Document:

Settlement Agreement

 Exhibit 10.1 

SETTLEMENT AGREEMENT 

THIS SETTLEMENT AGREEMENT (“Agreement”), dated as of September 3, 2010, is made by and between Orchid Cellmark
Inc., a Delaware corporation (“ORCH” or the “Company”), and the entities and natural persons listed on Schedule A hereto (collectively, the “Accipiter Group”) (each of the Company and the Accipiter
Group, a “Party” to this Agreement, and collectively, the “Parties”). 
 WHEREAS, the
Accipiter Group is the beneficial owner of 3,923,498 shares of common stock, $0.001 par value, of the Company (the “Common Stock”), or approximately 13.09% of the Common Stock issued and outstanding on the date hereof; 

WHEREAS, the Accipiter Group has nominated certain individuals for election to the Board of Directors of the Company (the
“Board”) at the 2010 annual meeting of stockholders of the Company (the “2010 Annual Meeting”); and 

WHEREAS, ORCH and the Accipiter Group have each respectively determined that the respective best interests of ORCH and the Accipiter
Group would be served by the Accipiter Group not engaging in a solicitation of proxies for the election of directors in opposition to the nominees of the Board, and the other arrangements set forth herein. 

NOW, THEREFORE, in consideration of the promises, mutual representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the Parties hereto hereby agree as follows: 

1. Representations and Warranties of the Accipiter Group. The Accipiter Group hereby represents, warrants and agrees that
(a) it has full legal right, power and authority to execute, deliver and perform this Agreement, and consummate the transactions contemplated hereby, (b) the execution and delivery of this Agreement, and the consummation by the Accipiter
Group of the transactions contemplated hereby have been duly authorized by all necessary corporate and limited partnership actions, and (c) this Agreement constitutes valid, legal and binding obligations of the Accipiter Group, enforceable
against it in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium (whether general or specific) or other laws now or hereafter in effect. The performance of the terms of this
Agreement shall not conflict with, constitute a violation of, or require any notice or consent under, the organizational documents of the Accipiter Group or any agreement or instrument to which the Accipiter Group is a party or by which the
Accipiter Group is bound, and shall not require any consent, approval or notice under any provision of any judgment, order, decree, statute, rule or regulation applicable to the Accipiter Group. 

2. Representations and Warranties of ORCH. ORCH hereby represents and warrants to the Accipiter Group that (a) this
Agreement has been duly authorized, executed and delivered by ORCH, and is a valid and binding obligation of ORCH, enforceable against ORCH in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles; (b) the 

 
execution of this Agreement, the consummation of any of the transactions contemplated hereby, and the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will not
(1) conflict with, result in a breach or violation of, constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, result in the loss of a material benefit or give any right of
termination, amendment, acceleration or cancellation under, or result in the imposition of any lien, charge or encumbrance upon any property or assets of ORCH or any of its subsidiaries pursuant to any law, any order of any court or other agency of
government, ORCH’s Restated Certificate of Incorporation, as amended (the “Certificate”), ORCH’s Third Amended and Restated Bylaws (as they may be amended from time to time after the date hereof, the
“Bylaws”), or the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which ORCH is a party or bound or to which its
property or assets is subject or (2) trigger any “change of control” provisions in any agreement to which ORCH is a party; and (c) no consent, approval, authorization, license or clearance of, or filing or registration with, or
notification to, any court, legislative, executive or regulatory authority or agency is required in order to permit ORCH to perform its obligations under this Agreement, except for such as have been obtained. 

3. Directorships. 

(a) ORCH shall not nominate for re-election as Class I directors at the 2010 Annual Meeting the three (3) individuals disclosed as
serving as Class I directors in the Company’s proxy statement for its 2009 annual meeting of stockholders. 
 (b) ORCH
shall, as soon as practicable following the execution of this Agreement and prior to the 2010 Annual Meeting, take all actions necessary and appropriate to effectuate the following: 

(i) invite each stockholder of the Company that beneficially owns at least five percent (5%) of the issued and outstanding shares
of Common Stock of the Company on the date of execution of this Agreement (each, a “Major Stockholder”), other than the Accipiter Group, to propose to the Board one (1) individual who is directly affiliated with such Major
Stockholder (i.e., such individual has the power to vote or dispose of the shares of the Company held by the Major Stockholder) for nomination for election to the Board at the 2010 Annual Meeting as a member of the Company’s slate of directors;

 (ii) subject to Sections 3(b)(iii) and (iv), two (2) individuals proposed by the Accipiter Group (the
“Accipiter Nominees”) will be nominated for election at the 2010 Annual Meeting, as members of the Company’s slate of directors, to serve as Class I directors of the Company for three-year terms ending in 2013. If the Board
determines that one or both of the Accipiter Nominees proposed initially by the Accipiter Group do not possess the qualifications, qualities and skills necessary to be considered for election to the Board, the Accipiter Group will have the
opportunity to propose additional individuals until a total of two (2) qualified individuals are identified. Subject to the Board’s good faith exercise of its fiduciary duties to all stockholders, the acceptance of any persons proposed by
the Accipiter Group will not be unreasonably withheld. The Company will recommend and use the same efforts to support and solicit proxies for the election of the Accipiter Nominees as it has in respect of the Company’s nominees at previous
annual meetings of stockholders; 
  

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 (iii) all of the members of the Board and any nominating committee of the Board (the
“Nominating Committee”) will review the credentials of all persons put forth as possible nominees in order to determine, in the exercise of their fiduciary duties to all stockholders, that each such individual possesses the qualifications,
qualities and skills necessary to be considered for election to the Board; and 
 (iv) nominate for election at the 2010 Annual
Meeting those candidates that it determines, in the exercise of its fiduciary duties to all stockholders, possess the qualifications, qualities and skills necessary to be members of the Board. 

(v) The Company will keep the Accipiter Group reasonably informed of its intentions and progress regarding the addition of any persons
to be nominated and included in the proposed Company slate of nominees for election at the 2010 Annual Meeting. 
 (c) If only
the Accipiter Nominees are identified within the timeframe for nominations set forth in the Company’s notice for the 2010 Annual Meeting the size of the Board will, subject to Section 3(g), be reduced to six (6) by the Board
immediately after the 2010 Annual Meeting. In the event a nominee other than the Accipiter Nominees is suggested for election to the Board at the 2010 Annual Meeting, the Accipiter Group shall have the option, in its sole discretion, to reduce the
number of nominees to be nominated by the Accipiter Group for election to the Board at the 2010 Annual Meeting from two (2) to one (1). In the event such option is exercised by the Accipiter Group, the size of the Board will, subject to
Section 3(g), be reduced to six (6) by the Board immediately after the 2010 Annual Meeting. 
 (d) ORCH agrees that:

 (i) if at any time prior to the date that is six (6) months after the one-year anniversary of the 2010 Annual Meeting,
an Accipiter Nominee, if elected to the Board, resigns or is otherwise unable to serve as a director or is removed for cause as a director, the Accipiter Group will have the right to designate and substitute a person or persons for appointment to
the Board as a replacement director, subject to evaluation and determination by the remaining members of the Nominating Committee and the Board using the standards described in Section 3(b)(iii). Subject to the Nominating Committee’s and
the Board’s good faith exercise of its fiduciary duties to all stockholders, the acceptance of any replacement director(s) recommended by the Accipiter Group will not be unreasonably withheld. In the event the Board does not accept a
replacement director recommended by the Accipiter Group, the Accipiter Group will have the right to recommend additional replacement director(s) for consideration. Any replacement director that has been recommended by the Nominating Committee and
the Board will be appointed to the Board no later than five (5) business days after the Board’s recommendation of such replacement director; and 

(ii) if at any time after the date that is six (6) months after the one-year anniversary date of the 2010 Annual Meeting, but prior
to the Company’s 2013 annual meeting of stockholders, an Accipiter Nominee, if elected to the Board, resigns or is otherwise unable to serve as a director or is removed for cause as a director, the Company shall notify the Accipiter Group of
such event and give the Accipiter Group five (5) business days to recommend a person or persons for consideration by the Board and the Nominating Committee as a replacement director for such vacancy. The Board and the Nominating Committee shall
not appoint a 
  

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replacement director for such vacancy until it has reviewed any such recommendation of the Accipiter Group. 

(e) Each of the Accipiter Nominees, if elected, will be governed by and have the same protections, duties and obligations regarding
confidentiality, conflicts of interests, fiduciary duties, trading and disclosure policies and other governance practices and guidelines, and shall have the same rights and benefits, including, but not limited to, with respect to insurance,
indemnification, compensation and fees, as are generally applicable to any non-employee directors of ORCH. 
 (f) The members of
the Nominating Committee and the Board will continue to exercise their fiduciary duties to all shareholders in the identification and selection of all nominees for the Company slate of director nominees for election at the 2010 Annual Meeting.

 (g) This Agreement will in no way preclude, restrict or limit any shareholder of the Company from proposing candidates for
nomination for election to the Board at the 2010 Annual Meeting. 
 4. Annual Meeting. 

(a) The Company shall use commercially reasonable efforts to hold the 2010 Annual Meeting during the month of November 2010, taking into
consideration the process for nominating qualified Accipiter Nominees and the obligation of the Company to provide all of its stockholders with at least thirty (30) days to propose individuals for nomination to the Board. 

(b) The Company shall hold the 2012 annual meeting of stockholders (the “2012 Annual Meeting”) no earlier than June 2012
and shall provide the Accipiter Group written notice of such meeting date at least seven (7) days prior to the date that an ORCH stockholder may first submit a notice of nomination for the election of directors at the 2012 Annual Meeting
pursuant to applicable law and the Bylaws. 
 5. Corporate Governance. 

(a) As soon as practicable following the 2010 Annual Meeting, the Board will engage a third party compensation consultant to conduct a
director compensation study to review the Company’s current structure with respect to the compensation of the Board. 
 (b)
As soon as practicable (and no later than forty-five (45) days) following the date of the 2010 Annual Meeting, the Board will take such actions as may be reasonably necessary to develop and implement compensation and stock ownership guidelines
applicable to the Board based upon the recommendations of the compensation study, subject to the review and approval of the recommendations by the Board. Compensation guidelines shall evaluate the compensation of directors over an entire three-year
term of service. Stock ownership guidelines shall take into account the time of service of each member of the Board. Any failure of a member of the Board to comply with the new guidelines may not be remedied through the grant by the Company of
additional shares of restricted stock or options, nor through the payment by the Company for future or past services in lieu of cash. The guidelines will obligate all members of the Board to be in compliance with said guidelines within the earlier
of nine (9) months of the adoption by the Board of the guidelines or the date of the 2011 annual meeting of stockholders of 

 

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the Company (the “2011 Annual Meeting”). No additional equity compensation will be issued to non-executive directors until the compensation study is completed. 

(c) Compensation to be paid (including initial stock option grants) to any new directors that are elected to the Board at the 2010 Annual
Meeting will be determined in accordance with the recommendations of the compensation study approved and implemented by the Board. 

6. Actions by the Accipiter Group. 

(a) Promptly following execution of this Agreement by all Parties hereto, Accipiter Life Sciences Fund, LP shall withdraw its letter to
the Company dated March 10, 2010, nominating certain individuals for election to the Board at the 2010 Annual Meeting, and the Accipiter Group shall file an amendment to its Schedule 13D disclosing such withdrawal. 

(b) The Accipiter Group shall cause all Common Stock beneficially owned by it and its Affiliates (as such term is defined below) under
its control or direction to be: 
 (i) present at both the 2010 Annual Meeting and the 2011 Annual Meeting for the purposes of
establishing a quorum; and 
 (ii) voted for the director nominees recommended by the Board for election at both the 2010
Annual Meeting and the 2011 Annual Meeting, provided that the Company is in compliance with its obligations under this Agreement. 

7. Standstill Restrictions. 

(a) Subject to applicable law, including any filing that may be required under Section 13(d) and/or (g) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), except as permitted pursuant to the terms of this Agreement, for the period commencing upon the date of execution of this Agreement and ending the earlier of: (i) the date
that is six (6) months after the one-year anniversary date of the 2010 Annual Meeting, and (ii) seven (7) days prior to the date that an ORCH stockholder may first submit a notice of nomination for the election of directors at the
2012 Annual Meeting pursuant to applicable law and the Bylaws (such period, the “Standstill Period”), neither the Accipiter Group nor any of its Affiliates under its control or direction, without the prior written consent of the
Board, shall in any manner, directly or indirectly: 
 (i) solicit (as such term is used in the proxy rules of the Securities
and Exchange Commission (the “SEC”)) proxies or consents to vote any securities of ORCH, or make, or in any way participate in, any “solicitation” of any “proxy” within the meaning of Rule 14a-1 promulgated
by the SEC under the Exchange Act to vote any shares of Common Stock with respect to: 
 (1) the election of directors of the
Company at the 2010 Annual Meeting or the 2011 Annual Meeting in opposition to the Company’s proposed director nominees; or 
  

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 (2) any transaction in which the Accipiter Group would be treated differently than other
stockholders of the Company or receive a benefit not shared by the other stockholders. 
 (ii) submit any nomination of an
individual for election to the Board, other than pursuant to this Agreement, or any other proposal for consideration at any annual or special meeting of the stockholders of the Company, including proposals pursuant to Rule 14a-8 promulgated under
the Exchange Act; 
 (iii) seek to advise, encourage, support or influence any person with respect to the voting or disposition
of any securities of the Company on the election of directors contrary to the recommendation of the Board; 
 (iv) otherwise
act, alone or in concert with others to control or seek to control the Board, other than through non-public communications with the officers and directors of ORCH; 

(v) form, join or in any way participate in any “group” pursuant to Rule 13d-5 promulgated by the SEC under the Exchange Act
with respect to any securities of the Company, other than a “group” that includes all or some lesser number of the persons identified as part of the Accipiter Group, but does not include any other members who are not currently identified
as Accipiter Group members as of the date hereof; or 
 (vi) enter into any discussions, negotiations, agreements or
understandings with any third party with respect to the foregoing, or advise, assist, encourage or seek to persuade any third party to take any action with respect to any of the foregoing, or otherwise take or cause any action inconsistent with any
of the foregoing. 
 (b) The restrictions set forth in Section 7(a) above shall not apply to actions taken by any Accipiter
Nominee while serving as a member of the Board and in his capacity as such. 
 (c) Notwithstanding anything contained herein to
the contrary, any member of the Accipiter Group, and any Affiliate of any such member, shall be entitled to: 
 (i) vote their
shares of Common Stock on any other proposals duly brought before the 2010 Annual Meeting or 2011 Annual Meeting as they determine in their sole discretion; and 

(ii) disclose, publicly or otherwise, how it intends to vote or act with respect to any securities of the Company, any stockholder
proposal or other matter to be voted on by the stockholders of the Company (other than the election of directors or with respect to any matter described in Section 7(a)(i)(2) above) and the reasons therefor. 

(d) As used in this Agreement, the term “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under
the Exchange Act. 
  

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 8. Public Announcement. ORCH and the Accipiter Group shall promptly disclose
the existence of this Agreement after its execution pursuant to a joint press release that is mutually acceptable to the Parties (the “Press Release”), including a description of the material terms of this Agreement. Subject to
applicable law, none of the Parties shall disclose the existence of this Agreement, the confidential disclosure agreement dated April 14, 2010 or the memorandum of understanding dated July 28, 2010, until the Press Release is issued.
Neither the Company nor the Accipiter Group shall make any public statements with respect to the 2010 Annual Meeting (including statements made in any public filing with the SEC or any other regulatory or governmental agency or with any stock
exchange) that are inconsistent with, or otherwise contrary to, the statements in the Press Release. The Parties agree that, until the expiration of the Standstill Period, each Party shall refrain from any disparagement, defamation, libel, or
slander with respect to any other Party or its affiliates or from publicly criticizing such other Party or its affiliates. 

9. Proxy Statement. The Company agrees to provide the Accipiter Group an opportunity to review and comment on the portions
of all proxy materials to be filed by the Company in connection with the 2010 Annual Meeting containing statements relating to the Accipiter Group, the Accipiter Nominees and this Agreement. The Accipiter Group agrees to promptly provide the Company
with true and complete information relating to the Accipiter Group required for inclusion in the Company’s proxy materials to be filed by the Company in connection with the 2010 Annual Meeting. The Accipiter Group further agrees to use
commercially reasonable efforts to cause the Accipiter Nominees to promptly provide the Company with true and complete information relating to each nominee, respectively, required for inclusion in the Company’s proxy materials to be filed by
the Company in connection with the 2010 Annual Meeting. 
 10. Releases. 

(a) The Accipiter Group hereby agrees for the benefit of ORCH, and each controlling person, officer, director, stockholder, agent,
affiliate, employee, partner, attorney, heir, assign, executor, administrator, predecessor and successor, past and present, of ORCH (ORCH and each such person being an “ORCH Released Person”) as follows: 

(i) the Accipiter Group, for themselves and for their members, officers, directors, assigns, agents and successors, past and present,
hereby agrees and confirms that, effective from and after the date of this Agreement, they hereby acknowledge full and complete satisfaction of, and covenant not to sue, and forever fully release and discharge each ORCH Released Person of, and hold
each ORCH Released Person harmless from, any and all rights, claims, warranties, demands, debts, obligations, liabilities, costs, attorneys’ fees, expenses, suits, losses and causes of action of any nature whatsoever, whether known or unknown,
suspected or unsuspected (collectively, “Claims”) that the Accipiter Group may have against the ORCH Released Persons, in each case with respect to events occurring prior to the date of the execution of this Agreement; and

 (ii) the Accipiter Group understands and agrees that the Claims released by the Accipiter Group above include not only those
Claims presently known but also include all unknown or unanticipated claims, rights, demands, actions, obligations, liabilities, 

 

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and causes of action of every kind and character that would otherwise come within the scope of the Claims as described above. The Accipiter Group understands that they may hereafter discover
facts different from or in addition to what they now believe to be true, which if known, could have materially affected this release of Claims, but they nevertheless waive any claims or rights based on different or additional facts. 

(b) ORCH hereby agrees for the benefit of each member of the Accipiter Group, and each controlling person, officer, director,
stockholder, agent, affiliate, employee, partner, attorney, heir, assign, executor, administrator, predecessor and successor, past and present, thereof, as well as each Accipiter Nominee (the Accipiter Group and each such person being a
“Stockholder Released Person”) as follows: 
 (i) ORCH, for itself and for its affiliates, officers,
directors, assigns, agents and successors, past and present, hereby agrees and confirms that, effective from and after the date of this Agreement, it hereby acknowledges full and complete satisfaction of, and covenants not to sue, and forever fully
releases and discharges each Stockholder Released Person of, and holds each Stockholder Released Person harmless from, any and all Claims of any nature whatsoever, whether known or unknown, suspected or unsuspected, that ORCH may have against the
Stockholder Released Persons, in each case with respect to events occurring prior to the date of the execution of this Agreement; and 

(ii) ORCH understands and agrees that the Claims released by ORCH above include not only those Claims presently known but also include
all unknown or unanticipated claims, rights, demands, actions, obligations, liabilities, and causes of action of every kind and character that would otherwise come within the scope of the Claims as described above. ORCH understands that it may
hereafter discover facts different from or in addition to what it now believes to be true, which if known, could have materially affected this release of Claims, but it nevertheless waives any claims or rights based on different or additional facts.

 (c) This release of Claims shall not include claims to enforce the terms of this Agreement. 

11. Remedies. Each of the Parties acknowledges and agrees that a breach or threatened breach by any Party may give rise to
irreparable injury inadequately compensable in damages, and accordingly each Party shall be entitled to seek injunctive relief to prevent a breach of the provisions hereof and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction located in the State of New York, County of New York, in addition to any other remedy to which such aggrieved Party may be entitled to at law or in equity.  

12. Notices. Any notice or other communication required or permitted to be given under this Agreement will be sufficient if
it is in writing, sent to the applicable address set forth below (or as otherwise specified by a Party by notice to the other Parties in accordance with this Section 12) and delivered personally or sent by recognized overnight courier, postage
prepaid, and will be deemed given (a) when so delivered personally, (b) if sent by recognized overnight courier, one day after the date of sending, or (c) if delivered by electronic mail transmission. 

 

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 If to ORCH: 

Orchid Cellmark Inc. 

4390 US Route One 

Princeton, New Jersey 08540 

Attention: William J. Thomas, Vice President and 

General Counsel 

Telephone: (609) 750-2280 

Facsimile: (609) 750-6405 

Email: wthomas@orchid.com 
 with
a copy (which shall not constitute notice to ORCH) to: 
 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. 

One Financial Center 

Boston, Massachusetts 02111 

Attention: John Cheney, Esq. 

Telephone: (617) 348-1742 

Facsimile: (617) 542-2241 

Email: JJCheney@mintz.com 
 If
to the Accipiter Group: 
 Accipiter Capital Management, LLC 

666
5th Avenue,
35th Floor 

New York, New York 10103 

Attention: Gabe Hoffman 

Telephone: (212) 705-8700 

Facsimile: (212) 705-8450 

Email: GHoffman@accipitercm.com 

with a copy (which shall not constitute notice to the Accipiter Group) to: 

Olshan Grundman Frome Rosenzweig & Wolosky LLP 

Park Avenue Tower 

65 East 55th Street 

New York, New York 10022 

Attention: Kenneth M. Silverman, Esq. 

Telephone: (212) 451-2300 

Facsimile: (212) 451-2222 

Email: ksilverman@olshanlaw.com 

13. Entire Agreement. This Agreement and the confidential disclosure agreement between the Parties dated April 14,
2010 constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions of the Parties in connection with the subject
matter hereof. 
  

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 14. Counterparts; Facsimile. This Agreement may be executed in any number of
counterparts and by the Parties in separate counterparts, and signature pages may be delivered by facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same
agreement. 
 15. Headings. The headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. 
 16. No Admission. Nothing contained herein shall constitute an
admission by any Party hereto of liability or wrongdoing. 
 17. Governing Law; Jurisdiction and Venue. This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without reference to the conflict of laws principles thereof to the extent that the general application of the laws of another
jurisdiction would be required thereby. The Parties agree to submit to the exclusive jurisdiction of any court of competent jurisdiction located in the State of New York, County of New York, to resolve any dispute relating to or arising out of this
Agreement and waive any right to move to dismiss or transfer any such action brought in any such court on the basis of any objection to personal jurisdiction or venue. 

18. No Waiver. Any waiver by either the Accipiter Group or ORCH of a breach of any provision of this Agreement shall not
operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of any Party to insist upon strict adherence to any term of this Agreement on one or more
occasions shall not be considered a waiver or deprive that Party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver of any provision of this Agreement must be signed by the Party
against whom enforcement of such waiver is sought. 
 19. Severability. In the event one or more of the provisions
of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement. To the extent permitted by applicable
law, each Party waives any provision of applicable law that renders any provision hereof prohibited or unenforceable in any respect. If any provision of this Agreement is held to be unenforceable for any reason, it will be adjusted rather than
voided, if possible, in order to achieve the intent of the Parties to the extent possible. 
 20. Successors and
Assigns. This Agreement shall not be assignable by any of the Parties. This Agreement, however, shall be binding on successors of the Parties. 

21. Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery
of a written agreement executed by all of the Parties. 
 22. Survival of Representations. All representations and
warranties made by the Parties in this Agreement or pursuant hereto shall survive the execution of this Agreement. 
  

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 23. Further Action. Each Party agrees to execute such additional reasonable
documents, and to do and perform such reasonable acts and things necessary or proper to effectuate or further evidence the terms and provisions of this Agreement. 

[Signatures are on the following page.] 
  

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 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first
above written. 
  

					
	ORCHID CELLMARK INC.
		
	By:	 	 /s/ Thomas A. Bologna

		 	Name:	 	Thomas A. Bologna
		 	Title:	 	President & Chief Executive Officer
	
	THE ACCIPITER GROUP:
	ACCIPITER LIFE SCIENCES FUND, LP
		
	By:	 	 Candens Capital, LLC

its general partner

		
	By:	 	 /s/ Gabe Hoffman

		 	Gabe Hoffman, Managing Member
	
	ACCIPITER LIFE SCIENCES FUND (OFFSHORE), LTD.
		
	By:	 	 Accipiter Capital Management, LLC

its investment manager

		
	By:	 	 /s/ Gabe Hoffman

		 	Gabe Hoffman, Managing Member
	
	ACCIPITER CAPITAL MANAGEMENT, LLC
		
	By:	 	 /s/ Gabe Hoffman

		 	Gabe Hoffman, Managing Member
	
	CANDENS CAPITAL, LLC
		
	By:	 	 /s/ Gabe Hoffman

		 	Gabe Hoffman, Managing Member
	
	 /s/ Gabe Hoffman

	GABE HOFFMAN

 Schedule A 

The Accipiter Group 

Accipiter Life Sciences Fund, LP 
 Accipiter
Life Sciences Fund (Offshore), Ltd. 
 Accipiter Capital Management, LLC 

Candens Capital, LLC 
 Gabe HoffmanClass Settlement Agreement and Release

 Exhibit 10.1 

 

					
	 SUPERIOR COURT OF CALIFORNIA

 
 COUNTY OF HUMBOLDT

			
	 VINNIE LAVENDER by and through her

Conservator, WANDA BAKER; WALTER
 SIMON; JACQUE
LYN VILCHINSKY,
  
 Plaintiffs,

 
 vs.

 
 SKILLED HEALTHCARE GROUP, INC.,

et al.,
  

Defendants.

 
	  	)
 )

)
 )

)
 )

)
 )

)
 )

)
 )

)
	  	 Case No. DR060264
  

 
  
 CLASS
SETTLEMENT AGREEMENT
 AND RELEASE WITH PLAINTIFFS 

VINNIE LAVENDER (BY AND
 THROUGH HER
CONSERVATOR),
 WANDA BAKER, WALTER SIMON, AND

JACQUELYN VILCHINSKY

This Class Settlement Agreement and Release (the “Settlement Agreement”) is entered into as of September 7, 2010
(the “Settlement Date”), subject to the approval of the Court, by and among: (i) Plaintiffs Vinnie Lavender by and through her Conservator; Wanda Baker; Walter Simon; and Jacquelyn Vilchinsky (collectively, the “Named
Plaintiffs,” and, together with the Class (as defined below), the “Plaintiffs”); and (ii) Defendants Skilled Healthcare Group, Inc. (“SKH”); Skilled Healthcare, LLC; Granada Healthcare and
Rehabilitation Center, LLC; Eureka Healthcare and Rehabilitation Center, LLC; Pacific Healthcare and Rehabilitation Center, LLC; Seaview Healthcare and Rehabilitation Center, LLC; St. Luke Healthcare and Rehabilitation Center, LLC; Bay
Crest Care Center, LLC; Brier Oak on Sunset, LLC; The Earlwood, LLC; Royalwood Care Center, LLC; Sycamore Park Care Center, LLC; Villa Maria Healthcare Center, LLC; Valley 

 
Healthcare Center, LLC; Willow Creek Healthcare Center, LLC; Alta Care Center, LLC; Anaheim Terrace Care Center, LLC; Carehouse Healthcare Center, LLC; Devonshire Care Center, LLC; Elmcrest
Care Center, LLC; Montebello Care Center, LLC; Alexandria Care Center, LLC; Hancock Park Rehabilitation Center, LLC; and Sharon Care Center, LLC (collectively, the “Defendants,” and, together with the Plaintiffs, the
“Parties,” or singularly, a “Party”) by and through their respective counsel of
record.1 

 

	I.	RECITALS 

 A. On
May 4, 2006, Plaintiffs filed a Class Action Complaint in the above captioned proceeding, which was amended by the Second Amended Class Action Complaint, filed in the above captioned proceeding by Plaintiffs on April 16, 2008
(collectively, the “Plaintiffs’ Complaint,” and together with all alleged causes of action therein, the “Plaintiffs’ Action”). By order dated June 23, 2008, Plaintiffs’ Motion for Class
Certification was granted. 
 B. On May 25, 2006, Intervenor, the Humboldt County District Attorney’s Office, (the
“Intervenor”) filed a Complaint in Intervention in the above captioned proceeding (the “Intervenor’s Complaint,” and, together with all alleged causes of action therein, the “Intervenor’s
Action”). The Intervenor’s Complaint and the Plaintiffs’ Complaint are collectively referred to herein as the “Complaints,” and the Intervenor’s Action and the Plaintiffs’ Action are collectively
referred to herein as the “Related Actions”). 
 C. The Plaintiffs’ Complaint seeks
relief on behalf of Plaintiffs and two classes (Facility Resident Class and Family Member Class) and one subclass (Facility Resident Private Pay Subclass) (collectively, the “Class” or “Settlement Classes”)
comprised of current and former residents of the Defendant Facilities, or any Defendant Facility (as defined below), during the period beginning September 1, 2003, and ending on the Settlement
Date,2 and their family members. 

 
  

	1
	 Concurrently herewith, Defendants have entered into the Settlement Agreement and Release with the People of the State of California, by and through
Intervenor, the Humboldt County District Attorney’s Office (the “Intervenor Settlement Agreement”). 

	2
	 As set forth in Section III.A below, the relevant period for all persons who resided at St. Luke (as defined below) runs from
December 15, 2003 through and including the Settlement Date. 

  

 2 

 Members of the Class are collectively referred to herein as the “Class Members.” The
Intervenor’s Action seeks relief on behalf the People of the State of California for alleged violations of California Business and Professions Code (“B&P Code”) § 17200, et seq., for alleged unlawful
business practices, including relief under B&P Code sections 17203, 17206 and 17206.1. The Plaintiffs do not include persons that elected to “Opt Out” of these proceedings during the prior class notice period, as more specifically
identified on Exhibit A to the Declaration of Ryanne Cozzi Re: Resident Opt-Out List filed with the Court on or about February 23, 2010. 

D. The Defendants are 22 separately licensed facilities, located in California (each a “Defendant Facility”), SKH and
Skilled Healthcare, LLC. 
 E. Throughout the Related Actions, the Defendants, and each of them, have denied and they continue
to deny each and every cause of action, claim and contention alleged against them by the Plaintiffs and Intervenor in the Related Actions and under the Complaints filed therein. 

F. Plaintiffs’ case was tried to a jury in the Superior Court of California for the County of Humboldt, Judge W.
Bruce Watson, presiding. On July 6, 2010, the jury returned a verdict on liability and damages under Health & Safety Code section 1430,
subdivision (b)3 (subsuming theories of liability
under sections 1276.5 and 1599.1), and under the Consumer Legal Remedies Act (CLRA). The approximate total of damages awarded was $676.8 million. 

G. The trial is incomplete. Remaining to be tried to or determined by the court are (1) equitable statutory claims, including
restitution and other civil remedies sought by Intervenor; and (2) punitive damages. 
 H. On July 25, 2010, the
Parties began mediation before retired San Francisco Superior Court Judge Daniel Weinstein and certain of his colleagues, at JAMS in San Francisco, California. The Parties met in person with the mediator and conducted numerous additional conferences
by phone. In addition to the sessions with Judge Weinstein and/or his colleagues, the Parties and their counsel engaged in many additional conference calls, and other communications intended to further 

 
  

	3
	 All statutory references are to the Health & Safety Code, unless otherwise specified. 

 

 3 

 the process of the global resolution of the Related Actions (the “Settlement”).
Negotiations were at arms length, hard fought, and frequently acrimonious. 
 I. On August 13, 2010, the Parties reached an
agreement regarding certain significant elements of a potential Settlement. The Parties conducted further negotiations over other terms of the Settlement, as reflected herein. 

J. Plaintiffs, Intervenor and the Public
Prosecutors4 (if applicable), have agreed to settle the
Related Actions pursuant to the provisions of this Settlement Agreement and the Intervenor Settlement Agreement, respectively, set forth in detail below and in the Intervenor Settlement Agreement, considering, among other things: 

1. The substantial benefits to the Class, Intervenor and the Public Prosecutors under the terms of this Settlement
Agreement and the Intervenor Settlement Agreement; 
 2. The attendant expense, risks, difficulties, delays, and
uncertainties of the continuation of trial, post-trial proceedings, and appeals; and 
 3. The Defendants’
financial condition and the risk the Class and/or Intervenor could obtain little or no relief if the proceedings did not resolve promptly. 

K. Plaintiffs, Counsel to the Class (“Class Counsel”), Intervenor and the Public Prosecutors agree that this Settlement
Agreement and the Intervenor Settlement Agreement provide fair, reasonable, and adequate relief to the Class and Intervenor in the circumstances presented, and that settlement on the agreed terms, set forth below and in the Intervenor Settlement
Agreement, is in the best interests of the Settlement Classes and Intervenor described below and in the Intervenor Settlement Agreement. 
  

 

	4
	 As used herein, the term “Public Prosecutors” means: (i) the Office of the Attorney General of the State of California (the
“Attorney General”), or alternatively; (ii) the District Attorney’s Offices for the Counties of Orange, Riverside, Los Angeles, Fresno or Santa Barbara (collectively, the “District Attorneys”), or any of
the District Attorneys or the Attorney General, as the case may be, which acknowledge and agree to the terms, conditions and obligations provided for in the Intervenor’s Settlement Agreement. Participation by the Public Prosecutors is not
required to bind Defendants, Plaintiffs or the Intervenor to the terms of the Settlement. 

  

 4 

 L. Class Counsel and Intervenor, after consultation with relevant experts, have carefully
evaluated and compared the strengths, weaknesses, and relative merits of the claims of the Settlement Classes and Intervenor and have developed a distribution plan for division of the economic relief that recognizes, to the extent possible based on
the available data and the uncertainties of litigation, the relative value of those claims. 
 M. The Parties mutually seek to
compromise and settle any and all past, present, future and potential claims, controversies, disputes and issues arising out of, or directly or indirectly related to or arising from the matters that were alleged or asserted, or could have been
alleged or asserted in the Plaintiffs’ Action, unless as otherwise provided by this Settlement Agreement. This Settlement Agreement is entered into without the admission of any wrongful conduct, wrongdoing or liability by the Defendants, or any
of them. 
 N. The Parties are willing to enter this Settlement Agreement only upon the assurance that each Party is authorized
to enter this Settlement Agreement and is willing to comply with the terms, conditions and obligations hereunder. 
 O. The
Parties acknowledge and agree that the Settlement has an estimated value of not less than $62.8 million (the “Estimated Settlement Value”), consisting of the Settlement Funds (as defined below) and the Estimated Injunction Costs (as
defined below). 
 NOW, THEREFORE, in light of the foregoing Recitals, and for good and valuable consideration, receipt
of which is acknowledged, the Parties hereby agree as follows: 
  

	II.	SETTLEMENT RELIEF 

A. An Injunction, as set forth below in Section II.E hereof. 

B. A payment by Defendants in the aggregate amount of $50 million consisting of (1) a payment in the amount of $45 million (the
“Class Settlement Payment”) to the Class Escrow Account (as defined below) pursuant to Section II.C hereof, to establish a settlement fund (the “Class Settlement Fund”); and (2) a separate payment
in the amount of $5 million (the “Additional Settlement Payment,” and, together with the Class Settlement Payment, the “Settlement Payments”) to the Additional Escrow Account (as defined below) pursuant to
Section II.C hereof, to establish a 
  

 5 

 
settlement fund (the “Additional Settlement Fund,” and, together with the Class Settlement Fund, the “Settlement Funds”), which shall be inclusive of:

 1. Settlement payments to Class Members; 

2. Notice costs, claims administration costs (including the costs of identifying Class Members), and taxes or tax
administration costs related to interest earned on the Settlement Funds (collectively, the “Administration Costs”); 

3. Service Payments (as defined below) to the Named Plaintiffs; and 

4. Reasonable attorneys’ fees and litigation costs (the “Attorneys’ Fees and Costs”) in an
amount to be determined by the Court and which the Defendants will not oppose for the purposes of Settlement Approval; and 

5. The Initial Additional Payment (as defined below) and the Final Additional Payment (as defined below), to the extent
funds are available, all pursuant to Section II.F hereof. 
  

	 	C.	Creation of the Settlement Funds: 

1. The Class Settlement Payment shall be deposited via wire transfer into a designated escrow account (the “Class
Escrow Account”), thereby establishing the Class Settlement Fund, within five (5) business days after (a) the Parties execute this Settlement Agreement, and (b) the Intervenor and the Defendants execute the Intervenor’s
Settlement Agreement, and shall be disbursed from the Class Escrow Account as provided for in the Class Escrow Agreement substantially in the form attached as Exhibit A hereto (the “Class Escrow Agreement”) by the escrow
agent designated in the Class Escrow Agreement (the “Class Escrow Agent”), but no amounts whatsoever (except disbursements to the Settlement Administrator as provided in this Section II.C.1 and
Section II.C.7 below, and disbursements to the Defendants in the event of a Termination as provided in Section II.C.3 below) shall be disbursed prior to the ninety-fourth (94th) calendar day after the latest to
occur of: (x) the execution by (i) all Parties of this Settlement Agreement; and (ii) the Intervenor and the Defendants of the Intervenor’s Settlement Agreement; (y) the receipt of the Class Settlement Payment into the

  

 6 

 
Class Escrow Account in collected funds; and (z) the entry of the Preliminary Approval Order (as defined herein). The Preliminary Approval Order shall include and constitute approval of
execution of the Class Escrow Agreement by all parties thereto, and the Class Escrow Agreement shall be legally valid, binding and enforceable obligations of the parties thereto irrespective of whether a Termination (as defined below) occurs,
whether a Final Approval Order (as defined below) is entered, or whether the Effective Date (as described below) occurs, if ever. The Class Escrow Account is, and is intended by the parties thereto to be, an escrow, with the funds therein to be held
by the Class Escrow Agent until the happening of the contingencies and/or the satisfaction of the conditions specified in the Class Escrow Agreement, then to be disbursed pursuant thereto. The deposit of the Class Settlement Payment into the Class
Escrow Account by Defendants is, and is intended by Defendants to be, an irrevocable relinquishment of any right of possession or control of the funds so deposited, and Defendants’ only right to disbursement of funds in the Class Escrow Account
shall be as provided in the Class Escrow Agreement and Section II.C.3 hereof. Upon receipt of the Class Settlement Payment into the Class Escrow Account, there shall be an immediate disbursement to the Settlement Administrator in
the amount of $50,000 for initial Administration Costs. 
 2. The Additional Settlement Payment shall be
deposited via wire transfer into a designated escrow account (the “Additional Escrow Account,” and together with the Class Escrow Account, the “Escrow Accounts”), thereby establishing the Additional Settlement Fund,
within five (5) business days after (a) the Parties execute this Settlement Agreement, and (b) the Intervenor and the Defendants execute the Intervenor’s Settlement Agreement, and shall be disbursed from the Additional Escrow
Account as provided for in the Additional Escrow Agreement substantially in the form attached as Exhibit B hereto (the “Additional Escrow Agreement,” and together with the Class Escrow Agreement, the “Escrow
Agreements”) by the escrow agent designated in the Additional Escrow Agreement (the “Additional Escrow Agent”), but no amounts whatsoever shall be disbursed prior to the ninety-fourth (94th) calendar day after

  

 7 

 
the latest to occur of: (x) the execution by (i) all Parties of this Settlement Agreement; and (ii) the Intervenor and the Defendants of the Intervenor’s Settlement Agreement;
(y) the receipt of the Additional Settlement Payment into the Additional Escrow Account in collected funds; and (z) the entry of the Preliminary Approval Order (as defined herein). The Preliminary Approval Order shall include and
constitute approval of execution of the Additional Escrow Agreement by all parties thereto, and the Additional Escrow Agreement shall be legally valid, binding and enforceable obligations of the parties thereto irrespective of whether a Termination
(as defined below) occurs, whether a Final Approval Order (as defined below) is entered, or whether the Effective Date (as described below) occurs, if ever. The Additional Escrow Account is, and is intended by the parties thereto to be, an escrow,
with the funds therein to be held by the Additional Escrow Agent until the happening of the contingencies and/or the satisfaction of the conditions specified in the Additional Escrow Agreement, then to be disbursed pursuant thereto. The deposit of
the Additional Settlement Payment into the Additional Escrow Account by Defendants is, and is intended by Defendants to be, an irrevocable relinquishment of any right of possession or control of the funds so deposited, and Defendants’ only
right to disbursement of funds in the Additional Escrow Account shall be as provided in the Additional Escrow Agreement and Section II.C.3 hereof. 

3. Upon the occurrence of a Termination, the Defendants will be entitled to receive a disbursement from the Escrow
Accounts of the entire amount of the Settlement Funds (including any accumulated interest), other than amounts previously disbursed, as provided for in the Settlement Agreement, for Administration Costs (the “Reimbursement”). The
Reimbursement shall be made by the Escrow Agents no later than five (5) business days following the receipt from Defendants’ counsel of certification in writing (i) confirming the occurrence of a Termination; and (ii) providing
instructions for the payment of the Reimbursement. Concurrently with the transmittal of such certification to the Escrow Agents, Defendants’ counsel shall transmit a copy of such certification to Class Counsel via

  

 8 

 
email and overnight delivery. In the event that Defendants receive the Reimbursement, Defendants shall pay upon demand all Administration Costs incurred by the Settlement Administrator prior to
the Termination or reasonably necessary for the Settlement Administrator to wind up after the Termination, to the extent not theretofore paid. 

4. From and after the Effective Date (as defined below), if it occurs, Defendants shall have no right to receive any
disbursement from the Escrow Accounts or the Settlement Funds. All amounts then on deposit in the Escrow Accounts shall be disbursed by the Escrow Agents to or for the account of the Settlement Administrator (as defined below), pursuant to the
Escrow Agreements no later than five (5) business days following the receipt from Class Counsel of certification in writing (i) confirming the occurrence of the Effective Date; and (ii) providing instructions for the disbursement of
all amounts then on deposit in the Escrow Accounts to or for the account of the Settlement Administrator. Concurrently with the transmittal of such certification to the Escrow Agents, Class Counsel shall transmit a copy of such certification to
Defendants’ counsel via email and overnight delivery. Upon receipt of such amounts by the Settlement Administrator, all such amounts shall be held and disbursed in accordance with Sections II.C.5, II.C.6,
II.D, II.F, VI.D., IX.H and IX.I hereof. 

5. Amounts, if any, in the Class Settlement Fund received by the Settlement Administrator not used for other purposes
permitted in this Settlement Agreement (the “Unused Funds”) shall be donated, by way of an award in the nature of cy pres to one or more charitable or non-profit organizations (the “Proposed Cy Pres
Recipients”). The Proposed Cy Pres Recipients shall be selected by Class Counsel, subject to approval of Defendants, which approval will not be unreasonably withheld. In the event that Defendants do not approve selection of any of the Cy
Pres Recipients within five (5) business days of receiving the proposal, the Parties will submit the dispute to Judge Daniel Weinstein of JAMS, who will have sole authority, after appropriate consultation with the Parties, to make

  

 9 

 
a binding decision on whether the objectionable Cy Pres Recipient(s) is an appropriate recipient of the Unused Funds. 

6. Amounts in the Additional Settlement Fund received by the Settlement Administrator shall be retained by the Settlement
Administrator in a segregated account and used solely to fund the payments contemplated by Section II.F hereof; provided, however, that in the event that the amounts in the Class Settlement Fund received by the Settlement
Administrator are not sufficient to make all settlement payments to Class Members, then the Settlement Administrator shall first use amounts in the Additional Settlement Fund for such purpose, and then apply all remaining amounts to fund the
payments contemplated by Section II.F hereof. 
 7. The Class Settlement Fund shall be a
“Qualified Settlement Fund” within the meaning of Treasury Regulation Section 1.468B-1, and the Defendants and the Settlement Administrator agree to treat the Class Settlement Fund as being at all times a “Qualified Settlement
Fund.” The Defendants and Settlement Administrator shall timely make such elections, file such returns and take all other actions as are necessary (i) to comply with and satisfy the requirements of Section 468B of the Internal Revenue
Code of 1986, as amended (“IRC”), and Treasury Regulation Sections 1.468B-1 through 1.468B-5, and (ii) to ensure that the Class Settlement Fund constitutes and is treated as a “Qualified Settlement Fund”. Settlement
Administrator agrees to make the “relation-back election” (as defined in Treasury Regulation Section 1.468B-1) back to the earliest permitted date. The elections and other actions referenced in this Section II.C.7 shall
be made in compliance with the procedures and requirements contained in Treasury Regulation Sections 1.468B-1 through 1.468B-5. For the purposes of IRC Section 468B and the regulations promulgated thereunder, the “settlement
administrator” shall be Settlement Administrator. Settlement Administrator has obtained an “employer identification number” for the Class Settlement Fund and shall timely and properly file all information and other tax returns
necessary or advisable with respect to the Class Settlement Fund (including during the time that it is in the Class Escrow Account, 

 

 10 

 
and including, without limitation, the returns described in Treasury Regulation Sections 1.468B-2(k) and (l). All such returns (as well as the elections), shall reflect that all federal
and state taxes (including any interest or penalties) arising with respect to the income earned by the Class Settlement Fund (including during the time that it is in the Class Escrow Account) shall be paid out of the Class Settlement Fund, and,
during the time that the Class Settlement Fund is in the Class Escrow Account, the Settlement Administrator is authorized to instruct the Class Escrow Agent to make disbursements therefrom to the Settlement Administrator as necessary to timely pay
all such taxes. Settlement Administrator shall prepare and deliver, timely and properly, the necessary documentation for signature by all necessary parties and thereafter shall cause the appropriate elections and filings to occur. 

 

	 	D.	Distribution Plan: 

1. The funds to be made available from the Class Settlement Fund for payment to the Class Members (the “Class
Settlement Amount”) shall equal the amount of the Class Settlement Fund, less the Initial Additional Payment, the Administration Costs, the Service Payments, and the Attorneys’ Fees and Costs. 

2. Class Counsel shall obtain entry of the Preliminary Approval Order (as defined herein) and approval of this Settlement
Agreement at the Final Approval Hearing for a Distribution Plan to distribute the Class Settlement Amount, to the extent that claims are made in accordance with the claims administration process set forth in Section IX below, as
follows: (a) approximately 91.43% of the Class Settlement Amount shall be paid to the Class Members that comprise the Facility Resident Class (as defined below), or if such Class Members are deceased, to their heirs, assigns or legal successors
that make timely claims; (b) the balance of approximately 8.57% of the Class Settlement Amount shall be paid to the Class Members that comprise the Private Pay Subclass (as defined below) of the Facility Resident Class and the Family Member
Class (as defined below). 
 3. To the extent feasible, the Distribution Plan shall provide that the payments
made to specific Class Members shall reasonably reflect the duration of the Class Member’s 
  

 11 

 
stay at any Defendant Facility and the percentage of days when such Defendant Facility(ies) fell below 3.2 NHPPD during the year(s) of the Class Member’s stay(s). 

 

	 	E.	Implementation of Injunction: 

1. The Parties agree to the entry, effective as of the Effective Date, if it occurs, by the Court of the Stipulation
for Entry of Injunction (the “Injunction”) in the form attached hereto as Exhibit C. 

2. Defendants represent that the estimated costs of compliance with the terms of the Injunction are approximately $12.8
million (the “Estimated Injunction Costs”). Plaintiffs hereby agree and acknowledge that for purposes of calculating the Estimated Injunction Costs and the Actual Injunction Costs (as defined below), Defendants shall include any and
all anticipated costs to develop, implement, monitor and report pursuant to the terms of the Injunction, which shall include, but shall not be limited to costs attributable to (i) enhanced reporting requirements; (ii) implementing advanced
staffing tracking systems; (iii) fees and expenses paid to the Auditor (as defined in the Injunction) and Special Master (as defined in the Injunction); and (iv) increased labor and labor related expenses; (v) lost revenues
attributable to admission decisions based on compliance with the terms and conditions of the Injunction. Defendants shall provide a sworn declaration that supports the Estimated Injunction Costs and agree that such declaration may be filed in
support of the Parties’ request for Court approval of this Settlement Agreement pursuant to Section VI hereof. 

3. On or before the date that is three (3) months from the end of the term of the Injunction, Defendants shall
provide the Auditor with documentation sufficient to determine the actual costs and expenses incurred by Defendants in compliance with the terms of the Injunction (the “Actual Injunction Costs”). Defendants hereby agree that if the
Actual Injunction Costs are less than $9.6 million (the “Minimum Injunction Costs”), Defendants shall remit the amount by which the Actual Injunction Costs are less than the Minimum Injunction Costs, if any, to the Class Settlement
Fund to be treated as Unused Funds as contemplated by Section II.C.5 hereof; provided, however, that to the extent that any 

 

 12 

 
Defendant Facility does not operate or is no longer operated by an affiliate of SKH during any portion of the term of the Injunction, the Minimum Injunction Costs shall be reduced by the amount
of Estimated Injunction Costs attributable to such Defendant Facility for the period of time that such Defendant Facility was not in operation or was no longer operated by an affiliate of SKH. 

 

	 	F.	Remedial Payments: 

1. (a) On the Effective Date, if it occurs, remedial payments shall be made from the Additional Settlement Fund to
the Humboldt County Treasurer-Tax Collector on behalf of The People of the State of California in the amount of $1.0 million payable at the same time that distributions commence to the Class Members (the “Initial Additional
Payment”), for purposes of reimbursement to the Humboldt County District Attorney’s Office for litigation efforts in prosecuting this case and restitution and other civil remedies. (b) On the second anniversary of the Effective
Date, if it occurs, provided that no actions described in Section II.F.2 below have been filed by the Office of the Attorney General of the State of California, or any of the District Attorney’s Offices for the Counties of
Orange, Riverside, Los Angeles, Fresno or Santa Barbara, an aggregate amount of $4.0 million (constituting additional remedial payments for restitution and other civil remedies) (the “Final Additional Payment”) shall be distributed
from the Additional Settlement Fund as follows: (i) $1.0 million to the Humboldt County District Attorney’s Office pursuant to Business and Professions Code 17206(b); (ii) $500,000 to the Office of the Attorney General of the
State of California; (iii) $500,000 (plus any interest accumulated on the Final Additional Payment, if any) to the California District Attorney’s Association; and (iv) $400,000 to each of the District Attorney’s Offices
for the Counties of Orange, Riverside, Los Angeles, Fresno and Santa Barbara. 
 2. In the event that the Office
of the Attorney General of the State of California, or any of the District Attorney’s Offices for the Counties of Orange, Riverside, Los Angeles, Fresno or Santa Barbara institute a separate action(s) seeking restitution and other civil

  

 13 

 
remedies for violations under Health & Safety Code section 1430, subdivision (b) (subsuming theories of liability under sections 1276.5 and 1599.1) based on claims or
allegations that occurred during the Class Period under B&P Code sections 17200, et seq., for alleged unlawful business practices, including, but not limited to, relief under B&P Code sections 17203, 17206 and 17206.1, except for
matters involving the conduct at Eureka Healthcare and Rehabilitation Center, LLC, which was the subject of a search warrant by the Department of Justice served on the Northern California regional offices of Skilled Healthcare, LLC, on or about
April 14, 2009, the entire amount of the Final Additional Payment (including any accumulated interest thereon, if any) shall be paid from the Additional Settlement Fund to the Defendants within three (3) business days of written request to
the Settlement Administrator by counsel to the Defendants accompanied with a copy of the complaint filed in any such action. 

3. In the event that the Office of the Attorney General of the State of California, or alternatively, each of the District
Attorney’s Offices for the Counties of Orange, Riverside, Los Angeles, Fresno and Santa Barbara, acknowledges and agrees to the terms, conditions and obligations provided for in the Intervenor’s Settlement Agreement by their respective
(a) counterpart execution in the space provided in the Intervenor’s Settlement Agreement; and (b) delivery of same to the attention of the counsel to the Defendants (original by mail and a copy by facsimile), prior to the
ninety-fourth (94th) calendar day after the latest to occur of: (x) the execution by (i) all Parties of this Settlement Agreement; and (ii) the Intervenor and the Defendants of the Intervenor’s Settlement Agreement;
(y) the receipt of the Settlement Payments into the Escrow Accounts in collected funds; and (z) the entry of the Preliminary Approval Order (as defined herein), then the Additional Prosecutor Payment shall instead be payable from the
Additional Settlement Fund on the Effective Date, if it occurs. In such event, the payments described in Section II.F.1(b) above shall be made and Section II.F.2 above shall not be effective. 

 

	III.	SETTLEMENT CLASSES 

  

 14 

 A. Class Definitions: For the purpose of the definition of the Settlement
Classes, the “Class Period” is, except as set forth immediately below with respect to persons who resided at St. Luke (as defined below), September 1, 2003, through and including the Settlement Date. The Settlement Classes
consist of two classes and a subclass, namely: (1) the “Facility Resident Class” with a “Private Pay Subclass,” and (2) the “Family Member Class,” as those terms are defined below;
provided, however, that the Settlement Classes shall exclude all persons identified on Exhibit A to the Declaration of Ryanne Cozzi Re: Resident Opt-Out List filed with the Court on or about February 23, 2010, unless
any such person: (i) resided at a Defendant Facility from April 2, 2009 through and including the Settlement Date; or (ii) are related to any person referenced in the immediately preceding subparagraph (i) by blood, marriage
or legal relationship and paid monies to the Defendants, or any of them, for services rendered at a Defendant Facility from April 2, 2009, through and including the Settlement Date. 

Class 1: FACILITY RESIDENT CLASS 

The Facility Resident Class consists of all persons who resided at a Defendant Facility from September 1, 2003 through and including
the Settlement Date, with the exception of St. Luke Healthcare and Rehabilitation Center (“St. Luke”), which consists of all persons who resided at St. Luke from December 15, 2003 through and including the Settlement Date.

  

 15 

 Class 1A: PRIVATE PAY SUBCLASS 

The Private Pay Subclass is a subclass of the Facility Resident Class and consists of all persons who are members of the Facility Resident
Class and who made payments to the Defendants, or any of them, through private pay funds and/or privately-acquired insurance during the Class Period. 

Class 2: FAMILY MEMBER CLASS 

The Family Member Class consists of all persons who are related to any Facility Resident Class member by blood, marriage or legal
relationship and paid monies to the Defendants, or any of them, for services rendered at a Defendant Facility to any Facility Resident Class member during the Class Period. 

 

	IV.	RELEASE BY PLAINTIFFS 

A. On the Effective Date, if it occurs, except for the obligations arising under this Settlement Agreement and as necessary to enforce the
terms of this Settlement Agreement, the Plaintiffs, and each of them, on behalf of themselves and on behalf of each of their respective former, present and future joint ventures, partnerships, partners, principals, agents, employees, predecessors,
successors, assigns, heirs, estates, executors, trustees, administrators and representatives, hereby fully and forever waive, relinquish, release and discharge the Defendants, and each of them, and each of their former, present and future joint
ventures, partnerships, parent and subsidiary affiliate corporations, related companies by common ownership, partners, principals, agents, employees, stockholders, officers, directors, managers, predecessors, successors, assigns, heirs, estates,
executors, administrators, representatives and attorneys (which foregoing entities and individuals are collectively referred to herein as the “Defendant Released Parties”), of and from, without limitation, any and all claims,
demands, controversies, damages, actions, causes of action, debts, liabilities, rights contracts, costs (including attorneys’ fees, costs and litigation expenses), indemnities, obligations and losses of every kind or nature whatsoever,
including, without limitation, in contract, in tort, statute (including, but not limited to Health and Safety Code section 1430(b) claims based on violations of Health and Safety Code section 1276.5 or Health and

  

 16 

 
Safety Code section 1599.1(a) (collectively, the “1430(b) Claims”), or RICO claims), regulation, or common law, whether in arbitration, regulatory, administrative, or
judicial proceedings, whether as individual claims or as part of a class of claims or claims on behalf of the general public or a subset thereof, whether at this time known or unknown, anticipated or unanticipated, direct or indirect, fixed or
contingent, liquidated or unliquidated, which may presently exist or may hereafter arise or become known, for or by reason of any act, omission, event, transaction, matter or cause whatsoever during the Class Period, directly or indirectly related
to or arising from the matters that were alleged or asserted, or could have been alleged or asserted in the Plaintiffs’ Action; provided, however, that no Plaintiff, or any of them, is waiving any claim for personal injuries,
emotional injuries, physical injuries, or wrongful death (collectively, the “Personal Injury Claims”); provided further, however, that no Plaintiff may assert a 1430(b) Claim, including, but not limited to a
1430(b) Claim for damages or injuries, against the Defendant Released Parties, which arose prior to the Settlement Date, whether associated with a Personal Injury Claim or any other claim whatsoever (collectively, the “Released
Claims”). Except with respect to any Released Claim, the Plaintiffs, and each of them, shall be entitled to assert any other claim or allegation in connection with any Personal Injury Claim. 

B. Without limiting the foregoing and except as excluded by the proviso in the immediately preceding paragraph A, the Released Claims
specifically extend to claims that the Plaintiffs do not know or suspect to exist in their favor as of the date the Final Approval Order is entered by the Court. Plaintiffs, on behalf of themselves individually and in their representative capacities
acknowledge, and all Plaintiffs are deemed to acknowledge that they are aware that any of them may hereafter discover facts in addition to, or different from, those facts which they now know or believe to be true with respect to the subject matter
of this Settlement Agreement, but that it is their intention to release fully, finally and forever all Released Claims, and in furtherance of such intention, the release of the Released Claims will be and remain in effect notwithstanding the
discovery or existence of any such additional or different facts. 
  

 17 

 C. On the Effective Date, if it occurs, and subject to Section IV.E hereof,
the Defendant Released Parties, and each of them, hereby fully and forever waive, relinquish, release and discharge the Plaintiffs, Class Counsel, and each of them, and each of their respective former, present and future joint ventures,
partnerships, partners, principals, agents, employees, predecessors, successors, assigns, heirs, estates, executors, trustees, administrators, attorneys and representatives, of and from, without limitation, any and all claims, demands,
controversies, damages, actions, causes of action, debts, liabilities, rights contracts, costs (including attorneys’ fees, costs and litigation expenses), indemnities, obligations and losses of every kind or nature whatsoever, that arise from
or relate to the filing and prosecution of the Plaintiffs’ Action. 
 D. With respect to any and all of the claims released
by this Settlement Agreement, the Parties expressly represent and warrant, and each Class Member shall be deemed to have represented and warranted, that they have each read and understand fully the provisions of California Civil Code
§ 1542 (“section 1542”), which states: 
 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. 

E. Having been apprised of the statutory language of section 1542, the Parties shall expressly, and each of the Class Members shall be
deemed to have, and by operation of the Final Approval Order shall have, expressly, elected to assume all risks for claims heretofore and hereafter arising, whether known or unknown, from the subject of this Settlement Agreement and waived any and
all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law which is similar, comparable or equivalent to section 1542. 

F. Nullification of Releases and Judgment of Dismissal With Prejudice: 

1. As used herein: “Payee” means any person or entity to whom a portion of the Settlement Funds is paid,
directly or indirectly; and “DRP” means any Defendant Released Party or any affiliate of any Defendant Released Party, or any successor to, assignee of, or 

 

 18 

 
estate of any Defendant Released Party or any such affiliate, or any trustee, receiver, or other fiduciary for any Defendant Released Party or any such affiliate or any such successor, assignee
or estate. 
 2. Notwithstanding any other provision of this Settlement Agreement to the contrary, but subject to
Section IV.F.3 below, if a Payee shall be required at any time to return, restore, repay, pay on account of the avoidance or recovery of, or in any other way surrender the benefit of all or any portion of the Settlement Payments
(collectively a “Recovery”), to or for the benefit of any DRP, and the full amount of such Recovery is paid to or for the benefit of any DRP, then the release of Defendant Released Parties under this Settlement Agreement by or on
behalf of such Payee, the Judgment of Dismissal With Prejudice (as defined below) as it applies to such Payee, and the release granted under this Settlement Agreement to or for the benefit of such Payee, shall thereupon automatically be of no
further force or effect, as if the release by or on behalf of such Payee had never been entered into, the Judgment of Dismissal With Prejudice as it applies to such Payee had never been entered, and the release granted under this Settlement
Agreement to or for the benefit of such Payee had never been entered into. 
 3. To the extent that a Recovery is
made from the Escrow Agents and/or the Settlement Administrator with respect to funds that were to be distributed by the Settlement Administrator to the Intervenor, the Public Prosecutors (if any) and/or those Class Members who have mailed or
delivered a Claim Form to the Settlement Administrator prior to the date of such Recovery, if any, and the full amount of such Recovery is paid to or for the benefit of any DRP, then Section IV.F.2 shall apply to the releases and the
Judgment of Dismissal With Prejudice only as to the Intervenor, Public Prosecutors (if any), and/or such Class Members who have mailed or delivered a Claim Form, if any, whose funds are the subject of such Recovery (and for that purpose they shall
be considered “Payees”), but Section IV.F.2 shall not affect the releases or the Judgment of Dismissal With Prejudice as to any other 

 

 19 

 
persons or entities who might have or could have become recipients of such funds under this Settlement Agreement. 
  

	V.	COVENANT NOT TO PROSECUTE RELEASED CLAIMS 

A. From the Settlement Date until the Effective Date, if it occurs, or a Termination, if it occurs, and notwithstanding that the releases
granted herein are not yet effective during that period, the Parties hereby covenant and agree not to commence or prosecute any action or proceeding based on any Released Claim or any claim released within Section IV.C above, unless
otherwise provided in this Settlement Agreement. 
 B. From and after the Effective Date, if it occurs, the Parties hereby
covenant and agree never to commence or prosecute any action or proceeding based on any Released Claim or any claim released within Section IV.C above, subject, however, to Section IV.F above, unless otherwise provided in
this Settlement Agreement. 
  

	VI.	NOTICE AND APPROVAL OF THE SETTLEMENT 

A. Class Counsel and Intervenor will submit preliminary approval papers for the Settlement, including a Motion for Preliminary Approval
of Settlement Agreements, which shall seek preliminary approval of this Settlement Agreement and the Intervenor Settlement Agreement, along with a proposed order for preliminary approval substantially in the form of Exhibit D hereto
(the “Preliminary Approval Order”), an agreed proposed form of mailed notice and a summary notice substantially in the Form of Exhibits E and F hereto (the “Notice” and the “Summary
Notice,” respectively), the proposed form of the order for final approval substantially in the form of Exhibit G hereto (the “Final Approval Order”), and the executed Settlement Agreement and Intervenor
Settlement Agreement, within a reasonable time following of execution of this Settlement Agreement and the Intervenor Settlement Agreement. The Defendants will not oppose the Motion for Preliminary Approval. 

B. The Preliminary Approval Order will approve the form of the Notice, will find that the method of notice selected constitutes the best
notice to all persons within the definition of the 
  

 20 

 
Settlement Classes that is practicable under the circumstances, and will find that the form and method of notice each comply fully with all applicable law. 

C. The Parties will propose the following notice protocol for approval by the Court: 

1. The appropriate form of the Notice, along with a claim form, will be mailed to the last known address of Settlement
Class Members in Defendants records, by first class mail as soon as practicable, but in no event later than thirty (30) calendar days after the Court enters the Preliminary Approval Order; 

2. The Settlement Administrator (as defined below) and each Class Counsel will provide a link on its website to a central
site maintained by the Settlement Administrator to obtain downloadable and printable copies of the Settlement Agreement, the Notice and the Claim Form; 

3. The Settlement Administrator will also provide publication notice of the Settlement Agreement (via the Summary Notice)
through one (1) notice to be published in appropriate newspaper(s) of state-wide publication, or as otherwise ordered by the Court, not later than thirty (30) calendar days after the Court enters the Preliminary Approval Order; and

 4. The Settlement Administrator will promptly re-mail any notices returned by the Post Office with a
forwarding address. 
 D. All Administration Costs will be paid out of the Class Settlement Fund, except as otherwise provided
in Section II.C.3 hereof. 
 E. The Settlement Administrator will file with the Court and serve upon Class
Counsel, Intervenor and Defendants’ counsel no later than ten (10) calendar days prior to the hearing before this Court to consider the entry of the Final Approval Order (the “Final Approval Hearing”) an affidavit or
declaration stating that notice has been completed in accordance with the terms of the Preliminary Approval Order. 
 F. The
Final Approval Hearing will be held at a date and time to be set by the Court after mailing of the Notice and the passing of the Opt-Out Date (as defined below) and the date for 

 

 21 

 
Class Members to object to this Settlement. At the Final Approval Hearing, the Court will consider and determine whether the provisions of this Settlement Agreement, the Intervenor Settlement
Agreement, and the Distribution Plan should be finally approved as fair, reasonable and adequate, whether any objections to the Settlement should be overruled, whether attorneys’ fees, costs and Service Payments (as defined below) to Named
Plaintiffs should be approved in the amounts requested, and whether a judgment and order finally approving the Settlement and dismissing any or all of the actions should be entered. Class Counsel for the Plaintiffs will file the Motion for Final
Approval of the Settlement Agreements, which shall seek final approval of this Settlement Agreement and the Intervenor Settlement Agreement, on the schedule ordered by the Court and the Defendants will not oppose the Motion. The Parties will
submit a proposed form of Final Approval Order substantially in the form of Exhibit G hereto. 

G. The term “Effective Date” means, for purposes of this Settlement Agreement, assuming that no
Termination (as defined below) has theretofore occurred, the fifth (5th) business day after the latest of the following dates: (a) the date upon which the time to commence an appeal of the Final Approval Order and a Judgment of Dismissal
With Prejudice with respect to the Complaints, which shall include a provision vacating, as of the Effective Date, the Orders and Judgments for Permanent Injunction entered by the Court on August 26, 2010, and vacating, as of the
Effective Date, certain identified rulings and orders made pursuant to hearings and during trial in the Related Actions (the “Judgment of Dismissal With
Prejudice”)5 has expired, if no one has commenced
any appeal or writ proceeding challenging the Final Approval Order and Judgment of Dismissal With Prejudice; or (b) the date the Final Approval Order and Judgment of Dismissal With Prejudice has been affirmed on appeal or writ review (or the
appeal or writ petition has been dismissed with prejudice), and the time within which to seek further review has expired. In no event will this Settlement Agreement or the Intervenor Settlement Agreement become effective unless the Court has entered
the Judgment of Dismissal With Prejudice. 
  
  

	5
	 The form of Judgment of Dismissal With Prejudice agreed to by the Parties is attached hereto as Exhibit H. 

 

 22 

 H. Concurrently with the execution of this Settlement Agreement, Plaintiffs shall execute
and authorize the filing of the Stipulation for Stay of Pending Appeal and [Proposed] Order Thereon, in the form attached hereto as Exhibit I. 
  

	VII.	EXCLUSIONS FROM THE SETTLEMENT 

A. The last date for Class Members to exclude themselves from the Settlement (the “Opt-Out Date”) will be thirty
(30) calendar days after the date that mailed and published Notice has been completed (the “Class Notice Date”), as confirmed by the Settlement Administrator. The Opt-Out Date shall be conspicuously listed in the Notice and in
the Summary Notice. 
 B. Each Class Member who wishes to be excluded from the Settlement must mail to the Settlement
Administrator, postmarked or received in a manner allowed by the Notice on or before thirty (30) calendar days after the Class Notice Date, an appropriate written request for exclusion, including his or her name, address, telephone number, that
is personally signed by the Class Member. No Class Member, or any person acting on behalf or in concert or participation with that Class Member, may exclude another Class Member from the Settlement. 

C. No later than fourteen (14) calendar days after the Opt-Out Date, Class Counsel shall direct the Settlement Administrator to
provide a list of those Class Members of each class who have attempted timely and validly to opt out (the “Administrator’s Report”) to Class Counsel and designated counsel for the Defendants. A copy of the form used for each
such attempted opt out will be appended to the Administrator’s Report. 
 D. The final list of requests for exclusion will
be filed with the Court by the Settlement Administrator not later than five (5) business days before the Final Approval Hearing. Upon the Effective Date, if it occurs, any and all Class Members who have not submitted a timely, written request
for exclusion to the Settlement Administrator, will be bound by the releases set forth herein, and all proceedings, orders, and judgments entered in the Related Actions, even if those persons have previously initiated or subsequently initiate
individual claims, litigation or other proceedings against the Defendants, or any of them, related to the claims released pursuant to this Settlement Agreement. 
  

 23 

 E. Any Class Member who excludes themselves from the Settlement shall no longer be
considered a Class Member under this Settlement Agreement and shall be entitled to no benefits whatsoever of the Settlement, including, without limitation, any settlement payments, or payment of Attorneys’ Fees and Costs. 

VIII. OBJECTIONS TO SETTLEMENT 

A. Any Class Member who has not filed a timely written request for exclusion and who wishes to object to or oppose the fairness,
reasonableness or adequacy of this Settlement Agreement, or to any application for Attorneys’ Fees and Costs, must serve upon Class Counsel and Counsel for the Defendants, and must file with the Court, no later than twenty (20) calendar
days after the Class Notice Date, a statement of his/her objection, as well as the specific reason(s), if any, for such objection, including any legal support the Class Member wishes to bring to the Court’s attention and any evidence the Class
Member wishes to introduce in support of the objection. Class Members may so object either on their own or through an attorney hired at their own expense. Class Members who intend to appear and be heard at the Final Approval Hearing shall be
required to so state in connection with their objection. The Deadline for Objections will be conspicuously listed in the Notice and in the Summary Notice. 

B. Class Counsel and Counsel for the Defendants may, in their discretion, file and serve a written response to objection(s), if any,
filed and served by any Class Member. Any such written response shall be filed with the Court, and served upon the Class Member or the Class Member’s attorney, if any, in the most expeditious manner practicable, not later than seven
(7) calendar days before the Final Approval Hearing. 
 C. The Final Approval Hearing will be the only opportunity for any
Class Member who objects to the proposed Settlement, to this Settlement Agreement, to the release of the Released Claims, or to the entry of an order awarding Attorneys’ Fees and Costs to Class Counsel, to appear and be heard. 

 

 24 

	IX.	CLAIMS ADMINISTRATION PROCESS 

A. Pursuant to this Settlement Agreement, certain monetary benefits are available to eligible Class Members only upon submission of a
timely and substantially compliant claim on a Claim Form approved by the Court. Court-approved Claim Forms shall be mailed together with the Notice, or otherwise made available through other means by the Claims Administrator, and shall have a return
date of no earlier than ninety (90) calendar days from the date of the Class Notice Date. However, no Class Members who opted out of the Class shall be entitled to submit a Claim Form. 

B. To the extent possible, the Settlement Administrator shall permit the return of Claims Forms by other means including, for example,
fax, email, or online submission, and shall establish a process for return of Claims Forms by those other means if reasonably economical and practicable. In the event that alternative means for filing claims is permitted, such means will be
explained in the class notice and on the Settlement Administrator’s website. 
 C. A copy of the Claim Form for which Court
approval will be sought is attached hereto as Exhibit J. 
 D. Untimely Claims: Claims Forms that are not
timely submitted will not be allowed absent relief from the Settlement Administrator (in consultation with Class Counsel), or otherwise ordered by the Court. 

E. Claims of Deceased Persons: Claims of deceased persons shall be allowed if a claim is submitted by a person generally
authorized to act on behalf of the deceased person’s estate together with proof of such authorization. 
 F. Incomplete,
Late or Improper Claims: The Settlement Administrator will have final authority, in consultation with Class Counsel, to disallow any late, incomplete or improperly filed claims and will send notice of and the reasons for such disallowance, if
any. 
 G. To the extent that deficiencies in filed claims are not resolved, and if no relief from the Court is obtained by the
claimant at the claimant’s sole cost and expense, said claim will be permanently and finally disallowed. 
  

 25 

 H. After receipt of funds from the Class Escrow Account as provided in Section
II.C.4 above, the Settlement Administrator shall disburse the Class Settlement Fund as follows, as soon as practicable after the Effective Date: 

1. The Settlement Administrator shall apply the Class Settlement Amount in accordance with the Distribution Plan to the
properly filed claims (and to any other claims allowed by the Court) and will provide Class Counsel and Counsel for the Defendants with a Distribution List identifying all Class Members who submitted allowed Claims, and the amount of the payment
that claimant is allowed under the Distribution Plan. Payments will be made by the Settlement Administrator within thirty (30) calendar days of the approval of the Distribution List by Class Counsel. 

2. The Settlement Administrator shall disburse amounts to fund the other purposes of the Class Settlement Fund specified
in Section II.B above, to the extent not theretofore paid. 
 I. After receipt of funds from the Additional Escrow
Account as provided in Section II.C.4 above, the Settlement Administrator shall disburse the Additional Settlement Fund as provided for in Section II.C.6 above. 

J. Within seven (7) business days after execution of this Settlement Agreement, Defendants shall, to the extent reasonably
available, provide to the Settlement Administrator a database that identifies each of the Plaintiffs, including last known address and telephone number. Within fifteen (15) business days after execution of this Settlement Agreement, Defendants
shall, to the extent reasonably available, provide to the Settlement Administrator a database that includes information respecting each of the Plaintiffs’ Social Security number, dates of admission and discharge from any Defendant Facility, and
the amounts of any private payments, if any, made by or on behalf of each of the Plaintiffs. 
  

	X.	SELECTION OF SETTLEMENT ADMINISTRATOR 

Class Counsel shall select the settlement administrator in advance of the hearing before the Court to consider entry of the Preliminary
Approval Order (the “Settlement Administrator”). 
  

 26 

 
Because of the confidential nature of the information the Settlement Administrator will encounter in the administration of the Settlement, the Settlement Administrator shall be required to
execute a standard HIPAA Business Associate Agreement in a form acceptable to the Parties. 
  

	XI.	ATTORNEYS’ FEES AND COSTS/SERVICE PAYMENTS TO PLAINTIFFS 

A. Class Counsel and Intervenor have prosecuted the Related Actions since at least May 2006, at their own expense without having
received any benefit for their services. Class Counsel will, pursuant to a request to be filed with the Court prior to the expiration of the time for a Class Member to object to the approval of this Settlement Agreement set forth in Section
VIII hereof, ask the Court to approve an award of the Attorneys’ Fees and Costs from the Class Settlement Fund. The Defendants will not object to payments from the Class Settlement Fund for Attorneys’ Fees and Costs in an amount
that includes (1) an amount not to exceed $2 million for the reimbursement of Class Counsel’s actual out-of-pocket litigation costs and expenses; plus (2) an amount that is equal to or less than forty percent
(40%) of the Estimated Settlement Value (plus interest accrued on that percentage from the date interest begins to accrue for the benefit of the Class Settlement Fund). At the sole discretion of Class Counsel, a portion of the requested
Attorney’s Fees and Cost may be set aside for anticipated post-settlement work, such as claims administration issues, not to exceed $750,000. Distribution of attorneys’ fees among Class Counsel will be at the sole discretion of Class
Counsel. Class Counsel’s entire claim for Attorneys’ Fees and Costs will be satisfied from the Class Settlement Fund and Class Counsel will have no claim against the Defendant Released Parties. 

B. Named Plaintiffs shall apply for service payments from the Class Settlement Fund in the aggregate amount of $30,000 (the
“Service Payments”) in recognition of their efforts and contribution to the case and for their service to the Class. The Defendants will not object to payment from the Class Settlement Fund of these amounts. 

C. Approval of the Settlement will not be contingent upon approval of the Attorneys’ Fees and Costs or of Service Payments in the
amounts requested. To the extent of Court approval, Attorneys’ Fees and Costs as well as Service Payments will be payable from the Class Settlement 

 

 27 

 
Fund upon the earlier to occur of (a) the entry of the Final Approval Order; and (b) the entry of any other order entered by the Court approving the Attorneys’ Fees and Costs;
provided, however, that the payment of any such Attorneys’ Fees and Costs or Service Payments shall not occur earlier than the ninety-fourth (94th) calendar day after the latest to occur of (i) the execution by all
Parties of this Settlement Agreement; (ii) the receipt of the Settlement Payments into the Escrow Accounts in collected funds; and (iii) the entry of the Preliminary Approval Order (as defined herein); provided further,
however, that in the event of a Termination, or any order entered by the Court approving the Attorneys’ Fees and Costs is reversed or reduced by any order of any court of competent jurisdiction that has not been stayed (the “Fee
Reduction Order”), Class Counsel hereby agrees to repay into the Class Settlement Fund, not later than five (5) business days after the Termination or entry of such Fee Reduction Order, as the case may be, the fees and costs received
thereby in the full amount of such Attorneys’ Fees and Costs (in the event of a Termination), or an amount equal to the reduction required by the Fee Reduction Order (in the event that any Fee Reduction Order is entered). Subject to the above
provisions, the Attorneys’ Fees and Costs and Service Payments shall be payable from the Class Settlement Fund by the Class Escrow Agent pursuant to the Class Escrow Agreement no later than five (5) business days following the receipt from
Class Counsel of certification in writing (i) confirming that the above conditions for payment have been satisfied; and (ii) providing instructions for the disbursement of amounts constituting the Attorneys’ Fees and Costs and Service
Payments. Concurrently with the transmittal of such certification to the Class Escrow Agent, Class Counsel shall transmit a copy of such certification to Defendants’ counsel via email and overnight delivery. 

D. The Defendants shall bear their own legal fees and costs in connection with seeking approval of and administering the Settlement.
Class Counsels’ legal fees and costs in connection with seeking approval of and administering the Settlement shall be paid as set forth in Section XI hereof. 

 

	XII.	NO ADMISSION OF WRONGDOING 

  

 28 

 A. The Parties acknowledge that the execution of this Settlement Agreement and consummation
of the transactions contemplated hereby do not constitute an admission of liability, wrongdoing, or of any facts by the Defendant Released Parties. This Settlement Agreement, whether or not consummated, and any proceedings or events that occur
pursuant to it: 
 1. Shall not be offered or received against the Defendant Released Parties for any purpose or
used as evidence of, or to be construed as or deemed to be evidence of, any admission or concession by either the Defendant Released Parties of the truth or relevance of any fact alleged by Plaintiffs, the Class, Intervenor and/or the Public
Prosecutors, the validity of any claim that has been or could have been asserted in the Related Actions or in any other litigation, or of any liability, fault, or wrongdoing of any kind by or on behalf of the Defendant Released Parties. 

2. Shall not be offered or received against any of the Defendant Released Parties as evidence of, or construed as or
deemed to be evidence of, any admission or concession of any liability, fault, or wrongdoing, or in any way referred to for any other reason as against any of the Parties to this Settlement Agreement, in any other civil, criminal, regulatory or
administrative action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of this Settlement Agreement; provided, however, that if this Settlement Agreement is approved by the Court, the
Defendant Released Parties may refer to it to effectuate the liability protection granted them hereunder or to establish insurance coverage; and 

3. Is not, and shall not be construed against any Party as an admission or concession that the consideration to be given
hereunder represents the amount which could be or would have been recovered after trial, or as a reflection of the value of claims in any other litigation. 

XIII. PUBLIC STATEMENTS 

Absent prior written approval by the other Parties, there shall be no press release or other public statements by any Party, including
Intervenor, the Public Prosecutors, Class Counsel, 
  

 29 

 
Plaintiffs or Class Members, regarding the Settlement other than the Court filings necessary to obtain entry of the Preliminary Approval Order and receive final approval of the Settlement at the
Final Approval Hearing. The Parties expressly recognize the continuing need for confidentiality concerning all aspects of the proposed Settlement pending the Parties Motion for Preliminary Approval, other than as required by the Court. Nothing in
this Section XIII, however, is intended to limit communications between and among Class Counsel and the Class or the ability of any Party to respond to a request from a third party to comment on the Settlement; provided,
however, that any response by a Party to any request from a third party to comment on the Settlement shall be limited to the information contained in this Settlement Agreement. Notwithstanding the foregoing, the Parties acknowledge and agree
that SKH is subject to the reporting requirements of Federal and state securities laws and the securities exchange(s) on which its securities are traded (the “Stock Exchange”) and, as such, SKH is expressly permitted to make all
public disclosures required by law, including, but not limited to, the Securities Exchange Act of 1934 and the rules of the Stock Exchange. 
  

	XIV.  TERMINATION	

 Prior to the Effective Date, if
it occurs, the Parties shall have the right to terminate this Settlement Agreement (“Termination”) if certain events occur (the “Termination Events”) by providing written notice to the other Parties. The agreement
concerning Termination Events will be contained in a confidential side letter to this Settlement Agreement and will be available for in camera inspection by the Court. The Parties agree to maintain the Termination Events and the confidential side
letter concerning the Termination Events in strictest confidence, except as otherwise agreed. Notwithstanding the occurrence of a Termination Event, the following provisions of this Settlement Agreement shall remain in effect following Termination:
Section II.C and the Escrow Agreements; Section XV; Section XVI; and Section XVIII. 
  

 30 

 XV.  MEDIATORS CONTINUED INVOLVEMENT 

Upon joint request of the Parties or by order of the Court, Judge Weinstein of JAMS may assist the Parties in resolving open issues that
may arise. 
 XVI.  CONTINUING JURISDICTION OF THE SUPERIOR COURT 

In accordance with Code of Civil Procedure section 664.6, the Superior Court of California for the County of Humboldt will have continuing
jurisdiction over the Related Actions for the purpose of implementing the Settlement and all related matters, including this Settlement Agreement, the Settlement, the Final Approval Order, Entry of the Judgment of Dismissal With Prejudice,
post-judgment issues, until all related matters are fully resolved. Any dispute regarding the Parties’ obligations pursuant to this Settlement Agreement and/or interpretation of the terms of this Settlement Agreement (that cannot be resolved by
the mediator in the event of a joint request for mediation under Section XV hereof) will be presented to, and resolved by, Judge W. Bruce Watson, or if he is unavailable, by another judge of the Superior Court of California for the
County of Humboldt, which Judge shall be appointed by the Presiding Judge of the Superior Court of California for the County of Humboldt. 

XVII.  DISMISSAL 

In connection with the entry of the Final Approval Order, the Judgment of Dismissal With Prejudice shall be entered by the Court.

 XVIII.  MISCELLANEOUS PROVISIONS 

A. Neutral Interpretation. This Settlement Agreement will not be construed more strictly against one Party than another merely
because it may have been prepared by counsel for one of the Parties, it being recognized that, because of the arms’ length negotiations resulting in the Settlement Agreement, all Parties hereto have contributed substantially materially and
equally to the preparation of this Settlement Agreement. 
 B. Choice of Law. This Settlement Agreement is to be
construed, enforced, and administered in accordance with the laws of the State of California. 
  

 31 

 C. Additional Acts to Effectuate Settlement Agreement. The Parties hereto shall
execute all documents and perform all acts necessary and proper to effectuate the terms of this Settlement Agreement and to obtain the benefit of the Settlement Agreement for the Parties. 

D. No Oral Modification. Subject to any power of the Court to order a modification, this Settlement Agreement may not be modified
or amended except by a writing signed by all Parties thereto and their respective attorneys. 
 E. Competency; Independent
Counsel. Each Party to this Settlement Agreement represents and warrants that he, she, or it is competent to enter into this Settlement Agreement and in doing so is acting upon his, her, or its independent judgment and upon the advice of his,
her, or its own counsel and not in reliance upon any warranty or representation, express or implied, or any nature or kind by any other Party, other than the warranties and representations expressly set forth in this Settlement Agreement itself.

 F. Entire Agreement. This Settlement Agreement constitutes the entire agreement between and among the Parties with
respect to the Settlement of the Related Actions, except as otherwise stated herein, and supersedes any and all prior negotiations and agreements. 

G. Counterparts. This Settlement Agreement may be executed in counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument. 
 H. Authority to Bind. Each of the undersigned
Plaintiffs’ counsel represents that he or she is authorized to sign this Settlement Agreement on behalf of the Class and to resolve the Plaintiffs’ Complaint. Each of the undersigned counsel for Defendants represents that he or she is
authorized to sign this Settlement Agreement on behalf of the particular Defendant or Defendants designated in the respective signature blocks below. 

I. Cooperation. The Parties and their counsel agree to fully cooperate with each other to accomplish the terms of this Settlement
Agreement, including but not limited to: (a) execution of such documents and to take such other action as may reasonably be necessary to implement the terms of this Settlement Agreement; (b) providing documentation and data to effectuate
class notice 
  

 32 

 
and claims administration; (c) obtaining entry by the Court of the Preliminary Approval Order and the Final Approval Order; and (d) providing documentation and data regarding the
payments and distributions made pursuant to this Settlement Agreement from the Settlement Funds. The Parties to this Settlement Agreement shall use their reasonable best efforts, including all efforts contemplated by this Settlement Agreement and
any other efforts that may become necessary by order of the Court, or otherwise, to effectuate this Settlement Agreement and the terms set forth herein. 

[Signature Page Follows] 
  

					
	DATED: September 7, 2010	  	  
  

/s/ W. Timothy Needham

JANSSEN, MALLOY, NEEDHAM, MORRISON,

REINHOLSTSEN, CROWLEY & GRIEGO, LLP
 By:
W. Timothy Needham 
  
 LAW OFFICES OF MICHAEL D. THAMER

Michael D. Thamer
  

LUCE, FORWARD, HAMILTON & SCRIPPS LLP
 By:
Christopher J. Healey
  
 Attorneys for all Plaintiffs
	 	
			
	DATED: September 7, 2010	  	  
  

/s/ Kippy L. Wroten

WROTEN & ASSOCIATES
 By: Kippy L.
Wroten
  
 Attorneys for all Defendants
	 	

  

 33

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