QCP Quality Care Properties, Inc. (delisted)

THE MERGER (PROPOSAL 1)

Certain Effects of the Merger

        If the merger is approved by the Company's stockholders and certain other conditions to the closing of the merger are either satisfied or waived, the Company will be merged with and into Merger Sub with Merger Sub continuing as the surviving entity and a subsidiary of Welltower.

        At the effective time of the merger, each share of common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held by the Company, Welltower or Merger Sub, or any of their respective wholly owned subsidiaries, in each case other than such shares held on behalf of third parties) will be converted into the right to receive, without interest and less any applicable withholding taxes, $20.75 in cash, and, if the effective time of the merger does not occur prior to August 25, 2018, $0.006 in cash for each day during the period commencing on August 25, 2018 and ending on, but excluding, the closing date.

        Our common stock is currently registered under the Exchange Act and is quoted on the NYSE under the symbol "QCP." As a result of the merger, the common stock will cease to be publicly traded, and the separate corporate existence of the Company will cease. Following the consummation of the merger, the registration of our common stock and our reporting obligations under the Exchange Act will be terminated. In addition, upon the consummation of the merger, our common stock will no longer be listed on any stock exchange or quotation system, including the NYSE.

HCR ManorCare Transactions

Alternative Plan Sponsor Agreement

        In connection with the merger and the other transactions contemplated by the merger agreement, on April 25, 2018, the Company entered into the alternative plan sponsor agreement with HCR ManorCare, ProMedica, and the ProMedica-Welltower JV. The alternative plan sponsor agreement contemplates that, among other things, pursuant to the amended Plan, ProMedica will acquire all of the newly issued common stock of HCR ManorCare, in exchange for a cash contribution (consisting of either a capital contribution or a combination of a capital contribution and an unsecured, subordinated loan in a principal amount not to exceed $550 million) by ProMedica to HCR ManorCare in an amount sufficient to pay, in full, all claims in respect of HCR ManorCare's credit facility, dated as of July 17, 2017 with RD Credit, LLC, as administrative agent and collateral agent, as amended (referred to as the "Centerbridge facility"), an agreed deferred rent obligation owed to the Company and its subsidiaries in the amount of approximately $440 million (referred to as the "agreed deferred rent obligation") and a distribution to the holders of HCR ManorCare's existing preferred and common equity in the amount of $50 million (referred to as the "total equity distribution"), each of which will be paid at the closing of the HCR ManorCare transactions. Payment of these amounts will not increase the merger consideration, nor will the amounts be distributed to the Company's stockholders of record as of the date of the merger. If the alternative plan sponsor agreement is terminated and instead the QCP-HCR ManorCare transactions are consummated, any claims of the Company and its subsidiaries against HCR ManorCare will be discharged in accordance with the initial plan sponsor agreement.

        The amended Plan includes the following terms, which shall apply if the HCR ManorCare transactions are consummated:

•

the agreed deferred rent obligation will be paid in full and the balance of the Company's and its subsidiaries' claims against HCR ManorCare will be waived and released;



•

all creditors (including creditors holding claims subordinated pursuant to section 510(b) of the Bankruptcy Code) of HCR ManorCare other than the Company and its subsidiaries will be unimpaired under the amended Plan;

27

Table of Contents

•

holders of HCR ManorCare's existing preferred and common equity will each receive a portion of the total equity distribution, allocated as set forth in the amended Plan; and



•

the amended Plan will include customary releases and exculpation by HCR ManorCare of reorganized HCR ManorCare, its current and former representatives, ProMedica, the Company and certain other parties.

        The alternative plan sponsor agreement contains additional commitments by HCR ManorCare, ProMedica and the Company relating to the conduct of the HCR ManorCare bankruptcy, including for HCR ManorCare to use reasonable best efforts to pursue entry of the confirmation order within 65 days following the date of the alternative plan sponsor agreement.

        The consummation of the HCR ManorCare transactions is subject to certain conditions, including (subject to certain terms set forth in the alternative plan sponsor agreement):

•

the receipt of certain state licensing approvals with respect to the HCR ManorCare transactions;



•

the entry by the bankruptcy court in the HCR ManorCare bankruptcy of the confirmation order; and



•

no entry of an order by the bankruptcy court dismissing the HCR ManorCare bankruptcy or converting the HCR ManorCare bankruptcy into a case under Chapter 7 of the Bankruptcy Code or an order materially inconsistent with the alternative plan sponsor agreement, the amended Plan or the confirmation order in a manner adverse to ProMedica or the Company.

        The obligation of HCR ManorCare to consummate the HCR ManorCare transactions is also conditioned upon compliance by ProMedica in all material respects with its pre-closing obligations under the alternative plan sponsor agreement, while the obligation of ProMedica to consummate the HCR ManorCare transactions is also conditioned upon a court of competent jurisdiction not having determined that HCR ManorCare has breached in any material respect its pre-closing obligations under the alternative plan sponsor agreement.

        The alternative plan sponsor agreement will automatically terminate if the merger agreement is terminated. The alternative plan sponsor agreement may also be terminated by the Company if:

•

an order confirming the amended Plan is not entered within 65 days following the date of the alternative plan sponsor agreement;



•

the HCR ManorCare transactions have not been consummated by 11:59 p.m., New York City time, on October 12, 2018; or



•

HCR ManorCare fails to pay such cash and cash equivalents available to pay all or part of the reduced cash rent (as defined in the alternative plan sponsor agreement) after making all transfers of funds permitted under the Centerbridge facility, and retaining such reserves and making such other expenditures that either HCR ManorCare's chief restructuring officer or board of directors has determined would be necessary to allow HCR ManorCare to operate in the ordinary course of business.

        Either HCR ManorCare or ProMedica may also terminate the alternative plan sponsor agreement if the Plan Transactions have not been consummated by 11:59 p.m., New York City time, on October 15, 2018. The alternative plan sponsor agreement also contains various other termination rights. If the alternative plan sponsor agreement is terminated, the initial plan sponsor agreement will remain in effect and the parties thereto will be obligated, subject to the terms and conditions of the initial plan sponsor agreement, as amended as described below, to consummate the QCP-HCR ManorCare transactions.

        HCR ManorCare, ProMedica and the Company have made customary representations, warranties and covenants in the alternative plan sponsor agreement. ProMedica has further agreed to reimburse

28

Table of Contents

HCR ManorCare for certain restructuring costs paid from and including May 1, 2018 until the earlier of (i) the effective date of the amended Plan or (ii) the date of termination of the alternative plan sponsor agreement, in an aggregate amount not to exceed $2 million per calendar month.

Amendment to Initial Plan Sponsor Agreement

        Concurrently with the execution of the alternative plan sponsor agreement, HCR ManorCare, the Company, HCP Mezzanine Lender, LP and the lessors identified therein (collectively, together with the Company and HCP Mezzanine Lender, LP, the "purchaser parties") entered into an amendment to the initial plan sponsor agreement, pursuant to which the purchaser parties consented to HCR ManorCare's entry into the alternative plan sponsor agreement and the alternative restructuring support agreement (as defined below). The amendment to the initial plan sponsor agreement also makes termination of the alternative plan sponsor agreement a condition to the consummation of the QCP-HCR ManorCare transactions, extends the outside date for consummation of the transactions contemplated by the initial plan sponsor agreement to January 15, 2019 and makes certain other changes to the terms of the initial plan sponsor agreement.

Alternative Restructuring Support Agreement

        Concurrently with the execution of the alternative plan sponsor agreement, HCR ManorCare, ProMedica Health System, Inc., MC Operations Investments, LLC, a wholly owned indirect subsidiary of the Company, and certain holders of the common stock of HCR ManorCare (together with the ProMedica Health System, Inc. and MC Operations Investments, LLC, referred to as the "restructuring support parties"), entered into an alternative restructuring support agreement (referred to as the "alternative restructuring support agreement"), pursuant to which, subject to the terms and conditions therein, the restructuring support parties, as the owners of common stock of HCR ManorCare and/or the sponsor under the alternative plan sponsor agreement, covenanted to, among other things, support the HCR ManorCare transactions and the amended Plan. In addition, the restructuring support parties agreed not to transfer, sell or pledge their HCR ManorCare common stock or the right to vote unless the transferee of those shares joins the alternative restructuring support agreement.

        All obligations pursuant to the alternative restructuring support agreement will terminate upon the earlier of the effectiveness of the amended Plan or the date of termination of the alternative plan sponsor agreement and the initial plan sponsor agreement. As of April 25, 2018, the restructuring support parties collectively owned 38,901,801 shares of common stock of HCR ManorCare, representing more than 80% of the total shares of common stock of HCR ManorCare issued and outstanding on that date.

Background of the Merger

        The Company was formed in 2016 to hold a portfolio of properties leased to HCR ManorCare under a master lease agreement (referred to as the "master lease"), 28 other healthcare related properties, a deferred rent obligation due from HCR ManorCare under the master lease and an equity method investment in HCR ManorCare. Prior to its separation from HCP, Inc. (referred to as "HCP"), which was completed on October 31, 2016, the Company was a wholly owned subsidiary of HCP. In connection with the separation, HCP transferred to certain subsidiaries of the Company the equity interests of the entities that hold the Company's business. Pursuant to the separation agreement, dated as of October 31, 2016, by and between HCP and the Company, HCP effected the separation by means of a pro rata distribution of substantially all of the outstanding shares of Company common stock to HCP stockholders of record as of the close of business on October 24, 2016 (referred to as the "spin-off").

        HCR ManorCare's financial position had deteriorated significantly in the several years prior to the spin-off. In light of these circumstances, prior to the spin-off, HCR ManorCare and HCP entered into

29

Table of Contents

several arrangements and amendments to the master lease, which, among other things, provided for the sale of certain facilities, deferred rent payments, reset rent escalations and extended the terms of the master lease.

        In the months following the spin-off, the Company's board and management undertook a detailed review of the Company's portfolio and the continued deterioration of HCR ManorCare's businesses. Along with representatives of Houlihan Lokey Capital, Inc., the Company's financial advisor in connection with this portfolio review, members of the Company's senior management visited more than 100 of the Company's properties and undertook a detailed analysis assessing, among other things, the value and strategic positioning of the Company's properties and the extent and potential cost of capital expenditures necessary to keep the properties competitive in the marketplace.

        During and following this detailed review, the Company and HCR ManorCare engaged in approximately 16 months of negotiations concerning a comprehensive restructuring of the economic relationship between the parties that culminated on March 2, 2018 with the execution by the Company and HCR ManorCare of the initial plan sponsor agreement.

        The negotiations between the Company and HCR ManorCare included a series of forbearance agreements, defaults and litigation that preceded the execution of the initial plan sponsor agreement and the commencement of the HCR ManorCare bankruptcy as described below.

        On April 5, 2017, the Company and HCR ManorCare entered into a forbearance agreement, which provided, among other things, for specified rent payments in each of April, May and June 2017 and the deferral of certain rent. Around this time, the Company, HCR ManorCare, HCR ManorCare's management, its controlling stockholder and its lenders began engaging in negotiations regarding a potential out-of-court restructuring of HCR ManorCare.

        On June 2, 2017, in connection with the acceleration of loans by its secured lenders, HCR ManorCare failed to make the required rent payments to the Company under the forbearance agreement.

        On July 1, 2017, the Company formally engaged Lazard as a financial advisor in connection with the negotiations with HCR ManorCare.

        In July 2017, the Company sent a notice of default and a subsequent declaration of default to HCR ManorCare under the master lease.

        On August 17, 2017, after several months of continued negotiations without an agreement regarding a long-term restructuring of the master lease or other out-of-court restructuring of HCR ManorCare, the Company commenced a litigation seeking the appointment of a receiver for the HCR ManorCare subsidiary party to the master lease.

        On November 15, 2017, Mark Ordan, the Company's Chairman and Chief Executive Officer, and Steven Cavanaugh, the Chief Executive Officer of HCR ManorCare, received a letter from ProMedica. In the letter, ProMedica requested that the Company and HCR ManorCare enter into discussions with ProMedica regarding ProMedica's potential interest in acquiring HCR ManorCare and certain of the Company's properties, and having the Company and HCR ManorCare enter into new lease agreements. ProMedica did not propose in the letter any price or other financial terms for such a transaction, and ProMedica indicated that any transaction would be subject to the completion of due diligence. Following the receipt of the ProMedica letter, Mr. Ordan and members of the board discussed the letter, as well as the risk that any new lease agreement at a market rent based on HCR ManorCare's poor performance could undervalue the Company's assets and put the Company in a precarious position under its debt covenants. They also discussed that a single tenant strategy was contrary to what the board had determined was in the Company's best interest.

30

Table of Contents

        Following his discussions with members of the board and at their direction, on November 20, 2017, Mr. Ordan sent a letter to ProMedica, in which Mr. Ordan explained that the Company was not interested in engaging in discussions with ProMedica regarding its proposal, that the Company did not believe it was in its best interests to remain undiversified and risk further erosion at the hands of a single tenant, and that any market rent based on HCR ManorCare's poor performance would undervalue the Company's assets.

        In mid-December 2017, Mr. Ordan met with representatives of a financial sponsor with a significant real estate presence in response to the financial sponsor's indication of interest in acquiring HCR ManorCare's hospice business. Mr. Ordan and the representatives of the financial sponsor discussed the financial sponsor's interest, but the financial sponsor did not propose a definitive proposal or any pricing terms. Representatives of the financial sponsor stated that the financial sponsor's interest was solely in respect of HCR ManorCare's hospice business, and not any other portion of HCR ManorCare's business or the Company's business. Prior to the signing of the merger agreement, the financial sponsor did not make and as of the date of this proxy statement, the financial sponsor has not made any proposal to acquire the Company or any portion of its assets.

        On December 22, 2017, the Company and HCR ManorCare entered into another forbearance agreement and amendment to the master lease, which, among other things, provided for HCR ManorCare to pay a reduced cash rent under the master lease until November 30, 2018, and acknowledged HCR ManorCare's expectation that it would be unable to pay a material portion of such rent through the end of November 30, 2018.

        On January 30, 2018, the Company announced that HCR ManorCare failed to make a required $14 million rent payment due under the master lease on January 25, 2018.

        In the several months leading up to March 2, 2018, the date on which the Company and HCR ManorCare entered into the initial plan sponsor agreement, the Company engaged in extensive negotiations with HCR ManorCare and affiliates of The Carlyle Group (referred to as "Carlyle"), the controlling stockholders of HCR ManorCare, in an attempt to reach agreement on a comprehensive restructuring of the economic relationship between the parties that eventually resulted in the signing of the initial plan sponsor agreement.

        During February 2018, the Company discussed with representatives of Goldman Sachs a potential role for Goldman Sachs in advising the Company in connection with the Company's strategic positioning following a potential transaction with HCR ManorCare, including a restructuring and/or refinancing of the Company's capital structure. In engaging Goldman Sachs, the Company focused on the relevance of Goldman Sachs' expertise in equity and debt capital markets to any restructuring and/or refinancing of the Company's capital structure. The engagement was formalized on March 12, 2018, and it included a commitment, subject to certain conditions, for the Company to also engage Goldman Sachs as an advisor in connection with certain extraordinary transactions, including a merger or business combination involving the Company.

        On February 21, 2018, Mr. Ordan and Paul J. Klaassen, the board's lead independent director, received a non-binding written proposal from Welltower (referred to as the "initial Welltower proposal"), pursuant to which Welltower proposed that an entity formed by Welltower and minority owned by ProMedica would acquire QCP for all-cash consideration of $15.25 per share of common stock, with such transaction occurring in parallel with, and being conditioned upon, ProMedica's acquisition of HCR ManorCare. The purchase price of $15.25 per share represented a premium of 22% to the Company's closing price of $12.51 on February 21, 2018. The Welltower proposal was conditioned, among other things, on the completion of due diligence, but was not conditioned on the receipt of any third-party financing. The initial Welltower proposal did not provide any background information concerning the terms or status of ProMedica's proposed acquisition of HCR ManorCare.

31

Table of Contents

        On February 22, 2018, at a regularly scheduled meeting of the board, the directors, management, the Company's legal counsel for the restructuring negotiations with HCR ManorCare, and Lazard discussed the ongoing negotiations with HCR ManorCare and the initial Welltower proposal. The consensus among the directors was that HCR ManorCare's recent nonpayment of rent was a negotiating tactic intended to exert public pressure on the Company. The directors, management and Lazard also discussed the fact that the proposed consideration of $15.25 per share in the initial Welltower proposal did not account for the benefits of the potential transaction being negotiated with HCR ManorCare. In light of the discussion regarding the proposed price and the conditional nature of the initial Welltower proposal, as well as the advanced state of negotiations between the Company and HCR ManorCare regarding the initial plan sponsor agreement and the board's judgment that engaging on the initial Welltower proposal could jeopardize or materially delay a potential transaction with HCR ManorCare that the board thought could resolve the Company's most pressing and challenging issues in a constructive manner for the benefit of the Company's stockholders, the board instructed Mr. Ordan to decline the initial Welltower proposal.

        Following the board meeting on February 22, 2018, Mr. Ordan called Thomas J. DeRosa, the Chief Executive Officer of Welltower, which call was followed by a letter, to state that after discussion with the board, the Company did not have any interest in Welltower's proposal. In the conversation with Mr. Ordan, Mr. DeRosa stated that he understood the board's decision not to engage on a proposal with proposed consideration of $15.25 per share, but that Welltower would remain interested in acquiring the Company. On February 23, 2018, Mr. DeRosa sent a follow-up letter to Mr. Ordan and Mr. Klaassen indicating Welltower's continued interest in acquiring the Company and its willingness to engage in a discussion of the per share consideration. Later that day Mr. Ordan emailed Mr. DeRosa thanking him for the follow-up letter and stating that Mr. Ordan had shared Mr. DeRosa's continued interest with the board.

        On March 2, 2018, the Company and HCR ManorCare entered into the initial plan sponsor agreement and certain related agreements. The initial plan sponsor agreement contemplated, among other things, that pursuant to a prepackaged plan of reorganization of HCR ManorCare under chapter 11 of the Bankruptcy Code, a subsidiary of the Company would acquire all of the issued and outstanding capital stock of HCR ManorCare in exchange for the discharge of all claims of the Company against HCR ManorCare and its subsidiaries arising under HCR ManorCare's guaranty of the master lease. On March 4, 2018, as required by the initial plan sponsor agreement, HCR ManorCare filed a voluntary petition for reorganization under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

        Following the public announcement of the initial plan sponsor agreement, the Company's stock price increased from $12.60 (closing price on March 1, 2018) to $17.00 (closing price on March 5, 2018), and continued to increase through March and April of 2018.

        On March 15, 2018, a representative of Barclays plc (referred to as "Barclays"), financial advisor to Welltower, contacted Mr. Ordan. The representative of Barclays stated that Welltower remained interested in acquiring the Company and could likely increase the proposed consideration to a per share price in the mid-to-high teens. Based on his previous conversations with the directors, including the discussion at the February 22 board meeting, Mr. Ordan responded that the proposed consideration would need to be at least in the high teens on a per share basis for the board to consider entering into discussions.

        Also on March 15, 2018, Guy Sansone, who was serving as a consultant to the Company on-site at HCR ManorCare and, as publicly announced, was expected to assume the role of Chief Executive Officer of HCR ManorCare upon consummation of the QCP-HCR ManorCare transactions, was contacted by an individual with significant experience in the Company's and HCR ManorCare's industry (referred to as "Individual A") regarding potentially submitting a proposal to acquire the

32

Table of Contents

Company. Mr. Sansone referred Individual A to Mr. Ordan, who agreed to an in-person meeting with Individual A the following week.

        On March 19, Mr. Ordan met in person with Mr. DeRosa. Mr. DeRosa reiterated Welltower's interest in a potential transaction and discussed the strategic rationale for partnering with ProMedica and the importance to Welltower of announcing any transaction prior to Welltower's upcoming earnings announcement.

        Later on March 19, Mr. Ordan met in person with Individual A. Individual A indicated that he was interested in acquiring the Company, but did not identify potential financing sources or provide any other specific terms. Mr. Ordan and Individual A then discussed the possible benefits of a potential acquisition transaction as well as other industry topics. Mr. Ordan told Individual A that he would make himself available to further discuss any proposal from Individual A that had concrete terms and a feasible financing plan.

        On April 2, 2018, Individual A spoke with a representative of Goldman Sachs. Individual A reiterated his interest in acquiring the Company, and stated that he might personally contribute approximately $250 million of equity financing in connection with any proposal if he were to make a proposal. Individual A did not, however, identify any other potential financing sources or provide any other specific terms of a proposal. The representative of Goldman Sachs encouraged Individual A to seek financing and make a formal proposal if he wanted his interest to be considered by the board. Individual A responded that he would contact potential financing sources and continue working on formulating a bona fide proposal.

        On April 3, 2018, at the request of Mr. DeRosa and Randy Oostra, President and Chief Executive Officer of ProMedica, Mr. Ordan and representatives of Goldman Sachs met in person with representatives of Welltower, including Mr. DeRosa, and representatives of ProMedica, including Mr. Oostra. At the meeting, the representatives of ProMedica provided a detailed presentation regarding ProMedica's business, mission, strategy, capital structure and financial resources. Representatives of Welltower and ProMedica reviewed the strategic rationale for their proposed acquisition of the Company and HCR ManorCare, including their intention to make a significant capital expenditures commitment to HCR ManorCare should a transaction be consummated, and provided a high-level outline of the potential business arrangements between Welltower and ProMedica. Representatives of Welltower and ProMedica did not make any specific transaction proposals, and neither price nor transaction structure were discussed at the meeting.

        On April 5, 2018, Mr. Ordan and Greg Neeb, the Company's President and Chief Investment Officer, met with representatives of a financial sponsor (referred to as "Party B"), that was a shareholder in a privately held competitor of HCR ManorCare (referred to as "Party C") at an ordinary course meeting to discuss industry matters and commercial relationships. At the meeting, representatives of Party B described a potential "Reverse Morris Trust" transaction pursuant to which the Company would spin-off HCR ManorCare's Heartland home health and hospice business into a newly formed public company with a leveraged capital structure and then merge the newly formed public company with Party C (referred to as the "RMT transaction"). The Company's existing stockholders would own approximately 55% of such combined company. Representatives of Party B also proposed that the cash proceeds of the debt raised at the new combined company would be distributed to the Company prior to the spin-off, with the Company de-levering and remaining a publicly traded company owning skilled nursing facilities and other assets. Following the meeting, Party B's financial advisor provided the Company, through representatives of Goldman Sachs, with a presentation providing additional details regarding the proposed transactions.

        On April 7, 2018, representatives of Party B's financial advisor contacted a representative of Goldman Sachs to discuss the potential transaction described in Party's B's presentation. The

33

Table of Contents

representative of Goldman Sachs informed the representatives of Party B's financial advisor that Goldman Sachs would discuss the proposed RMT transaction with the Company.

        On April 9, 2018, Mr. Ordan and Mr. Klaassen received a non-binding joint written proposal from Welltower and ProMedica (referred to as the "joint proposal"), pursuant to which an entity formed by Welltower and ProMedica would acquire QCP for all-cash consideration of $20.35 per share of common stock. In the joint proposal, Welltower and ProMedica discussed the history of their interest, that Welltower had initially offered to pay consideration of $15.25 per share of common stock in February 21, when shares of common stock had a closing trading price of $12.51, that Welltower increased the proposed consideration in March when, as disclosed for the first time in the joint proposal, Welltower had been willing to pay $18.00 per share, and that the $20.35 per share of common stock proposed in the joint proposal represented a premium of 63% to the unaffected price of the common stock on February 21 when Welltower made the initial Welltower proposal. The joint proposal provided that the acquisition of the Company would occur in parallel with, and would be conditioned upon, ProMedica's acquisition of HCR ManorCare. The joint proposal also provided additional details regarding ProMedica's acquisition of HCR ManorCare, including several proposed terms for ProMedica's assumption of the Company's obligations under HCR ManorCare's original plan of reorganization and the initial plan sponsor agreement and related matters. The joint proposal had no financing condition, and Welltower and ProMedica stated that they anticipated that a definitive agreement could be executed and announced within 20 to 30 days.

        Later on April 9, 2018, Mr. Ordan forwarded the joint proposal to the rest of the board and indicated that management and the Company's advisors would work to clarify the issues that were not addressed in the joint proposal and proceed with valuation and planning workstreams so that the board would be prepared to fully consider a firm and actionable proposal, should it be forthcoming. After forwarding the joint proposal, Mr. Ordan spoke with several of the directors and also had conversations with representatives of Goldman Sachs, Lazard and Wachtell, Lipton, Rosen & Katz (referred to as "Wachtell Lipton"), the Company's legal counsel.

        On April 11, 2018, Individual A spoke again with a representative of Goldman Sachs. Individual A reiterated his interest in making a proposal to acquire the Company, but did not indicate that he made progress on finding additional equity or debt financing sources and did not provide a concrete proposal. The representative from Goldman Sachs and Individual A had another similar conversation on April 16, 2018. Prior to the signing of the merger agreement, Individual A did not make, and as of the date of this proxy statement, Individual A has not made a formal proposal.

        On April 11, 2018, representatives of Goldman Sachs received another presentation from the financial advisor to Party B. The revised presentation included the same RMT transaction structure as in Party B's initial proposal, but also proposed that concurrently with the RMT transaction, the Company would sell its skilled nursing facility business to Party B for cash. Following these transactions, the Company would remain a publicly traded company, but would own only assets related to the memory care business. The presentation did not provide any indication of the timing of these transactions or the conditions to each transaction, any assurance as to the aggregate amount to be received by the Company's shareholders, or the sources of financing for the acquisition by Party B of the Company's skilled nursing facility business.

        From April 11, 2018 until April 13, 2018, Wachtell Lipton negotiated the terms of confidentiality agreements with each of Welltower's and ProMedica's legal counsel, which were finalized and executed on April 13, 2018. Subsequently, the Company provided Welltower and ProMedica with access to an electronic data room that contained information relating to the Company and its business, properties and tenants.

        On April 13, 2018, Wachtell Lipton provided Welltower's and ProMedica's legal counsel with a non-binding term sheet (referred to as the "initial term sheet") setting forth certain terms that the

34

Table of Contents

Company considered important in any transaction with Welltower and ProMedica. Among other things, the initial term sheet provided that (a) the merger would not be conditioned on the completion of the transactions contemplated by HCR ManorCare's original plan of reorganization, meaning that Welltower would be obligated to consummate the merger regardless of whether the Company had completed the QCP-HCR ManorCare transactions; (b) Welltower would have the right to delay the closing of the merger until four months after the date of the merger agreement in order to obtain state regulatory approvals for the QCP-HCR ManorCare transactions or the sale of the equity of HCR ManorCare to ProMedica or another third party, (c) a merger agreement would need to include a go-shop period and (d) there should be a low termination fee of 1% of the Company's equity value payable by the Company for a termination pursuant to a fiduciary out provision, including as a result of the go-shop process.

        On April 15, 2018, at a special meeting of the board, Mr. Ordan updated the board on the status of discussions with Welltower and ProMedica, including the execution of non-disclosure agreements with Welltower and ProMedica, the indications of interest received from Individual A and Party B and Welltower's and ProMedica's due diligence efforts, and summarized his conversations with representatives of HCR ManorCare and Carlyle, in which such representatives indicated that HCR ManorCare and Carlyle were supportive of ongoing due diligence efforts and would consider an amendment to HCR ManorCare's original plan of reorganization and an alternative restructuring support agreement to facilitate the transactions contemplated by the joint proposal. A representative of Wachtell Lipton discussed with the directors their legal obligations in the context of considering the potential sale of the Company, including in the context of the joint proposal. Together with management and the Company's financial advisors, the board discussed the financial terms of the joint proposal and the indications of interest from Individual A and Party B, and representatives of Goldman Sachs and Lazard provided an overview of the businesses of Welltower and ProMedica, including a discussion of how their respective business models could position them to have a unique strategic rationale for pursuing the joint proposal. The directors, management and the Company's financial advisors also discussed the Company's stand-alone prospects, including factors that have led to a decline in HCR ManorCare's businesses, including expense growth outpacing reimbursement rates, declining length of stay, reduction of discharges from hospitals and competitive challenges from new and modernized senior housing, memory care and skilled nursing facilities, as well as the risks relating to the Company's assumption of additional debt and the need for significant capital expenditures if the HCR ManorCare acquisition were to be completed and the ability of the Company to comply with its debt covenants and seek waivers or refinancings of the Company's and HCR ManorCare's credit facilities, and alternative strategies that could be pursued, including breaking-up the Company's businesses and serially selling them to different purchasers, and the risks and potential benefits inherent in these strategies. The directors, management and the Company's financial advisors also discussed the relatively low premium of the price proposed in the joint proposal to the then-current trading price of the common stock and evaluated the upside and downside risks to the then-current trading price of the common stock, with the consensus of the board being that given the Company's stand-alone prospects, the state of the industry and other alternatives reasonably available to the Company, as well as the rapid increase in the trading price of the common stock over the previous two months, there was substantial downside risk to the then-current trading price of common stock and to pursuing a stand-alone business strategy, particularly with the steepening of the negative trajectory of HCR ManorCare's businesses and the Company's potential future inability to comply with its debt covenants. The board, together with management and advisors, also discussed other aspects of the joint proposal and the terms that the Company could pursue in the proposed transaction, including with respect to the financing certainty, closing conditions, stockholder approval requirements, termination fees and go-shop and fiduciary out provisions. The board, together with management and advisors, also discussed (i) the speculative nature of the indications of interest from Individual A and Party B, (ii) the unlikely prospect that such indications of interest would result in superior value to the Company's stockholders

35

Table of Contents

than the proposed transaction with Welltower and ProMedica and (iii) that each of those parties was aware that should they have a more actionable proposal, including, in the case of Party B, a proposal to acquire the Company as a whole rather than to effect several transactions relating to select parts of the Company, they could submit it at any time. The board directed management to continue to pursue the due diligence process with Welltower and ProMedica and continue to negotiate the terms of the possible transaction with Welltower and ProMedica while also directing Goldman Sachs to continue to maintain an open line of communication with Individual A and Party B.

        On April 16, 2018, representatives of Barclays spoke with representatives of Goldman Sachs and stated that a transaction structure that provided for the possibility that Welltower would be required to acquire the Company prior to ProMedica acquiring HCR ManorCare was not acceptable to Welltower due to, among other things, REIT-qualification considerations. The representatives of Barclays indicated that Welltower would propose a structure in which Welltower would only acquire the Company concurrently with (but immediately after) ProMedica's acquisition of HCR ManorCare, but that Welltower would be required to pay a reverse termination fee to the Company if ProMedica's acquisition of HCR ManorCare did not occur under certain circumstances. The representatives of Barclays explained that representatives of Gibson Dunn & Crutcher LLP (referred to as "Gibson Dunn"), legal counsel to Welltower, would provide additional details regarding the proposed structure to representatives of Wachtell Lipton.

        On the morning of April 17, 2018, a representative of Gibson Dunn contacted a representative of Wachtell Lipton to communicate Welltower's positions on the items raised in the term sheet, including stating Welltower's position that the only transaction structure that was feasible for Welltower was one in which Welltower would acquire the Company concurrently with (but immediately after) ProMedica's acquisition of HCR ManorCare, and that Welltower was prepared to pay a $150 million reverse termination fee if Welltower's acquisition of the Company was not consummated by a specified date as a result of ProMedica's failure to complete the acquisition of HCR ManorCare through the bankruptcy process, so long as the Company was not at fault. In addition, representatives of Gibson Dunn discussed the possibility of a ticking fee to incentivize Welltower and ProMedica to proceed expeditiously with obtaining all required approvals, including state licensing approvals, for ProMedica's acquisition of HCR ManorCare.

        On the evening of April 17, 2018, Mr. Ordan met with Mr. DeRosa and Mr. Oostra. The parties discussed moving forward with due diligence and commencing negotiation of definitive documentation to formalize Welltower's and ProMedica's joint proposal based on a structure in which Welltower would only be required to acquire the Company if ProMedica acquired HCR ManorCare through the bankruptcy process, and that Welltower would pay a significant reverse termination fee if the transaction was not completed as a result of the bankruptcy process. Mr. Ordan emphasized the importance to the Company of a go-shop period, a low fiduciary termination fee and a large reverse termination fee with broad triggers to ensure there was maximum closing certainty, but these items remained open points. Mr. DeRosa stated that it was essential to Welltower that the proposed transaction be announced no later than Wednesday April 25, 2018.

        On April 18, 2018, a representative of Goldman Sachs spoke with a representative of Party B's financial advisor and communicated the board's belief that Party B's proposal as structured would not result in superior value relative to the other alternatives available to the Company. The representative of Goldman Sachs encouraged Party B to find sufficient financing sources and submit a proposal to acquire the entire Company.

        On April 20, 2018, Wachtell Lipton delivered a draft merger agreement to Gibson Dunn and Shumaker, Loop & Kendrick, LLP (referred to as "Shumaker"), legal counsel to ProMedica. The draft merger agreement provided, among other things, for (a) a go-shop period expiring 45 days following the date of the merger agreement, (b) a termination fee payable by the Company to Welltower of 1% of the Company's equity value for a termination pursuant to a fiduciary out provision, (c) a reverse

36

Table of Contents

termination fee of $300 million payable by Welltower to the Company in specified circumstances and (d) a ticking fee commencing on the date the Company's stockholders approved the merger. Representatives of Wachtell Lipton, Gibson Dunn and Shumaker also began having discussions regarding the proposed terms of the alternative plan sponsor agreement, the alternative restructuring support agreement, the amendment to the initial plan sponsor agreement and related matters.

        On April 21, 2018, representatives of Party B's financial advisor contacted a representative of Goldman Sachs and stated that in response to Goldman Sachs' guidance, Party B was shifting focus away from a proposal that included a RMT transaction structure that left the Company as a publicly traded entity with a narrowly focused asset base and towards a proposal to acquire the Company as a whole. The representative of Party B's financial advisor indicated that Party B believed it would very soon present a fully-financed proposal to acquire the Company as a whole, but did not provide any details about the sources of such potential financing or process for obtaining it. Prior to the signing of the merger agreement, Party B did not present or provide, and as of the date of this proxy statement, Party B has not presented or provided, any proposal to acquire the Company as a whole or any update to its prior RMT transaction proposal.

        On April 21, 2018, at a special meeting of the board, Mr. Ordan updated the board on the state of discussions with Welltower and ProMedica, including Mr. DeRosa's proposed timing deadline and the positions of the parties with respect to possible transaction structures, the proposed go-shop provision and the scope and size of the fiduciary termination fee and the reverse termination fee. Mr. Neeb discussed with the board the financial projections management had prepared and provided to the board, the reasons behind the expected substantial drop in performance between actual 2017 financial metrics and projections for 2018 and beyond, including noting that the earnings before interest, taxes, depreciation, amortization and rent expense (referred to as "EBITDAR") of the core skilled nursing facility business has declined from $358 million in 2013 to $155 million projected for 2019 (with actual EBITDAR of $43 million for such business in the first quarter of 2018), and the EBITDAR for the assisted living business has declined from $75 million in 2016 to $60 million projected for 2019 (with actual EBITDAR of $15 million for such business in the first quarter of 2018). Along with input from Mr. Sansone that Mr. Neeb described, considerations and risks regarding continuing with the consummation of the QCP-HCR ManorCare transactions and operating the Company on a stand-alone basis were discussed, including risks relating to the continued deterioration of the Company's and HCR ManorCare's businesses, the Company's future ability to comply with its debt covenants and/or seek a waiver or a refinancing of its and HCR ManorCare credit facilities, the cultural, cost and structural challenges associated with integrating and operating HCR ManorCare businesses, potential HCR ManorCare employee retention issues, drastically shifting from a business with 10 employees to a business with thousands of employees and the significant capital expenditures required to maintain the competitiveness of the Company's properties. The board and management also discussed the factors that have led to a decline in HCR ManorCare's businesses, including expense growth outpacing reimbursement rates, declining length of stay, reduction of discharges from hospitals and competitive challenges from new and modernized senior housing, memory care and skilled nursing facilities. Mr. Neeb also reviewed the assumptions underlying management's projections and the rationale for the underlying assumptions, pointing out the extent to which different assumptions were included in, and had varying effects on, management's financial model. The board, management and representatives of Goldman Sachs and Lazard discussed the potential benefits and significant risks of the Company's stand-alone plan, as well as the reasonableness of, and risks inherent in, management's assumptions. Next, representatives of Goldman Sachs and Lazard led a discussion, based on materials previously provided to the board, of the Company's strategic alternatives, including the potential merger with Welltower, management's stand-alone plan, a strategy of divesting key components of the Company to separate buyers, and the indications of interest from Individual A and Party B. Representatives of Goldman Sachs reviewed a preliminary financial analysis and discussed key considerations of each of the strategic alternatives. Representatives of Lazard also presented a preliminary financial analysis of

37

Table of Contents

strategic alternatives, based on materials previously provided to the board, and noted where the Lazard analysis differed from the Goldman analysis. A representative of Wachtell Lipton also discussed with the directors their legal obligations in the context of considering the potential sale of the Company, including factors for the board to consider in evaluating the financial analysis of its financial advisors. The board, management and representatives of Goldman Sachs, Lazard and Wachtell Lipton discussed the strategic alternatives, including their viability, risks, and relative certainty of value, as well as structural considerations relating to the timing and conditionality of the proposed transactions with Welltower and ProMedica (including with Mr. Neeb noting that if the Company were to lose its REIT status, Welltower would no longer proceed with or have interest in a proposed transaction), the size and scope of a possible reverse termination fee and the flexibility that would be afforded by a go-shop period, including potential parties that would be contacted during such go-shop period. At the conclusion of the meeting, the board directed management to continue to negotiate for the best terms that could be obtained from Welltower and ProMedica.

        On April 21, 2018, Gibson Dunn delivered to Wachtell Lipton a revised draft of the merger agreement, which, among other things, (a) did not provide for a go-shop period, (b) provided for a termination fee of 3.0% of the Company's equity value payable by the Company for a termination pursuant to a fiduciary out provision and (c) provided for a ticking fee commencing 6 months after the date of the merger agreement. Thereafter, representatives of Wachtell Lipton and Gibson Dunn had an initial discussion regarding Gibson Dunn's mark-up of the draft merger agreement. On each of the next two days, April 22, 2018 and April 23, 2018, representatives of Gibson Dunn and Wachtell Lipton had additional discussions concerning the merger agreement, including representatives of Gibson Dunn orally reiterating to Wachtell Lipton that Welltower had not changed its position that the size of the proposed reverse termination fee would be $150 million.

        On April 22, 2018, Gibson Dunn, Shumaker and Jones Day, regulatory counsel to ProMedica, delivered to Wachtell Lipton, Sidley Austin LLP (referred to as "Sidley"), legal counsel to HCR ManorCare, and Latham & Watkins LLP (referred as "Latham"), legal counsel to certain subsidiaries and affiliates of HCR ManorCare, drafts of the amended Plan, the alternative restructuring support agreement and related agreements.

        On April 23, 2018, Wachtell Lipton delivered a revised draft of the merger agreement to Gibson Dunn and Shumaker, which provided for, among other things, (a) a go-shop period expiring 60 days following the date of the merger agreement, (b) a bifurcated termination fee payable by the Company of (x) 1% of the Company's equity value for a termination pursuant to a fiduciary out provision under certain circumstances related to acquisition proposals made during the go-shop period and (y) 2% of the Company's equity value for a termination pursuant to a fiduciary out provision under all other circumstances, (c) a reverse termination fee of $300 million and (d) a ticking fee commencing upon the Company's stockholders approving the merger. Following delivery of revised drafts, representatives of Gibson Dunn and Wachtell Lipton engaged in ongoing discussions and negotiations regarding the merger agreement and the ancillary documents.

        Also on April 23, 2013, Wachtell Lipton delivered to Gibson Dunn, Shumaker, Jones Day, Sidley and Latham a revised draft of the amended Plan.

        On the evening of April 23, 2018, Gibson Dunn and Shumaker delivered to Wachtell Lipton, Sidley and Latham a draft of the alternative plan sponsor agreement.

        Also in the evening of April 23, 2018, Mr. DeRosa called Mr. Ordan and stated that Welltower was prepared to increase the base merger consideration from $20.35 per share of common stock to $20.75 per share of common stock and increase the size of its proposed reverse termination fee from $150 million to $250 million. Mr. DeRosa stated that these terms represented Welltower's best and final offer, and would only be available if the transactions contemplated by the merger agreement were announced on or prior to April 25, 2018.

38

Table of Contents

        Later in the evening of April 23, 2018, Gibson Dunn delivered a revised draft of the merger agreement to Wachtell Lipton, pursuant to which, among other things, Welltower accepted the go-shop provisions, but reduced the go-shop period to 45 days (from 60 days proposed by the Company in the prior draft of the merger agreement), proposed a termination fee in the event of a termination pursuant to the fiduciary out provisions of (x) 1.5% of the Company's equity value in certain circumstances related to acquisition proposals made during the go-shop period and (y) 3.0% of the Company's equity value in all other circumstances in which the fee was payable, and proposed a ticking fee commencing 4 months after the date of the merger agreement.

        On the afternoon of April 24, 2018, the board held a special meeting. At the meeting, Mr. Ordan updated the board about the state of negotiations, described the key terms of the transactions and outlined the open issues to be resolved and documentation to be finalized if the board determined to pursue the transactions contemplated by the merger agreement in the timeframe proposed by Welltower. The directors, Mr. Ordan and Mr. Neeb and the Company's financial advisors and legal counsel discussed the current industry environment, the continued deterioration of the Company's and HCR ManorCare's businesses, the risk-adjusted performance of the Company's properties, the challenges to integrate and operate HCR ManorCare's businesses, the significant capital expenditures required to maintain the competitiveness of the Company's properties and the ability of the Company to maintain compliance with its debt covenants and seek waivers and/or refinancings of the Company's and HCR ManorCare's credit facilities, and again reviewed the potential risks and benefits of both the Company's stand-alone plan and the transactions contemplated by the merger agreement, including certainty of value and lack of a financing condition in the proposed merger agreement, as well as the possible benefits to the Company and its stockholders of the go-shop period and the low fiduciary termination fee. Representatives of Wachtell Lipton discussed with the directors their legal obligations in connection with evaluating the transactions contemplated by the merger agreement and described to the board the mechanics of the go-shop provisions and the termination triggers and amounts of the fiduciary termination fee and the reverse termination fee. Representatives of Wachtell Lipton also provided a detailed summary of the other material terms of the merger agreement, the alternative plan sponsor agreement and the related agreements and documents, including discussing the potential outcomes of the various open issues. The board then reviewed and discussed the respective updated financial analyses of the proposed merger presented by representatives of Goldman Sachs and Lazard, as well as the strategic alternatives available to the Company relative to the transactions contemplated by the merger agreement and the relative upside and downside risks to the trading price of the common stock over the long term, particularly given the significant increase of the stock price since the announcement of the initial plan sponsor agreement on March 2, 2018.

        The board then met in executive session without management and further discussed the proposed merger, including the consideration to be paid and the timing and conditionality of the transactions, and the merits of the proposed merger relative to the other strategic alternatives available to the Company, including continuing to operate the Company on a stand-alone basis and the significant risks associated with such alternatives. Following the executive session, the consensus of the board was that the transactions contemplated by the merger agreement, including the merger consideration, represented the best alternative reasonably available to the Company and board directed management and the Company's advisors to proceed with finalizing the draft merger agreement on terms discussed at the meeting and on Welltower's proposed timetable, subject to the final approval of the board.

        Following the board meeting on April 24, 2018, representatives of Wachtell Lipton and Gibson Dunn continued to discuss the draft merger agreement and representatives of Gibson Dunn confirmed that Welltower would accept the Company's proposal that the fiduciary termination fee would be (x) 1.0% of the Company's equity value in certain circumstances related to acquisition proposals made during the go-shop period and (y) 3.0% of the Company's equity value in all other circumstances in which the fee was payable.

39

Table of Contents

        Later that evening, Mr. DeRosa informed Mr. Ordan that following negotiations in the previous 24 hours between Welltower, ProMedica, HCR ManorCare and Carlyle, (a) Welltower and ProMedica agreed that the terms of the amended Plan would provide that upon consummation of the Plan transactions, the existing equityholders of HCR ManorCare would be entitled to a $50 million distribution in respect of their pre-bankruptcy equity interest, and (b) HCR ManorCare would agree to enter into the amendment to the initial plan sponsor agreement, the alternative plan sponsor agreement and the alternative restructuring support agreement and Carlyle would agree to enter into the alternative restructuring support agreement.

        In the late evening of April 24, 2018 and early morning of April 25, 2018, the Company's and Welltower's management, together with representatives of Goldman Sachs and Barclays, engaged in negotiations regarding the per-day amount of the ticking fee. Following negotiations, early in the morning on April 25, 2018, the parties agreed to $0.006 per share per-day ticking fee, subject to approval of the board.

        Throughout the afternoon and evening of April 24, 2018 and throughout the day on April 25, 2018, representatives of Wachtell Lipton, Gibson Dunn, Shumaker, Jones Day, Sidley and Latham discussed and exchanged drafts of the merger agreement and other agreements and documents related to the HCR ManorCare transactions.

        On the morning of April 25, 2018, at a special meeting of the board, Mr. Ordan and representatives of Goldman Sachs, Lazard and Wachtell Lipton reviewed with the directors the progress made since the board's meeting the previous afternoon. The board, management and representatives of Goldman Sachs and Wachtell Lipton discussed the remaining open items and their likely resolution, as well as the anticipated timing for completion of the documentation. The board, management and representatives of Goldman Sachs and Lazard further discussed the strategic alternatives available to the Company relative to the transactions contemplated by the merger agreement, the merger consideration, the certainty of closing and the relative upside and downside risks to the Company's business and trading price of the common stock over the long term, particularly considering the significant increase of the stock price since the announcement of the initial plan sponsor agreement on March 2, 2018. The consensus of the board was that the transactions contemplated by the merger agreement, including the merger consideration, represented the best alternative reasonably available to the Company. Next, representatives of Goldman Sachs and Lazard reviewed for the board their respective financial analyses undertaken in connection with rendering an opinion to the board with respect to the fairness from a financial point of view to the holders of common stock (other than Welltower and its affiliates) of the base merger consideration of $20.75 per share in cash to be paid to such holders pursuant to the merger agreement, as well as the assumptions, limitations and qualifications related thereto. Representatives of Goldman Sachs informed the board that subject to the finalization of the draft merger agreement, Goldman Sachs was prepared to render its fairness opinion. Representatives of Lazard also informed the board the subject to finalization of the merger agreement, Lazard was prepared to render its fairness opinion. Subsequently on April 25, 2018, Goldman Sachs rendered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date, and based upon and subject to the factors and assumptions described to the board and set forth in Goldman Sachs' written opinion, the base merger consideration of $20.75 per share in cash to be paid to the holders of common stock (other than Welltower and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders. Also, subsequently on April 25, 2018, Lazard rendered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations described to the board and set forth in Lazard's written opinion, the base merger consideration of $20.75 per share in cash to be paid to holders of common stock (other than Welltower and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of the written opinions of Goldman Sachs and Lazard to the board, each dated April 25, 2018, are attached as Annex B and Annex C, respectively, to this proxy statement, and are

40

Table of Contents

described in more detail below under " The Merger (Proposal 1)—Opinion of Goldman Sachs " and " The Merger (Proposal 1)—Opinion of Lazard ," respectively.

        At the conclusion of the April 25, 2018 board meeting, upon a unanimous vote of the board, the board approved the proposed merger agreement, the mergers and the HCR ManorCare transactions, and resolved to recommend that the stockholders of the Company approve the merger. The board authorized the members of management to receive on behalf of the board the opinions rendered by each of Goldman Sachs and Lazard (which they subsequently received) and to finalize and execute definitive transaction agreements consistent with the forms of agreements provided to the board prior to the meeting and as discussed at the meeting.

        Following the board meeting, representatives of Wachtell Lipton, Gibson Dunn, Shumaker, Sidley and Latham continued to finalize the transaction documentation throughout the day on April 25, 2018.

        In the early afternoon on April 25, 2018, Reuters published a news report that that Welltower and ProMedica had made an offer that valued the Company "at around $20 per share, close to its current market value." Following release of the news report, the trading price of the Company's common stock increased by approximately 10% to approximately $22.90 from the closing price of $20.80 on April 24, 2018.

        Late in the evening on April 25, 2018, the merger agreement, the alternative plan sponsor agreement and the related transaction agreements were executed, and the Company, Welltower and ProMedica publicly announced the transactions.

        As further described under " The Merger Agreement—Other Covenants and Agreements—Alternative Proposals; No Solicitation ," from the execution of the merger agreement and until the go-shop period end time, subject to specified terms and conditions set forth in the merger agreement, the Company and its subsidiaries, and their respective representatives, were permitted to directly or indirectly solicit, initiate and encourage, whether publicly or otherwise, acquisition proposals from any third party and enter into and maintain discussions or negotiations with respect to acquisition proposals with any third party or otherwise cooperate with, or assist or participate in, or facilitate any inquiries, proposals, discussions or negotiations or the making of any acquisition proposal from any third party.

        After April 25, 2018, representatives of Goldman Sachs contacted 34 potential parties that might have an interest in making a proposal to acquire the Company, including a diverse selection of REITs, health care providers, operators and other strategic parties, financial sponsors and non-profit health organizations. As discussed below, of those contacted, four parties entered into a confidentiality agreement with the Company, and a fifth party contacted (Strategic Party A) was a named "Representative" entitled to receive confidential information under the confidentiality agreement with Financial Sponsor A (as defined below).

        In response to Goldman Sachs' initial outreach, one financial sponsor (referred to as "Financial Sponsor A") requested a draft confidentiality agreement. On April 27, 2018 representatives of Goldman Sachs provided a draft confidentiality agreement to representatives of Financial Sponsor A's financial advisor.

        On April 30, 2018, representatives of Financial Sponsor A contacted representatives of Goldman Sachs requesting that Financial Sponsor A be able to share information under the proposed confidentiality agreement with its financing sources and several other entities. The representative of Financial Sponsor A informed the representatives of Goldman Sachs that Financial Sponsor A planned to work with another industry participant (referred to as "Strategic Party A") with respect to one portion of the Company's and HCR ManorCare's business, and several other financial sponsors and operators in respect of the other portions of the Company's and HCR ManorCare's business.

        On May 3, 2018, at a special meeting of the board, the directors, management and representatives of Goldman Sachs discussed Goldman Sachs' outreach efforts and the responses to date.

41

Table of Contents

Representatives of Wachtell Lipton discussed with the directors their legal duties in the context of the go-shop process and also updated the board on the status of the transactions contemplated by the merger agreement.

        On May 7, 2018, Financial Sponsor A and Strategic Party A jointly submitted a written indication of interest to the Company. The indication of interest did not specify the intended structure of the transaction, provide a specific indicative purchase price or provide information with respect to equity or debt financing sources or their potential commitments or terms.

        On May 9, 2018, the Company and Financial Sponsor A entered into a confidentiality agreement and thereafter the Company began providing diligence information to representatives of Financial Sponsor A and Strategic Party A.

        Later on May 9, 2018, Mr. Ordan and a representative of Goldman Sachs met with a representative of Financial Sponsor A, and in addition to discussing the Company, its assets and its strategy, discussed Financial Sponsor A's experience in the industry and the strategic rationale behind Financial Sponsor A's indication of interest.

        On May 22, 2018, in response to Goldman Sachs' earlier outreach, representatives of another financial sponsor (referred to as "Financial Sponsor B") contacted representatives of Goldman Sachs and requested a draft confidentiality agreement, which representatives of Goldman Sachs provided on May 23, 2018.

        On May 24, 2018, the Company and Financial Sponsor B entered into a confidentiality agreement and thereafter the Company began providing diligence information to representatives of Financial Sponsor B.

        On May 30, 2018, a representative of an industry participant (referred to as "Strategic Party B") contacted Mr. Ordan and stated Strategic Party's B's intention to partner with Financial Sponsor B in evaluating the opportunity to make a proposal for the Company. Later on May 30, 2018, representatives of Goldman Sachs provided Strategic Party B with a draft confidentiality agreement.

        Also on May 30, 2018, the Chief Executive Officer of Strategic Party A communicated to Mr. Ordan that Strategic Party A would not continue to participate in the process.

        On June 1, 2018, representatives of another financial sponsor (referred to as "Financial Sponsor C") contacted representatives of Goldman Sachs and requested a draft confidentiality agreement, which representatives of Goldman Sachs provided later that same day.

        On June 2, 2018, the Company and Strategic Party B entered into a confidentiality agreement and thereafter the Company began providing diligence information to representatives of Strategic Party B.

        On June 5, 2018, at a special meeting of the board, representatives of Goldman Sachs led a discussion with the directors, management and representatives of Wachtell Lipton, based on materials previously provided to the board, regarding the effect of the Corrected GS Information (as defined below under "— Opinion of Goldman Sachs ") on Goldman Sachs' discounted cash flow analysis and sum-of-the-parts disposition analysis. Representatives of Goldman Sachs confirmed to the board that, had Goldman Sachs performed its financial analysis set forth in the Goldman Sachs April 25 presentation using the Corrected GS Information, there would have been no change in the conclusion set forth in the written opinion of Goldman Sachs dated April 25, 2018, and that Goldman Sachs' written opinion was only of such date. Next, representatives of Lazard led a discussion with the directors, management and representatives of Wachtell Lipton, based on materials previously provided to the board, regarding the effect of the Corrected Lazard Information (as defined below under "— Opinion of Lazard ") on Lazard's sum-of-the-parts discounted cash flow analysis. Representatives of Lazard confirmed to the board that, had Lazard issued its opinion on April 25, 2018 on the basis of the Corrected Lazard Information, the conclusion set forth in its written opinion dated April 25, 2018, would not have changed and that Lazard's written opinion was only as of such date. After discussion,

42

Table of Contents

the board determined that none of the changes resulting from the Corrected GS Information or the Corrected Lazard Information altered the board's view that the merger agreement is advisable and in the best interests of the Company and its stockholders. Also at the board meeting, Mr. Ordan provided an update to the board regarding the status of the go-shop process.

        Also on June 5, 2018, the Company and Financial Sponsor C entered into a confidentiality agreement and thereafter the Company began providing diligence information to representatives of Financial Sponsor C.

        Later on June 5, 2018, a representative of Financial Sponsor A called Mr. Ordan and indicated that Financial Sponsor A would not submit an acquisition proposal.

        On the evening of June 6, 2018, a representative of Financial Sponsor A emailed Mr. Ordan reaffirming that, based on the valuation work done by Financial Sponsor A and Strategic Party A, Financial Sponsor A would not be submitting an acquisition proposal.

        On June 7, 2018, representatives of Financial Sponsor C spoke with representatives of Goldman Sachs and indicated that Financial Sponsor C would not submit an acquisition proposal.

        On June 8, 2018, a representative of Financial Sponsor B contacted Mr. Ordan and indicated that Financial Sponsor B would submit an acquisition proposal prior to the go-shop period end-time.

        Later on June 8, 2018, a representative of a real estate focused investor (referred to as "Investor A") contacted a representative of Goldman Sachs to discuss the possibility of submitting an acquisition proposal. Promptly thereafter, Mr. Ordan and a representative of Goldman Sachs contacted the representative of Investor A by telephone to discuss Investor A's interest in the Company. The representative of Investor A indicated that Investor A had done preliminary diligence and could be interested in making an acquisition proposal. Mr. Ordan and the representative of Goldman Sachs encouraged Investor A to make an acquisition proposal or submit a letter indicating its level of interest in making an acquisition proposal, and reminded the representative of Investor A of the go-shop period end-time, the requirements to be designated as an excluded party under the merger agreement in order to obtain the benefit of the reduced termination fee and permit continuing discussions with Investor A outside the confines of the Company's non-solicitation obligations under the merger agreement that would come into effect following the go-shop period end-time. Following the discussion, representatives of Goldman Sachs provided a draft confidentiality agreement to the representative of Investor A.

        On June 9, 2018, a representative of Investor A confirmed receipt of the draft confidentiality agreement, but stated that the initial inquiry from Investor A to Goldman Sachs had reflected a higher level of interest in the Company than was Investor A's then-current reality, and that Investor A would not be submitting a letter indicating its interest in the Company.

        Later on June 9, 2018, Financial Sponsor B submitted a written acquisition proposal (referred to as the "Financial Sponsor B Proposal"), which was subject to several conditions, including the completion of a due diligence review of the Company and HCR ManorCare and the negotiation of a definitive merger agreement. The Financial Sponsor B Proposal also stated that Financial Sponsor B would need to obtain debt financing, and that the definitive merger agreement providing for Financial Sponsor B's acquisition of the Company would need to contain provisions limiting the remedies of the Company exclusively to a termination fee if Financial Sponsor B's debt financing sources failed to fund. In addition, the Financial Sponsor B Proposal stated that Financial Sponsor B expects a negotiated definitive merger agreement to include (i) the termination fee structure discussed above, (ii) substantially the same representations, covenants and conditions regarding HCR ManorCare's business as are included in the alternative plan sponsor agreement, (iii) a closing condition that the Company acquire HCR ManorCare prior to the closing of the transaction with Financial Sponsor B and (iv) an increase in the fee payable to Financial Sponsor B in connection with unsolicited proposals based on the same percentage as the termination fee in the existing merger agreement but applied to the new merger consideration. The Financial Sponsor B Proposal also stated that Strategic Party B

43

Table of Contents

would assist Financial Sponsor B in the operation of the Company and its properties following Financial Sponsor B's proposed acquisition of the Company.

        On June 11, 2018, at a special meeting of the board, Mr. Ordan and representatives of Goldman Sachs and Wachtell Lipton provided an update on the go-shop process and its conclusion, and led a discussion reviewing the Financial Sponsor B Proposal and background information regarding Financial Sponsor B. Representatives of Wachtell Lipton also discussed with the directors the go-shop framework and the directors' legal duties in the context of evaluating the Financial Sponsor B Proposal. The directors, management and the Company's advisors then discussed the merits of the Financial Sponsor B Proposal, including the fact that although the proposed indicative valuation was higher than the valuation contemplated by the merger agreement with Welltower, the Financial Sponsor B Proposal was subject to, among other conditions, the completion of a due diligence review of the Company and HCR ManorCare and the negotiation of a definitive merger agreement. The directors, management and the Company's advisors also discussed other aspects of the Financial Sponsor B Proposal, including that Financial Sponsor B would need to obtain debt financing to have sufficient funds to consummate a transaction and that the terms of a proposed definitive agreement to effect the transaction included (x) provisions limiting the remedies of the Company to a termination fee if Financial Sponsor B's debt financing sources failed to fund and (y) a closing condition that the Company acquired HCR ManorCare prior to the closing of the transaction with Financial Sponsor B. Following the discussion, the board determined that the Financial Sponsor B qualified as an excluded party under the merger agreement. No determination was made by the board as to whether or not a transaction along the lines proposed by Financial Sponsor B, should it become available to the Company following further diligence by and negotiation with Financial Sponsor B, would be superior to the agreed transaction with Welltower and ProMedica. The board also did not change its recommendation in favor of the merger agreement and the transactions contemplated thereby.

        On June 12, 2018, the Company issued a press release disclosing the existence of the Financial Sponsor B Proposal and that Financial Sponsor B had been designated as an excluded party under the merger agreement. The press release stated that the board had not changed its recommendation and continued to recommend that the Company's stockholders vote to approve the merger with Welltower.

        As of June 21, 2018, to the knowledge of the Company, Financial Sponsor B continues to conduct due diligence on the Company and its properties, tenants and business.

Reasons for the Merger

        The board evaluated, with the assistance of its legal and financial advisors, the merger agreement, the merger and the other transactions contemplated by the merger agreement. In reaching its decision to approve the merger and enter into the merger agreement and recommend that the stockholders of the Company vote "FOR" the proposal to approve the merger, the board considered a number of factors, including the following factors that the board viewed as generally supporting its decision:

•

The historical market price of the common stock, including the market performance of the common stock relative to the stock of other participants in the Company's industry and general market indices, the rapid increase in the price of the Company's common stock on limited volume in the several weeks prior to the announcement of the merger agreement, and the fact that the base merger consideration of $20.75 per share in cash represented an attractive premium of approximately 64.7% to the closing price of the common stock on March 1, 2018, the last day of trading prior to the Company's announcement that it had entered into the initial plan sponsor agreement to acquire HCR ManorCare, and a premium of approximately 17.3% to the 60-day volume weighted average price ending April 24, 2018, the last trading day prior to media speculation regarding the proposed transaction.



•

That the base merger consideration of $20.75 per share was more favorable to the Company's stockholders than the potential value that might result from other alternatives reasonably

44

Table of Contents

available to the Company in light of a number of factors, including the risks and uncertainties associated with such alternatives. Such alternatives that the board considered include: the continued operation of the Company on a stand-alone basis (including the consummation of the QCP-HCR ManorCare transactions in accordance with the initial plan sponsor agreement), a merger with a different buyer, a strategic combination involving a spin-off of HCR ManorCare's Heartland business in a Reverse Morris Trust transaction, divestitures of each component of the Company's business to distinct buyers active in the applicable industry subsectors, and other extraordinary transactions.

•

The board's understanding, informed by the Company's financial advisors, that Welltower and ProMedica may be uniquely positioned to be the highest-paying counterparties to the proposed transactions, including as a result of various factors, including Welltower's capital structure, Welltower and ProMedica's post-closing joint venture arrangements (which, when combined with Welltower's capital structure, would enable Welltower and ProMedica to avoid divesting components of the Company's business and thereby avoid risks relating to such liquidation strategy), ProMedica's status as a non-profit entity with a different mission and different financial goals and resources than other potential industry counterparties, and the potential synergies available to ProMedica as a result of its operational focus in Ohio and Michigan, where 79 of the Company's properties, accounting for approximately 20% of the Company's revenue, are located.



•

That, as a result of the negotiations between the parties, the merger consideration was the highest price per share for the common stock that Welltower was willing to pay at the time of those negotiations, and that the combination of Welltower's agreement to pay that price and the go-shop process described below and under " The Merger Agreement—Other Covenants and Agreements—Alternative Proposals; No Solicitation " would result in a sale of the Company at the highest price per share for the common stock that was reasonably attainable.



•

The board's understanding of the Company's business, assets, properties, financial condition and results of operations, its competitive position and historical and projected financial performance, the nature of the industry and regulatory environment in which the Company and its tenants operate and that the proposed merger consideration is all cash, so the transaction provides stockholders with certainty of value and liquidity for their shares, especially when viewed against the risks and uncertainties facing the Company's business and its ability to continue to operate on a stand-alone basis, which the board categorized in three broad areas: industry dynamics relating to a high acuity national operator such as HCR ManorCare, HCR ManorCare's performance and projected trajectory, and the ability of a 10-person REIT, with a very constrained capital structure, to dramatically transform and likely downsize a national operator in a multi-year process. In particular, the board considered the following risks and uncertainties:



o

that a sustained, long-term negative business trajectory in the skilled nursing and assisted living sectors has been ongoing since 2012 and has steepened over the past year and is expected to continue through at least 2020, including as a result of expense growth outpacing reimbursement rates, declining length of stay, reduction of discharges from hospitals and competitive challenges from new and modernized senior housing, memory care and skilled nursing facilities;



o

that HCR ManorCare continues to be adversely impacted by underperformance and a challenging operating environment and the continued deterioration of the Company's and HCR ManorCare's businesses, including, for example, that the EBITDAR of the core skilled nursing facility business has declined from $358 million in 2013 to $155 million projected for 2019, with actual EBITDAR of $43 million for such business in the first quarter of 2018, and the EBITDAR for the assisted living business has declined from

45

Table of Contents

$75 million in 2016 to $60 million projected for 2019, with actual EBITDAR of $15 million for such business in the first quarter of 2018;

o

that HCR ManorCare's continued performance decline has reduced, and will likely continue to reduce, the Company's cushion/coverage under its debt service coverage ratio covenant in its senior secured credit facilities, and that the Company's ability to continue to comply with its covenants under its credit facilities is in doubt. For example, as of December 31, 2017, the debt service coverage ratio under the Company's senior secured credit facilities was 2.14x, but as of March 31, 2018 had deteriorated to 1.79x. The Company's senior secured credit facilities require it to maintain a minimum debt service coverage ratio of 1.75x;



o

uncertainties and costs associated with getting any necessary waivers under the Company's credit facilities if the Company is not able to continue to comply with its covenants under such facilities, and that such costs are unpredictable and likely to be material;



o

the assumption of approximately $550 million of additional debt as a result of acquiring HCR ManorCare (in the absence of the merger) and the uncertainty regarding the Company's ability to extend or refinance its indebtedness and HCR ManorCare's credit facility scheduled to mature on January 17, 2019, and the material and adverse consequences to the Company if its current or future lenders do not cooperate with the Company on reasonable terms or at all regarding extending or refinancing current or future credit facilities;



o

the cultural, cost and structural challenges associated with integrating HCR ManorCare's operating platform into the Company's real estate business following the QCP-HCR ManorCare transactions, including the risk of an unsuccessful integration and potential high cost of retention efforts in respect of key HCR ManorCare employees, and the risks associated with losing key HCR ManorCare employees notwithstanding the Company retention efforts, including consequences of such employee loss to attempting to implement a viable business strategy and maintain quality controls, especially in light of the many recent proposed and actual organizational changes;



o

the risks and uncertainty associated with a drastic transformation of the Company's employee base from a business with 10 employees to a business with thousands of employees;



o

the significant capital expenditures, including significant deferred maintenance catch-up, required to maintain the competitiveness of the Company's properties, the uncertainty the Company faces regarding the ability to finance, or the potentially high cost of financing, such capital expenditures and the significant uncertainty that the necessary capital expenditures will yield improved operating results;



o

that the Company's business plan is based, in part, on projections for a number of variables that are difficult to project and subject to a high level of uncertainty and volatility, including economic growth, admission rates, average length of stay, reimbursement rates, ongoing operating costs, necessary capital expenditures, costs of the integration of HCR ManorCare into the Company and the amount of investment necessary to keep pace with technological change;



o

risks related to the timing and execution of any material adjustment in the Company's strategy, including pursuing a strategy of separately divesting the components of the Company's business, and the ability to complete any such adjustment without defaulting under the terms of the Company's indebtedness covenants;



o

the risk that any multi-year divestiture strategy of all or substantially all of the Company assets, which could require substantial reduction in HCR ManorCare's workforce both in

46

Table of Contents

the field and in Toledo, could pose significant risk of low loyalty, low productivity and other irreparable challenges, including increased risks of medical malpractice or regulatory violations due to decreased morale and reduced commitment to the Company's and HCR ManorCare's standards;

o

risks related to the completion of the Company's previously announced plans to sell 74 non-core skilled nursing/senior housing facility assets, and that as of April 25, 2018, the Company had signed purchase agreements in 7 of 16 states where these assets were located with 5 different buyers, illustrating the lack of large, well-capitalized buyers in this space and was negotiating with six other buyers with respect to the remaining assets, illustrating the lack of large, well-capitalized buyers in this space;



o

risks relating to the deteriorating performance of the Company's Arden Courts portfolio, which must demonstrate meaningful patient outcomes data to stay competitive in light of industry-wide excess bed capacity, and which has experienced substantial declines in occupancy levels; and



o

that the skilled nursing industry is de-consolidating and restructuring, with many larger national companies divesting skilled nursing assets to local and regional operators.



•

The board's consideration of the following additional factors regarding HCR ManorCare's businesses:



o

that HCR ManorCare's strategy in managing the 160 core skilled nursing assets that the Company would own after completing its previously announced divestiture of 74 non-core skilled nursing/senior housing assets was to focus on post-acute care. Through its branded MedBridge program, a specialized unit designed for post-acute care, HCR ManorCare was a first mover in this space, as evidenced by a higher Medicare and managed care patient mix versus the national average, which generated approximately 2.0 to 2.5 times higher revenue per patient than long term care facilities, with higher operating margins.. However, industry trends have reduced the attractiveness and operating performance of facilities that focus on post-acute care. In particular, Medicare fee for service reimbursement has come under pressure, with a shift towards greater managed care and shorter length of stays, and in many cases, for certain types of post-acute categories, home healthcare has also become a viable alternative to skilled nursing facilities. These trends have resulted in reduced reimbursement rates, lower length of stay and daily census, and lower margins and EBITDAR, which have impacted the operating performance of these assets. Specifically, the 160 core skilled nursing facilities have exhibited the following trends from 2014 to 2017: (i) patient day mix of 22% Medicare and 13% managed care in 2014 has decreased to 17% Medicare and 13% managed care in 2017; (ii) length of stay of 34.8 days for Medicare FFS and 24.1 days for managed care in 2014 has decreased to 29.3 days for Medicare FFS and 20.7 days for managed care in 2017; and (iii) EBITDAR of $344 million in 2014 has decreased to $211 million in 2017;



o

that the negative outlook for these core 160 skilled nursing facilities has continued into 2018 where, based on actual first quarter results and HCR ManorCare's operating budget, EBITDAR for the full year 2018 is projected at approximately $158 million;



o

that HCR ManorCare continues to operate its facilities focusing on post-acute patients and, given that the Company does not expect any change in this operating practice in the foreseeable future, future operating income is expected to continue to be lower than historical levels;



o

that the market values for skilled nursing assets that focus on high Medicare and managed care patient populations, such as the 160 core skilled nursing facilities, are

47

Table of Contents

uncertain, particularly with EBITDAR levels falling by over 50% in less than four years, and the continued negative trends that are expected to continue, and that HCR ManorCare's long-term care-focused assets with lower Medicare and managed care populations, like the 74 non-core assets currently being marketed by the Company, are likely to be more attractive in the marketplace;

o

that consistent with the foregoing, the Company has experienced a bifurcation in demand for skilled nursing facility assets, such that non-performing, turnaround assets (similar to the Company's 74 non-core assets being marketed by the Company) command a premium, but high Medicare/Medicaid ratio assets (similar to the Company's 160 core assets) face operating pressure and are not in strong demand, and that this bifurcation poses a significant value constraint on the Company's entire portfolio;



o

that the continued rise in operating costs, particularly costs of labor, with historically low unemployment levels, have continued to negatively influence margins and EBITDAR;



o

the risk that any state budgetary constraints or changes in Medicaid reimbursement policy could adversely affect the revenues and operating results of HCR ManorCare's long-term care operations, particularly given that increases in the cost of living and the Company's cost of capital significantly exceed the current annual reimbursement rate increases provided by many states where HCR ManorCare operates;



o

the industry-wide excess capacity of beds, particularly in markets in the mid-Atlantic and Midwest where HCR ManorCare operates; and



o

the relatively older age of the Company's core skilled nursing facilities and assisted living facilities. Given these older facilities, and the newer competition that has been built in many of the Company's markets for both asset types, significant capital expenditures are required to remain competitive, and the risks that capital investment alone may not be sufficient to stem the negative operating trends currently being exhibited in the Company's remaining core skilled nursing facilities and assisted living facilities.



•

That to mitigate certain of the foregoing substantial risks and uncertainties relating to the alternative of pursuing a multi-year liquidation strategy, the Company could enter into a long-term lease for the facilities on market terms with a recapitalized HCR ManorCare, that this long-term lease alternative would pose significant risks to the Company's future ability to comply with its debt covenants and that the value and certainty provided by the proposed merger to the Company's stockholders would be superior to the Company proceeding with this long-term lease alternative.



•

The financial analysis of Goldman Sachs presented to the board and the fairness opinion of Goldman Sachs that, as of April 25, 2018 and based upon and subject to the factors and assumptions set forth therein, the base merger consideration of $20.75 per share to be paid by Welltower to the holders (other than Welltower and its affiliates) of shares of common stock pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described below in the section entitled " The Merger (Proposal 1)—Opinion of Goldman Sachs ."



•

The financial analysis of Lazard presented to the board and the fairness opinion of Lazard that, as of April 25, 2018 and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the per share base merger consideration of $20.75 in cash to be paid to holders of common stock, other than the excluded holders, in the merger

48

Table of Contents

was fair, from a financial point of view, to such holders, as more fully described below in the section entitled " The Merger (Proposal 1)—Opinion of Lazard ."

•

The board's belief in the likelihood of completing the merger on the anticipated schedule, including as a result of the incentives provided by certain of the terms of the merger agreement, alternative plan sponsor agreement and related transaction documents, including as described below.



•

The terms and conditions of the merger agreement, the alternative plan sponsor agreement and the related transaction documents, including:



o

the fact that if the effective time of the merger does not occur prior to August 25, 2018, the base merger consideration will be increased by $0.006 in cash per share of common stock for each day during the period commencing on August 25, 2018 and ending on, but excluding, the closing date;



o

the fact that the merger and the other transactions are not conditioned upon the receipt of any financing by Welltower or ProMedica, and the fact that Welltower had already obtained committed debt financing for the transaction;



o

the Company's right to solicit acquisition proposals during a 45 day go-shop period and to continue discussions following the go-shop period end time with third parties in certain circumstances, as more fully described under " The Merger Agreement—Other Covenants and Agreements—Alternative Proposals; No Solicitation ";



o

the Company's right, subject to certain conditions, to respond to and engage and participate in discussions and negotiations with respect to certain unsolicited acquisition proposals made after the go-shop period end time and prior to the time the Company's stockholders approve the merger, as more fully described under " The Merger Agreement—Other Covenants and Agreements—Alternative Proposals; No Solicitation ";



o

the fact that the board may terminate the merger agreement, in specified circumstances relating to a superior proposal, subject, in specified cases, to payment of a termination fee of $59.5 million (which amount is reduced to $19.8 million under specified circumstances relating to participants in the go-shop), which amounts the board believed were reasonable in light of, among other matters, the benefits of the merger to the Company's stockholders, the typical size of such termination fees in similar transactions and the likelihood that a fee of such size would not be a meaningful deterrent to acquisition proposals, as more fully described under " The Merger Agreement—Termination " and " The Merger Agreement—Termination Fees ";



o

the provision of the merger agreement allowing the board to make a recommendation change upon the occurrence of certain intervening events that were not known to the board at or prior to the execution of the merger agreement;



o

the fact that the Company may terminate the merger agreement in specified circumstances, including relating to the termination of the alternative plan sponsor agreement, the failure or inability of the Plan transactions to be consummated and the failure of certain milestones to be met in the HCR ManorCare bankruptcy, and that if the merger agreement is terminated in those certain circumstances, Welltower is required to pay the Company a fee of $250.0 million, as more fully described under " The Merger Agreement—Termination " and " The Merger Agreement—Termination Fees "; and



o

the fact that each of Welltower and Merger Sub is required to use its reasonable best efforts to cause ProMedica to effect the Plan closing as promptly as practicable, and that Welltower has agreed to be jointly and severally responsible for the performance

49

Table of Contents

and compliance by ProMedica and its affiliates with the covenants and agreements set forth in the alternative plan sponsor agreement and to indemnify the Company for certain liabilities arising out of, relating to or in connection with the failure of ProMedica or any of its affiliates to perform or comply with the covenants and agreements set forth in the alternative plan sponsor agreement.

•

Risks of adverse changes to the trading price of the common stock.



•

The potential impact of macroeconomic changes on the Company or the trading price of the common stock.

        In the course of reaching the determinations and decisions and making the recommendation described above, the board considered the following risks and potentially negative factors relating to the merger agreement and the merger:

•

That the Company's stockholders will have no ongoing equity participation in the Company or Welltower following the merger, and that such stockholders will cease to participate in the Company's or Welltower's future earnings or growth, if any, or to benefit from increases, if any, in the value of the common stock or Welltower's common stock.



•

The possibility that macroeconomic and industry factors contributing to the financial condition or results of operations of the Company, and the trading price of the Company's common stock, would become more favorable.



•

The risk of incurring substantial expenses related to the merger, including in connection with any litigation that may result from the announcement or pendency of the merger, in circumstances in which the merger fails to close.



•

The risk that there can be no assurance that all conditions to the parties' obligations to complete the merger will be satisfied, or will be satisfied in a timely manner, including for reasons beyond the control of the Company, Welltower and ProMedica, and as a result, that it is possible that the merger may not be completed even if the Company's stockholders approve the merger.



•

The fact that the Company's pursuit of the merger and the Plan transactions is an alternative to the QCP-HCR ManorCare transactions, and that if the merger and the Plan transactions are not completed, the Company will have diverted resources from, and delayed the potential closing of, the QCP-HCR ManorCare transactions and exacerbated the risks to the consummation of the QCP-HCR ManorCare transactions and risks to the Company's ability to successfully operate as a stand-alone enterprise.



•

Other risks and costs to the Company if the merger does not close, including uncertainty about the effect of the proposed merger on the Company's partners, tenants, providers and others with whom it does business, and the risk that such parties may seek to change existing business relationships with the Company.



•

The merger agreement's restrictions on the conduct of the Company's business prior to the completion of the merger, generally requiring the Company to conduct its business only in the ordinary course and subjecting the Company to other specific limitations, which may delay or prevent the Company from undertaking business opportunities that may arise pending completion of the merger.



•

That the receipt of cash by stockholders in exchange for shares of common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes.



•

The possibility that, under certain circumstances under the merger agreement, the Company may be required to pay a termination fee of $59.5 million or $19.8 million as more fully described under " The Merger Agreement—Termination Fees ."

50

Table of Contents

        The foregoing discussion of the information and factors considered by the board includes the material factors considered by the board. In view of the variety of factors considered in connection with its evaluation of the merger, the board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The board recommended the merger agreement and the merger based upon the totality of the information it considered.

Recommendation of the Company's Board of Directors

        After careful consideration, the board has unanimously approved the merger and determined that the merger agreement is advisable and in the best interests of the Company and its stockholders.

         The board unanimously recommends that the stockholders of the Company vote "FOR" the proposal to approve the merger.

Opinion of Goldman Sachs

        Goldman Sachs rendered its opinion to the board that, as of April 25, 2018 and based upon and subject to the factors and assumptions set forth therein, the base merger consideration of $20.75 per share to be paid by Welltower to the holders (other than Welltower and its affiliates) of shares of common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

         The full text of the written opinion of Goldman Sachs, dated April 25, 2018, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. The description of the Goldman Sachs opinion set forth in this proxy statement is qualified in its entirety by reference to the full text the written opinion of Goldman Sachs attached as Annex B to this proxy statement. You are encouraged to read the opinion of Goldman Sachs and this section carefully and in their entirety. Goldman Sachs provided advisory services and its opinion for the information and assistance of the board in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of common stock should vote with respect to the merger, or any other matter.

        In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

•

the merger agreement;



•

annual reports to stockholders and Annual Reports on Form 10-K of the Company for the fiscal years ended December 31, 2016 and 2017;



•

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;



•

the Company's initial registration statement on Form 10;



•

certain other communications from the Company to its stockholders;



•

certain publicly available research analyst reports for the Company; and

51

Table of Contents

•

certain internal financial analyses and forecasts for the Company on a stand-alone basis giving effect to the QCP-HCR ManorCare transactions prepared by the Company's management, as approved for Goldman Sachs' use by the Company (referred to in this section as "Forecasts"); and



•

certain internal financial analyses and forecasts for the Company assuming the disposal of all of the Company's assets and businesses, including HCR ManorCare, prepared by the Company's management, as approved for Goldman Sachs' use by the Company (referred to in the section as "Disposition Forecasts").

        Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition, and future prospects of the Company and HCR ManorCare; reviewed the reported price and trading activity for the common stock; compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the home health and hospice and post-acute care facilities industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

        For purposes of rendering its opinion, Goldman Sachs, with the Company's consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the Company's consent that the Forecasts and Disposition Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or HCR ManorCare or any of their respective subsidiaries and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger and the other transactions contemplated by the merger agreement (which are together referred to in this section as the "transaction") will be obtained without any adverse effect on the expected benefits of the transaction in any way meaningful to its analysis. Goldman Sachs has also assumed that the transaction will be consummated on the terms set forth in the merger agreement and the alternative plan sponsor agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

        Goldman Sachs' opinion does not address the underlying business decision of the Company to engage in the transaction or the relative merits of the transaction as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. Prior to the date of its opinion, Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, the Company or any alternative transaction. Goldman Sachs' opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the base merger consideration of $20.75 per share to be paid by Welltower to the holders (other than Welltower and its affiliates) of shares of common stock pursuant to the merger agreement was fair from a financial point of view to such holders. Goldman Sachs' opinion does not express any view on, and its opinion does not address, any other term or aspect of the merger agreement or the transaction or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transaction, including the fairness of the transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or

52

Table of Contents

any class of such persons in connection with the transaction, whether relative to the base merger consideration of $20.75 per share to be paid to the holders (other than Welltower and its affiliates) of shares of common stock pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the impact of the transaction on the solvency or viability of the Company, Welltower, ProMedica or Merger Sub, or the ability of the Company, Welltower, ProMedica or Merger Sub to pay their respective obligations when they come due. Goldman Sachs' opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs' opinion was approved by a fairness committee of Goldman Sachs.

        Following Goldman Sachs' presentation to the board on April 25, 2018 (referred to as the "Goldman Sachs April 25 presentation"), Goldman Sachs became aware that certain estimated 2018 restructuring charges for the Company were incorrectly deducted twice in connection with the calculation of unlevered free cash flow, as they were deducted in the financial forecasts used to calculate unlevered free cash flow and again deducted in the working capital and other adjustment in Goldman Sachs' discounted cash flow analysis and sum-of-the-parts disposition analysis, that the financial forecasts incorrectly limited the potential use of certain 2017 and prior year net operating losses and that the summation of discounted periodic unlevered free cash flows in Goldman Sachs' sum-of-the-parts disposition analysis did not include the second quarter of fiscal year 2018. Goldman Sachs subsequently performed its discounted cash flow analysis and sum-of-the-parts analysis as of April 25, 2018, using the corrected information including, in the case of the sum-of-the-parts disposition analysis, the second quarter unlevered free cash flow (collectively, referred to as the "Corrected GS Information"). Such subsequent analyses performed by Goldman Sachs do not address any circumstances, developments or events occurring after April 25, 2018, which is the date of the written opinion of Goldman Sachs, and Goldman Sachs' opinion set forth in its written opinion letter was provided only as of such date. Based upon and subject to the foregoing, Goldman Sachs confirmed to the board that, had Goldman Sachs performed its financial analysis set forth in the April 25 presentation using the Corrected GS Information, there would have been no change to the conclusion set forth in the written opinion of Goldman Sachs.

        The following is a summary of the material financial analyses delivered by Goldman Sachs to the board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs' financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 24, 2018 and is not necessarily indicative of current market conditions.

        Illustrative Present Value of Future Share Price Analysis.     Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of common stock, which is designed to provide an indication of the present value of a theoretical future value of a company's equity as a function of such company's financial multiples. For this analysis, Goldman Sachs used Forecasts for each of the fiscal years 2019 to 2022. Goldman Sachs first calculated the implied values per share of common stock as of December 31 for each of the fiscal years 2019 to 2022, by applying full year forward earnings before interest, taxes, depreciation and amortization (referred to as "EBITDA") multiples of 9.0x to 11.0x to full year EBITDA estimates for each of the fiscal years 2019 to 2022. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical EBITDA multiples for the

53

Table of Contents

Company and multiples of comparable companies. Goldman Sachs then discounted such values back to March 31, 2018, using an illustrative discount rate of 11.5%, reflecting an estimate of the Company's cost of equity. Goldman Sachs derived such range of discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the Company, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values of $13.32 to $21.77 per share of common stock.

        Illustrative Discounted Cash Flow Analysis.     Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis on the Company. Using discount rates ranging from 9.5% to 10.5%, reflecting estimates of the Company's weighted average cost of capital, Goldman Sachs discounted to present value as of March 31, 2018 (i) estimates of unlevered free cash flow for the Company for the second, third and fourth quarters of 2018 and the fiscal years 2019 through 2022 as derived from the Forecasts and (ii) a range of illustrative terminal values for the Company, which were calculated by applying perpetuity growth rates ranging from 1.5% to 2.5%, to a terminal year estimate of the Company's unlevered free cash flow, as derived from the Forecasts (which analysis implied a range of terminal enterprise value/EBITDA multiples of 8.4x to 10.8x). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including the company's target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the Forecasts and market expectations regarding long-term real growth of gross domestic product and inflation. Goldman Sachs derived ranges of illustrative enterprise values for the Company by adding the ranges of present values it derived above and adding to such amount the estimated present value of the net operating loss carryforwards (referred to as "NOL") of QCP based on the NOL projections using the discount rates to derive the enterprise value. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived for the Company net debt, deferred capital expenditures and net working capital, in each case, as provided by the management of the Company to derive a range of illustrative equity values for the Company. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of the Company, as provided by the management of the Company to derive a range of illustrative present values per share ranging from (i) $15.21 to $21.90 using the information included in the Goldman Sachs April 25 presentation and (ii) $15.39 to $22.08 using the Corrected GS Information.

        Selected Transactions Analysis.     Goldman Sachs analyzed certain information relating to the following transactions in the home health and hospice and post-acute facilities industries since 2013:

54

Table of Contents

        For each of the selected transactions, using publicly available information, Goldman Sachs reviewed and compared the ratios of enterprise value to EBITDA for the last twelve months period (such ratios referred to as "EV to LTM EBITDA multiples"). While none of the companies that participated in the selected transactions are directly comparable to the Company, the companies that participated in the selected transactions are companies with portfolios and operations that, for the purposes of analysis, may be considered to have a similar profile to certain of the portfolios and operations of the Company and HCR ManorCare.

        The following table presents the results of this analysis:

        Goldman Sachs applied a reference range of EV to LTM EBITDA multiples of 10.3x to 13.1x in respect of the selected transactions to the pro forma EBITDA of the Company as reflected in the Forecasts. Goldman Sachs calculated a range of implied equity values per fully diluted outstanding share of common stock of $16.94 to $26.99.

        Premia Analysis.     Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for all-cash acquisition transactions announced since 2013 involving a public company in the United States where the disclosed enterprise value for the transaction was in excess of $250,000,000. For the entire period, using publicly available information, Goldman Sachs calculated the median, 25th percentile and 75th percentile premia of the price paid in terms of premium to (i) the closing price per share one day prior to announcement and (ii) the 52-week high closing price per share for all transactions. This analysis indicated a median of (i) a 25.0% premium to the closing price per share one day prior to announcement and (ii) a 6.9% premium to the 52-week high closing price per share. This analysis also indicated a (i) 25th percentile premium of negative 4.9% and 75th percentile premium of 18.9% to the 52-week high closing price per share and a (ii) 25th percentile premium of 12.4% and 75th percentile premium of 42.1% to the closing price one day prior to announcement per share. Using this analysis, Goldman Sachs applied a reference range of 12.4% to 42.1% to the closing price one day prior to announcement and a reference range of negative 4.9% to 18.9% to the 52-week high closing price and calculated a range of implied equity values per share of common stock of (i) $23.77 to $29.56 for closing price one day prior to announcement per share and (ii) $20.11 to $25.15 for 52-week high closing price per share.

        Sum-of-the Parts Disposition Analysis.     Goldman Sachs performed a sum-of-the-parts disposition analysis for the following five business segments of the Company:

•

HCR ManorCare Home Healthcare and Hospice (referred to in this section as "4H");



•

Arden Courts assisted living (referred to in this section as "ALMC");



•

The operating portion of the HCR ManorCare skilled nursing facilities (referred to in this section as "HCR ManorCare SNF");



•

The real property portion of the HCR ManorCare skilled nursing facilities (referred to in this section as "SNF PropCo"); and



•

The Company's other properties (referred to in this section as "Other Properties").

55

Table of Contents

        Goldman Sachs calculated implied ranges of values for each segment by applying the following illustrative ranges, provided by the Company to Goldman Sachs, to the following information set forth in the Disposition Forecasts:

•

the estimated next twelve months (referred to as "NTM") EBITDA multiple for 4H using a range of 9.0x to 13.0x, which resulted in a midpoint gross value of $1,322,000,000;



•

the estimated cap rate for ALMC of 7.5%, which resulted in a gross value of $800,000,000;



•

the estimated NTM EBITDA multiple for HCR ManorCare SNF of 4.0x, which resulted in a gross value of $166,000,000;



•

the estimated cap rate for SNF PropCo using a range of 7.5% to 9.0%, which resulted in a midpoint gross value of $1,255,000,000; and



•

the estimated cap rate for Other Properties of 10.0%, which resulted in gross proceeds of $265,000,000.

        In accordance with the Disposition Forecasts, Goldman Sachs assumed that the 4H and ALMC segments were sold in January 2019 and that the HCR ManorCare SNF business, SNF PropCo, and Other Properties segments were sold in December 2019. Goldman Sachs also assumed, in accordance with the Disposition Forecasts, a corporate wind-down expense of $125,000,000 spent ratably through the remaining life of the Company, and 1.5% transaction costs on all segment sales. Goldman Sachs discounted the forecasted cash flows and net proceeds from divestitures using a weighted-average cost of capital of 9.9%.

        Goldman Sachs then calculated an illustrative range of implied enterprise values of the Company by calculating the low end of the range of EBITDA multiples and cap rates for the 4H and SNF PropCo segments, respectively, together with the high cap rate and the high end of the range of EBITDA multiples, and then adding the estimated present value of NOLs of the Company based on the NOL projections, to derive the illustrative range of enterprise values. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived for the Company net debt, deferred capital expenditures and net working capital, in each case, as provided by the management of the Company to derive a range of illustrative equity values for the Company. This analysis resulted in an illustrative range of values per share of common stock of (i) $14.74 to $20.10 using the information included in the Goldman Sachs April 25 presentation and (ii) $16.09 to $21.42 using the Corrected GS Information.

        The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company, HCR ManorCare or Welltower or the contemplated transaction.

        Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to the board as to the fairness from a financial point of view of the base merger consideration of $20.75 per share to be paid by Welltower to the holders (other than Welltower and its affiliates) of shares common stock pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are

56

Table of Contents

inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Welltower, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

        The base merger consideration was determined through arm's-length negotiations between the Company and Welltower and was approved by the board. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or the board or that any specific amount of consideration constituted the only appropriate consideration for the merger.

        As described above, Goldman Sachs' opinion to the board was one of many factors taken into consideration by the board in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B to this proxy statement.

        Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities in which they invest or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, Welltower, any of their respective affiliates and third parties, including HCR ManorCare, ProMedica or any of their respective affiliates, or any currency or commodity that may be involved in the transaction contemplated by the merger agreement for the accounts of Goldman Sachs and its affiliates and employees and their customers. Goldman Sachs acted as financial advisor to the Company in connection with, and participated in certain of the negotiations leading to, the transaction contemplated by the merger agreement. Except in connection with the merger (which includes acting as financial advisor to the Company in connection with its go-shop efforts as contemplated by the merger agreement), during the two year period ended April 25, 2018, the Investment Banking Division of Goldman Sachs has not been engaged by the Company or its affiliates to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs also has provided certain investment banking services to Welltower and its affiliates from time to time, although during the two year period ended April 25, 2018, Goldman Sachs has not recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Welltower and/or its affiliates. However, an affiliate of Goldman Sachs is a participating lender to Welltower under its existing credit facility and, with the consent of the Company, an affiliate of Goldman Sachs has also committed to participate as a lender under a replacement Welltower credit facility, a portion of the proceeds of which Welltower has stated it intends to use to finance a portion of the consideration to be paid in the merger. Goldman Sachs may also in the future provide investment banking services to the Company, Welltower, HCR ManorCare, ProMedica and their respective affiliates for which the Investment Banking Division of Goldman Sachs may receive compensation.

        The board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction. Pursuant to a letter agreement dated April 25, 2018, the Company engaged Goldman Sachs to act as its financial advisor in connection with the transaction. The engagement letter between the Company and Goldman Sachs provides for a transaction fee of $18.75 million, all of which is contingent upon consummation of the transaction; provided that Goldman Sachs will receive a portion of its fee if the transaction is not consummated but the Company receives a reverse termination fee pursuant to the terms of the merger agreement. In addition, the Company has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys' fees and disbursements, and to

57

Table of Contents

indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws. In addition, pursuant to a separate letter agreement dated March 12, 2018, the Company engaged Goldman Sachs to provide strategic advisory services in connection with a restructuring and/or refinancing of the Company's capital structure, pursuant to which the Company has agreed to pay Goldman Sachs an advisory fee in the amount of $2,500,000 prior to the end of calendar year 2018.

Opinion of Lazard

        On April 25, 2018, Lazard rendered its oral opinion, subsequently confirmed in writing by delivery of a written opinion, dated April 25, 2018, to the board that, as of such date, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the base merger consideration of $20.75 per share to be paid to holders of common stock, other than excluded holders, in the merger was fair, from a financial point of view, to such holders of common stock.

         The full text of Lazard's written opinion, dated April 25, 2018, which sets forth the assumptions made, procedures followed, factors considered and qualifications and limitations on the scope of review undertaken by Lazard in connection with its opinion, is attached as Annex C to this proxy statement. The description of Lazard's opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Lazard's written opinion attached as Annex C to this proxy statement. You are encouraged to read Lazard's opinion and this section carefully and in their entirety.

         Lazard's opinion was for the benefit of the board (in its capacity as such) in connection with the board's evaluation of the merger and the other transactions contemplated by the merger agreement (referred to in this section as the "transaction") and only addressed the fairness, from a financial point of view, to holders of common stock, other than excluded holders, of the base merger consideration. Lazard's opinion was not intended to and does not constitute a recommendation to any stockholder as to how such person should vote or act with respect to the merger or any matter relating thereto.

        In connection with its opinion, Lazard:

•

reviewed the financial terms and conditions of a draft, dated April 25, 2018, of the merger agreement;



•

reviewed certain historical business and financial information relating to the Company and HCR ManorCare;



•

reviewed various financial forecasts and other data provided to Lazard by the Company relating to the business of the Company and HCR ManorCare; and financial forecasts and other data provided to Lazard by HCR ManorCare relating to the business of HCR ManorCare;



•

held discussions with members of the senior management of the Company with respect to the business and prospects of the Company and HCR ManorCare;



•

reviewed public information with respect to certain other companies in lines of business Lazard believed to be generally relevant in evaluating the businesses of the Company and HCR ManorCare;



•

reviewed the financial terms of certain business combinations involving companies in lines of business Lazard believed to be comparable in certain respects to the businesses of the Company and HCR ManorCare;



•

reviewed historical stock prices and trading volumes of the common stock; and



•

conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.

58

Table of Contents

        Lazard assumed and relied upon the accuracy and completeness of the foregoing information, without independent verification of such information. Lazard did not conduct any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company or concerning the solvency or fair value of the Company and Lazard was not furnished with any such valuation or appraisal. At the direction of the Company, for purposes of Lazard's analyses in connection with its opinion, Lazard utilized financial forecasts prepared by management of the Company with respect to the business of the Company and HCR ManorCare. With respect to the financial forecasts utilized in Lazard's analyses, Lazard assumed, with the consent of the Company, that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments as to the future financial performance of the Company and HCR ManorCare. Lazard assumed no responsibility for and expressed no view as to any such forecasts or the assumptions on which they are based.

        Lazard's opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, the date of its opinion. Lazard assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date thereof. Although Lazard noted that the merger agreement contains a "go-shop" provision, in connection with its engagement, prior to the date of its opinion, Lazard was not authorized to, and did not, solicit indications of interest from third parties regarding a potential transaction with the Company. Lazard did not express any opinion as to the prices at which shares of the common stock might trade at any time subsequent to the announcement of the merger. In addition, Lazard's opinion did not address the relative merits of the transaction as compared to any other transaction or business strategy in which the Company might engage or the merits of the underlying decision by the Company to engage in the merger and related transactions contemplated by the merger agreement.

        Lazard was advised by representatives of the Company, and Lazard assumed, that the merger agreement, when executed, would conform to the draft reviewed by Lazard in all respects material to Lazard's analyses. In rendering its opinion, Lazard assumed, with the consent of the Company, that the transaction would be consummated on the terms described in or contemplated by the merger agreement, without any waiver or modification of any material terms or conditions. Lazard also assumed, with the consent of the Company, that obtaining the necessary governmental, regulatory or third party approvals and consents for the transaction would not have an adverse effect on the Company, HCR ManorCare or the transaction in any way meaningful to Lazard's analysis. For purposes of its analyses, Lazard further assumed at the direction of the Company, that HCR ManorCare's tax attributes would remain intact as part of the QCP-HCR ManorCare transactions. Lazard did not express any opinion as to any tax or other consequences that might result from the transaction, nor does Lazard's opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that the Company obtained such advice as it deemed necessary from qualified professionals. Lazard expressed no view or opinion as to any terms or other aspects (other than the base merger consideration to the extent expressly specified in the opinion) of the transaction or the Company's previously announced plan to acquire HCR ManorCare, including, without limitation, the form or structure of the transaction, the initial plan sponsor agreement or the alternative plan sponsor agreement or any agreements or arrangements entered into in connection with, or contemplated by, the transaction, or the QCP-HCR ManorCare transactions. In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the transaction, or class of such persons, relative to the base merger consideration or otherwise.

        The following is a brief summary of the material financial analyses and reviews that Lazard deemed appropriate in connection with rendering its opinion. The summary of Lazard's financial analyses and reviews provided below is not a complete description of the financial analyses and reviews underlying Lazard's opinion. The preparation of a fairness opinion is a complex process involving

59

Table of Contents

various determinations as to the most appropriate and relevant methods of analysis and review and the application of those methods to particular circumstances, and, therefore, is not readily susceptible to summary description. Selecting portions of the financial analyses described below, without considering the financial analyses described below as a whole, could create an incomplete view of the financial analyses and reviews underlying Lazard's opinion.

        In arriving at its opinion, Lazard considered the results of its financial analyses and did not attribute any particular weight to any factor or financial analysis considered by it; rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its financial analyses. For purposes of its financial analyses and reviews, Lazard considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. No company, business or transaction used in Lazard's financial analyses and reviews as a comparison is identical to the Company, or the merger and related transactions contemplated by the merger agreement, and an evaluation of the results of those financial analyses and reviews is not entirely mathematical. Rather, the financial analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the transaction, public trading or other values of the companies, businesses or transactions used in Lazard's financial analyses and reviews. The estimates contained in Lazard's financial analyses and reviews and the ranges of values resulting from any particular financial analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Lazard's financial analyses and reviews. In addition, financial analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Lazard's financial analyses and reviews are inherently subject to substantial uncertainty.

        Following Lazard's presentation to the board on April 25, 2018 (referred to as the "Lazard April 25, 2018 Presentation"), Lazard became aware that certain estimated 2018 restructuring charges for the Company were incorrectly double-counted, as they were deducted in the financial forecasts used to calculate free cash flow and again deducted in the working capital and other adjustment in Lazard's sum-of-the-parts discounted cash flow analysis, and that the financial forecasts incorrectly limited the potential use of certain 2017 and prior year net operating losses. After becoming aware of these issues, Lazard revised its sum-of-the-parts discounted cash flow analysis using corrected information (referred to as the "Corrected Lazard Information") but otherwise based upon economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, April 25, 2018. Such subsequent analysis does not address any circumstances, developments or events occurring after April 25, 2018, which is the date of Lazard's written opinion and the only date as of which such opinion is given. Based upon and subject to the foregoing and the assumptions, limitations, qualifications and conditions set forth in Lazard's written opinion, Lazard confirmed to the Company that had Lazard issued its opinion on April 25, 2018 on the basis of the Corrected Lazard Information, the conclusion set forth in its written opinion would not have changed.

Summary of Lazard Financial Analyses

        The summary of the financial analyses and reviews provided below includes information presented in tabular format. In order to fully understand Lazard's financial analyses and reviews, the tables must be read together with the full text of each summary. The tables alone do not constitute a complete description of Lazard's financial analyses and reviews. Considering the data in the tables below without considering the full narrative description of the financial analyses and reviews, including the description of the methodologies and assumptions underlying the financial analyses and reviews, could create an incomplete view of Lazard's financial analyses and reviews.

60

Table of Contents

        Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 24, 2018, the last trading day before the date of Lazard's opinion, and is not necessarily indicative of current market conditions.

Sum-of-the-Parts Comparable Company Multiples Analysis

        Lazard applied comparable company multiples to perform a sum-of-the-parts analysis of the Company pro forma for its acquisition of HCR ManorCare, referred to as "Pro Forma QCP." A sum-of-the-parts valuation analysis reviews a company on a segment-by-segment basis to determine an implied market value for the enterprise as a whole. Lazard based its analysis on an estimated valuation of Pro Forma QCP's operating segments, referred to as the "Pro Forma QCP Segments":

•

HCR ManorCare Home Healthcare and Hospice (referred to in this section as "4H");



•

Skilled nursing facility (referred to in this section as "SNF");



•

Assisted living facility (referred to in this section as "ALF");



•

Non-HCR ManorCare properties; and



•

All other Company activities and transactions aggregated and referred to in this section as "corporate/other."

        Lazard analyzed the respective valuations of each Pro Forma QCP Segment by reviewing various financial multiples and ratios of selected publicly traded companies (referred to as the "Pro Forma QCP Segment comparable companies") that Lazard believed, based on its experience with companies in the home health & hospice, post-acute care, assisted living and healthcare REIT industries and professional judgment, to be relevant for purposes of this analysis, considering such companies' operations, lines of business, markets, sizes and geographies, and applying such multiples and ratios to the applicable estimated operating metric for such Pro Forma QCP Segment as set forth in the Company management forecasts.

        The selected group of companies Lazard reviewed were in each of the home health & hospice, post-acute care, assisted living and healthcare REIT industries and were as follows:

        Lazard selected the companies reviewed in this analysis because, among other things, the Pro Forma QCP Segment comparable companies operate businesses similar to the businesses of the Pro Forma QCP Segments. Lazard noted that Lazard viewed Ensign, due to its business mix, as the most relevant selected company to the Company's SNF business segment. However, no selected company is identical to any of the Pro Forma QCP Segments. Accordingly, Lazard believes that purely quantitative analyses are not, in isolation, determinative in the context of the transaction and that qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of each QCP Segment and the Pro Forma QCP Segment comparable companies are also relevant.

        For each of the selected home health and hospice companies and healthcare REIT companies, Lazard calculated and compared the ratio of such company's enterprise value, which Lazard calculated as the market capitalization of each company, plus debt, non-controlling interest and preferred or preference stock, less cash, cash equivalents and marketable securities in each case, as of April 24,

61

Table of Contents

2018, to its calendar year 2018 estimated EBITDA. For each of the selected post-acute care and assisted living companies, Lazard calculated and compared the ratio of such company's adjusted enterprise value (adjusted to capitalize operating leases as debt), which Lazard calculated as (a) enterprise value plus (b) rent expense multiplied by 8.0x in accordance with industry convention, in each case, as of April 24, 2018, to its calendar year 2018 estimated EBITDAR.

        The 2018 EBITDA and EBITDAR estimates for the Pro Forma QCP Segment comparable companies used by Lazard in its analysis were based on publicly available Wall Street equity research estimates. The 2018 EBITDA estimates used for the Pro Forma QCP Segments were based on the Company management forecasts.

        Based on Lazard's analysis of the relevant metrics for each of the Pro Forma QCP Segment comparable companies, as well as its professional judgment and experience, Lazard selected and applied the following EBITDA and EBITDAR multiples, as appropriate to the Pro Forma QCP Segments:

        Lazard then calculated an implied equity value range of Pro Forma QCP by calculating the sum of: (i) the implied value range of the 4H segment, (ii) the implied value range of the SNF segment, (iii) the implied value range of the ALF segment, (iv) the implied value range of the Non-HCR ManorCare Properties segment, and (v) the implied value range of the corporate/other segment, minus (vi) Pro Forma QCP's debt as of December 31, 2017, minus (v) Pro Forma QCP's preferred stock as of December 31, 2017, plus (vii) Pro Forma QCP's cash as of December 31, 2017, plus (viii) certain other adjustments as provided by the Company divided by the fully diluted shares of common stock outstanding to calculate an implied price per share range. Lazard compared the implied price per share range for shares of common stock to the base merger consideration to be paid to holders of common stock, other than excluded holders, in the merger as set forth below:

Sum-of-the-Parts Discounted Cash Flow Analysis

        Lazard performed a discounted cash flow analysis of the Company on a sum-of-the-parts basis, consisting of a discounted cash flow analysis of the Pro Forma QCP Segments and certain tax attributes of Pro Forma QCP.

        A discounted cash flow analysis is a valuation methodology used to derive a valuation of a company by calculating the present value of its estimated future cash flows. "Future cash flows" refers to projected unlevered free cash flows (calculated, beginning with EBITDA, by adding other income, subtracting taxes, capital expenditures and adjusting for changes in working capital, other investments, and other items) of a company. "Present value" refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, capital structure, income taxes, expected returns and other appropriate factors. Lazard calculated the

62

Table of Contents

discounted cash flow value of each Pro Forma QCP Segment as the sum of the net present value, as of 12/31/2017, of each of:

•

the estimated future cash flows of such segment for each of fiscal years 2018 through 2022; and



•

the estimated value of such segment at the end of fiscal year 2022, or the "implied terminal value."

        Lazard also calculated the discounted cash flow value of certain Pro Forma QCP tax attributes as the sum of the net present value, as of 12/31/2017, of the estimated future tax savings of certain Pro Forma QCP tax attributes through the depletion of such tax attributes.

        For its sum-of-the-parts discounted cash flow analysis, Lazard applied a discount rate range of 7.75% to 8.75% consisting of Lazard's estimated ranges of the weighted average cost of capital for Pro Forma QCP, based on, among other things, the average unlevered risk profiles and weighted after-tax cost of debt, in order to calculate the discounted cash flow value of each component of Pro Forma QCP.

        The estimated future cash flows for the Pro Forma QCP Segments were calculated by Lazard based on data provided by the Company in the Company management forecasts. The following table sets forth for each Pro Forma QCP Segment, the estimated unlevered free cash flow for each of fiscal years 2018 through 2022 as calculated by Lazard.

        The terminal values for the Pro Forma QCP Segments were calculated by applying selected ranges of EBITDA multiples to each segment's estimated terminal year 2023 EBITDA, as set forth in the Company management forecasts. Lazard in its professional judgment selected the ranges of the multiples applied to each Pro Forma QCP Segment.

        The selected terminal year 2023E EBITDA multiple ranges are summarized below:

        The net present values of certain Pro Forma QCP tax attributes were calculated by applying a discount rate range of 7.75% to 8.75% to the estimated tax savings resulting from the utilization of Pro Forma QCP's net operating losses, tax credits and amortizable goodwill.

        Lazard then added the low ends and high ends of the enterprise value ranges (based on the sum of the range of net present value of (i) the estimated unlevered free cash flow; and (ii) implied terminal value) for each of the Pro Forma QCP Segments, respectively, plus the range of net present

63

Table of Contents

value of certain Pro Forma QCP tax attributes to calculate a consolidated enterprise value range for the Company. Lazard then calculated a consolidated equity value range for the Company by taking the consolidated enterprise value range minus (i) Pro Forma QCP's debt as of December 31, 2017, minus (ii) Pro Forma QCP's preferred stock as of December 31, 2017, plus (iii) Pro Forma QCP's cash as of December 31, 2017, plus (iv) certain other adjustments as provided by the Company. Lazard divided the resulting consolidated equity value range by the fully diluted shares of common stock outstanding to calculate an implied price per share range for shares of common stock and compared it to the base merger consideration to be paid to holders of common stock, other than excluded holders, in the merger:

Other Information

        The analyses and data described below were presented to the board for informational purposes only and did not provide the basis for, and were not considered a part of Lazard's financial analyses for purposes of its opinion, and were not otherwise material to, the rendering of Lazard's opinion.

Sum-of-the-Parts Selected Precedent Transactions Multiples Analysis

        Lazard reviewed and analyzed selected precedent merger and acquisition transactions involving companies in the home health & hospice, post-acute care and assisted living industries it viewed as comparable in certain respect to the business of the Company. In performing this analysis, Lazard reviewed certain financial information and transaction multiples relating to the companies involved in such selected transactions and compared such information to the corresponding information for the Pro Forma QCP Segments. Specifically, Lazard selected and reviewed thirteen merger and acquisition transactions announced since February 2013 involving companies in the home health & hospice and post-acute care industries for which sufficient public information was available.

        The selected group of transactions reviewed in the home health and hospice industry was as follows:

64

Table of Contents

        The selected group of transactions reviewed in the post-acute care and assisted living facilities industries were as follows:

        To the extent publicly available, Lazard reviewed, among other things, the trailing twelve months EBITDA multiples of each of the target companies implied by the selected transactions by comparing the relevant target company's total enterprise value (based on the acquisition price) to its trailing twelve months EBITDA at the time of the transaction. Estimated EBITDA amounts for the target companies were based on company filings, Wall Street equity research estimates or other publicly available financial information.

        Lazard selected the following multiple ranges and applied them to the Pro Forma QCP Segments' 2017 EBITDA and 2018 estimated EBITDA based on its professional judgement and experience:

        Lazard added the low ends and high ends of the implied value ranges for the Pro Forma QCP Segments to calculate a consolidated enterprise value range for the Company based on 2017 EBITDA and 2018 estimated EBITDA. Lazard then calculated a consolidated equity value range for the Company by taking the consolidated enterprise value range minus (i) Pro Forma QCP's debt as of December 31, 2017, minus (ii) Pro Forma QCP's preferred stock as of December 31, 2017, plus (iii) Pro Forma QCP's cash as of December 31, 2017, plus (iv) certain other adjustments as provided by the Company. Lazard divided the resulting consolidated equity value range by the fully diluted shares of common stock outstanding to calculate an implied price per share range for shares of common stock.

        Based on the selected multiple ranges applied to the Pro Forma QCP Segments' 2017 EBITDA and 2018 estimated EBITDA described above, Lazard calculated the implied price per share range for shares of common stock of $22.57 to $29.90 based on the 2017 EBITDA and $17.67 to $23.97 based on 2018 estimated EBITDA. Based on an analysis of the relevant metrics for each of the transactions, including the fact that the Company's management forecasted negative forward twelve months EBITDA growth in comparison to the positive forward twelve months EBITDA growth observed for the target companies, and considering that the Company was projecting a significant decline in the Company's and HCR ManorCare's businesses in 2018 and in the following years as compared to 2017

65

Table of Contents

and that this analysis valued the Company segments on a going-concern basis without taking into account any transaction or other costs to separate the businesses, Lazard determined, in its professional judgment and experience, that the sum-of-the-parts selected precedent transactions analysis was not meaningful for the purposes of application to the Company.

52-Week High/Low Trading Prices

        Lazard reviewed the range of trading prices of shares of common stock for the 52 weeks ended on April 24, 2018. Lazard observed that, during such period, the daily closing share prices of common stock ranged from $12.39 per share to $20.92 per share.

Miscellaneous

        The scope of Lazard's engagement by the Company was limited to advising the board with respect to the fairness, from a financial point of view, to holders of common stock (other than excluded holders) of the base merger consideration to be paid to such holders in the merger. In connection with Lazard's services as financial advisor to the board, the Company agreed to pay Lazard a fee for such services in the amount of $5.0 million, $2.0 million of which is payable upon Lazard rendering its opinion and the remainder of which is contingent on the closing of the merger. However, Lazard is entitled to a portion of its fee if the closing of the merger does not occur but the Company receives a reverse termination fee pursuant to the terms of the merger agreement. In addition, if the consideration paid in any transaction (not including any consideration payable as a result of a time-based ticking fee), whether the transaction or another transaction in which a majority of the Company's voting power or assets are acquired, exceeds $20.75 per share, the Company will pay Lazard 0.20% of such additional consideration. The Company has also agreed to reimburse Lazard for certain expenses incurred in connection with Lazard's engagement and to indemnify Lazard and certain related persons under certain circumstances against various liabilities that may arise from or be related to Lazard's engagement, including certain liabilities under U.S. federal securities laws. Other than its engagement as financial advisor to the Company in connection with the transaction, Lazard has provided certain investment banking services to the Company and certain of its affiliates in the past two years, including restructuring advice to the Company in connection with the QCP-HCR ManorCare transactions, pursuant to which it has received fees in the approximate amount of $2.75 million. Pursuant to its engagement letter with the Company with respect to the merger, Lazard and the Company have agreed that Lazard will be entitled to be paid an additional fee of not less than $1.0 million upon consummation of the merger in satisfaction of the remaining fees owed and payable to Lazard under its restructuring engagement in connection with the QCP-HCR ManorCare transactions.

        Lazard, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts, and valuations for estate, corporate and other purposes. In addition, in the ordinary course, Lazard and its respective affiliates and employees may trade securities of the Company, Welltower, ProMedica and HCR ManorCare and certain of their respective affiliates for their own accounts and for the accounts of their customers, may at any time hold a long or short position in such securities, and may also trade and hold securities on behalf of the Company, Welltower, ProMedica and HCR ManorCare and certain of their respective affiliates. The issuance of Lazard's opinion was approved by the opinion committee of Lazard.

        The Company and Welltower determined the base merger consideration of $20.75 in cash in the merger through arm's-length negotiations, and the board approved such base merger consideration. Lazard did not recommend any specific consideration to the board or any other person or indicate that

66

Table of Contents

any given consideration constituted the only appropriate consideration for the merger. Lazard's opinion was one of many factors considered by the board, as discussed further in " —Reasons for the Merger ."