Document:

Exhibit

MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANING (this “MOU”) is entered into as of May 1, 2017, by and between SABRA HEALTH CARE REIT, INC., a Maryland corporation (“Sabra”), and GENESIS HEALTHCARE INC., a Delaware corporation (“Genesis”), with reference to the following Recitals:
RECITALS
A.Subsidiaries of Sabra, as landlord (collectively, “Landlord”) and subsidiaries of Genesis, as tenant, (collectively, “Tenant”) are parties to certain Leases and Master Leases (as amended from time to time, collectively, the “Leases”) with respect to certain healthcare facilities (each a “Facility” and, collectively, the “Facilities”). The obligations of Tenants under the Leases have been guaranteed by Genesis, as guarantor (“Guarantor”), pursuant to the terms of each amended and restated guaranty of lease (each a “Guaranty” and, collectively, the “Guaranties”) executed by Guarantor in favor of Landlord. 
B.Genesis has requested that Landlord enter into amendments to the Leases and/or Guaranties with respect to Guarantor’s obligations to maintain certain minimum fixed charge coverage requirements (the “Amendments”).
C.As a condition to Landlord’s willingness to execute and deliver the Amendments, the parties have agreed to execute and deliver this MOU with respect to the obligations more specifically set forth herein. 
NOW, THEREFORE, in consideration of the recitals set forth above (which by this reference are incorporated herein) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Conditions to Effectiveness of Amendments. As conditions to the effectiveness of the Amendments, Genesis shall:
(a)    Cause Genesis Administrative Services LLC (“GAS LLC”) to execute and deliver a letter of intent with GMF I, LLC with respect to the commitment by Tenant to continue to lease twenty (20) skilled nursing facilities located in Kentucky, Ohio and Indiana (the “Midwest Facilities”) following the sale by Landlord of such Midwest Facilities to GMF I, LLC or its affiliates;
(b)    Execute, together with its affiliate, 656 Dillon Way Operations LLC (“Seller”), that certain Asset Purchase Agreement with Aurora Real Property VPC, LLC, as buyer, with respect to the sale of the skilled nursing facility, its improvements, furniture, fixtures, and equipment known as Aspen Center, located at 656 Dillon Way, Aspen, Colorado; and
(c)    Reimburse Sabra for the amount of $197,591.45 of closing costs and expenses incurred in connection with the sale of Renaissance Terrace located at 257 Patton Lane, Harriman, Tennessee.

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2. Sale or Transfer of Additional Facilities. Genesis hereby acknowledges that Sabra is considering the sale or joint venture of the ownership interest in other Facilities subject to the Leases (the “Additional Dispositions”). In connection with any such Additional Disposition, it may be necessary to (a) create a separate lease or master lease governing Tenant’s lease obligations with respect to such sold or joint ventured property provided that (x) any severance shall not adversely affect Tenant on an aggregate basis, and (y) the terms of such severed leases are substantially the same to the Leases including, but not limited to, the definition of Event of Default in the Lease, except that (A) the Base Rent will be reallocated in accordance with subsection (b) below, and (B) each such severed lease will only be cross-defaulted with the Leases and the other severed leases to the extent the underlying event giving rise to an Event of Default under the applicable severed lease would have constituted an Event of Default under the Leases had the Leases not been severed, and/or (b) reallocate the Base Rent payable under the Leases in such manner as Sabra shall determine in order to more appropriately reflect the economic performance of the assets thereunder so long as such reallocation is not detrimental to Tenant in the aggregate. Genesis acknowledges that certain covenants (including the minimum aggregate maintenance amount, bed closures and regulatory defaults) will be assessed on a stand-alone basis for any Transferred Facilities sold to a party unrelated to Landlord. Accordingly, Landlord shall have the right from time to time during the applicable lease term, by notice to Tenant, to require that Tenant execute an amendment to the applicable Lease pursuant to which one or more facilities (individually, a “Transferred Facility” or collectively, “Transferred Facilities”) are separated and removed from the applicable Lease, and, in such event, simultaneously with the execution of such amendment, Landlord (or the subsequent owner) and Tenant (or its affiliate) shall execute a substitute lease with respect to such Transferred Facilities substantially in the form of, and not materially less favorable to Genesis than, the existing Lease (each a “Substitute Lease”).  Although the rent payable with respect to any such Transferred Facilities (including related annual escalators) may increase or decrease from the amount payable by Tenant with respect to such Facilities under the existing Leases, the collective economic terms (including related annual escalators) of any such amendment to a Lease, the related Substitute Lease and any other Lease impacted thereby shall not increase Tenant’s overall payment obligations from the obligations due under the applicable Leases prior to such transaction, except to the extent provided below with respect to deferred maintenance obligations relating to the Transferred Facilities. Accordingly, any difference between the new rent established for the Transferred Facilities and the rent allocable thereto under the existing Leases will either remain in the current Lease to be paid (including related annual escalators) as a continuing obligation under such Lease, or at Sabra’s option may be reallocated to either the Connecticut Master Lease or Other Centers Master Lease (the “Allocation’s Leases”) where such reallocated amounts will be paid under such Lease (including related annual escalators) until such time as that rent obligation would have originally expired on the expiration of the term of the Lease from which such rents were reallocated. Furthermore, but subject to the foregoing, Genesis hereby acknowledges and agrees that it may be necessary to extend the term of the impacted Allocation’s Lease if rent is reallocated from later expiring Leases in order to achieve the aggregate economic neutrality contemplated by the parties hereunder. In connection with any Additional Disposition, Genesis hereby agrees to execute and deliver (i) a new guaranty of lease with respect to the obligations due under the Substitute Lease, and (ii) an amended and restated guaranty of lease with respect to the obligations due under any Leases amended in connection therewith, which new and/or amended and restated guaranty (each a “Substitute Guaranty”), as applicable, shall be substantially in the form of, and not 

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materially less favorable to Genesis than, the existing Guaranties. Any Substitute Lease and Substitute Guaranty relating thereto shall be freely transferable by Landlord to any successor to Landlord’s ownership interest in the real and personal property subject thereto.
3.Tenant’s Cooperation with Additional Dispositions. Tenant hereby agrees to use its commercially reasonable efforts to facilitate the sale of additional Facilities, including, without limitation and to the extent applicable, by (a) entering into, and faithfully complying with, commercially reasonable operations transfer agreements (each an “OTA”) with any proposed purchaser thereof (or its designee, and in such capacity, the “New Operator”), which are reasonably acceptable to Tenant and shall, inter alia, (i) provide for the proration of operational revenues and expenses, (ii) include commercially reasonable and customary representations and warranties from Tenant as to physical plant and operational matters and reasonable and customary post-closing indemnities for operational liabilities, including improper billings, from a net-worth entity reasonably acceptable to the New Operator (iii) provide for the conveyance to the New Operator of Tenant’s interest in the personal property at the Facilities as of the closing thereunder (but specifically excluding any IT equipment and any personal property owned by third parties or affiliates of Genesis other than Tenant) for value agreed by Tenant in its reasonable discretion; and (iv) grant the New Operator reasonable access to the Premises and Tenant’s books and records relating to the operations thereof (but specifically excluding the policies and procedure manuals and other proprietary information of Tenant); (b) reasonably cooperating (at New Operator’s sole cost and expense) with the New Operator in connection with its efforts to obtain the licenses, permits and other authorizations needed to operate the applicable Facilities for their current use from and after the sale thereof, including, without limitation, by filing, submitting or otherwise distributing such applications and notices as the New Operator may reasonably request; (c) in Tenant’s capacity as the party in possession of the Facilities, delivering such customary affidavits as the title company handling the sale of the Facilities may reasonably require in order to issue the title policy required under the applicable purchase and sale agreement (“PSA”); and (d) continuing to operate the Facilities in material compliance with all legal and licensing requirements as set forth in the Leases. In addition, if in connection with due diligence of the properties by any New Operator it is reasonably determined pursuant to a third-party property condition report that there are deferred repair and or maintenance obligations with respect to the applicable Facilities that should reasonably have been completed by Tenant under the terms of the Leases, and where New Operator reasonably requests be completed, Tenant shall (i) immediately complete such deferred repair and/or maintenance obligations or (ii) permit Landlord to cause such corrective action to be taken on its behalf.  In either event, Tenant or Genesis shall reimburse Sabra for any costs it incurs in connection therewith within 24 months after the occurrence thereof, with such amounts accruing compound interest in the amount of 8% per annum until paid. In the event that Tenant immediately completes such deferred repair and/or maintenance obligations at its sole expense, any such costs incurred by Tenant that exceed more than $1,000 per bed for the applicable Facility will be credited toward the following years’ minimum aggregate capex spend requirement for the leased portfolio.
4.Default.  For the avoidance of doubt, if a material default occurs hereunder and such default is not cured within sixty (60) days following written notice thereof, the same shall constitute an Event of Default under the subject Leases and the non-defaulting party’s rights and remedies under such Leases in connection with such default shall survive the expiration of this MOU. 

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5.Miscellaneous.
(a)    Within fifteen (15) days following Landlord’s written request therefor, Tenant agrees to reimburse Landlord for its reasonable out of pocket legal fees and costs incurred in connection the execution and delivery of this MOU and the Amendments.
(b)    This MOU shall constitute the entire agreement between the parties with respect to the subject matter hereof.  No variation or modification of this MOU shall be valid and enforceable, except by an agreement in writing, executed and approved in the same manner as this MOU.
(c)    If any party commences an action against another other to interpret or enforce any of the terms of this MOU or because of the breach by another party of any of the terms hereof, the losing party shall pay to the prevailing party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment.  
(d)    This MOU shall inure solely to the benefit of the parties hereto and their respective successors and assigns.  No third party shall have the right to derive or claim any benefit hereunder and shall have no right to enforce or rely upon any provision of this MOU.
(e)    This MOU shall be governed by and construed and enforced in accordance with the applicable laws of the state of California, without regard to the conflict of laws rules thereof; provided that that the law of the applicable state or commonwealth shall govern procedures for enforcing, in the respective state or commonwealth, provisional and other remedies directly related to each Facility.
(f)    Each party will, whenever and as often as it shall be reasonably requested so to do by another party, cause to be executed, acknowledged or delivered, any and all such further instruments and documents as may be necessary or proper, in the reasonable opinion of the requesting party, in order to carry out the intent and purpose of this MOU.
(g)    This MOU may be executed and delivered (including by facsimile or Portable Document Format (pdf) transmission) in counterparts, all of which executed counterparts shall together constitute a single document.  Signature pages may be detached from the counterparts and attached to a single copy of this document to physically form one document.  Any such facsimile documents and signatures shall have the same force and effect as manually-signed originals and shall be binding on the parties hereto.

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IN WITNESS WHEREOF, this MOU has been executed and delivered as of the date first set forth above. 
GENESIS:
GENESIS HEALTHCARE, INC.,  
a Delaware corporation

By:    /S/ MICHAEL S. SHERMAN    
Name:    Michael S. Sherman            
Title:    Senior Vice President            

[SIGNATURES CONTINUE ON NEXT PAGE]

73608.SIG    S-1

SABRA:
SABRA HEALTH CARE REIT, INC.,  
a Maryland corporation

By:    /S/ HAROLD W. ANDREWS, JR.    
Name:    Harold W. Andrews, Jr.        
Title:    Chief Financial Officer        

73608.SIG    S-2Exhibit

[ __________ ] AMENDED AND RESTATED GUARANTY OF LEASE 
([ _____________ ])
This [ ________ ]AMENDED AND RESTATED GUARANTY OF LEASE (this “Guaranty”), is made and entered into as of May 4, 2017 (the “Effective Date”), by GENESIS HEALTHCARE, INC., a Delaware corporation (f/k/a Skilled Healthcare Group, Inc.) (“Guarantor”), in favor of [ ________, a ________ ] (“Landlord”).  Landlord hereby executes this Guaranty solely for the purpose of acknowledging and agreeing to accept this amended and restated Guaranty in substitution and replacement of the Existing Guaranty (as defined below).
RECITALS
A.    WHEREAS, reference is hereby made to [ Lease dated as of ______ ] (as amended, modified, revised or restated, the “Lease”) pursuant to which Landlord leases that certain facility (the “Facility”) to [ ________, a ________ ] (“Tenant”), and (ii) that certain [ ________ ]Amended and Restated Guaranty of Lease dated as of July 29, 2016 (the “Existing Guaranty”), executed by Guarantor in favor of Landlord.  All initially-capitalized terms used and not otherwise defined herein shall have the same meanings given such terms in the Lease.
B.    WHEREAS, Guarantor has requested that Landlord consent to the modification of certain terms of the Existing Guaranty.  Guarantor and Landlord now desire to amend and restate the Existing Guaranty in its entirety in accordance with the terms set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing recitals, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:
1.    Guaranty. In consideration of the benefit derived or to be derived by it therefrom, as to the Lease, effective as of the Effective Date with respect to Obligations (as hereinafter defined) arising from and after the Commencement Date, Guarantor hereby jointly and severally, unconditionally, and irrevocably guarantees (i) the payment when due of all rent and all other sums payable by Tenant under the Lease, and (ii) the faithful and prompt performance when due of each and every one of the terms, conditions and covenants to be kept and performed by Tenant under the Lease, and any and all amendments, modifications, extensions and renewals of the Lease, including without limitation all indemnification obligations, insurance obligations, and all obligations to operate, rebuild, restore or replace any Facility or improvements now or hereafter located at the Facility (collectively, the “Obligations”). In the event of the failure of Tenant to pay any such rent or other sums, or to render any other performance required of Tenant under the Lease, when due or within any applicable cure period, Guarantor shall forthwith perform or cause to be performed all provisions of the Lease to be performed by Tenant thereunder, and pay all reasonable costs of collection or enforcement and other damages that may result from the non-performance thereof to the full extent provided under the Lease. As to the Obligations, Guarantor's liability under this Guaranty is without limit.
2.    Survival of Obligations. The obligations of Guarantor under this Guaranty shall survive and continue in full force and effect notwithstanding:
(a)    any amendment, modification, or extension of the Lease;

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(b)    any compromise, release, consent, extension, indulgence or other action or inaction in respect of any terms of the Lease;
(c)    any substitution or release, in whole or in part, of any security for this Guaranty which Landlord may hold at any time;
(d)    any exercise or non-exercise by Landlord of any right, power or remedy under or in respect of the Lease or any security held by Landlord with respect thereto, or any waiver of any such right, power or remedy;
(e)    any bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation, or the like of Tenant or any other guarantor;
(f)    any limitation of Tenant's liability under the Lease or any limitation of Tenant's liability thereunder which may now or hereafter be imposed by any statute, regulation or rule of law, or any illegality, irregularity, invalidity or unenforceability, in whole or in part, of the Lease or any term thereof;
(g)    any sale, lease, or transfer of all or any part of any interest in the Facility or any or all of the assets of Tenant to any other person, firm or entity other than to Landlord;
(h)    any act or omission by Landlord with respect to any of the security instruments or any failure to file, record or otherwise perfect any of the same;
(i)    any extensions of time for performance under the Lease, whether prior to or after the expiration of the Term;
(j)    the release of Tenant from performance or observation of any of the agreements, covenants, terms or conditions contained in the Lease by operation of law or otherwise;
(k)    the fact that Tenant may or may not be personally liable, in whole or in part, under the terms of the Lease to pay any money judgment;
(l)    the failure to give any Guarantor any notice of acceptance, default or otherwise;
(m)    any other guaranty now or hereafter executed by any Guarantor or anyone else in connection with the Lease;
(n)    any rights, powers or privileges Landlord may now or hereafter have against any other person, entity or collateral; or
(o)    any other circumstances, whether or not Guarantor had notice or knowledge thereof.
3.    Primary Liability. The liability of Guarantor with respect to the Lease shall be primary, direct and immediate, and Landlord may proceed against any Guarantor: (a) prior to or in lieu of proceeding against Tenant, its assets, any security deposit, or any other guarantor; and (b) prior to or in lieu of pursuing any other rights or remedies available to Landlord. All rights and remedies afforded to Landlord by reason of this Guaranty or by law are separate, independent and cumulative, and the exercise 

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of any rights or remedies shall not in any way limit, restrict or prejudice the exercise of any other rights or remedies.
In the event of any default under the Lease, a separate action or actions may be brought and prosecuted against Guarantor whether or not Tenant is joined therein or a separate action or actions are brought against Tenant. Landlord may maintain successive actions for other defaults. Landlord’s rights hereunder shall not be exhausted by its exercise of any of its rights or remedies or by any such action or by any number of successive actions until and unless all indebtedness and Obligations the payment and performance of which are hereby guaranteed have been paid and fully performed.
4.    Obligations Not Affected. Subject to the terms of the Lease, Landlord may, without notice to any Guarantor: (a) amend, alter, compromise, accelerate, extend or change the time or manner for the payment or the performance of any Obligation hereby guaranteed; (b) extend, amend or terminate the Lease; or (c) release Tenant by consent to any assignment (or otherwise) as to all or any portion of the Obligations hereby guaranteed. Any exercise or non-exercise by Landlord of any right hereby given Landlord, dealing by Landlord with Guarantor or any other guarantor, Tenant or any other person, or change, impairment, release or suspension of any right or remedy of Landlord against any person including the Tenant and any other guarantor will not affect any of the Obligations of Guarantor hereunder or give Guarantor any recourse or offset against Landlord.
5.    Waiver. With respect to the Lease, Guarantor hereby waives and relinquishes all rights and remedies accorded by applicable law to sureties and/or guarantors or any other accommodation parties, under any statutory provisions, common law or any other provision of law, custom or practice, and agrees not to assert or take advantage of any such rights or remedies including, but not limited to:
(a)    any right to require Landlord to proceed against Tenant or any other person or to proceed against or exhaust any security held by Landlord at any time or to pursue any other remedy in Landlord's power before proceeding against any Guarantor or to require that Landlord cause a marshaling of Tenant's assets or the assets, if any, given as collateral for this Guaranty or to proceed against Tenant and/or any collateral, including collateral, if any, given to secure Guarantor's obligation under this Guaranty, held by Landlord at any time or in any particular order;
(b)    any defense that may arise by reason of the incapacity or lack of authority of any other person or persons;
(c)    notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Tenant, Landlord, any creditor of Tenant or Guarantor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Landlord or in connection with any obligation hereby guaranteed;
(d)    any defense based upon an election of remedies by Landlord which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor to proceed against Tenant for reimbursement, or both;
(e)    any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal;

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(f)    any duty on the part of Landlord to disclose to Guarantor any facts Landlord may now or hereafter know about Tenant, regardless of whether Landlord has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume or has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Tenant and of all circumstances bearing on the risk of non-payment or non-performance of any Obligations or indebtedness hereby guaranteed;
(g)    any defense arising because of Landlord's election, in any proceeding instituted under the federal Bankruptcy Code, of the application of Section 1111(b)(2) of the federal Bankruptcy Code;
(h)    any defense based on any borrowing or grant of a security interest under Section 364 of the federal Bankruptcy Code; and
(i)    all rights and remedies accorded by applicable law to guarantors, including without limitation, any extension of time conferred by any law now or hereafter in effect and any requirement or notice of acceptance of this Guaranty or any other notice to which the undersigned may now or hereafter be entitled to the extent such waiver of notice is permitted by applicable law.
6.    Warranties. With respect to the Lease, Guarantor warrants that: (a) this Guaranty is executed at the Tenant’s request; and (b) Guarantor has established adequate means of obtaining from each Tenant on a continuing basis financial and other information pertaining to Tenant’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that the Landlord shall have no obligation to disclose to Guarantor information or material acquired in the course of the Landlord's relationships with Tenant.
7.    No-Subrogation. Until all Obligations of Tenant under the Lease have been satisfied and discharged in full for six (6) months, Guarantor shall have no right of subrogation and waives any right to enforce any remedy which Landlord now has or may hereafter have against Tenant and any benefit of, and any right to participate in, any security now or hereafter held by Landlord with respect to the Lease.
8.    Subordination. If for any reason whatsoever Tenant now or hereafter becomes indebted to Guarantor or any Affiliate of any Guarantor, such indebtedness and all interest thereon shall at all times be subordinate to Tenant's obligation to Landlord to pay as and when due in accordance with the terms of the Lease the guaranteed Obligations. During any time in which an Event of Default has occurred and is continuing under the Lease and not been cured within any cure period provided for therein (and provided that Guarantor has received written notice thereof), Guarantor agrees to make no claim for such indebtedness that does not recite that such claim is expressly subordinate to Landlord's rights and remedies under the Lease.
9.    No Delay. Any payments required to be made by Guarantor hereunder shall become due within ten (10) days of written demand therefor following the occurrence and during the continuance of an Event of Default under the Lease.

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10.    Application of Payments. With respect to the Lease, and with or without notice to Guarantor, Landlord, in its sole discretion and at any time and from time to time and in such manner and upon such terms as Landlord deems appropriate, may (a) apply any or all payments or recoveries from Tenant or from any other guarantor under any other instrument or realized from any security, in such manner and order of priority as Landlord may determine, to any indebtedness or other obligation of Tenant with respect to the Lease and whether or not such indebtedness or other obligation is guaranteed hereby or is otherwise secured or is due at the time of such application, and (b) refund to Tenant any payment received by Landlord under the Lease.
11.    Guaranty Default.
(a)    As used herein, the term “Guaranty Default” shall mean one or more of the following events (subject to applicable cure periods):
(i)    the failure of Guarantor to pay the amounts required to be paid hereunder within ten (10) days of written demand therefor following the occurrence and during the continuance of an Event of Default under the Lease; and
(ii)    the failure of Guarantor to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in subsection (i) above, for a period of thirty (30) days after written notice of such failure has been given to Guarantor by Landlord, unless Landlord agrees in writing to an extension of such time prior to its expiration.
(b)    Upon the occurrence of a Guaranty Default, Landlord shall have the right to bring such actions at law or in equity, including appropriate injunctive relief, as it deems appropriate to compel compliance, payment or deposit, and among other remedies to recover its reasonable attorneys' fees in any proceeding, including any appeal therefrom and any post judgment proceedings.
12.    Guarantor Covenants.
(a)    Within ninety (90) days after the end of Guarantor’s fiscal years, the entities then comprising Guarantor shall deliver to Landlord a copy of their (consolidated) Financial Statements, prepared in accordance with GAAP, consistently applied, and certified by an officer of Guarantor and reported on by a “Big Four” certified public accounting firm or other certified public accounting firm approved by Landlord, which approval will not be unreasonably withheld. Together with Guarantor's Financial Statements furnished in accordance with the preceding sentence, Guarantor shall deliver (a) an Officer's Certificate of Guarantor stating that Guarantor is not in default in the performance or observance of any of the terms of this Guaranty, or if Guarantor is in default, specifying all such defaults, the nature thereof, and the steps being taken to remedy the same, and (b) a report with respect to the financial statements from Guarantor's accountants, which report shall be unqualified as to going concern and scope of audit of Guarantor and its subsidiaries and shall provide in substance that (i) such consolidated financial statements present fairly the consolidated financial position of Guarantor and its subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP, and (ii) that the examination by Guarantor's accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards.

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(b)    The entities that comprise Guarantor shall collectively maintain, without duplication, a Net Worth (as defined below) as follows:
(i)    as of March 31, 2015 and June 30, 2015, no less than the greater of (A) One Hundred Million Dollars ($100,000,000) and (B) 75% of the combined Net Worth of Guarantor as of February 2, 2015 (the “Closing Date TNW”).  In no event shall the Closing Date TNW be less than One Hundred Million Dollars ($100,000,000);
(ii)    as of the last day of each fiscal quarter thereafter, commencing September 30, 2015 and ending on the last day of the last fiscal quarter of 2015 but including December 31, 2015, no less than the Net Worth required as of the last day of the prior fiscal quarter plus the TNW Increment (as defined below); and
(iii)    from and after January 1, 2016, no minimum Net Worth shall be required to be maintained.
 “Net Worth” means an amount equal to the total consolidated net book value of the tangible assets of Guarantor (excluding goodwill and other intangible assets) minus the total consolidated liabilities of such Guarantor. For purposes of this calculation, (a) the net book value of tangible assets will (i) exclude the unamortized balance of capitalized assets associated with capital lease or similar financing obligations and (ii) be adjusted to add back (A) $217,300,000 of deferred tax asset valuation allowance and (B) any unamortized goodwill and identifiable intangible assets associated with the acquisition pursuant to that certain purchase agreement dated June 15, 2015, by certain Affiliates of Company, of certain assets formerly operated by Revera Assisted Living, Inc. and its Affiliates and (b) the total liabilities will exclude (i) the unamortized balance of capital lease or similar financing obligation liabilities and (ii) the net book value of any deferred tax liabilities associated with intangible assets.
“TNW Increment” means Eighteen Million Two Hundred Thousand Dollars ($18,200,000)
(c)    Coverage Ratio.  Guarantor, collectively, shall maintain a Coverage Ratio (as defined below), based upon operating results for the most recent twelve (12) months, tested at the end of each fiscal quarter: 
(i)for the period commencing on June 30, 2016 and ending December 31, 2016, of not less than 1.15 to 1.00;
(ii)for the period commencing January 1, 2017 and ending December 31, 2017, of not less than 1.10 to 1.00;
(iii)for the period commencing January 1, 2018 and ending December 31, 2019, of not less than 1.12 to 1.00; 
(iv)for the period commencing on January 1, 2020 and ending on December 31, 2020, of not less than 1.14 to 1.00;
(v)for the period commencing on January 1, 2021 and ending on December 31, 2021, of not less than 1.15 to 1.00; and

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(vi)for the remainder of the Term, of not less than 1.18 to 1.00.
“Coverage Cure Multiplier” means an amount determined by dividing (a) the aggregate number of beds licensed at the Facility which are the subject of (i) the Lease and (ii) the Affiliate Leases (as defined below), as of the date of determination, by (b) the aggregate number of beds licensed at the Facility leased by Guarantor or any direct or indirect subsidiary thereof pursuant to the Welltower Master Lease (as defined below), as of the date of determination. “Affiliate Leases” means each other lease between Landlord or any Affiliate thereof, on the one hand, and Guarantor or any direct or indirect subsidiary thereof, on the other.
“Coverage Ratio” means the ratio of (a) Net Operating Income (as defined below) for each applicable period; to (b) all real estate lease payments made or otherwise payable on a cash basis, regardless of accounting treatment, and interest payments made on a cash basis or otherwise payable by Guarantor for the applicable period.  Notwithstanding the foregoing, income and expenses related to any facility owned or operated by Guarantor or any direct or indirect subsidiary thereof, shall be excluded from the calculation of the “Coverage Ratio” with respect to the first twelve month period after a certificate of occupancy is issued for such facility.
“Net Operating Income” means the pre-tax net income of Guarantor, collectively, plus (a) the amount of the provision for depreciation and amortization; plus (b) to the extent included in pre-tax income of Guarantor, collectively, the amount of the provision for interest and real estate lease payments, plus (c) the amount of any non-cash impairment charges, the amount of any loss from unusual or extraordinary items in excess of $100,000, the costs of any restructuring, and, to the extent approved by Landlord, acting reasonably, any other non-recurring loss, but excluding any impairments or expenses related to bad debts; minus (d) the amount of any cash or non-cash unusual or extraordinary gains and revenues that are in excess of $100,000, and, to the extent approved by Landlord, acting reasonably, any other non-recurring gains.  Revenues and expenses of variable interest entities that are consolidated with Guarantor pursuant to GAAP will be excluded from the calculation of Net Operating Income.  For the five quarters that follow February 2, 2015, Guarantor will add to Net Operating Income up to $25,000,000 of unrealized cost reductions or revenue enhancements (the “Unrealized Synergy Add Back”).  In each measurement period, the Unrealized Synergy Add Back will be reduced by the amount of actual synergies realized, computed by Guarantor in good faith. Any cash held as security by Landlord, and the amount of any letters of credit held by Landlord pursuant to the terms of this Guaranty, shall, for the purposes of Sections 12(c) and 13 of this Guaranty (without duplication), be deemed to be “Net Operating Income” with respect to each period in which such cash or letters of credit are held by Landlord.
“Welltower Master Lease” means that certain 20th Amended and Restated Master Lease Agreement between FC-GEN Real Estate, LLC and Genesis Operations LLC, dated as of January 31, 2017, as amended by that certain First Amendment to 20th Amended and Restated Master Lease Agreement, dated as of the date hereof  (as further amended, restated or supplemented from time to time).
13.    Coverage Ratio Cure Right.  Guarantor’s failure to meet the requirements of the Coverage Ratio under this Guaranty or any other guaranty provided in favor of Landlord or an Affiliate 

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thereof with respect to any Affiliate Lease (each, an “Affiliate Guaranty”), shall not constitute a Guaranty Default (as defined in this Guaranty and each Affiliate Guaranty) or an Event of Default (as defined in the Lease and each Affiliate Lease) provided that (a) the actual Coverage Ratio is greater than or equal to 1.10 to 1.00, and (b) Guarantor, collectively, delivers a letter of credit (in form and substance, and issued by an issuer, reasonably satisfactory to Landlord) to Landlord (or an Affiliate thereof) equal to the Default Shortfall Amount (defined below) within 10 days following delivery of the Officer’s Certificates and Financial Statements for the applicable fiscal quarter.  By delivering a single letter of credit to Landlord (or an Affiliate thereof) equal to the Default Shortfall Amount, Guarantor shall be deemed to have cured Guarantor’s failure to meet the requirements of the Coverage Ratio under this Guaranty and each Affiliate Guaranty. The “Default Shortfall Amount” for any fiscal quarter means an amount determined by multiplying (x) the Coverage Cure Multiplier, by an amount equal to (y)(i) the Net Operating Income required to achieve a Coverage Ratio of not less than the amount required pursuant to the Coverage Ratio (being 1.10 to 1.00, 1.12 to 1.00, 1.14 to 1.00, 1.15 to 1.00, or 1.18 to 1.00, as applicable), less (ii) the actual Net Operating Income for the applicable period.  Landlord will return the letter of credit delivered under this Section 13 within 30 days after receipt by Landlord of Officer’s Certificates and Financial Statements evidencing a Coverage Ratio of the amount required in clause pursuant to the Coverage Ratio (being 1.10 to 1.00, 1.12 to 1.00, 1.14 to 1.00, 1.15 to 1.00, or 1.18 to 1.00, as applicable), for four consecutive fiscal quarters.
14.    Notices. Any notice, request or other communication to be given by any party hereunder shall be in writing and shall be sent by registered or certified mail, postage prepaid and return receipt requested, by hand delivery or express courier service, by email or by an overnight express service to the following address:
	
		
	To Guarantor:
	101 East State Street 
Kennett Square, Pennsylvania 19348 
Telephone: 610-444-6350 
Attention: Chief Executive Officer

	 
	 

	With a copy to:
(that shall not 
constitute notice)
	101 East State Street
Kennett Square, Pennsylvania 19348
Attention: Law Department

	 
	 

	With a copy to:
(that shall not 
constitute notice)
	Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attn: Neil L. Rock
Phone: +1 212 735 3787

	 
	 

	To Landlord:
	c/o Sabra Health Care REIT, Inc. 
18500 Von Karman Avenue, Suite 550 
Irvine, CA 92612 
Attention: Chief Executive Officer

	 
	 

	With a copy to:
(that shall not 
constitute notice)
	Sherry Meyerhoff Hanson & Crance LLP
610 Newport Center Drive, Suite 1200
Newport Beach, CA 92660-6445
Attention: Kevin L. Sherry, Esq.

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or to such other address as either party may hereafter designate. Notice shall be deemed to have been given on the date of delivery if such delivery is made on a Business Day, or if not, on the first Business Day after delivery. If delivery is refused, Notice shall be deemed to have been given on the date delivery was first attempted. Notice sent by email shall be deemed given (i) if sent by email before 5:00 p.m. (Eastern time) on a Business Day, when transmitted; (ii) if sent by email on a day other than a Business Day or after 5:00 p.m. (Eastern time) on a Business Day, on the following Business Day.
15.    Miscellaneous.
(a)    No term, condition or provision of this Guaranty may be waived except by an express written instrument to that effect signed by Landlord. No waiver of any term, condition or provision of this Guaranty will be deemed a waiver of any other term, condition or provision, irrespective of similarity, or constitute a continuing waiver of the same term, condition or provision, unless otherwise expressly provided.
(b)    If any one or more of the terms, conditions or provisions contained in this Guaranty is found in a final award or judgment rendered by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms, conditions and provisions of this Guaranty shall not in any way be affected or impaired thereby, and this Guaranty shall be interpreted and construed as if the invalid, illegal, or unenforceable term, condition or provision had never been contained in this Guaranty.
(c)    THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT THAT THE LAWS OF THE STATE WHERE THE FACILITY IS LOCATED SHALL GOVERN THIS AGREEMENT TO THE EXTENT NECESSARY (I) TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO THE FACILITY AND (II) FOR PROCEDURAL REQUIREMENTS WHICH MUST BE GOVERNED BY THE LAWS OF SUCH STATE. GUARANTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF CALIFORNIA AND AGREES THAT ALL DISPUTES CONCERNING THIS GUARANTY SHALL BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA. GUARANTOR FURTHER CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF EACH STATE WITH RESPECT TO ANY ACTION COMMENCED BY LANDLORD SEEKING TO RETAKE POSSESSION OF ANY OR ALL OF THE LEASED PROPERTY IN WHICH GUARANTOR IS REQUIRED TO BE NAMED AS A NECESSARY PARTY. GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OF CALIFORNIA AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA OR, TO THE EXTENT APPLICABLE IN ACCORDANCE WITH THE TERMS HEREOF, LOCATED IN THE STATE WHERE THE FACILITY IS LOCATED.
(d)    EACH OF THE GUARANTOR, BY ITS EXECUTION OF THIS GUARANTY, AND THE LANDLORD, BY THEIR ACCEPTANCE OF THIS GUARANTY, HEREBY WAIVE TRIAL BY JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON, UNDER, OUT OF, BY REASON OF OR RELATING IN ANY WAY TO THIS GUARANTY OR THE INTERPRETATION, BREACH OR ENFORCEMENT THEREOF.

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(e)    In the event of any suit, action, arbitration or other proceeding to interpret this Guaranty, or to determine or enforce any right or obligation created hereby, the prevailing party in the action shall recover such party's reasonable costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorneys' fees and costs of appeal, post judgment enforcement proceedings (if any) and bankruptcy proceedings (if any). Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit, action, arbitration or other proceeding, in addition to any and all other relief awarded to such prevailing party, include in such judgment or award such party's reasonable costs and expenses as provided in this paragraph.
(f)    Guarantor (i) represents that it has been represented and advised by counsel in connection with the execution of this Guaranty; (ii) acknowledges receipt of a copy of the Lease; and (iii) further represents that Guarantor has been advised by counsel with respect thereto. This Guaranty shall be construed and interpreted in accordance with the plain meaning of its language, and not for or against Guarantor or Landlord, and as a whole, giving effect to all of the terms, conditions and provisions hereof.
(g)    Except as provided in any other written agreement now or at any time hereafter in force between the Landlord and Guarantor, this Guaranty shall constitute the entire agreement of Guarantor with Landlord with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof will be binding upon Landlord or Guarantor unless expressed herein.
(h)    All stipulations, obligations, liabilities and undertakings under this Guaranty shall be binding upon Guarantor and its respective successors and assigns and shall inure to the benefit of Landlord and to the benefit of Landlord's successors and assigns.
Whenever the singular shall be used hereunder, it shall be deemed to include the plural (and vice-versa) and reference to one gender shall be construed to include all other genders, including neuter, whenever the context of this Guaranty so requires. Section captions or headings used in the Guaranty are for convenience and reference only, and shall not affect the construction thereof.

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EXECUTED as of the date first set forth above.
GUARANTOR: 
 
GENESIS HEALTHCARE, INC.,  
a Delaware corporation 

By:                        
Name:    Michael S. Sherman
Title:    Senior Vice President

LANDLORD:

[ __________________, ] 
a [ ___________________ ]

By:                        
Name:                        
Title:                        

S - 1

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