected, and the
party hereto who received any over-payment as a result thereof shall pay the
amount of such over-payment in cash to the party hereto entitled thereto;
provided, however, that such obligation to correct apportionments shall only
survive the Closing for a period of 365 days; provided, further, that any
disagreement with respect to such calculation shall be resolved pursuant to the
procedures set forth in this Section 2.3 (b).
 
(c)   The Initial Cash Consideration shall be (i) (A) reduced by the excess, if
any, of the aggregate amount of Accrued Expenses over the aggregate amount of
Prepaid Expenses and (B) increased by the excess, if any, of the aggregate
amount of Prepaid Expenses over the aggregate amount of Accrued Expenses, and
(ii) (A) reduced by the excess, if any, of the aggregate amount of Prepaid
Income over the aggregate amount of Accrued Income and (B) increased by the
excess, if any, of the aggregate amount of Accrued Income over the aggregate
amount of Prepaid Income, in the case of each of the foregoing clauses (i) and
(ii), as such amounts are mutually agreed or finally resolved in accordance with
Section 2.3 (b).  In addition, the Initial Cash Consideration shall be increased
by the amounts held by third parties as of the Closing Date with respect to all
amounts related to the matters set forth on Schedule 2.3 (c) hereof as set forth
in a certificate delivered from Sellers to the Buyer no less than ten (10)
Business Days prior to the Closing Date.
 
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2.4   Payments and Computations.
 
All cash payments to be made under this Option Agreement by any party hereto
shall be paid by wire transfer of immediately available funds to the account or
accounts designated by the party receiving such payment.  All computations of
interest with respect to any amounts due from or to either party hereto pursuant
to this Option Agreement will be made on the basis of a year of 365 days, in
each case for the actual number of days (excluding the first day, but including
the last day) occurring in the period for which such interest is payable.
 
SECTION 3.  EXERCISE OF CASABLANCA OPTION
 
Exercise.
 
At any time during the Option Period, Buyer may exercise the Casablanca Option
by delivering written notice to Sellers of its election to exercise (the
“Exercise Notice”) not less than forty-five (45) days prior to the requested
Closing Date.  “Option Period” shall mean the period beginning on the date of
this Option Agreement and ending on the earlier of (i) 12:01 a.m. (New York
time) on January 1, 2012 (as such date may be extended pursuant to Section 10.1
hereof or by mutual agreement of the parties) and (ii) the Closing hereunder
(the “Termination Date”).
 
SECTION 4.  SELLERS’ REPRESENTATIONS AND WARRANTIES
 
Incorporation by Reference of Representations and Warranties.  As a material
inducement to the Buyer to enter into and perform its obligations under this
Option Agreement, Sellers have jointly and severally made to Buyer certain
representations and warranties contained in the Purchase Agreement, which are
subject to certain exceptions set forth in the Disclosure Schedule.  Solely to
the extent such representations are with respect to Sellers, the Casablanca
Units, Casablanca Holdings, the Casablanca Subsidiaries or the Casablanca
Properties, such representations are incorporated by reference herein, and
Sellers shall be deemed to have jointly and severally made such representations
to Buyer as of the date of this Option Agreement and in the event Buyer delivers
an Exercise Notice, as of the Closing Date hereunder, in each case except as set
forth in the Disclosure Schedule.
 
SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BUYER
 
As a material inducement to the Sellers to enter into and perform their
respective obligations under this Option Agreement, in the event the Buyer
delivers an Exercise Notice, the Buyer represents and warrants to Sellers as of
the date hereof and as of the Closing Date as follows:
 
5.1   Organization and Good Standing.
 
The Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland, and has all requisite
corporate power and authority to conduct its business as presently conducted and
to own and lease the properties and assets used in connection therewith.
 
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5.2   Power and Authorization.
 
The Buyer has all requisite corporate power and authority to enter into and
perform its obligations under this Option Agreement.  The execution, delivery
and performance by the Buyer of this Option Agreement have been duly authorized
by all necessary corporate action on the part of the Buyer.  This Option
Agreement has been duly and validly executed and delivered by the Buyer and
constitutes the legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms and will constitute the legal,
valid and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, in each case, subject to applicable bankruptcy,
insolvency and similar laws affecting the enforceability of creditors’ rights
generally, general equitable principles, the discretion of courts in granting
equitable remedies and matters of public policy.
 
5.3   Validity of Contemplated Transactions.
 
The execution, delivery and performance of this Option Agreement and the
consummation by the Buyer of the transactions provided for herein, do not and
will not (with or without the passage of time or the giving of notice):  (i)
violate or conflict with the articles of incorporation or bylaws of Buyer,
(ii) violate or conflict with any Law binding upon, or any permit, license,
order, judgment or decree applicable to, Buyer or its Subsidiaries or their
respective properties, (iii) conflict with, violate, result in a breach of or
default or otherwise cause any loss of benefit under any material contract or
agreement to which the Buyer is a party or by which it or its Subsidiaries or
their assets are bound or give rise to any penalty, acceleration of any
remedies, right of termination or otherwise cause any alteration of any rights
or obligations of any party under any material contract or agreement to which
the Buyer is a party or by which it or its Subsidiaries or their assets are
bound or (iv) require any consent, notice, authorization, waiver of filing with
any Governmental Entity or other Person except in the case of (ii) or (iii)
above, for such violations, conflicts, breaches, defaults or losses as would not
adversely affect the Buyer’s ability to consummate the transactions contemplated
hereby in any material respect.
 
5.4   Consents.
 
Except for the consents, authorizations, waivers and filings set forth in
Section 5.4 of the Buyer’s Disclosure Schedule (the “Buyer Consents”), no
consent, authorization, waiver by or filing with any Governmental Entity or
other Person is required in connection with the execution or performance of this
Option Agreement or the consummation by the Buyer of the transactions
contemplated hereby except for such consents, authorizations, waivers or
filings, as to which the failure to obtain would not adversely affect the
Buyer’s ability to consummate the transactions contemplated hereby in any
material respect.
 
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5.5   Brokers.
 
No Person acting on behalf of the Buyer or any of its Affiliates or under the
authority of any of the foregoing is or will be entitled to any brokers’ or
finders’ fee or any other commission or similar fee with respect to which any
Seller or any of their respective Affiliates will be liable in connection with
any of the transactions contemplated by this Agreement.
 
5.6   Operator Matters.
 
The Buyer acknowledges that it has been advised by Seller that (a) neither
Sellers nor the Casablanca Subsidiaries have ever operated or managed a nursing
facility, assisted living facility and/or rehabilitation hospital, (b) neither
Sellers nor the Casablanca Subsidiaries are associated or affiliated with
Facility Operators other than through the respective Property Leases, and
(c) Sellers provide the representations and warranties set forth in Sections
4.17 (Operator Matters), 4.19 (Medicare, Medicaid and Participation) and 4.20
(Health Care Compliance) of the Purchase Agreement insofar as such
representations and warranties relate to Casablanca Tenants, the Facility
Operators or the Casablanca Properties, solely for purposes of indemnification
and risk allocation.
 
SECTION 6.  COVENANTS OF THE PARTIES UNTIL CLOSING
 
6.1   Conduct of Business Pending Closing.
 
(a)   Except (i) as set forth in Schedule 6.1 (a), (ii) as otherwise expressly
provided in this Option Agreement or any Transaction Document, (iii) as required
by applicable Law, (iv) as necessary to consummate the transactions contemplated
by the Transaction Documents or (v) as required by sound business practice,
between the date hereof and the Closing, without the prior written consent of
the Buyer (not to be unreasonably withheld, delayed or conditioned), Sellers
shall cause each Casablanca Subsidiary to, operate, in all material respects,
its respective business only in the ordinary course consistent with past
practices and to use commercially reasonable efforts to preserve intact its
respective business organization and goodwill in all material respects,
including, without limitation, the goodwill and relationships of each Casablanca
Subsidiary with Tenants, vendors, Facility Operators and other Persons having a
business relationship with any Casablanca Subsidiary and, without limiting the
foregoing, to:
 
(i)   maintain its respective existence, and discharge debts, liabilities and
obligations as they become due, and operate in the ordinary course in a manner
consistent with past practice and, except as would not have a Material Adverse
Effect on the Casablanca Subsidiaries, in compliance in all respects with all
applicable Laws, authorizations, and Contracts (including, without limitation,
those identified in the Disclosure Schedule);
 
(ii)   enforce obligations set forth in Property Leases that the Tenant
thereunder maintain the facilities and assets of the Casablanca Subsidiary in
the same state of repair, order and condition as on the date hereof, reasonable
wear and tear excepted;
 
(iii)           maintain, in all material respects, its respective books and
records in accordance with past practice, and with respect to accounting
records, GAAP, and use commercially reasonable efforts to maintain in full force
and effect all authorizations and all insurance policies and binders;
 
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(iv)   maintain in full force and effect all Permits, except for such Permits
the failure of which to maintain in full force and effect would not have a
Material Adverse Effect on the Casablanca Subsidiaries;
 
(v)   file, when due or required (after giving effect to any applicable and
valid extension), federal, state, foreign and other Tax Returns and other
reports required to be filed and pay when due all Taxes, assessments, fees and
other charges lawfully levied or assessed against them, unless the validity
thereof is contested in good faith and by appropriate proceedings diligently
conducted;
 
(vi)   consistent with past practice, enforce the terms of the Property Leases
in all material respects; and
 
(vii)          promptly provide Buyer, with copies of all (A) information,
notices, reports and other materials and written communications received by
Sellers from any Tenant or Facility Operator pursuant to any Property Lease or
any Casablanca Senior Lender or Casablanca Mezzanine Lender and (B) notices,
demands, analyses and other materials and written communications provided by
Sellers to any Tenant or Facility Operator pursuant to the Terms of any Property
Lease or any Casablanca Senior Lender or Casablanca Mezzanine Lender.
 
(b)   Except (i) as set forth in Schedule 6.1(b), (ii) as otherwise provided in
this Option Agreement or the Transaction Documents, (iii) as required by
applicable Law, (iv) as necessary to consummate the transactions contemplated by
the Transaction Documents, or (v) as required by sound business practice,
between the date hereof and the Closing, without the prior written consent of
the Buyer (not to be unreasonably withheld, delayed or conditioned), Sellers
shall cause each Casablanca Subsidiary not to:
 
(i)   make any change in, or purchase, redeem or retire, or otherwise grant any
option, warrant or other right to purchase or acquire, any Casablanca
Subsidiary’s authorized, issued or outstanding equity interests or other
securities, or declare or pay any dividend or other distribution (other than
cash dividends or distributions) upon any equity interest or other securities of
any Casablanca Subsidiary;
 
(ii)   amend (as applicable) in any material respect the declaration of trusts,
articles or certificate of incorporation, articles or certificate of formation
or organization, limited liability company operating agreement, partnership
agreement or other organizational document of any Casablanca Subsidiary;
 
(iii)           fail to pay or discharge when due any material liability or
obligation of the Casablanca Subsidiaries, except any such liability or
obligation that shall be contested in good faith or except as would not
adversely affect the ability of any Seller or Casablanca Subsidiary to
consummate the transactions contemplated hereby;
 
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(iv)   make or enter into any Contract which obligates any Casablanca Subsidiary
from and after the Closing Date unless otherwise permitted by this Section 6.1
or terminate any Contract set forth in Section 4.10 of the Disclosure Schedule.
 
(v)   incur or otherwise become liable for any Indebtedness (whether as primary
obligor, guarantor or otherwise), or agree to any amendment or modification of
any Indebtedness;
 
(vi)   amend or modify the Casablanca Senior Loan Agreement or the Casablanca
Mezzanine Loan Agreement; or
 
(vii)          agree or commit to do any of the foregoing.
 
6.2   Access.
 
(a)   Between the date of this Option Agreement and the Closing Date, Sellers
will, and will cause each Casablanca Subsidiary to, afford to the authorized
representatives and agents of the Buyer free and reasonable access to and the
right to inspect the assets, properties, books and records thereof and their
respective Affiliates to the extent related to any Casablanca Subsidiary or any
Casablanca Property, and will furnish, or cause to be furnished to, the Buyer
such additional financial and operating data and other information regarding the
same as the Buyer may from time to time reasonably request and is available to
Sellers or any Casablanca Subsidiary.  Sellers will, and will cause each
Casablanca Subsidiary to, make reasonably available for conference any of their
respective officers and employees and will attempt to make available their
respective agents vendors or suppliers who are involved in the business
conducted at any Casablanca Property as reasonably requested by the Buyer and
will supply, or cause to be supplied, to the Buyer all other information that
the Buyer deems necessary to review the Casablanca Property as is available to
Sellers or any Casablanca Subsidiary.  The Buyer and the Buyer’s agents,
representatives and designees will also have the continuing right until the
Closing to enter in and upon the Casablanca Properties to inspect, examine,
survey and make any borings, soil bearing tests, monitoring wells, or other
physical tests and any other engineering, structural, building system,
environmental, architectural or landscaping test, drawings, investigations,
analyses or surveys which the Buyer deems necessary or appropriate, subject to
the prior written approval of Seller, which approval shall not be unreasonably
withheld.  Any access pursuant to this Section  6.2 (a) shall be subject to the
terms of the applicable Property Lease.
 
(b)   The Buyer will cooperate with Sellers to conduct the inspections,
examinations, surveys, tests, drawings, investigations, analyses, surveys,
reviews and interviews contemplated in this Section 6.2 in such a manner as to
cause as little disruption to the business conducted at the Casablanca
Properties as possible, and the Buyer will indemnify, defend and save the
Sellers harmless from any Damages incurred by the Sellers to the extent such
Damages are caused by Buyer’s or its employees’, contractors’ or
representatives’ negligence in the performance of such inspections,
examinations, surveys, analyses, tests, drawings, investigations, surveys,
reviews and interviews; provided, however, that in no event shall the Buyer be
liable for any Damages based solely on its discovery of pre-existing conditions.
 
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6.3   Consents and Cooperation.
 
Prior to the Closing, Sellers and the Buyer shall use commercially reasonable
efforts to obtain all Seller Consents (as defined in the Purchase Agreement) and
Buyer Consents, respectively. Without limiting, and in furtherance of, the
foregoing, prior to the Closing, the Buyer will submit appropriate licensure
applications for a change of ownership for the Casablanca Subsidiaries with the
appropriate state licensure authorities and provide notice of any such
submissions to the Sellers concurrently with the making of such submissions.
Each of Sellers and the Buyer shall reasonably assist and cooperate with the
other in preparing and filing all documents required to be submitted by the
Buyer or the Sellers to any Governmental Entity in connection with such
transactions and in obtaining any relevant Seller Consents and Buyer Consents
(which assistance and cooperation shall include, without limitation, the timely
furnishing to the Buyer or Sellers, as applicable, of all information concerning
Buyer or Sellers or any Casablanca Subsidiary that counsel to the Buyer
determines is required to be included in such documents or would be helpful in
obtaining any such Buyer Consents and Seller Consents).  Each of the parties
hereto shall use all commercially reasonable efforts to resolve such objections,
if any, as may be asserted by any Governmental Entity with respect to the
transactions contemplated by the Transaction Documents.  In connection
therewith, if any administrative or judicial action or proceeding is instituted
challenging the transactions contemplated by the Transaction Documents as
violative of any applicable Law, each of the parties hereto shall cooperate and
use all commercially reasonable efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or permanent
(each an “Order”), that is in effect and that prohibits, prevents, or restricts
consummation of such transactions, unless by mutual agreement the Buyer and
Sellers decide that litigation is not in their respective best interests.  The
Buyer and Sellers shall each use all commercially reasonable efforts to take
such action as may be required to cause the expiration of the notice periods
under the applicable Laws with respect to the transactions contemplated by the
Transaction Documents as promptly as possible after the execution of this Option
Agreement.  Notwithstanding anything to the contrary herein, (i) none of the
Buyer, any of its Subsidiaries or any Affiliate thereof shall (a) be required to
divest any of its or its Subsidiaries’ or Affiliates’ businesses or assets, (b)
to take or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Buyer, any of its Subsidiaries or any Affiliates thereof or the
Casablanca Subsidiaries (or any of them) from and after the Closing Date or (c)
take any action involving more than nominal expense, cost or burden prior to the
delivery of an Exercise Notice and (ii) none of Sellers or any Affiliate thereof
shall (x) be required to divest any of their respective businesses, or assets,
or (y) to take or agree to take any other action or agree to any limitation that
could reasonably be expected to have a Material Adverse Effect on the Casablanca
Subsidiaries or a material adverse effect on any of its Subsidiaries or any
Affiliates thereof or any Seller or any of their respective Affiliates from and
after the Closing Date.  Without limiting, and in furtherance of, the foregoing,
Sellers shall, and shall cause each Casablanca Subsidiary to, fully cooperate
with the Buyer in connection with the Buyer obtaining title policies (and
customary endorsements thereto), surveys, zoning reports or certificates and any
other property-level inquiries or undertakings sought by the Buyer with respect
to the Casablanca Properties, and Sellers shall, and shall cause each Casablanca
Subsidiary to, subject to the last sentence of Section 6.2 (a), grant access to
the Casablanca Properties and execute and deliver any certificates or affidavits
reasonably requested in connection therewith (including any title affidavit and
indemnity relating to customary non-imputation endorsements) at or prior to
Closing.
 
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6.4   No Solicitation.
 
During the period commencing on the date hereof and ending on the Termination
Date, except for the matters set forth on Schedule 6.1 (b):
 
(a)   Neither any Seller, any Casablanca Subsidiary nor any of its or their
respective Affiliates shall, and each of the foregoing shall not allow any
Person acting on its behalf to, directly or indirectly, continue, initiate,
encourage, solicit or participate in discussions or negotiations with, or
provide any nonpublic information to, any Person (other than the Buyer and its
representatives in connection with the transactions contemplated by this Option
Agreement or the other Transaction Documents) concerning (i) any sale of assets
of any Casablanca Subsidiary (other than in the ordinary course of its business
and consistent with past practice), (ii) any sale of any securities of any
Casablanca Subsidiary including, without limitation, the Casablanca Units,
(iii) any other transaction including, without limitation, a merger,
consolidation, recapitalization, liquidation or similar transaction, directly
involving any Casablanca Subsidiary (collectively, an “Acquisition Transaction”)
or (iv) enter into any agreement, understanding or arrangement with respect to
an Acquisition Transaction.  In addition to the foregoing, no Seller shall agree
to engage in any Acquisition Transaction unless the terms thereof expressly
exclude the Casablanca Subsidiaries and the transactions contemplated by the
Transaction Documents.  Sellers shall advise their financial advisors of
Sellers’ obligations pursuant to this Section 6.4 and instruct such advisors not
to take any action in contravention hereof.
 
(b)   Sellers shall, and each of them, shall cause each Casablanca Subsidiary
to, promptly communicate to the Buyer within three (3) Business Days following
receipt the terms of any proposal that any of its officers or directors or
Persons serving similar capacities may receive after the date of this Option
Agreement in respect of an Acquisition Transaction.  Any notification under this
Section 6.4 (b) shall include the identity of each Person making such proposal,
the terms of such proposal and any other information with respect thereto as the
Buyer may reasonably request.
 
(c)   Sellers hereby agree that a monetary remedy for a breach of the agreements
set forth in this Section 6.4 will be inadequate and impracticable, and that any
such breach would cause the Buyer and its Affiliates irreparable harm.  In the
event of a breach of this Section 6.4, in addition to any other remedies
available to the Buyer, without the requirement of posting any bond or other
security, the Buyer shall be entitled to seek equitable remedies in a court of
competent jurisdiction regarding this Section 6.4, including, without
limitation, the equitable remedy of specific performance with respect to the
provisions of this Section 6.4, and shall be entitled to such injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions, as a court of competent jurisdiction shall determine with respect
to any such breach of the agreements set forth in this Section 6.4; provided,
however, that, in the event that the Buyer terminates this Option Agreement
pursuant to Section 1.1(e), the Buyer’s sole and exclusive remedy in respect of
such termination (including any breach by Sellers, any Casablanca Subsidiary or
any of their respective Affiliates of the agreements set forth in this Section
6.4) shall be to pursue an action against Sellers for Damages as provided in
Section 10.2, and neither any Seller, any Casablanca Subsidiary nor any of their
respective Affiliates shall have any further obligations or liabilities under
this Option Agreement except as otherwise provided in Section 10.2.
 
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(d)   For the avoidance of doubt, any breach by a Seller, any Casablanca
Subsidiary or any of their respective Affiliates of any provision of Section 
6.4(a) that is not cured within five (5) Business Days shall be deemed to be a
material breach of this Option Agreement and, for purposes of the exercise by
the Buyer of its termination rights pursuant to Section 10.1(e), after such cure
period such breach shall be deemed incapable of being cured prior to the
Termination Date.
 
6.5   Disclosure Schedule.
 
Not less than five business days prior to the Closing Date, Sellers shall
deliver to the Buyer updated Disclosure Schedules and the Buyer shall deliver to
Sellers disclosure schedules relating to the representations and warranties set
forth in Section 5 (the “Buyer Disclosure Schedules” and, collectively, the
“Updated Disclosure Schedule”) solely for informational purposes, specifying
material changes to the Disclosure Schedules.  Subject to the provisions set
forth in the Updated Disclosure Schedule, each exception set forth in the
Updated Disclosure Schedule and each other disclosure and response to this
Option Agreement set forth in the Updated Disclosure Schedule shall be in
reasonable detail and identified by reference to, or shall be grouped under a
heading referring to, a specific individual section or subsection (as
applicable) of this Option Agreement.  The inclusion of any information in the
Updated Disclosure Schedule shall not be deemed an admission or acknowledgement,
in and of itself or solely by virtue of the inclusion of such information in the
Updated Disclosure Schedule, that such information is required to be set forth
therein or that such information is material to Sellers, any Casablanca
Subsidiary, the Buyer or their respective business, assets or liabilities.  Any
item disclosed on any section in the Updated Disclosure Schedule shall be deemed
to be disclosed with respect to all other sections under which such item may be
relevant to the extent that such section is reasonably cross-referenced or the
relevance to such other section is readily apparent on the face of the
disclosure.  Capitalized terms used and not otherwise defined in the Updated
Disclosure Schedule shall have the respective meanings ascribed to them in this
Option Agreement.
 
6.6   Notices of Certain Events.
 
(a)   From the date hereof until the Closing Date, or expiration of the Option
Period, Sellers shall, promptly, and in any event within five (5) Business Days,
after obtaining Knowledge of any of the following, notify the Buyer, in writing,
of: (i) any notice or communication to any Seller from any Person alleging that
the consent of such Person is required in connection with the transactions
contemplated by this Option Agreement; (ii) any notice or other communication to
any Seller from any Governmental Entity in connection with the transactions
contemplated by this Option Agreement; (iii) (A) any fact or condition that
causes or constitutes a breach of any of the representations or warranties made
by any Seller pursuant to this Option Agreement such that the condition set
forth in Section 7.2 would not be satisfied and (B) any changes or events which
have had or would reasonably be expected to have a Material Adverse Effect or
otherwise result in any representation or warranty of any Seller being
materially inaccurate as of the date of such changes or events such that the
condition set forth in Section 7.2 would not be satisfied; and (iv) the
occurrence of any default or event of default under any Property Lease and the
exercise (or receipt of notice of intent to exercise) by any Tenant of any
renewal option contained in any Property Lease.
 
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(b)   From the date hereof until the Closing Date, or expiration of the Option
Period, Buyer shall, promptly, and in any event within five (5) Business Days,
after obtaining Knowledge of any of the following, notify Sellers, in writing,
of: (i) any notice or communication to Buyer from any Person alleging that the
consent of such Person is required in connection with the transactions
contemplated by this Option Agreement; (ii) any notice or other communication to
Buyer from any Governmental Entity in connection with the transactions
contemplated by this Option Agreement; (iii) (A) any fact or condition that
causes or constitutes a breach of any of the representations or warranties made
by Buyer pursuant to this Option Agreement such that the condition set forth in
Section 8.2 would not be satisfied and (B) any changes or events which result in
any representation or warranty of Buyer being materially inaccurate as of the
date of such changes or events such that the condition set forth in Section  8.2
would not be satisfied.
 
6.7   Seller Releases.
 
(a)   Effective as of the Closing Date, in consideration of the mutual covenants
and agreements contained herein, including the consideration to be received by
Sellers, each Seller, in its capacity as a selling equityholder, hereby
irrevocably releases and forever discharges each Casablanca Subsidiary (for the
benefit of each such Casablanca Subsidiary and the Buyer and their respective
Affiliates, Subsidiaries, and predecessors and their respective past and present
managers, directors, officers, employees and agents, and each of their
respective successors, heirs, assigns, executors and administrators
(collectively, the “Released Persons”)) of and from all manner of action and
actions, cause and causes of action, suits, rights, debts, dues, sums of money,
accounts, bonds, bills, covenants, Contracts, controversies, omissions,
promises, variances, trespasses, damages, liabilities, judgments, executions,
claims and demands whatsoever, in law or in equity against the Released Persons
which each Seller ever had, now has or which it hereafter can, shall or may
have, whether known or unknown, suspected or unsuspected, matured or unmatured,
fixed or contingent, for, upon or by reason of any matter or cause arising at
any time on or prior to the Closing Date; provided, however, that nothing herein
shall operate to release any obligation of any Casablanca Subsidiary or the
Buyer under the Transaction Documents or the Assumed Indebtedness.  No Seller
has assigned any such claim set forth in this Section  6.7 (a).
 
(b)   Each Seller hereby covenants not to sue or to institute or cause to be
instituted any action in any federal, state or local agency or any court or
other tribunal against the Released Persons that is related directly or
indirectly to any of the matters released in Section  6.7 (a).  If any Seller
sues or otherwise institutes any such action, that action shall be dismissed
upon presentation of this Option Agreement to the applicable agency, court or
tribunal.
 
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6.8   Property Financial Statements.
 
In addition to the other actions contemplated elsewhere herein, for all periods
ending on or after December 31, 2009, Sellers shall deliver or cause to be
delivered to the Buyer (or its designee) audited financial statements for the
Casablanca Properties for each calendar year ending prior to the Closing Date,
together with the report thereon of Ernst & Young LLP, within 70 days after
calendar year end, and unaudited interim financial statements for the Casablanca
Properties for each interim period subsequent to December 31, 2009 within 45
days after the end of each of the first three calendar quarters of each year
prior to the Closing Date.  Such financial statements shall comply in all
material respects with the applicable accounting requirements with respect to
acquired real estate operations, shall be prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the Securities and Exchange Commission  (the “SEC”))
and SEC Regulation S-X to the extent applicable to acquired properties, applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto and subject, in the case of unaudited statements, to normal
year-end audit adjustments) and shall fairly present, in accordance with the
applicable requirements of GAAP, the information set forth therein.
 
6.9   Public Announcements.
 
The parties shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Option Agreement or
the transactions contemplated by this Option Agreement and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with a national
securities exchange or trading system to which any of the parties is a party.
 
6.10          Confidentiality.
 
All confidential information obtained by the Buyer or any Seller in connection
with the transactions contemplated by this Option Agreement shall be kept
confidential in accordance with (a) the confidentiality agreement, dated October
9, 2009, by and between the Buyer and CapitalSource and (b) the confidentiality
agreement dated November 6, 2009, by and between the Buyer and CapitalSource
(collectively, the “Confidentiality Agreement”).
 
6.11          Estoppel Certificates.
 
Sellers shall use their commercially reasonable efforts to deliver to the Buyer
an Estoppel Certificate substantially in the form of Exhibit B to the Purchase
Agreement executed by each Tenant.
 
6.12          Intercreditor Arrangements.
 
With respect to any Tenant or Facility Operator of any Casablanca Property set
forth on Section 4.14(b) of the Disclosure Schedule that is a party to any
Seller/Tenant Indebtedness, Sellers (or the appropriate Affiliate of Sellers)
shall enter into an agreement at or before the Closing Date, in the form
attached hereto as Exhibit C to the Purchase Agreement (the “Intercreditor
Agreements”), pursuant to which Sellers (or such Affiliates) agree, among other
things, that any exercise of any rights or remedies arising under, pursuant to
or in connection with any such Contract, shall in no way terminate, impair,
alter, extinguish or otherwise affect the terms or conditions of any Property
Lease between any Casablanca Subsidiary and such Tenant or Facility Operator.
 
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6.13          Senior Loan Extension.
 
Sellers shall cause (i) each of the Casablanca Senior Loan Borrowers to exercise
its options to extend the maturity date of the Casablanca Senior Loan for
successive one-year periods, first to April 9, 2011, and then to April 9, 2012,
and (ii) CSE Casablanca Holdings II LLC to exercise its options to extend the
maturity date of the Casablanca Mezzanine Loan for successive one-year periods,
first to April 9, 2011, and then to April 9, 2012.  Sellers shall provide the
Buyer with copies of the extension notices given by or on behalf of the
Casablanca Senior Loan Borrowers and CSE Casablanca Holdings II LLC,
respectively, promptly after such notices are sent to the Casablanca Senior
Lender and the Casablanca Mezzanine Lender, as the case may be.
 
6.14         Title Searches; Title Commitments.
 
(a)   Existing Title Policies.  For any Casablanca Properties with respect to
which the applicable Casablanca Subsidiary is the named insured under an
existing policy of title insurance covering such Casablanca Property (an
“Insured Property”), as soon as reasonably practicable after the date of the
Exercise Notice, Sellers shall cause title searches (the “Title Searches”)
covering the Casablanca Properties from the date the applicable Casablanca
Subsidiary acquired its interest in the applicable Insured Property through the
most recent date the applicable real estate records can be searched to be issued
by the title insurer, together with copies of all documents evidencing the items
referred to as exceptions in the Title Searches.  Sellers shall be obligated to
cure any title encumbrances with respect to (i) deeds of trust, mortgages,
assignments of leases and rents, fixture filings and security interests and
encumbrances securing money borrowed from a financial institution (such as a
bank, savings and loan, insurance company, or the like) securing obligations
other than the Assumed Indebtedness, and (ii) other liens that can be cured
solely by the payment of a liquidated amount, in each case from the closing
proceeds payable to Sellers or otherwise.
 
(b)   No Title Policy.  For any Casablanca Properties with respect to which the
applicable Casablanca Subsidiary is not the named insured under an existing
policy of title insurance covering such Casablanca Property (an “Uninsured
Property”), as soon as reasonably practicable after the date of this Option
Agreement, Sellers shall cause title insurance commitments (the “Title
Commitments”) covering the Uninsured Properties to be issued by a nationally
recognized title insurer reasonably acceptable to Buyer, committing the title
insurer to issue its current form of ALTA owner’s or leasehold title insurance
policy to the Casablanca Subsidiary in the amount of the Final Purchase Price
allocated to each Uninsured Property (each a “Title Policy”), together with
copies of all documents evidencing the items referred to as exceptions in the
Title Commitments.  Sellers shall be obligated to cure any title encumbrances
with respect to (i) deeds of trust, mortgages, assignments of leases and rents,
fixture filings and security interests and encumbrances securing money borrowed
from a financial institution (such as a bank, savings and loan, insurance
company, or the like) securing obligations other than the Assumed Indebtedness,
and (ii) other liens that can be cured solely by the payment of a liquidated
amount, in each case from the closing proceeds payable to Sellers or
otherwise.  Notwithstanding the foregoing, for any Uninsured Property for which
an affiliate of an Casablanca Subsidiary is the insured under an existing policy
of title insurance, Sellers shall be permitted to obtain an endorsement to such
title policy from the issuer thereof changing the insured to the applicable
Casablanca Subsidiary; upon the issuance of such endorsement, such Casablanca
Property shall thereafter be an Insured Property for all purposes of this
Agreement.
 
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6.15          Seller Cooperation with Transaction Financing.
 
Prior to the Closing, Sellers shall provide, and shall use their commercially
reasonable efforts to cause their officers and employees to provide, on a timely
basis, all reasonable cooperation requested by the Buyer and that is customary
for sellers to provide in connection with the arrangement of the financing to be
incurred by the Buyer (the “Financing”) in connection with the transactions
contemplated hereby (provided that such requested cooperation does not
unreasonably interfere with the ongoing operations of Sellers), including using
its commercially reasonable efforts to (i) facilitate the provision of
guarantees and pledge of collateral (effective as of the Closing Date), (ii)
provide financial and other pertinent information regarding the Casablanca
Subsidiaries and the Casablanca Properties as may be reasonably requested in
writing by the Buyer, (iii) provide (to the extent not previously provided)
copies of the most recent appraisals, environmental reports, evidence of title
(including copies of deeds, lease documentation, title insurance policies and/or
commitments for title insurance, title opinions, surveys, and similar
information currently maintained on the data site), and similar information as
may be reasonably requested by the Buyer with respect to the Casablanca
Properties, and (iv) assist the Buyer and its financing sources as may be
reasonably requested in the preparation of all agreements (including review of
schedules for completeness) for the Financing insofar as such materials relate
to the properties to be acquired by the Buyer, it being understood and agreed
that information and documents provided by Sellers may be delivered to agents
and lenders (subject to customary arrangements for confidentiality that are
substantially similar to the provisions in the Confidentiality Agreement or
reasonably acceptable to the Sellers); provided, however, that no certificate,
document or instrument referred to above shall be effective until the Closing
Date, and none of the Sellers (nor prior to the Closing Date, the Casablanca
Subsidiaries) shall be required to pay any commitment or other similar fee or
incur any other liability or obligation in connection with the Financing.  Buyer
shall promptly, upon request by the Sellers, reimburse Sellers for all
out-of-pocket costs (including attorneys’ fees) incurred by the Sellers in
connection with the cooperation of Sellers contemplated by this Section 
6.15 and the Buyer.  The Buyer shall promptly, upon request by Sellers,
reimburse Sellers for all out-of-pocket costs (including attorneys’ fees)
incurred by Sellers or the Casablanca Subsidiaries in connection with the
cooperation of Sellers contemplated by this Section  6.15 and shall indemnify
and hold harmless Sellers and their respective directors, officers, employees
and representatives from and against any and all losses, damages, claims, costs
or expenses suffered or incurred by any of them in connection with the
arrangement of the Financing and any information used in connection
therewith.  Any assumption of the Assumed Indebtedness, if any, shall be at the
sole cost and expense of the Buyer.
 
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6.16          CSE Pittsburg.
 
(a)    As of the date hereof, all of the membership interests in the limited
liability company known as CSE Pittsburg LLC (“CSE Pittsburg”) are owned by CSE
Casablanca Holdings II LLC (“Casablanca II”) which is one of the Casablanca
Subsidiaries hereunder.  The Buyer acknowledges that it is not acquiring CSE
Pittsburg nor the facility owned by CSE Pittsburg or any real or personal
property owned by CSE Pittsburg (collectively, the “Pittsburg Facility”).
 
(b)    At any time subsequent to the date hereof, Sellers may (i) cause CSE
Pittsburg to convey the Pittsburg Facility to any Seller or their designees or
(ii) may cause Casablanca II to convey the membership interests in CSE Pittsburg
to any Seller or their designee, provided that, to the extent any such
conveyances are prior to the Closing Date, such conveyances shall only be with
the consent of the Casablanca Senior Lender and the Casablanca Mezzanine Lender,
to the extent required.
 
(c)    In the event that, as of Closing, Casablanca II continues to own all of
the membership interests in CSE Pittsburg and CSE Pittsburg owns the Pittsburg
Facility, at Closing, at Sellers’ option, CSE Pittsburg shall convey the
Pittsburg Facility to any Seller or their designee or Casablanca II shall convey
all of the membership interests in CSE Pittsburg to any Seller or their
designees.  Such transfers shall occur immediately following the Closing and
Buyer shall execute all documents necessary or appropriate in connection
therewith, at Sellers’ expense.
 
(d)    In the event that the Pittsburg Facility is conveyed pursuant to the
foregoing Section 6.16(c), Buyer shall retain ownership of the membership
interests in CSE Pittsburg.
 
6.17          CSE Canton; CSE Hilliard.
 
(a)    Sellers, in their sole discretion, shall have the right to exclude the
Acquired Properties owned by the Casablanca Subsidiaries CSE Hillard LLC (“CSE
Hilliard”) and CSE Canton LLC (“CSE Canton”) pursuant to the provisions of this
Section 6.17 from the Closing.  In the event that Sellers elect to exclude CSE
Hilliard and CSE Canton from the Closing, the Final Purchase Price shall be
reduced by the amount of the purchase price allocated to CSE Hilliard and CSE
Canton on Schedule 2.1(a) of the Purchase Agreement, and the condition to
Closing set forth in Section 7.9 shall be deemed to have been satisfied.
 
(b)    In the event that Sellers elect to proceed under Section 6.17(a) above,
at Closing, at Sellers’ option, CSE Hilliard shall convey the Acquired Property
owned by CSE Hilliard (the “Hilliard Property”) and CSE Canton shall convey the
Acquired Property owned by CSE Canton (the “Canton Property”) to any Seller or
their designee or Casablanca II shall convey all of the membership interests in
CSE Hilliard and CSE Canton to any Seller or their designee.  Such transfers
shall occur immediately following the Closing and Buyer shall execute all
documents necessary or appropriate in connection therewith, at Sellers’ expense.
 
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(c)    In the event that the Hilliard Property and the Canton Property are
conveyed pursuant to the foregoing Section 6.17(b), Buyer shall retain ownership
of the membership interests in CSE Hilliard and CSE Canton.
 
SECTION 6A TAX COVENANTS
 
The provisions of Section 6A (Tax Covenants) of the purchase agreement are
hereby incorporated by reference in their entirety into this Option Agreement
other than Section 6A.3 which is excluded and Sellers and the Buyer intend that
such provisions shall be applicable from and after the Closing Date.  For the
avoidance of doubt, any reference in such provisions to Casablanca
Subsidiaries”  and “ Casablanca Subsidiary Securities” shall mean “Casablanca
Holdings,” the “Casablanca Subsidiaries” and the “Casablanca Units,” as
appropriate.
 
SECTION 7.  CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS
 
Unless waived by the Buyer in writing on or prior to the Closing Date, the
obligation of the Buyer to consummate the transactions contemplated hereunder
following the delivery of an Exercise Notice is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions:
 
7.1   Deliveries at the Closing.
 
Sellers shall have delivered, or caused to have been delivered, to the Buyer all
items required pursuant to Section 9.2, it being acknowledged and agreed that
any certificate required thereunder or under any other provision of this Option
Agreement shall be without personal liability on the part of any individual who
signs such certificate.
 
7.2   Representations and Warranties.
 
The representations and warranties of Sellers contained in this Option Agreement
shall be true and correct at and as of the Closing Date in all respects (without
giving effect to any qualifiers relating to “materiality,” “Material Adverse
Effect,” “in all material respects” or similar qualifications) as though such
representations and warranties were made at and as of the Closing Date, except
for representations and warranties made as of a specified date, which shall be
true and correct in all respects (without giving effect to any qualifiers
relating to “materiality,” “Material Adverse Effect,” “in all material respects”
or similar qualifications) as of the specified date, except in each case to the
extent that the failure of any such representations and warranties to be so true
and correct as of such times shall not have had a Material Adverse Effect on the
Casablanca Subsidiaries taken as a whole.  The Buyer shall have received from
Sellers certificates, each dated the Closing Date, to that effect signed on
behalf of each Seller by an authorized officer thereof.
 
7.3   Performance of Covenants.
 
Each Seller shall have performed or complied in all material respects with all
agreements and covenants required by this Option Agreement to be performed or
complied with by it at or prior to the Closing, and the Buyer shall have
received from each Seller certificates, each dated the Closing Date, to that
effect signed, on behalf of each Seller, by an authorized officer thereof.
 
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7.4   No Material Adverse Effect.
 
Since the date hereof, there shall not have occurred any event or condition that
has had and is continuing to or would reasonably be expected to have, a Material
Adverse Effect on the Casablanca Subsidiaries taken as a whole or on the ability
of any Seller to consummate the transactions contemplated by this Option
Agreement, and the Buyer shall have received from each Seller certificates, each
dated the Closing Date, to that effect signed on behalf of each Seller by an
authorized officer.
 
7.5   Approvals.
 
The consents, approvals, notices and filings with any Governmental Entity or
other Person (“Consents”) set forth on Schedule 7.5 shall have been obtained in
form and substance reasonably satisfactory to the Buyer and shall be in full
force and effect on the Closing Date.
 
7.6   Legal Matters.
 
No Order shall exist that prohibits or restrains the consummation of the
transactions contemplated by this Option Agreement, and no Proceeding shall have
been commenced by any Governmental Entity (and be pending) seeking to prohibit
or restrain the consummation of the transactions contemplated by this Option
Agreement to be consummated on the Closing Date.
 
7.7   Outstanding Indebtedness.
 
No Casablanca Subsidiary shall have any Indebtedness or otherwise be liable for
any Indebtedness other than the Assumed Indebtedness, and as evidence thereof
the Buyer shall have received (a) a certificate from an officer of each Seller
certifying the same with respect to each Casablanca Subsidiary beneficially
owned by such Seller and (b) confirmation from a nationally recognized title
insurance company that such title insurance company is prepared to issue title
insurance policies to the Buyer with respect to the Casablanca Properties being
purchased by the Buyer indicating that each such Casablanca Property is free and
clear of all Encumbrances other than Permitted Encumbrances and (c) such payoff
letters, releases or other further assurances thereof from third parties as the
Buyer may reasonably request.
 
7.8   Title Insurance.
 
With respect to any Casablanca Property that is an Uninsured Property, a
nationally recognized title insurance company shall have issued or shall be
prepared to issue upon payment of the applicable premiums therefor, title
policies in customary form and substance and with endorsements reasonably
acceptable to the Buyer, including, without limitation, comprehensive and zoning
and non-imputation endorsement, to the extent applicable.  With respect to any
Casablanca Property that is an Insured Property, the issuer of the title
insurance policy relating thereto shall have issued or be prepared to issue upon
payment of the applicable premiums therefor, a so-called date down endorsement
and a non-imputation endorsement with respect to such Insured Property;
provided, however, that Sellers, in lieu of providing such endorsements, may
provide, at their expense,  a new title insurance policy that satisfies the
requirements of the first sentence of this Section 7.8.
 
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7.9   Replacement Leases for Canton and Hilliard.
 
(a)   On or before the Closing Date, Sellers shall have entered into long-term
Property Leases for each of Arbors at Canton and Arbors at Hilliard with a
Tenant having a credit rating comparable to or better than that of the current
Tenant, which Property Leases shall provide for initial aggregate annual rent of
not less than $1,360,000 (the “Arbors Base Rent”) with an annual rent escalator
of not less than 2.5%.  In the event such Property Leases establish a level of
initial rent (the “Arbors Initial Rent”) payable at the commencement of the
Property Leases (excluding any rent holidays) that is less than the Arbors Base
Rent, then the difference between the level of Arbors Base Rent and Arbors
Initial Rent shall be divided by 0.1032 (the “Cap Rate”) and the Base Purchase
Price shall be decreased by the product so obtained in the event the Arbors
Initial Rent is less than the Arbors Base Rent.
 
(b)   Notwithstanding the foregoing, if the adjustment contemplated by Section
7.9(a) result in a decrease in the Base Purchase Price, then in the event that
prior to the Closing Date Sellers enter into a new (or renewed) long-term
Property Lease for the two properties currently covered by the Pinon master
lease (the “Pinon Properties”), then the amount by which Arbors Base Rent
exceeds the Arbors Initial Rent shall be reduced, dollar-for-dollar, by any
increase in the annual rent relating to the Pinon Properties in excess of
$385,008.  The amount by which Arbors Base Rent exceeds Arbors Initial Rent, as
adjusted pursuant to the preceding sentence, and multiplied by the Cap Rate,
will then reflect the total reduction in the Base Purchase Price.
 
(c)   Sellers shall deliver to the Buyer a certificate no less than five (5)
Business Days prior to the Closing Date setting forth in reasonable detail the
adjustments to the Base  Purchase Price, if any, contemplated by Sections 7.9(a)
and (b).
 
7.10          Property Financial Statements.
 
The property financial statements described in Section 6.8 shall have been
delivered to Buyer (or its designee) in compliance with the terms and conditions
set forth in Section 6.8.
 
SECTION 8.  CONDITIONS PRECEDENT TO SELLERS’ OBLIGATIONS
 
Unless waived by Sellers in writing on or prior to the Closing Date, the
obligation of Sellers to consummate the transactions contemplated hereunder is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
 
8.1   Deliveries at Closing.
 
The Buyer shall have delivered, or caused to have been delivered, to Sellers all
items required pursuant to Section 9.3, it being acknowledged and agreed that
any certificate required thereunder or under any other provision of this Option
Agreement shall be without personal liability on the part of any individual who
signs such certificate.
 
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8.2   Representations and Warranties.
 
The representations and warranties of the Buyer contained in this Option
Agreement shall be true and correct in all respects (without giving effect to
any qualifiers relating to “materiality,” “Material Adverse Effect,” “in all
material respects” or similar qualifications) at and as of the Closing Date as
though such representations and warranties were made at and as of the Closing
Date (except for representations and warranties made as of a specified date,
which shall be true and correct in all respects as of the specified date
(without giving effect to any qualifiers relating to “materiality,” “Material
Adverse Effect,” “in all material respects” or similar qualifications), except
in each case to the extent that the failure of any such representations and
warranties to be so true and correct as of such times shall not have had a
Material Adverse Effect on the Buyer and its Subsidiaries taken as a whole, and
Sellers shall have received a certificate dated the Closing Date to that effect,
signed, on behalf of the Buyer, by an authorized officer of the Buyer.
 
8.3   Performance of Covenants.
 
The Buyer shall have performed or complied in all material respects with all
agreements and covenants required by this Option Agreement to be performed or
complied with by it at or prior to the Closing, and Sellers shall have received
a certificate dated the Closing Date to that effect signed, on behalf of the
Buyer, by an authorized officer of the Buyer.
 
8.4   Approvals.
 
All Consents set forth on Schedule 8.4 shall have been obtained in form and
substance reasonably satisfactory to Sellers and shall be in full force and
effect on the Closing Date.
 
8.5   Legal Matters.
 
No Order shall exist that prohibits or restrains the consummation of the
transactions contemplated by this Option Agreement or the other Transaction
Documents and no Proceeding shall have been commenced by any Governmental Entity
(and be pending) seeking to prohibit or restrain the consummation of the
transactions contemplated by this Option Agreement or the Transaction Documents
to be consummated on the Closing Date.
 
8.6   Assumed Indebtedness.
 
The Sellers and their respective Affiliates shall have been released and
discharged from any and all obligations under the Assumed Indebtedness, and
Sellers shall have received such payoff letters, releases or other further
assurances thereof from third parties as the Sellers may reasonably request.
 
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SECTION 9.  CLOSING
 
9.1   Time and Place of the Closing; Extension.
 
If Buyer delivers an Exercise Notice, the closing of the purchase and sale of
the Casablanca Units (the “Closing”) pursuant to this Option Agreement shall
take place at the offices of Bryan Cave LLP, 1155 F Street, NW, Washington, D.C.
20004, on the date specified in the Exercise Notice, subject to the satisfaction
or waiver of the conditions to the Closing set forth in Section 7 and Section 8,
or if such conditions are not met on the date specified in the Exercise Notice,
such later date during the Option Period as Buyer may elect when such conditions
have been waived or satisfied, but, in any event no later than the expiration of
the Option Period unless otherwise agreed to by the Buyer and Sellers (the date
on which the Closing occurs, the “Closing Date”).
 
9.2   Deliveries at the Closing by Sellers.
 
At the Closing, in addition to the other actions contemplated elsewhere herein,
Sellers shall deliver or cause to be delivered to the Buyer (or its designee):
 
(a)   one or more assignment instruments duly executed by the applicable Sellers
in blank accompanied by all certificates and other instruments evidencing or
otherwise representing the Casablanca Units, and accompanied by appropriate
powers (or similar instruments) duly executed in blank and sufficient to convey
to the Buyer good and valid title in and to the Casablanca Units, together with
all accrued benefits and rights attaching thereto;
 
(b)   a certificate, dated the Closing Date, executed, on behalf of each Seller,
by an authorized officer of each Seller certifying as of the Closing Date the
following:  (i) copies of the articles or certificate of incorporation or
formation or declaration of trust of each Seller and each Casablanca Subsidiary
and all amendments thereto, certified by the Secretary of State of the relevant
jurisdiction of formation as of a date not more than 30 days prior to the
Closing Date; (ii) a copy of the bylaws, limited liability company operating
agreements, partnership agreements of each Seller and each Casablanca Property,
as amended and in effect as of the Closing Date; (iii) copies of resolutions of
the board of directors (or similar body) of each Seller authorizing the
execution, delivery and performance of the Transaction Documents to which such
Seller is a party and any other agreement, instrument or other document
necessary for such Seller to consummate the transactions contemplated hereby;
(iv) the due authorization of each Seller to execute and deliver the Transaction
Documents to which such Seller is a party and any other agreement, instrument or
other document necessary for such Seller to consummate the transactions
contemplated hereby; and (v) the name, title and incumbency of, and bearing the
signatures of, the officers of each Seller authorized to execute and deliver the
Transaction Documents to which such Seller is a party and any other agreement,
instrument or other document necessary for such Seller to consummate the
transactions contemplated hereby;
 
(c)   Sellers shall have delivered to the Buyer payoff letters, and to the
extent applicable, releases and lien discharges, each in a form and substance
reasonably acceptable to the Buyer, with respect to all Indebtedness of the
Casablanca Subsidiaries outstanding as of the Closing Date;
 
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(d)   the certificates, evidence and other deliverables required under Sections 
7.2 (Representations and Warranties), 7.3 (Performance of Covenants), 7.4 (No
Material Adverse Effect), 7.7 (Outstanding Indebtedness), and, if applicable,
7.9 (Replacement Leases for Canton and Hilliard) as conditions to the Buyer’s
obligation to effect the Closing;
 
(e)   Sellers shall have delivered to Buyer the written consents of third
parties or Governmental Entities required pursuant to Section 4.4 that Sellers
have obtained;
 
(f)   the managers and officers of each Casablanca Subsidiary shall have
tendered resignation letters in form and substance reasonably acceptable to the
Buyer on or prior to the Closing, such resignation letters to be effective upon
the Closing;
 
(g)   to the extent in the possession or control of Sellers or any Casablanca
Subsidiary, all of the keys, passcodes, keycards, and similar items for all
locks (for doors, cabinets and any other locked item) within, on or about each
of the Casablanca Properties;
 
(h)   for each Casablanca Property that is an Insured Property, (i) the original
to the extent available, or a copy, of the existing title insurance policy, (ii)
a “date down” endorsement to the existing owner’s title policy bringing the date
of the title insurance policy to the Closing Date subject only to Permitted
Encumbrances, and (iii) a non-imputation endorsement to the existing owner’s
title policy in accordance with Section 7.8;
 
(i)   for each Casablanca Property that is an Uninsured Property, a Title Policy
subject only to Permitted Encumbrances with endorsements reasonably acceptable
to the Buyer, including, without limitation comprehensive, zoning, and
non-imputation endorsements, to the extent available in accordance with Section
7.8;
 
(j)   all deposits and reserves set forth on Section 4.6(e) of the Disclosure
Schedule and pertaining to the Casablanca Properties, including all original
letters of credit; and
 
(k)   the Intercreditor Agreements required by Section 6.12 with respect to the
applicable Casablanca Properties.
 
9.3   Deliveries at the Closing by the Buyer.
 
At the Closing, in addition to the other actions contemplated elsewhere herein,
the Buyer shall deliver or cause to be delivered to Sellers:
 
(a)   the Final Purchase Price in accordance with Sections 2.1 and 2.3;
 
(b)   a certificate, dated the Closing Date, executed, on behalf of the Buyer,
by the Secretary of the Buyer certifying as of the Closing Date the
following:  (i) copies of the certificate of incorporation of the Buyer and all
amendments thereto, certified by the Secretary of State of the State of Maryland
as of a date not more than 30 days prior to the Closing Date; (ii) a copy of the
bylaws of the Buyer, as amended and in effect as of the Closing Date; (iii)
copies of resolutions of board of directors of the Buyer authorizing the
execution and delivery of the Transaction Documents to which the Buyer is a
party and any other agreement, instrument or other document necessary for the
Buyer to consummate the transactions contemplated hereby and thereby; (iv) the
due authorization of the Buyer to execute and deliver the Transaction Documents
to which the Buyer is a party and any other agreement, instrument or other
document necessary for the Buyer to consummate the transactions contemplated
hereby and thereby; and (v) the name, title and incumbency of, and bearing the
signatures of, the officers of the Buyer authorized to execute and deliver the
Transaction Documents to which the Buyer is a party and any other agreement,
instrument or other document necessary for the Buyer to consummate the
transactions contemplated hereby;
 
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(c)   the certificates required under Sections 8.2 (Representations and
Warranties) and 8.3 (Performance of Covenants) as a condition to Seller’s
obligation to effect the Closing;
 
(d)   Buyer shall have delivered to Sellers the written consents of third
parties or Governmental Entities required pursuant to Section 5.4 that Buyer has
obtained; and
 
(e)   the Intercreditor Agreements required by Section 6.12 with respect to the
applicable Casablanca Properties.
 
9.4   Transfer Taxes.
 
All transfer and recording taxes, filing fees and other similar expenses arising
in connection with the conveyances contemplated by this Option Agreement that
are due upon or as a result of the consummation of the transactions contemplated
hereby shall be paid one-half by Sellers and one-half by Buyer.  In connection
with the Closing, Sellers and Buyer shall file with the relevant Governmental
Entities all transfer tax returns, affidavits and other similar instruments, if
any, required in connection with the payment of the foregoing expenses, or, to
the extent not filed contemporaneously with the Closing, shall escrow sufficient
funds with the title insurer (or other third party reasonably acceptable to
Sellers and the Buyer) to cover such taxes or the Buyer shall receive a credit
for Sellers’ share of such taxes and the Buyer shall pay such taxes or cause
such taxes to be paid.  Notwithstanding anything in this Option Agreement to the
contrary, the obligations of Sellers and the Buyer under this Section 9.4 shall
survive the Closing indefinitely and the indemnity obligations of Sellers or the
Buyer, as applicable under this Option Agreement with respect to the obligations
under this Section 9.4 shall not be subject to any threshold, deductible, or
other limitation.
 
SECTION 10.  REMEDIES
 
10.1         Clawback Remedy.
 
Notwithstanding anything to the contrary contained in this Option Agreement,
upon the occurrence of any Clawback Trigger Event (as defined below) the Buyer
shall have the right, exercisable by written notice (a “Clawback Demand”) made
upon Sellers, to require Sellers to refund an amount equal to the Option Price,
and in such event, Sellers shall refund such amount to the Buyer within ten days
after receipt of a Clawback Demand, which refund shall be in the form of either
a return of the Stock Consideration or, in the event Sellers no longer
beneficially own the Stock Consideration, the refund of $25,000,000 in cash.  In
the event Sellers shall fail to refund the Option Price within such ten day
period, (a) the Buyer shall have the right to take legal action (the
“Enforcement Action”) to enforce such refund (and so long as any lawsuit to
enforce the refund of the Option Price pursuant to this Section 10.1 shall be
pending, the expiration date of the Option Period shall be extended one day for
each day that such lawsuit is pending; provided, however, that the Casablanca
Option shall expire at 5:00 p.m. New York City time on the third Business Day
following the date on which the Option Price is amount is refunded to the
Buyer.  Unless the Buyer shall have otherwise expressly otherwise agreed in
writing, so long as the Option Period shall not have expired as hereinabove
provided, the Casablanca Option shall survive any dismissal with prejudice of an
Enforcement Action or the entry by a court of competent jurisdiction of a final
non-appealable orders in connection with the Enforcement Action finding that the
Buyer is not entitled to a refund of the Option Price.
 
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The term “Clawback Trigger Event” shall mean the occurrence of any of the
following events or circumstances:
 
(a)   the occurrence of an “event of default” under the Casablanca Senior Loan
or Casablanca Mezzanine Loan which results in the acceleration of the maturity
thereof and/or any attempt by the Lender or Holder thereof to exercise remedies
against any collateral therefor;
 
(b)   the occurrence of any event, act or circumstance that results in action or
attempted action by the Lender or Holder of the CapitalSource Guaranty to
exercise any remedies thereunder;
 
(c)   any of the representations and warranties of Sellers under the Transaction
Documents, solely as they relate to Casablanca, shall prove to be false when
made as of the date of this Option Agreement, except in each case where to the
extent that the failure of any such representations and warranties to be true
and correct as of such date shall not have had a Material Adverse Effect on the
Casablanca Subsidiaries taken as a whole;
 
(d)   the material breach by Sellers of any of their covenants under Section 6.1
hereof, which default is not cured within 30 days after written notice thereof
by the Buyer to Sellers;
 
(e)   the breach by Sellers of any of their covenants under Section 6.4 hereof;
and
 
(f)   the failure of Sellers to fulfill any condition to the obligations of
Buyer to consummate the purchase of the Casablanca Units set forth in Section 7
after the exercise of the Casablanca Option and a good faith and reasonable
determination by the Buyer that such obligations cannot be fulfilled prior to
December 31, 2011.
 
SECTION 11.  INDEMNIFICATION
 
11.1         Survival.
 
All representations and warranties contained or incorporated into this Option
Agreement shall be made as of the date or dates thereof as indicated and not any
date after the Closing Date, but shall survive the Closing until the first
anniversary of the Closing Date, except that (a) the representations and
warranties contained in Sections 4.12 (Compliance with Laws and Permits), as
appropriate, and 4.13 (Environmental) shall survive the Closing until the third
anniversary of the Closing Date, (b) the representations and warranties set
forth in Sections 4.7 (Taxes) and 5.11 (Taxes) shall survive the Closing until
30 days following the date on which all claims relating to the subject matter
thereof shall have been barred by the relevant statutes of limitations, and (c)
the representations and warranties contained in Section 4.1 (Organization and
Good Standing), Section 4.2 (Power and Authorization), Section 4.3
(Capitalization), Section 4.4(i) (No Conflicts and Consents), Section 5.1(i)
(Organization and Good Standing) Section 5.2 (Power and Authorization),
Section 5.3 (Validity of Contemplated Transactions) and Section 5.7
(Capitalization) shall survive indefinitely.  All covenants and agreements
contained herein shall survive until, by their respective terms, they are no
longer operative.
 
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11.2          Indemnification.
 
(a)   Sellers shall, jointly and severally, indemnify and hold the Buyer and its
Affiliates and their respective directors (or Persons in similar positions),
officers, employees, agents, successors and assigns (collectively, the “Buyer
Indemnified Parties”) harmless from and against any Damages arising from or in
connection with or otherwise with respect to (i) any inaccuracy in any
representation or the breach of any warranty of any Seller under the Transaction
Documents relating to Casablanca Holdings, (ii) the failure of any Seller to
duly perform or observe any term, provision, covenant or agreement to be
performed or observed by it pursuant to this Option Agreement, or (iii) any
Excluded Liability.
 
(b)   The Buyer shall indemnify and hold each Seller and its Affiliates and its
respective directors (or Persons in similar positions), officers, employees,
agents, successors and assigns (collectively, the “Seller Indemnified Parties”
and, together with the Buyer Indemnified Parties, the “Indemnified Parties”)
harmless from and against any Damages arising from or in connection with or
otherwise with respect to (i) any inaccuracy in any representation or the breach
of any warranty of the Buyer under this Option Agreement or any certificate or
other instrument delivered by the Buyer at the Closing pursuant to the
provisions of Section 8, (ii) the failure of the Buyer to duly perform or
observe any term, provision, covenant or agreement to be performed or observed
by it pursuant to this Option Agreement, or (iii) any Assumed Indebtedness.
 
(c)   Notwithstanding anything herein to the contrary, other than with respect
to any Excluded Liability, (i) no indemnification shall be available to any
Buyer Indemnified Party under Section 11.2 (a) if the Damages to which the Buyer
Indemnified Parties would otherwise be entitled to indemnification with respect
to any single breach or inaccuracy are less than $100,000; and (ii) no
indemnification shall be available to any Buyer Indemnified Party under Section
11.2 (a) unless and until the aggregate amount of the Damages for which the
Buyer Indemnified Parties (as applicable) seek indemnification (excluding
Damages not available as a result of clause (i) above) exceeds a one-time
deductible amount of $1,000,000 (the “Deductible Amount”), in which case the
relevant Buyer Indemnified Parties entitled to such indemnification shall be
entitled to recover all such Damages to which such Buyer Indemnified Parties are
entitled in excess of such Damages constituting the Deductible Amount.  Other
than with respect to any Assumed Indebtedness, (A) no indemnification shall be
available to any Seller Indemnified Party under Section 11.2 (b) if the Damages
to which the Seller Indemnified Parties would otherwise be entitled to
indemnification with respect to any single breach or inaccuracy are less than
$100,000, and (B) no indemnification shall be available to any Seller
Indemnified Parties under Section  11.2 (b) unless and until the aggregate
amount of the Damages for which the Seller Indemnified Parties (as applicable)
seek indemnification (excluding Damages not available as a result of
Section 11.2(c)(i) exceeds the one time Deductible Amount, in which case the
relevant Seller Indemnified Parties entitled to such indemnification shall be
entitled to recover such Damages to which such Seller Indemnified Parties are
entitled in excess of such Damages constituting the Deductible Amount.  The
obligations of Sellers pursuant to the indemnification provisions set forth in
this Section 11.2, and recourse against the Sellers pursuant to this Section 
11.2, shall be limited such that the aggregate liability of Sellers under this
Section  11.2 shall not exceed ten percent (10%) of the Final Purchase Price
(the “General Indemnification Cap”) in the aggregate.  The obligations of the
Buyer pursuant to the indemnification provisions set forth in this Section 
11.2, and recourse against the Buyer pursuant to this Section 11.2, shall be
limited such that the aggregate liability of the Buyer under this Section 11.2
shall not exceed in the aggregate the then General Indemnification Cap;
provided, however, that, for the avoidance of doubt, the foregoing limitations
set forth in this Section  11.2 (c), including, without limitation, the
Deductible Amount and the General Indemnification Cap, shall not apply to (X)
any Excluded Liability, and (pursuant to Section  11.2 (a)) Sellers shall
indemnify and hold the Buyer Indemnified Parties harmless from and against any
Damages arising from or in connection with or otherwise with respect to any
Excluded Liability from the first dollar of any Excluded Liability and without
any cap or other limitation with respect to the amount thereof and (Y) any
Assumed Indebtedness, and (pursuant to Section 11.2 (b)) Buyer shall indemnify
and hold the Seller Indemnified Parties harmless from and against any Damages
arising from or in connection with or otherwise with respect to any Assumed
Indebtedness from the first dollar of any Damages incurred without any cap or
other limitation with respect to the amount thereof.  Notwithstanding anything
in this Option Agreement to the contrary, for purposes of determining the amount
of Damages to which an Indemnified Party is entitled under Section 11.2, but not
for determining whether or not any inaccuracy or breach has occurred, all of the
representations, warranties and covenants set forth in this Option Agreement
that are qualified by “material,” “materiality,” “material respects,” or words
of similar import shall be deemed to have been made without any such
qualification for purposes of determining the amount of Damages resulting from,
arising out of or relating to any such breach or violation of representation,
warranty or covenant.
 
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(d)   Each Indemnified Party, upon it or (as applicable) its directors (or
Persons in similar positions) or officers becoming aware of any event which
gives rise to any indemnification rights such Indemnified Party has or may have
under this Section 11.2, shall take reasonable steps to mitigate any Damages in
respect of which such indemnification may be sought, including (i) using its
commercially reasonable efforts to secure payment from available insurance
arrangements, including insurance arrangements maintained by any Tenant with
respect to any Casablanca Subsidiary or Casablanca Property that are to provide
coverage with respect to such Damages (an “Insurance Payment”) and (ii) using
its commercially reasonable efforts to secure reimbursement, indemnity or other
payment from any third Person obligated by Contract or otherwise to reimburse,
indemnify or pay the Indemnified Party with respect to such Damages (a “Third
Party Payment” and, together with an Insurance Payment, a “Mitigation Payment”);
provided, however, that no such Indemnified Party shall be required to pursue
any potential source of a Mitigation Payment prior to seeking indemnification
hereunder or incur any material costs or expenses (unless the Indemnifying Party
agrees to reimburse such costs and expenses) or take any action materially
adverse to such Indemnified Party in complying with its obligation to mitigate
under this Section  11.2 (d) and in no event may any Indemnifying Party assert
any failure to mitigate by an Indemnified Party as a defense to a claim for
indemnification hereunder.
 
(e)   Any calculation of Damages for purposes of this Section 11.2 shall be net
of (i) any Mitigation Payment actually received; provided, however that the
Mitigation Payment received or recovered shall be reduced by the amount of any
out-of-pocket costs incurred in pursuing such Mitigation Payment; and (ii) Tax
benefits actually realized under applicable Law in respect of such Damages, in
each case net of all reasonable costs and expenses of recovering any such Tax
benefits, whether realized in the year in which payments of Damages are made or
thereafter.  In the event a payment is made to an Indemnified Party with respect
to any Damages and thereafter the Indemnified Party receives a Mitigation
Payment with respect to such Damages, the Indemnified Party shall reimburse the
Indemnifying Parties an amount equal to the lesser of (x) the Mitigation Payment
and (y) the amount so paid by the Indemnifying Parties.
 
(f)   Upon receipt by any Indemnified Party of written notice from any third
party of any action, suit, proceedings, claim, demand or assessment by such
third party against such Indemnified Party which would reasonably be expected to
give rise to a claim for Damages hereunder, such Indemnified Party shall as
promptly as practicable give written notice thereof to the Buyer or Sellers (as
applicable, the “Indemnifying Party”), if indemnification shall be sought
therefrom, indicating the nature of such claim and the basis therefor; provided,
however, that failure to give such notice shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure. The Indemnifying Party shall
have the right, at its option and expense (and by its own counsel), to assume
the defense of any such matter involving the liability of the Indemnified Party
asserted by a third party as to which the Indemnifying Party shall have
acknowledged its obligation to indemnify the Indemnified Party hereunder. If any
Indemnifying Party shall undertake to compromise or defend any such asserted
liability, it shall promptly notify the Indemnified Party in writing of its
intention to do so, and the Indemnified Party will cooperate fully with the
Indemnifying Party and its counsel in the compromise of, or defense against, any
such asserted liability; provided, however, that the Indemnifying Party shall
not settle any such asserted liability without the prior written consent of the
Indemnified Party (which consent will not be unreasonably withheld, conditioned
or delayed) unless such settlement (x) includes only the payment of monetary
damages, (y) does not impose any injunctive or equitable relief upon the
Indemnified Party and (z) includes a complete and unconditional release of the
Indemnified Party and does not include any admission of wrongdoing by the
Indemnified Party.  Notwithstanding any such election to assume the defense of
such action or proceeding, such Indemnified Party shall have the right to employ
separate counsel and to participate in the defense of such action or proceeding,
and the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel (and shall pay such fees, costs and expenses at least
quarterly), if the Indemnified Party shall have reasonably concluded that (i)
there may be a conflict of interest (including one or more legal defenses or
counterclaims available to it or to other Indemnified Parties which are
different from or additional to those available to the Indemnifying Party) that
would make it inappropriate in the reasonable judgment of such Indemnified Party
for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, (ii) the claim seeks non-monetary relief which, if granted,
could materially and adversely affect such Indemnified Party or its Affiliates
(in which case, notwithstanding any other term of this Option Agreement, the
Indemnifying Party shall not have the right to direct the defense of such action
or proceeding on behalf of such Indemnified Party), (iii) the Indemnifying Party
shall not have employed counsel reasonably satisfactory to such Indemnified
Party to represent such Indemnified Party within a reasonable time after notice
of the institution of such action or proceeding (for the avoidance of doubt,
Bryan Cave LLP and Hogan & Hartson LLP shall each be deemed satisfactory
counsel) or (iv) the Indemnifying Party shall authorize such Indemnified Party
to employ separate counsel at the Indemnifying Party’s expense.
 
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(g)   Unless otherwise required by applicable Law, the parties hereto agree to
treat any payment made pursuant to this Section 11.2 as an adjustment to the
consideration paid pursuant to this Option Agreement for all Tax purposes.
 
(h)   Sellers and the Buyer hereby acknowledge and agree that, from and after
the Closing Date, the foregoing indemnification provisions in this Section 11.2
shall be the sole and exclusive rights and remedy of any Indemnified Party with
respect to the transactions contemplated by this Option Agreement, including,
without limitation, with respect to (a) any misrepresentation, breach or default
of or under any of the representations, warranties, covenants and agreements
contained in this Option Agreement or (b) any failure duly to perform or observe
any term, provision, covenant or agreement contained in this Option Agreement;
provided, however, that nothing set forth herein shall be deemed to limit any
party’s rights or remedies in the event that the other party has committed fraud
in connection herewith.
 
(i)   Notwithstanding any other provision of this Option Agreement, Sellers
shall have no obligation to indemnify, defend, or hold harmless Buyer
Indemnified Parties with respect to Damages related to Remediation of Hazardous
Materials if such Damages arise solely from environmental sampling performed by
Buyer indiscriminately and for the sole purpose of discovering conditions which
would require Remediation under applicable Law.
 
11.3         Environmental Remediation
 
(a)   Any Remediation for which an Indemnified Party seeks indemnification from
Sellers under this Section 11 shall be governed by this Section 11.3.
 
(b)   Buyer Indemnified Parties shall have the right to perform Remediation and
seek indemnification from Sellers for related costs or shall, at their sole
option, elect to have Sellers perform all or a portion of such Remediation.
 
(c)           Any Party performing a Remediation the cost of which is the
responsibility of Sellers pursuant to Section 11 of this Agreement (“Performing
Party”) shall: (i) provide written notification to the other Party (“Other
Party”) that it intends to perform Remediation prior to commencing any such
Remediation; (ii) shall select a qualified consultant to oversee the
Remediation, subject to the approval of the Other Party, whose approval shall
not be unreasonably withheld; (iii) provide the Other Party with a reasonable
opportunity to comment in advance upon any material written communications,
filings, reports, correspondence or other writings given to any Governmental
Entity in connection with such Remediation and consider timely provided comments
in good faith; (iv) to the extent practical, provide the Other Party with a
reasonable opportunity to participate in any meetings with any Governmental
Authority regarding the Remediation at such Other Party’s sole cost and expense;
(v) comply with applicable Laws; (vi) minimize costs in conducting any
Remediation and employ cost-effective Remediation methods that are commercially
reasonable under the circumstances; (vii) use risk based clean-up standards and
employ deed restrictions and institutional and engineering controls to the
extent commercially reasonable; (viii) allow the Other Party or their agents
reasonable access to the Casablanca Properties for purposes of observing the
Remediation so long as such Other Party and its agents do not interfere with the
Remediation or the operation of the business conducted thereon; (ix) keep the
Other Party reasonably informed of the progress of any such Remediation and the
schedule for completing such Remediation; (x) within five (5) business days of
receipt, use commercially reasonable efforts to provide to the Other Party
copies of all material written communications, filings, reports, correspondence
or other writings, photographs or materials received from any Person (including
any Governmental Authority) in connection with the performance of any such
Remediation; and (xi) use commercially reasonable efforts to preserve any rights
the Other Party may have against insurers or other third parties.
 
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(d)           Buyer shall permit Sellers and their representatives and
consultants  access to the applicable real property (i) for purpose of
performing the Remediation, to the extent Sellers are performing the
Remediation, so long as Sellers use commercially reasonable efforts to minimize
interference with the business conducted thereon and (ii) for observing and
monitoring the Remediation if Buyer is performing the Remediation, so long as
Sellers uses commercially reasonable efforts to minimize interference with
Buyer’s Remediation or the business conducted thereon.  Following completion of
any Remediation performed by Sellers, Sellers shall promptly return the real
property to substantially the same condition in which it existed prior to the
commencement of the Remediation (other than with respect to the presence of
Hazardous Materials).  Buyer Indemnified Parties shall reasonably cooperate with
Sellers with respect to any Remediation performed by Sellers in accordance with
this Section 11.3.
 
SECTION 12.  CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
 
12.1          Casualty.
 
(a)   Sellers shall notify the Buyer as soon as reasonably practicable after
obtaining Knowledge of the occurrence of any Force Majeure Event with respect to
any Casablanca Property and of any material damage or destruction (a “Casualty
Event”) by fire or other casualty that is suffered by any Casablanca Property on
or before the Closing Date or the HUD Portfolio Closing Date, as appropriate,
which notice shall include a reasonably detailed description of the extent of
such damage or destruction and of the relevant Casualty Event. If, on or prior
to the relevant Closing Date, any Casablanca Property shall have been damaged or
destroyed by a Casualty Event or a Force Majeure Event, then the Buyer shall
proceed to effect the relevant Closing in which such Casablanca Property is
included, in which event the provisions of Sections  12.1 (b) shall apply.
 
(b)   With respect to any Casablanca Subsidiary that owns an Casablanca Property
that has been damaged by a Casualty Event or a Force Majeure Event:
 
(i)    Sellers shall not (A) adjust and settle any insurance claims with respect
to such damaged Casablanca Property, or (B) enter into any construction or other
contract for the repair or restoration of such damaged Casablanca Property, in
each case, without the Buyer’s prior written consent (except no such consent
shall be necessary to repair or restore any emergency or hazardous condition at
such damaged Casablanca Property), which consent shall not be unreasonably
withheld, conditioned or delayed;
 
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(ii)        at the relevant Closing, Sellers shall (A) pay over to the Buyer the
amount of any insurance or other proceeds, to the extent collected by Sellers or
any Casablanca Subsidiary in connection with such Casualty Event or Force
Majeure Event, less the amount of the actual and reasonable unreimbursed
expenses incurred by Sellers or any Casablanca Subsidiary in connection with
collecting such proceeds and making any repairs to the applicable Casablanca
Property occasioned by such Casualty Event or Force Majeure Event pursuant to
any contract (provided that such contract was reasonably approved by the Buyer
as required by this Section 12.1) and (B) assign to the Buyer in form reasonably
satisfactory to the Buyer all of Sellers’ right, title and interest in and to
(or provide written confirmation from Sellers of an Casablanca Subsidiary’s
right to) any insurance proceeds that are uncollected at the time of the subject
Closing and that may be paid in respect of such Casualty Event or Force Majeure
Event. Sellers shall cooperate with the Buyer in the collection of such
proceeds, which obligation shall survive the subject Closing; and
 
(iii)          The Final Purchase Price shall be reduced by the amount by which:
 
(1)    the reasonably estimated post-closing cost of repair and restoration of
all of the Damaged Properties,
 
exceeds
 
(2)    the remaining balance of the insurance proceeds assigned pursuant to
(ii)(A) above plus the uncollected insurance proceeds or tenant contributions to
the cure reasonably expected to be collected after the relevant Closing by the
Casablanca Subsidiary and described in (ii)(B) above;
 
provided, however, that if such amount in the aggregate is less than One Million
Dollars ($1,000,000), then (a) no reduction shall be made to the Final Purchase
Price and (b) such amount shall count against the Deductible Amount for purposes
of indemnification claims under Section 11.2 without regard to the limitations
set forth in Section 11.2(c)(i); provided, further, that if the Deductible
Amount has otherwise been reached, then such reduction (or a reduction to the
extent of the excess over the Deductible Amount) shall be made to the Final
Purchase Price.
 
12.2         Condemnation Pending Closing.
 
If, prior to the Closing Date, condemnation or eminent domain proceedings shall
be commenced by any competent public authority against any Casablanca Property
or any portion thereof, Sellers shall promptly (but in no event more than two
Business Days after obtaining Knowledge of such proceedings) notify the Buyer
thereof, which notice shall include a reasonably detailed description of the
nature and extent of such proceedings and of each Casablanca Property affected
thereby. After notice of the commencement of any such proceedings, the Buyer
shall accept title to such Casablanca Property subject to such proceedings,
whereupon any award payable to Sellers shall be paid to the Buyer and Sellers
shall deliver to the Buyer at the Closing all assignments and other documents
reasonably requested by the Buyer to vest such award in the Buyer.
 
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SECTION 13.  DEFINITIONS
 
As used in this Option Agreement, the following terms shall have the respective
meanings below:
 
“Arbors Base Rent” shall have the meaning set forth in Section 7.9(a).
 
“Arbors Initial Rent” shall have the meaning set forth in Section 7.9(a).
 
“Accrued Expenses” shall have the meaning set forth in Section 2.3 (a).
 
“Accrued Income” shall have the meaning set forth in Section 2.3 (a).
 
“Acquisition Transaction” shall have the meaning set forth in Section 6.4 (a).
 
“Affiliate” means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls such Person, and (b) each Person that is controlled
by or is under common control with such Person or any Affiliate of such Person.
For the purpose of this definition, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
 
“Assumed Indebtedness” shall have the meaning set forth in Section 2.2(a).
 
“Base Purchase Price” shall have the meaning set forth in Section 2.2(a).
 
“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks in New York City are authorized or obligated by Law or executive order to
close.
 
“Buyer” shall have the meaning set forth in the Preamble.
 
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“Buyer Common Stock” means the common stock, par value $0.10 per share, of the
Buyer.
 
“Buyer Consents” shall have the meaning set forth in the Purchase Agreement.
 
“Buyer Disclosure Schedules” shall have the meaning set forth in Section 6.5.
 
“Buyer Indemnified Parties” shall have the meaning set forth in Section 11.2
(a).
 
“Buyer Transaction Costs” means all costs and expenses incurred by the Buyer in
connection with the negotiation, documentation, execution, delivery and
performance of the Transaction Documents, including, without limitation, the
fees and disbursements of counsel, accountants and consultants engaged by the
Buyer and any inspection, examination, survey, test boring, soil bearing test or
other engineering, structural, building system, environmental, architectural or
landscaping test or drawing performed by or at the direction of the Buyer in
connection with the transactions contemplated hereby and thereby, and one-half
of the cost of any date-down endorsement to existing title insurance policies.
 
“Canton Property” shall have the meaning set forth in Section 6.17(b).
 
“Cap Rate” shall have the meaning set forth in Section 7.9(a).
 
“CapitalSource” shall have the meaning set forth in the Preamble.
 
 “Casablanca Holdings” shall have the meaning set forth in the Recitals.
 
“Casablanca Mezzanine Lender” means JER US Debt Finance Company CS LLC,
successor to Column Financial, Inc., in its capacity as the holder of the
Casablanca Mezzanine Loan, and its permitted successors and assigns in such
capacity.
 
“Casablanca Mezzanine Loan” means that certain mezzanine loan in the original
principal amount of $36,140,981, made by the Casablanca Mezzanine Lender to CSE
Casablanca Holdings II, pursuant to that certain Mezzanine Loan Agreement dated
as of July 31, 2007, between CSE Casablanca Holdings II LLC and the Casablanca
Mezzanine Lender, as the same may be amended, extended, renewed or replaced in
accordance with the provisions of this Option Agreement.
 
“Casablanca Option” shall have the meaning set forth in Section 1.
 
“Casablanca Option Price” shall have the meaning set forth in Section 2.1.
 
“Casablanca Units” shall have the meaning set forth in the Recitals.
 
“Casablanca Property” and “Casablanca Properties” shall have the meaning set
forth in the Recitals.
 
“Casablanca Senior Lender” means Wells Fargo Bank, N.A., as Trustee  for the
Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage
Pass-Through Certificates, Series 2007-TFL2, successor to Column Financial,
Inc., in its capacity as the holder of the Casablanca Senior Loan, and its
permitted successors and assigns in such capacity.
 
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“Casablanca Senior Loan” means that certain mortgage loan in the original
principal amount of $287,182,422, made by the Casablanca Senior Lender to the
Casablanca Senior Loan Borrowers pursuant to the Casablanca Senior Loan
Agreement
 
“Casablanca Senior Loan Agreement” means that certain Amended and Restated Loan
Agreement dated as of March 29, 2007, between the Casablanca Senior Loan
Borrowers and the Casablanca Senior Lender, as heretofore amended by that
certain Modification Agreement dated as of July 31, 2007, between the Casablanca
Senior Lender and the Casablanca Senior Loan Borrowers, as the same may be
further amended, extended, renewed or replaced in accordance with the provisions
of this Option Agreement.
 
“Casablanca Senior Loan Borrowers” means, collectively, the Casablanca
Subsidiaries identified as such on Schedule III of the Purchase Agreement, being
the borrowers under the Casablanca Senior Loan.
 
“Casablanca Subsidiaries” shall have the meaning set forth in the Recitals.
 
“Casablanca Units” shall have the meaning set forth in the Recitals.
 
“Casablanca II” has the meaning set forth in Section 6.16(a).
 
“Cash Consideration” shall have the meaning set forth in Section 2.2(a).
 
“Casualty Event” shall have the meaning set forth in Section 12.1 (a).
 
“Clawback Demand” shall have the meaning set forth in Section 10.1.
 
“Clawback Trigger Event” shall have the meaning set forth in Section 10.1.
 
“Closing Adjustments” shall have the meaning set forth in Section 2.2(a).
 
“Closing” shall have the meaning set forth in Section 9.1.
 
“Closing Date” shall have the meaning set forth in Section 9.1.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Confidentiality Agreement” shall have the meaning set forth in Section 6.10.
 
“Consents” shall have the meaning set forth in Section 7.5.
 
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“Contingent Obligation” shall mean, as to any person, any obligation, agreement,
understanding or arrangement of such person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other obligations (“primary
obligations”) of any other person (the “primary obligor”) in any manner, whether
directly or indirectly, including any obligation of such person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor; (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor; (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation; (d) with respect to bankers’ acceptances,
letters of credit and similar credit arrangements, until a reimbursement
obligation arises (which reimbursement obligation shall constitute
Indebtedness); or (e) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof; provided, however, that the
term “Contingent Obligation” shall not include endorsements of instruments for
deposit or collection in the ordinary course of business or any product
warranties.  The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such person may be liable, whether
singly or jointly, pursuant to the terms of the instrument evidencing such
Contingent Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such person is required to
perform thereunder) as determined by such person in good faith.
 
“Contract” means any contract, undertaking, agreement, arrangement, commitment,
indemnity, indenture, instrument, lease (but not including any Property Lease),
forbearance agreement, consent, waiver or understanding, including any and all
amendments, supplements, and modifications thereto, in each case whether written
or oral, to or under which any Casablanca Subsidiary or any of their respective
assets is legally bound.
 
“CSE Canton” shall have the meaning set forth in Section 6.17(a).
 
“CSE Hilliard” shall have the meaning set forth in Section 6.17(a).
 
“CSE Pittsburg” shall have the meaning set forth in Section 6.16(a).
 
“CSE SLB” shall have the meaning set forth in the Preamble.
 
“CSH REIT” shall have the meaning set forth in the Preamble.
 
“Damages” means any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, any
Proceeding brought by any Governmental Entity or other Person), including,
without limitation, reasonable attorneys’, experts’ and consultants’ fees and
costs of investigation or defense.
 
“Deductible Amount” shall have the meaning set forth in Section 11.2(c).
 
“Disclosure Schedule” shall mean the “Sellers’ Disclosure Schedule” as defined
in the Purchase Agreement.
 
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“Encumbrance” means any mortgage, pledge, security interest, encumbrance, lien,
limitation, restriction, assessment, encroachment, defect in title or charge of
any kind, including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction and including any lien or charge arising by statute or other
laws, which secures the payment of a debt (including, without limitation, any
Tax or Indebtedness) or the performance of an obligation.
 
“Enforcement Action” has the meaning set forth in Section 10.1.
 
“Environmental Laws” means all Laws (a) related to emissions, discharges,
spills, Releases or threatened Releases of any Hazardous Materials into or
impacting the indoor or outdoor environment, (b) governing the manufacture,
processing, distribution, recycling, sale, offer for sale, distribution, use,
generation, treatment, storage, disposal, transport, or handling of Hazardous
Materials or (c) related to pollution or to the protection of the environment,
human health or natural resources. Such Environmental Laws shall include, but
are not limited to, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response, Compensation and Liability Act, the
Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Occupational Safety
and Health Act (but only to the extent it relates to exposure to Hazardous
Materials), the Clean Water Act, the Clean Air Act, the Safe Drinking Water Act,
and the Emergency Planning and Community Right-to-Know Act, each as amended from
time to time, the state and local Laws implementing such Laws, and all state,
local or foreign analogs.
 
“Excluded Liabilities” means any and all liabilities or obligations of any
Seller or any Casablanca Subsidiary, whether accrued, absolute, contingent,
known, unknown or otherwise including without limitation, taxes payable by any
Seller pursuant to Section 6A of the Purchase Agreement, relating to any period
ending on or before the Closing Date, as appropriate; provided, however, that
“Excluded Liabilities” shall expressly not include any liability to the extent
such liability is taken into account in the Closing Adjustments or any liability
that results from or arises out of any Assumed Indebtedness or any post-Closing
obligation or liability of the Casablanca Subsidiaries unless the result of an
inaccurate representation or breach of a warranty or covenant or unless such
post-Closing obligation or liability arises from or is related to (i) the
environmental condition of any Casablanca Property prior to the Closing Date
Closing Date or (ii) any actions or omissions by Seller or any Casablanca
Subsidiary prior to the Closing Date.
 
“Exercise Notice” shall have the meaning set forth in Section 3.
 
“Facility Operator” means (a) as of the date hereof, each Person identified on
Schedule IV hereto as a “Current Facility Operator”, and (b) as of immediately
prior to the Closing, each Person identified on Schedule IV hereto as a
“Facility Operator Upon Closing”.
 
“Final Purchase Price” shall have the meaning set forth in Section 2.2(a).
 
“Financing” shall have the meaning set forth in Section 6.15.
 
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“Force Majeure Event” means any riot, act of terrorism, war or hostilities
between nations, act of God, fire, explosion, storm damage, tornado damage or
flood damage that prevents any of the transactions contemplated by this Option
Agreement from being consummated as a result of the ability of any party
thereto, pursuant to and in accordance with the terms hereof, to terminate this
Option Agreement.
 
“GAAP” means generally accepted accounting principles in the United States of
America, applied on a consistent basis and applied to both classification of
items and amounts, including without limitation, the official interpretations
thereof by the Financial Accounting Standards Board, its predecessors and
assigns.
 
“General Indemnification Cap” shall have the meaning set forth in Section 11.2
(c).
 
“Governmental Entity” means any domestic, international, foreign, national,
multinational, territorial, regional, state or local governmental authority,
quasi-governmental authority, instrumentality, court, commission, arbitrator or
tribunal or any regulatory, administrative or other authority or agency, or any
political or other subdivision, department or branch of any of the foregoing.
 
“Hazardous Materials” means:  (a) any liquid, gaseous or solid material,
substance or waste that (from use, handling, processing, storage, emission,
disposal, spill, Release or any other activity or for any other reason) (i) is
regulated by, forms the basis of liability under, or requires removal,
remediation or reporting under any Environmental Law, or is listed, classified,
defined, or regulated as a contaminant, pollutant, solid waste, toxic product or
substance, “hazardous waste” or “hazardous substance” (or any other similar
terms) pursuant to any Environmental Law, (ii) is regulated under Environmental
Laws as being toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or (iii) is otherwise hazardous to human health or to
the environment; (b) any petroleum product or by-product or fractions thereof,
petroleum-derived substances, asbestos, polychlorinated biphenyls, radon, toxic
mold, fungi, bacteria, lead-based paint, pesticides, defoliants, alcohols,
chemical solvents, polybrominated diphenyl ether, or urea formaldehyde; and (c)
any medical or radioactive waste, substance or material defined as such in the
Occupational Safety & Health Act, the Toxic Substances Act or any Environmental
Law.
 
“Hilliard Property” shall have the meaning set forth in Section 6.17(b).
 
“Income Tax” means any federal, state, local, or foreign tax based on or
measured by reference to net income, including any interest, penalty, or
addition thereto, whether disputed or not.
 
“Indebtedness” means, with respect to any Casablanca Subsidiary: (a) any
liability for borrowed money, or evidenced by an instrument for the payment of
money, or incurred in connection with the acquisition of any property, services
or assets (including securities), or relating to a capitalized lease obligation,
including, without limitation, accounts payable or any other indebtedness to
trade creditors created or assumed by any Casablanca Subsidiary in the ordinary
course of business in connection with the obtaining of materials or services;
(b) obligations under exchange rate contracts or interest rate protection
agreements; (c) any obligations to reimburse the issuer of any letter of credit,
surety bond, performance bond or other guarantee of contractual performance, in
each case to the extent drawn or otherwise not contingent; (d) all Indebtedness
of others secured by any lien on property owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, but limited to
the fair market value of such property; (e) all Contingent Obligations of such
person in respect of Indebtedness or obligations of others of the kinds referred
to in clauses (a) through (e) above; and (f) any payments, fines, fees,
penalties or other amounts applicable to or otherwise incurred in connection
with or as a result of any prepayment or early satisfaction of any obligation
described in clauses (a) through (e) above.
 
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“Indemnified Parties” shall have the meaning set forth in Section 11.2 (b).
 
“Indemnifying Party” shall have the meaning set forth in Section 11.2 (f).
 
“Independent Accountant” shall have the meaning set forth in Section 2.3 (b).
 
“Initial Cash Consideration” shall have the meaning set forth in Section 2.2(a).
 
“Insurance Payment” shall have the meaning set forth in Section 11.2 (d).
 
“Insured Property” shall have the meaning set forth in Section 6.14(a).
 
“Intercreditor Agreement” shall have the meaning set forth in Section 6.12.
 
“Knowledge” means (i) with respect to Sellers, the actual knowledge of the
individuals listed on Exhibit H to the Purchase Agreement, and (ii) with respect
to the Buyer, the actual knowledge of the individuals listed on Exhibit I to the
Purchase Agreement.
 
“Law” means any law (including, without limitation, the Foreign Corrupt
Practices Act), common law, statute (including, without limitation, those
relating to zoning, land use, the Americans with Disabilities Act, abandoned
property and similar laws and regulations), ordinance, regulation, rule,
directive, Permit, license, certificate, judgment, order, award, decree or other
decision or requirement of any Governmental Entity.
 
“Material Adverse Effect” means, when used with reference to the Casablanca
Subsidiaries, or the Buyer, as the case may be (and Sellers in the case of the
provisions of Section 7.4), any event, circumstance, change or effect (any such
item, an “Effect”) that is materially adverse to the business, financial
condition or results of operations of such party and its Subsidiaries taken as a
whole; provided, however, that in no event shall any of the following be deemed,
either alone or in combination, to constitute, nor shall any of the following be
taken into account in determining whether there has been, a Material Adverse
Effect:  (i) any Effect that results from changes in general economic conditions
or changes in securities markets in general, including any changes in interest
rates, (ii) any Effect that results from general changes in the industries in
which such party and its Subsidiaries operate, (iii) any Effect related to the
public announcement or the pendency or consummation of the transactions
contemplated by this Option Agreement, (iv) any Effect that results from any
action taken at the specific request of the other party, (v) any change in the
market price or trading volume of the Buyer Common Stock after the date hereof,
(vi) any Effect that results from natural disasters, acts of war, sabotage or
terrorism, military actions or the escalation thereof, or (vii) any Effects
resulting from any change in applicable law or regulation applicable to a party
or any of its Subsidiaries; except in the case of clauses (i), (ii), (vi) and
(vii), for any Effect that has a significantly disproportionate adverse impact
on such party and its Subsidiaries compared to other companies of similar size
operating in the principal industries in which such party and its Subsidiaries
operate.
 
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“Mitigation Payment” shall have the meaning set forth in Section 11.2 (d).
 
“Option Agreement” shall have the meaning set forth in the Preamble.
 
“Option Period” shall have the meaning set forth in Section 3.
 
“Order” shall have the meaning set forth in Section 6.3.
 
“Other Party” shall have the meaning set forth in Section 11.3(c).
 
“Past Due Rent” shall have the meaning set forth in Section 2.3 (a).
 
“Performing Party” shall have the meaning set forth in Section 11.3(c).
 
“Permits” means all material governmental licenses, permits, registrations,
filings, orders, qualifications, approvals and authorizations which are required
in order to conduct Casablanca’s business as conducted presently in all material
respects and as of immediately prior to the Closing and to own and lease its
respective assets and properties as such assets and properties are owned and
leased by each Casablanca Subsidiary as of the date hereof and immediately prior
to the Closing.
 
“Permitted Encumbrance” means any (a) right of way, easement, Encumbrance,
written agreement or Law affecting the improvement, use or occupancy or any
reservation of an interest in title imposed or promulgated by applicable Law
with respect to real property and improvements, including zoning regulations,
provided they do not materially and adversely affect the current use of any
Casablanca Property, (b) right of way, easement, Encumbrance, written agreement
or Law affecting the improvement, use or occupancy or any reservation of an
interest that is disclosed on existing title reports or existing surveys
delivered to the Buyer on or before the date hereof, (c) the existing subleases
identified in Section 4.6(a) of the Disclosure Schedule (including the rights of
subtenants thereunder), copies of which have been made available to the Buyer on
or before the date hereof, (d) mechanics’, carriers’, workmen’s, repairmen’s and
similar lien incurred in the ordinary course of business and which (i) is not
yet due and payable, (ii) is duly budgeted to be paid and (iii) does not
materially detract from the value of or materially interfere with the present
use of any of the Casablanca Property, subject thereto or affected thereby, (e)
Encumbrance for Taxes that are not yet due and payable, (f) agreement to which
neither any Seller nor any Casablanca Subsidiary, is a party that does not
affect the use or occupancy of any Casablanca Property, in any material respect
or is otherwise not material, (g) the Property Leases (and the rights of tenants
thereunder, including any rights of first refusal or purchase options
thereunder) and any Property Lease entered into subsequent to the date hereof in
accordance with the terms hereof, (h) all Encumbrances securing or otherwise
relating to any Assumed Indebtedness (including any HUD regulatory agreements),
and (i) minor imperfections or defects of title or other matters that do not
materially detract from the value of or materially interfere with the use of any
Casablanca Property.
 
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“Permitted Securities Encumbrance” means adverse claims set forth on Section
4.3(a) of the Disclosure Schedule.
 
“Person” means an individual, a partnership (general or limited), a corporation,
a limited liability company, an association, a joint stock company, Governmental
Entity, a business or other trust, a joint venture, any other business entity or
an unincorporated organization.
 
“Pinon Properties” shall have the meaning set forth in Section 7.9(b).
 
“Post-Closing Period” shall have the meaning set forth in Section 2.3 (a).
 
“Pre-Closing Period” shall have the meaning set forth in Section 2.3 (a).
 
“Prepaid Expenses” shall have the meaning set forth in Section 2.3 (a).
 
“Prepaid Income” shall have the meaning set forth in Section 2.3 (a).
 
“Proceeding” means any action, suit, proceeding, arbitration, claim, complaint,
decree, lawsuit or any notice of violation, noncompliance or investigation.
 
“Property Lease” means each document comprising, evidencing, securing or entered
into in connection with a lease or sublease of all or any portion of the real
property compromising any Casablanca Property.
 
“Purchase Agreement” shall have the meaning set forth in the Recitals.
 
“Release” means the intentional or unintentional spilling, emitting, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of any Hazardous Material into the indoor or outdoor environment.
 
“Released Persons” shall have the meaning set forth in Section 6.7(a).
 
“Remediation” means any abatement, investigation, clean-up, removal action,
remedial action, restoration, repair, response action, engineering or
institutional controls, corrective action, monitoring, sampling and analysis,
installation, reclamation, closure, or post-closure in connection with the
suspected, threatened or actual Release of Hazardous Materials.
 
“Seller Indemnified Parties” shall have the meaning set forth in
Section 11.2(b).
 
“Seller Transaction Costs” means all costs and expenses incurred by any Seller
and/or any of the Casablanca Subsidiaries in connection with the negotiation,
documentation, execution, delivery and performance of this Option Agreement and
the Transaction Documents, including, without limitation, the fees and
disbursements of counsel, accountants and consultants engaged by Sellers, any
Casablanca Subsidiary or any Affiliate thereof, one-half of the fees incurred in
connection with obtaining the endorsements to the title insurance policies or
endorsements required by Section 7.8 of this Agreement.
 
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“Sellers” shall have the meaning set forth in the Preamble.
 
“Stock Consideration” shall mean the shares of Buyer Common Stock issued in
payment of the Option Price.
 
“Subsidiary” means any Person (other than an individual) with respect to which
any Person (or any Subsidiary thereof) has the power to vote or direct the
voting of sufficient securities or other interests to elect a majority of the
directors (or persons in similar positions, including, without limitation,
trustees) thereof.
 
“Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind, including, without limitation, all net income,
gross receipts, ad valorem, value added, transfer, gains, franchise, windfall,
profits, inventory, net worth, capital stock, assets, sales, use, license,
registration, documentation fees, estimated, withholding (including dividend
withholding and withholding required pursuant to Sections 1445 and 1446 of the
Code), payroll, premium, capital employment, social security, workers
compensation, unemployment, excise, severance, stamp, occupation, customers’
duties, tariffs and property taxes, together with any interest and penalties,
fines, additions to tax or additional amounts imposed by any Governmental Entity
or Tax authority.
 
“Tax Return” means any return, report, declaration, statement, extension, form
or other documents or information filed with or submitted to, or required to be
filed with or submitted to, any governmental body in connection with the
determination, assessment, collection or payment of any Tax.
 
“Tenant” means the tenant under each applicable Property Lease.
 
“Termination Date” shall have the meaning set forth in Section 3.
 
“Third Party Payment” shall have the meaning set forth in Section  11.2 (d).
 
“Title Commitments” shall have the meaning set forth in Section 6.14(b).
 
“Title Policy” shall have the meaning set forth in Section 6.14(b).
 
“Title Searches” shall have the meaning set forth in Section 6.14(b).
 
“Transaction Documents” means, collectively, this Option Agreement, the Purchase
Agreement (solely to the extent incorporated by reference herein) and the
certificates and instruments delivered hereby and thereby.
 
“Uninsured Property” shall have the meaning set forth in Section 6.14(b).
 
“Updated Disclosure Schedule” shall have the meaning set forth in Section 6.5.
 
40

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SECTION 14.  GENERAL PROVISIONS
 
14.1          Construction.
 
Within this Option Agreement, the other Transaction Documents and all other
documents required to consummate the transactions contemplated hereby, the
singular shall include the plural and the plural shall include the singular, and
any gender shall include all other genders, all as the meaning and the context
of this Option Agreement shall require.  Unless otherwise specified, references
to section numbers contained herein shall mean the applicable section of this
Option Agreement and references to exhibits and schedules shall mean the
applicable exhibits and schedules to this Option Agreement.  The parties have
participated jointly in the negotiation and drafting of this Option Agreement.
In the event an ambiguity or question of intent or interpretation arises, this
Option Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Option Agreement.  Any
reference to any federal, state, local, or foreign statute or Law shall be
deemed also to refer to all rules and regulations promulgated thereunder and any
successor statute or Law thereto, unless the context requires otherwise.  Unless
otherwise expressly provided, the word “including” does not limit the preceding
words or terms.
 
14.2          Further Assurances.
 
Each party hereto shall use its commercially reasonable efforts to comply with
all requirements imposed hereby on such party and to cause the transactions
contemplated herein to be consummated as contemplated herein and shall, from
time to time and without further consideration, either before or after the
Closing, execute such further instruments and take such other actions as any
other party hereto shall reasonably request in order to fulfill its obligations
under this Option Agreement and to effectuate the purposes of this Option
Agreement and to provide for the orderly and efficient transition to the Buyer
of the ownership of the Casablanca Units.
 
14.3         Costs and Expenses.
 
Sellers shall bear the Seller Transaction Costs and the Buyer shall bear the
Buyer Transaction Costs, and to the extent not covered by the foregoing, each
party will pay its own costs and expenses.
 
14.4         Notices.
 
All notices or other communications permitted or required under this Option
Agreement shall be in writing and shall be sufficiently given if and when hand
delivered or sent by facsimile to the Persons set forth below or if sent by
documented overnight delivery service or certified mail, postage prepaid, return
receipt requested, addressed as set forth below or to such other Person or
Persons and/or at such other address or addresses (or facsimile number) as shall
be furnished in writing by any party hereto to the others.  Any such notice or
communication shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt or confirmation
therefor in all other cases.
 
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To the Buyer:
 
Omega Healthcare Investors, Inc.
Suite 3500
200 Independence Circle
Hunt Valley, MD 21030
Attention:      C. Taylor Pickett
Facsimile:       (410) 824-3570
 
With a copy to:
 
Bryan Cave LLP
One Atlantic Center
14th Floor
1201 West Peachtree Street, N.E.
Atlanta, Georgia  30309-3488
Attention:      Rick Miller
Telephone:     (404) 572-6787
Telecopier:     (404) 420- 0787
 
 
To the Sellers:
 
c/o CapitalSource Inc.
4445 Willard Avenue
12th Floor
Chevy Chase, MD
Attention:      General Counsel
Facsimile:       (301) 841-2380
 
With a copy to:
 
Hogan & Hartson LLP
Columbia Square
555 Thirteenth Street, NW
Washington, DC  20004
Attention:      James Showen
                         Alexander Cobey
Facsimile:       (202) 637-5910
 
14.5         Assignment and Benefit.
 
(a)   This Option Agreement shall be binding upon and inure to the benefit of
the parties and their respective permitted successors and assigns.  Neither this
Option Agreement, nor any of the rights hereunder or thereunder, may be assigned
by any party, nor may any party delegate any obligations hereunder or
thereunder, without the written consent of the other parties hereto or thereto;
provided, that the Buyer may assign its rights hereunder to one or more of its
wholly-owned Subsidiaries (but the Buyer shall not be released from its
obligations hereunder upon any such assignment).  Any assignment or attempted
assignment other than in accordance with this Section  14.5 (a) shall be void ab
initio.
 
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(b)   Except as provided in Section 6.7 (Seller Releases) and Section 11.2
(Indemnification), this Option Agreement shall not be construed as giving any
Person, other than the parties hereto and their permitted successors, heirs and
assigns, any legal or equitable right, remedy or claim under or in respect of
this Option Agreement or any of the provisions herein contained, this Option
Agreement and all provisions and conditions hereof being intended to be, and
being, for the sole and exclusive benefit of such parties, and their respective
permitted successors, heirs and assigns and for the benefit of no other Person
or entity.
 
14.6          Amendment, Modification and Waiver.
 
The parties hereto may amend or modify, or may waive any right or obligation
under, this Option Agreement in any respect, provided that any such amendment,
modification or waiver shall be in writing and executed by the Buyer and
Sellers.  No waiver of any breach of any provision of this Option Agreement
shall constitute or operate as a waiver of any other breach of such provision or
of any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
 
14.7          Governing Law; Consent to Jurisdiction.
 
This Option Agreement is made pursuant to, and shall be construed and enforced
in accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State, irrespective of the principal
place of business, residence or domicile of the parties hereto, and without
giving effect to otherwise applicable principles of conflicts of law.  Any legal
action, suit or Proceeding arising out of or relating to this Option Agreement
shall be instituted, heard and determined exclusively in any federal court or in
any state court located in Wilmington, Delaware, and each party hereto hereby
waives any objection which such party may now or hereafter have to the laying of
the venue of any such action, suit or Proceeding, and hereby irrevocably and
unconditionally submits to the jurisdiction of any such court.  Any and all
service of process and any other notice in any such action, suit or Proceeding
shall be effective against any party hereto if given as provided in Section
14.4.  Nothing herein contained shall be deemed to affect the right of any party
to serve process in any other manner permitted by applicable Law.
 
14.8         Section Headings and Defined Terms.
 
The section headings contained herein are for reference purposes only and shall
not in any way affect the meaning and interpretation of any of the provisions of
this Option Agreement. Except as otherwise indicated, all agreements defined
herein refer to the same as from time to time amended or supplemented or the
terms thereof waived or modified in accordance herewith and therewith.  All
references to Schedules herein shall be references to Schedules in the Purchase
Agreement.
 
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14.9          Severability.
 
If any term or other provision of this Option Agreement is invalid, illegal or
incapable of being enforced by any rule of Law, or public policy, all other
conditions and provisions of this Option Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party.  Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Option Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
 
14.10        Counterparts.
 
This Option Agreement and the other documents required to consummate the
transactions contemplated herein may be executed in one or more counterparts,
each of which shall be deemed an original (including facsimile and PDF
signatures), and all of which together shall be deemed to be one and the same
instrument.  The parties hereto may deliver this Option Agreement and the other
documents required to consummate the transactions contemplated herein by
telecopier machine/facsimile or via e-mail and each party shall be permitted to
rely upon the signatures so transmitted to the same extent and effect as if they
were original signatures.
 
14.11        Entire Agreement.
 
This Option Agreement, the other Transaction Documents, the Disclosure Schedule
and the schedules and exhibits hereto constitute the entire agreement between
the parties hereto, and supersede all prior agreements and understandings
(written or oral), with respect to such subject matter.
 
14.12        Waiver of Jury Trial.
 
EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS OPTION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
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14.13        Remedies.
 
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party shall be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by Law or equity upon such party, and the
exercise by a party of any one remedy shall not preclude the exercise of any
other remedy.  Notwithstanding the foregoing, the rights and remedies contained
in this Option Agreement shall constitute the sole and exclusive means of
recourse against Sellers with respect to any current or future environmental
conditions at, on, under or emanating from any of the Casablanca Properties or
any other real property currently or formerly owned by Casablanca Holdings, and
the Buyer expressly waives any and all other claims, rights, or causes of action
it may have against Sellers, now or in the future, arising under, in connection
with or relating to any Environmental Law (whether by statute, regulation, or
common law) with respect to such properties.  The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Option Agreement were not performed in accordance with their specific terms or
were otherwise breached.  It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Option
Agreement and to enforce specifically the terms and provisions of this Option
Agreement, this being in addition to any other remedy to which the parties are
entitled at Law or in equity.  Notwithstanding anything to the contrary in this
Option Agreement, in no event shall either party to this Option Agreement be
liable for punitive damages however caused and on any theory of liability,
arising out of the performance of, or the failure to perform, any obligation(s)
set forth herein.
 
 
[Remainder of Page Intentionally Left Blank]
 
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Casablanca
Option Agreement as of the date first written above.
 
 
 

 
SELLERS:
         
CAPITALSOURCE INC.
         
 
By:
      Name:      Title:   

 

     
CSE SLB LLC
         
 
By:
      Name:    Title:   

 
 

 
BUYER:
         
OMEGA HEALTHCARE INVESTORS, INC.
         
 
By:
/s/ C. Taylor Pickett     Name: C. Taylor Pickett     Title:   Chief Executive
Officer  

 

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CASABLANCA OPTION AGREEMENT
 
by and among
 
CAPITALSOURCE INC.,
 
CSE SLB LLC,
 
and
 
OMEGA HEALTHCARE INVESTORS, INC.
 
December 22, 2009
 
 
 
 
 
 
 

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TABLE OF CONTENTS
 
 
SECTION 1.
GRANT OF OPTION
1
SECTION 2.
PURCHASE AND SALE OF OPTION AND CASABLANCA UNITS
1
 
2.1
Purchase Price for Casablanca Option.
1
 
2.2
Purchase Price For Casablanca Units.
2
 
2.3
Additional Adjustments and Apportionments.
3
 
2.4
Payments and Computations.
5
SECTION 3.
EXERCISE OF CASABLANCA OPTION
5
   
Exercise.
5
SECTION 4.
SELLERS’ REPRESENTATIONS AND WARRANTIES
5
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
5
 
5.1
Organization and Good Standing.
5
 
5.2
Power and Authorization.
6
 
5.3
Validity of Contemplated Transactions.
6
 
5.4
Consents.
6
 
5.5
Operator Matters.
7
SECTION 6.
COVENANTS OF THE PARTIES UNTIL CLOSING
7
 
6.1
Conduct of Business Pending Closing.
7
 
6.2
Access.
9
 
6.3
Consents and Cooperation.
10
 
6.4
No Solicitation.
11
 
6.5
Disclosure Schedule.
12
 
6.6
Notices of Certain Events.
12
 
6.7
Seller Releases.
13

 

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6.8
Property Financial Statements.
14
 
6.9
Public Announcements.
14
 
6.10
Confidentiality.
14
 
6.11
Estoppel Certificates.
14
 
6.12
Intercreditor Arrangements.
14
 
6.13
Senior Loan Extension.
15
 
6.14
Title Searches; Title Commitments.
15
 
6.15
Seller Cooperation with Transaction Financing.
16
SECTION 7.
CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS
18
 
7.1
Deliveries at the Closing.
18
 
7.2
Representations and Warranties.
18
 
7.3
Performance of Covenants.
18
 
7.4
No Material Adverse Effect.
19
 
7.5
Approvals.
19
 
7.6
Legal Matters.
19
 
7.7
Outstanding Indebtedness.
19
 
7.8
Title Insurance.
19
 
7.9
Replacement Leases for Canton and Hilliard
20
SECTION 8.
CONDITIONS PRECEDENT TO SELLERS’ OBLIGATIONS
20
 
8.1
Deliveries at Closing.
20
 
8.2
Representations and Warranties.
21
 
8.3
Performance of Covenants.
21
 
8.4
Approvals.
21
 
8.5
Legal Matters.
21
 
8.6
Assumed Indebtedness.
21

 

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SECTION 9.
CLOSING
22
 
9.1
Time and Place of the Closing; Extension.
22
 
9.2
Deliveries at the Closing by Sellers.
22
 
9.3
Deliveries at the Closing by the Buyer.
23
 
9.4
Transfer Taxes.
24
SECTION 10.
REMEDIES
24
 
10.1
Clawback Remedy.
24
SECTION 11.
INDEMNIFICATION
25
 
11.1
Survival.
25
 
11.2
Indemnification.
26
SECTION 12.
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
29
 
12.1
Casualty.
29
 
12.2
Condemnation Pending Closing.
30
SECTION 13.
DEFINITIONS
31
SECTION 14.
GENERAL PROVISIONS
41
 
14.1
Construction.
41
 
14.2
Further Assurances.
41
 
14.3
Costs and Expenses.
41
 
14.4
Notices.
41
 
14.5
Assignment and Benefit.
42
 
14.6
Amendment, Modification and Waiver.
43
 
14.7
Governing Law; Consent to Jurisdiction.
43
 
14.8
Section Headings and Defined Terms.
43
 
14.9
Severability.
44
 
14.10
Counterparts.
44
 
14.11
Entire Agreement.
44
 
14.12
Waiver of Jury Trial.
44
 
14.13
Remedies.
45