Exhibit 10.1

 

MERGER CONSIDERATION ALLOCATION AGREEMENT

 

This Merger Consideration Allocation Agreement (this “Agreement”) is made and
entered into as of May 3, 2017 by and among Sentio Healthcare Properties, Inc.,
a Maryland corporation (the “Company”), Sentio Healthcare Properties OP, L.P., a
Delaware limited partnership (the “Operating Partnership”), Sentinel RE
Investment Holdings LP, a Delaware limited partnership (the “Investor”), Sentio
Investments, LLC, a Florida limited liability company (the “Advisor”), and,
solely with respect to Section 3, Section 5, Section 6, Section 7, and Section
10, KAREP Master JV LLC, a Delaware limited liability company (“Parent”).

 

RECITALS

 

WHEREAS, the Company, the Operating Partnership, Parent, KAREP Acquisitions
Vehicle, LLC and Advisor, solely in its capacity as stockholders’
representative, intend to enter into that certain Agreement and Plan of Merger
to be dated as of the date hereof (the “Merger Agreement”), pursuant to which
the Company will be merged with and into Merger Sub (as defined in the Merger
Agreement), with Merger Sub being the surviving entity and each share of Company
Common Stock (as defined in the Merger Agreement) and Company Preferred Stock
(as defined in the Merger Agreement) issued and outstanding immediately prior to
the Effective Time (as defined in the Merger Agreement) will be converted into
the right to receive the applicable Merger Consideration (as defined in the
Merger Agreement) upon the terms and conditions set forth in the Merger
Agreement. Any capitalized term not otherwise defined herein shall have the
meaning given such term in the Merger Agreement.

 

WHEREAS, the Company and the Advisor are party to that certain Advisory
Agreement dated as of January 1, 2013 (as amended by that certain Transition to
Internal Management Agreement (as amended by those certain Amendments No. 1, No.
2, No. 3 and No. 4 to Transition to Internal Management Agreement), collectively
the “Advisory Agreement”), pursuant to which the Advisor would be entitled to
certain payments as a result of the transactions contemplated by the Merger
Agreement and the termination of the Advisory Agreement.

 

WHEREAS, the Investor and the Company are parties to that certain Second Amended
and Restated Limited Partnership Agreement of the Operating Partnership dated as
of August 5, 2013 (as amended on December 22, 2014 and August 31, 2016, the
“Partnership Agreement”). Pursuant to the Merger Agreement it is contemplated
that the OP Series B Preferred Units will be treated as provided herein,
notwithstanding anything contained in the Partnership Agreement or any other
agreement to which the Investor is a party.

 

WHEREAS, in connection with the determination of the Aggregate Merger
Consideration and ultimately, the Common Merger Consideration, the parties
hereto desire to (a) confirm the amounts that the Investor will receive as
consideration for all of its outstanding OP Series B Preferred Units and agree
upon how such units will be redeemed, (b) confirm the amounts that the Investor
will receive as consideration for all of its outstanding Company Preferred
Stock, (c) confirm the amounts the Advisor will be entitled to receive in
connection with the consummation of the Merger (the “Promote Payment”) and the
amount as a result of the termination of the Advisory Agreement (the “Advisor
Termination Payment” and together with the Promote Payment the “Advisory
Agreement Payment Amount”) and (d) confirm the allocation of the contingent
value rights (each a “CVR” and collectively, the “CVRs”) among the holders of
Company Common Stock, Investor and the Advisor.

 

 

 

 

WHEREAS, in connection with the transactions contemplated by the Merger
Agreement, on or prior to the Calculation Date, the Company and Parent will
agree upon the Aggregate Cash Merger Consideration, which amount will be between
$382,407,161 and $398,407,161 (the “Cash Consideration Range”) per the terms of
Section 2.1 of the Merger Agreement (subject to possible increases to the range
per the terms of the last proviso of Section 2.1(a) of the Merger Agreement).

 

WHEREAS, in connection with the transactions contemplated by the Merger
Agreement, the ultimate aggregate value of the CVRs will be between $0 and
$8,760,000 (the “CVR Consideration”) per the terms of the Merger Agreement, the
Indemnity Escrow Agreement and the Contingent Value Rights Agreement (subject to
possible increases to the range per the terms of Section 2.1(a) of the Merger
Agreement).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and subject to the conditions herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:

 

AGREEMENT

 

1.          Allocation of the Aggregate Cash Merger Consideration. Attached
hereto as Exhibit A is a sample calculation of the Aggregate Cash OP Series B
Preferred Units Consideration, the aggregate Common Cash Merger Consideration
payable with respect to all shares of Company Common Stock entitled thereto, the
Aggregate Preferred Merger Consideration payable with respect to all shares of
Company Preferred Stock entitled thereto, and the Promote Payment, each based on
the Initial Estimated Closing Date for the calculation of the Aggregate Cash
Merger Consideration and the high and low end of the Cash Consideration Range.
In addition, Exhibit A sets forth the amount by which each of the foregoing
changes on a monthly basis for later Estimated Closing Dates.

 

2.          Allocation of the CVR Consideration. Attached hereto as Exhibit B is
the calculation setting forth the percentage allocation among the OP Series B
Preferred Units, the Company Common Stock and the Advisor of the CVR
Consideration. Holders of Company Common Stock shall receive one CVR for each
share of Company Common Stock, and the Investor and the Advisor shall receive
the corresponding numbers of CVRs that will give effect to the percentage
allocation of CVRs among the OP Series B Preferred Units, the Company Common
Stock and the Advisor.

 

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3.          Treatment of OP Series B Preferred Units and Company Preferred
Stock.

 

(a)          Redemption. Notwithstanding anything contained in the Partnership
Agreement or any other agreement to which the Investor is a party, conditioned
upon the occurrence of the Merger, the parties agree that the Operating
Partnership shall, and Parent and Merger Sub shall cause the Operating
Partnership to, redeem all of the issued and outstanding OP Series B Preferred
Units effective as of immediately following the Effective Time for the Aggregate
OP Series B Preferred Units Consideration as defined below in subsection (b). No
further notice of the redemption shall be required to be delivered by the
Operating Partnership and the Investor waives any notice requirements for a
redemption of the OP Series B Preferred Units to which the Investor may
otherwise be entitled. Furthermore, the Investor agrees that notwithstanding any
right the Investor may have in the Partnership Agreement or otherwise to convert
the OP Series B Preferred Units to Company Common Stock, the Investor agrees
that it will not exercise such right for so long as this Agreement remains in
effect.

 

(b)          Aggregate OP Series B Preferred Units Consideration.
Notwithstanding anything contained in the Partnership Agreement or any other
agreement to which the Investor is a party, Parent, the Company, the Operating
Partnership, the Advisor and the Investor hereby agree that the “Aggregate Cash
OP Series B Preferred Units Consideration” payable upon the redemption of the OP
Series B Preferred Units, subject to the final determination of the Aggregate
Cash Merger Consideration pursuant to Section 2.1 of the Merger Agreement (based
on the Cash Consideration Range) is between $216,355,482 and $226,054,788 based
on the Initial Estimated Closing Date (subject to possible increases to the
range per the terms of the last proviso of Section 2.1(a) of the Merger
Agreement). Notwithstanding anything contained in the Partnership Agreement or
any other agreement to which the Investor is a party, Parent, the Company, the
Operating Partnership, the Advisor and the Investor hereby agree that upon
determination of the Aggregate Cash Merger Consideration pursuant to Section 2.1
of the Merger Agreement, the Aggregate Cash OP Series B Preferred Units
Consideration shall be determined based on the sample calculation set forth on
Exhibit A using the final Estimated Closing Date as determined pursuant to the
Merger Agreement. In addition, upon the Effective Time, Parent, the Company, the
Operating Partnership, the Advisor and the Investor agree that the Investor
shall be entitled to 57.78% of the aggregate number of CVRs to be issued. The
aggregate number of CVRs issued to the Investor in respect of the OP Series B
Preferred Units together with the Aggregate Cash OP Series B Unit Consideration
is the “Aggregate OP Series B Unit Consideration.” Notwithstanding anything in
the foregoing to the contrary, distributions on the OP Series B Preferred Units
shall continue to be made until the Closing Date, including payment thereof on a
daily basis for the period between the date of the last regularly paid quarterly
distribution and the Closing Date, in accordance with the Partnership Agreement
and in accordance with Section 5.1(c) and the last paragraph of Section 5.1 of
the Merger Agreement.

 

(c)          Company Preferred Stock. The Investor is the only holder of Company
Preferred Stock. Parent, the Company, the Operating Partnership, the Advisor and
the Investor hereby agree to the treatment of all of the issued and outstanding
Company Preferred Stock in accordance with Section 2.2(b) of the Merger
Agreement. The Company shall continue to declare and pay dividends on the
Company Preferred Stock in accordance with the terms thereof, and the Company
shall declare and pay immediately prior to the Effective Time a dividend for the
period from the most recent dividend payment date for the Company Preferred
Stock to the date of the Closing Date in accordance with Section 5.1(c) and the
last paragraph of Section 5.1 of the Merger Agreement.

 

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4.          Payments to the Advisor. Notwithstanding anything contained in the
Advisory Agreement, or any other agreement pursuant to which the Company, the
Operating Partnership, the Advisor and the Investor are parties, the Company,
the Operating Partnership, the Advisor and the Investor agree that the Promote
Payment, subject to the final determination of the Aggregate Cash Merger
Consideration pursuant to Section 2.1 of the Merger Agreement (based on the Cash
Consideration Range) is between $4,697,186 and $5,483,061 based on the Initial
Estimated Closing Date (subject to possible increases to the range per the terms
of the last proviso of Section 2.1(a) of the Merger Agreement). The Company, the
Operating Partnership, the Advisor and the Investor agree that upon final
determination of the Aggregate Cash Merger Consideration in accordance with
Section 2.1 of the Merger Agreement, the amount of the Promote Payment shall be
determined based on the sample calculation on Exhibit A using the final
Estimated Closing Date as determined pursuant to the Merger Agreement.
Furthermore, the Company, the Operating Partnership, the Advisor and the
Investor agree that the Advisor is entitled to 4.22% of the aggregate number of
CVRs to be issued. In addition, the Company, the Operating Partnership, the
Advisor and the Investor agree that upon the Effective Time and as a result of
the termination of the Advisory Agreement, the Advisor Termination Payment shall
be fixed based on the Estimated Closing Date agreed to by the parties pursuant
to Section 2.1 of the Merger Agreement, which amount shall be determined in
accordance with the sample calculation set forth on Exhibit C. Notwithstanding
the foregoing, prior to the termination of the Advisory Agreement, the Advisor
shall continue to be entitled to receive all amounts payable under the Advisory
Agreement through the Effective Time.

 

5.          Funding of the Aggregate OP Series B Preferred Units Consideration.
Prior to the Effective Time, Parent shall deposit with the Paying Agent cash in
immediately available funds in an amount equal to the Aggregate Cash OP Series B
Preferred Units Consideration in accordance with Section 2.4 of the Merger
Agreement. Such amount will be deemed to have been contributed by the Company to
the Operating Partnership, and used by the Operating Partnership to redeem the
OP Series B Preferred Units in accordance with Section 3(a). Immediately after
the Effective Time, Parent and Merger Sub shall cause (i) the Paying Agent to
pay the Investor the Aggregate Cash OP Series B Preferred Units Consideration to
the account designated by the Investor and (ii) the Rights Agent to deliver to
the Investor the aggregate number of CVRs as set forth in Section 3(b).

 

6.          Termination of Certain Related Party Agreements. The Company, the
Operating Partnership and the Investor hereby agree that effective as of the
Effective Time each of the Securities Purchase Agreement, dated as of February
10, 2013, among the Company, the Operating Partnership and the Investor, as
amended and the Investor Rights Agreement, dated as of February 10, 2013, among
the Investor, the Company and the Operating Partnership, as amended (the “IRA”),
shall each be terminated and shall have no further force or effect, and no party
thereto shall have any liability or obligation thereunder as of the Effective
Time. The Company and the Advisor hereby agree that effective as of the
Effective Time the Advisory Agreement shall be terminated and shall have no
further force or effect, and no party thereto shall have any liability or
obligation thereunder as of the Effective Time.

 

7.Representations and Warranties.

 

(a)The Company. The Company hereby represents and warrants that:

 

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(i)The Company is a corporation duly organized, validly existing and in good
standing under the Laws of Maryland and has the requisite corporate power and
authority to conduct its business as now being conducted.

 

(ii)The Company has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.

 

(iii)The execution, delivery and performance by the Company of this Agreement,
and the consummation by it of the transactions contemplated hereby, have been
duly and validly authorized by the Company Board and no other corporate action
on the part of the Company is necessary to authorize the execution and delivery
by the Company of this Agreement, and the consummation by it of the transactions
contemplated hereby.

 

(iv)This Agreement has been duly executed and delivered by the Company and,
assuming due and valid authorization, execution and delivery hereof by the other
parties hereto, is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except that the enforcement
hereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium
or other similar Laws, now or hereafter in effect, relating to creditors’ rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at Law) (collectively,
the “Enforceability Exceptions”).

 

(b)The Operating Partnership. The Operating Partnership hereby represents and
warrants that:

 

(i)The Operating Partnership is a limited partnership duly organized, validly
existing and in good standing under the Laws of Delaware and has the requisite
power and authority to conduct its business as now being conducted.

 

(ii)The Operating Partnership has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.

 

(iii)The execution, delivery and performance by the Operating Partnership of
this Agreement, and the consummation by it of the transactions contemplated
hereby, have been duly and validly authorized and no other action on the part of
the Operating Partnership is necessary to authorize the execution and delivery
by the Operating Partnership of this Agreement, and the consummation by it of
the transactions contemplated hereby.

 

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(iv)This Agreement has been duly executed and delivered by the Operating
Partnership and, assuming due and valid authorization, execution and delivery
hereof by the other parties hereto, is a valid and binding obligation of the
Operating Partnership enforceable against the Operating Partnership in
accordance with its terms, except that the enforcement hereof may be limited by
the Enforceability Exceptions.

 

(v)The Operating Partnership is not entering into this Agreement with the intent
to hinder, delay or defraud either present or future creditors. Immediately
after giving effect to the redemption of the OP Series B Preferred Units and the
other transactions contemplated hereby and payment of all related fees and
expenses, the Operating Partnership will be Solvent. For purposes of this clause
(v), the term “Solvent” with respect to the Operating Partnership means that, as
of any date of determination, (x) the amount of the fair saleable value of the
assets of the Operating Partnership and its Subsidiaries, taken as a whole,
exceeds, as of such date, the sum of (i) the value of all liabilities of the
Operating Partnership and its Subsidiaries, taken as a whole, including
contingent and other liabilities, as of such date, as such quoted terms are
generally determined in accordance with the applicable federal Laws governing
determinations of the solvency of debtors, and (ii) the amount that will be
required to pay the probable liabilities of the Operating Partnership and its
Subsidiaries, taken as a whole on its existing debts (including contingent
liabilities) as such debts become absolute and matured; (y) the Operating
Partnership will not have, as of such date, an unreasonably small amount of
capital for the operation of the business in which it is engaged or proposed to
be engaged by Parent following such date; and (z) the Operating Partnership will
be able to pay its liabilities, including contingent and other liabilities, as
they mature.

 

(c)The Investor. The Investor hereby represents and warrants that:

 

(i)The Investor is a limited partnership duly organized, validly existing and in
good standing under the Laws of Delaware and has the requisite power and
authority to conduct its business as now being conducted.

 

(ii)The Investor has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.

 

(iii)The execution, delivery and performance by the Investor of this Agreement,
and the consummation by it of the transactions contemplated hereby, have been
duly and validly authorized and no other action on the part of the Investor is
necessary to authorize the execution and delivery by the Investor of this
Agreement, and the consummation by it of the transactions contemplated hereby.

 

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(iv)This Agreement has been duly executed and delivered by the Investor and,
assuming due and valid authorization, execution and delivery hereof by the other
parties hereto, is a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except that the enforcement
hereof may be limited by the Enforceability Exceptions.

 

(d)The Advisor. The Advisor hereby represents and warrants that:

 

(i)The Advisor is a limited liability company duly organized, validly existing
and in good standing under the Laws of Florida and has the requisite power and
authority to conduct its business as now being conducted.

 

(ii)The Advisor has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.

 

(iii)The execution, delivery and performance by the Advisor of this Agreement,
and the consummation by it of the transactions contemplated hereby, have been
duly and validly authorized and no other action on the part of the Advisor is
necessary to authorize the execution and delivery by the Advisor of this
Agreement, and the consummation by it of the transactions contemplated hereby.

 

(iv)This Agreement has been duly executed and delivered by the Advisor and,
assuming due and valid authorization, execution and delivery hereof by the other
parties hereto, is a valid and binding obligation of the Advisor enforceable
against the Advisor in accordance with its terms, except that the enforcement
hereof may be limited by the Enforceability Exceptions.

 

(e)Parent. Parent hereby represents and warrants that:

 

(i)Parent is a limited liability company duly organized, validly existing and in
good standing under the Laws of Delaware and has the requisite power and
authority to conduct its business as now being conducted.

 

(ii)Parent has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.

 

(iii)The execution, delivery and performance by Parent of this Agreement, and
the consummation by it of the transactions contemplated hereby, have been duly
and validly authorized by the governing body of Parent and no other action on
the part of Parent is necessary to authorize the execution and delivery by
Parent of this Agreement, and the consummation by it of the transactions
contemplated hereby.

 

(iv)This Agreement has been duly executed and delivered by Parent and, assuming
due and valid authorization, execution and delivery hereof by the other parties
hereto, is a valid and binding obligation of Parent enforceable against Parent
in accordance with its terms, except that the enforcement hereof may be limited
by the Enforceability Exceptions.

 

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8.          Covenants.

 

(a)          Transfer of OP Series B Preferred Units. Absent the prior written
consent of the other parties hereto, the Investor hereby agrees that, from the
date hereof until the termination of this Agreement, it shall not offer, sell,
transfer, assign, tender in any tender or exchange offer, pledge, encumber,
loan, hypothecate or similarly dispose of (by merger, by testamentary
disposition, by operation of law or otherwise) (a “Transfer”) or convert any OP
Series B Preferred Units, unless prior to the effectiveness of any such
Transfer, the transferee executes a joinder to this Agreement pursuant to which
such transferee agrees in writing to become a party to this Agreement and be
subject to the terms hereof and otherwise become a party for all purposes of
this Agreement and notice of such Transfer is delivered to the other parties
pursuant to Section 10(d).

 

(b)          Consent to Merger Agreement. Pursuant to the Partnership Agreement
and IRA, the Investor hereby consents to the transactions contemplated by the
Merger Agreement for all purposes thereunder and agrees to the treatment of the
OP Series B Preferred Units as contemplated herein and therein.

 

(c)          Further Assurances. The parties agree to use commercially
reasonable efforts to execute and deliver, or cause to be executed and
delivered, any additional documents, instruments and assurances and to take, or
cause to be taken, all actions that may be reasonably necessary or appropriate
to effectuate the provisions of this Agreement, including entering into any
amendments to the Partnership Agreement or the Advisory Agreement.

 

9.          Termination. This Agreement shall terminate automatically without
any further action of the parties upon the termination of the Merger Agreement.

 

10.         Miscellaneous Provisions.

 

(a)          Amendment. This Agreement may be amended, modified and supplemented
by written agreement of all the parties hereto; provided, that Parent’s consent
shall only be required to the extent that the amendment relates to Section 3,
Section 5, Section 6, Section 7, or Section 10.

 

(b)          Counterparts. This Agreement may be executed manually or by
facsimile by the parties, in any number of counterparts, each of which shall be
considered one and the same agreement and shall become effective when a
counterpart hereof shall have been signed by each of the parties and delivered
to the other parties hereto.

 

(c)          Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by rule of Law or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
Merger and the transactions contemplated hereby are not affected in any manner
adverse to the applicable party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the Merger and the transactions contemplated hereby are fulfilled to the
extent possible.

 

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(d)          Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally (notice deemed given
upon receipt), telecopied (notice deemed given upon confirmation of receipt) or
sent by a nationally recognized overnight courier service, such as Federal
Express (notice deemed given upon receipt of proof of delivery), to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):

 

if to Parent, to:

 

c/o KAREP Acquisitions, LLC
1 Town Center Road, Suite 300
Boca Raton, FL 33486
Attention: David Selznick and Russell Reiter
Facsimile: (561) 300-6290

 

with a copy to:

Hogan Lovells US LLP
555 13th Street NW
Washington, DC 20004

Attention: Stuart Barr
Facsimile: (202) 637-5910

 

if to the Company or the Operating Partnership, to:

 

Sentio Healthcare Properties, Inc.

c/o Sentio Investments, LLC

189 S Orange Ave, Suite 1700

Orlando, FL. 32801
Attention: John Mark Ramsey
Facsimile: (407) 999-5210

 

with copies to:

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, California 90071-1560

Attention: Julian Kleindorfer

David Wheeler

Facsimile: (213) 891-8763

 

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if to the Investor:

 

Sentinel RE Investment Holdings, L.P.

 c/o Kohlberg Kravis Roberts & Co. L.P.

 9 West 57th Street, Suite 4200

 New York, NY 10019

 Attention: Billy Butcher and General Counsel

 Facsimile: (212) 750-0003

 

With copies to:

 

Simpson Thacher & Bartlett LLP

 425 Lexington Avenue

 New York, New York 10017

 Attention: Gary I. Horowitz

 Facsimile: (212) 455-2502

 

if to the Advisor:

 

Sentio Investments, LLC

189 S Orange Ave, Suite 1700

Orlando, FL. 32801
Attention: John Mark Ramsey
Facsimile: (407) 999-5210

 

with copies to:

 

Foley & Lardner LLP

111 North Orange Avenue, Suite 1800

Orlando, FL 32801-2386
Attention: Matthew E. Jassak
Facsimile: mjassak@foley.com

 

(e)Governing Law; Jurisdiction

. 

(i)This Agreement, and all claims or causes of actions (whether at Law, in
contract or in tort) that may be based upon, arise out of or related to this
Agreement or the negotiation, execution or performance of this Agreement, shall
be governed by, and construed in accordance with, the Laws of the State of
Maryland without giving effect to conflicts of laws principles (whether of the
State of Maryland or any other jurisdiction that would cause the application of
the Laws of any jurisdiction other than the State of Maryland).

 

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(ii)All Legal Proceedings and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in any Maryland state or
federal court. Each of the parties hereby irrevocably and unconditionally
(a) submits to the exclusive jurisdiction of any Maryland state or federal
court, for the purpose of any Legal Proceeding arising out of or relating to
this Agreement or any ancillary agreement related hereto brought by any party,
(b) agrees not to commence any such action or proceeding except in such courts,
(c) agrees that any claim in respect of any such action or proceeding may be
heard and determined in any Maryland state or federal court, (d) waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any such action or proceeding,
and (e) waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding. Each of the
parties agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by Law. Each party irrevocably consents to service
of process in the manner provided for notices in Section 10(d). Nothing in this
Agreement will affect the right of any party to serve process in any other
manner permitted by Law.

 

(f)          Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
MERGER AND OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES
SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10(f).

 

(g)          Assignment. This Agreement shall not be assigned or delegated by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties hereto, except this Agreement shall
be assignable without any consent to a permitted transferee under Section 8(a).
Any assignment in violation of this Section 10(g) shall be null and void.
Subject to the preceding sentence, but without relieving any party hereto of any
obligation hereunder, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
assigns.

 

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(h)          Specific Performance. Parent agrees that, in the event that Parent
does not perform the provisions of this Agreement in accordance with its
specified terms or otherwise breach such provisions, irreparable damage would
occur, for which monetary damages, even if available, may not be an adequate
remedy. Parent agrees that if the Closing occurs, the Investor shall be entitled
to an injunction, specific performance or other equitable relief to cause the
redemption of the OP Series B Preferred Units in accordance with Section 3. Such
remedy shall not be deemed to be the exclusive remedy for breach of Agreement
but shall be in addition to all other remedies available at law or equity to the
Investor. Parent agrees that it will not oppose the granting of an injunction,
specific performance and other equitable relief as provided herein on the basis
that (x) the Investor has an adequate remedy at law or (y) an award of specific
performance is not an appropriate remedy for any reason at law or equity. The
Investor, in seeking specific performance, shall not be required to provide any
bond or other security in connection with any such order or injunction

 

(i)          Entire Agreement. This Agreement, together with the Merger
Agreement, constitute the entire agreement among the Parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the Parties or any of them with
respect to the subject matter hereof and thereof.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Advisor, the Company, the Operating Partnership, the
Investor, and Parent have caused this Agreement to be signed by their duly
authorized representatives as of the date first written above.

 

  SENTIO INVESTMENTS, LLC         By: /s/ John Mark Ramsey     Name: John Mark
Ramsey     Title: Manager         SENTIO HEALTHCARE PROPERTIES, INC.         By:
/s/ John Mark Ramsey     Name: John Mark Ramsey     Title: Chief Executive
Officer and President         SENTIO HEALTHCARE PROPERTIES OP, L.P.         By:
Sentio Healthcare Properties, Inc.,     its general partner         By: /s/ John
Mark Ramsey     Name: John Mark Ramsey     Title: Chief Executive Officer and
President

 

[Signature Page to Merger Consideration Allocation Agreement]

 

 

 

 

  SENTINEL RE INVESTMENT HOLDINGS LP         By: Sentinel RE Investment Holdings
GP LLC,     its general partner         By: KKR REPA AIV-1 LP., managing member
        By: KKR Associates REPA L.P., its general     partner         By: KKR
REPA GP LLC, its general partner         By: /s/ David Sorkin     Name: David
Sorkin     Title: Secretary

 

[Signature Page to Merger Consideration Allocation Agreement]

 

 

 

 

  KAREP MASTER JV, LLC         By: /s/ S. David Selznick     Name: S. David
Selznick     Title: Vice President

 

[Signature Page to Merger Consideration Allocation Agreement]

 

 

 

 

EXHIBIT A

 

Aggregate Cash Merger Consideration Allocation ("ACMC") Exhibit A

 

            ACMC Range           Initial ACMC   Low   High   Aggregate Cash
Merger Consideration   (A)+(B)+(C)   $390,407,161   $382,407,161   $398,407,161
  Add back: Promote Payment       $5,090,124   4,697,186   5,483,061   Aggregate
Consideration       $395,497,285   $387,104,347   $403,890,222   Distribution
Catch Up to OP Common Units (a)       ($12,573,815 ) (12,573,815 ) (12,573,815 )
OP Series A Capital       ($100,000 ) (100,000 ) (100,000 ) Series A Accrued
Distributions       $0   -   -   Proceeds Available for Distribution Pro Rata  
    $382,823,470   $374,430,532   $391,216,407  

 

Pro Rata Distributions: OP Common Units and OP Series B Preferred Units

 

    Capital   Contribution       Relative Unit                   Contribution  
per Unit   # Units   Percentages               OP Common Units   $115,665,030  
$10.00   11,566,503 * 42.22%   $161,618,335   $158,075,050   $165,161,619   OP
Series B Preferred Units   158,626,000   $10.02   15,830,938   57.78%  
$221,205,135   216,355,482   226,054,788       $274,291,030       27,397,441  
100.00%   $382,823,470   $374,430,532   $391,216,407       * includes 20,000 LP
common units held by REIT              

 

Common Cash Merger Consideration

 

Proceeds Allocated Based on Pro Rata Units           $161,618,335   $158,075,050
  $165,161,619   Distribution Catch Up to OP Common Units           $12,573,815
  12,573,815   12,573,815   Less: Promote Payment           ($5,090,124 )
(4,697,186 ) (5,483,061 ) Common Cash Merger Consideration   Shares O/S   (A)  
$169,102,026   $165,951,679   $172,252,373   Common Cash Merger Consideration
per Share   11,546,503                               $14.65   $14.37   $14.92  
    Collar Per Share Impact           ($0.27 ) $0.27   Aggregate Cash OP Series
B Preferred Unit Consideration (KKR)                       Proceeds Allocated
Based on Pro Rata Units           $221,205,135   $216,355,482   $226,054,788  
Aggregate Cash OP Series B Preferred Unit Consideration       (B)   $221,205,135
  $216,355,482   $226,054,788   Preferred Merger Consideration (KKR)            
          OP Series A Capital           $100,000   100,000   100,000   Preferred
Merger Consideration       (C)   $100,000   100,000   100,000  

 

(a) Through Initial Estimated Closing Date (July 31, 2017). To be updated
through revised Estimated Closing Date.

 

 

 

  

Promote Payment Exhibit A (Continued)

 

I   Consideration to Legacy Common Shares       ACMC   Collar-Low   Collar-High
      Proceeds Allocated Based on Pro Rata Units       $161,618,335  
$158,075,050   $165,161,619       Distribution Catch Up to OP Common Units      
12,573,815   12,573,815   12,573,815       Sub-Total: Equity Value Available to
Common Stock       $174,192,150   $170,648,865   $177,735,434       Company
Common Stock Shares Outstanding       11,546,503   11,546,503   11,546,503      
Equity Value Per Share Available to Company Common Stock       $15.0861   $14.78
  $15.39                               Legacy Common Shares       12,804,644  
12,804,644   12,804,644       X  Equity Value Per Share Available to Company
Common Stock       X $15.09   X $14.78   X $15.39           A   $193,172,640  
$189,243,268   $197,102,011       Aggregate Distributions Paid to Company Common
Stock (a)   B   45,643,359   45,643,359   45,643,359       Total   A+B  
$238,815,999   $234,886,627   $242,745,370                           II  
Threshold                       Company Common Stock Shares Outstanding      
11,546,503   11,546,503   11,546,503       X Invested Capital per Common Share  
    X $10.00   X $10.00   X $10.00           C   $115,465,030   $115,465,030  
$115,465,030       Plus: KKR Capital Used in Redemption   D   8,726,000  
8,726,000   8,726,000       7% Stockholder Return (a)       63,723,734  
63,723,734   63,723,734       Total Threshold   C+D+E   $187,914,764  
$187,914,764   $187,914,764                           III   Promote Payment    
                  Difference Between I and II       $50,901,235   $46,971,863  
$54,830,606       Promote Payment %       X 10.0%   X 10.0%   X 10.0%      
Promote Payment       $5,090,124   $4,697,186   $5,483,061  

 

(a) Through July 31, 2017.

 

 

 

  

Aggregate Cash Merger Consideration Allocation ("ACMC"): Estimated Monthly
Impact Post 7/31/17 (a) Exhibit A (Cont)

 

    Pro Forma Pro Forma Change   Aggregate Cash Merger Consideration   7/31/17
ACMC 8/31/17 ACMC 8/31 vs 7/31   (A)+(B) $390,407,161 $390,805,947 $398,786  
Add back: Promote Payment   5,090,124 5,104,397 14,273   Aggregate Consideration
  $395,497,285 $395,910,344 $413,059   Distribution Catch Up to OP Common Units
(b)   (12,573,815) (12,795,093) (221,278)   OP Series A Capital   (100,000)
(100,000) -   Series A Accrued Distributions   - - -   Proceeds Available for
Distribution Pro Rata   $382,823,470 $383,015,251 $191,781  

 

Pro Rata Distributions: OP Common Units and OP Series B Preferred Units

 

  Capital Contribution Contribution per Unit # Units Relative Unit Percentages  
      OP Common Units $115,665,030 $10.00 11,566,503  * 42.22% $161,618,335
$161,699,300 $80,965   OP Series B Preferred Units 158,626,000 $10.02 15,830,938
57.78% 221,205,135 221,315,951 110,816     $274,291,030     27,397,441 100.00%
$382,823,470 $383,015,251 $191,781     * includes 20,000 LP common units held by
REIT    

 

Common Cash Merger Consideration           Proceeds Allocated Based on Pro Rata
Units     $161,618,335 $161,699,300 $80,965 Distribution Catch Up to OP Common
Units     12,573,815 12,795,093 221,278 Less: Promote Payment     (5,090,124)
(5,104,397) (14,273) Common Cash Merger Consideration Shares O/S (A)
$169,102,026 $169,389,996 $287,970 Common Cash Merger Consideration per Share
11,546,503               $14.65 $14.67 $0.02 Aggregate Cash OP Series B
Preferred Unit Consideration (KKR)           Proceeds Allocated Based on Pro
Rata Units     $221,205,135 $221,315,951 $110,816 Aggregate Cash OP Series B
Preferred Unit Consideration   (B) $221,205,135 $221,315,951 $110,816 Preferred
Merger Consideration (KKR)           OP Series A Capital     100,000 100,000 -
Preferred Merger Consideration   (C) 100,000 100,000 -

  

 

(a)  Based on net cash flow projection from Advisor (estimated at $92K per
month) and average debt amortization for period Aug-Dec (actual monthly
amortization per month does not vary materially)

(b)  Through pro forma closing date of Aug 31, 2017. Actual amount dependent on
agreed to revised Estimated Closing Date.

 

 

 

 

Aggregate Cash Merger Allocation as of 7/31/17 at Million Dollar Increments with
Collar Exhibit A (Continued)

 

   Collar Low                       ACMC                       Collar High
Aggregate Consideration  $387,104,347  $388,153,465  $389,202,582  $390,251,699 
$391,300,816  $392,349,933  $393,399,050  $394,448,167  $395,497,285 
$396,546,402  $397,595,519  $398,644,636  $399,693,753  $400,742,870 
$401,791,987  $402,841,105  $403,890,222                                       
              Promote Payment  (4,697,186)  ($4,746,304)  ($4,795,421) 
($4,844,538)  ($4,893,655)  ($4,942,772)  ($4,991,889)  ($5,041,006) 
($5,090,124)  ($5,139,241)  ($5,188,358)  ($5,237,475)  ($5,286,592) 
($5,335,709)  ($5,384,826)  ($5,433,944)  ($5,483,061) Aggregate Cash Merger
Consideration  $382,407,161  $383,407,161  $384,407,161  $385,407,161 
$386,407,161  $387,407,161  $388,407,161  $389,407,161  $390,407,161 
$391,407,161  $392,407,161  $393,407,161  $394,407,161  $395,407,161 
$396,407,161  $397,407,161  $398,407,161 Aggregate Cash OP Series B Preferred
Unit Consideration  $216,355,482  $216,961,689  $217,567,896  $218,174,102 
$218,780,309  $219,386,515  $219,992,722  $220,598,928  $221,205,135 
$221,811,342  $222,417,548  $223,023,755  $223,629,961  $224,236,168 
$224,842,374  $225,448,581  $226,054,788 Preferred Merger Consideration 
100,000  100,000  100,000  100,000  100,000  100,000  100,000  100,000  100,000 
100,000  100,000  100,000  100,000  100,000  100,000  100,000  100,000 Common
Cash Merger Consideration  165,951,679  166,345,472  166,739,265  167,133,059 
167,526,852  167,920,646  168,314,439  168,708,233  169,102,026  169,495,819 
169,889,613  170,283,406  170,677,200  171,070,993  171,464,787  171,858,580 
172,252,373    $382,407,161  $383,407,161  $384,407,161  $385,407,161 
$386,407,161  $387,407,161  $388,407,161  $389,407,161  $390,407,161 
$391,407,161  $392,407,161  $393,407,161  $394,407,161  $395,407,161 
$396,407,161  $397,407,161  $398,407,161 Promote Payment  $4,697,186 
$4,746,304  $4,795,421  $4,844,538  $4,893,655  $4,942,772  $4,991,889 
$5,041,006  $5,090,124  $5,139,241  $5,188,358  $5,237,475  $5,286,592 
$5,335,709  $5,384,826  $5,433,944  $5,483,061

 

 

 

 

  

Contingent Value Right ("CVR") Allocation (i.e. Indemnity Escrow and
Representative Fund) Exhibit B

 

  At At Cash Consideration Range   Assumed Maximum Indemnity Escrow /
Representative Fund Amount (a) Initial ACMC Low High   $8,760,000 $8,760,000
$8,760,000  

 

Company Common Stock Incremental Share of CVR         Pro Rata Unit Allocation
Applicable to OP Common Units 42.22% 42.22% 42.22%   Adjustment for Advisor
Promote Payment (1-10% Advisor Promote) x 90.00% x 90.00% x 90.00%   Incremental
Company Common Stock CVR Allocation Percentage 38.00% 38.00% 38.00%   Estimated
Maximum CVR Dollars Allocable to Company Common Stock $3,328,424 $3,328,424
$3,328,424   Common Cash Merger Consideration 169,102,026 165,951,679
172,252,373   Estimated Potential Total Proceeds to Common Shareholders
$172,430,450 $169,280,103 $175,580,797   Potential Total Per Shr $14.93 $14.66
$15.21   OP Series B Preferred Units Incremental Share of CVR        
Incremental OP Series B Preferred Units CVR Allocation Percentage 57.78% 57.78%
57.78%   Estimated Maximum CVR Dollars Allocable to OP Series B Preferred Units
$5,061,751 $5,061,751 $5,061,751   Advisor Incremental Share of CVR /
Representative Fund         Incremental Company Common Stock CVR Allocation
Percentage 42.22% 42.22% 42.22%   x Advisor Promote (10%) x 10.00% x 10.00% x
10.00%   Incremental Advisor Share CVR Allocation 4.22% 4.22% 4.22%   Estimated
Maximum CVR Dollars Allocable to Advisor $369,825 $369,825 $369,825  

(a) Amounts remaining in Representative Fund and Indemnity Escrow will be
distributed via CVR. Illustrative example above assumes full Indemnity Fund
return (before any possible adjustment for the Company's Bryan interest) and use
of Representative Fund limited to the $240,000 administrative fee.

 

CVR Issuance

 

  Common Shares CVRs Pro Rata CVR per Share Company Common Stock 11,546,503
11,546,503 38.00% 1.000 OP Series B Preferred Units 15,830,938 17,559,516 57.78%
1.109 Advisor N/A 1,282,945 4.22%       30,388,964    

 

 

 

  

Advisory Agreement Payment Exhibit C

 

  ACMC Collar-Low Collar-High Promote Payment $5,090,124 $4,697,186 $5,483,061
Strategic Alternative Fee 3,000,000 3,000,000 3,000,000 Total: Advisory
Agreement Payment $8,090,124 $7,697,186 $8,483,061