Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TRANSITION SERVICES AGREEMENT

 

BY AND BETWEEN

 

HCP, INC.

 

and

 

QUALITY CARE PROPERTIES, INC.

 

Dated as of

 

October 31, 2016

 

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TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of
October 31, 2016 (the “Effective Date”), by and between HCP, INC., a Maryland
corporation (“Service Provider”), and QUALITY CARE PROPERTIES, INC., a Maryland
corporation (“Service Recipient”).  Service Provider and Service Recipient are
sometimes referred to herein individually as a “Party,” and collectively as the
“Parties.”  Capitalized terms used but not otherwise defined herein shall have
the respective meanings set forth in Section 1.1.

 

RECITALS

 

WHEREAS, the board of directors of Service Provider has determined that it is
advisable and in the best interests of Service Provider and its stockholders to
reorganize and separate the assets and liabilities of Service Provider into two
companies:  (i) Service Provider which, following consummation of the
separation, will own and conduct the HCP Business; and (ii) Service Recipient
which, following consummation of the separation, will own and conduct the SpinCo
Business (the “Separation”);

 

WHEREAS, in furtherance of the Separation, concurrently with the execution of
this Agreement, Service Provider and Service Recipient are entering into a
Separation and Distribution Agreement (the “Separation Agreement”); and

 

WHEREAS, in furtherance of the Separation and in connection with the
transactions contemplated by the Separation Agreement, Service Provider will
provide certain transition services to Service Recipient in accordance with the
terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1      Definitions.  Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Separation
Agreement.  As used in this Agreement, capitalized terms which are defined
herein shall have the meaning ascribed to them herein, including the following
terms shall have the meanings set forth in this Section 1.1:

 

“Host Systems” shall mean those software and information technology systems,
applications and platforms selected by Service Provider, in its sole discretion,
for use in connection with its provision of the Services hereunder.

 

 

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“Representative(s)” shall mean (a) with respect to Service Provider, Service
Provider, its Affiliates and each of their respective officers, directors,
employees, consultants, contractors and agents, in each case to the extent
designated by Service Provider to provide Services under this Agreement, and
(b) with respect to Service Recipient, Service Recipient, its Affiliates and
each of their respective officers, directors, employees, consultants,
contractors and agents, in each case to the extent authorized to receive
Services or to perform any obligations on behalf of Service Recipient pursuant
to this Agreement.

 

“Service(s)” shall mean all services to be provided by Service Provider to
Service Recipient as described on the Transition Services Schedule.

 

“Transition Services Schedule” means those applications, services, functions and
reports to the extent specifically set forth in Schedule A.

 

“Third Party” means any Person other than Service Provider, Service Recipient or
their respective Affiliates.

 

ARTICLE II

 

SERVICES

 

Section 2.1      General.  Subject to the terms and conditions of this
Agreement, Service Recipient will purchase the Services from Service Provider
and Service Provider will provide the Services to Service Recipient during the
Term.  Service Recipient acknowledges and agrees that Service Provider may
provide Services itself or by or through one or more of its Affiliates,
Representatives or Third Parties.

 

Section 2.2      Transition.  Service Recipient shall use reasonable efforts to
transition the provision of Services from Service Provider to Service Recipient
as soon as reasonably practicable, but in no event later than the Term.  It is
the Parties’ shared objective to transition responsibility for the performance
of Services from Service Provider to Service Recipient in a manner that
minimizes, to the extent reasonably possible, disruption to the HCP Business and
SpinCo Business.  Service Provider shall have no obligation to perform any
Services following the Term of this Agreement.

 

Section 2.3      Information.  Unless otherwise mutually agreed by the Parties,
the Transition Services Schedule and any amendments thereto shall set forth, at
a minimum, the following information for each listed Service:

 

(a)     a description of the Service to be provided;

 

(b)     the time period during which the Service will be provided;

 

(c)     the location(s) where Services are to be provided, if applicable;

 

(d)     the fees, if any, payable by Service Recipient for such Service in
addition to the Service Fee, including, where applicable, the methodology used
to determine such fees; and

 

(e)     any other terms uniquely applicable to such Service.

 

 

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Section 2.4      Nature of Services.

 

(a)     Service Provider shall use reasonable efforts to perform, or use
reasonable efforts to cause its Affiliates, Representatives or Third Party
contractors to perform, the Services in the manner and quality consistent with
the manner and quality and at a relative level of service substantially similar
to the level that such Services were performed internally by Service Provider
(or by its Affiliates, Representatives or Third Party contractors, as
applicable) with respect to the SpinCo Business immediately prior to the
Effective Date, subject to any limitations or restrictions posed by or resulting
from (a) changes in the nature, scope and performance levels of such Service
necessitated by the Separation or the transactions contemplated by the
Separation Agreement, (b) any modification in process for providing Services
necessitated by the separation of the SpinCo Business from Service Provider’s
continuing operations, (c) any change in scope (as agreed in writing by the
Parties from time-to-time during the Term of this Agreement), (d) any
restrictions imposed on Service Provider by applicable Law, and (e) any
contractual obligations owed by Service Provider to any Third Party(ies). For
the avoidance of doubt, in providing the Services, Service Provider may use any
information systems, hardware, software, processes and procedures it deems
necessary or desirable in its reasonable discretion.

 

(b)     To the extent Service Provider fails to provide Services in accordance
with the terms of this Agreement, Service Recipient’s sole and exclusive remedy
for such failure shall be (i) to require Service Provider to re-perform the
non-conforming portion of such Service in accordance with this Agreement without
obligation on the part of Service Recipient to make additional payments for such
performance, or (ii) to replace such Service with service provided by a Third
Party provider.

 

Section 2.5      Service Limitations.

 

(a)     Notwithstanding any provision of this Agreement or the Separation
Agreement to the contrary:

 

(i)      Except as and to the extent set forth in Section 3, Service Provider
shall have no obligation to provide Service Recipient with access to or use of
any Service Provider information technology systems, information technology,
platforms, networks, applications, software databases or computer hardware;

 

(ii)     Service Provider shall have no obligation to provide Service Recipient
with any applications, services, functions and reports other than the Services,
and Service Provider shall not be obligated to provide and shall not be deemed
to be providing any advisory services (including without limitation any legal,
financial, accounting, insurance, regulatory or tax advice) to Service Recipient
or any of its Representatives as part of or in connection with the Services or
otherwise;

 

 

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(iii)    Service Provider shall have no obligation (pursuant to this Agreement,
as part of or in connection with the Services, as a result of storing or
maintaining any data or otherwise) to prepare or deliver any notification or
report to any Governmental Authority or other Person on behalf of Service
Recipient or any of its Representatives; and

 

(iv)    in no event shall Service Provider or its Affiliates have any obligation
to favor Service Recipient or any of its Affiliates’ operation of the SpinCo
Business over Service Provider’s own business operations or those of its
Affiliates.

 

(b)     Notwithstanding any provision of this Agreement or the Separation
Agreement to the contrary, Service Provider shall not be required to:

 

(i)      perform any Service in any manner that violates or contravenes any
restrictions imposed on Service Provider by applicable Law;

 

(ii)     perform any Service in any manner that breaches or contravenes any
contractual obligations owed by Service Provider to any Third Party(ies). 
Service Provider will provide written notice to Service Recipient to the extent
any such Third Party contractual obligation will materially impact the provision
of Services hereunder;

 

(iii)    hire any additional employees;

 

(iv)    maintain the employment of any one or more specific employees;

 

(v)     purchase, lease or license any additional equipment, software (including
additional seats or instances under existing software license agreements) or
other resources; or

 

(vi) bear or pay any costs related to the transfer or conversion of the Service
Recipient’s data to the Service Recipient, any Representative of the Service
Recipient, or any alternate supplier of Services.

 

(c)     Service Provider shall have the right to shut down temporarily for
maintenance or similar purposes the operation of any facilities or systems
providing any Service whenever in Service Provider’s reasonable judgment such
action is necessary or advisable for general maintenance or emergency purposes;
provided that Service Provider will use its reasonable efforts to schedule
non-emergency maintenance impacting the Services so as not to materially disrupt
the operation of the SpinCo Business by Service Recipient. Service Provider will
use reasonable efforts to give Service Recipient reasonable advance notice of
any planned shutdown. With respect to the Services dependent on the operation of
such facilities or systems, Service Provider shall be relieved of its
obligations hereunder to provide such Services during the period that such
facilities or systems are shut down.  Service Recipient acknowledges that
certain Services may be subject to network or other delays outside of Service
Provider’s direct control and that the Services may be affected by such network
or other delays in the same manner.

 

 

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(d)     Service Provider shall be excused from performing any Service under this
Agreement to the extent that, and for so long as, it is prevented from
performing such Service as a result of Service Recipient’s or any of its
Representatives’ failure to comply with Service Recipient’s obligations under
this Agreement.

 

Section 2.6      Additional Services.  During the Term, the Parties may identify
additional services that are not described in the Transition Services Schedule
(collectively, the “Additional Services”).  Upon mutual agreement by the Parties
with respect to the price, terms and conditions for the provision of a given
Additional Service, the Parties shall execute a written amendment to the
then-current Transition Services Schedule to reflect such Additional Service and
associated price, terms and conditions.  Neither Party shall have any obligation
to execute any amendment to the initial or any subsequent version of the
Transition Services Schedule.

 

Section 2.7      Use of Services.  Service Provider shall not be required to
provide the Services to any Person other than Service Recipient and its
Affiliates, and shall not be required to provide Services in connection with
anything other than the Service Recipient’s or its Affiliates’ use or operation
of the SpinCo Business after the Effective Date.  Service Recipient shall not,
and shall not permit its or any of its Affiliates’ employees, agents or
representatives to, resell any Services to any Third Party or permit the use of
any Services by any Third Party.

 

Section 2.8      Third Party Consents.   If (a) Service Provider’s provision of
any Service requires any license or services provided by a Third Party, (b) such
Service is included in the then-current Transition Services Schedule, and
(c) Service Provider’s contract with the applicable Third Party for the Service
does not permit such Third Party license or service to be provided by or passed
through Service Provider (as a non-Affiliate service provider) to Service
Recipient, then Service Provider will use reasonable efforts to secure the
consent of such Third Party to provide Service Recipient with access to such
Third Party license or Service, as applicable, in accordance with the terms and
conditions of this Agreement, provided, however, that in no event shall Service
Provider have any obligation to make any payment or expend any funds, assume any
liability, or offer or grant any accommodation or concession (financial or
otherwise) to secure such consent.  If Service Provider is unable to secure the
consent of the applicable Third Party vendor using its reasonable efforts, then,
notwithstanding any provision of this Agreement or the Separation Agreement to
the contrary, Service Provider shall have no obligation to provide the impacted
Service(s) to Service Recipient.

 

ARTICLE III

 

HOST SYSTEM ACCESS

 

Section 3.1      Host Systems Access. Subject to the terms and conditions of
this Agreement, during the Term, Service Provider will permit the Service
Recipient to access the Host Systems, in each case, for the sole purpose of
receiving the Services in accordance with the terms and conditions expressly
stated in this Agreement.

 

 

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Section 3.2      Disabling Code. Service Recipient shall not, and shall cause
each of its Representatives not to, knowingly introduce or otherwise expose any
Host System to any (a) computer code or instructions (e.g., malicious code or
viruses) that may disrupt, damage, or interfere with the Host System or other
software or firmware stored or operated thereon, (b) device that is capable of
automatically or remotely stopping any Host System from operating, in whole or
in part (e.g., passwords, fuses or time bombs), (c) “back doors” or “trap doors”
which allow for any access or bypassing of any security feature of the Host
System, or (d) any barriers designed for, or having the effect of, preventing
Service Provider from accessing all or any portion of its systems, software or
data.

 

Section 3.3      Connectivity and Compliance Measures.  Service Recipient shall,
at its sole expense (a) provide all network connectivity necessary for each of
its Representatives to connect to the Host Systems and (b) comply, and cause
each of its Representatives to comply, with all information security policies
and procedures of Service Provider of which they are informed in connection with
their access to the Host Systems and receipt and use of the Services.

 

ARTICLE IV

 

TERM AND TERMINATION

 

Section 4.1      Term.  This Agreement shall commence on the Effective Date and
terminate on the earlier of (a) twelve (12) months after the Effective Date or
(b) completion of all Services to be provided by Service Provider under this
Agreement (the “Initial Term”), unless earlier terminated under this Section 4. 
This Agreement may be extended, either in whole or with respect to one or more
of the Services, by mutual written agreement of the Parties, consent to which
extension shall be in each Party’s absolute discretion (a “Renewal Term,” and
together with the Initial Term, the “Term”); and provided further that any
Service which is subject to a Renewal Term shall be provided by or on behalf of
Service Provider to the Service Recipient during the Renewal Term at a price to
be mutually agreed upon in writing by the Parties.

 

Section 4.2      Termination.

 

(a)     Either Party may terminate this Agreement in its entirety or with
respect to affected Services if the other Party commits a material breach of
this Agreement and fails to cure such breach within fifteen (15) business days
or five (5) business days in the event of a payment breach) after receiving
written notice of the breach.  Each Party hereby acknowledges and agrees that
any breach by any of its Representatives of any term or condition of this
Agreement shall be deemed to be a breach by such Party of such term or
condition.

 

(b)     Service Recipient may terminate this Agreement, either with respect to
all or any portion of any one or more of the Services provided to Service
Recipient hereunder, for any reason or for no reason, at any time upon at least
thirty (30) days’ prior written notice to Service Provider, unless the
Transition Services Schedule specifically provides otherwise.  Service Recipient
acknowledges and agrees that (a) Services provided by Third Parties may be
subject to term-limited licenses and contracts between Service Provider and
applicable Third Parties (collectively, “Provider Third Party Contracts”),
(b) the renewal periods under the Provider Third Party Contracts may be for
fixed periods, and (c) Service Provider may not have

 

 

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the right to renew certain Provider Third Party Contracts.  As a result, Service
Recipient agrees that (i) if Service Provider is required to extend any Provider
Third Party Contract in order to continue to provide any Service during the
Term, then Service Recipient shall be required to pay Service Provider the
amount of any renewal fees or purchase commitments applicable to the relevant
Service for the full renewal period specified in the applicable Provider Third
Party Contract, regardless of whether the Term or Service Provider’s provision
of the relevant Service ends prior to the end of the relevant renewal period,
and (ii) Service Provider will not be required to provide any Service to the
extent it is unable to renew any applicable Provider Third Party Contract.

 

(c)     Any provision of this Agreement which by its nature should survive the
termination hereof, including the provisions of this Section 4.2 (Termination),
and Articles IX, X, XI and XIII hereof shall survive the termination of this
Agreement.

 

ARTICLE V

 

PAYMENT TERMS AND TAX MATTERS

 

Section 5.1      Charges for Services.  Service Recipient shall pay Service
Provider the fee set forth on Schedule A (the “Service Fee”), plus any
additional fees for particular Services as provided herein, in accordance with
the terms set forth in this Article V. If and to the extent that the Services
are subsequently increased (whether through the addition of Services, through
the extension of the duration of particular Services, or otherwise) or reduced
(whether through Service Recipient’s permitted early termination of particular
Services or otherwise), the Parties shall cooperate in good faith to mutually
agree upon a commensurate increase or decrease, as the case may be, in the
Service Fee payable for the affected period(s) of time.

 

Section 5.2      Expenses.  Without limiting Service Provider’s payment
obligations with respect to service charges under Section 5.1 or Provider Third
Party Contracts pursuant to Section 4.2(b), Service Recipient shall, for each
Service performed, reimburse Service Provider for any reasonable documented
out-of-pocket amounts payable to any one or more Third Parties which are
incurred by Service Provider or its Representatives in connection with the
Service Provider’s provision of the Services (“Expenses”).  Without limiting the
foregoing, Expenses shall include (a) expenses payable to Third Parties for
tailoring, expanding or otherwise modifying any service provided to the SpinCo
Business prior to the Effective Date in any manner required to provide such
Service to Service Recipient in accordance with the terms and conditions of this
Agreement following the Closing Date, (b) Third Party fees, costs or expenses
payable by Service Provider or any of its Representatives to any Third
Party(ies) for the licensing, provisioning, implementation, maintenance or
operation of separate environments, separate instances of existing environments
or “clean” environments necessary to provide the Services to Service Recipient,
(c) any fees payable to any Third Party(ies) that are associated with extending,
expanding or maintaining Third Party licenses or other contracts necessary to
provide the Services to Service Recipient, and (d) outside professional fees
(including without limitation accounting and legal fees).  Any individual
reimbursable Expense in excess of Twenty-Five Thousand Dollars ($25,000) must be
pre-approved by the SRBRM (as defined in Section 6.2), and, for clarity, if the
proposed Expense is not approved by the SRBRM then Service Provider shall have
no obligation to provide the affected Service, or portion thereof, which would
have been supplied or facilitated by incurrence of the proposed Expense.

 

 

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Section 5.3      Payment Terms.   Service Provider shall invoice Service
Recipient monthly for all charges pursuant to this Agreement.  To the extent the
applicable invoice contains charges in addition to the Service Fee, or Expenses
for which reimbursement is being sought, such invoice shall contain reasonable
detail of the additional charges or the applicable Expenses.  Service Recipient
shall pay Service Provider for all amounts due for Services provided hereunder,
or reimbursable Expenses incurred, within thirty (30) days from Service
Provider’s delivery of an invoice therefor.  Late payments shall bear interest
at the lesser of 10% per annum or the maximum rate allowed by Law.  Failure to
pay amounts due hereunder pursuant to the terms of this Agreement is agreed by
the Parties to be a material breach and Service Provider may terminate this
Agreement under Section 4.2 hereof.

 

Section 5.4      Books and Records.   During the Term, each Party shall keep
such books, records and accounts as are reasonably necessary to verify the
calculation of the fees and related expense for Services provided hereunder.
Service Provider shall provide or make available documentation supporting any
amounts invoiced pursuant to Section 5.3 as Service Recipient may from time to
time reasonably request, at Service Recipient’s cost. Service Recipient shall
have the right, at Service Recipient’s cost, to review such books, records and
accounts no more than twice per year during normal business hours upon
reasonable written notice, and Service Recipient agrees to conduct any such
review in a manner so as not to unreasonably interfere with Service Provider’s
normal business operations.

 

Section 5.5      Disputes.

 

(a)     Except as the Parties may expressly agree in writing, amounts due
hereunder shall not be offset by amounts due under any other agreement. 
Further, the Parties agree that disputes related to any other agreement shall
not serve as grounds to delay payment obligations or otherwise fail to perform
under this Agreement.

 

(b)     Should Service Recipient reasonably and in good faith contest any
invoice (or any part thereof), or should any Party have any other dispute under
this Agreement, the disputing Party shall notify the other Party in writing of
such dispute and provide the other Party with a reasonably detailed description
of the basis for such dispute, and in the case of a disputed invoice, prior to
the payment due date for the applicable invoice.  Promptly upon the Party’s
receipt of notice of such dispute, the Service Provider Business Relationship
Manager (“SPBRM”) and the Service Recipient Business Relationship Manager
(“SRBRM”) shall confer and attempt to resolve such dispute.  If the SPBRM and
SRBRM are unable to resolve such dispute within ten (10) days following their
initially conferring with one another about it, then the SPBRM and SRBRM shall
give written notice of such dispute to the Senior Officers.  “Senior Officers”
means Service Provider’s Chief Financial Officer, and Service Recipient’s Chief
Financial Officer; provided, however, that, each Senior Officer shall be
entitled to designate another senior functional leader of his company to act in
his stead when he deems appropriate.  Promptly upon receiving notice of the
dispute, the Senior Officers shall confer and attempt to resolve such dispute. 
If the Senior Officers are unable to resolve such dispute within ten (10) days
following their initially conferring with one another about it, then such
dispute will be escalated and resolved in accordance with Article X of the
Separation Agreement, mutatis mutandis.

 

 

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Section 5.6      Taxes.  In addition to any amounts otherwise payable by Service
Recipient pursuant to this Agreement, Service Recipient shall be responsible,
and promptly pay or reimburse Service Provider, for any sales, use, value added,
goods and services, excise, transfer, recording or similar taxes, including any
interest, penalties or additional amounts imposed with respect thereto, imposed
with respect to, or in connection with, the provision of Services or payment of
any fees hereunder.

 

ARTICLE VI

 

TRANSITION SERVICE RESPONSIBILITIES

 

Section 6.1      Responsibilities of Service Provider.

 

(a)     During the Term, Service Provider agrees to designate and maintain an
ongoing primary contact: (a) with whom Service Recipient may communicate about
current issues, needs, and problem resolution; (b) who has authority to make or
cause to be made prompt technical decisions on Service Provider’s part; (c) who
will be reasonably accessible by Service Recipient; and (d) who will remain
generally knowledgeable about Service Provider’s policies and procedures in
connection with the provision of the Services. Such Service Provider contact is
referred to herein as the SPBRM.  The SPBRM shall have regular meetings with the
SRBRM, in person or via teleconference, pursuant to a reasonable schedule agreed
to by the SPBRM and SRBRM, to discuss the performance of the Parties of their
obligations under this Agreement and to resolve any disputes pursuant to
Section 5.4.  Service Provider may change its SPBRM from time-to-time upon
prior, written notice to Service Recipient.

 

(b)     Service Provider shall provide technical assistance and training to
Service Recipient personnel to the extent specified in the Transition Services
Schedule.

 

(c)     Service Provider shall perform its obligations under this Agreement in a
manner consistent with all Laws applicable to Service Provider in its capacity
as a third party provider of the Services to the Service Recipient.

 

Section 6.2      Responsibilities of Service Recipient.

 

(a)     Following the Effective Date, Service Recipient shall exercise ultimate
control over the operation of the SpinCo Business.  By entering into this
Agreement, Service Recipient is not delegating any powers, duties or
responsibilities to Service Provider or any of its Representatives that are
required to be exercised or performed by the Service Recipient under applicable
Laws.  Service Recipient shall be solely responsible for the operation of the
SpinCo Business in accordance with all applicable Laws.

 

(b)     During the Term, Service Recipient agrees to designate and maintain an
ongoing primary contact: (a) with whom Service Provider may communicate about
current issues, needs, and problem resolution; (b) who has authority to make or
cause to be made prompt technical decisions on Service Recipient’s part; and
(c) who will be reasonably

 

 

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accessible by Service Provider. Such Service Recipient contact is referred to
herein as the Service Recipient Business Relationship Manager (“SRBRM”).  The
SRBRM shall have regular meetings with the SPBRM, in person or via
teleconference, pursuant to a reasonable schedule agreed to by the SRBRM and
SPBRM, to discuss the performance of the Parties of their obligations under this
Agreement and to resolve any disputes pursuant to Section 5.4. Service Recipient
may change its SRBRM from time-to-time upon prior, written notice to Service
Provider.

 

(c)     Service Recipient shall provide Service Provider and its Representatives
with access to its facilities as is reasonably necessary for Service Provider to
perform the Services.

 

(d)     Service Recipient shall provide Service Provider and its Representatives
with all information and documentation reasonably necessary for Service Provider
to perform the Services.

 

(e)     Service Recipient shall make available, as reasonably requested by
Service Provider, reasonable access to resources (including personnel) and
provide timely decisions in order that Service Provider may perform its
obligations hereunder.

 

(f)      Service Recipient acknowledges and agrees that certain of the
Transition Services to be provided hereunder were previously performed for
Service Provider or its Affiliates by individuals who may no longer be employed
by Service Provider or its Affiliates as a result of the consummation of the
transactions contemplated by the Separation Agreement and that the provision of
the Services to Service Recipient may require Service Provider’s reasonable
access to, or support from, Service Recipient’s relevant employees.

 

(g)     Service Recipient is and shall remain solely responsible for the
content, accuracy and adequacy of all data that Service Recipient or its
Representatives transmit or have transmitted to Service Provider for processing
or use in connection with the performance of Services.

 

(h)     Service Recipient shall comply, and shall cause its Representatives to
comply, with all applicable Laws in connection with their respective operations
and obligations under this Agreement, including, the receipt and use of the
Services.

 

Section 6.3      Mutual Responsibilities.  The Parties will reasonably cooperate
with each other in all matters relating to the provision and receipt of
Services.  Such reasonable cooperation shall include:

 

(i)   exchanging information relevant to the provision of Services hereunder;

 

(ii)  good faith efforts to mitigate problems with the work environment
interfering with the Services; and

 

 

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(iii)    each Party requiring its personnel to obey, while on the other Party’s
premises, applicable security regulations and procedures and other published
policies of which it is informed by the other Party.

 

ARTICLE VII

 

INTELLECTUAL PROPERTY

 

Section 7.1      Existing Ownership Rights Unaffected.  Neither Party will gain,
by virtue of this Agreement, any rights of ownership or use of copyrights,
patents, trade secrets, trademarks or any other intellectual property rights
owned by the other Party or its Affiliates.  No license, title, ownership, or
other intellectual property or proprietary rights are transferred to Service
Recipient or any Representative of Recipient Representative pursuant to this
Agreement, and Service Provider retains all such rights, titles, ownership and
other interests in the Host Systems and all other software, hardware, systems
and resources it uses to provide the Services, including, any special programs,
functionalities, interfaces, or other work product that Service Provider or its
Representatives may develop at Service Recipient’s request to provide the
Services.   Service Provider shall be the sole and exclusive owner of, and
nothing in this Agreement shall be deemed to grant Service Recipient or any
Representative of Service Recipient any right, title, license, leasehold right
or other interest in or to, any copyrights, patents, trade secrets, other
intellectual property rights, ideas, concepts, techniques, inventions,
processes, systems, works of authorship, facilities, floor space, resources,
special programs, functionalities, interfaces, computer hardware or software,
documentation or other work product developed, created, modified, improved, used
or relied upon by Service Provider or its Representatives in connection with the
Services or the performance of Service Provider’s obligations hereunder.  For
the avoidance of doubt, no such items shall be considered a work made for hire
within the meaning of Title 17 of the United States Code.

 

ARTICLE VIII

 

RELATIONSHIP BETWEEN THE PARTIES

 

Section 8.1      Independent Contractors.  The Parties to this Agreement are and
shall remain independent contractors and neither Party is an employee, agent,
partner, franchisee or joint venturer of or with the other.  Each Party will be
solely responsible for any employment-related taxes, insurance premiums or other
employment benefits respecting its employees.  Neither Party shall hold itself
out as an agent of the other and neither Party shall have the authority to bind
the other.

 

ARTICLE IX

 

CONFIDENTIALITY

 

Section 9.1      Confidentiality.  Service Recipient (on behalf of itself and
each other member of its Group) and Service Provider (on behalf of itself and
each other member of its Group) shall hold, and shall cause each of their
respective Affiliates to hold, and each of the foregoing shall cause their
respective directors, officers, employees, agents, consultants and

 

 

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advisors to hold, in strict confidence, and not disclose or release or use,
without the prior written consent of such member of the other Group, for any
purpose other than as expressly permitted pursuant to this Agreement, any and
all Confidential Information concerning any member of the other Group disclosed
hereunder; provided, that each Party and the members of its Group may disclose,
or may permit disclosure of, such Confidential Information (i) to other members
of their Group and their respective Representatives who have a need to know such
information for purposes of performing services for a member of such Group and
who are informed of their obligation to hold such information confidential to
the same extent as is applicable to the Parties and in respect of whose failure
to comply with such obligations, such Party will be responsible, (ii) if it or
any of its Affiliates are required or compelled to disclose any such
Confidential Information by judicial or administrative process or by other
requirements of Law or stock exchange rule, or (iii) as necessary in order to
permit such Party to prepare and disclose its financial statements, or other
disclosures required by Law or such applicable stock exchange.  Notwithstanding
the foregoing, in the event that any demand or request for disclosure of
Confidential Information is made pursuant to the foregoing clause (ii) above,
the Party requested to disclose Confidential Information concerning a member of
the other Group, shall promptly notify such member of the other Group of the
existence of such request or demand and, to the extent practicable, shall
provide such member of the other Group thirty (30) days (or such lesser period
as is practicable) to seek an appropriate protective order or other remedy,
which the Parties will cooperate in obtaining.  In the event that such
appropriate protective order or other remedy is not obtained, the Party that is
required to disclose Confidential Information about a member of the other Group
shall furnish, or cause to be furnished, only that portion of the Confidential
Information that is legally required to be disclosed and shall use reasonable
efforts to ensure that confidential treatment is accorded such information.

 

Section 9.2      Reasonable Care.  Notwithstanding anything to the contrary set
forth herein, the Parties shall be deemed to have satisfied their obligations
hereunder with respect to Confidential Information of any member of the other
Group if they exercise the same degree of care (but no less than a reasonable
degree of care) as they exercise to preserve confidentiality for their own
similar Confidential Information.

 

ARTICLE X

 

INDEMNIFICATION

 

Section 10.1    Indemnification by Service Recipient.  Service Recipient hereby
agrees to indemnify, defend and hold harmless Service Provider, its Affiliates,
its Representatives and its and their respective officers, directors, agents,
employees and Affiliates, from and against any and all Losses arising out of,
relating to or resulting from (i) Service Recipient’s or any of its
Representatives’ gross negligence or willful misconduct related to this
Agreement, (ii) Service Provider’s or any of its Representatives’ execution of
an instruction of Service Recipient regarding an action to be taken under this
Agreement, (iii) Service Recipient’s or any of its Representatives’ breach of
this Agreement, or (iv) Third Party property damage, personal injury to a Third
Party or infringement of Third Party intellectual property caused by Service
Recipient or its Representatives relating to this Agreement.

 

 

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Section 10.2    Indemnification by Service Provider.  Service Provider hereby
agrees to indemnify, defend and hold harmless Service Recipient and its
officers, directors, agents, employees and Affiliates from and against any and
all Losses arising out of, relating to or resulting from (i) Service Provider’s
or any of its Representatives’ gross negligence or willful misconduct relating
to this Agreement or (ii) Service Provider’s or any of its Representatives’
breach of this Agreement, except to the extent arising from a claim for which
Service Recipient has an indemnification obligation pursuant to Section 10.1.

 

Section 10.3    Procedures for Indemnification.  The provisions of Section 9.4
of the Separation Agreement shall apply to a claim for indemnification
hereunder, mutatis mutandis.

 

ARTICLE XI

 

LIMITATIONS OF LIABILITY; DISCLAIMER

 

Section 11.1    EXCEPT FOR CLAIMS ARISING AS A RESULT OF (A) A PARTY’S BREACH OF
ITS CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE IX, (B) A PARTY’S INDEMNIFICATION
OBLIGATIONS WITH RESPECT TO THIRD PARTY LOSSES UNDER ARTICLE X, OR (C) A PARTY’S
GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD, TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW: (I)  NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY LOST
PROFITS, LOSS OF DATA, LOSS OF USE, COST OF COVER, BUSINESS INTERRUPTION OR
OTHER SPECIAL, INCIDENTAL, DIRECT, INDIRECT, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY, ARISING
FROM THE PERFORMANCE OF, OR RELATING TO, THIS AGREEMENT REGARDLESS OF WHETHER
SUCH PARTY HAS BEEN NOTIFIED OF THE POSSIBILITY OF, OR THE FORESEEABILITY OF,
SUCH DAMAGES; AND (II) SERVICE RECIPIENT’S LIABILITY FOR DAMAGES HEREUNDER SHALL
NOT EXCEED THE AMOUNT OF THE FEES PAID (OR PAYABLE) BY SERVICE RECIPIENT TO
SERVICE PROVIDER UNDER THE TRANSITION SERVICES SCHEDULE.  IN NO EVENT SHALL
SERVICE PROVIDER’S LIABILITY IN THE AGGREGATE FOR DAMAGES HEREUNDER EXCEED THE
AMOUNT OF FEES PAID BY SERVICE RECIPIENT TO SERVICE PROVIDER UNDER THE
TRANSITION SERVICES SCHEDULE (EXCLUDING ALL AMOUNTS PASSED THROUGH OR PAID BY
SERVICE PROVIDER TO A THIRD PARTY HEREUNDER).

 

 

Section 11.2    Disclaimer of Representations and Warranties.  EACH PARTY (ON
BEHALF OF ITSELF AND EACH OTHER MEMBER OF ITS GROUP) UNDERSTANDS AND AGREES
THAT, NO PARTY IS REPRESENTING OR WARRANTING IN ANY WAY AS TO AND HEREBY
DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUIET ENJOYMENT,
NONINFRINGEMENT AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR
TRADE PRACTICE.  ALL SERVICES PERFORMED AND PROVIDED BY SERVICE PROVIDER
HEREUNDER ARE PERFORMED, PROVIDED, AND MADE AVAILABLE ON AN “AS IS” AND “WITH
ALL FAULTS” BASIS.

 

 

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ARTICLE XII

 

FORCE MAJEURE

 

Section 12.1    Each Party will be excused for any failure or delay in
performing any of its obligations under this Agreement, other than the
obligations of Service Recipient to make payments to Service Provider for
Services rendered, if such failure or delay is caused by any event or condition
beyond the reasonable control of the impacted Party, including act of God,
voluntary or involuntary compliance with any regulation, Law or order of any
government, war, act of terror, civil commotion, labor strike or lock-out,
epidemic, failure or default of public utilities or common carriers, destruction
of facilities, systems or materials by fire, earthquake, storm or like
catastrophe.  The impacted Party shall take measures to overcome the condition
with respect to the Services which are consistent in all material respects with
the measures taken in connection with the Party’s other similarly affected
operations, as relevant.

 

Section 12.2    Notices.   Upon becoming aware of a disability causing a
material delay in the performance or preventing performance of any Services to
be provided by Service Provider (or its Affiliates, Representatives or Third
Party contractors) under this Agreement, Service Provider shall promptly notify
Service Recipient in writing of the existence of such disability and the
anticipated duration of the disability.

 

ARTICLE XIII

 

MISCELLANEOUS

 

Section 13.1    Amendments and Waivers.

 

(a)     This Agreement may not be amended except by an agreement in writing
signed by both Parties.

 

(b)     Any term or provision of this Agreement may be waived, or the time for
its performance may be extended, by the Party entitled to the benefit thereof
and any such waiver shall be validly and sufficiently given for the purposes of
this Agreement if it is in writing signed by an authorized representative of
such Party.  No delay or failure in exercising any right, power or remedy
hereunder shall affect or operate as a waiver thereof; nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or remedy preclude any further exercise thereof or
of any other right, power or remedy.  The rights and remedies hereunder are
cumulative and not exclusive of any rights or remedies that either Party would
otherwise have.

 

Section 13.2    Entire Agreement.  This Agreement, the Separation Agreement, and
the other Ancillary Agreements and the Exhibits and Schedules referenced herein
and therein and attached hereto or thereto, constitute the entire agreement and
understanding between the Parties with respect to the subject matter hereof and
supersede all prior negotiations, agreements, commitments, writings, courses of
dealing and understandings with respect to the subject matter hereof.

 

 

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Section 13.3    Third-Party Beneficiaries.  Except with respect to Third-Party
indemnitees under Article X, this Agreement is solely for the benefit of the
Parties and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, cause of action or other right in excess of those
existing without reference to this Agreement.

 

Section 13.4    Coordination with Tax Matters Agreement.  Except as specifically
provided herein, this Agreement shall not apply to Taxes (which are covered by
the Tax Matters Agreement).  In the case of any conflict between this Agreement
and the Tax Matters Agreement in relation to any matter addressed in the Tax
Matters Agreement, the Tax Matters Agreement shall prevail.

 

Section 13.5    Notices.  All notices, requests, permissions, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) five (5) Business Days following sending by registered or
certified mail, postage prepaid, (b) when sent, if sent by facsimile or e-mail
of a PDF document (with confirmation of transmission) if sent during normal
business hours of the recipient, and on the next Business Day if sent after
normal business hours of the recipient, (c) when delivered, if delivered
personally to the intended recipient, and (d) one (1) Business Day following
sending by overnight delivery via a national courier service and, in each case,
addressed to a Party at the following address for such Party (as updated from
time to time by notice in writing to the other Party):

 

(a)        If to Service Provider:

 

HCP, Inc.
1920 Main Street, Suite 1200
Irvine, CA 92614
Attention:        Office of the General Counsel
E-mail:                 [omitted]
Facsimile:           [omitted]

 

(b)        If to Service Recipient:

 

Quality Care Properties, Inc.
7315 Wisconsin Ave.
Suite 250-W
Bethesda, MD 20814
Attention:        Chief Financial Officer
E-mail:                 [omitted]

 

Section 13.6    Counterparts; Electronic Delivery.  This Agreement may be
executed in multiple counterparts, each of which when executed shall be deemed
to be an original, but all of which together shall constitute one and the same
agreement.  Execution and delivery of this Agreement or any other documents
pursuant to this Agreement by facsimile or other electronic means shall be
deemed to be, and shall have the same legal effect as, execution by an original
signature and delivery in person.

 

 

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Section 13.7    Severability.  If any term or other provision of this Agreement
or the Exhibits and Schedules attached hereto is determined by a nonappealable
decision by a court, administrative agency or arbitrator to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the Transactions
is not affected in any manner materially adverse to either Party.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the court, administrative agency or arbitrator shall
interpret this Agreement so as to affect the original intent of the Parties as
closely as possible in an acceptable manner to the end that the Transactions are
fulfilled to the fullest extent possible.  If any sentence in this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
as broad as is enforceable.

 

Section 13.8    Assignability; Binding Effect.  This Agreement shall be binding
upon and inure to the benefit of the Parties and their successors and permitted
assigns; provided, however, that the rights and obligations of each Party under
this Agreement shall not be assignable, in whole or in part, directly or
indirectly, whether by operation of law or otherwise, by such Party without the
prior written consent of the other Party (such consent not to be unreasonably
withheld, conditioned or delayed) and any attempt to assign any rights or
obligations under this Agreement without such consent shall be null and void. 
Notwithstanding the foregoing, (i) either Party may assign its rights and
obligations under this Agreement to any of their respective Affiliates provided
that no such assignment shall release such assigning Party from any liability or
obligation under this Agreement, and (ii) Service Provider may assign its rights
and obligations, in whole or in part, under this Agreement in connection with
the assignment or other transfer of all or the applicable portion of the
business of Service Provider or its Affiliates, or the relevant assets, or any
part thereof, to which a Service relates.

 

Section 13.9    Governing Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive Laws of the State of
California, without regard to any conflicts of law provisions thereof that would
result in the application of the Laws of any other jurisdiction.

 

Section 13.10  Construction.  This Agreement shall be construed as if jointly
drafted by the Parties and no rule of construction or strict interpretation
shall be applied against either Party.  The Parties represent that this
Agreement is entered into with full consideration of any and all rights which
the Parties may have.  The Parties have relied upon their own knowledge and
judgment.  The Parties have had access to independent legal advice, have
conducted such investigations they thought appropriate, and have consulted with
such other independent advisors as they deemed appropriate regarding this
Agreement and their rights and asserted rights in connection therewith.  The
Parties are not relying upon any representations or statements made by the other
Party, or such other Party’s employees, agents, representatives or attorneys,
regarding this Agreement, except to the extent such representations are
expressly set forth or incorporated in this Agreement.  The Parties are not
relying upon a legal duty, if one exists, on the part of the other Party (or
such other Party’s employees, agents, representatives or attorneys) to disclose
any information in connection with the execution of this Agreement or their
preparation, it being expressly understood that neither Party shall ever assert
any failure to disclose information on the part of the other Party as a ground
for challenging this Agreement.

 

 

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Section 13.11  Performance.  Each Party shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary or Affiliate of such Party.

 

Section 13.12  Title and Headings.  Titles and headings to Sections and Articles
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.

 

Section 13.13  Exhibits and Schedules.  The Exhibits and Schedules attached
hereto are incorporated herein by reference and shall be construed with and as
an integral part of this Agreement to the same extent as if the same had been
set forth verbatim herein.

 

[Signature Page Follows]

 

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective officers as of the date first set forth above.

 

 

 

HCP, INC.

 

 

 

 

 

 

By:

/s/ Troy E. McHenry

 

 

Name:

Troy E. McHenry

 

 

Title:

Executive Vice President and Corporate

 

Secretary

 

 

 

 

 

 

 

 

 

QUALITY CARE PROPERTIES, INC.

 

 

 

 

 

 

By:

/s/ C. Marc Richards

 

 

Name:

C. Marc Richards

 

 

Title:

Chief Financial Officer

 

 

19

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Schedule A

 

Transition Services Schedule

 

[Omitted]

 

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Schedule 1

 

[Omitted]

 

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