Note 12 — Commitments and Contingencies

As discussed above in Note 5 to the Condensed Consolidated Financial Statements, as of April 15, 2011, Care’s previous obligation to provide approximately $0.9 million in tenant improvements related to our purchase of the Cambridge properties was eliminated in conjunction with the execution of the Omnibus Agreement.

On November 4, 2010, the Company entered into a Services Agreement with TREIT pursuant to which TREIT will provide certain advisory services related to the Company’s business beginning upon the effective termination of CIT Healthcare as our external manager on November 16, 2010. For such services, the Company will pay TREIT a monthly base services fee in arrears of one-twelfth of 0.5% of the Company’s Equity (as defined in the Services Agreement) and a quarterly incentive fee of 15% of the Company’s AFFO Plus Gain/(Loss) On Sale (as defined in the Services Agreement), as adjusted to account for Equity Offerings (as defined in the Services Agreement), and quarterly incentive fee equal to the lesser of: (a) 15% of the Company’s AFFO Plus Gain/(Loss) On Sale (as defined in the Services Agreement) and (b) the amount by which the Company’s AFFO Plus Gain /(Loss) on Sale exceeds an amount equal to Adjusted Equity multiplied by the Hurdle Rate (as defined in the Services Agreement). Twenty percent (20%) of any such incentive fee shall be paid in shares of common stock of the Company, unless a greater percentage is requested by TREIT and approved by an independent committee of directors. The initial term of the Services Agreement extends until December 31, 2013, unless terminated earlier in accordance with the terms of the Services Agreement and will be automatically renewed for one year periods following such date unless either party elects not to renew the Services Agreement in accordance with its terms. If the Company elects to terminate without cause, or elects not to renew the Services Agreement, a Termination Fee (as defined in the Services Agreement) shall be payable by the Company to TREIT. On November 9, 2011, we entered into an amendment to the Services Agreement which clarified the basis upon which the Company calculates the quarterly incentive fee.

In addition to the mortgage notes from our Bickford and Greenfield properties (See Note 7 to the Condensed Consolidated Financial Statements), the table below summarizes our annual remaining contractual obligations as of September 30, 2011.


Amounts (in millions)	2011		2012		2013		2014		2015		2016		Thereafter
TREIT Base service fee(1)	$	0.3		0.4		0.4		—		—		—		—
Company Office Lease	$	0.1		0.2		0.2		0.2		0.2		0.2		0.5


(1)		Subject to increase based on increases in stockholders’ equity. In 2014 and 2015, TREIT will receive either (i) the Termination Fee in the event of termination without cause or non-renewal, or (ii) the base service fee in the event of renewal by the Company. The Termination Fee payable to TREIT in the event of termination without cause or non-renewal of the Services Agreement by the Company is not fixed and determinable and is, therefore, not included in the table.

Litigation

Care is not presently involved in any material litigation or, to our knowledge, is any material litigation threatened against us or our investments, other than routine litigation arising in the ordinary course of business. Management believes the costs, if any, incurred by us related to litigation will not materially affect our financial position, operating results or liquidity. Notwithstanding the foregoing, the Company, as discussed above in Note 4 to the Condensed Consolidated Financial Statements, may have certain indemnification obligations with respect to a lawsuit filed by certain borrowers and certain related party entities in our remaining loan investment in which Care was not named as a defendant.

Cambridge Litigation

On November 25, 2009, we filed a lawsuit in the U.S. District Court for the Northern District of Texas against Mr. Jean-Claude Saada and 13 of his companies (the “Saada Parties”), seeking various declaratory judgments relating to our various partnership agreements with respect to the Cambridge Portfolio. Saada brought a number of counterclaims against us.

On April 14, 2011 (effective April 15, 2011) we settled all litigation with the Saada Parties and the Cambridge entities, and all litigation between the parties was dismissed with prejudice, ending the litigation.

Shareholder IPO Litigation

On September 18, 2007, a class action complaint for violations of federal securities laws was filed in the United States District Court, Southern District of New York alleging that the Registration Statement relating to the initial public offering of shares of our common stock, filed on June 21, 2007, failed to disclose that certain of the assets in the contributed portfolio were materially impaired and overvalued and that we were experiencing increasing difficulty in securing our warehouse financing lines. On January 18, 2008, the court entered an order appointing co-lead plaintiffs and co-lead counsel. On February 19, 2008, the co-lead plaintiffs filed an amended complaint citing additional evidentiary support for the allegations in the complaint. The parties filed various motions between April 2008 and July 2010. The plaintiffs filed an opposition to our motion to dismiss on July 9, 2008, to which we filed our reply on September 10, 2008. On March 4, 2009, the court denied our motion to dismiss. Care filed its answer on April 15, 2009. At a conference held on May 15, 2009, the Court ordered the parties to make a joint submission (the “Joint Statement”) setting forth: (i) the specific statements that Plaintiffs claim are false and misleading; (ii) the facts on which Plaintiffs rely as showing each alleged misstatement was false and misleading: and (iii) the facts on which Defendants rely as showing those statements were true. The parties filed the Joint Statement on June 3, 2009. On July 31, 2009, the parties entered into a stipulation that narrowed the scope of the proceeding to the single issue of the warehouse financing disclosure in the Registration Statement. Fact discovery closed on April 23, 2010. Care filed a motion for summary judgment on July 9, 2010. By Opinion and Order dated December 22, 2010, the Court granted Care summary judgment motion in its entirety and directed the Clerk of the Court to enter judgment accordingly.

On January 11, 2011, the parties entered into a stipulation ending the litigation. In the stipulation: (i) plaintiffs waived any and all appeal rights that they had in the action, including, without limitation, the right to appeal any portion of the Court’s Opinion and Order granting Care’s summary judgment or the judgment entered by the Clerk; (ii) Care waived any and all rights that they had to seek sanctions of any form against plaintiffs or their counsel in connection with the action; and (iii) each party agreed it would bear its own fees and costs in connection with the action. The stipulation was so ordered by the Court on January 12, 2011, bringing the litigation to a close.