Exhibit 10.11


 


AMENDED AND RESTATED

MASTER MANAGEMENT

AGREEMENT


 


THIS AMENDED AND RESTATED MASTER MANAGEMENT
AGREEMENT (this “Agreement”) is made as of June 3rd, 2009 by and among
Midwest Care Holdco TRS I LLC, a Delaware limited liability company (“Holdco”),
the eighteen limited liability companies listed in and identified on Schedule I
to this Agreement (each, a “GNC Tenant” and collectively, the “GNC Tenants”),
and Good Neighbor Care Centers, LLC (“Manager”), an Oregon limited liability company.


 


RECITALS


 


A.                                   Sixteen limited liability companies
wholly owned by Holdco (each, a “Holdco SPE” and collectively, the “Holdco SPEs”)
and the GNC Tenants lease from subsidiaries of Wakefield Capital, LLC the
senior care facility properties described on Exhibit A (each, a “Facility”
and collectively, the “Facilities”) pursuant to certain lease agreements (each,
a “Lease”) in the form attached hereto as Exhibit B;


 


B.                                     A
Management Agreement between a Holdco SPE or a GNC Tenant, on the one hand, and
Manager, on the other, has been entered into with respect to each Facility (the
“Management Agreements”) in the form attached hereto as Exhibit E;


 


C.                                  It is the intention of the parties hereto
that the rights and obligations set forth in this Agreement shall have priority
with respect to the terms of the Management Agreements and the terms of this
Agreement shall prevail to the extent of any inconsistency between this
Agreement and any Management Agreement.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the foregoing and the mutual promises and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:


 


1.                                      General.


 


1.1                                     Definitions. The following terms shall have
the meanings indicated or referred to below, inclusive of their singular and
plural forms, except where the context requires otherwise. Initially
capitalized terms used and not otherwise defined herein shall have the meanings
given to such terms in the Management Agreements. Unless the context otherwise
requires, all references herein to “years” or “months” shall mean “calendar
years” or “calendar months.”


 


“Adjusted Net Operating Income” or “ANOI”
shall mean the aggregate Gross Revenues for all Facilities, as adjusted for Bad
Debts, refunds of Resident payments, other cash adjustments and other reserves
in accordance with United States generally accepted accounting principles, less
the aggregate Facility Expenses for all Facilities, less the aggregate Base
Management Fees for all Facilities and less the aggregate Capex Reserve for all
Facilities. ANOI 


 

















 


shall
be measured quarterly as soon as practicable in accordance with the Management
Agreements and in any event within twenty (20) days of the end of each quarter.


 


“Additional Incentive Management Fee” shall have the
meaning ascribed to such term in Section 4.2.


 


“Affiliate” shall have the meaning ascribed to such
term in the Management Agreements.


 


“Agreed Adjustment” shall have the meaning ascribed
to such term in Section 5.1 hereof.


 


“Approved Budgets” shall mean the budgets approved
by Tenant for the operation of a Facility as further described in the
Management Agreements.


 


“Annual Operating Budget” shall have the meaning
ascribed to such term in the Management Agreements.


 


“Assisted Living” means housing facilities for
seniors who seek housing with supporting care and services including assistance
with activities of daily living (such as bathing, eating, dressing and
monitoring medications), Alzheimer’s care and other services such as
housekeeping, meals and activities.


 


“Bad Debt” shall have the meaning ascribed to such
term in the Management Agreements.


 


“Base Management Fee” shall have the meaning
ascribed to such term in Section 3.


 


“Business Day” shall have the meaning ascribed to
such term in the Management Agreements.


 


“Capex Reserve” shall have the meaning
ascribed to such term in the Management Agreements.


 


“Capital Budget” shall have the meaning ascribed to
such term in the Management Agreements.


 


“Cause” shall mean termination related to any act of
dishonesty, gross negligence, fraud, embezzlement, or bad faith, any violation
of fiduciary duties, or any indictment or conviction for a felony.


 


“Code” shall mean the Internal Revenue Code of 1986,
as amended.


 


“Compensation Uses” shall have the meaning ascribed
to such term in Section 5.4.


 


“EBITDAR” shall mean earnings before interest,
taxes, depreciation, amortization and rent, calculated in accordance with
United States generally accepted accounting principles.


 


“Estimated Base Management Fee” shall have the
meaning ascribed to such term in Section 5.1.


 

















 


“Facilities” shall have the meaning ascribed thereto
in Recital A.


 


“Facility Expenses” shall have the meaning ascribed
to such term in the Management Agreements.


 


“FF&E” shall have the meaning ascribed to such
term in the Management Agreements.


 


“Force Majeure” shall have the meaning ascribed to
such term in the Management Agreements.


 


“GNC Tenant” shall have the meaning ascribed thereto
in the Preamble.


 


“Gross Revenues” shall have the meaning ascribed to
such term in the Management Agreements.


 


“Incentive Management Fee” shall have the meaning
ascribed to such term in Section 4.1.


 


“Independent Living” means senior housing facilities
designed to meet the needs of seniors who choose to live in an environment
surrounded by their peers where they receive services such as housekeeping,
meals and activities, but are not reliant on assistance with activities of
daily living such as bathing, eating and dressing (although some residents may
contract out for those services).


 


“Key Man” shall have the meaning ascribed to such
term in Section 11.1.


 


“Holdco” shall have the meaning ascribed to such
term in the Preamble.


 


“Holdco SPE” shall have the meaning ascribed to such
term in Recital A and shall also include any other limited liability company
wholly owned by Holdco that enters into or takes assignment of a Management
Agreement.


 


“Hurdle” shall have the meaning ascribed to such
term in Section 4.1.


 


“Legal Requirements” shall have the meaning ascribed
to such term in the Management Agreements.


 


“License” shall have the meaning ascribed to such
term in Section 7.5.


 


“Management Agreements” shall have the meaning
ascribed to such term in Recital B and includes any amendments, supplements,
restatements or replacements thereof.


 


“Management Fee” shall have the meaning ascribed to
such term in the Management Agreements.


 


“Manager” shall mean Good Neighbor Care
Centers, LLC.


 


“Manager’s Standards” shall have the meaning
ascribed to such term in the Management Agreements.


 

















 


“National Vendor Contracts” shall have the meaning
ascribed to such term in the Management Agreements.


 


“Obligations” mean the obligations and covenants to
perform of any Manager hereunder or under a Management Agreement.


 


“Person” means an individual, sole proprietorship,
partnership, limited partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, body corporate, joint venture,
co-ownership, and a natural person in his or her capacity as a trustee,
executor, administrator or other legal representative.


 


“Residents” shall have the meaning ascribed to such term in Section 2.1(b).


 


“Sale Transaction” shall mean the sale of all or
substantially all of the Facilities.


 


“Senior Living Facility” means a senior housing
facility, and, for certainty, without limitation, includes Skilled Nursing,
Assisted Living and Independent Living facilities.


 


“Skilled Nursing” means senior housing facilities that
meet the needs of seniors who require a substantial level of skilled nursing
services or who are receiving rehabilitative services following an adverse
event such as a broken hip or stroke.


 


“Tenant” means Holdco, each Holdco SPE, and each GNC
Tenant, individually or collectively as the context requires; provided that
each GNC Tenant will cease to be treated as a “Tenant” effective as of the date
it assigns its Lease to a subsidiary of Holdco.


 


“Term” means the term of each Management Agreement,
being one (1) year, renewable at the end of each year unless either party
provides written notice no less than sixty (60) days prior to the end of the
initial term or any extension, unless sooner terminated pursuant to the terms
of the applicable Management Agreement or this Agreement and, for greater
certainty, this Agreement shall be automatically amended so as to no longer
apply to any Management Agreement that is no longer in effect or that has been
terminated; provided that for the avoidance of
doubt, this Agreement shall automatically terminate at any time that all of the
Management Agreements are no longer in effect.


 


“Termination Date” shall mean with respect to any
Management Agreement, the date of termination of such Management Agreement
specified in any notice of termination given by Tenant to Manager pursuant to
the exercise thereby of the termination right  hereunder.


 


“Travel Budget” shall have the meaning ascribed to
such term in Section 12.1.


 


2.                                             Performance


 


2.1                                              Goals. The operation and management of the
Facilities is delegated to the Manager pursuant to the Management Agreement,
and Tenant relied on Manager’s experience and expertise in making that
delegation.  The joint goals of the
parties hereto are for the Manager to:


 

















 


(a)                                  Establish and maintain programs to promote
the most effective and profitable utilization
of each Facility’s services;


 


(b)                                 Provide quality services to individuals
residing at each Facility (the “Residents”) in a manner complying with the actual Resident agreements in
use at the Facility, the Manager’s Standards and the Approved Budget, and
create a form resident agreement for future use at the Facilities;


 


(c)                                  Establish appropriate marketing programs and
maintain excellence and first-class operation for each Facility, all in accordance
with this Agreement, the applicable Management Agreement, the Manager’s
Standards and the Approved Budget;


 


(d)                                 Maintain well trained, adequately supervised,
quality staff, in sufficient number, at each Facility in a manner consistent
with this Agreement, the applicable Management Agreement, the Manager’s
Standards and the Approved Budget;


 


(e)                                  Operate each Facility prudently, on a sound
financial basis and in a manner consistent
with this Agreement, the applicable Management Agreement, the Manager’s
Standards and the Approved Budget;


 


(f)                                    Establish and maintain a sound financial
accounting system for each Facility;


 


(g)                                 Institute and maintain adequate internal
fiscal controls through proper budgeting, accounting procedures, and timely financial reporting in a manner
consistent with this Agreement, the applicable Management Agreement and the
Approved Budget;


 


(h)                                 Prevent loss of Gross Revenues for each
Facility and institute and maintain sound billing and collection procedures and methods;


 


(i)                                     Maintain and increase Gross Revenues at each
Facility;


 


(j)                                     Conform operations at each Facility to, and
comply with, all applicable Legal Requirements,
this Agreement and the Manager’s Standards, including without limitation, those
pertaining to licensing, and take all steps necessary to ensure that any
and all licenses, permits, and certificates necessary for the
ownership, use and operation of each Facility as a Senior Living Facility is
maintained at all times, without interruption; and


 


(k)                                  Take such other steps as are necessary to
provide high quality care to the Residents,
consistent with this Agreement, the Manager’s Standards and as otherwise
requested by Tenant, all consistent with the applicable Approved Budget.


 


2.2                                       Standard of Care. Manager will discharge its duties under
each Management Agreement in good faith, and will exercise, with respect to all
services provided under or pursuant to this Agreement or any Management
Agreement, a standard of care, skill, prudence and diligence under the
circumstances then prevailing as would be expected of a prudent manager who has
a high level of experience and expertise with respect to such matters and at or
above the Manager’s Standards and in no event with less care, skill, prudence
or diligence as the Manager would customarily utilize in the conduct of its
business, and as is 


 

















 


necessary
for the maintenance of any license or permit required for the applicable
Facility and compliance with all Legal Requirements and the Manager’s
Standards.


 


3.                                   Base Management Fee.


 


3.1                                      Manager shall be paid an annual fee by the
Tenant (the “Base Management Fee”)
equal to five percent (5.0%) of aggregate Gross Revenues, adjusted for Bad
Debt, refunds of Resident payments, other cash adjustments and other reserves
in accordance with United States generally accepted accounting principles.  The Base Management Fee shall be calculated
separately for the Holdco SPEs, on the one hand, and the GNC Tenants, on the
other, and the Holdco SPEs and GNC Tenants shall be liable only for their proportionate
share (based on relative Gross Revenues) of the Base Management Fee.


 


4.                                      Incentive Management Fee.


 


4.1                                      Manager shall be paid an annual incentive fee
by the Tenant (the “Incentive
Management Fee”) equal to twenty percent (20%) of the excess, if any, of actual
ANOI for such year for all Facilities managed by Manager (excluding the
Incentive Management Fees for purposes of calculating ANOI) over $20.5 million
(the “Hurdle”).  The Hurdle will be
increased for each year after 2009 by 2.50% per year, compounded annually.  Any such Incentive Management Fee shall be
allocated amongst the Facilities in a manner determined appropriate by Holdco
and Manager, both acting reasonably; provided that the Incentive Management Fee
shall be calculated separately for the Holdco SPEs, on the one hand, and the
GNC Tenants, on the other, and the Holdco SPEs and GNC Tenants shall be liable
only for their proportionate share (based on relative ANOI) of the Incentive
Management Fee.  To the extent that after
the date hereof (i) Tenant and Manager enter into additional Management
Agreements or (ii) Tenant incurs capital expenses (A) for expansion
of a Facility or (B) in excess of $350 per unit per year, increased by
2.50% annually, at a Facility, the Hurdle will be adjusted, as appropriate,
pursuant to written agreement of the parties.


 


4.2                                    In the event of a Sale Transaction, the
Manager shall be paid an additional incentive fee (the “Additional Incentive
Management Fee”) in an amount equal to ten percent (10%) of the excess of (i) the
fair market value of the consideration received by Wakefield Capital, LLC
and/or its Affiliates pursuant to the Sale Transaction over (ii) $275
million (which amount shall be increased by five percent (5%) per year for each
year after the 2009 calendar year) (the “Incentive Threshold”);
provided, however, that with respect to
a Sale Transaction involving the sale of all or substantially all of the
facilities of Wakefield Capital, LLC, such portion of the consideration
received that is allocable to the Facilities (which shall be determined jointly
by Wakefield Capital, LLC and the buyer and which determination shall be
binding on the Manager, Holdco and the GNC Tenants) shall be deemed to be
consideration received by Wakefield Capital, LLC and/or its Affiliates pursuant
to a Sale Transaction for purposes of calculating the Additional Incentive
Management Fee.  Notwithstanding the
foregoing, the Incentive Threshold shall be adjusted for each Management Agreement
as provided herein.  To the extent that after the date hereof (i) Tenant
and Manager enter into additional Management Agreements (other than Management Agreements assigned by GNC Tenants to
Holdco SPEs) or (ii) Tenant incurs capital expenses (A) for expansion
of a Facility or (B) in excess of $350 per unit per year at a Facility,
the Incentive Threshold will be adjusted, as appropriate, pursuant to 


 

















 


written
agreement of the parties.   If a Management Agreement is terminated, the
Incentive Threshold shall be decreased by the amount allocated for such
Facility as set forth on Exhibit C. 
The Incentive Threshold shall not be adjusted for any Management
Agreements terminated within sixty (60) day of the closing date of the Sales
Transaction unless such termination is for Cause.  The Manager agrees that
thirty-five percent (35%) of the Additional Incentive Management Fee shall be
paid as compensation to Manager’s management and employees, and/or the management and employees of Manager
located at or otherwise assigned to the Facilities.


 


5.                                         Calculation and Payment of
Management Fee and Incentive Management Fee


 


5.1                                         An estimate of the Base Management Fee (the “Estimated
Based Management Fee”) will be paid by Tenant to Manager within five (5) days
of the beginning of each calendar month and shall be credited against Tenant’s
obligation to pay the Base Management Fee pursuant to Section 3.1.  For purposes of calculating the Estimated
Base Management Fee paid during January 2009 through April 2009, the
amount of Gross Revenues, adjusted for Bad Debt, refunds of Resident payments,
other cash adjustments and other reserves in accordance with United States
generally accepted accounting principles, for such month shall be assumed to be
$5,022,946.   Following April 2009
and until such time as Holdco and Manger agree upon the Agreed Adjustment (as
defined below), for purposes of calculating the Estimated Base Management Fee
for the second calendar quarter of 2009, the amount of Gross Revenues, adjusted for Bad Debt, refunds of Resident
payments, other cash adjustments and other reserves in accordance with United
States generally accepted accounting principles, for any month shall be
assumed to be the average of the actual Gross Revenues, adjusted for Bad Debt, refunds of Resident payments, other cash
adjustments and other reserves in accordance with United States generally
accepted accounting principles, for the first three months of 2009.  Following the end of the second calendar
quarter of 2009, Holdco and Manager shall agree upon an adjustment for Bad
Debt, refunds of Resident payments, other cash adjustments and other reserves
(the “Agreed Adjustment”), and the Estimated Base Management Fees paid in each
month following such agreement shall be based on the Gross Revenues for the
most recent month for which the actual Gross Revenues have been determined and
shall be reduced by the Agreed Adjustment. 
Notwithstanding the payment of an Estimated Base Management Fee, the
amount of Base Management Fee owed by Tenant to Manager with respect to any
month will be based on the actual Gross Revenues, adjusted for Bad Debt, refunds of Resident payments, other cash
adjustments and other reserves in accordance with United States generally
accepted accounting principles, for such month, and the overpayment or
underpayment of the Base Management Fees as a result of the payment of
Estimated Base Management Fees with respect to any month will be addressed
through the true-up provisions of Section 5.3.


 


5.2                                         ANOI for all Facilities will be measured by
the Manager quarterly within twenty (20) days following the end of each
calendar quarter; and the Incentive Management Fee, if any, will be paid by
Tenant to Manager on the tenth (10th) day of the following calendar month.


 


5.3                                         Within twenty-five (25) days following each
calendar quarter in each calendar year (including the fourth such quarter),
Manager shall verify the determinations of 


 

















 


ANOI
and Gross Revenues, adjusted for Bad Debt, refunds of Resident payments, other
cash adjustments and other reserves in accordance with United States generally
accepted accounting principles, with respect to all Facilities for the entire
calendar year to date. If the Base Management Fee (including Estimated Base
Management Fees) and/or Incentive Management Fee payments made to Manager on a
monthly or quarterly basis, as applicable, exceed (or are less than) the
year-to-date monthly Base Management Fee and/or quarterly Incentive Management
Fee to which Manager is entitled, then (i) Manager will reimburse Tenant
(or Tenant will pay Manager) for such excess (or deficiency) within ten (10) Business
Days of the determination of the actual Base Management Fee and/or Incentive
Management Fee, but not later than forty (40) days following the end of the
applicable calendar quarter, or (ii) at Holdco’s option, future payments
of the Base Management Fee (including Estimated Base Management Fees) and/or
Incentive Management Fee will be reduced to the extent of such excess.  In
the event Holdco or its auditors determines that the Manager’s calculation of
Gross Revenues or ANOI for any calendar year was incorrect (as a result of an
audit pursuant to Section 6.2 hereof or otherwise) and the Base Management
Fee and/or Incentive Management Fee paid for such period exceeded (or was less
than) the correct amount for such calendar year, then (i) the Manager will
reimburse Tenant (or Tenant will pay Manager) such excess (or deficiency)
of Base Management Fee and/or Incentive Management Fee within twenty (20)
Business Days of the determination of the actual Base Management Fee and/or
Incentive Management Fee or (ii) at Holdco’s option, future payments of
the Base Management Fee (including Estimated Base Management Fees) and/or
Incentive Management Fee will be reduced to the extent of such excess.


 


5.4                                         The Incentive Management Fee will be used
primarily to provide incentive compensation to Manager’s management and
employees who are involved in the day-to-day management of the Manager either
in the Manager’s home office in Eugene, Oregon or at or in the Facilities,
and/or management and employees of Manager located at or otherwise assigned to the Facilities, therefore Manager agrees
that any Incentive Management Fee earned in a given year will be allocated as
follows:


 


(a)                                          The first $500,000:  75% to compensate Manager’s management
and/or employees, and management and
employees of Manager located at or otherwise assigned to the Facilities (the “Compensation
Uses”), with the remainder of such first $500,000 unrestricted;


 


(b)                                         From $500,000 to $1,000,000:  50% to the Compensation Uses, with the
remainder of such amount from $500,000 to $1,000,000 unrestricted; and


 


(c)                                          Above $1,000,000:  Unrestricted.


 


5.5                                         The Tenant’s
obligation to pay the Base Management Fee and the Incentive Management Fee to
the Manager is subordinate to the Tenant’s obligation under each  Lease to pay “Rent” (as defined in each
Lease).


 


6.                                   Representations of Manager (Internal Controls)


 


6.1                                   The Manager will at all times maintain
appropriate and proper accounting systems,
books of account and records on a Facility-by-Facility basis and as to all transactions 


 

















 


entered
into in the performance of its obligations under the Management Agreements. The
Manager will maintain appropriate internal controls in connection with its
duties, obligations and services provided under the Management Agreements and,
at the request of Holdco, will provide appropriate documentation with respect
to the nature of, and existence, of such internal controls and procedures.
Without in any way limiting the foregoing, the Manager will also maintain on a
Facility-by-Facility basis and a portfolio-wide basis appropriate business
interruption and disaster recovery controls, procedures and systems. Each
Tenant will have the right, at such Tenant’s expense, at reasonable times to
inspect the Facilities and the books and records maintained by the Manager or
to cause an inspection to be made and to make copies of or extracts from the
books of account and records. In addition, the Manager will provide promptly to
any Tenant copies of any electronic and computer records and disks that may be
requested by any Tenant from time to time. The Manager will, in addition to the applicable Approved
Budget and accounting information specified in the Management Agreements,
supply, at any Tenant’s request, such Tenant with such additional information
required by such Tenant, at such Tenant’s expense. The Manager agrees that, as
and when required by any Tenant in order to permit it and its management to
comply with Legal Requirements, the Manager will cooperate with, and assist,
any Tenant in respect of the foregoing. In that regard, Manager will supply, on
request, such written representations by the Manager to the best of its
knowledge and belief as such Tenant may request in connection with internal
controls or procedures, including without limitation: (i) the absence of significant
deficiencies or material weaknesses in the design or operation of such internal
controls which could adversely affect the financial information provided by the
Manager to such Tenant; (ii) the absence, in any context, of material
changes to, or violations of, such internal controls or procedures; and (iii) the
absence of any fraud, whether or not material, that involves management or any
employees of the Manager who have a significant role in the Manager’s internal
controls. At any time should the Manager become aware of items described in
(i), (ii) and (iii) above, the Manager will notify the applicable
Tenant immediately. All books, records, reports or other papers maintained by
the Manager in connection with its duties, obligations and services provided
under this Agreement or the Management Agreements will be maintained by the
Manager, and shall not be destroyed, within six (6) years of making thereof without the prior
written approval of the Tenant.


 


6.2                                   If any of the reports required by this Section 6
are not furnished on a timely
basis, and Manager does not provide the same within ten (10) Business Days
after notice from Tenant thereof, Tenant shall have the right, at Manager’s expense,
to cause the books and records of Manager relating to the Facility to be
audited; provided that the foregoing right shall be in addition to, and not in
lieu of, any other right or remedy available to Tenant under this Agreement or
the Management Agreements. Manager shall promptly correct all accounting method
deficiencies and errors disclosed by Tenant’s audits and shall timely inform
Tenant of all corrective actions taken. Except as set forth above, Tenant’s
audit shall be at Tenant’s expense unless an error on the part of Manager or
its accountant is discovered which affects Tenant adversely and is equal to or
greater than five percent (5%) of the greater of gross Facility Expenses or
Gross Revenues for the most recent twelve (12) month period, in which case
Manager shall bear the reasonable cost of the audit.


 


6.3                                      Manager hereby covenants and agrees to
co-operate with and assist Tenant in order to enable Tenant and its owners to
prepare their respective financial statements.


 

















 


7.                                       Representations and Warranties of
Manager.


 


7.1                                       Manager is a limited liability company, duly organized and validly existing under the laws of the State of Oregon, and, to the extent necessary, duly licensed
and qualified to do business and to manage a Facility in each of the states in
which a Facility is located, with the full power and authority and legal right
to carry on its business in the manner and in the locations in which such
business has been and is now being conducted by it, to execute and deliver this
Agreement and each Management Agreement and to perform its obligations
hereunder and thereunder.


 


7.2                                        Except to the extent related to consents of
lenders of Holdco and its Affiliates and the consent of any state regulatory
authorities, to the actual knowledge of the Board of Directors of Manager,  no consent of any third party is required as
a condition to the entering into of this Agreement by Manager and each Management Agreement other than such
consent as has been previously obtained.


 


7.3                                          Manager has authorized the execution and
delivery of this Agreement and
each Management Agreement and this Agreement and each Management Agreement
constitutes the valid and binding obligation and agreement of Manager,
enforceable in accordance with its terms (subject to the effect on
enforceability of lender consent and/or state regulatory compliance,
bankruptcy, insolvency or creditor’s rights generally, and to limitations
imposed by general principles of equity).


 


7.4                                           Except to the extent related to consents of
lenders of Holdco and its Affiliates and the consent of any state regulatory
authorities, to the actual knowledge of the Board of Directors of Manager,
neither the execution and delivery of this Agreement and each Management Agreement, nor compliance with the
terms and provisions hereof or thereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any Facility or
the assets of Manager pursuant to the terms of, any indenture, mortgage, deed of trust, note, evidence of
indebtedness, agreement or other instrument to which Manager or any Affiliate
thereof may be party or by which it or they or any of its or their properties
or assets may be bound, or violate any provision of law, or any applicable
order, writ, injunction, judgment or decree of any court, or any order or other
public regulation of any governmental commission, bureau or administrative
agency.


 


7.5                                 Manager and/or each GNC Tenant, as applicable,
holds all necessary permissions, consents, approvals, licenses, authorizations,
registrations or validations of, or filing with, notice to, or exemptions
by, any governmental agency, commission, board or public authority 
(collectively, “License”)  required to operate lawfully each Facility, and
all such licenses are in full force and effect as of the date of this
Agreement.  Manager shall provide a list
of all necessary Licenses to Holdco within ten (10) business days of the
date of this Agreement.


 


7.6                                 During the term of any of the Management
Agreements, Manager shall qualify as an “eligible independent contractor”
as defined in Section 856(d)(9) of the Code.  To that end, during the term of any of the
Management Agreements:


 














 


(a)           Manager shall not own,
directly or indirectly (within the meaning of Section 856(d)(5) of
the Code), more than 35% of the shares of NRFC Sub-REIT Corp. or Inland
American Real Estate Trust, Inc.;


 


(b)           if Manager is a
corporation for federal income tax purposes, no more than 35% of the total
combined voting power of its outstanding stock (or 35% of the total shares of
all classes of its outstanding stock) or, if it is not a corporation for
federal income tax purposes, no more than 35% of the ownership interest in its
assets or net profits is owned, directly or indirectly, by one or more Persons
owning 35% or more of the outstanding stock of NRFC Sub-REIT Corp.
or Inland American Real Estate Trust, Inc.; and


 


(c)           Manager shall be (or shall,
within the meaning of Section 856(d)(9)(F), be related to a person (a “Related
Operator”) that is) actively engaged in the trade or business of operating “qualified
health care properties” (defined below) for a person who is not a “related
person” within the meaning of Section 856(d)(9)(F) of the Code with
respect to NRFC Sub-REIT Corp., Inland American Real Estate Trust, Inc. or
Tenant (“Unrelated Persons”).  In order
to meet this requirement, Manager agrees that for each calendar year it (i) shall
derive at least 10% of both its revenue and profit from operating “qualified
health care properties” for Unrelated Persons and (ii) shall comply with
any regulations or other administrative guidance under Section 856(d)(9) of
the Code with respect to the amount of health care management business with
Unrelated Persons that is necessary to qualify as an “eligible independent
contractor” with the meaning of such Code Section.  For purposes of the calculation called for by
clause (i) of the immediately preceding sentence, the Manager may
consolidate the operations of any Related Operators.


 


A “qualified health care property” is defined
in Section 856(e)(6)(D)(i) of the Code and means any real property
(including interests therein), and any personal property incident to such real
property, which (I) is a health care facility or (II) is necessary or
incidental to the use of a health care facility.  A “health care facility” means a hospital,
nursing facility, assisted living facility, congregate care facility, qualified
continuing care facility (as defined in Section 7872(g)(4) of the
Code), or other licensed facility which extends medical or nursing or ancillary
services to patients and which is operated by a provider of such services which
was eligible for participation in the medicare program under Title XVIII of the
Social Security Act with respect to such facility.  Any breach by Manager of the provisions of
this Section 7.6 shall be an Event of Default under each Management
Agreement.


 


7.7           Manager shall not agree to
any amendment of any of the terms of the Management Agreements entered into
with a GNC Tenant without Holdco’s prior written consent.


 


8.            Representations
and Warranties of Tenant.


 


8.1            Each Tenant is a limited liability
company duly organized and validly existing under the laws of the State of
Delaware, Oregon or California, with full power and authority and legal right,
through its trustees, to carry on its business in the manner and in the
locations in which such business has been and is now being conducted by it, to execute
and deliver this Agreement and to perform its obligations hereunder.


 

















 


8.2            Tenant and its Affiliates are in material
compliance with all third party agreements.


 


8.3            Tenant has authorized the execution and
delivery of this Agreement and this Agreement constitutes the valid and binding
obligation and agreement of Tenant, enforceable in accordance with its terms
(subject to the effect of bankruptcy, insolvency or creditor’s rights
generally, and to limitations imposed by general principals of equity).


 


8.4             Neither the execution and delivery of
this Agreement, nor compliance with the terms and provisions hereof, will
result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon the property or assets of Tenant pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness, agreement or other instrument to which Tenant or any Affiliate
thereof may be party or by which it or they or any of its or their properties
or assets may be bound, or violate any provision of law, or any applicable
order, writ, injunction, judgment or decree of any court, or any order or other
public regulation of any governmental commission, bureau or administrative
agency.


 


8.5             No order, permission,
consent, approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental agency, commission, board or
public authority is required to authorize, or is required in connection with
the execution, delivery and performance by Tenant of this Agreement or the
taking of any action thereby contemplated, which has not been obtained.


 


8.6           No GNC Tenant shall agree to
any amendment of any of the terms of the Management Agreements to which it is a
party without Holdco’s prior written consent.


 


9.            Exclusivity of Manager


 


9.1           Except for properties listed
on Exhibit D hereof, Manager, each Affiliate and
subsidiary of the Manager and each Key Man is prohibited from (i) expanding its senior living management
activities for parties other than Holdco and its Affiliates or (ii) providing or
expanding its provision of back office or other support services to other
managers of senior living facilities without the written consent of Holdco, which consent shall
not be unreasonably withheld.


 


9.2           The consent requirement in Section 9.1
will no longer apply after the assets managed by Manager for Tenant achieve a
trailing six month annualized EBITDAR for all of the Facilities of  $21,300,000, increased annually by 2.50% and
as adjusted for any new Facilities; provided however, that if any rolling three
month period annualized EBITDAR for all of the Facilities after such time falls
below $20,300,000, increased annually by 2.50% and as adjusted for any new
facilities, the consent requirement in Section 9.1 will be automatically reinstated
without notice.


 


9.3           Holdco and Manager will
establish a “New Business Advisory Committee” to make recommendations regarding
expansion plans for Manager’s management business including criteria for
evaluating new management assignments and examining new


 

















 


potential
management assignments for Manager.  The “New
Business Advisory Committee” will consist of five members, three appointed by
Manager and two appointed by Holdco.


 


10.          Approvals


 


10.1         Holdco will have approval
over the following significant items relating to the Facilities:


 


(a)   National Vendor Contracts;


 


(b)   Contracts with a multi-year
term and contracts involving an annual commitment of $50,000 or more;


 


(c)   Employee benefit plans;


 


(d)   Approved Budget;


 


(e)   Unplanned capital
expenditures of more than $10,000 per item or $25,000 in aggregate for a
facility; and


 


(f)    Any fees paid to, or
contracts entered into with, an Affiliate of Manager.


 


11.          Key Man Provisions


 


11.1         Holdco must be notified in
writing sixty (60) days in advance of the termination or hiring of one or more
of the following individuals or positions (each a “Key Man”), except in
the event of termination for Cause, in which case Tenant shall be provided with
reasonable advance notice of such termination:


 


(a)   Doug Sproul;


 


(b)   Kacy Kang;


 


(c)   Sean Nelson;


 


(d)   Don Rath;


 


(e)   Manager’s Chief Financial
Officer; and


 


(f)    Any officer reporting
directly to the Chief Executive Officer or Board of Directors of Manager.


 


11.2         Manager will promptly notify
Holdco should any Key Man resign or separate from Manager.


 


11.3         Manager’s management team as
of the date hereof is shown on Exhibit F, hereof.


 

















 


12.          Travel Budget


 


12.1         Manager shall by November 1
of each year deliver to Holdco for Holdco’s approval, a draft
travel budget for the next calendar year that includes scheduled visits to
Facilities by certain employees of Manager and other policies restricting the
manner in which travel costs are incurred. 
The travel budget as proposed shall be considered by Tenant and, in
consultation between Holdco and Manager, the travel budget for the Facilities
for the ensuing calendar year will be prepared by the Manager with the final
contents of the travel budget to be determined mutually by Manager and Holdco
(the “Travel Budget”).


 


12.2         For calendar year 2009,  Holdco agrees to pay Manager the sum of
$12,500 per month to subsidize the cost of travel by operating personnel
employed by Manager in providing services under this, and related, agreements
to Facilities.  Manager will provide a
quarterly summary accounting of the travel expenses.  Such summary will identify the employee that
traveled, the properties reviewed during the period and the expenses incurred
during the period.  The parties agree
that this payment is intended to subsidize the travel of key Manager management
personnel to provide oversight and support of operations for the facilities listed
in Exhibit A.  From time to time, the
parties will review the amount, level of travel and other aspects of the
activities covered in this section 12.2. 
The accounting report provided to Tenant will include the following
elements:


 


·                  Name of Employee Traveling


 


·                  Title of Employee Traveling


 


·                  Home Office of Employee
Traveling


 


·                  Facility(ies) Visited


 


·                  Date of Visit


 


·                  Summary of Business Purpose
of Visit


 


·                  Travel Segments


 


·                  Expenses incurred by
category


 


After March 30, 2009
the parties will review the actual expenditures incurred by Manager relative to
the subsidy provided in this Section 12.2. 
Tenant, at its sole discretion, may increase the amount of the monthly
subsidy.


 


12.3         Tenant agrees to reimburse
Manager monthly for certain travel expenses incurred by Manager in accordance
with the approved Travel Budget.


 


13.          Miscellaneous.


 


13.1 Notices.


 

















 


Any and all notices,
demands, consents, approvals, offers, elections and other communications
required or permitted under this Agreement (collectively, “notices”) shall be
governed by the notice provisions set forth in the Management Agreements;
provided, however, all such notices shall be addressed:


 


(a) to Holdco:


 


Wakefield Capital, LLC

c/o Midwest Care Holdco TRS I LLC


2 Wisconsin Circle, Suite 540


Chevy Chase, Maryland 20815


Tele: (301) 941 -1 690


Fax: (301) 941-1661


Attention: Sean P. Murphy


 


(b) to any Holdco
SPE :


 


Wakefield Capital, LLC

c/o [Insert Name of Holdco SPE]


2 Wisconsin Circle, Suite 540


Chevy Chase, Maryland 20815


Tele: (301) 941 -1 690


Fax: (301) 941-1661


Attention: Sean P. Murphy


 


(c) to any GNC Tenant:


 


The Wilkinson Corporation


c/o [Insert Name of GNC Tenant]


402 East Yakima Avenue, 15th Floor


Yakima, Washington 98901


Attention: Lonnie P. Gienger,
President & CEO


Tele: (509) 965-4240


Fax: (509) 965-8535


 


(d) to Manager:


 


Good Neighbor Care Centers, LLC


78 Centennial Loop


Eugene, OR 97401


Attention: P. Kacy Kang


Tele:  (541) 747-3373


Fax:   (541) 747-0673


 


With a copy to:


 


The Wilkinson Corporation


 

















 


c/o [Insert Name of GNC Tenant]


402 East Yakima Avenue, 15th Floor


Yakima, Washington 98901


Attention: Lonnie P. Gienger,
President & CEO


Tele: (509) 965-4240


Fax: (509) 965-8535


 


(e) to Wakefield:


 


Wakefield Capital, LLC


2 Wisconsin Circle, Suite 540


Chevy Chase, Maryland 20815


Tele: (301) 941 -1 690


Fax: (301) 941-1661


Attention: Sean P. Murphy


 


By notice given as herein
provided, the parties hereto and their respective successors and assigns shall
have the right from time to time and at any time during the term of this
Agreement to change their respective addresses effective upon receipt by the
other parties of such notice and each shall have the right to specify as its
address any other address.


 


13.2           Amendments. This Agreement
may be amended only with the written approval of the parties hereto.


 


13.3           Interpretation. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to the principles of
conflicts of law. Any dispute arising in connection with this Agreement shall
be resolved in a court of competent jurisdiction, and each party hereby submits
to the jurisdiction of that court. Each party hereby waives its right to trial
by jury in connection with any dispute between any of the parties to this
Agreement arising out of this Agreement or the rights or obligations of the
parties hereunder. The titles of the Articles and Sections in this Agreement
are for convenience only and shall not be considered in construing this
Agreement. Pronouns used herein shall be construed to refer to the masculine,
feminine, neuter, singular and plural as  the identity of the
individual or entity referred to may require. No provision of this Agreement
shall be interpreted as bestowing any rights whatsoever upon any third party. A
cross reference to another section shall be deemed to be to such section of
this Agreement, unless explicitly stated otherwise.


 


13.4         Counterparts. 
This Agreement may be executed in multiple  counterparts,
each of which shall be deemed an original.


 


13.5         Severability. If any
provision of this Agreement is determined to be unenforceable for any reason,
it shall be adjusted rather than voided, if possible, to achieve the intent of
the parties. In any event, all other provisions shall be deemed valid and
enforceable to the greatest possible extent.


 


13.6           Binding on Successors. The
rights and obligations of the parties under this


 

















 


Agreement shall bind their respective successors and
assigns and shall enure to the benefit of their successors and permitted
assigns. This Agreement may not be assigned by Manager.


 


13.7           Confidentiality. The
provisions as to confidentiality in the Management Agreements shall apply to
the parties hereto as if such provisions were expressly set forth herein.


 


13.8           Time is of the Essence. Time
is of the essence with respect to all time or notice deadlines set forth
herein; provided, however, this provision shall not affect the rights of any
defaulting party hereunder to cure such default within the time periods (if
any) explicitly set forth herein, if and as so permitted pursuant to the terms
of this Agreement.


 


EXECUTED as of the date first above written.


 


[SIGNATURE PAGES TO FOLLOW]


 

















 


IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first set forth above.


 


HOLDCO I:                                                                                   MIDWEST CARE
HODLCO TRS I LLC, a Delaware limited liability company


 


	
   

  	
  By:

  	
  MIDWEST
  CARE HOLDINGS LLC, a Delaware limited liability company and its Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Timothy O’Brien

  
	
   

  	
   

  	
  Title: Executive Vice President

  



 

















 


GNC TENANTS:


 


RICHMAN
GARDENS, LLC, a California limited liability company


SUNFLOWER
GARDENS, LLC, a California limited liability company


VALLEY
VIEW GARDENS, LLC, a California limited liability company


FULLERTON
GARDENS, LLC, a California limited liability company


ANGELWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


CARRIAGE
COURT MEMPHIS, LLC, a Delaware limited liability company


COTTAGE
LANDING, LLC, a Delaware limited liability company


COUNTRYWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


ELKWOOD
SENIOR LIVING CENTER, LLC, a Delaware limited liability company


GRANVILLE
ASSISTED LIVING, LLC, a Delaware limited liability company


OAKWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


TIMBERWOOD
SENIOR LIVING, LLC, a Delaware limited liability company


WEATHERWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


CARRIAGE
COURT GROVE CITY, LLC, a Delaware limited liability company


CARRIAGE
COURT KENWOOD, LLC, a Delaware limited liability company


CARRIAGE
COURT LANCASTER, LLC, a Delaware limited liability company


CARRIAGE
COURT MARYSVILLE, LLC, a Delaware limited liability company


CARRIAGE
COURT WASHINGTON COURTHOUSE, LLC, a Delaware limited liability company


 


 


	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Russell Wilkinson

  
	
   

  	
   

  	
   

  	
  Authorized Representative of each of the foregoing limited liability
  companies

  



 

















 


MANAGER:                                                                             GOOD NEIGHBOR
CARE CENTERS, LLC, an Oregon limited liability company


 


	
   

  	
  By:

  	
   

  
	
   

  	
  Name: Russell L. Wilkinson

  
	
   

  	
  Its: Authorized Person

  



 














 


EXHIBIT A


 


DESCRIPTION OF FACILITIES


 


	
  Facility
  Name

  	
   

  	
  Address

  
	
  Fullerton
  Gardens

  	
   

  	
  1510 E. Commonwealth

  Fullerton, CA

  
	
   

  	
   

  	
   

  
	
  Sunflower
  Gardens

  	
   

  	
  3730 S. Greenville St.

  Santa Ana, CA

  
	
   

  	
   

  	
   

  
	
  Richman
  Gardens

  	
   

  	
  317 N. Richman Ave.

  Fullerton, CA

  
	
   

  	
   

  	
   

  
	
  Valley
  View Gardens

  	
   

  	
  11848 Valley View St.

  Garden Grove, CA

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Effingham

  	
   

  	
  1101 North Maple St.

  Effingham, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Olney

  	
   

  	
  1110 N. East St.

  Olney, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Fairfield

  	
   

  	
  315 N. Market St.

  Fairfield, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Mattoon North

  	
   

  	
  1920 Brookstone Ln.

  Mattoon, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Rantoul

  	
   

  	
  300 Twin Lakes

  Rantoul, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Mattoon South

  	
   

  	
  2008 S. 9th Street

  Mattoon, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Charleston

  	
   

  	
  300 Lincoln Hwy Rd.

  Charleston, IL

  
	
   

  	
   

  	
   

  
	
  Cottage
  Landing

  	
   

  	
  150 Cottage Lane

  Carrollton, GA

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Suites of Effingham

  	
   

  	
  505 W. Temple Ave.

  Effingham, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Paris

  	
   

  	
  146 Brookstone Ln.

  Paris, IL

  



 

















 


	
  Brookstone
  Estates of Vandalia

  	
   

  	
  1607 W. Fillmore

  Vandalia, IL

  
	
   

  	
   

  	
   

  
	
  Emerald
  Glen

  	
   

  	
  1301 North East St.

  Olney, IL

  
	
   

  	
   

  	
   

  
	
  Countrywood Assisted
  Living and Memory Care

  	
   

  	
  1604 South 13th Street

  Kingfisher, OK

  
	
   

  	
   

  	
   

  
	
  Timberwood Senior Living

  	
   

  	
  5020 SE 44th St.

  Oklahoma City, OK

  
	
   

  	
   

  	
   

  
	
  Carriage Court of Kenwood

  	
   

  	
  4650 E. Galbraith Rd.

  Cincinnati, OH

  
	
   

  	
   

  	
   

  
	
  Granville Villa of LaVista

  	
   

  	
  8507
  Granville Parkway

  LaVista, NE

  
	
   

  	
   

  	
   

  
	
  Grand Victorian of
  Sycamore

  	
   

  	
  1440 Somonauk St.

  Sycamore, IL

  
	
   

  	
   

  	
   

  
	
  Grand Victorian of
  Rockford

  	
   

  	
  3495 McFarland Road

  Rockford, IL

  
	
   

  	
   

  	
   

  
	
  Carriage Court of Memphis

  	
   

  	
  1645 W. Massey Road

  Memphis, TN

  
	
   

  	
   

  	
   

  
	
  Oakwood Assisted Living &
  Memory Care

  	
   

  	
  2305 Lingleville Highway

  Stephenville, TX

  
	
   

  	
   

  	
   

  
	
  Elkwood Assisted Living &
  Memory Care

  	
   

  	
  1000 Elkwood Blvd.

  Elk City, OK

  
	
   

  	
   

  	
   

  
	
  Weatherwood Assisted
  Living & Memory Care

  	
   

  	
  3601 Main St.

  Weatherford, OK

  
	
   

  	
   

  	
   

  
	
  Angelwood Assisted Living &
  Memory Care

  	
   

  	
  3200 West Hayes

  Clinton, OK

  
	
   

  	
   

  	
   

  
	
  The Glenwood

  	
   

  	
  1101 North Monroe St.

  Robinson, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone Estates of
  Tuscola

  	
   

  	
  1106 E. North Line St.

  Tuscola, IL

  
	
   

  	
   

  	
   

  
	
  Brookstone
  Estates of Harrisburg

  	
   

  	
  165 Ron Morse Drive

  Harrisburg, IL

  



 

















 


	
  Carriage
  Court of Marysville

  	
   

  	
  717 South Walnut Street

  Marysville, OH

  
	
   

  	
   

  	
   

  
	
  Carriage
  Court of Lancaster

  	
   

  	
  800 Becks Knob Road

  Lancaster, OH

  
	
   

  	
   

  	
   

  
	
  Carriage
  Court of Grove City

  	
   

  	
  2320 Sonora Drive

  Grove City, OH

  
	
   

  	
   

  	
   

  
	
  Carriage
  Court of Washington Court House

  	
   

  	
  500 N. Glen Avenue

  Washington Court House, OH

  



 

















 


EXHIBIT B


 


FORM OF LEASE


 

















 


EXHIBIT C


 


INCENTIVE THRESHOLD PURCHASE PRICE ALLOCATION


 

















 


EXHIBIT D


 


SCHEDULE OF DEVELOPMENT FACILITIES


 


1.               Grand Victorian of
Washington


100 Good Neighbor Place


Washington, IL 61571


 


2.               Grand Victorian of Pekin


2700 S. 14th St.


Pekin, IL 61554


 


3.               MSC of Port Royal


1901 N. Paris Avenue


Port Royal, SC 29935


 

















 


EXHIBIT E


 


FORM OF MANAGEMENT AGREEMENT


 

















 


EXHIBIT F


 


MANAGER’S MANAGEMENT TEAM


 


1.               Doug Sproul, Senior Advisor


 


2.               Kacy Kang, President &
Chief Operating Officer


 


3.               Don Rath, Chief
Administrative Officer


 


4.               Lonnie Gienger, Chief
Executive Officer


 

















 


SCHEDULE I


 


RICHMAN
GARDENS, LLC, a California limited liability company


SUNFLOWER
GARDENS, LLC, a California limited liability company


VALLEY
VIEW GARDENS, LLC, a California limited liability company


FULLERTON
GARDENS, LLC, a California limited liability company


ANGELWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


CARRIAGE
COURT MEMPHIS, LLC, a Delaware limited liability company


COTTAGE
LANDING, LLC, a Delaware limited liability company


COUNTRYWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


ELKWOOD
SENIOR LIVING CENTER, LLC, a Delaware limited liability company


GRANVILLE
ASSISTED LIVING, LLC, a Delaware limited liability company


OAKWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


TIMBERWOOD
SENIOR LIVING, LLC, a Delaware limited liability company


WEATHERWOOD
ASSISTED LIVING & MEMORY CARE, LLC, a Delaware limited liability
company


CARRIAGE
COURT GROVE CITY, LLC, a Delaware limited liability company


CARRIAGE
COURT KENWOOD, LLC, a Delaware limited liability company


CARRIAGE
COURT LANCASTER, LLC, a Delaware limited liability company


CARRIAGE
COURT MARYSVILLE, LLC, a Delaware limited liability company


CARRIAGE
COURT WASHINGTON COURTHOUSE, LLC, a Delaware limited liability company