Document:

ex10-1.htm

    

      

    

    Exhibit 10.1

     

    
CASABLANCA OPTION AGREEMENT

     

     

    CASABLANCA OPTION AGREEMENT (this “Option Agreement”), dated as of December 22, 2009, by
and among CapitalSource Inc., a Delaware corporation (“CapitalSource”), CSE SLB LLC, a Delaware limited liability
company (“CSE SLB”), and Omega Healthcare Investors, Inc., a Maryland
corporation (the “Buyer”).  Capitalized terms used in this Option
Agreement shall have the respective meanings ascribed to them in 
Section 13 hereof.  CapitalSource and CSE SLB are collectively
referred to herein as the “Sellers.”

     

    R E C I T A L S:

     

    WHEREAS, CSE SLB owns 100% of the membership interests (the
“Casablanca Units”) of CSE Casablanca Holdings LLC, a Delaware
limited liability company (“Casablanca Holdings”), which in turn owns, through various
direct and indirect subsidiaries (the “Casablanca Subsidiaries”), the various healthcare properties
identified by the physical addresses listed on Schedule I hereto (each a “Casablanca Property” and collectively, the “Casablanca Properties”); and

     

    WHEREAS, pursuant to that certain Securities Purchase
Agreement (the “Purchase Agreement”) dated as of November 17, 2009, by
and among Buyer, the Sellers and the other parties identified on the signature
pages thereto, Buyer has purchased from the Sellers an option to acquire the
Casablanca Units on the terms and conditions set forth therein and
herein.

     

    NOW,
THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
each intending to be legally bound, hereby agree as follows:

     

    
      SECTION 1.  GRANT OF OPTION

    

     

    Subject to the terms and conditions of, and on the basis of and in
reliance upon the covenants, agreements and representations and warranties set
forth in, this Option Agreement, (i) for and in consideration of the Casablanca
Option Price, Sellers hereby grant to Buyer the exclusive option (but not the
obligation) to purchase and acquire at any time during the Option Period the
Casablanca Units on the terms and conditions set forth herein (the “Casablanca Option”); and (ii) in the event Buyer elects to
exercise the Casablanca Option as set forth in Section 3 hereof, then, Sellers, as applicable, shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase and acquire from such Sellers, free and clear of all Encumbrances
except for Permitted Securities Encumbrances, the Casablanca Units.

     

    
      SECTION 2.  PURCHASE AND SALE OF OPTION AND CASABLANCA UNITS

    

     

    
      2.1    Purchase Price for Casablanca
Option.

    

     

    The aggregate consideration for the purchase of the Casablanca
Option payable by Buyer to Seller on the date hereof in accordance with Section 2.1 of the Purchase Agreement, is $25,000,000 (the
“Casablanca Option Price”), which such Casablanca Option Price
is payable in the form of a number of shares of Buyer Common Stock (as defined
in the Purchase Agreement) calculated pursuant to Section 2.1(b) of the Purchase Agreement.

     

    
      
        
        

      

      
        
        

        

          

        

      

      
        
        

      

    

    
      2.2   Purchase Price For Casablanca
Units.

    

     

    (a)   In the event Buyer elects to exercise the Casablanca Option, the
aggregate purchase price for the Casablanca Units payable by the Buyer to
Sellers shall be $295,210,829 (the “Base Purchase Price”), consisting of:

     

    (i)   an amount in cash equal to $30,510,829 (the “Initial Cash Consideration”), increased or decreased in
accordance with Sections 2.2(b), 2.2(c), 2.3 and, if applicable, 6.17 (such adjusted Initial Cash Consideration, the “Cash Consideration” and such adjustments, the “Closing Adjustments”);

     

    (ii)   $264,700,000 of Indebtedness of the Casablanca Subsidiaries assumed
or paid off by the Buyer, which such Indebtedness shall be designated in a
certificate delivered from Sellers no later than five (5) Business Days prior to
the Closing Date (the “Assumed Indebtedness”).

     

    The Base Purchase Price as adjusted pursuant to this Option
Agreement is referred to as the “Final Purchase Price.”  The allocation of the Final
Purchase Price among the Casablanca Properties is set forth on Schedule 2.1(a) of the Purchase Agreement.  The
Cash Consideration shall be paid to Sellers or their Affiliates as directed by
Sellers in a notice delivered no less than three (3) Business Days prior to the
Closing.

     

    (b)   In the event that any of the Casablanca Subsidiaries or Casablanca
Properties are sold between the date hereof and the Closing Date, the Initial
Cash Consideration shall be reduced by the greater of (i) the net proceeds of
such sale or (ii) the purchase price allocated to such Casablanca Property on
Schedule 2.1(a) to the Purchase Agreement; provided, however, that there shall be no reduction in the Initial Cash
Consideration with respect to a sale of CSE Pittsburg or the Pittsburg
Facility.

     

    (c)   On the Closing Date, the Initial Cash Consideration shall be (i)
increased, dollar-for-dollar, to the extent the aggregate principal amount of
Assumed Indebtedness is less than $264,700,000 or (ii) decreased,
dollar-for-dollar, to the extent the aggregate principal amount of Assumed
Indebtedness is greater than $264,700,000.

     

    (d)   [Intentionally left blank]

     

    (e)   Tax Treatment of the Purchase and Sale of Casablanca
Units.  Solely for U.S. federal Income Tax purposes, the Buyer
and each Seller, as applicable, shall treat the purchase and sale of the
Casablanca Units pursuant to Buyer’s exercise of the Casablanca Option under
this Option Agreement as a purchase and sale of each of the Casablanca
Properties and other assets owned by the Casablanca Subsidiaries.  The
purchase price for Income Tax purposes of the Casablanca Properties and other
assets shall equal the Final Purchase Price (plus the Casablanca Option Price
and any other items constituting consideration for purposes of Section 1060 of
the Code).  The allocation of such purchase price to the Casablanca
Properties and other assets of the Casablanca Subsidiaries shall be agreed to by
the Buyer and Sellers within ninety (90) days after the Closing
Date.  The Buyer and Sellers and each of their respective Affiliates
shall take all actions and properly and timely file all Tax Returns (including,
but not limited to, IRS Form 8594 (Asset Acquisition Statement) consistent with
such allocation).  None of the Sellers or the Buyer shall take any
position for U.S. federal Income Tax purposes (whether in audits, Tax Returns or
otherwise) that is inconsistent with the allocation unless required to do so by
applicable Law. In the event that any Tax authority disputes such allocation,
Sellers or the Buyer, as the case may be, shall promptly notify the other party
of the nature of such dispute.

     

    
      
        
        

      

      
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      2.3   Additional Adjustments and
Apportionments.

    

     

    (a)   Sellers and the Buyer hereby acknowledge and agree that, as of the
Closing Date:  (i) certain costs and expenses, including any Taxes
(franchise, income or other), relating to the Casablanca Subsidiaries and the
Casablanca Properties, (A) may have accrued during and be applicable for the
period ending at 12:01 a.m. (New York time) on the Closing Date (such period,
the “Pre-Closing Period”) but will not have been paid by Sellers
or the applicable Casablanca Subsidiary prior to the end of the Pre-Closing
Period (such accrued expenses, if any, that are unpaid as of the end of the
Pre-Closing Period being hereinafter referred to as “Accrued Expenses”) or (B) will not accrue until, or may be
applicable for, the period after 12:01 a.m. (New York time) on the Closing Date
(the “Post-Closing Period”) but will have been paid by Sellers or
one or more of the applicable Casablanca Subsidiaries prior to the beginning of
the Post-Closing Period (such unaccrued expenses, if any, that have been prepaid
as of the beginning of the Post-Closing Period being hereinafter referred to as
“Prepaid Expenses”); and (ii) certain items of income and
revenue relating to the Casablanca Subsidiaries and the Casablanca Properties,
including, without limitation, rental income (excluding Past Due Rent),
(A) may have accrued during or be applicable for the Pre-Closing Period but
will not have been paid during the Pre-Closing Period (such accrued income,
revenue and other amounts, if any, that are unpaid as of the end of the
Pre-Closing Period, the “Accrued Income”) or (B) will not accrue until, or may be
applicable for, the Post-Closing Period but will have been paid prior to the
Post-Closing Period (such unaccrued income, revenue and other amounts, if any,
that has been prepaid as of the beginning of the Post-Closing Period being
hereinafter referred to as “Prepaid Income”).  Subject to the other provisions
herein contained, the Accrued Expenses, Prepaid Expenses, Accrued Income and
Prepaid Income shall be apportioned (on the basis of a 365 day year) to Sellers
with respect to the Pre-Closing Period and the Buyer with respect to the
Post-Closing Period.  Notwithstanding the foregoing, “Accrued Income” shall exclude any rent as to which the Tenant
is fifteen (15) days or more past due as of the Closing Date (“Past Due Rent”), and “Accrued Expenses” shall exclude any accrued, but unpaid costs
or expenses for which a Tenant is obligated to reimburse any of the Casablanca
Subsidiaries pursuant to the terms of a Property Lease; provided, however, that
in the event a Tenant is, as of the Closing Date, in default of (and all
applicable cure periods have expired), or disputing any obligation to pay such
costs or expenses, the amount thereof shall be payable by Sellers for purposes
of calculating the apportionments contemplated by this Section 2.3(a).  Subsequent to the Closing Date,
the Buyer shall use its commercially reasonable efforts to enforce the terms of
the applicable Property Lease and shall remit to Sellers the amount of any such
defaulted or disputed costs and expenses together with any Past Due Rent
actually collected by the Buyer less all fees and expenses incurred by the Buyer
in collecting such monies.  In addition to the foregoing, any deposits
reflected on Schedule 4.6(e) of the Disclosure Schedule held by Sellers or
any of the Casablanca Subsidiaries (excluding any amounts set forth on Schedule 2.3(c)), will be paid (if not already held in an
account of the Casablanca Subsidiaries) over to the Buyer on the Closing Date or
contributed to the Casablanca Subsidiaries on or prior to the Closing
Date.

     

    
      
        
        

      

      
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    (b)   Not later than ten Business Days prior to the Closing Date, Sellers
shall prepare and deliver to the Buyer a written statement setting forth, as of
the Closing Date, a reasonably detailed good faith calculation of the Accrued
Expenses, Prepaid Expenses, Accrued Income and Prepaid Income for each of the
Casablanca Subsidiaries and Casablanca Properties.  The Buyer shall
have the right to review such written statement and shall notify Sellers of any
objection thereto within three Business Days after the receipt
thereof.  Sellers and the Buyer shall negotiate in good faith to
attempt to resolve any objection made by the Buyer, provided that if the parties
are unable to agree upon a reasonably detailed calculation of such amounts at
least five Business Days prior to the Closing Date, the Buyer and Sellers shall
promptly cause, an independent accountant to be mutually agreed upon by the
Buyer and Sellers (the “Independent Accountant”), to review this Option Agreement and
the disputed amounts for the purposes of calculating such disputed amounts (it
being understood that in making such calculation, the Independent Accountant
shall be functioning as an expert and not as an arbitrator).  In
making such calculation, the Independent Accountant shall consider only those
amounts in the Sellers’ calculation of the Accrued Expenses, Prepaid Expenses,
Accrued Income and Prepaid Income as to which Buyer has
disagreed.  The Independent Accountant shall deliver to the Buyer and
Sellers, as promptly as practicable, a report setting forth its estimation of
each disputed amount.  The fees and expenses of any such Independent
Accountant shall be shared equally between the Buyer and
CapitalSource.  If the Buyer does not notify Sellers of any objection
within such three Business Day period, the Buyer shall be deemed to have agreed
with the apportionments specified in Sellers’ written statement.  If,
after the Closing, an error or omission in the calculation of the Accrued
Expenses, Prepaid Expenses, Accrued Income or Prepaid Income is found by one of
the parties hereto, such error or omission shall be promptly corrected, and the
party hereto who received any over-payment as a result thereof shall pay the
amount of such over-payment in cash to the party hereto entitled thereto; provided, however, that such obligation to correct apportionments shall
only survive the Closing for a period of 365 days; provided, further, that any disagreement with respect to such
calculation shall be resolved pursuant to the procedures set forth in this Section 
2.3
(b).

     

    (c)   The Initial Cash Consideration shall be (i) (A) reduced by the
excess, if any, of the aggregate amount of Accrued Expenses over the aggregate
amount of Prepaid Expenses and (B) increased by the excess, if any, of the
aggregate amount of Prepaid Expenses over the aggregate amount of Accrued
Expenses, and (ii) (A) reduced by the excess, if any, of the aggregate amount of
Prepaid Income over the aggregate amount of Accrued Income and
(B) increased by the excess, if any, of the aggregate amount of Accrued
Income over the aggregate amount of Prepaid Income, in the case of each of the
foregoing clauses (i) and (ii), as such amounts are mutually agreed or finally
resolved in accordance with Section 
2.3
(b).  In addition, the Initial Cash
Consideration shall be increased by the amounts held by third parties as of the
Closing Date with respect to all amounts related to the matters set forth on
Schedule 
2.3
(c) hereof as set forth in a certificate delivered from
Sellers to the Buyer no less than ten (10) Business Days prior to the Closing
Date.

     

    
      
        
        

      

      
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      2.4   Payments and Computations.

    

     

    All cash payments to be made under this Option Agreement by any
party hereto shall be paid by wire transfer of immediately available funds to
the account or accounts designated by the party receiving such
payment.  All computations of interest with respect to any amounts due
from or to either party hereto pursuant to this Option Agreement will be made on
the basis of a year of 365 days, in each case for the actual number of days
(excluding the first day, but including the last day) occurring in the period
for which such interest is payable.

     

    
      SECTION 3.  EXERCISE OF CASABLANCA OPTION

    

     

    Exercise.

     

    At any time during the Option Period, Buyer may exercise the
Casablanca Option by delivering written notice to Sellers of its election to
exercise (the “Exercise Notice”) not less than forty-five (45) days prior to
the requested Closing Date.  “Option Period” shall mean the period beginning on the date of
this Option Agreement and ending on the earlier of (i) 12:01 a.m. (New York
time) on January 1, 2012 (as such date may be extended pursuant to Section 10.1 hereof or by mutual agreement of the parties)
and (ii) the Closing hereunder (the “Termination Date”).

     

    
      SECTION 4.  SELLERS’ REPRESENTATIONS AND WARRANTIES

    

     

    Incorporation by Reference of Representations and
Warranties.  As a material inducement to the Buyer to enter
into and perform its obligations under this Option Agreement, Sellers have
jointly and severally made to Buyer certain representations and warranties
contained in the Purchase Agreement, which are subject to certain exceptions set
forth in the Disclosure Schedule.  Solely to the extent such
representations are with respect to Sellers, the Casablanca Units, Casablanca
Holdings, the Casablanca Subsidiaries or the Casablanca Properties, such
representations are incorporated by reference herein, and Sellers shall be
deemed to have jointly and severally made such representations to Buyer as of
the date of this Option Agreement and in the event Buyer delivers an Exercise
Notice, as of the Closing Date hereunder, in each case except as set forth in
the Disclosure Schedule.

     

    
      SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BUYER

    

     

    As a material inducement to the Sellers to enter into and perform
their respective obligations under this Option Agreement, in the event the Buyer
delivers an Exercise Notice, the Buyer represents and warrants to Sellers as of
the date hereof and as of the Closing Date as follows:

     

    
      5.1   Organization and Good Standing.

    

     

    The Buyer is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland, and has all requisite
corporate power and authority to conduct its business as presently conducted and
to own and lease the properties and assets used in connection
therewith.

     

    
      
        
        

      

      
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      5.2   Power and Authorization.

    

     

    The Buyer has all requisite corporate power and authority to enter
into and perform its obligations under this Option Agreement.  The
execution, delivery and performance by the Buyer of this Option Agreement have
been duly authorized by all necessary corporate action on the part of the
Buyer.  This Option Agreement has been duly and validly executed and
delivered by the Buyer and constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms and
will constitute the legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms, in each case,
subject to applicable bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally, general equitable principles, the
discretion of courts in granting equitable remedies and matters of public
policy.

     

    
      5.3   Validity of Contemplated
Transactions.

    

     

    The execution, delivery and performance of this Option Agreement and
the consummation by the Buyer of the transactions provided for herein, do not
and will not (with or without the passage of time or the giving of
notice):  (i) violate or conflict with the articles of incorporation
or bylaws of Buyer, (ii) violate or conflict with any Law binding upon, or
any permit, license, order, judgment or decree applicable to, Buyer or its
Subsidiaries or their respective properties, (iii) conflict with, violate,
result in a breach of or default or otherwise cause any loss of benefit under
any material contract or agreement to which the Buyer is a party or by which it
or its Subsidiaries or their assets are bound or give rise to any penalty,
acceleration of any remedies, right of termination or otherwise cause any
alteration of any rights or obligations of any party under any material contract
or agreement to which the Buyer is a party or by which it or its Subsidiaries or
their assets are bound or (iv) require any consent, notice, authorization,
waiver of filing with any Governmental Entity or other Person except in the case
of (ii) or (iii) above, for such violations, conflicts, breaches, defaults or
losses as would not adversely affect the Buyer’s ability to consummate the
transactions contemplated hereby in any material respect.

     

    
      5.4   Consents.

    

     

    Except for the consents, authorizations, waivers and filings set
forth in Section 5.4 of the Buyer’s Disclosure Schedule (the “Buyer Consents”), no consent, authorization, waiver by or
filing with any Governmental Entity or other Person is required in connection
with the execution or performance of this Option Agreement or the consummation
by the Buyer of the transactions contemplated hereby except for such consents,
authorizations, waivers or filings, as to which the failure to obtain would not
adversely affect the Buyer’s ability to consummate the transactions contemplated
hereby in any material respect.

     

    
      
        
        

      

      
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      5.5   Brokers.

    

     

    No Person acting on behalf of the Buyer or any of its Affiliates or
under the authority of any of the foregoing is or will be entitled to any
brokers’ or finders’ fee or any other commission or similar fee with respect to
which any Seller or any of their respective Affiliates will be liable in
connection with any of the transactions contemplated by this
Agreement.

     

    
      5.6   Operator Matters.

    

     

    The Buyer acknowledges that it has been advised by Seller that (a)
neither Sellers nor the Casablanca Subsidiaries have ever operated or managed a
nursing facility, assisted living facility and/or rehabilitation hospital,
(b) neither Sellers nor the Casablanca Subsidiaries are associated or
affiliated with Facility Operators other than through the respective Property
Leases, and (c) Sellers provide the representations and warranties set
forth in Sections 4.17 (Operator Matters), 4.19 (Medicare, Medicaid and Participation) and 4.20 (Health Care Compliance) of the Purchase Agreement
insofar as such representations and warranties relate to Casablanca Tenants, the
Facility Operators or the Casablanca Properties, solely for purposes of
indemnification and risk allocation.

     

    
      SECTION 6.  COVENANTS OF THE PARTIES UNTIL CLOSING

    

     

    
      6.1   Conduct of Business Pending
Closing.

    

     

    (a)   Except (i) as set forth in Schedule 
6.1
(a), (ii) as otherwise expressly provided in this Option
Agreement or any Transaction Document, (iii) as required by applicable Law, (iv)
as necessary to consummate the transactions contemplated by the Transaction
Documents or (v) as required by sound business practice, between the date hereof
and the Closing, without the prior written consent of the Buyer (not to be
unreasonably withheld, delayed or conditioned), Sellers shall cause each
Casablanca Subsidiary to, operate, in all material respects, its respective
business only in the ordinary course consistent with past practices and to use
commercially reasonable efforts to preserve intact its respective business
organization and goodwill in all material respects, including, without
limitation, the goodwill and relationships of each Casablanca Subsidiary with
Tenants, vendors, Facility Operators and other Persons having a business
relationship with any Casablanca Subsidiary and, without limiting the foregoing,
to:

     

    (i)   maintain its respective existence, and discharge debts, liabilities
and obligations as they become due, and operate in the ordinary course
in a manner consistent with past practice and, except as would not have a
Material Adverse Effect on the Casablanca Subsidiaries, in compliance in all
respects with all applicable Laws, authorizations, and Contracts (including,
without limitation, those identified in the Disclosure Schedule);

     

    (ii)   enforce obligations set forth in Property Leases that the Tenant
thereunder maintain the facilities and assets of the Casablanca Subsidiary in
the same state of repair, order and condition as on the date hereof, reasonable
wear and tear excepted;

     

    (iii)          
maintain, in all material respects, its respective books and records
in accordance with past practice, and with respect to accounting records, GAAP,
and use commercially reasonable efforts to maintain in full force and effect all
authorizations and all insurance policies and binders;

     

    
      
        
        

      

      
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    (iv)   maintain in full force and effect all Permits, except for such
Permits the failure of which to maintain in full force and effect would not have
a Material Adverse Effect on the Casablanca Subsidiaries;

     

    (v)   file, when due or required (after giving effect to any applicable
and valid extension), federal, state, foreign and other Tax Returns and other
reports required to be filed and pay when due all Taxes, assessments, fees and
other charges lawfully levied or assessed against them, unless the validity
thereof is contested in good faith and by appropriate proceedings diligently
conducted;

     

    (vi)   consistent with past practice, enforce the terms of the Property
Leases in all material respects; and

     

    (vii)         
promptly provide Buyer, with copies of all (A) information, notices,
reports and other materials and written communications received by Sellers from
any Tenant or Facility Operator pursuant to any Property Lease or any Casablanca
Senior Lender or Casablanca Mezzanine Lender and (B) notices, demands, analyses
and other materials and written communications provided by Sellers to any Tenant
or Facility Operator pursuant to the Terms of any Property Lease or any
Casablanca Senior Lender or Casablanca Mezzanine Lender.

     

    (b)   Except (i) as set forth in Schedule 6.1(b), (ii) as otherwise provided in this
Option Agreement or the Transaction Documents, (iii) as required by applicable
Law, (iv) as necessary to consummate the transactions contemplated by the
Transaction Documents, or (v) as required by sound business practice, between
the date hereof and the Closing, without the prior written consent of the Buyer
(not to be unreasonably withheld, delayed or conditioned), Sellers shall cause
each Casablanca Subsidiary not to:

     

    (i)   make any change in, or purchase, redeem or retire, or otherwise
grant any option, warrant or other right to purchase or acquire, any Casablanca
Subsidiary’s authorized, issued or outstanding equity interests or other
securities, or declare or pay any dividend or other distribution (other than
cash dividends or distributions) upon any equity interest or other securities of
any Casablanca Subsidiary;

     

    (ii)   amend (as applicable) in any material respect the declaration of
trusts, articles or certificate of incorporation, articles or certificate of
formation or organization, limited liability company operating agreement,
partnership agreement or other organizational document of any Casablanca
Subsidiary;

     

    (iii)          
fail to pay or discharge when due any material liability or
obligation of the Casablanca Subsidiaries, except any such liability or
obligation that shall be contested in good faith or except as would not
adversely affect the ability of any Seller or Casablanca Subsidiary to
consummate the transactions contemplated hereby;

     

    
      
        
        

      

      
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    (iv)   make or enter into any Contract which obligates any Casablanca
Subsidiary from and after the Closing Date unless otherwise permitted by this
Section 6.1 or terminate any Contract set forth in Section 4.10 of the Disclosure Schedule.

     

    (v)   incur or otherwise become liable for any Indebtedness (whether as
primary obligor, guarantor or otherwise), or agree to any amendment or
modification of any Indebtedness;

     

    (vi)   amend or modify the Casablanca Senior Loan Agreement or the
Casablanca Mezzanine Loan Agreement; or

     

    (vii)         
agree or commit to do any of the foregoing.

     

    
      6.2   Access.

    

     

    (a)   Between the date of this Option Agreement and the Closing Date,
Sellers will, and will cause each Casablanca Subsidiary to, afford to the
authorized representatives and agents of the Buyer free and reasonable access to
and the right to inspect the assets, properties, books and records thereof and
their respective Affiliates to the extent related to any Casablanca Subsidiary
or any Casablanca Property, and will furnish, or cause to be furnished to, the
Buyer such additional financial and operating data and other information
regarding the same as the Buyer may from time to time reasonably request and is
available to Sellers or any Casablanca Subsidiary.  Sellers will, and
will cause each Casablanca Subsidiary to, make reasonably available for
conference any of their respective officers and employees and will attempt to
make available their respective agents vendors or suppliers who are involved in
the business conducted at any Casablanca Property as reasonably requested by the
Buyer and will supply, or cause to be supplied, to the Buyer all other
information that the Buyer deems necessary to review the Casablanca Property as
is available to Sellers or any Casablanca Subsidiary.  The Buyer and
the Buyer’s agents, representatives and designees will also have the continuing
right until the Closing to enter in and upon the Casablanca Properties to
inspect, examine, survey and make any borings, soil bearing tests, monitoring
wells, or other physical tests and any other engineering, structural, building
system, environmental, architectural or landscaping test, drawings,
investigations, analyses or surveys which the Buyer deems necessary or
appropriate, subject to the prior written approval of Seller, which approval
shall not be unreasonably withheld.  Any access pursuant to this Section 
6.2
(a) shall be subject to the terms of the applicable
Property Lease.

     

    (b)   The Buyer will cooperate with Sellers to conduct the inspections,
examinations, surveys, tests, drawings, investigations, analyses, surveys,
reviews and interviews contemplated in this Section 
6.2 in such a manner as to cause as little disruption to
the business conducted at the Casablanca Properties as possible, and the Buyer
will indemnify, defend and save the Sellers harmless from any Damages incurred
by the Sellers to the extent such Damages are caused by Buyer’s or its
employees’, contractors’ or representatives’ negligence in the performance of
such inspections, examinations, surveys, analyses, tests, drawings,
investigations, surveys, reviews and interviews; provided, however, that in no event shall the Buyer be liable for any
Damages based solely on its discovery of pre-existing conditions.

     

    
      
        
        

      

      
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      6.3   Consents and Cooperation.

    

     

    Prior to the Closing, Sellers and the Buyer
shall use commercially reasonable efforts to obtain all Seller Consents (as
defined in the Purchase Agreement) and Buyer Consents, respectively. Without
limiting, and in furtherance of, the foregoing, prior to the Closing, the Buyer
will submit appropriate licensure applications for a change of ownership for the
Casablanca Subsidiaries with the appropriate state licensure authorities and
provide notice of any such submissions to the Sellers concurrently with the
making of such submissions. Each of Sellers and the Buyer shall reasonably
assist and cooperate with the other in preparing and filing all documents
required to be submitted by the Buyer or the Sellers to any Governmental Entity
in connection with such transactions and in obtaining any relevant Seller
Consents and Buyer Consents (which assistance and cooperation shall include,
without limitation, the timely furnishing to the Buyer or Sellers, as
applicable, of all information concerning Buyer or Sellers or any Casablanca
Subsidiary that counsel to the Buyer determines is required to be included in
such documents or would be helpful in obtaining any such Buyer Consents and
Seller Consents).  Each of the parties hereto shall use all
commercially reasonable efforts to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to the transactions
contemplated by the Transaction Documents.  In connection therewith,
if any administrative or judicial action or proceeding is instituted challenging
the transactions contemplated by the Transaction Documents as violative of any
applicable Law, each of the parties hereto shall cooperate and use all
commercially reasonable efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or permanent
(each an “Order”), that is in effect and that prohibits, prevents, or
restricts consummation of such transactions, unless by mutual agreement the
Buyer and Sellers decide that litigation is not in their respective best
interests.  The Buyer and Sellers shall each use all commercially
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the applicable Laws with respect to the
transactions contemplated by the Transaction Documents as promptly as possible
after the execution of this Option Agreement.  Notwithstanding
anything to the contrary herein, (i) none of the Buyer, any of its Subsidiaries
or any Affiliate thereof shall (a) be required to divest any of its or its
Subsidiaries’ or Affiliates’ businesses or assets, (b) to take or agree to take
any other action or agree to any limitation that could reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the Buyer, any of
its Subsidiaries or any Affiliates thereof or the Casablanca Subsidiaries (or
any of them) from and after the Closing Date or (c) take any action involving
more than nominal expense, cost or burden prior to the delivery of an Exercise
Notice and (ii) none of Sellers or any Affiliate thereof shall (x) be required
to divest any of their respective businesses, or assets, or (y) to take or
agree to take any other action or agree to any limitation that could reasonably
be expected to have a Material Adverse Effect on the Casablanca Subsidiaries or
a material adverse effect on any of its Subsidiaries or any Affiliates thereof
or any Seller or any of their respective Affiliates from and after the Closing
Date.  Without limiting, and in furtherance of, the foregoing, Sellers
shall, and shall cause each Casablanca Subsidiary to, fully cooperate with the
Buyer in connection with the Buyer obtaining title policies (and customary
endorsements thereto), surveys, zoning reports or certificates and any other
property-level inquiries or undertakings sought by the Buyer with respect to the
Casablanca Properties, and Sellers shall, and shall cause each Casablanca
Subsidiary to, subject to the last sentence of Section 
6.2
(a), grant
access to the Casablanca Properties and execute and deliver any certificates or
affidavits reasonably requested in connection therewith (including any title
affidavit and indemnity relating to customary non-imputation endorsements) at or
prior to Closing.

     

    
      
        
        

      

      
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      6.4   No Solicitation.

    

     

    During the period commencing on the date
hereof and ending on the Termination Date, except for the matters set forth on
Schedule 
6.1
(b):

     

    (a)   Neither any Seller, any Casablanca Subsidiary nor any of its or
their respective Affiliates shall, and each of the foregoing shall not allow any
Person acting on its behalf to, directly or indirectly, continue, initiate,
encourage, solicit or participate in discussions or negotiations with, or
provide any nonpublic information to, any Person (other than the Buyer and its
representatives in connection with the transactions contemplated by this Option
Agreement or the other Transaction Documents) concerning (i) any sale of
assets of any Casablanca Subsidiary (other than in the ordinary course of its
business and consistent with past practice), (ii) any sale of any
securities of any Casablanca Subsidiary including, without limitation, the
Casablanca Units, (iii) any other transaction including, without
limitation, a merger, consolidation, recapitalization, liquidation or similar
transaction, directly involving any Casablanca Subsidiary (collectively, an
“Acquisition Transaction”) or (iv) enter into any
agreement, understanding or arrangement with respect to an Acquisition
Transaction.  In addition to the foregoing, no Seller shall agree to
engage in any Acquisition Transaction unless the terms thereof expressly exclude
the Casablanca Subsidiaries and the transactions contemplated by the Transaction
Documents.  Sellers shall advise their financial advisors of Sellers’
obligations pursuant to this Section 
6.4 and instruct such advisors not to take any action in
contravention hereof.

     

    (b)   Sellers shall, and each of them, shall cause each Casablanca
Subsidiary to, promptly communicate to the Buyer within three (3) Business Days
following receipt the terms of any proposal that any of its officers or
directors or Persons serving similar capacities may receive after the date of
this Option Agreement in respect of an Acquisition Transaction.  Any
notification under this Section 
6.4
(b) shall include the identity of each Person making such
proposal, the terms of such proposal and any other information with respect
thereto as the Buyer may reasonably request.

     

    (c)   Sellers hereby agree that a monetary remedy for a breach of the
agreements set forth in this Section 
6.4 will be inadequate and impracticable, and that any
such breach would cause the Buyer and its Affiliates irreparable
harm.  In the event of a breach of this Section 
6.4, in addition to any other remedies available to the
Buyer, without the requirement of posting any bond or other security, the Buyer
shall be entitled to seek equitable remedies in a court of competent
jurisdiction regarding this Section 
6.4, including, without limitation, the equitable remedy
of specific performance with respect to the provisions of this Section 
6.4, and shall be entitled to such injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions, as a court of competent jurisdiction shall determine with respect
to any such breach of the agreements set forth in this Section 
6.4; provided, however, that, in the event that the Buyer terminates this
Option Agreement pursuant to Section 
1.1(e), the Buyer’s sole and exclusive remedy in respect
of such termination (including any breach by Sellers, any Casablanca Subsidiary
or any of their respective Affiliates of the agreements set forth in this Section 
6.4) shall be to pursue an action against Sellers for
Damages as provided in Section 10.2, and neither any Seller, any Casablanca
Subsidiary nor any of their respective Affiliates shall have any further
obligations or liabilities under this Option Agreement except as otherwise
provided in Section 10.2.

     

    
      
        
        

      

      
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    (d)   For the avoidance of doubt, any breach by a Seller, any Casablanca
Subsidiary or any of their respective Affiliates of any provision of Section 
6.4(a) that is not cured within five (5) Business Days shall be
deemed to be a material breach of this Option Agreement and, for purposes of the
exercise by the Buyer of its termination rights pursuant to Section 10.1(e), after such cure period such breach
shall be deemed incapable of being cured prior to the Termination
Date.

     

    
      6.5   Disclosure Schedule.

    

     

    Not less than five business days prior to the Closing Date, Sellers
shall deliver to the Buyer updated Disclosure Schedules and the Buyer shall
deliver to Sellers disclosure schedules relating to the representations and
warranties set forth in Section 5 (the “Buyer Disclosure Schedules” and, collectively, the “Updated Disclosure Schedule”) solely for informational
purposes, specifying material changes to the Disclosure
Schedules.  Subject to the provisions set forth in the Updated
Disclosure Schedule, each exception set forth in the Updated Disclosure Schedule
and each other disclosure and response to this Option Agreement set forth in the
Updated Disclosure Schedule shall be in reasonable detail and identified by
reference to, or shall be grouped under a heading referring to, a specific
individual section or subsection (as applicable) of this Option
Agreement.  The inclusion of any information in the Updated Disclosure
Schedule shall not be deemed an admission or acknowledgement, in and of itself
or solely by virtue of the inclusion of such information in the Updated
Disclosure Schedule, that such information is required to be set forth therein
or that such information is material to Sellers, any Casablanca Subsidiary, the
Buyer or their respective business, assets or liabilities.  Any item
disclosed on any section in the Updated Disclosure Schedule shall be deemed to
be disclosed with respect to all other sections under which such item may be
relevant to the extent that such section is reasonably cross-referenced or the
relevance to such other section is readily apparent on the face of the
disclosure.  Capitalized terms used and not otherwise defined in the
Updated Disclosure Schedule shall have the respective meanings ascribed to them
in this Option Agreement.

     

    
      6.6   Notices of Certain Events.

    

     

    (a)   From the date hereof until the Closing Date, or expiration of the
Option Period, Sellers shall, promptly, and in any event within five (5)
Business Days, after obtaining Knowledge of any of the following, notify the
Buyer, in writing, of: (i) any notice or communication to any Seller from any
Person alleging that the consent of such Person is required in connection with
the transactions contemplated by this Option Agreement; (ii) any notice or
other communication to any Seller from any Governmental Entity in connection
with the transactions contemplated by this Option Agreement; (iii) (A) any fact
or condition that causes or constitutes a breach of any of the representations
or warranties made by any Seller pursuant to this Option Agreement such that the
condition set forth in Section 
7.2 would not be satisfied and (B) any changes or events
which have had or would reasonably be expected to have a Material Adverse Effect
or otherwise result in any representation or warranty of any Seller being
materially inaccurate as of the date of such changes or events such that the
condition set forth in Section 
7.2 would not be satisfied; and (iv) the occurrence
of any default or event of default under any Property Lease and the exercise (or
receipt of notice of intent to exercise) by any Tenant of any renewal option
contained in any Property Lease.

     

    
      
        
        

      

      
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    (b)   From the date hereof until the Closing Date, or expiration of the
Option Period, Buyer shall, promptly, and in any event within five (5) Business
Days, after obtaining Knowledge of any of the following, notify Sellers, in
writing, of: (i) any notice or communication to Buyer from any Person alleging
that the consent of such Person is required in connection with the transactions
contemplated by this Option Agreement; (ii) any notice or other communication to
Buyer from any Governmental Entity in connection with the transactions
contemplated by this Option Agreement; (iii) (A) any fact or condition that
causes or constitutes a breach of any of the representations or warranties made
by Buyer pursuant to this Option Agreement such that the condition set forth in
Section 
8.2 would not be satisfied and (B) any changes or events
which result in any representation or warranty of Buyer being materially
inaccurate as of the date of such changes or events such that the condition set
forth in Section 
8.2 would not be satisfied.

     

    
      6.7   Seller Releases.

    

     

    (a)   Effective as of the Closing Date, in consideration of the mutual
covenants and agreements contained herein, including the consideration to be
received by Sellers, each Seller, in its capacity as a selling equityholder,
hereby irrevocably releases and forever discharges each Casablanca Subsidiary
(for the benefit of each such Casablanca Subsidiary and the Buyer and their
respective Affiliates, Subsidiaries, and predecessors and their respective past
and present managers, directors, officers, employees and agents, and each of
their respective successors, heirs, assigns, executors and administrators
(collectively, the “Released Persons”)) of and from all manner of action and
actions, cause and causes of action, suits, rights, debts, dues, sums of money,
accounts, bonds, bills, covenants, Contracts, controversies, omissions,
promises, variances, trespasses, damages, liabilities, judgments, executions,
claims and demands whatsoever, in law or in equity against the Released Persons
which each Seller ever had, now has or which it hereafter can, shall or may
have, whether known or unknown, suspected or unsuspected, matured or unmatured,
fixed or contingent, for, upon or by reason of any matter or cause arising at
any time on or prior to the Closing Date; provided, however, that nothing herein shall operate to release any
obligation of any Casablanca Subsidiary or the Buyer under the Transaction
Documents or the Assumed Indebtedness.  No Seller has assigned any
such claim set forth in this Section 
6.7
(a).

     

    (b)   Each Seller hereby covenants not to sue or to institute or cause to
be instituted any action in any federal, state or local agency or any court or
other tribunal against the Released Persons that is related directly or
indirectly to any of the matters released in Section 
6.7
(a).  If any Seller sues or otherwise
institutes any such action, that action shall be dismissed upon presentation of
this Option Agreement to the applicable agency, court or tribunal.

     

    
      
        
        

      

      
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      6.8   Property Financial Statements.

    

     

    In addition to the
other actions contemplated elsewhere herein, for all periods ending on or after
December 31, 2009, Sellers shall deliver or cause to be delivered to the Buyer
(or its designee) audited financial statements for the Casablanca Properties for
each calendar year ending prior to the Closing Date, together with the report
thereon of Ernst & Young LLP, within 70 days after calendar year end, and
unaudited interim financial statements for the Casablanca Properties for each
interim period subsequent to December 31, 2009 within 45 days after the end of
each of the first three calendar quarters of each year prior to the Closing
Date.  Such financial statements shall comply in all material respects
with the applicable accounting requirements with respect to acquired real estate
operations, shall be prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by the applicable rules and regulations of
the Securities and Exchange Commission  (the “SEC”)) and SEC Regulation S-X to the extent applicable to
acquired properties, applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto and subject, in the case of
unaudited statements, to normal year-end audit adjustments) and shall fairly
present, in accordance with the applicable requirements of GAAP, the information
set forth therein.

     

    
      6.9   Public Announcements.

    

     

    The parties shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Option
Agreement or the transactions contemplated by this Option Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law or any listing agreement with a
national securities exchange or trading system to which any of the parties is a
party.

     

    
      6.10         
Confidentiality.

    

     

    All confidential information obtained by the Buyer or any Seller in
connection with the transactions contemplated by this Option Agreement shall be
kept confidential in accordance with (a) the confidentiality agreement, dated
October 9, 2009, by and between the Buyer and CapitalSource and (b) the
confidentiality agreement dated November 6, 2009, by and between the Buyer
and CapitalSource (collectively, the “Confidentiality Agreement”).

     

    
      6.11         
Estoppel Certificates.

    

     

    Sellers shall use their commercially reasonable efforts to deliver
to the Buyer an Estoppel Certificate substantially in the form of Exhibit B to the Purchase Agreement executed by each
Tenant.

     

    
      6.12         
Intercreditor Arrangements.

    

     

    With respect to any Tenant or Facility Operator of any Casablanca
Property set forth on Section 4.14(b) of the Disclosure Schedule that is a party to
any Seller/Tenant Indebtedness, Sellers (or the appropriate Affiliate of
Sellers) shall enter into an agreement at or before the Closing Date, in the
form attached hereto as Exhibit C to the Purchase Agreement (the “Intercreditor Agreements”), pursuant to which Sellers (or
such Affiliates) agree, among other things, that any exercise of any rights or
remedies arising under, pursuant to or in connection with any such Contract,
shall in no way terminate, impair, alter, extinguish or otherwise affect the
terms or conditions of any Property Lease between any Casablanca Subsidiary and
such Tenant or Facility Operator.

     

    
      
        
        

      

      
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      6.13         
Senior Loan Extension.

    

     

    Sellers shall cause (i) each of the Casablanca Senior Loan Borrowers
to exercise its options to extend the maturity date of the Casablanca Senior
Loan for successive one-year periods, first to April 9, 2011, and then to April
9, 2012, and (ii) CSE Casablanca Holdings II LLC to exercise its options to
extend the maturity date of the Casablanca Mezzanine Loan for successive
one-year periods, first to April 9, 2011, and then to April 9,
2012.  Sellers shall provide the Buyer with copies of the extension
notices given by or on behalf of the Casablanca Senior Loan Borrowers and CSE
Casablanca Holdings II LLC, respectively, promptly after such notices are sent
to the Casablanca Senior Lender and the Casablanca Mezzanine Lender, as the case
may be.

     

    
      6.14         Title Searches; Title Commitments.

    

     

    (a)   Existing Title Policies.  For any Casablanca
Properties with respect to which the applicable Casablanca Subsidiary is the
named insured under an existing policy of title insurance covering such
Casablanca Property (an “Insured Property”), as soon as reasonably practicable after
the date of the Exercise Notice, Sellers shall cause title searches (the “Title Searches”) covering the Casablanca Properties from the
date the applicable Casablanca Subsidiary acquired its interest in the
applicable Insured Property through the most recent date the applicable real
estate records can be searched to be issued by the title insurer, together with
copies of all documents evidencing the items referred to as exceptions in the
Title Searches.  Sellers shall be obligated to cure any title
encumbrances with respect to (i) deeds of trust, mortgages, assignments of
leases and rents, fixture filings and security interests and encumbrances
securing money borrowed from a financial institution (such as a bank, savings
and loan, insurance company, or the like) securing obligations other than the
Assumed Indebtedness, and (ii) other liens that can be cured solely by the
payment of a liquidated amount, in each case from the closing proceeds payable
to Sellers or otherwise.

     

    (b)   No Title Policy.  For any Casablanca Properties
with respect to which the applicable Casablanca Subsidiary is not the named
insured under an existing policy of title insurance covering such Casablanca
Property (an “Uninsured Property”), as soon as reasonably practicable after
the date of this Option Agreement, Sellers shall cause title insurance
commitments (the “Title Commitments”) covering the Uninsured Properties to be
issued by a nationally recognized title insurer reasonably acceptable to Buyer,
committing the title insurer to issue its current form of ALTA owner’s or
leasehold title insurance policy to the Casablanca Subsidiary in the amount of
the Final Purchase Price allocated to each Uninsured Property (each a “Title Policy”), together with copies of all documents
evidencing the items referred to as exceptions in the Title
Commitments.  Sellers shall be obligated to cure any title
encumbrances with respect to (i) deeds of trust, mortgages, assignments of
leases and rents, fixture filings and security interests and encumbrances
securing money borrowed from a financial institution (such as a bank, savings
and loan, insurance company, or the like) securing obligations other than the
Assumed Indebtedness, and (ii) other liens that can be cured solely by the
payment of a liquidated amount, in each case from the closing proceeds payable
to Sellers or otherwise.  Notwithstanding the foregoing, for any
Uninsured Property for which an affiliate of an Casablanca Subsidiary is the
insured under an existing policy of title insurance, Sellers shall be permitted
to obtain an endorsement to such title policy from the issuer thereof changing
the insured to the applicable Casablanca Subsidiary; upon the issuance of such
endorsement, such Casablanca Property shall thereafter be an Insured Property
for all purposes of this Agreement.

     

    
      
        
        

      

      
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      6.15         
Seller Cooperation with Transaction
Financing.

    

     

    Prior to the Closing, Sellers shall provide,
and shall use their commercially reasonable efforts to cause their officers and
employees to provide, on a timely basis, all reasonable cooperation requested by
the Buyer and that is customary for sellers to provide in connection with the
arrangement of the financing to be incurred by the Buyer (the “Financing”) in connection with the transactions contemplated
hereby (provided that such requested cooperation does not unreasonably interfere
with the ongoing operations of Sellers), including using its commercially
reasonable efforts to (i) facilitate the provision of guarantees and pledge of
collateral (effective as of the Closing Date), (ii) provide financial and other
pertinent information regarding the Casablanca Subsidiaries and the Casablanca
Properties as may be reasonably requested in writing by the Buyer, (iii) provide
(to the extent not previously provided) copies of the most recent appraisals,
environmental reports, evidence of title (including copies of deeds, lease
documentation, title insurance policies and/or commitments for title insurance,
title opinions, surveys, and similar information currently maintained on the
data site), and similar information as may be reasonably requested by the Buyer
with respect to the Casablanca Properties, and (iv) assist the Buyer and
its financing sources as may be reasonably requested in the preparation of all
agreements (including review of schedules for completeness) for the Financing
insofar as such materials relate to the properties to be acquired by the Buyer,
it being understood and agreed that information and documents provided by
Sellers may be delivered to agents and lenders (subject to customary
arrangements for confidentiality that are substantially similar to the
provisions in the Confidentiality Agreement or reasonably acceptable to the
Sellers); provided, however, that no certificate, document or instrument referred
to above shall be effective until the Closing Date, and none of the Sellers (nor
prior to the Closing Date, the Casablanca Subsidiaries) shall be required to pay
any commitment or other similar fee or incur any other liability or obligation
in connection with the Financing.  Buyer shall promptly, upon request
by the Sellers, reimburse Sellers for all out-of-pocket costs (including
attorneys’ fees) incurred by the Sellers in connection with the cooperation of
Sellers contemplated by this Section 
6.15 and
the Buyer.  The Buyer shall promptly, upon request by Sellers,
reimburse Sellers for all out-of-pocket costs (including attorneys’ fees)
incurred by Sellers or the Casablanca Subsidiaries in connection with the
cooperation of Sellers contemplated by this Section 
6.15 and
shall indemnify and hold harmless Sellers and their respective directors,
officers, employees and representatives from and against any and all losses,
damages, claims, costs or expenses suffered or incurred by any of them in
connection with the arrangement of the Financing and any information used in
connection therewith.  Any assumption of the Assumed Indebtedness, if
any, shall be at the sole cost and expense of the Buyer.

     

    
      
        
        

      

      
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      6.16         
CSE Pittsburg.

    

     

    (a)    As of the date
hereof, all of the membership interests in the limited liability company known
as CSE Pittsburg LLC (“CSE Pittsburg”) are owned by CSE Casablanca Holdings II LLC
(“Casablanca II”) which is one of the Casablanca Subsidiaries
hereunder.  The Buyer acknowledges that it is not acquiring CSE
Pittsburg nor the facility owned by CSE Pittsburg or any real or personal
property owned by CSE Pittsburg (collectively, the “Pittsburg
Facility”).

     

    (b)    At any time
subsequent to the date hereof, Sellers may (i) cause CSE Pittsburg to convey the
Pittsburg Facility to any Seller or their designees or (ii) may cause Casablanca
II to convey the membership interests in CSE Pittsburg to any Seller or their
designee, provided that, to the extent any such conveyances are prior to the
Closing Date, such conveyances shall only be with the consent of the Casablanca
Senior Lender and the Casablanca Mezzanine Lender, to the extent
required.

     

    (c)    In the event that, as
of Closing, Casablanca II continues to own all of the membership interests in
CSE Pittsburg and CSE Pittsburg owns the Pittsburg Facility, at Closing, at
Sellers’ option, CSE Pittsburg shall convey the Pittsburg Facility to any Seller
or their designee or Casablanca II shall convey all of the membership interests
in CSE Pittsburg to any Seller or their designees.  Such transfers
shall occur immediately following the Closing and Buyer shall execute all
documents necessary or appropriate in connection therewith, at Sellers’
expense.

     

    (d)    In the event that the
Pittsburg Facility is conveyed pursuant to the foregoing Section 6.16(c), Buyer shall retain ownership of the
membership interests in CSE Pittsburg.

     

    
      6.17         
CSE Canton; CSE Hilliard.

    

     

    (a)    Sellers, in their
sole discretion, shall have the right to exclude the Acquired Properties owned
by the Casablanca Subsidiaries CSE Hillard LLC (“CSE Hilliard”) and CSE Canton LLC (“CSE Canton”) pursuant to the provisions of this Section 6.17 from the Closing.  In the event that
Sellers elect to exclude CSE Hilliard and CSE Canton from the Closing, the Final
Purchase Price shall be reduced by the amount of the purchase price allocated to
CSE Hilliard and CSE Canton on Schedule 2.1(a) of the Purchase Agreement, and the condition
to Closing set forth in Section 7.9 shall be deemed to have been
satisfied.

     

    (b)    In the event that
Sellers elect to proceed under Section 6.17(a) above, at Closing, at Sellers’ option, CSE
Hilliard shall convey the Acquired Property owned by CSE Hilliard (the “Hilliard Property”) and CSE Canton shall convey the Acquired
Property owned by CSE Canton (the “Canton Property”) to any Seller or their designee or
Casablanca II shall convey all of the membership interests in CSE Hilliard and
CSE Canton to any Seller or their designee.  Such transfers shall
occur immediately following the Closing and Buyer shall execute all documents
necessary or appropriate in connection therewith, at Sellers’
expense.

     

    
      
        
        

      

      
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    (c)    In the event that the
Hilliard Property and the Canton Property are conveyed pursuant to the foregoing
Section 6.17(b), Buyer shall retain ownership of the
membership interests in CSE Hilliard and CSE Canton.

     

    SECTION 6A TAX COVENANTS

     

    The provisions of Section 6A (Tax Covenants) of the purchase agreement are
hereby incorporated by reference in their entirety into this Option Agreement
other than Section 6A.3 which is excluded and Sellers and the Buyer
intend that such provisions shall be applicable from and after the Closing
Date.  For the avoidance of doubt, any reference in such provisions to
Casablanca Subsidiaries”  and “ Casablanca Subsidiary Securities”
shall mean “Casablanca Holdings,” the “Casablanca Subsidiaries” and the
“Casablanca Units,” as appropriate.

     

    
      SECTION 7.  CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS

    

     

    Unless waived by the Buyer in writing on or prior to the Closing
Date, the obligation of the Buyer to consummate the transactions contemplated
hereunder following the delivery of an Exercise Notice is subject to the
fulfillment, prior to or at the Closing, of each of the following
conditions:

     

    
      7.1   Deliveries at the Closing.

    

     

    Sellers shall have delivered, or caused to
have been delivered, to the Buyer all items required pursuant to Section 
9.2, it being
acknowledged and agreed that any certificate required thereunder or under any
other provision of this Option Agreement shall be without personal liability on
the part of any individual who signs such certificate.

     

    
      7.2   Representations and Warranties.

    

     

    The representations and warranties of Sellers contained in this
Option Agreement shall be true and correct at and as of the Closing Date in all
respects (without giving effect to any qualifiers relating to “materiality,”
“Material Adverse Effect,” “in all material respects” or similar qualifications)
as though such representations and warranties were made at and as of the Closing
Date, except for representations and warranties made as of a specified date,
which shall be true and correct in all respects (without giving effect to any
qualifiers relating to “materiality,” “Material Adverse Effect,” “in all
material respects” or similar qualifications) as of the specified date, except
in each case to the extent that the failure of any such representations and
warranties to be so true and correct as of such times shall not have had a
Material Adverse Effect on the Casablanca Subsidiaries taken as a
whole.  The Buyer shall have received from Sellers certificates, each
dated the Closing Date, to that effect signed on behalf of each Seller by an
authorized officer thereof.

     

    
      7.3   Performance of Covenants.

    

     

    Each Seller shall have performed or complied in all material
respects with all agreements and covenants required by this Option Agreement to
be performed or complied with by it at or prior to the Closing, and the Buyer
shall have received from each Seller certificates, each dated the Closing Date,
to that effect signed, on behalf of each Seller, by an authorized officer
thereof.

     

    
      
        
        

      

      
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      7.4   No Material Adverse Effect.

    

     

    Since the date hereof, there shall not have occurred any event or
condition that has had and is continuing to or would reasonably be expected to
have, a Material Adverse Effect on the Casablanca Subsidiaries taken as a whole
or on the ability of any Seller to consummate the transactions contemplated by
this Option Agreement, and the Buyer shall have received from each Seller
certificates, each dated the Closing Date, to that effect signed on behalf of
each Seller by an authorized officer.

     

    
      7.5   Approvals.

    

     

    The consents, approvals, notices and filings
with any Governmental Entity or other Person (“Consents”) set forth on Schedule 
7.5 shall
have been obtained in form and substance reasonably satisfactory to the Buyer
and shall be in full force and effect on the Closing Date.

     

    
      7.6   Legal Matters.

    

     

    No Order shall exist that prohibits or restrains the consummation of
the transactions contemplated by this Option Agreement, and no Proceeding shall
have been commenced by any Governmental Entity (and be pending) seeking to
prohibit or restrain the consummation of the transactions contemplated by this
Option Agreement to be consummated on the Closing Date.

     

    
      7.7   Outstanding Indebtedness. 

    

     

    No Casablanca Subsidiary shall have any Indebtedness or otherwise be
liable for any Indebtedness other than the Assumed Indebtedness, and as evidence
thereof the Buyer shall have received (a) a certificate from an officer of
each Seller certifying the same with respect to each Casablanca Subsidiary
beneficially owned by such Seller and (b) confirmation from a nationally
recognized title insurance company that such title insurance company is prepared
to issue title insurance policies to the Buyer with respect to the Casablanca
Properties being purchased by the Buyer indicating that each such Casablanca
Property is free and clear of all Encumbrances other than Permitted Encumbrances
and (c) such payoff letters, releases or other further assurances thereof from
third parties as the Buyer may reasonably request.

     

    
      7.8   Title Insurance.

    

     

    With respect to any Casablanca Property that is an Uninsured
Property, a nationally recognized title insurance company shall have issued or
shall be prepared to issue upon payment of the applicable premiums therefor,
title policies in customary form and substance and with endorsements reasonably
acceptable to the Buyer, including, without limitation, comprehensive and zoning
and non-imputation endorsement, to the extent applicable.  With
respect to any Casablanca Property that is an Insured Property, the issuer of
the title insurance policy relating thereto shall have issued or be prepared to
issue upon payment of the applicable premiums therefor, a so-called date down
endorsement and a non-imputation endorsement with respect to such Insured
Property; provided, however, that Sellers, in lieu of providing such
endorsements, may provide, at their expense,  a new title insurance
policy that satisfies the requirements of the first sentence of this Section 7.8.

     

    
      
        
        

      

      
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      7.9   Replacement Leases for Canton and
Hilliard.

    

     

    (a)   On or before the Closing Date, Sellers shall have entered into
long-term Property Leases for each of Arbors at Canton and Arbors at Hilliard
with a Tenant having a credit rating comparable to or better than that of the
current Tenant, which Property Leases shall provide for initial aggregate annual
rent of not less than $1,360,000 (the “Arbors Base Rent”) with an annual rent escalator of not less
than 2.5%.  In the event such Property Leases establish a level of
initial rent (the “Arbors Initial Rent”) payable at the commencement of the
Property Leases (excluding any rent holidays) that is less than the Arbors Base
Rent, then the difference between the level of Arbors Base Rent and Arbors
Initial Rent shall be divided by 0.1032 (the “Cap Rate”) and the Base Purchase Price shall be decreased by
the product so obtained in the event the Arbors Initial Rent is less than the
Arbors Base Rent.

     

    (b)   Notwithstanding the foregoing, if the adjustment contemplated by
Section 7.9(a) result in a decrease in the Base Purchase Price, then in the
event that prior to the Closing Date Sellers enter into a new (or renewed)
long-term Property Lease for the two properties currently covered by the Pinon
master lease (the “Pinon Properties”), then the amount by which Arbors Base Rent
exceeds the Arbors Initial Rent shall be reduced, dollar-for-dollar, by any
increase in the annual rent relating to the Pinon Properties in excess of
$385,008.  The amount by which Arbors Base Rent exceeds Arbors Initial
Rent, as adjusted pursuant to the preceding sentence, and multiplied by the Cap
Rate, will then reflect the total reduction in the Base Purchase
Price.

     

    (c)   Sellers shall deliver to the Buyer a certificate no less than five
(5) Business Days prior to the Closing Date setting forth in reasonable detail
the adjustments to the Base  Purchase Price, if any, contemplated by
Sections 7.9(a) and (b).

     

    
      7.10         
Property Financial Statements.

    

     

    The property
financial statements described in Section 6.8 shall have been delivered to Buyer (or its
designee) in compliance with the terms and conditions set forth in Section 6.8.

     

    
      SECTION 8.  CONDITIONS PRECEDENT TO SELLERS’ OBLIGATIONS

    

     

    Unless waived by Sellers in writing on or prior to the Closing Date,
the obligation of Sellers to consummate the transactions contemplated hereunder
is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:

     

    
      8.1   Deliveries at Closing.

    

     

    The Buyer shall have delivered, or caused to
have been delivered, to Sellers all items required pursuant to Section 
9.3, it being
acknowledged and agreed that any certificate required thereunder or under any
other provision of this Option Agreement shall be without personal liability on
the part of any individual who signs such certificate.

     

    
      
        
        

      

      
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      8.2   Representations and Warranties.

    

     

    The representations and warranties of the Buyer contained in this
Option Agreement shall be true and correct in all respects (without giving
effect to any qualifiers relating to “materiality,” “Material Adverse Effect,”
“in all material respects” or similar qualifications) at and as of the Closing
Date as though such representations and warranties were made at and as of the
Closing Date (except for representations and warranties made as of a specified
date, which shall be true and correct in all respects as of the specified date
(without giving effect to any qualifiers relating to “materiality,” “Material
Adverse Effect,” “in all material respects” or similar qualifications), except
in each case to the extent that the failure of any such representations and
warranties to be so true and correct as of such times shall not have had a
Material Adverse Effect on the Buyer and its Subsidiaries taken as a whole, and
Sellers shall have received a certificate dated the Closing Date to that effect,
signed, on behalf of the Buyer, by an authorized officer of the
Buyer.

     

    
      8.3   Performance of Covenants.

    

     

    The Buyer shall have performed or complied in all material respects
with all agreements and covenants required by this Option Agreement to be
performed or complied with by it at or prior to the Closing, and Sellers shall
have received a certificate dated the Closing Date to that effect signed, on
behalf of the Buyer, by an authorized officer of the Buyer.

     

    
      8.4   Approvals.

    

     

    All Consents set forth on Schedule 
8.4 shall
have been obtained in form and substance reasonably satisfactory to Sellers and
shall be in full force and effect on the Closing Date.

     

    
      8.5   Legal Matters.

    

     

    No Order shall exist that prohibits or restrains the consummation of
the transactions contemplated by this Option Agreement or the other Transaction
Documents and no Proceeding shall have been commenced by any Governmental Entity
(and be pending) seeking to prohibit or restrain the consummation of the
transactions contemplated by this Option Agreement or the Transaction Documents
to be consummated on the Closing Date.

     

    
      8.6   Assumed Indebtedness.

    

     

    The Sellers and their respective Affiliates shall have been released
and discharged from any and all obligations under the Assumed Indebtedness, and
Sellers shall have received such payoff letters, releases or other further
assurances thereof from third parties as the Sellers may reasonably
request.

     

    
      
        
        

      

      
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      SECTION 9.  CLOSING

    

     

    
      9.1   Time and Place of the Closing;
Extension.

    

     

    If Buyer delivers an Exercise Notice, the
closing of the purchase and sale of the Casablanca Units (the “Closing”) pursuant to this Option Agreement shall take place
at the offices of Bryan Cave LLP, 1155 F Street, NW, Washington, D.C. 20004, on
the date specified in the Exercise Notice, subject to the satisfaction or waiver
of the conditions to the Closing set forth in 
Section 7 and 
Section 8, or
if such conditions are not met on the date specified in the Exercise Notice,
such later date during the Option Period as Buyer may elect when such conditions
have been waived or satisfied, but, in any event no later than the expiration of
the Option Period unless otherwise agreed to by the Buyer and Sellers (the date
on which the Closing occurs, the “Closing Date”).

     

    
      9.2   Deliveries at the Closing by
Sellers.

    

     

    At the Closing, in addition to the other actions contemplated
elsewhere herein, Sellers shall deliver or cause to be delivered to the Buyer
(or its designee):

     

    (a)   one or more assignment instruments duly executed by the applicable
Sellers in blank accompanied by all certificates and other instruments
evidencing or otherwise representing the Casablanca Units, and accompanied by
appropriate powers (or similar instruments) duly executed in blank and
sufficient to convey to the Buyer good and valid title in and to the Casablanca
Units, together with all accrued benefits and rights attaching
thereto;

     

    (b)   a certificate, dated the Closing Date, executed, on behalf of each
Seller, by an authorized officer of each Seller certifying as of the Closing
Date the following:  (i) copies of the articles or certificate of
incorporation or formation or declaration of trust of each Seller and each
Casablanca Subsidiary and all amendments thereto, certified by the Secretary of
State of the relevant jurisdiction of formation as of a date not more than 30
days prior to the Closing Date; (ii) a copy of the bylaws, limited liability
company operating agreements, partnership agreements of each Seller and each
Casablanca Property, as amended and in effect as of the Closing Date;
(iii) copies of resolutions of the board of directors (or similar body) of
each Seller authorizing the execution, delivery and performance of the
Transaction Documents to which such Seller is a party and any other agreement,
instrument or other document necessary for such Seller to consummate the
transactions contemplated hereby; (iv) the due authorization of each Seller to
execute and deliver the Transaction Documents to which such Seller is a party
and any other agreement, instrument or other document necessary for such Seller
to consummate the transactions contemplated hereby; and (v) the name, title and
incumbency of, and bearing the signatures of, the officers of each Seller
authorized to execute and deliver the Transaction Documents to which such Seller
is a party and any other agreement, instrument or other document necessary for
such Seller to consummate the transactions contemplated hereby;

     

    (c)   Sellers shall have delivered to the Buyer payoff letters, and to the
extent applicable, releases and lien discharges, each in a form and substance
reasonably acceptable to the Buyer, with respect to all Indebtedness of the
Casablanca Subsidiaries outstanding as of the Closing Date;

     

    
      
        
        

      

      
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    (d)   the certificates, evidence and other deliverables required under
Sections 
7.2 (Representations and Warranties), 7.3 (Performance of Covenants), 
7.4 (No Material Adverse Effect), 7.7 (Outstanding Indebtedness), and, if applicable, 7.9 (Replacement Leases for Canton and Hilliard) as
conditions to the Buyer’s obligation to effect the Closing;

     

    (e)   Sellers shall have delivered to Buyer the written consents of third
parties or Governmental Entities required pursuant to Section 4.4 that Sellers have obtained;

     

    (f)   the managers and officers of each Casablanca Subsidiary shall have
tendered resignation letters in form and substance reasonably acceptable to the
Buyer on or prior to the Closing, such resignation letters to be effective upon
the Closing;

     

    (g)   to the extent in the possession or control of Sellers or any
Casablanca Subsidiary, all of the keys, passcodes, keycards, and similar items
for all locks (for doors, cabinets and any other locked item) within, on or
about each of the Casablanca Properties;

     

    (h)   for each Casablanca Property that is an Insured Property, (i) the
original to the extent available, or a copy, of the existing title insurance
policy, (ii) a “date down” endorsement to the existing owner’s title policy
bringing the date of the title insurance policy to the Closing Date subject only
to Permitted Encumbrances, and (iii) a non-imputation endorsement to the
existing owner’s title policy in accordance with Section 7.8;

     

    (i)   for each Casablanca Property that is an Uninsured Property, a Title
Policy subject only to Permitted Encumbrances with endorsements reasonably
acceptable to the Buyer, including, without limitation comprehensive, zoning,
and non-imputation endorsements, to the extent available in accordance with
Section 7.8;

     

    (j)   all deposits and reserves set forth on Section 4.6(e) of the Disclosure Schedule and pertaining
to the Casablanca Properties, including all original letters of credit;
and

     

    (k)   the Intercreditor Agreements required by Section 6.12 with respect to the applicable Casablanca
Properties.

     

    
      9.3   Deliveries at the Closing by the
Buyer.

    

     

    At the Closing, in addition to the other actions contemplated
elsewhere herein, the Buyer shall deliver or cause to be delivered to
Sellers:

     

    (a)   the Final Purchase Price in accordance with Sections 
2.1 and 
2.3;

     

    (b)   a certificate, dated the Closing Date, executed, on behalf of the
Buyer, by the Secretary of the Buyer certifying as of the Closing Date the
following:  (i) copies of the certificate of incorporation of the
Buyer and all amendments thereto, certified by the Secretary of State of the
State of Maryland as of a date not more than 30 days prior to the Closing Date;
(ii) a copy of the bylaws of the Buyer, as amended and in effect as of the
Closing Date; (iii) copies of resolutions of board of directors of the Buyer
authorizing the execution and delivery of the Transaction Documents to which the
Buyer is a party and any other agreement, instrument or other document necessary
for the Buyer to consummate the transactions contemplated hereby and thereby;
(iv) the due authorization of the Buyer to execute and deliver the Transaction
Documents to which the Buyer is a party and any other agreement, instrument or
other document necessary for the Buyer to consummate the transactions
contemplated hereby and thereby; and (v) the name, title and incumbency of, and
bearing the signatures of, the officers of the Buyer authorized to execute and
deliver the Transaction Documents to which the Buyer is a party and any other
agreement, instrument or other document necessary for the Buyer to consummate
the transactions contemplated hereby;

     

    
      
        
        

      

      
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    (c)   the certificates required under Sections 
8.2 (Representations and Warranties) and 
8.3 (Performance of Covenants) as a condition to Seller’s
obligation to effect the Closing;

     

    (d)   Buyer shall have delivered to Sellers the written consents of third
parties or Governmental Entities required pursuant to Section 
5.4 that Buyer has obtained; and

     

    (e)   the Intercreditor Agreements required by Section 6.12 with respect to the applicable Casablanca
Properties.

     

    
      9.4   Transfer Taxes.

    

     

    All transfer and recording taxes, filing fees and other similar
expenses arising in connection with the conveyances contemplated by this Option
Agreement that are due upon or as a result of the consummation of the
transactions contemplated hereby shall be paid one-half by Sellers and one-half
by Buyer.  In connection with the Closing, Sellers and Buyer shall
file with the relevant Governmental Entities all transfer tax returns,
affidavits and other similar instruments, if any, required in connection with
the payment of the foregoing expenses, or, to the extent not filed
contemporaneously with the Closing, shall escrow sufficient funds with the title
insurer (or other third party reasonably acceptable to Sellers and the Buyer) to
cover such taxes or the Buyer shall receive a credit for Sellers’ share of such
taxes and the Buyer shall pay such taxes or cause such taxes to be
paid.  Notwithstanding anything in this Option Agreement to the
contrary, the obligations of Sellers and the Buyer under this Section 9.4 shall survive the Closing indefinitely and the
indemnity obligations of Sellers or the Buyer, as applicable under this Option
Agreement with respect to the obligations under this Section 9.4 shall not be subject to any threshold,
deductible, or other limitation.

     

    
      SECTION 10.  REMEDIES

    

     

    
      10.1         Clawback Remedy.

    

     

    Notwithstanding anything to the contrary contained in this Option
Agreement, upon the occurrence of any Clawback Trigger Event (as defined below)
the Buyer shall have the right, exercisable by written notice (a “Clawback Demand”) made upon Sellers, to require Sellers to
refund an amount equal to the Option Price, and in such event, Sellers shall
refund such amount to the Buyer within ten days after receipt of a Clawback
Demand, which refund shall be in the form of either a return of the Stock
Consideration or, in the event Sellers no longer beneficially own the Stock
Consideration, the refund of $25,000,000 in cash.  In the event
Sellers shall fail to refund the Option Price within such ten day period, (a)
the Buyer shall have the right to take legal action (the “Enforcement Action”) to enforce such refund (and so long as
any lawsuit to enforce the refund of the Option Price pursuant to this Section 10.1 shall be pending, the expiration date of
the Option Period shall be extended one day for each day that such lawsuit is
pending; provided, however, that the Casablanca Option shall expire at 5:00 p.m.
New York City time on the third Business Day following the date on which the
Option Price is amount is refunded to the Buyer.  Unless the Buyer
shall have otherwise expressly otherwise agreed in writing, so long as the
Option Period shall not have expired as hereinabove provided, the Casablanca
Option shall survive any dismissal with prejudice of an Enforcement Action or
the entry by a court of competent jurisdiction of a final non-appealable orders
in connection with the Enforcement Action finding that the Buyer is not entitled
to a refund of the Option Price.

     

    
      
        
        

      

      
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    The term “Clawback Trigger Event” shall mean the occurrence of any of
the following events or circumstances:

     

    (a)   the occurrence of an “event of default” under the Casablanca Senior
Loan or Casablanca Mezzanine Loan which results in the acceleration of the
maturity thereof and/or any attempt by the Lender or Holder thereof to exercise
remedies against any collateral therefor;

     

    (b)   the occurrence of any event, act or circumstance that results in
action or attempted action by the Lender or Holder of the CapitalSource Guaranty
to exercise any remedies thereunder;

     

    (c)   any of the representations and warranties of Sellers under the
Transaction Documents, solely as they relate to Casablanca, shall prove to be
false when made as of the date of this Option Agreement, except in each case
where to the extent that the failure of any such representations and warranties
to be true and correct as of such date shall not have had a Material Adverse
Effect on the Casablanca Subsidiaries taken as a whole;

     

    (d)   the material breach by Sellers of any of their covenants under Section 6.1 hereof, which default is not cured within 30 days
after written notice thereof by the Buyer to Sellers;

     

    (e)   the breach by Sellers of any of their covenants under Section 6.4 hereof; and

     

    (f)   the failure of Sellers to fulfill any condition to the obligations
of Buyer to consummate the purchase of the Casablanca Units set forth in Section 7 after the exercise of the Casablanca Option and a
good faith and reasonable determination by the Buyer that such obligations
cannot be fulfilled prior to December 31, 2011.

     

    
      SECTION 11.  INDEMNIFICATION

    

     

    
      11.1         Survival.

    

     

    All representations and warranties contained or incorporated into
this Option Agreement shall be made as of the date or dates thereof as indicated
and not any date after the Closing Date, but shall survive the Closing until the
first anniversary of the Closing Date, except that (a) the representations and
warranties contained in Sections 4.12 (Compliance with Laws and Permits), as
appropriate, and 4.13 (Environmental) shall survive the Closing until the
third anniversary of the Closing Date, (b) the representations and warranties
set forth in Sections 4.7 (Taxes) and 5.11 (Taxes) shall survive the Closing until 30 days
following the date on which all claims relating to the subject matter thereof
shall have been barred by the relevant statutes of limitations, and (c) the
representations and warranties contained in Section 4.1 (Organization and Good Standing), Section 4.2 (Power and Authorization), Section 4.3 (Capitalization), Section 4.4(i) (No Conflicts and Consents), Section 5.1(i) (Organization and Good Standing) Section 5.2 (Power and Authorization), Section 5.3 (Validity of Contemplated Transactions) and
Section 5.7 (Capitalization) shall survive
indefinitely.  All covenants and agreements contained herein shall
survive until, by their respective terms, they are no longer
operative.

     

    
      
        
        

      

      
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      11.2         
Indemnification.

    

     

    (a)   Sellers shall, jointly and severally, indemnify and hold the Buyer
and its Affiliates and their respective directors (or Persons in similar
positions), officers, employees, agents, successors and assigns (collectively,
the “Buyer Indemnified Parties”) harmless from and against any
Damages arising from or in connection with or otherwise with respect to (i) any
inaccuracy in any representation or the breach of any warranty of any Seller
under the Transaction Documents relating to Casablanca Holdings, (ii) the
failure of any Seller to duly perform or observe any term, provision, covenant
or agreement to be performed or observed by it pursuant to this Option
Agreement, or (iii) any Excluded Liability.

     

    (b)   The Buyer shall indemnify and hold each Seller and its Affiliates
and its respective directors (or Persons in similar positions), officers,
employees, agents, successors and assigns (collectively, the “Seller Indemnified Parties” and, together with the Buyer
Indemnified Parties, the “Indemnified Parties”) harmless from and against any Damages
arising from or in connection with or otherwise with respect to (i) any
inaccuracy in any representation or the breach of any warranty of the Buyer
under this Option Agreement or any certificate or other instrument delivered by
the Buyer at the Closing pursuant to the provisions of 
Section 8, (ii) the failure of the Buyer to duly perform
or observe any term, provision, covenant or agreement to be performed or
observed by it pursuant to this Option Agreement, or (iii) any Assumed
Indebtedness.

     

    (c)   Notwithstanding anything herein to the contrary, other than with
respect to any Excluded Liability, (i) no indemnification shall be available to
any Buyer Indemnified Party under Section 
11.2
(a) if the Damages to which the Buyer Indemnified Parties
would otherwise be entitled to indemnification with respect to any single breach
or inaccuracy are less than $100,000; and (ii) no indemnification shall be
available to any Buyer Indemnified Party under Section 
11.2
(a) unless and until the aggregate amount of the Damages
for which the Buyer Indemnified Parties (as applicable) seek indemnification
(excluding Damages not available as a result of clause (i) above) exceeds a
one-time deductible amount of $1,000,000 (the “Deductible Amount”), in which case the relevant Buyer
Indemnified Parties entitled to such indemnification shall be entitled to
recover all such Damages to which such Buyer Indemnified Parties are entitled in
excess of such Damages constituting the Deductible Amount.  Other than
with respect to any Assumed Indebtedness, (A) no indemnification shall be
available to any Seller Indemnified Party under Section 
11.2
(b) if the Damages to which the Seller Indemnified
Parties would otherwise be entitled to indemnification with respect to any
single breach or inaccuracy are less than $100,000, and (B) no indemnification
shall be available to any Seller Indemnified Parties under Section 
11.2
(b) unless and until the aggregate amount of the Damages
for which the Seller Indemnified Parties (as applicable) seek indemnification
(excluding Damages not available as a result of Section 11.2(c)(i) exceeds the one time Deductible
Amount, in which case the relevant Seller Indemnified Parties entitled to such
indemnification shall be entitled to recover such Damages to which such Seller
Indemnified Parties are entitled in excess of such Damages constituting the
Deductible Amount.  The obligations of Sellers pursuant to the
indemnification provisions set forth in this Section 
11.2, and recourse against the Sellers pursuant to this
Section 
11.2, shall be limited such that the aggregate liability
of Sellers under this Section 
11.2 shall not exceed ten percent (10%) of the Final
Purchase Price (the “General Indemnification Cap”) in the
aggregate.  The obligations of the Buyer pursuant to the
indemnification provisions set forth in this Section 
11.2, and recourse against the Buyer pursuant to this
Section 
11.2, shall be limited such that the aggregate liability
of the Buyer under this Section 
11.2 shall not exceed in the aggregate the then General
Indemnification Cap; provided, however, that, for the avoidance of doubt, the foregoing
limitations set forth in this Section 
11.2
(c), including, without limitation, the Deductible Amount
and the General Indemnification Cap, shall not apply to (X) any Excluded
Liability, and (pursuant to Section 
11.2
(a)) Sellers shall indemnify and hold the Buyer
Indemnified Parties harmless from and against any Damages arising from or in
connection with or otherwise with respect to any Excluded Liability from the
first dollar of any Excluded Liability and without any cap or other limitation
with respect to the amount thereof and (Y) any Assumed Indebtedness, and
(pursuant to Section 
11.2
(b)) Buyer shall indemnify and hold the Seller
Indemnified Parties harmless from and against any Damages arising from or in
connection with or otherwise with respect to any Assumed Indebtedness from the
first dollar of any Damages incurred without any cap or other limitation with
respect to the amount thereof.  Notwithstanding anything in this
Option Agreement to the contrary, for purposes of determining the amount of
Damages to which an Indemnified Party is entitled under Section 
11.2, but not for determining whether or not any
inaccuracy or breach has occurred, all of the representations, warranties and
covenants set forth in this Option Agreement that are qualified by “material,”
“materiality,” “material respects,” or words of similar import shall be deemed
to have been made without any such qualification for purposes of determining the
amount of Damages resulting from, arising out of or relating to any such breach
or violation of representation, warranty or covenant.

     

    
      
        
        

      

      
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    (d)   Each Indemnified Party, upon it or (as applicable) its directors (or
Persons in similar positions) or officers becoming aware of any event which
gives rise to any indemnification rights such Indemnified Party has or may have
under this Section 
11.2, shall take reasonable steps to mitigate any Damages
in respect of which such indemnification may be sought, including (i) using its
commercially reasonable efforts to secure payment from available insurance
arrangements, including insurance arrangements maintained by any Tenant with
respect to any Casablanca Subsidiary or Casablanca Property that are to provide
coverage with respect to such Damages (an “Insurance Payment”) and (ii) using its commercially
reasonable efforts to secure reimbursement, indemnity or other payment from any
third Person obligated by Contract or otherwise to reimburse, indemnify or pay
the Indemnified Party with respect to such Damages (a “Third Party Payment” and, together with an Insurance Payment,
a “Mitigation Payment”); provided, however, that no such Indemnified Party shall be required to
pursue any potential source of a Mitigation Payment prior to seeking
indemnification hereunder or incur any material costs or expenses (unless the
Indemnifying Party agrees to reimburse such costs and expenses) or take any
action materially adverse to such Indemnified Party in complying with its
obligation to mitigate under this Section 
11.2
(d) and in no event may any Indemnifying Party assert any
failure to mitigate by an Indemnified Party as a defense to a claim for
indemnification hereunder.

     

    (e)   Any calculation of Damages for purposes of this Section 
11.2 shall be net of (i) any Mitigation Payment actually
received; provided, however that the Mitigation Payment received or recovered
shall be reduced by the amount of any out-of-pocket costs incurred in pursuing
such Mitigation Payment; and (ii) Tax benefits actually realized under
applicable Law in respect of such Damages, in each case net of all reasonable
costs and expenses of recovering any such Tax benefits, whether realized in the
year in which payments of Damages are made or thereafter.  In the
event a payment is made to an Indemnified Party with respect to any Damages and
thereafter the Indemnified Party receives a Mitigation Payment with respect to
such Damages, the Indemnified Party shall reimburse the Indemnifying Parties an
amount equal to the lesser of (x) the Mitigation Payment and (y) the amount so
paid by the Indemnifying Parties.

     

    (f)   Upon receipt by any Indemnified Party of written notice from any
third party of any action, suit, proceedings, claim, demand or assessment by
such third party against such Indemnified Party which would reasonably be
expected to give rise to a claim for Damages hereunder, such Indemnified Party
shall as promptly as practicable give written notice thereof to the Buyer or
Sellers (as applicable, the “Indemnifying Party”), if indemnification shall be sought
therefrom, indicating the nature of such claim and the basis therefor; provided, however, that failure to give such notice shall not affect
the indemnification provided hereunder except to the extent the Indemnifying
Party shall have been actually prejudiced as a result of such failure. The
Indemnifying Party shall have the right, at its option and expense (and by its
own counsel), to assume the defense of any such matter involving the liability
of the Indemnified Party asserted by a third party as to which the Indemnifying
Party shall have acknowledged its obligation to indemnify the Indemnified Party
hereunder. If any Indemnifying Party shall undertake to compromise or defend any
such asserted liability, it shall promptly notify the Indemnified Party in
writing of its intention to do so, and the Indemnified Party will cooperate
fully with the Indemnifying Party and its counsel in the compromise of, or
defense against, any such asserted liability; provided, however, that the Indemnifying Party shall not settle any
such asserted liability without the prior written consent of the Indemnified
Party (which consent will not be unreasonably withheld, conditioned or delayed)
unless such settlement (x) includes only the payment of monetary damages, (y)
does not impose any injunctive or equitable relief upon the Indemnified Party
and (z) includes a complete and unconditional release of the Indemnified Party
and does not include any admission of wrongdoing by the Indemnified
Party.  Notwithstanding any such election to assume the defense of
such action or proceeding, such Indemnified Party shall have the right to employ
separate counsel and to participate in the defense of such action or proceeding,
and the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel (and shall pay such fees, costs and expenses at least
quarterly), if the Indemnified Party shall have reasonably concluded that (i)
there may be a conflict of interest (including one or more legal defenses or
counterclaims available to it or to other Indemnified Parties which are
different from or additional to those available to the Indemnifying Party) that
would make it inappropriate in the reasonable judgment of such Indemnified Party
for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, (ii) the claim seeks non-monetary relief which, if granted,
could materially and adversely affect such Indemnified Party or its Affiliates
(in which case, notwithstanding any other term of this Option Agreement, the
Indemnifying Party shall not have the right to direct the defense of such action
or proceeding on behalf of such Indemnified Party), (iii) the Indemnifying Party
shall not have employed counsel reasonably satisfactory to such Indemnified
Party to represent such Indemnified Party within a reasonable time after notice
of the institution of such action or proceeding (for the avoidance of doubt,
Bryan Cave LLP and Hogan & Hartson LLP shall each be deemed satisfactory
counsel) or (iv) the Indemnifying Party shall authorize such Indemnified Party
to employ separate counsel at the Indemnifying Party’s expense.

     

    
      
        
        

      

      
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    (g)   Unless otherwise required by applicable Law, the parties hereto
agree to treat any payment made pursuant to this Section 
11.2 as an adjustment to the consideration paid pursuant
to this Option Agreement for all Tax purposes.

     

    (h)   Sellers and the Buyer hereby acknowledge and agree that, from and
after the Closing Date, the foregoing indemnification provisions in this Section 
11.2 shall be the sole and exclusive rights and remedy of
any Indemnified Party with respect to the transactions contemplated by this
Option Agreement, including, without limitation, with respect to (a) any
misrepresentation, breach or default of or under any of the representations,
warranties, covenants and agreements contained in this Option Agreement or (b)
any failure duly to perform or observe any term, provision, covenant or
agreement contained in this Option Agreement; provided, however, that nothing set forth herein shall be deemed to
limit any party’s rights or remedies in the event that the other party has
committed fraud in connection herewith.

     

    (i)   Notwithstanding any other provision of this Option Agreement,
Sellers shall have no obligation to indemnify, defend, or hold harmless Buyer
Indemnified Parties with respect to Damages related to Remediation of Hazardous
Materials if such Damages arise solely from environmental sampling performed by
Buyer indiscriminately and for the sole purpose of discovering conditions which
would require Remediation under applicable Law.

     

    
      11.3         Environmental Remediation

    

     

    (a)   Any Remediation for which an Indemnified Party seeks indemnification
from Sellers under this Section 11 shall be governed by this Section 11.3.

     

    (b)   Buyer Indemnified Parties shall have the right to perform
Remediation and seek indemnification from Sellers for related costs or shall, at
their sole option, elect to have Sellers perform all or a portion of such
Remediation.

     

    (c)           Any
Party performing a Remediation the cost of which is the responsibility of
Sellers pursuant to Section 11 of this Agreement (“Performing Party”) shall: (i) provide written
notification to the other Party (“Other Party”) that it intends to perform Remediation prior to
commencing any such Remediation; (ii) shall select a qualified consultant to
oversee the Remediation, subject to the approval of the Other Party, whose
approval shall not be unreasonably withheld; (iii) provide the Other Party
with a reasonable opportunity to comment in advance upon any material written
communications, filings, reports, correspondence or other writings given to any
Governmental Entity in connection with such Remediation and consider timely
provided comments in good faith; (iv) to the extent practical, provide the Other
Party with a reasonable opportunity to participate in any meetings with any
Governmental Authority regarding the Remediation at such Other Party’s sole cost
and expense; (v) comply with applicable Laws; (vi) minimize costs in conducting
any Remediation and employ cost-effective Remediation methods that are
commercially reasonable under the circumstances; (vii) use risk based clean-up
standards and employ deed restrictions and institutional and engineering
controls to the extent commercially reasonable; (viii) allow the Other
Party or their agents reasonable access to the Casablanca Properties for
purposes of observing the Remediation so long as such Other Party and its agents
do not interfere with the Remediation or the operation of the business conducted
thereon; (ix) keep the Other Party reasonably informed of the progress of any
such Remediation and the schedule for completing such Remediation;
(x) within five (5) business days of receipt, use commercially reasonable
efforts to provide to the Other Party copies of all material written
communications, filings, reports, correspondence or other writings, photographs
or materials received from any Person (including any Governmental Authority) in
connection with the performance of any such Remediation; and (xi) use
commercially reasonable efforts to preserve any rights the Other Party may have
against insurers or other third parties.

     

    
      
        
        

      

      
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    (d)           Buyer
shall permit Sellers and their representatives and consultants  access
to the applicable real property (i) for purpose of performing the Remediation,
to the extent Sellers are performing the Remediation, so long as Sellers use
commercially reasonable efforts to minimize interference with the business
conducted thereon and (ii) for observing and monitoring the Remediation if Buyer
is performing the Remediation, so long as Sellers uses commercially reasonable
efforts to minimize interference with Buyer’s Remediation or the business
conducted thereon.  Following completion of any Remediation performed
by Sellers, Sellers shall promptly return the real property to substantially the
same condition in which it existed prior to the commencement of the Remediation
(other than with respect to the presence of Hazardous
Materials).  Buyer Indemnified Parties shall reasonably cooperate with
Sellers with respect to any Remediation performed by Sellers in accordance with
this Section 11.3.

     

    
      SECTION 12.  CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS

    

     

    
      12.1         
Casualty.

    

     

    (a)   Sellers shall notify the Buyer as soon as reasonably practicable
after obtaining Knowledge of the occurrence of any Force Majeure Event with
respect to any Casablanca Property and of any material damage or destruction (a
“Casualty Event”) by fire or other casualty that is suffered
by any Casablanca Property on or before the Closing Date or the HUD Portfolio
Closing Date, as appropriate, which notice shall include a reasonably detailed
description of the extent of such damage or destruction and of the relevant
Casualty Event. If, on or prior to the relevant Closing Date, any Casablanca
Property shall have been damaged or destroyed by a Casualty Event or a Force
Majeure Event, then the Buyer shall proceed to effect the relevant Closing in
which such Casablanca Property is included, in which event the provisions of
Sections 
12.1
(b) shall apply.

     

    (b)   With respect to any Casablanca Subsidiary that owns an Casablanca
Property that has been damaged by a Casualty Event or a Force Majeure
Event:

     

    (i)    Sellers shall not (A)
adjust and settle any insurance claims with respect to such damaged Casablanca
Property, or (B) enter into any construction or other contract for the repair or
restoration of such damaged Casablanca Property, in each case, without the
Buyer’s prior written consent (except no such consent shall be necessary to
repair or restore any emergency or hazardous condition at such damaged
Casablanca Property), which consent shall not be unreasonably withheld,
conditioned or delayed;

     

    
      
        
        

      

      
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    (ii)        at
the relevant Closing, Sellers shall (A) pay over to the Buyer the amount of any
insurance or other proceeds, to the extent collected by Sellers or any
Casablanca Subsidiary in connection with such Casualty Event or Force Majeure
Event, less the amount of the actual and reasonable unreimbursed expenses
incurred by Sellers or any Casablanca Subsidiary in connection with collecting
such proceeds and making any repairs to the applicable Casablanca Property
occasioned by such Casualty Event or Force Majeure Event pursuant to any
contract (provided that such contract was reasonably approved by the Buyer as
required by this Section 12.1) and (B) assign to the Buyer in form reasonably
satisfactory to the Buyer all of Sellers’ right, title and interest in and to
(or provide written confirmation from Sellers of an Casablanca Subsidiary’s
right to) any insurance proceeds that are uncollected at the time of the subject
Closing and that may be paid in respect of such Casualty Event or Force Majeure
Event. Sellers shall cooperate with the Buyer in the collection of such
proceeds, which obligation shall survive the subject Closing; and

     

    (iii)          The
Final Purchase Price shall be reduced by the amount by which:

     

    (1)    the reasonably
estimated post-closing cost of repair and restoration of all of the Damaged
Properties,

     

    exceeds

     

    (2)    the remaining balance
of the insurance proceeds assigned pursuant to (ii)(A) above plus the
uncollected insurance proceeds or tenant contributions to the cure reasonably
expected to be collected after the relevant Closing by the Casablanca Subsidiary
and described in (ii)(B) above;

     

    provided, however, that if such amount in the aggregate is less than
One Million Dollars ($1,000,000), then (a) no reduction shall be made to the
Final Purchase Price and (b) such amount shall count against the Deductible
Amount for purposes of indemnification claims under Section 11.2 without regard to the limitations set forth in
Section 11.2(c)(i); provided, further, that if the Deductible Amount has otherwise been
reached, then such reduction (or a reduction to the extent of the excess over
the Deductible Amount) shall be made to the Final Purchase
Price.

     

    
      12.2         Condemnation Pending Closing.

    

     

    If, prior to the Closing Date, condemnation or eminent domain
proceedings shall be commenced by any competent public authority against any
Casablanca Property or any portion thereof, Sellers shall promptly (but in no
event more than two Business Days after obtaining Knowledge of such proceedings)
notify the Buyer thereof, which notice shall include a reasonably detailed
description of the nature and extent of such proceedings and of each Casablanca
Property affected thereby. After notice of the commencement of any such
proceedings, the Buyer shall accept title to such Casablanca Property subject to
such proceedings, whereupon any award payable to Sellers shall be paid to the
Buyer and Sellers shall deliver to the Buyer at the Closing all assignments and
other documents reasonably requested by the Buyer to vest such award in the
Buyer.

     

    
      
        
        

      

      
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      SECTION 13.  DEFINITIONS

    

     

    As used in this Option Agreement, the following terms shall have the
respective meanings below:

     

    “Arbors Base Rent” shall have the meaning set forth in Section 7.9(a).

     

    “Arbors Initial Rent” shall have the meaning set forth in
Section 7.9(a).

     

    “Accrued Expenses” shall have the meaning set forth in Section 
2.3
(a).

     

    “Accrued Income” shall have the meaning set forth in Section 
2.3
(a).

     

    “Acquisition Transaction” shall have the meaning set forth in
Section 
6.4
(a).

     

    “Affiliate” means, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls such Person, and (b) each Person
that is controlled by or is under common control with such Person or any
Affiliate of such Person. For the purpose of this definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.

     

    “Assumed Indebtedness” shall have the meaning set forth in
Section 2.2(a).

     

    “Base Purchase Price” shall have the meaning set forth in
Section 2.2(a).

     

    “Business Day” means any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by Law or
executive order to close.

     

    “Buyer” shall have the meaning set forth in the
Preamble.

     

    
      
        
        

      

      
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    “Buyer Common Stock” means the common stock, par value $0.10
per share, of the Buyer.

     

    “Buyer Consents” shall have the meaning set forth in the
Purchase Agreement.

     

    “Buyer Disclosure Schedules” shall have the meaning set forth
in Section 6.5.

     

    “Buyer Indemnified Parties” shall have the meaning set forth
in Section 
11.2
(a).

     

    “Buyer Transaction Costs” means all costs and expenses
incurred by the Buyer in connection with the negotiation, documentation,
execution, delivery and performance of the Transaction Documents, including,
without limitation, the fees and disbursements of counsel, accountants and
consultants engaged by the Buyer and any inspection, examination, survey, test
boring, soil bearing test or other engineering, structural, building system,
environmental, architectural or landscaping test or drawing performed by or at
the direction of the Buyer in connection with the transactions contemplated
hereby and thereby, and one-half of the cost of any date-down endorsement to
existing title insurance policies.

     

    “Canton Property” shall have the meaning set forth in Section 6.17(b).

     

    “Cap Rate” shall have the meaning set forth in Section 7.9(a).

     

    “CapitalSource” shall have the meaning set forth in the Preamble.

     

     “Casablanca Holdings” shall have the meaning set forth in the
Recitals.

     

    “Casablanca Mezzanine Lender” means JER US Debt Finance
Company CS LLC, successor to Column Financial, Inc., in its capacity as the
holder of the Casablanca Mezzanine Loan, and its permitted successors and
assigns in such capacity.

     

    “Casablanca Mezzanine Loan” means that certain mezzanine loan
in the original principal amount of $36,140,981, made by the Casablanca
Mezzanine Lender to CSE Casablanca Holdings II, pursuant to that certain
Mezzanine Loan Agreement dated as of July 31, 2007, between CSE Casablanca
Holdings II LLC and the Casablanca Mezzanine Lender, as the same may be
amended, extended, renewed or replaced in accordance with the provisions of this
Option Agreement.

     

    “Casablanca Option” shall have the meaning set forth in Section 1.

     

    “Casablanca Option Price” shall have the meaning set forth in
Section 2.1.

     

    “Casablanca Units” shall have the meaning set forth in the
Recitals.

     

    “Casablanca Property” and “Casablanca Properties” shall have the meaning set forth in
the Recitals.

     

    “Casablanca Senior Lender” means Wells Fargo Bank, N.A., as
Trustee  for the Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2007-TFL2, successor to
Column Financial, Inc., in its capacity as the holder of the Casablanca Senior
Loan, and its permitted successors and assigns in such capacity.

     

    
      
        
        

      

      
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    “Casablanca Senior Loan” means that certain mortgage loan in
the original principal amount of $287,182,422, made by the Casablanca Senior
Lender to the Casablanca Senior Loan Borrowers pursuant to the Casablanca Senior
Loan Agreement

     

    “Casablanca Senior Loan Agreement” means that certain Amended
and Restated Loan Agreement dated as of March 29, 2007, between the Casablanca
Senior Loan Borrowers and the Casablanca Senior Lender, as heretofore amended by
that certain Modification Agreement dated as of July 31, 2007, between the
Casablanca Senior Lender and the Casablanca Senior Loan Borrowers, as the same
may be further amended, extended, renewed or replaced in accordance with the
provisions of this Option Agreement.

     

    “Casablanca Senior Loan Borrowers” means, collectively, the
Casablanca Subsidiaries identified as such on Schedule III of the Purchase Agreement, being the borrowers
under the Casablanca Senior Loan.

     

    “Casablanca Subsidiaries” shall have the meaning set forth in
the Recitals.

     

    “Casablanca Units” shall have the meaning set forth in the
Recitals.

     

    “Casablanca II” has the meaning set forth in Section 6.16(a).

     

    “Cash Consideration” shall have the meaning set forth in Section 2.2(a).

     

    “Casualty Event” shall have the meaning set forth in Section 
12.1
(a).

     

    “Clawback Demand” shall have the meaning set forth in Section 10.1.

     

    “Clawback Trigger Event” shall have the meaning set forth in
Section 
10.1.

     

    “Closing Adjustments” shall have the meaning set forth in
Section 2.2(a).

     

    “Closing” shall have the meaning set forth in Section 
9.1.

     

    “Closing Date” shall have the meaning set forth in Section 
9.1.

     

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

     

    “Confidentiality Agreement” shall have the meaning set forth
in Section 6.10.

     

    “Consents” shall have the meaning set forth in Section 7.5.

     

    
      
        
        

      

      
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    “Contingent Obligation” shall mean, as to any person, any
obligation, agreement, understanding or arrangement of such person guaranteeing
or intended to guarantee any Indebtedness, leases, dividends or other
obligations (“primary obligations”) of any other person (the “primary obligor”)
in any manner, whether directly or indirectly, including any obligation of such
person, whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor; (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor; (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation; (d) with respect
to bankers’ acceptances, letters of credit and similar credit arrangements,
until a reimbursement obligation arises (which reimbursement obligation shall
constitute Indebtedness); or (e) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however, that the term “Contingent Obligation” shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business or any product warranties.  The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or, if less, the maximum amount of such primary
obligation for which such person may be liable, whether singly or jointly,
pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such person is required to perform thereunder) as
determined by such person in good faith.

     

    “Contract” means any contract, undertaking, agreement,
arrangement, commitment, indemnity, indenture, instrument, lease (but not
including any Property Lease), forbearance agreement, consent, waiver or
understanding, including any and all amendments, supplements, and modifications
thereto, in each case whether written or oral, to or under which any Casablanca
Subsidiary or any of their respective assets is legally bound.

     

    “CSE Canton” shall have the meaning set forth in Section 6.17(a).

     

    “CSE Hilliard” shall have the meaning set forth in Section 6.17(a).

     

    “CSE Pittsburg” shall have the meaning set forth in Section 6.16(a).

     

    “CSE SLB” shall have the meaning set forth in the Preamble.

     

    “CSH REIT” shall have the meaning set forth in the Preamble.

     

    “Damages” means any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
any Proceeding brought by any Governmental Entity or other Person), including,
without limitation, reasonable attorneys’, experts’ and consultants’ fees and
costs of investigation or defense.

     

    “Deductible Amount” shall have the meaning set forth in Section 11.2(c).

     

    “Disclosure Schedule” shall mean the “Sellers’ Disclosure
Schedule” as defined in the Purchase Agreement.

     

    
      
        
        

      

      
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    “Encumbrance” means any mortgage, pledge, security interest,
encumbrance, lien, limitation, restriction, assessment, encroachment, defect in
title or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
statute or other laws, which secures the payment of a debt (including, without
limitation, any Tax or Indebtedness) or the performance of an
obligation.

     

    “Enforcement Action” has the meaning set forth in Section 10.1.

     

    “Environmental Laws” means all Laws (a) related to emissions,
discharges, spills, Releases or threatened Releases of any Hazardous Materials
into or impacting the indoor or outdoor environment, (b) governing the
manufacture, processing, distribution, recycling, sale, offer for sale,
distribution, use, generation, treatment, storage, disposal, transport, or
handling of Hazardous Materials or (c) related to pollution or to the protection
of the environment, human health or natural resources. Such Environmental Laws
shall include, but are not limited to, the Resource Conservation and Recovery
Act, and the Comprehensive Environmental Response, Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act of 1986, the Hazardous
Materials Transportation Act, the Toxic Substances Control Act, the Occupational
Safety and Health Act (but only to the extent it relates to exposure to
Hazardous Materials), the Clean Water Act, the Clean Air Act, the Safe Drinking
Water Act, and the Emergency Planning and Community Right-to-Know Act, each as
amended from time to time, the state and local Laws implementing such Laws, and
all state, local or foreign analogs.

     

    “Excluded Liabilities” means any and all liabilities or
obligations of any Seller or any Casablanca Subsidiary, whether accrued,
absolute, contingent, known, unknown or otherwise including without limitation,
taxes payable by any Seller pursuant to Section 6A of the Purchase Agreement, relating to any period
ending on or before the Closing Date, as appropriate; provided, however, that “Excluded Liabilities” shall expressly not include any
liability to the extent such liability is taken into account in the Closing
Adjustments or any liability that results from or arises out of any Assumed
Indebtedness or any post-Closing obligation or liability of the Casablanca
Subsidiaries unless the result of an inaccurate representation or breach of a
warranty or covenant or unless such post-Closing obligation or liability arises
from or is related to (i) the environmental condition of any Casablanca Property
prior to the Closing Date Closing Date or (ii) any actions or omissions by
Seller or any Casablanca Subsidiary prior to the Closing Date.

     

    “Exercise Notice” shall have the meaning set forth in Section 3.

     

    “Facility Operator” means (a) as of the date hereof, each
Person identified on Schedule IV hereto as a “Current Facility Operator”, and
(b) as of immediately prior to the Closing, each Person identified on Schedule IV hereto as a “Facility Operator Upon
Closing”.

     

    “Final Purchase Price” shall have the meaning set forth in
Section 2.2(a).

     

    “Financing” shall have the meaning set forth in Section 6.15.

     

    
      
        
        

      

      
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    “Force Majeure Event” means any riot, act of terrorism, war or
hostilities between nations, act of God, fire, explosion, storm damage, tornado
damage or flood damage that prevents any of the transactions contemplated by
this Option Agreement from being consummated as a result of the ability of any
party thereto, pursuant to and in accordance with the terms hereof, to terminate
this Option Agreement.

     

    “GAAP” means generally accepted accounting principles in the
United States of America, applied on a consistent basis and applied to both
classification of items and amounts, including without limitation, the official
interpretations thereof by the Financial Accounting Standards Board, its
predecessors and assigns.

     

    “General Indemnification Cap” shall have the meaning set forth
in Section 
11.2
(c).

     

    “Governmental Entity” means any domestic, international,
foreign, national, multinational, territorial, regional, state or local
governmental authority, quasi-governmental authority, instrumentality, court,
commission, arbitrator or tribunal or any regulatory, administrative or other
authority or agency, or any political or other subdivision, department or branch
of any of the foregoing.

     

    “Hazardous Materials” means:  (a) any liquid,
gaseous or solid material, substance or waste that (from use, handling,
processing, storage, emission, disposal, spill, Release or any other activity or
for any other reason) (i) is regulated by, forms the basis of liability under,
or requires removal, remediation or reporting under any Environmental Law, or is
listed, classified, defined, or regulated as a contaminant, pollutant, solid
waste, toxic product or substance, “hazardous waste” or “hazardous substance”
(or any other similar terms) pursuant to any Environmental Law, (ii) is
regulated under Environmental Laws as being toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or (iii) is
otherwise hazardous to human health or to the environment; (b) any petroleum
product or by-product or fractions thereof, petroleum-derived substances,
asbestos, polychlorinated biphenyls, radon, toxic mold, fungi, bacteria,
lead-based paint, pesticides, defoliants, alcohols, chemical solvents,
polybrominated diphenyl ether, or urea formaldehyde; and (c) any medical or
radioactive waste, substance or material defined as such in the Occupational
Safety & Health Act, the Toxic Substances Act or any Environmental
Law.

     

    “Hilliard Property” shall have the meaning set forth in Section 6.17(b).

     

    “Income Tax” means any federal, state, local, or foreign tax
based on or measured by reference to net income, including any interest,
penalty, or addition thereto, whether disputed or not.

     

    “Indebtedness” means, with respect to any Casablanca
Subsidiary: (a) any liability for borrowed money, or evidenced by an instrument
for the payment of money, or incurred in connection with the acquisition of any
property, services or assets (including securities), or relating to a
capitalized lease obligation, including, without limitation, accounts payable or
any other indebtedness to trade creditors created or assumed by any Casablanca
Subsidiary in the ordinary course of business in connection with the obtaining
of materials or services; (b) obligations under exchange rate contracts or
interest rate protection agreements; (c) any obligations to reimburse the issuer
of any letter of credit, surety bond, performance bond or other guarantee of
contractual performance, in each case to the extent drawn or otherwise not
contingent; (d) all Indebtedness of others secured by any lien on property owned
or acquired by such person, whether or not the obligations secured thereby have
been assumed, but limited to the fair market value of such property; (e) all
Contingent Obligations of such person in respect of Indebtedness or obligations
of others of the kinds referred to in clauses (a) through (e) above; and (f) any
payments, fines, fees, penalties or other amounts applicable to or otherwise
incurred in connection with or as a result of any prepayment or early
satisfaction of any obligation described in clauses (a) through (e)
above.

     

    
      
        
        

      

      
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    “Indemnified Parties” shall have the meaning set forth in
Section 
11.2
(b).

     

    “Indemnifying Party” shall have the meaning set forth in Section 
11.2
(f).

     

    “Independent Accountant” shall have the meaning set forth in
Section 
2.3
(b).

     

    “Initial Cash Consideration” shall have the meaning set forth
in Section 2.2(a).

     

    “Insurance Payment” shall have the meaning set forth in Section 
11.2
(d).

     

    “Insured Property” shall have the meaning set forth in Section 
6.14(a).

     

    “Intercreditor Agreement” shall have the meaning set forth in
Section 6.12.

     

    “Knowledge” means (i) with respect to Sellers, the actual
knowledge of the individuals listed on Exhibit H to the Purchase Agreement, and (ii) with respect to
the Buyer, the actual knowledge of the individuals listed on Exhibit I to the Purchase Agreement.

     

    “Law” means any law (including, without limitation, the
Foreign Corrupt Practices Act), common law, statute (including, without
limitation, those relating to zoning, land use, the Americans with Disabilities
Act, abandoned property and similar laws and regulations), ordinance,
regulation, rule, directive, Permit, license, certificate, judgment, order,
award, decree or other decision or requirement of any Governmental
Entity.

     

    “Material Adverse Effect” means, when used with reference to
the Casablanca Subsidiaries, or the Buyer, as the case may be (and Sellers in
the case of the provisions of Section 7.4), any event, circumstance, change or effect (any
such item, an “Effect”) that is materially adverse to the business,
financial condition or results of operations of such party and its Subsidiaries
taken as a whole; provided, however, that in no event shall any of the following be
deemed, either alone or in combination, to constitute, nor shall any of the
following be taken into account in determining whether there has been, a
Material Adverse Effect:  (i) any Effect that results from changes in
general economic conditions or changes in securities markets in general,
including any changes in interest rates, (ii) any Effect that results from
general changes in the industries in which such party and its Subsidiaries
operate, (iii) any Effect related to the public announcement or the pendency or
consummation of the transactions contemplated by this Option Agreement, (iv) any
Effect that results from any action taken at the specific request of the other
party, (v) any change in the market price or trading volume of the Buyer Common
Stock after the date hereof, (vi) any Effect that results from natural
disasters, acts of war, sabotage or terrorism, military actions or the
escalation thereof, or (vii) any Effects resulting from any change in applicable
law or regulation applicable to a party or any of its Subsidiaries; except in the case of clauses (i), (ii), (vi) and (vii), for
any Effect that has a significantly disproportionate adverse impact on such
party and its Subsidiaries compared to other companies of similar size operating
in the principal industries in which such party and its Subsidiaries
operate.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    “Mitigation Payment” shall have the meaning set forth in Section 
11.2
(d).

     

    “Option Agreement” shall have the meaning set forth in the
Preamble.

     

    “Option Period” shall have the meaning set forth in Section 3.

     

    “Order” shall have the meaning set forth in Section 
6.3.

     

    “Other Party” shall have the meaning set forth in Section 11.3(c).

     

    “Past Due Rent” shall have the meaning set forth in Section 
2.3
(a).

     

    “Performing Party” shall have the meaning set forth in Section 11.3(c).

     

    “Permits” means all material governmental licenses, permits,
registrations, filings, orders, qualifications, approvals and authorizations
which are required in order to conduct Casablanca’s business as conducted
presently in all material respects and as of immediately prior to the Closing
and to own and lease its respective assets and properties as such assets and
properties are owned and leased by each Casablanca Subsidiary as of the date
hereof and immediately prior to the Closing.

     

    “Permitted Encumbrance” means any (a) right of way, easement,
Encumbrance, written agreement or Law affecting the improvement, use or
occupancy or any reservation of an interest in title imposed or promulgated by
applicable Law with respect to real property and improvements, including zoning
regulations, provided they do not materially and adversely affect the current
use of any Casablanca Property, (b) right of way, easement, Encumbrance, written
agreement or Law affecting the improvement, use or occupancy or any reservation
of an interest that is disclosed on existing title reports or existing surveys
delivered to the Buyer on or before the date hereof, (c) the existing subleases
identified in Section 4.6(a) of the Disclosure Schedule (including the
rights of subtenants thereunder), copies of which have been made available to
the Buyer on or before the date hereof, (d) mechanics’, carriers’, workmen’s,
repairmen’s and similar lien incurred in the ordinary course of business and
which (i) is not yet due and payable, (ii) is duly budgeted to be paid and (iii)
does not materially detract from the value of or materially interfere with the
present use of any of the Casablanca Property, subject thereto or affected
thereby, (e) Encumbrance for Taxes that are not yet due and payable,
(f) agreement to which neither any Seller nor any Casablanca Subsidiary, is
a party that does not affect the use or occupancy of any Casablanca Property, in
any material respect or is otherwise not material, (g) the Property Leases (and
the rights of tenants thereunder, including any rights of first refusal or
purchase options thereunder) and any Property Lease entered into subsequent to
the date hereof in accordance with the terms hereof, (h) all Encumbrances
securing or otherwise relating to any Assumed Indebtedness (including any HUD
regulatory agreements), and (i) minor imperfections or defects of title or
other matters that do not materially detract from the value of or materially
interfere with the use of any Casablanca Property.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    “Permitted Securities Encumbrance” means adverse claims set
forth on Section 4.3(a) of the Disclosure Schedule.

     

    “Person” means an individual, a partnership (general or
limited), a corporation, a limited liability company, an association, a joint
stock company, Governmental Entity, a business or other trust, a joint venture,
any other business entity or an unincorporated organization.

     

    “Pinon Properties” shall have the meaning set forth in Section 7.9(b).

     

    “Post-Closing Period” shall have the meaning set forth in
Section 
2.3
(a).

     

    “Pre-Closing Period” shall have the meaning set forth in Section 
2.3
(a).

     

    “Prepaid Expenses” shall have the meaning set forth in Section 
2.3
(a).

     

    “Prepaid Income” shall have the meaning set forth in Section 
2.3
(a).

     

    “Proceeding” means any action, suit, proceeding, arbitration,
claim, complaint, decree, lawsuit or any notice of violation, noncompliance or
investigation.

     

    “Property Lease” means each document comprising, evidencing,
securing or entered into in connection with a lease or sublease of all or any
portion of the real property compromising any Casablanca Property.

     

    “Purchase Agreement” shall have the meaning set forth in the
Recitals.

     

    “Release” means the intentional or unintentional spilling,
emitting, leaking, pumping, pouring, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any Hazardous Material into the indoor or
outdoor environment.

     

    “Released Persons” shall have the meaning set forth in Section 6.7(a).

     

    “Remediation” means any abatement, investigation, clean-up,
removal action, remedial action, restoration, repair, response action,
engineering or institutional controls, corrective action, monitoring, sampling
and analysis, installation, reclamation, closure, or post-closure in connection
with the suspected, threatened or actual Release of Hazardous
Materials.

     

    “Seller Indemnified Parties” shall have the meaning set forth
in Section 11.2(b).

     

    “Seller Transaction Costs” means all costs and expenses
incurred by any Seller and/or any of the Casablanca Subsidiaries in connection
with the negotiation, documentation, execution, delivery and performance of this
Option Agreement and the Transaction Documents, including, without limitation,
the fees and disbursements of counsel, accountants and consultants engaged by
Sellers, any Casablanca Subsidiary or any Affiliate thereof, one-half of the
fees incurred in connection with obtaining the endorsements to the title
insurance policies or endorsements required by Section 7.8 of this Agreement.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    “Sellers” shall have the meaning set forth in the Preamble.

     

    “Stock Consideration” shall mean the shares of Buyer Common
Stock issued in payment of the Option Price.

     

    “Subsidiary” means any Person (other than an individual) with
respect to which any Person (or any Subsidiary thereof) has the power to vote or
direct the voting of sufficient securities or other interests to elect a
majority of the directors (or persons in similar positions, including, without
limitation, trustees) thereof.

     

    “Tax” or “Taxes” means any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind, including, without limitation,
all net income, gross receipts, ad
valorem, value added, transfer, gains, franchise, windfall, profits,
inventory, net worth, capital stock, assets, sales, use, license, registration,
documentation fees, estimated, withholding (including dividend withholding and
withholding required pursuant to Sections 1445 and 1446 of the Code), payroll,
premium, capital employment, social security, workers compensation,
unemployment, excise, severance, stamp, occupation, customers’ duties, tariffs
and property taxes, together with any interest and penalties, fines, additions
to tax or additional amounts imposed by any Governmental Entity or Tax
authority.

     

    “Tax Return” means any return, report, declaration, statement,
extension, form or other documents or information filed with or submitted to, or
required to be filed with or submitted to, any governmental body in connection
with the determination, assessment, collection or payment of any
Tax.

     

    “Tenant” means the tenant under each applicable Property
Lease.

     

    “Termination Date” shall have the meaning set forth in Section 3.

     

    “Third Party Payment” shall have the meaning set forth in
Section 
11.2
(d).

     

    “Title Commitments” shall have the meaning set forth in Section 6.14(b).

     

    “Title Policy” shall have the meaning set forth in Section 6.14(b).

     

    “Title Searches” shall have the meaning set forth in Section 6.14(b).

     

    “Transaction Documents” means, collectively, this Option
Agreement, the Purchase Agreement (solely to the extent incorporated by
reference herein) and the certificates and instruments delivered hereby and
thereby.

     

    “Uninsured Property” shall have the meaning set forth in Section 6.14(b).

     

    “Updated Disclosure Schedule” shall have the meaning set forth
in Section 6.5.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    
      SECTION 14.  GENERAL PROVISIONS

    

     

    
      14.1         
Construction.

    

     

    Within this Option Agreement, the other Transaction Documents and
all other documents required to consummate the transactions contemplated hereby,
the singular shall include the plural and the plural shall include the singular,
and any gender shall include all other genders, all as the meaning and the
context of this Option Agreement shall require.  Unless otherwise
specified, references to section numbers contained herein shall mean the
applicable section of this Option Agreement and references to exhibits and
schedules shall mean the applicable exhibits and schedules to this Option
Agreement.  The parties have participated jointly in the negotiation
and drafting of this Option Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Option Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Option Agreement.  Any reference to any federal,
state, local, or foreign statute or Law shall be deemed also to refer to all
rules and regulations promulgated thereunder and any successor statute or Law
thereto, unless the context requires otherwise.  Unless otherwise
expressly provided, the word “including” does not limit the preceding words or
terms.

     

    
      14.2         
Further Assurances.

    

     

    Each party hereto shall use its commercially reasonable efforts to
comply with all requirements imposed hereby on such party and to cause the
transactions contemplated herein to be consummated as contemplated herein and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments and take such other actions
as any other party hereto shall reasonably request in order to fulfill its
obligations under this Option Agreement and to effectuate the purposes of this
Option Agreement and to provide for the orderly and efficient transition to the
Buyer of the ownership of the Casablanca Units.

     

    
      14.3         Costs and Expenses.

    

     

    Sellers shall bear the Seller Transaction Costs and the Buyer shall
bear the Buyer Transaction Costs, and to the extent not covered by the
foregoing, each party will pay its own costs and expenses.

     

    
      14.4         Notices.

    

     

    All notices or other communications permitted or required under this
Option Agreement shall be in writing and shall be sufficiently given if and when
hand delivered or sent by facsimile to the Persons set forth below or if sent by
documented overnight delivery service or certified mail, postage prepaid, return
receipt requested, addressed as set forth below or to such other Person or
Persons and/or at such other address or addresses (or facsimile number) as shall
be furnished in writing by any party hereto to the others.  Any such
notice or communication shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor in all other cases.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    To the Buyer:

     

    Omega Healthcare Investors, Inc.

    Suite 3500

    200 Independence Circle

    Hunt Valley, MD 21030

    Attention:      C. Taylor
Pickett

    Facsimile:       (410)
824-3570

     

    With a copy to:

     

    Bryan Cave LLP

    One Atlantic Center

    14th
Floor

    1201 West Peachtree Street, N.E.

    Atlanta, Georgia  30309-3488

    Attention:      Rick
Miller

    Telephone:     (404) 572-6787

    Telecopier:     (404) 420-
0787

     

     

    To the Sellers:

     

    c/o CapitalSource Inc.

    4445 Willard Avenue

    12th
Floor

    Chevy Chase, MD

    Attention:      General
Counsel

    Facsimile:       (301)
841-2380

     

    With a copy to:

     

    Hogan & Hartson LLP

    Columbia Square

    555 Thirteenth Street, NW

    Washington, DC  20004

    Attention:      James
Showen

                            
Alexander
Cobey

    Facsimile:       (202)
637-5910

     

    
      14.5         Assignment and Benefit.

    

     

    (a)   This Option Agreement shall be binding upon and inure to the benefit
of the parties and their respective permitted successors and
assigns.  Neither this Option Agreement, nor any of the rights
hereunder or thereunder, may be assigned by any party, nor may any party
delegate any obligations hereunder or thereunder, without the written consent of
the other parties hereto or thereto; provided, that the Buyer may assign its rights hereunder to
one or more of its wholly-owned Subsidiaries (but the Buyer shall not be
released from its obligations hereunder upon any such
assignment).  Any assignment or attempted assignment other than in
accordance with this Section 
14.5
(a) shall be void ab
initio.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

    (b)   Except as provided in Section 
6.7 (Seller Releases) and Section 
11.2 (Indemnification), this Option Agreement shall not
be construed as giving any Person, other than the parties hereto and their
permitted successors, heirs and assigns, any legal or equitable right, remedy or
claim under or in respect of this Option Agreement or any of the provisions
herein contained, this Option Agreement and all provisions and conditions hereof
being intended to be, and being, for the sole and exclusive benefit of such
parties, and their respective permitted successors, heirs and assigns and for
the benefit of no other Person or entity.

     

    
      14.6         
Amendment, Modification and Waiver.

    

     

    The parties hereto may amend or modify, or may waive any right or
obligation under, this Option Agreement in any respect, provided that any such
amendment, modification or waiver shall be in writing and executed by the Buyer
and Sellers.  No waiver of any breach of any provision of this Option
Agreement shall constitute or operate as a waiver of any other breach of such
provision or of any other provision hereof, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other provision
hereof.

     

    
      14.7          Governing Law; Consent to
Jurisdiction.

    

     

    This Option Agreement is made pursuant to,
and shall be construed and enforced in accordance with, the laws of the State of
Delaware applicable to contracts executed in and to be performed in that State,
irrespective of the principal place of business, residence or domicile of the
parties hereto, and without giving effect to otherwise applicable principles of
conflicts of law.  Any legal action, suit or Proceeding arising out of
or relating to this Option Agreement shall be instituted, heard and determined
exclusively in any federal court or in any state court located in Wilmington,
Delaware, and each party hereto hereby waives any objection which such party may
now or hereafter have to the laying of the venue of any such action, suit or
Proceeding, and hereby irrevocably and unconditionally submits to the
jurisdiction of any such court.  Any and all service of process and
any other notice in any such action, suit or Proceeding shall be effective
against any party hereto if given as provided in Section 
14.4.  Nothing herein contained shall be deemed to affect the
right of any party to serve process in any other manner permitted by applicable
Law.

     

    
      14.8         Section Headings and Defined Terms.

    

     

    The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning and interpretation of any of
the provisions of this Option Agreement. Except as otherwise indicated, all
agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.  All references to Schedules herein shall be references to
Schedules in the Purchase Agreement.

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

    
      14.9         
Severability.

    

     

    If any term or other provision of this Option Agreement is invalid,
illegal or incapable of being enforced by any rule of Law, or public policy, all
other conditions and provisions of this Option Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.  Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Option Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent
possible.

     

    
      14.10        Counterparts.

    

     

    This Option Agreement and the other documents required to consummate
the transactions contemplated herein may be executed in one or more
counterparts, each of which shall be deemed an original (including facsimile and
PDF signatures), and all of which together shall be deemed to be one and the
same instrument.  The parties hereto may deliver this Option Agreement
and the other documents required to consummate the transactions contemplated
herein by telecopier machine/facsimile or via e-mail and each party shall be
permitted to rely upon the signatures so transmitted to the same extent and
effect as if they were original signatures.

     

    
      14.11        Entire Agreement.

    

     

    This Option Agreement, the other Transaction Documents, the
Disclosure Schedule and the schedules and exhibits hereto constitute the entire
agreement between the parties hereto, and supersede all prior agreements and
understandings (written or oral), with respect to such subject
matter.

     

    
      14.12        Waiver of Jury Trial.

    

     

    EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS OPTION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

    
      14.13        Remedies.

    

     

    Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party shall be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by Law or equity upon such
party, and the exercise by a party of any one remedy shall not preclude the
exercise of any other remedy.  Notwithstanding the foregoing, the
rights and remedies contained in this Option Agreement shall constitute the sole
and exclusive means of recourse against Sellers with respect to any current or
future environmental conditions at, on, under or emanating from any of the
Casablanca Properties or any other real property currently or formerly owned by
Casablanca Holdings, and the Buyer expressly waives any and all other claims,
rights, or causes of action it may have against Sellers, now or in the future,
arising under, in connection with or relating to any Environmental Law (whether
by statute, regulation, or common law) with respect to such
properties.  The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Option Agreement were not
performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Option Agreement and
to enforce specifically the terms and provisions of this Option Agreement, this
being in addition to any other remedy to which the parties are entitled at Law
or in equity.  Notwithstanding anything to the contrary in this Option
Agreement, in no event shall either party to this Option Agreement be liable for
punitive damages however caused and on any theory of liability, arising out of
the performance of, or the failure to perform, any obligation(s) set forth
herein.

     

     

    [Remainder of Page Intentionally Left Blank]

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

    IN
WITNESS WHEREOF, each of the parties hereto has duly executed this
Casablanca Option Agreement as of the date first written
above.

     

     

     

    
      
        	 	

                SELLERS:

              	 
	 	 	 
	 	

                CAPITALSOURCE INC.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	Name: 	 
	 	Title: 	 

      

    

     

    
      
        	 	 
	 	

                

                  CSE SLB LLC

                

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	Name: 
	 	Title: 	 

      

       

       

      
        
          	 	

                  BUYER:

                	 
	 	 	 
	 	

                  

                    OMEGA HEALTHCARE INVESTORS, INC.

                  

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/
      C. Taylor Pickett	 
	 	Name:
      C. Taylor Pickett	 
	 	Title:  
      Chief Executive Officer	 

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

    

     

     

     

     

     

     

     

     

     

     

     

    CASABLANCA OPTION AGREEMENT

     

    by and among

     

    CAPITALSOURCE INC.,

     

    CSE SLB LLC,

     

    and

     

    OMEGA HEALTHCARE INVESTORS, INC.

     

    December 22, 2009

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE OF CONTENTS

     

     

    
      
        
          	
                  SECTION
      1.

                	
                  GRANT
      OF OPTION

                	
                  1

                
	
                  SECTION
      2.

                	
                  PURCHASE
      AND SALE OF OPTION AND CASABLANCA UNITS

                	
                  1

                
	 
      	
                  2.1

                	
                  Purchase
      Price for Casablanca Option.

                	
                  1

                
	 
      	
                  2.2

                	
                  Purchase
      Price For Casablanca Units.

                	
                  2

                
	 
      	
                  2.3

                	
                  Additional
      Adjustments and Apportionments.

                	
                  3

                
	 
      	
                  2.4

                	
                  Payments
      and Computations.

                	
                  5

                
	
                  SECTION
      3.

                	
                  EXERCISE
      OF CASABLANCA OPTION

                	
                  5

                
	 
      	 
      	
                  Exercise.

                	
                  5

                
	
                  SECTION
      4.

                	
                  SELLERS’
      REPRESENTATIONS AND WARRANTIES

                	
                  5

                
	
                  SECTION
      5.

                	
                  REPRESENTATIONS
      AND WARRANTIES OF BUYER

                	
                  5

                
	 
      	
                  5.1

                	
                  Organization
      and Good Standing.

                	
                  5

                
	 
      	
                  5.2

                	
                  Power
      and Authorization.

                	
                  6

                
	 
      	
                  5.3

                	
                  Validity
      of Contemplated Transactions.

                	
                  6

                
	 
      	
                  5.4

                	
                  Consents.

                	
                  6

                
	 
      	
                  5.5

                	
                  Operator
      Matters.

                	
                  7

                
	
                  SECTION
      6.

                	
                  COVENANTS
      OF THE PARTIES UNTIL CLOSING

                	
                  7

                
	 
      	
                  6.1

                	
                  Conduct
      of Business Pending Closing.

                	
                  7

                
	 
      	
                  6.2

                	
                  Access.

                	
                  9

                
	 
      	
                  6.3

                	
                  Consents
      and Cooperation.

                	
                  10

                
	 
      	
                  6.4

                	
                  No
      Solicitation.

                	
                  11

                
	 
      	
                  6.5

                	
                  Disclosure
      Schedule.

                	
                  12

                
	 
      	
                  6.6

                	
                  Notices
      of Certain Events.

                	
                  12

                
	 
      	
                  6.7

                	
                  Seller
      Releases.

                	
                  13

                

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

          	 
      	
                  6.8

                	
                  Property
      Financial Statements.

                	
                  14

                
	 
      	
                  6.9

                	
                  Public
      Announcements.

                	
                  14

                
	 
      	
                  6.10

                	
                  Confidentiality.

                	
                  14

                
	 
      	
                  6.11

                	
                  Estoppel
      Certificates.

                	
                  14

                
	 
      	
                  6.12

                	
                  Intercreditor
      Arrangements.

                	
                  14

                
	 
      	
                  6.13

                	
                  Senior
      Loan Extension.

                	
                  15

                
	 
      	
                  6.14

                	
                  Title
      Searches; Title Commitments.

                	
                  15

                
	 
      	
                  6.15

                	
                  Seller
      Cooperation with Transaction Financing.

                	
                  16

                
	
                  SECTION
      7.

                	
                  CONDITIONS
      PRECEDENT TO BUYER’S OBLIGATIONS

                	
                  18

                
	 
      	
                  7.1

                	
                  Deliveries
      at the Closing.

                	
                  18

                
	 
      	
                  7.2

                	
                  Representations
      and Warranties.

                	
                  18

                
	 
      	
                  7.3

                	
                  Performance
      of Covenants.

                	
                  18

                
	 
      	
                  7.4

                	
                  No
      Material Adverse Effect.

                	
                  19

                
	 
      	
                  7.5

                	
                  Approvals.

                	
                  19

                
	 
      	
                  7.6

                	
                  Legal
      Matters.

                	
                  19

                
	 
      	
                  7.7

                	
                  Outstanding
      Indebtedness.

                	
                  19

                
	 
      	
                  7.8

                	
                  Title
      Insurance.

                	
                  19

                
	 
      	
                  7.9

                	
                  Replacement
      Leases for Canton and Hilliard

                	
                  20

                
	
                  SECTION
      8.

                	
                  CONDITIONS
      PRECEDENT TO SELLERS’ OBLIGATIONS

                	
                  20

                
	 
      	
                  8.1

                	
                  Deliveries
      at Closing.

                	
                  20

                
	 
      	
                  8.2

                	
                  Representations
      and Warranties.

                	
                  21

                
	 
      	
                  8.3

                	
                  Performance
      of Covenants.

                	
                  21

                
	 
      	
                  8.4

                	
                  Approvals.

                	
                  21

                
	 
      	
                  8.5

                	
                  Legal
      Matters.

                	
                  21

                
	 
      	
                  8.6

                	
                  Assumed
      Indebtedness.

                	
                  21

                

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

          	
                  SECTION
      9.

                	
                  CLOSING

                	
                  22

                
	 
      	
                  9.1

                	
                  Time
      and Place of the Closing; Extension.

                	
                  22

                
	 
      	
                  9.2

                	
                  Deliveries
      at the Closing by Sellers.

                	
                  22

                
	 
      	
                  9.3

                	
                  Deliveries
      at the Closing by the Buyer.

                	
                  23

                
	 
      	
                  9.4

                	
                  Transfer
      Taxes.

                	
                  24

                
	
                  SECTION
      10.

                	
                  REMEDIES

                	
                  24

                
	 
      	
                  10.1

                	
                  Clawback
      Remedy.

                	
                  24

                
	
                  SECTION
      11.

                	
                  INDEMNIFICATION

                	
                  25

                
	 
      	
                  11.1

                	
                  Survival.

                	
                  25

                
	 
      	
                  11.2

                	
                  Indemnification.

                	
                  26

                
	
                  SECTION
      12.

                	
                  CERTAIN
      ADDITIONAL COVENANTS AND AGREEMENTS

                	
                  29

                
	 
      	
                  12.1

                	
                  Casualty.

                	
                  29

                
	 
      	
                  12.2

                	
                  Condemnation
      Pending Closing.

                	
                  30

                
	
                  SECTION
      13.

                	
                  DEFINITIONS

                	
                  31

                
	
                  SECTION
      14.

                	
                  GENERAL
      PROVISIONS

                	
                  41

                
	 
      	
                  14.1

                	
                  Construction.

                	
                  41

                
	 
      	
                  14.2

                	
                  Further
      Assurances.

                	
                  41

                
	 
      	
                  14.3

                	
                  Costs
      and Expenses.

                	
                  41

                
	 
      	
                  14.4

                	
                  Notices.

                	
                  41

                
	 
      	
                  14.5

                	
                  Assignment
      and Benefit.

                	
                  42

                
	 
      	
                  14.6

                	
                  Amendment,
      Modification and Waiver.

                	
                  43

                
	 
      	
                  14.7

                	
                  Governing
      Law; Consent to Jurisdiction.

                	
                  43

                
	 
      	
                  14.8

                	
                  Section
      Headings and Defined Terms.

                	
                  43

                
	 
      	
                  14.9

                	
                  Severability.

                	
                  44

                
	 
      	
                  14.10

                	
                  Counterparts.

                	
                  44

                
	 
      	
                  14.11

                	
                  Entire
      Agreement.

                	
                  44

                
	 
      	
                  14.12

                	
                  Waiver
      of Jury Trial.

                	
                  44

                
	 
      	
                  14.13

                	
                  Remedies.

                	
                  45ex10-2.htm

    
      
        

      
Exhibit 10.2

    REGISTRATION RIGHTS
AGREEMENT

    

    This REGISTRATION RIGHTS
AGREEMENT (the “Agreement”) dated as
of December 22, 2009 by and among Omega Healthcare Investors, Inc., a Maryland
corporation (the “Company”),
CapitalSource Inc., a Delaware corporation (“CapitalSource”), CHR
HUD Borrower LLC, a Delaware limited liability company (“CHR HUD Borrower”),
CSE Mortgage LLC, a Delaware limited liability company (“CSE Mortgage”), CSE
SLB LLC, a Delaware limited liability company (“CSE SLB”), CSE SNF
Holding LLC, a Delaware limited liability company (“CSE SNF”) and
CapitalSource Healthcare REIT, a Maryland real estate investment trust (“CSH
REIT”).  CapitalSource, CHR HUD Borrower, CSE Mortgage, CSE
SLB, CSE SNF and CSH REIT are collectively referred to herein as the “Stockholders.”

     

    WHEREAS, the Company and
certain of the Stockholders are parties to the Purchase Agreement;
and

     

    WHEREAS, pursuant to the terms
of the Transaction Documents, the Company has agreed to issue shares of Common
Stock to the Stockholders and to enter into this Agreement granting certain
registration rights with respect to such Common Stock on the terms and subject to the conditions set forth
herein.

     

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

     

    1.           Certain
Definitions.

     

    As used
in this Agreement, the following terms shall have the following
meanings:

     

    “Affiliate” shall mean
with respect to any Person any direct or indirect
subsidiary of such Person and any other Person directly or indirectly
controlling, controlled by, or under common control with such
Person.  As used in this definition, “control” (including with
correlative meanings, “controlled by” and “under common control with”) means
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies, or the power to appoint and remove a
majority of the board or other governing body (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise), of a Person.

     

    “Business Day” shall
mean a day other than a Saturday, Sunday or other day on which commercial banks
in New York City are required by Law to close.  Any event the
scheduled occurrence of which would fall on a day that is not a Business Day
shall be deferred until the next succeeding Business Day.

     

     “Common Stock” shall
mean the Company’s common stock, par value $ 0.10 per share, and any securities
into which such shares may hereinafter be reclassified.

     

    “Filing Date” shall
mean:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)           with
respect to Registrable Securities issued at the Core Portfolio Closing
Date:

     

    (i)           January
15, 2010 if the Core Portfolio Closing Date occurs on or before December 31,
2009 and Stockholders have provided to Buyer the Property Financial Statements
(as defined in the Purchase Agreement) on or before December 18,
2009;

     

    (ii)          fifteen
(15) days subsequent to the Core Portfolio Closing Date if the Core
Portfolio Closing date occurs after December 31, 2009 and prior to
January 29, 2010, and Stockholders have provided to Buyer the Property Financial
Statements (as defined in the Purchase Agreement) on or before the fifth
(5th) day prior to the Core Portfolio Closing Date; 

     

    (iii)         in
all other cases, fifteen (15) days after the later of (A) the Core Portfolio
Closing Date, and (B) the delivery of the 2009 Property Financial Statements to
Buyer, but in no event earlier than five (5) Business Days after the Company
files its Annual Report on Form 10-K for the year ended December 31, 2009;
and

     

    (b)           with
respect to Registrable Securities issued other than as of the Core Portfolio
Closing Date, fifteen (15) days after the later (i) of the issuance of such
Registrable Securities and (ii) the delivery to Buyer of the Property Financial
Statements, 2009 Financial Statements, Updated HUD Property Financial
Statements, and Casablanca Financial Statements to the extent required to be
delivered prior to such  date pursuant to the Transaction
Documents.

     

    “GAAP” shall mean
generally accepted accounting principles in the United States of America,
applied on a consistent basis and applied to both classification of items and
amounts, including without limitation, the official interpretations thereof by
the Financial Accounting Standards Board, its predecessors and
assigns.

     

    “Person” shall mean
any individual, corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity.

     

    “Prospectus” shall
mean the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference or deemed to be incorporated by reference in such
prospectus.

     

    “Purchase Agreement”
shall mean the Securities Purchase Agreement, dated as of November 17, 2009, by
and among the Company, and such Stockholders and any other parties identified on
the signature pages thereto, as such agreement has been amended through the date
hereof and may be further amended from time to time after the date
hereof.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     “Register,” “registered” and
“registration”
refer to a registration made by preparing and filing with the SEC a Registration
Statement or similar document in compliance with the 1933 Act, and the
declaration or ordering of effectiveness of such Registration Statement or
document.

     

    “Registrable
Securities” shall mean the Shares and any other securities issued or
issuable in exchange for the Shares; provided, however, that a
security shall cease to be a Registrable Security upon (A) sale pursuant to a
Registration Statement or Rule 144 under the 1933 Act, or (B) such security
becoming eligible for sale by a Stockholder pursuant to Rule 144 without being
subject to a volume limitation.

     

    “Registration
Statement” shall mean any registration statement of the Company filed
with the SEC under the 1933 Act that covers the resale of any of the Registrable
Securities pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement, including the Shelf
Registration Statement.

     

    “S-X 3-14 Financial
Statements” shall mean the financial statements for the properties
acquired and to be acquired by Buyer pursuant to the Transaction Documents, for
the periods required by applicable SEC requirements with respect to acquired
real estate operations, and prepared in accordance with GAAP (except, in the
case of unaudited statements, as permitted by the applicable rules and
regulations of the SEC), applied on a consistent basis during the period
involved (except as may be indicated in the notes thereto and subject, in the
case of unaudited statements, to normal year-end adjustments).

     

    “SEC” shall mean the
U.S. Securities and Exchange Commission.

     

    “Shares” shall mean
the shares of Common Stock issued pursuant to the Transaction Documents and held
by the Stockholders and any permitted assignees to which shares have been
transferred.

     

    “Stockholders” shall
have the meaning set forth in the Preamble.

     

    “Transaction
Documents” shall mean the Purchase
Agreement, the Casablanca Option Agreement (as such term is defined in the
Purchase Agreement) and the Note (as such term is defined in the Purchase
Agreement), as such documents has been amended through the date hereof
and may be further amended from time to time after the date hereof.

     

    “WKSI” shall mean a
well-known seasoned issuer as defined under Rule 405 of the 1933
Act.

     

    “1933 Act” shall mean
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     

    “1934 Act” shall mean
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    2.           Registration.

     

    (a)           Shelf Registration
Statement.  Promptly following each issuance of Registrable
Securities but in no event later than the Filing Date with respect to such
issuance, the Company shall prepare and file with the SEC one or more
Registration Statements on Form S-3, or shall file one or more Prospectus
supplements under the Company’s existing Form S-3 automatic shelf registration
statement,  (or, if Form S-3 is not then available to the Company, on
such form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, subject to the
Stockholders’ consent), pursuant to Rule 415 under the Securities Act, covering
the resale of the Registrable Securities on a delayed or continuous basis (the
“Shelf Registration
Statement”) to the extent not already registered on a previously filed
and effective Registration Statement.  Such Shelf Registration
Statement also shall cover, to the extent allowable under the 1933 Act and the
rules promulgated thereunder (including Rule 416), such indeterminate number of
additional Registrable Securities resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable
Securities.  The Shelf Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) hereof to the Stockholders,
the Stockholders’ designated counsel, and their designated underwriters if any,
at a reasonable time prior to its filing or other submission.

     

    (b)           Expenses.  The
Company will pay all expenses incurred by it in connection with each
registration, including filing and printing fees, the Company’s counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws and listing fees, but
excluding discounts, commissions, fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals with respect to the
Registrable Securities being sold and fees of the Stockholders’ counsel, and the
cost of preparing and the S-X 3-14 Financial Statements; provided however, that the
Stockholders shall reimburse the Company for all expenses incurred by it (if
any) to update or supplement the Registration Statement or Prospectus if and to
the extent required on more than two occasions per year as a result of transfers
or assignments of Registrable Securities pursuant to Section 6(c)
hereof.

     

    (c)           Effectiveness.

     

    (i)           If
the Company is eligible as a WKSI, the Registration Statements shall utilize the
automatic shelf registration process under Rule 415 and Rule 462. If the Company
is not a WKSI or is otherwise ineligible to utilize the automatic shelf
registration process, the Company shall use commercially reasonable efforts to
have each Registration Statement declared effective as soon as practicable
following the filing thereof.  The Company shall notify the
Stockholders by facsimile or e-mail as promptly as practicable after any
Registration Statement is declared effective and shall as soon as reasonably
practicable provide the Stockholders, without charge, with a copy of any related
Prospectus (including any amendments, supplements and exhibits thereto) and such
other documents (including any documents incorporated into the Registration
Statement by reference) as the Stockholders may reasonably request in order to
facilitate the sale or other disposition of the securities covered
thereby.  The Company represents and warrants that it is a WKSI as of
the date hereof.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (ii)           Notwithstanding
anything to contrary, the Company may delay, suspend the use of or withdraw any
Registration Statement if Company in good faith determines that any such
Registration Statement, or the use thereof, would materially and adversely
affect any material corporate event or would otherwise require disclosure of
nonpublic information which disclosure the Company determines, in its reasonable
judgment, is not in the best interests of the Company at such time, or, if the
Company determines, in its reasonable judgment, that an event described in
Section 3(h) has occurred (each, an “Allowed Delay”);
provided, however, that the
Company shall promptly (a) notify the Stockholders in writing of the existence
of the event giving rise to an Allowed Delay, (b) advise the Stockholders in
writing that all sales must cease under the Registration Statement until the end
of the Allowed Delay and (c) use commercially reasonable efforts to terminate an
Allowed Delay as promptly as practicable consistent with the best interests of
the Company.  Notwithstanding anything herein to the contrary, (A) the
Company shall not be required to disclose material nonpublic information to the
Stockholders and (B) the  Company’s rights to delay or suspend the use
of any Registration Statement or qualification of Registrable Securities during
the pendency of any Allowed Delay shall not, in the aggregate, cause the
Stockholders to be required to suspend sales of the Shares pursuant to the
Registration Statement or relieve the Company of its obligation to file, amend
or supplement and maintain the effectiveness of a Registration Statement for a
period exceeding (i) forty-five (45) consecutive days or (ii) ninety (90) days
during any twelve (12) month period.

     

    (d)           Underwritten
Offerings.

     

    (i)           Until
the expiration of the Effectiveness Period, the Company shall notify the
Stockholders in writing at least two (2) Business Days prior to the filing of
any registration statement or Prospectus under the 1933 Act (excluding a
registration or Prospectus relating solely to employee benefit plans, or a
registration relating to a corporate reorganization or other transaction on
Form S-4, or a registration on any registration form that does not permit
secondary sales) for purposes of a firm commitment underwritten public offering
of Common Stock by the Company (an “Underwritten
Offering”) and will include in such Underwritten Offering all or part of
the Registrable Securities held by the Stockholders to the extent and on the
terms and conditions set forth herein.  If the Stockholder elects to
include in any such Underwritten Offering all or a portion of the Registrable
Securities, the Stockholders shall, within one (1) Business Day after the
above-described notice from the Company, so notify the Company in
writing.

     

    (ii)           The
right of the Stockholders to include Registrable Securities in an Underwritten
Offering pursuant to this Section 2(d) shall be conditioned upon the
Stockholders’ participation in such underwriting and the inclusion of the
Stockholders’ Registrable Securities in the underwriting to the extent provided
herein.  In order to distribute its Registrable Securities through
such Underwritten Offering, the Stockholders shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company, and shall deliver all such documents and
materials reasonably requested by the underwriters and the Company on a timely
basis.  Notwithstanding any other provision of this Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten in an Underwritten Offering, the
number of shares that may be included in such Underwritten Offering shall be
allocated as follows: (A) the Company shall be entitled to priority in
registration with respect to shares generating the first $50 million of gross
proceeds; and (B) the remaining shares to be included in such Underwritten
Offering shall be allocated equally between the Company on the one hand and the
Stockholders on the other. The Company shall have the right to terminate any
Underwritten Offering initiated by it under this Section 2(d) prior to execution
of an underwriting agreement whether or not the Stockholders have elected to
include securities in such registration.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (iii)           In
connection with any Underwritten Offering in which the Stockholders participate
or are invited to participate in accordance with this Section 2(d), the
Stockholders hereby agree that they will agree in writing to any restrictions on
sale of the Registrable Securities owned by the Stockholders that are requested
by the managing underwriter for a period not to exceed ninety (90) days; provided, however, that such
restrictions shall not be imposed unless restrictions as least as burdensome are
imposed on each executive officer and director of the Company.

     

    3.           Company
Obligations.  The Company will use commercially reasonable
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:

     

    (a)           use
commercially reasonable efforts to cause such Registration Statement to remain
continuously effective for a period that will terminate upon the earlier of (i)
the date on which all Registrable Securities have been sold, or (ii) the date on
which all Registrable Securities (other than with respect to Registrable
Securities owned by Affiliates of the Company) may be sold pursuant to Rule 144
without being subject to any volume limitation (the “Effectiveness
Period”);

     

    (b)           prepare
and file with the SEC such amendments, Prospectus supplements or post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the Effectiveness Period and to
timely comply with the provisions of the 1933 Act and the 1934 Act with respect
to the distribution of all of the Registrable Securities covered thereby and,
upon fifteen (15) Business Days’ notice, shall file any supplement or amendment
to the Registration Statement and Prospectus with respect to the plan of
distribution or the Stockholders’ ownership interests in its Registrable
Securities that is reasonably necessary to permit the sale of such Registrable
Securities pursuant to the Registration Statement;

     

    (c)           provide
copies to and permit the Stockholders’ counsel, and its underwriters, if any, to
review each Registration Statement and all amendments and supplements thereto no
fewer than five (5) Business Days prior to their filing with the SEC and not
file any document to which such counsel reasonably objects based upon such
counsel’s belief that such Registration Statement is not in compliance with
applicable laws, rules or regulations or contains a material misstatement or
omission or any underwriters or Stockholders reasonably object;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (d)           furnish
to the Stockholders, its legal counsel, and any underwriters, promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company (but not later than three (3) Business Days after the filing date,
receipt date or sending date, as the case may be), (A) one (1) copy of any
Registration Statement and any amendment thereto, and (B) such number of copies
of each preliminary Prospectus and Prospectus and each amendment or supplement
thereto, and each letter written by or on behalf of the Company to the SEC or
the staff of the SEC, and each item of correspondence from the SEC or the staff
of the SEC, in each case relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment) as the Stockholders may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by the
Stockholders that are covered by each Registration Statement;

     

    (e)           use
commercially reasonable efforts to (i) prevent the issuance of any stop order or
other suspension of effectiveness and, (ii) if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;

     

    (f)           prior
to any public offering of Registrable Securities, use
all  commercially reasonable efforts to register or qualify, or exempt
therefrom, or cooperate with the Stockholders, their counsel, and any
underwriters in connection with the registration or qualification, or exemption
therefrom, of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions requested by the Stockholders
and do any and all other commercially reasonable acts or things necessary or
advisable to enable the distribution in such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (i) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(f), (ii) subject itself to general
taxation in any jurisdiction where it would not otherwise be so subject but for
this Section 3(f), or (iii) file a general consent to service of process in any
such jurisdiction;

     

    (g)           use
commercially reasonable efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;

     

    (h)           immediately
notify the Stockholders in writing, at any time when a Prospectus relating to
Registrable Securities is required to be delivered under the 1933 Act (including
during any period when the Company is in compliance with Rule 172), upon
discovery that, or upon the happening of any event or the passage of time as a
result of which, the Prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of the Stockholders, promptly prepare and furnish to the Stockholders a
reasonable number of copies of a supplement to or an amendment of such
Prospectus or the Registration Statement as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (i)           use
commercially reasonable efforts to timely make and keep public information
available, as that term is understood and defined in, and required under, Rule
144 under the 1933 Act, at all times;

     

    (j)           if,
subsequent to thirty (30) days after the applicable Filing Date as defined in
clause (a) of the definition of Filing Date in Section 1 hereof, the Company has
failed to initiate an Underwritten Offering allowing for Stockholders’
participation in accordance with Section 2(d)(i) hereof, and the Stockholders
have provided fifteen (15) days’ notice that they intend to engage an
underwriter or underwriters to offer and sell all, or a portion of the
Registrable Securities anticipated to generate gross proceeds exceeding $50
million (a “Secondary Underwritten Offering”), enter into customary agreements
(including an underwriting agreement in customary form for the managing
underwriters with respect to issuers of similar market capitalization and
reporting and financial histories, and no more burdensome on the Company than
such agreements customarily entered into between the Company and its
underwriters) and take such other reasonable actions in connection therewith in
order to expedite or facilitate the disposition of the Registrable Securities
included in such Registration Statement and: (A) make representations and
warranties to the Stockholders and to each of the underwriters, in such form,
substance and scope as are customarily made to the managing underwriter or
underwriters by issuers of similar market capitalization and reporting and
financial histories (but no more burdensome on the Company than customarily
provided by the Company in underwritten offerings) and confirm the same to the
extent customary if and when requested; (B) obtain negative assurance letters,
opinions of counsel to the Company and updates thereof addressed to the
Stockholders and to each of the underwriters, such negative assurance letters,
opinions and updates to be in customary form and covering the matters
customarily covered in negative assurance letters and opinions obtained in
underwritten offerings by the managing underwriter or underwriters for issuers
of similar market capitalization and reporting and financial histories (but no
more burdensome on the Company than customarily provided by the Company in
underwritten offerings); (C) use commercially reasonable efforts to obtain
"comfort" letters and updates thereof from the Company's independent certified
public accountants addressed to the Stockholders and to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "comfort" letters to the managing underwriter or
underwriters in connection with underwritten offerings by them for issuers of
similar market capitalization and reporting and financial histories (but no more
burdensome on the Company than customarily provided by the Company in
underwritten offerings); (D) provide, in the underwriting agreement to be
entered into in connection with such offering, indemnification provisions and
procedures no less favorable than those set forth in Section 5 hereof with
respect to all parties to be indemnified pursuant to such Section 5; and (E)
deliver such customary documents and certificates as may be reasonably requested
by the Stockholders and the managing underwriter or underwriters to evidence
compliance with this paragraph (j) and with any customary conditions contained
in the underwriting agreement entered into by the Company in connection with
such offering (but no more burdensome on the Company than customarily provided
by the Company in underwritten offerings); provided however that
the Company shall have a right to make a reasonable objection to the
Stockholders’ choice of underwriters within two (2) Business Days of notice of
the underwritten offering, it being understood that Company’s failure to give
notice of such objection to Stockholders shall be deemed approval of such choice
of underwriters; and; provided, however, that in the
event the Company notifies CapitalSource within five (5) Business Days of
receipt of the notice of Secondary Underwritten Offering that the Company plans
to promptly commence an Underwritten Offering pursuant to Section 2(d), and
afford Stockholders the right to include in such Underwritten Offering the
greater of (x) one-half of the number of shares the Stockholders intended to
include in the Secondary Underwritten Offering, or (y) such number of shares as
they would otherwise be entitled to include in accordance with Section 2(d),
then the Company’s obligations under this paragraph (j) shall be deferred until
the completion or abandonment of such Underwritten Offering, but in no event
longer than 30 days.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (k)           otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act and take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder.

     

    4.           Obligations of the
Stockholders.

     

    (a)           The
Stockholders shall furnish in writing to the Company such information regarding
itself and the Registrable Securities held by them as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.  At least ten (10) Business Days prior to the
first anticipated filing date of any Registration Statement or Prospectus, the
Company shall notify the Stockholders of the information the Company requires in
order to have the Registrable Securities included in the Registration
Statement.  The Stockholders shall provide such information to the
Company at least three (3) Business Days prior to each anticipated filing date
of such Registration Statement.  The Company may delay the filing of
any Registration Statement or Prospectus hereunder if required information from
any Stockholder is not furnished to the Company within the three (3) Business
Days.

     

     (b)          The
Stockholders agree to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration
Statement hereunder, unless the Stockholders have notified the Company in
writing of their election to exclude all of the Registrable Securities from such
Registration Statement.

     

    (c)           The
Stockholders agree that, upon receipt of any notice (which may be oral as long
as written notice is provided by the next day) from the Company of either (i)
the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(h) hereof, the Stockholders will
immediately discontinue the disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities, until otherwise
notified in writing by the Company or until the Stockholders’ receipt of the
copies of the supplemented or amended Prospectus filed with the SEC and until
any related post-effective amendment is declared effective and, if so directed
by the Company, the Stockholders shall deliver or cause to be delivered to the
Company (at the expense of the Company) or destroy or cause to be destroyed (and
deliver to the Company a certificate of destruction) all copies in the
Stockholders’ possession of the Prospectus covering the Registrable Securities
current at the time of receipt of notice of an event described in Section 3(h)
hereof.  The address of the Stockholders are as set forth on the
signature pages hereto.

     

    (d)           The
Stockholders covenant and agree that they will comply with the prospectus
delivery requirements of the 1933 Act as applicable in connection with sales of
Registrable Securities pursuant to the Registration Statement.

     

    (e)           The
Stockholder acknowledges and agrees that the Shelf Registration Statement and
Prospectus will in part be based on information provided by Sellers pursuant to
the Transaction Documents, and accordingly the Company will have no liability to
the Stockholder for any failure to comply with the Company’s obligations under
this Agreement that is substantially and directly caused by the failure of any
representation or warranty of Sellers pursuant to the Transaction Documents to
be true and correct, or violation of Seller’s covenants pursuant to the
Transaction Documents.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    5.      Indemnification.

     

    (a)           Indemnification by the
Company.  The Company will indemnify and hold harmless, the
Stockholders, its Affiliates, and their respective officers, directors, members,
employees, representatives and agents, successors and assigns, and each other
Person, if any, who controls the Stockholders (each, a “Holder Indemnitee”
and collectively, the “Holder Indemnitees’)
within the meaning of the 1933 Act, from and against any losses, claims, damages
or liabilities, joint or several, and expenses (including reasonable attorneys’
fees and disbursements and other reasonable expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened, and the costs of enforcement thereof) to which they may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based
upon:  (A) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement; (B) any preliminary
Prospectus or final Prospectus contained therein, or any amendment or supplement
thereof; (C) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Registrable Securities under the securities laws thereof; (D) the
omission or alleged omission to state in any Registration Statement, any
preliminary Prospectus or final Prospectus contained therein, or any amendment
or supplement thereof a material fact required to be stated therein or necessary
to make the statements therein not misleading; (E) any violation by the Company
or its agents of any rule or regulation promulgated under the Securities Act
applicable to the Company or its agents and relating to action or inaction
required of the Company in connection with such registration; or (F) any failure
to register or qualify the Registrable Securities included in any such
Registration Statement in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
conformity with representations, warranties or certifications made by Sellers
pursuant to the Transaction Documents, or made in conformity with information
regarding a Holder Indemnitee furnished by any Holder Indemnitee in writing
specifically for use in such Registration Statement or Prospectus, or in the
case of an occurrence of an Allowed Delay or of an event of the type specified
in Section 3(h), the use by such Holder Indemnitee of an outdated or defective
Prospectus after the Company has notified the Stockholders in writing that the
Prospectus is outdated or defective and prior to the receipt by the Stockholders
of an amended or supplemented Prospectus, but only if and to the extent that
following the receipt of such amended or supplemented Prospectus the
misstatement or omission giving rise to such liability would have been
corrected.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (b)           Indemnification by the
Stockholders.  The Stockholders agree to indemnify and hold
harmless, the Company, its directors, officers, employees, stockholders and each
Person who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from any untrue statement of a material fact or any omission of
a material fact required to be stated in the Registration Statement or
Prospectus or preliminary Prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent that such
untrue statement or omission is contained in any information regarding a Holder
Indemnitee furnished in writing by a Holder Indemnitee to the Company
specifically for inclusion in such Registration Statement or Prospectus or
amendment or supplement thereto, or in the case of an occurrence of an Allowed
Delay or an event of the type specified in Section 3(h), the use by such Holder
Indemnitee of an outdated or defective Prospectus after the Company has notified
the Stockholders in writing that the Prospectus is outdated or defective and
prior to the receipt by the Stockholders of an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the
amended or supplemented Prospectus the misstatement or omission giving rise to
such liability would have been corrected.

     

    (c)           Conduct of Indemnification
Proceedings.  Any Person entitled to indemnification under this
Agreement shall (i) give prompt notice to the indemnifying party of any claim
with respect to which it intends to seek indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to promptly assume the defense of such
claim and employ counsel reasonably satisfactory to such Person or (c) in the
reasonable judgment of any such Person, based upon advice of its counsel, a
conflict of interest exists between such Person and the indemnifying party with
respect to such claims (in which case, if the Person notifies the indemnifying
party in writing that such Person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such Person); and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation.  It
is understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more than
one separate firm of attorneys at any time for all such indemnified parties
except to the extent that based upon advice of counsel, a conflict of interest
exists between the indemnified parties.  No indemnifying party will,
except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or
litigation.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (d)           Contribution.  If
for any reason the indemnification provided for in the preceding paragraphs (a)
and (b) is unavailable to an indemnified party or insufficient to hold it
harmless, other than as expressly specified therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable
considerations.  No Person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any Person not guilty of such fraudulent
misrepresentation.

     

    6.      Miscellaneous.

     

    (a)           Notices.  All
notices or other communications permitted or required under this Agreement shall
be in writing and shall be sufficiently given if and when hand delivered or sent
by facsimile to the Persons set forth below or if sent by documented overnight
delivery service or certified mail, postage prepaid, return receipt requested,
addressed as set forth below or to such other Person or Persons and/or at such
other address or addresses (or facsimile number) as shall be furnished in
writing by any party hereto to the others. Any such notice or communication
shall be deemed to have been given as of the date received, in the case of
personal delivery, or on the date shown on the receipt or confirmation therefor
in all other cases.

     

    To the
Company:

    

    Omega
Healthcare Investors, Inc.

    Suite
3500

    200
Independence Circle

    Hunt
Valley, MD 21030

    Attention:      C.
Taylor Pickett

    Facsimile:       (410)
824-3570

    With a
copy to:

    

    Bryan
Cave LLP

    One
Atlantic Center

    14th
Floor

    1201 West
Peachtree Street, N.E.

    Atlanta,
Georgia  30309-3488

    Attention:      Rick
Miller

    Telephone:     (404)
572-6787

    Telecopier:     (404)
420- 0787

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    To the
Stockholders:

    

    CapitalSource
Inc.

    4445
Willard Avenue

    12th
Floor

    Chevy
Chase, MD

    Attention:      General
Counsel

    Facsimile:       (301)
841-2380

    

    With
copies to:

    

    Hogan
& Hartson LLP

    555
13th
Street

    Washington,
DC 20004

    Attention:      James
E. Showen

    Facsimile:       (202)
637-5910

    

    (b)           Construction.  Within
this Agreement, the singular shall include the plural and the plural shall
include the singular, and any gender shall include all other genders, all as the
meaning and the context of this Agreement shall require. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder and any
successor statute or law thereto, unless the context requires
otherwise.  Unless otherwise expressly provided, the word “including”
does not limit the preceding words or terms.

     

    (c)           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective permitted successors and assigns.
Neither this Agreement, nor any of the rights hereunder or thereunder, may be
assigned by any party, nor may any party delegate any obligations hereunder or
thereunder, without the written consent of the other party hereto or thereto,
provided that
the Stockholders may, without the consent of the Company and without affecting
such Stockholders rights and obligations hereunder, assign Stockholders’ same
rights and obligations under this Agreement to any of their respective
Affiliates or subsidiaries to the extent they are transferees of Registrable
Securities.  This Agreement shall not be construed as giving any
Person, other than the parties hereto and their permitted successors, heirs and
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any of the provisions herein contained, this Agreement and all
provisions and conditions hereof being intended to be, and being, for the sole
and exclusive benefit of such parties, and their respective permitted
successors, heirs and assigns and for the benefit of no other Person or
entity.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (d)           Amendment and Waiver.
The parties hereto may amend or modify, or may waive any right or obligation
under, this Agreement in any respect, provided that any such amendment,
modification or waiver shall be in writing and executed by each of the Company
and the Stockholders. No waiver of any breach of any provision of this Agreement
shall constitute or operate as a waiver of any other breach of such provision or
of any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision
hereof.

     

    (e)           Governing Law; Consent to
Jurisdiction. This Agreement is made pursuant to, and shall be construed
and enforced in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State, irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.
Any legal action, suit or proceeding arising out of or relating to this
Agreement shall be instituted, heard and determined exclusively in any federal
court or in any state court located in Wilmington, Delaware, and each party
hereto hereby waives any objection which such party may now or hereafter have to
the laying of the venue of any such action, suit or proceeding, and hereby
irrevocably and unconditionally submits to the jurisdiction of any such court.
Any and all service of process and any other notice in any such action, suit or
proceeding shall be effective against any party hereto if given as provided in
Section 6(a) hereof. Nothing herein contained shall be deemed to affect the
right of any party to serve process in any other manner permitted by applicable
law.

     

    (f)           Section Headings and Defined
Terms. The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning and interpretation of any of
the provisions of this Agreement. Except as otherwise indicated, all agreements
defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance herewith and
therewith.

     

    (g)           Severability.  If
any term or other provision of this Agreement is 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 contemplated
hereby is not affected in any manner materially adverse to any
party.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (h)           Counterparts.  This
Agreement and the other documents required to consummate the transactions
contemplated herein may be executed in one or more counterparts, each of which
shall be deemed an original (including facsimile and PDF signatures), and all of
which together shall be deemed to be one and the same instrument. The parties
hereto may deliver this Agreement and the other documents required to consummate
the transactions contemplated herein by telecopier machine/facsimile or via
e-mail and each party shall be permitted to rely upon the signatures so
transmitted to the same extent and effect as if they were original
signatures.

     

    (i)   Entire Agreement.
This Agreement constitutes the entire agreement between the parties hereto and
is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto with respect to the subject matter contained
herein.  This Agreement supersedes all prior agreements and
understandings (written or oral), with respect to such subject
matter.

     

    (j)   Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY  OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

     

    (k)           Stockholders’
Agent.  Each Stockholder, for itself and its successors and
permitted assigns, hereby appoints CapitalSource as its agent for purposes of
giving and receiving notices, and all other purposes under this
Agreement.  The Company may rely on instructions and elections from
CapitalSource as binding on each of the Stockholders.

     

    [Remainder of the page is
intentionally left blank.]

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    IN WITNESS WHEREOF, the
parties have executed this Registration Rights Agreement or caused their duly
authorized officers to execute this Registration Rights Agreement as of the date
first above written.

     

    
      
        	 	OMEGA HEALTHCARE INVESTORS,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ C.
      Taylor Pickett	 
	 	Name: C.
      Taylor Pickett	 
	 	Title: Chief
      Executive Officer	 

      

    

     

    

    [Signatures
Continued On Following Page]

    

    

    

     

    

    
 

    

    [REGISTRATION
RIGHTS AGREEMENT SIGNATURE PAGE]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      
        	 	CAPITALSOURCE
    INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	Name: 	 
	 	Title: 	 
	 	 	 	 

      

    

     

    
      	 	CHR HUD BORROWER
      LLC	 
	 	 	 	 
	
               

            	
              By:
      

            	 	 
	 	Name: 	 
	 	Title: 	 

      

         

        
          	 	CSE MORTGAGE
    LLC	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	Name: 	 
	 	Title: 	 

          

             

            
              	 	CSE SLB LLC	 
	 	 	 	 
	
                       

                    	
                      By:
      

                    	 	 
	 	Name: 	 
	 	Title: 	 

              

                 

                
                  	 	CSE SNF HOLDING
      LLC	 
	 	 	 	 
	
                           

                        	
                          By:
      

                        	 	 
	 	Name: 	 
	 	Title: 	 

                  

                     

                    
                      	 	CAPITALSOURCE HEALTHCARE
      REIT	 
	 	 	 	 
	
                               

                            	
                              By:
      

                            	 	 
	 	Name: 	 
	 	Title: 	 

                       

                    

                  

                

              

            

          

        

      

    

     

    

     

    [REGISTRATION
RIGHTS AGREEMENT SIGNATURE PAGE]

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