Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 23 day of
September, 2015 (the “Effective Date”), by and between Summit Healthcare REIT,
Inc, a Maryland corporation (“Company”), and Kent Eikanas, an individual
resident in the State of California (“Executive”).

 

RECITALS

 

WHEREAS, Company desires to continue to employ Executive as the President and
Chief Operating Officer of Company as of the Effective Date, subject to the
terms and conditions of this Agreement; and

 

WHEREAS, Executive desires to be employed by Company in the aforesaid capacity,
subject to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises, of the mutual
agreements and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows, effective as of the Effective Date:

 

AGREEMENT

 

1.Employment.

 

Company hereby agrees to employ Executive, and Executive hereby accepts
employment, as President of Company, pursuant to the terms of this Agreement.
Executive shall have the duties and responsibilities and perform such
administrative and managerial services customary to the position of President or
as shall be reasonably delegated or assigned to Executive by the Board of
Directors of Company (the “Board”) from time to time. Executive shall report
directly to the Board. Executive shall devote Executive’s full business time and
attention to his responsibilities hereunder; provided that Executive shall be
entitled to devote time to outside boards of directors, personal investments and
civic and charitable activities, so long as such activities do not materially
interfere with or conflict with Executive’s duties hereunder.

 

2.Effective Date and Term.

 

The term of Executive’s employment by Company under this Agreement shall
commence on the Effective Date and shall continue until the third (3rd)
anniversary of the Effective Date (the “Employment Period”). Executive’s
employment and the Employment Period may only be terminated as provided by this
Agreement.

 

3.Compensation and Benefits.

 

In consideration for the services Executive shall render under this Agreement,
Company shall provide to Executive the following compensation and benefits:

 

 

 

 

3.1         Base Salary. During the Employment Period, Company shall pay to
Executive an annual base salary at a rate of $300,000 per annum, subject to all
appropriate withholding taxes, which base salary shall be payable in accordance
with Company’s normal payroll practices and procedures (but no less frequently
than monthly). Executive’s base salary shall be reviewed annually prior to the
beginning of each fiscal year of Company during the Employment Period by the
Board, or a committee of the Board, and may be increased, in the sole discretion
of the Board, or such committee of the Board. For purposes of this Agreement,
the term “Fiscal Year” shall mean the fiscal year of Company. Executive’s base
salary, as in effect from time to time, is hereinafter referred to as the “Base
Salary.”

 

3.2         Annual Performance Bonus. Executive shall be eligible to receive an
annual cash bonus in accordance with this Section 3.2 (the “Performance Bonus”).
Payment of the Performance Bonus and the targeted amount for the Performance
Bonus for each Fiscal Year will be based upon achievement of performance
criteria reasonably established by the Board or committee appointed by the Board
and Executive working together in good faith prior to the commencement of the
applicable Fiscal Year (the “Performance Goals”); provided however that if no
Performance Bonus has been established by that date, it shall not be deemed a
breach of this Agreement. The Performance Goals and Performance Bonus amounts
for the 2015 Fiscal Year are set forth in Schedule 1. Any Performance Bonus
shall be deemed earned or partially earned as of the date that each Performance
Goal(s) is achieved, to the extent such partial credit is in accordance with
such Performance Goals. The Performance Bonus, if any, shall be paid within 30
days after the Board or committee’s confirmation of achievement of the specified
Performance Goals (e.g. for Fiscal Year 2015 the close of the capital raise);
provided, however, for those Performance Goals that are tied to the Company’s
year-end financials, the Performance Bonus shall be paid on the later of (i) 60
days after the close of the applicable Fiscal Year or (ii) the provision of the
outside auditor’s opinion with respect to the completion of the Company’s
audited financials for the applicable Fiscal Year

 

3.3         Benefits. During the Employment Period and as otherwise provided
hereunder, Executive shall be entitled to the following:

 

3.3.1     Paid Time-Off. Executive shall be entitled to thirty (30) days per
Fiscal Year of paid time-off, all in accordance with the Company’s employee
handbook then in effect, so long as such handbook does not have the effect of
reducing or otherwise limiting Executive’s entitlement as set forth above, plus
holidays in accordance with employee handbook. Any accrued but unused vacation
shall either be paid out or carried over to the following Fiscal Year, in
accordance with the Company’s policies at the Company’s sole and complete
discretion.

 

3.3.2     Participation in Benefit Plans. Executive shall be entitled to
participate in all employee benefit plans, practices and programs maintained by
Company and generally available to Company’s senior executive employees, as in
effect from time to time in accordance with the Company’s employee handbook
(collectively, “Employee Benefit Plans”) to the extent consistent with
applicable law and the terms of the applicable Employee Benefit Plans. Company
reserves the right to amend or cancel any Employee Benefit Plans at any time in
its sole discretion subject to the terms of such Employee Benefit Plan and
applicable law.

 

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3.3.3     Perquisites. Executive shall be entitled to such other benefits and
perquisites that are generally available to Company’s senior executive employees
and as provided in accordance with Company’s plans, practices, policies and
programs for senior executive employees of Company.

 

3.3.4     Indemnification. To the fullest extent permissible under applicable
law, Executive shall be entitled to indemnification and Board and officers’
insurance coverage, to the extent made available to other Board members and
senior executives, in accordance with applicable policies and procedures of
Company for expenses incurred or damages paid or payable by Executive with
respect to a claim against Executive based on actions or inactions by Executive
in his capacity as a senior executive or member of the Board of Company. To the
extent other managers and senior executives and members of the Board of Company
are, or are made a, party to an indemnification agreement, Company shall also
enter into an indemnification agreement with Executive in the same form as the
indemnification agreements, if any, to which all other managers and senior
executives and members of the Board of Company are, or are made, a party. The
Company will use it commercially reasonable efforts to obtain customary
directors and officers insurance, consistent with past practice.

 

3.4         Expenses. Company shall reimburse Executive for business expenses
incurred by Executive in the performance of his duties under this Agreement from
time to time, in accordance with the Company’s employee handbook then in effect.

 

3.5         Equity Interests. In consideration of his employment hereunder,
including, without limitation, his agreement to abide by the terms of the
covenants in this agreement, concurrently with the Effective Date, Company shall
grant to Executive stock options to acquire a certain number of shares of common
stock granted with an exercise price equal to then fair market value (the
“Initial Equity Award”). Such Initial Equity Award shall be granted immediately
(and in no event more than 7 days after) the 2015 Annual Stockholder’s Meeting,
currently scheduled to take place on October 28, 2015. Each Fiscal Year,
thereafter, the Company may grant Executive additional stock options to acquire
shares of common stock in amounts to be determined by the Board of Directors (or
such committee) in their sole and absolute discretion (any, the “Subsequent
Equity Award”);. The terms of the Initial Equity Award and any Subsequent Equity
Award shall be set forth in separate grant agreement(s) at the time of grant;
provided, however, that such terms shall provide (i) for vesting of one-third
(1/3) of the Initial Equity Award immediately upon grant and the remaining
two-thirds (2/3) of the Initial Equity Award to vest in equal monthly
installments over a two year period commencing on the first day of the month
immediately following the date of the grant; and (ii) vesting of any Subsequent
Equity Award(s) shall take place in equal monthly installments over not more
than a three year period from the date of each grant. The grant of the Initial
Equity Award and any Subsequent Equity Awards will be subject to Executive’s
delivery of the executed grant agreement(s) and certain other documents to be
executed in connection therewith; provided, however, that such grant
agreement(s) or other documents shall not be inconsistent with this provision.
Unless the plan is not approved at the shareholder’s meeting, any failure to
award the Initial Equity Award shall constitute a material breach of this
Agreement and amongst any other remedies, shall constitute grounds for Executive
to terminate this Agreement for Good Reason.

 

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4.Termination of the Services.

 

Executive’s employment hereunder and the Employment Period may be terminated at
any time as follows (the effective date of such termination hereinafter referred
to as the “Termination Date”).

 

4.1         Termination upon Death or Disability of Executive.

 

4.1.1     Executive’s employment hereunder and the Employment Period shall
terminate immediately upon the death of Executive. In such event, all rights of
Executive and/or Executive’s estate (or named beneficiary) shall cease except
for the right to receive payment of the amounts set forth in Section 4.5 of the
Agreement.

 

4.1.2     Company may terminate Executive’s employment hereunder and the
Employment Period upon the disability of Executive. For purposes of this
Agreement, Executive shall be deemed to be “disabled” if Executive suffers any
physical or mental incapacity that renders him unable to engage in any
substantial gainful activity by reason of any medically-determinable physical or
mental impairment which lasts for a continuous period of not less than six (6)
months. In the event of a dispute as to whether Executive is disabled, Company
may refer Executive to a licensed practicing board certified medical doctor (in
the field of dispute) mutually selected by the Company and Executive (and in the
event that Company and Executive are unable to agree upon such a doctor, they
shall each select one doctor and those two shall select a third doctor whose
opinion will be determinative) and Executive agrees to submit to such tests and
examination as such medical doctor shall deem appropriate to determine
Executive’s capacity to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment. In such event, the
parties hereby agree that the decision of such medical doctor as to the
disability of Executive shall be final and binding on the parties. Any
termination of the Employment Period under this Section 4.1.2 shall be effected
without any adverse effect on Executive’s rights to receive benefits under any
disability policy of Company, but shall not be treated as a termination without
Cause.

 

4.2         Termination by Company for Cause. Company may terminate Executive’s
employment hereunder and the Employment Period for Cause (as defined herein)
upon written notice to Executive, which termination shall be effective on the
date specified by Company in such notice. For purposes of this Agreement, the
term “Cause” shall mean:

 

4.2.1     the willful or grossly negligent failure by Executive to perform his
duties and obligations hereunder, other than any such failure resulting from the
disability of Executive;

 

4.2.2     Executive’s indictment for, conviction of, or plea of guilty or nolo
contendere to, a crime or offense (i) constituting a felony or involving fraud,
embezzlement or moral turpitude or (ii) involving the property of Company that
results in a material loss to Company; provided that, in the event that
Executive is arrested for such a crime or offense, then Company may, at its
option, place Executive on paid leave of absence, pending the final outcome of
such arrest;

 

4.2.3     Executive’s violation of the law which results in a conviction, which
violation in the reasonable opinion of the Board, after consultation with
outside independent counsel (appointed with concurrent approval by Board and
Executive), is material and injurious to Company ; or

 

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4.2.4     Executive’s material breach of any material agreement with or material
policy of Company.

 

Notwithstanding any provision to the contrary, no Cause shall be deemed to exist
with respect to any acts or omissions under Paragraphs 4.2.1 or 4.2.4 unless and
until Company has provided Executive with notice in writing setting forth in
detail all acts or omissions that purportedly would give rise to Cause, and
Executive fails to cure such alleged issues within 60 days after receipt of such
written notice. If Executive does so effect a cure, the Cause notice shall be
deemed rescinded and of no force or effect; provided, however, that Executive
shall have no more than one opportunity to “cure” in any 12 month period with
respect to any specific delineated issue creating “Cause” under Paragraph 4.2.1
or 4.2.4.

 

4.3         Termination without Cause; Termination by Executive without Good
Reason. Executive may terminate his employment and the Employment Period at any
time for any reason upon thirty (30) days’ prior written notice to Company.
Company may terminate Executive’s employment and the Employment Period without
Cause, upon thirty (30) days’ prior written notice to Executive; provided that,
Company shall have the option to provide Executive with a lump sum payment equal
to thirty (30) days’ Base Salary in lieu of such notice, which shall be paid in
a lump sum within thirty (30) days’ of the date of delivery of such notice of
termination to Executive, and for all purposes of this Agreement, the
Executive’s Termination Date shall be the date on which such notice of
termination is delivered to Executive. Upon termination of Executive’s
employment with Company for any reason, Executive shall be deemed to have
resigned from all positions with Company and its subsidiaries, the Board and any
boards of directors or managers of any of Company’s subsidiaries and affiliates
(provided that any such deemed resignations shall not affect Executive’s
entitlement (if any) to severance pay and benefits hereunder).

 

4.4         Termination by Executive for Good Reason.

 

4.4.1     Executive may terminate Executive’s employment and the Employment
Period, in accordance with the process set forth below for Good Reason. For
purposes of this Agreement “Good Reason” shall mean the occurrence of any of the
following after the Effective Date:

 

(i)          a failure to pay or reduction in the Base Salary; or

 

(ii)         a material diminution in or other substantial adverse alteration in
the nature or scope of Executive’s authority, title, duties and responsibilities
(including reporting responsibilities) with Company as set forth in this
Agreement; or

 

(iii)        Executive has been asked to relocate his principal place of
business to a location that is more than thirty (30) miles from Company’s
offices located in Lake Forest, CA.

 

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4.4.2     Upon the occurrence of an event constituting Good Reason, Executive
shall have the right to terminate his employment hereunder and receive the
benefits set forth in Section 4.5 below, upon delivery of written notice to
Company as follows: (i) with respect to any basis for Good Reason claimed under
Paragraph 4.4.1(i) such termination shall be effective no later than the close
of business on the tenth (10th) day following the date of the written notice of
Good Reason (which must be provided with fifteen (15) days of such occurrence)
unless Company has cured such deficiency prior to that tenth day; (ii) with
respect to any basis for Good Reason claimed under Paragraph 4.4.1(ii) or
4.4.1(iii) such termination shall be effective no later than the close of
business on the sixtieth (60th) day following the date of the written notice of
Good Reason unless Company has cured such deficiency prior to that sixtieth day.
If Company so effects a cure with the timeframes set forth above, the Good
Reason notice shall be deemed rescinded and of no force or effect; provided,
however, that Company shall have no more than one opportunity to “cure” in any
12 month period with respect to any issue creating “Good Reason” under Paragraph
4.4.1. Executive shall otherwise have been deemed to terminate the Employment
Period as a result of a Good Reason no later than five (5) days after the lapse
of the time set forth for cure as set forth above without the necessity of any
action, and the effective date of a Good Reason termination shall be the date of
Executive’s “separation from service” (within the meaning of Treas. Reg.
Section 1.409A-1(h)).

 

4.5         Rights upon Termination. Upon termination of Executive’s employment
and the Employment Period, the following shall apply:

 

4.5.1     Termination by Company Without Cause or for Good Reason. If Company
terminates Executive’s employment and the Employment Period without Cause, or if
Executive terminates Executive’s employment and the Employment Period for Good
Reason, Executive shall be entitled to receive payment of the Accrued Amounts in
lump sum form immediately on the Termination Date; provided, however, that
payments for any unreimbursed expenses may be paid within ten (10) days after
the Termination Date if the additional time is reasonably required to calculate
those amounts. The term “Accrued Amounts” means (A) any Base Salary amounts that
have accrued but have not been paid as of the Termination Date and (B) any
accrued but unused paid time off, and reimbursement for any expense reimbursable
under this Agreement. Any vested benefits payable to Executive hereunder accrued
through the Termination Date shall be paid to Executive pursuant to the terms of
the plan(s) providing said benefits. In addition, subject to Section 4.7 below,
Company shall, subject to Section 7.14, be obligated to pay Executive (or
provide Executive with) the following benefits as severance:

 

(i)          an amount equal to two (2) times Base Salary, payable as follows:
(i) fifty percent (50%) of the amount shall be paid in a single lump sum amount
within 10 days after the date by which Executive signs and returns a Release
(and any revocation period has lapsed or expired) as provided for in Paragraph
4.7 below (presuming such Release has not been revoked); and (ii) the remaining
fifty percent (50%) of the amount shall be paid in equal monthly installments
over a 12 month period on the first day of each month, commencing with the first
day of the month immediately following payment of the first fifty percent (50%)
installment.

 

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(ii)         if the Executive timely and properly elects continuation coverage
under COBRA, Company shall reimburse Executive for the monthly COBRA premium
paid by Executive and his dependents, and such reimbursement shall be paid to
Executive on the 1st day of the month immediately following the month in which
Executive timely remits the premium payment; provided that Executive shall be
eligible to receive such reimbursement until the earliest of (A) the eighteen
(18) month anniversary of the Termination Date; and (B) the date on which
Executive becomes eligible to enroll in comparable coverage with another
employer; and

 

(iii)        all options granted under the Initial Equity Award or any
Subsequent Equity Award and all other equity awards that otherwise were unvested
shall immediately and fully accelerate and shall be deemed to be fully vested.
In addition, Executive shall have the right to exercise any such option up until
the earlier of (i) the date that the option otherwise would have expired had
Executive remained employed with Company; or (ii) seven (7) years from the date
of the termination of employment.

 

4.5.2     Termination With Cause by Company or Without Good Reason by Executive.
If Company terminates Executive’s employment and the Employment Period with
Cause, or if Executive terminates Executive’s employment and the Employment
Period other than as a result of a Good Reason, Company shall, subject to
Section 7.14, be obligated to pay Executive the Accrued Amounts in lump sum form
immediately on the Termination Date; provided, however, that payments for any
unreimbursed expenses may be paid within ten (10) days after the Termination
Date if the additional time is reasonably required to calculate those amounts.

 

4.5.3     Termination Upon Death or Disability. If Executive’s employment and
the Employment Period are terminated because of the death or disability of
Executive, Company shall, subject to Section 7.14, be obligated to pay Executive
or, if applicable, Executive’s estate, the Accrued Amounts in lump sum form
immediately on the Termination Date; provided, however, that payments for any
unreimbursed expenses may be paid within ten (10) days after the Termination
Date if the additional time is reasonably required to calculate those amounts.
In addition, subject to Section 4.7 below, Company shall, subject to
Section 7.14, be obligated to pay Executive or Executive’s estate (or provide
Executive or Executive’s estate with) the following benefits as severance:

 

(i)          At all times throughout Executive’s employment with the Company,
Company shall pay the premiums for a term life insurance policy with a death
benefit of no less than Five Hundred Thousand Dollars ($500,000). Executive
shall be the named insured and shall be the sole owner of the policy. Executive
shall have the sole right to name all beneficiaries to the policy in his sole
discretion. In the event that Executive’s employment with the Company terminates
for any reason other than his death, Executive shall have the right to maintain
the term life insurance policy at his sole expense. ; and

 

(ii)         if the Executive and/or his dependents timely and properly elects
continuation coverage under COBRA, Company shall reimburse Executive and/or
Executive’s dependents for the monthly COBRA premium paid by Executive and/or
his dependents, and such reimbursement shall be paid to Executive and/or
Executive’s dependents on the 1st day of the month immediately following the
month in which Executive and/or Executive’s dependents timely remits the premium
payment; provided that Executive and/or Executive’s dependents shall be eligible
to receive such reimbursement until the earliest of (A) nine (9) month
anniversary of the Termination Date; and (B) the date on which Executive becomes
eligible to enroll in comparable coverage with another employer; and

 

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(iii)        fifty percent (50%) of all options granted under the Initial Equity
Award or any Subsequent Equity Award and all other equity awards that otherwise
were unvested at the time of the Termination Date shall immediately and fully
accelerate and shall be deemed to be fully vested. In addition, Executive or
Executive’s estate shall have the right to exercise any such option up until the
earlier of (i) the date that the option otherwise would have expired had
Executive remained employed with Company; or (ii) seven (7) years from the date
of the termination of employment .

 

4.5.4     Termination Upon Failure to Renew Agreement. If thirty days after the
expiration of the Employment Period, the Company and the Executive do not enter
into an agreement similar to this Agreement and Executive terminates his
employment hereunder, then Executive shall be entitled to receive payment of the
Accrued Amounts in lump sum form immediately on the Termination Date; provided,
however, that payments for any unreimbursed expenses may be paid within ten (10)
days after the Termination Date if the additional time is reasonably required to
calculate those amounts. In addition, subject to Section 4.7 below, Company
shall, subject to Section 7.14, be obligated to pay Executive (or provide
Executive with) the following benefits as severance:

 

(i)          an amount equal to 12 months of the Base Salary, payable 50% in a
lump sum amount within 10 days after the date by which Executive signs and
returns a Release (and any revocation period has lapsed or expired) as provided
for in Paragraph 4.7 below (presuming such Release has not been revoked) and the
remaining 50% over a period of six months thereafter.

 

(ii)         if the Executive timely and properly elects continuation coverage
under COBRA, Company shall reimburse Executive for the monthly COBRA premium
paid by Executive and his dependents, and such reimbursement shall be paid to
Executive on the 1st day of the month immediately following the month in which
Executive timely remits the premium payment; provided that Executive shall be
eligible to receive such reimbursement until the earliest of (A) the eighteen
(18) month anniversary of the Termination Date; and (B) the date on which
Executive becomes eligible to enroll in comparable coverage with another
employer; and

 

(iii)        all options granted under the Initial Equity Award or any
Subsequent Equity Award and all other equity awards that otherwise were unvested
shall immediately and fully accelerate and shall be deemed to be fully vested.
In addition, Executive shall have the right to exercise any such option up until
the earlier of (i) the date that the option otherwise would have expired had
Executive remained employed with Company; or (ii) seven (7) years from the date
of the termination of employment.

 

4.6         Effect of Notice of Termination. Any notice of termination by
Company, whether for Cause or without Cause, may specify that, during the notice
period, Executive need not attend to any business on behalf of Company.

 

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4.7         Requirement of a Release; Exclusivity of Severance Payments under
this Agreement. As a condition to the receipt of the severance payments to be
provided to Executive pursuant to Section 4.5.1, upon termination of Executive’s
employment, Executive shall (i) execute and deliver to Company a general release
of employment claims against Company and its affiliates in substantially the
form attached hereto as Exhibit A within twenty-one (21) days following the
Termination Date and (ii) continue to comply with the restrictive covenants set
forth in the Nondisclosure, Intellectual Property and Non-Solicitation Agreement
attached hereto as Exhibit B (the “Non-Solicitation Agreement”). In the event
Executive challenges or threatens to challenge the validity of these covenants
or has breached any provision of the Restrictive Covenant Agreement, all
severance payments under this Section 4 shall cease immediately and Executive
shall forfeit his right to any future severance payments. In addition, the
severance payments and termination benefits to be provided to Executive pursuant
to this Section 4 upon termination of Executive’s employment shall constitute
the exclusive payments in the nature of severance or termination pay or salary
continuation which shall be due to Executive upon a termination of employment
and shall be in lieu of any other such payments under any severance plan,
program, policy or other arrangement which has heretofore been or shall
hereafter be established by Company or any of its affiliates.

 

4.8         Return of Property. Except as otherwise permitted by Company in
writing, all property of Company, including, without limitation, records,
designs, plans, manuals, guides, computer programs, memoranda, pricing lists,
devices, processes, pricing policies or methods and other property used by or
delivered to Executive by or on behalf of Company or Company’s clients
(including, without limitation, clients obtained for Company by Executive), all
records and data compiled by Executive that pertain to the business of Company
and all cell phones, computers and other devices owned or leased by Company
shall be and remain the property of Company, shall be subject at all times to
Company’s discretion and control, and shall be delivered and tendered to Company
by Executive without the necessity of Company’s request following the
termination of Executive’s employment hereunder; provided however Executive
shall retain copies of his personal records and files and any other material
necessary to enforce this Agreement. Likewise, all correspondence with clients
or representatives, reports, records, charts, files, advertising materials and
any data collected by Executive, or by or on behalf of Company or its
representatives and in Executive’s possession or control, shall be delivered by
Executive promptly to Company without the necessity of Company’s request
following the termination of Executive’s employment hereunder.

 

4.9         Cooperation. Executive agrees that during the Employment Period,
during the Severance Period or otherwise following termination of employment for
any reason, Executive shall, at Company’s sole expense, upon reasonable advance
notice, reasonably assist and cooperate with Company with regard to any
investigation or litigation related to a matter or project in which Executive
was involved during Executive’s employment so long as such assistance does not
unreasonably interfere with Executive’s time or other responsibilities. Company
shall reimburse Executive for all reasonable and necessary out-of-pocket
expenses related to Executive’s services under this Section 4.9 within thirty
(30) business days after Executive submits to Company appropriate receipts and
expense statements. In addition, in the event that such cooperation is required
more than one year after the termination of Executive’s employment, Executive
shall be compensated at a reasonable hourly rate for all time spent providing
assistance to Company (other than providing actual testimony in response to a
subpoena or other similar legal process).

 

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5.Change in Control.

 

5.1         Effect of a Change in Control. Notwithstanding anything contained
herein to the contrary, in the event that the Company undergoes a Change in
Control (as defined in Section 5.2 hereof) during the Employment Period or
within 6 months after the termination of Executive’s employment, other than for
Cause, then:

 

5.1.1     Change in Control Bonus. The Company (or any successor entity) shall
pay to the Executive a lump sum bonus amount equal to three (3) times
Executive’s Base Salary. Such bonus shall be paid to Executive in full
simultaneously upon the close of the transaction that has created the Change of
Control.

 

5.1.2     Stock Awards. Executive shall immediately become vested in any
unvested stock options and any other equity awards granted to the Executive by
the Company prior to the Change in Control.

 

5.2         Definition. For purposes hereof, a “Change in Control” shall mean a
Change of Control for purposes of Section 409A of the Code plus the occurrence
of any of the following:

 

5.2.1     the sale, lease, transfer, conveyance or other disposition, in one or
a series of related transactions, of all or substantially all of the assets of
the Company to any “person” or “group” (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934 (“Act”));

 

5.2.2     any person or group is or becomes the “beneficial owner” (as defined
in Rules 13d-3 and 13d-5 under the Act, except that a person shall be deemed to
have “beneficial ownership” of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50 percent of the total voting
power of the voting stock of the Company, including by way of merger,
consolidation or otherwise; provided, however, that for purposes of this
Agreement, the following acquisitions shall not constitute a Change in Control:
(i) any acquisition by any employee benefit plan sponsored or maintained by the
Company or any affiliate, or (ii) any acquisition which complies with clauses
(i), (ii) and (iii) of subsection 5.2.4 below;

 

5.2.3     during any period of twelve (12) consecutive months, Present and/or
New Directors cease for any reason to constitute a majority of the Board;

 

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5.2.4     the consummation of a reorganization, recapitalization, merger,
consolidation, statutory share exchange or similar form of corporate transaction
involving the Company that requires the approval of the Company’s stockholders,
whether for such transaction or the issuance of securities in the transaction (a
“Business Combination”), unless immediately following such Business Combination:
(i) more than 50% of the total voting power of (x) the entity resulting from
such Business Combination (the “Surviving Company”), or (y) if applicable, the
ultimate parent entity that directly or indirectly has beneficial ownership of
sufficient voting securities eligible to elect a majority of the members of the
board of directors (or the analogous governing body) of the Surviving Company
(the “Parent Company”), is represented by the shares of voting stock of the
Company that were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which the shares of voting
stock of the Company were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the same
proportion as the voting power was among the holders of the shares of voting
stock of the Company that were outstanding immediately prior to the Business
Combination, (ii) no person (other than any employee benefit plan sponsored or
maintained by the Surviving Company or the Parent Company), is or becomes the
beneficial owner, directly or indirectly, of 50% or more of the total voting
power of the outstanding voting securities eligible to elect members of the
board of directors of the Parent Company (or the analogous governing body) (or,
if there is no Parent Company, the Surviving Company) and (iii) at least a
majority of the members of the board of directors (or the analogous governing
body) of the Parent Company (or, if there is no Parent Company, the Surviving
Company) following the consummation of the Business Combination were Board
members at the time of the Board’s approval of the execution of the initial
agreement providing for such Business Combination; or

 

5.2.5     the stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company.

 

For purposes of this Section 5.2, the following terms have the meanings
indicated: “Present Directors” shall mean individuals who at the beginning of
any one year period were members of the Board. “New Directors” shall mean any
directors whose election by the Board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors of the Company who, at the time of such vote, were either Present
Directors or New Directors but excluding any such individual whose initial
assumption of office occurs solely as a result of an actual or threatened proxy
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other
than the Board.

 

6.Restrictive Covenant Agreement.

 

Executive expressly acknowledges and agrees that, as a condition to Executive’s
employment with Company pursuant to this Agreement, Executive shall execute the
Restrictive Covenant Agreement attached hereto as Exhibit B and comply with the
provisions thereof.

 

7.Miscellaneous.

 

7.1         Valid Obligation. This Agreement has been duly authorized, executed
and delivered by Company and has been duly executed and delivered by Executive
and is a legal, valid and binding obligation of Company and of Executive,
enforceable in accordance with its terms.

 

7.2          No Conflicts. Executive represents and warrants that the
performance by his of his duties hereunder will not violate, conflict with, or
result in a breach of any provision of, any agreement to which he is a party.
Executive has previously provided to Company the agreements and details
regarding Executive’s most recent employment.

 

11

 

 

7.3          Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of California, without reference to California’s
choice of law statutes or decisions.

 

7.4         Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions hereof shall not affect the validity or enforceability of any other
provision. In the event any clause of this Agreement is deemed to be invalid,
the parties shall endeavor to modify that clause in a manner which carries out
the intent of the parities in executing this Agreement.

 

7.5         No Waiver. The waiver of a breach of any provision of this Agreement
by any party shall not be deemed or held to be a continuing waiver of such
breach or a waiver of any subsequent breach of any provision of this Agreement
or as nullifying the effectiveness of such provision, unless agreed to in
writing by the parties.

 

7.6         Notices. All demands, notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
and shall be (i) personally delivered or (ii) sent in PDF form by electronic
mail (with a confirmation copy sent by one of the other methods authorized in
this Section), or (iii) by commercial overnight delivery service or certified or
registered mail (return receipt requested), to the parties at the addresses set
forth below (postage prepaid):

 

  To Company: Summit Healthcare REIT, Inc.     2 South Pointe Drive     Suite
100     Lake Forest, CA 92630     Attention: Chair, Compensation Committee      
  To Executive: At the address, electronic mail or fax number most recently
contained in Company’s records.

 

Notices shall be deemed given upon the earliest to occur of (i) receipt by the
party to whom such notice is directed, if hand delivered; (ii) if sent by
electronic mail, on the day (other than a Saturday, Sunday or legal holiday in
the jurisdiction to which such notice is directed) such notice is sent (and if
sent via electronic mail, evidenced by an electronic “return receipt” or
confirmation reply by the recipient or if sent after 5:00 p.m. Central Time, on
the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to
which such notice is directed) after which such notice is sent; or (iii) on the
first business day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) following the day the same is
deposited with the commercial carrier if sent by commercial overnight delivery
service or the third business day (other than a Saturday, Sunday or legal
holiday in the jurisdiction to which such notice is directed) following the day
the same is deposited in the United States mail if sent by certified or
registered mail. Each party, by notice duly given in accordance therewith may
specify a different address for the giving of any notice hereunder.

 

12

 

 

7.7         Assignment of Agreement. This Agreement shall be personal to
Executive for all purposes and shall not be assigned by the Executive. Company
shall assign this Agreement to any successor to all or substantially all of the
business or assets of Company and/or otherwise use its commercially reasonable
efforts to ensure that such successor assumes all obligations to Executive under
this Agreement and/or provides in any transaction to otherwise cover such
obligations to Executive prior to any close or windup of the Company. This
Agreement shall inure to the benefit of Company and permitted successors and
assigns.

 

7.8         Entire Agreement; Amendments. Unless specifically provided herein,
this Agreement contains the entire understanding between the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous understandings, agreements, representations and warranties, both
written and oral, with respect to such subject matter, including, without
limitation, any term sheet between the Company or any of its affiliates and
Executive. Executive acknowledges that he is not relying upon any
representations or warranties concerning his employment by Company except as
expressly set forth herein. No amendment or modification to the Agreement shall
be valid except by a subsequent written instrument executed by the parties
hereto.

 

7.9         Dispute Resolution and Governing Law. The following procedures shall
be used in the resolution of disputes:

 

7.9.1     Dispute. In the event of any dispute or disagreement between the
parties under this Agreement, the disputing party shall provide written notice
to the other party that such dispute exists. The Executive and the Chairman of
the Compensation Committee of the Board of Directors of Company will then make a
good faith effort to resolve the dispute or disagreement. If the dispute is not
resolved upon the expiration of fifteen (15) days from the date a party receives
such notice of dispute, the matter may then be submitted to litigation as set
forth in Section 7.9.2.

 

7.9.2     Governing Law and Venue. This Agreement and any action related thereto
will be governed, controlled, interpreted, and defined by and under the laws of
the State of California as applied to transactions taking place wholly within
California between California residents excluding that body of laws related to
conflict of laws. All disputes will be resolved in state or federal court in the
State of California, County of Orange as the exclusive forum and all parties
expressly consent to the personal jurisdiction of such court(s).

 

7.10       Survival. For avoidance of doubt, the provisions of Sections 4.5,
4.7, 5, 6 and 7 of this Agreement shall survive the expiration or earlier
termination of the Employment Period.

 

7.11       Headings. Section headings used in this Agreement are for convenience
of reference only and shall not be used to construe the meaning of any provision
of this Agreement.

 

7.12       Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument. Any executed counterpart returned by facsimile or
PDF shall be deemed an original executed counterpart.

 

7.13       Taxes. Executive shall be solely responsible for taxes imposed on
Executive by reason of any compensation and benefits provided under this
Agreement and all such compensation and benefits shall be subject to applicable
withholding.

 

13

 

 

7.14       Section 409A of the Code. It is intended that this Agreement will
comply with Section 409A of the Internal Revenue Code (and any regulations and
guidelines issued thereunder) (“Code”) to the extent the Agreement is subject
thereto, and the Agreement shall be interpreted on a basis consistent with such
intent. If an amendment of the Agreement is necessary in order for it to comply
with Section 409A, the parties hereto will negotiate in good faith to amend the
Agreement in a manner that preserves the original intent of the parties to the
extent reasonably possible. No action or failure by Company in good faith to
act, pursuant to this Section 7.14, shall subject Company to any claim,
liability, or expense, and Company shall not have any obligation to indemnify or
otherwise protect the Executive from the obligation to pay any taxes pursuant to
Section 409A.

 

In addition, notwithstanding any provision to the contrary in this Agreement, if
Executive is deemed on the date of his “separation from service” (within the
meaning of Treas. Reg. Section 1.409A-1(h)) to be a “specified employee” (within
the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment
that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code
(the “Delayed Payments”), such payment shall not be made prior to the earlier of
(i) the expiration of the six (6) month period measured from the date of his
“separation from service” and (ii) the date of his death. Any payments due under
this Agreement other than the Delayed Payments shall be paid in accordance with
the normal payment dates specified herein. In no case will the delay of any of
the Delayed Payments by Company constitute a breach of Company’s obligations
under this Agreement. For the provision of payments and benefits under this
Agreement upon termination of employment, to the extent necessary to comply with
Section 409A of the Code, reference to Executive’s “termination of employment”
(and corollary terms) with Company shall be construed to refer to Executive’s
“separation from service” from Company (as determined under Treas. Reg.
Section 1.409A-1(h) with the work threshold of less than fifty percent (50%) of
the prior level of services, as uniformly applied by Company) in tandem with
Executive’s termination of employment with Company. For purposes of this
Agreement, all rights to payments and benefits hereunder shall be treated as
rights to receive a series of separate payments and benefits to the fullest
extent allowed by Section 409A of the Code.

 

In addition, to the extent that any reimbursement or in-kind benefit under this
Agreement or under any other reimbursement or in-kind benefit plan or
arrangement in which Executive participates during the term of Executive’s
employment under this Agreement or thereafter provides for a “deferral of
compensation” within the meaning of Section 409A of the Code, (i) the amount
eligible for reimbursement or in-kind benefit in one calendar year may not
affect the amount eligible for reimbursement or in-kind benefit in any other
calendar year, (ii) the right to reimbursement or an in-kind benefit is not
subject to liquidation or exchange for another benefit, and (iii) subject to any
shorter time periods provided herein or in the expense reimbursement policies of
Company, any such reimbursement of an expense or in-kind benefit must be made on
or before the last day of the calendar year following the calendar year in which
the expense was incurred.

 

If the sixty (60)-day period following a “separation from service” begins in one
calendar year and ends in a second calendar year (a “Crossover 60-Day Period”),
then any severance payments contingent upon a release and that would otherwise
occur during the portion of the Crossover 60-Day Period that falls within the
first year will be delayed and paid in a lump sum during the portion of the
Crossover 60-Day Period that falls within the second year.

 

14

 

 

7.15       280G Excise Tax. In the event that any economic benefit, payment or
distribution by the Company to or for the benefit of Executive, whether paid,
payable, distributed or distributable, including, if applicable, the vesting of
Executive’s stock options (hereinafter, the “Total Payments”), would result in
all or a portion of such Total Payments being subject to excise tax under
Section 4999 of the Code, or any interest or penalties with respect to such
excise tax (such excise tax and any applicable interest and penalties,
collectively referred to in this Agreement as the “Excise Tax”), then Executive
shall be entitled to receive an additional payment (the “Gross-Up Payment”)
equal to the Excise Tax imposed on the Total Payments.

 

All determinations required to be made under this Section 7.15 shall be made by
the Company’s regular outside independent public accounting firm immediately
prior to the event triggering the payments that are subject to the Excise Tax,
which firm must be reasonably acceptable to Executive (the “Accounting Firm”).
The Company shall cause the Accounting Firm to provide detailed supporting
calculations of its determinations to the Company and Executive. Any
determination by the Accounting Firm shall be binding on the Company and
Executive. All fees and expenses of the Accounting Firm shall be borne solely by
the Company.

 

Any Gross-Up Payment, as determined pursuant to this Section 7.15, shall be paid
by the Company to Executive within five days of the receipt of the Accounting
Firm’s determination, but by no later than the end of Executive’s taxable year
next following Executive’s taxable year in which Executive remits the related
taxes.

 

15

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written, to be effective at the Effective Date.

 

  EXECUTIVE       /s/ Kent Eikanas       SUMMIT HEALTHCARE REIT, INC.       /s/
Paul Danchik   By: Paul Danchik   Title:  Independent Director

 

16

 

 

Schedule 1

 

PERFORMANCE BONUS

 

One of the current priorities of Summit Healthcare REIT, Inc. (“the Company”) is
the raising of institutional third party capital. The Executive team has been
tasked to raise the third party capital. As an incentive for the capital raise,
the Compensation Committee of the Board of Directors has established a bonus
plan for calendar year 2015. This Plan will be based on 2% of new capital raised
and funded during 2015.

 

The Plan payout pool will be capped at $480,000 which would equate to $24
million in new capital. The pool would be allocated among the President, CIO and
CFO as follows:

 

   2015       Potential Max     Base salary   %   Bonus  President  $300,000  
 80   $240,000  CIO   200,000    60    120,000  CFO   200,000    60    120,000 
             $480,000 

 

In addition to the Potential Max outlined above, the Compensation Committee will
grant an additional Special Bonus of $20,000 to the President for his sole and
absolute discretion. This special bonus would be awarded if the Company raises
$1million or more above the previously mentioned $24 million during 2015 for a
total cap on Bonus to the Executive team in the amount of $500,000.

 

Some examples as to how the calculation works:     (1)  New capital funded
during 2015  $20,000,000                 X2%    Total bonus pool  $400,000      
   Allocated:              President  $200,000    50%    CIO   100,000    25%   
CFO   100,000    25%                (2)  New capital funded during 2015 
$26,000,000          Bonus capped at  $24,000,000                 X2%    Total
bonus pool  $480,000          Allocated:              Executive  $240,000  
 (Max)     CIO   120,000    (Max)     CFO   120,000    (Max) 

 

In addition, the Company raised in excess of $25,000,000 which entitles the
President to a Special Bonus of $20,000 to distribute for his sole and absolute
discretion.

Payments:

As of the date of this agreement, the Company has paid the President, CIO and
CFO $200,000 towards their 2015 bonus. The balance of any bonus earned shall be
paid within 30 days of new capital funding. Additionally, each Executive
continues to earn 2% on new capital funded until Potential Max has been
achieved.

 

Schedule 1

 

 

Exhibit A

 

SEPARATION AND CONFIDENTIALITY AGREEMENT

AND GENERAL AND SPECIAL RELEASE

 

This Separation and Confidentiality Agreement and General and Special Release
(the “Agreement”) is entered into as of this _____________ (the “Effective
Date”), by and between Employee Name (the “Employee”), on the one hand, and
Summit Healthcare REIT, Inc, a Maryland corporation, (the “Company”), on the
other hand (collectively, the “Parties”).

 

RECITALS

 

WHEREAS, Employee is employed as an Executive of the Company, pursuant to the
certain Employment Agreement dated _____________ (the “Employment Agreement”);

 

WHEREAS, the Company and Employee desire to separate Employee’s employment
relationship from the Company and to resolve any potential disputes in an
orderly manner. In addition, the Company wishes to continue to safeguard its
proprietary and confidential information;

 

THEREFORE, in consideration of the above recitals which are incorporated by
reference and the promises and mutual covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
expressly acknowledged, the Parties agree as follows:

 

AGREEMENT

 

1.          Employee’s Employment. Pursuant to Paragraph __ of the Employment
Agreement, Employee’s employment with Company has terminated as of the Effective
Date.

 

2.          Payment. In consideration for Employee’s release of any and all
claims he may have against the Company, if any, including those specified in
section 4 below, Company shall provide to Employee all compensation and benefits
provided for under Paragraph _________ of the Employment Agreement, within the
time frame specified therein.

 

3.          No Claims or Lawsuits. Employee represents and warrants that he/she
has not sold, transferred, conveyed, filed, claimed or asserted any complaints,
claims, charges, lawsuits or actions against the Released Parties (defined
below) with any state, federal, or local governmental agency or court or
arbitrator and that he/she will not do so at any time hereafter, and that if any
agency, court, or arbitrator assumes jurisdiction of any complaint, claim,
lawsuit or action against the Released Parties, to the extent Employee will
threaten or take actions to cause that agency, court, or arbitrator to withdraw
from or dismiss with prejudice the matter; provided, however, nothing in this
provision shall be deemed to purport to require Employee to take any such action
if prohibited by law.

 

Exhibit A – Page 1

 

 

4.          No Admission. This Agreement and compliance with this Agreement
shall not constitute an admission by the Company or the Employee of any
liability whatsoever, or as an admission by the Company or the Employee of any
violation of the rights of Employee or any person, Company or any violation of
any order, law, statute, duty, or contract whatsoever against Employee, Company,
or any person. The Company and Employee specifically denies and disclaims any
liability to one another or to any other person for any alleged violation of the
rights of Employee, Company or any person, or for any alleged violation of any
order, law, statute, duty, or contract on the part of the Company, its employees
or agents or affiliated entities or their employees or agents or on the part of
Employee.

 

5.          General and Special Release. As a material inducement for the
Company to enter into this Agreement, and except for those obligations created
by or arising out of this Agreement, Employee does hereby covenant not to sue
and acknowledges complete full and complete satisfaction or and forever and
completely releases, discharges, holds harmless and indemnifies the Company, its
parent, subsidiary and affiliated corporations and entities, and their
respective past and present officers, directors, managers, employees, agents,
attorneys, insurers, successors and assigns (collectively, “Released Parties”)
from any and all claims, charges, complaints, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown, suspected or
unsuspected, choate or inchoate, of whatever kind or nature in law, equity or
otherwise that Employee had, now has or at any time has held, or may hereafter
claim to have against the Released Parties, arising out of or relating in any
way to Employee’s hiring by, employment with, under the Employment Agreement (or
any agreement entered into in connection with that agreement) or otherwise, or
termination, firing, resignation or separation from the Company or otherwise
relating to any of the Released Parties on or prior to the Effective Date.
Without limiting the generality of the foregoing, such release shall include any
claims whatsoever under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act (“ADEA”), as amended by the Older Workers’
Benefit Protection Act of 1990 (29 U.S.C. §§ 621, et seq.), the Americans with
Disabilities Act, the Family and Medical Leave Act, the Employee Retirement
Income Security Act of 1974, as amended, the California Fair Employment and
Housing Act, the California Family Rights Act, the California Labor Code, or any
other federal, state or local law, regulation or ordinance or any common law
theories, breach of contract, defamation, retaliation, violation of public
policy, invasion of privacy, severance pay, bonus or similar benefit, pension,
retirement, overtime pay, wages, penalties, life insurance, health or medical
insurance or any other fringe benefit, or disability. Nothing in this Agreement
shall be deemed to release claims that cannot be waived as a matter of law or
from interfering with Employee’s protected right to file a charge with, or
participate in an investigation or proceeding conducted by, the EEOC; or any
other state, federal or local government entity.

 

Employee expressly waives all rights afforded by Section 1542 of the Civil Code
of the State of California (“Section 1542”) with respect to Released Parties.
Section 1542 states as follows:

 

Exhibit A – Page 2

 

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

 

Notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release, Employee understands and agrees that
this Agreement is intended to include all claims, if any, which Employee may
have and which Employee does not now know or suspect to exist in Employee’s
favor against the Released Parties and that this Agreement extinguishes those
claims.

 

ADEA. Employee acknowledges that he is knowingly and voluntarily waiving and
releasing any rights he may have under the federal Age Discrimination in
Employment Act of 1967, as amended (the “ADEA”). Employee also acknowledges that
the consideration given for the waiver in the above paragraph is in addition to
anything of value to which Employee was already entitled. Employee is advised by
this writing, as required by the ADEA that: (a) Employee’s waiver and release do
not apply to any claims that may arise after Employee signs this Agreement; (b)
Employee should consult with an attorney prior to executing this release; (c)
Employee has twenty-one (21) days within which to consider this release
(although Employee may choose to voluntarily execute this release earlier); (d)
Employee has seven (7) days following the execution of this release to revoke
this Agreement; and (e) this Agreement will not be effective until the eighth
day after this Agreement has been signed both by Employee and by the Company,
provided that Employee has not earlier revoked this Agreement and Employee will
not receive any of the benefits specified by this Agreement until after it
becomes effective.

 

6.          Confidentiality of Agreement. Employee agrees not to disclose the
terms of this Agreement, or the fact of its existence or execution, to anyone
other than his/her family, attorneys, governmental taxing authorities or other
administrative agencies (the “Non-Disclosure Obligations”), or pursuant to a
subpoena or order of a court reasonably believed by Employee to be a court of
proper jurisdiction, provided, however, prior to such disclosure, Employee shall
give the Company notice of such inquiry, subpoena or process as soon as possible
upon receipt or knowledge thereof in writing and in any event with sufficient
notice to permit Company to object or otherwise seek to quash the subpoena.

 

7.          Binding Effect. This Agreement shall be binding upon the Parties and
their respective heirs, administrators, representatives, executors, successors
and assigns, and shall inure to the benefit of the parties and their respective
heirs, administrators, representatives, executors, successors and assigns.

 

8.          Governing Law. This Agreement shall be governed by and construed and
enforced pursuant to the laws of the State of California applicable to contracts
made and entirely to be performed therein, without regard to its conflict of
laws provisions.

 

Exhibit A – Page 3

 

 

9.          Entire Agreement; Modification. This Agreement constitutes the
entire understanding among the Parties and may not be modified without the
express written consent of the Parties. This Agreement supercedes all prior
written and/or oral and all contemporaneous oral agreements, understandings and
negotiations regarding the subject matter hereof. If any individual term or
condition of this Agreement is found to be unenforceable, that term or condition
shall be deemed stricken and the other terms and conditions shall remain in full
force and effect.

 

10.         Governing Law and Venue. This Agreement and any action related
thereto will be governed, controlled, interpreted, and defined by and under the
laws of the State of California as applied to transactions taking place wholly
within California between California residents excluding that body of laws
related to conflict of laws. All disputes will be resolved in state or federal
court in the State of California, County of Orange as the exclusive forum and
all parties expressly consent to the personal jurisdiction of such court(s)..

 

11.         Counterparts. This Agreement may be executed in counterparts, and
each counterpart, when executed, shall have the efficacy of a signed original.
Photographic and facsimile copies of such signed counterparts may be used in
lieu of the originals for any purpose.

 

Employee and Company each affirm that they have read and understand this
Agreement and hereby agree to voluntary sign it as of the Effective Date.
Employee and Company each declare under penalty of perjury that the foregoing is
true and correct.

 

  By:         Its:             EMPLOYEE:    

 

Exhibit A – Page 4

 

 

Exhibit B

 

Summit Healthcare REIT, Inc.
Nondisclosure, Intellectual Property and Nonsolicitation Agreement

 

THIS NONDISCLOSURE, INTELLECTUAL PROPERTY, NONSOLICITATION AGREEMENT (the
“Agreement”) is entered into between Kent Eikanas (“Employee”) and Summit
Healthcare REIT, Inc. (the “Company”) and is effective as of the Effective Date
of the employment agreement entered into by Employee and the Company of even
date herewith (the “Employment Agreement”).

 

WHEREAS, the Company possesses certain valuable confidential, proprietary and
trade secret information (collectively, “Confidential Information” as further
defined below), and customer relationships, that give the Company a competitive
advantage;

 

WHEREAS, as a result of being employed by the Company, Employee will be given
access to and will assist in the development of the Company’s Confidential
Information and its customer base and relationships, and it is the intent of
this Agreement to safeguard the Confidential Information and the Company’s
customer relationships both during and after the term of Employee’s employment
by the Company; and

 

WHEREAS, the Company’s reputation and present and future competitive position
are largely dependent upon the protection of the Confidential Information and
Employee’s performance of the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the Company’s (i) employing Employee,
(ii) providing Employee access to the Company’s Confidential Information and
customers and (iii) granting to Employee an equity interest in the Company, and
for other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties agree as follows:

 

1.          Nondisclosure. Employee acknowledges that, during the period of
employment and during any period of time, the longer of which is (A) three
calendar months thereafter (B) during when Employee is receiving payment or
compensation under the Agreement for any reason; provided however, that under no
circumstances will this period exceed one year (the “Restricted Period”) and
solely by reason of his employment with the Company, he will have access to and
knowledge of, the Company’s services, products and programs, computers,
software, source code, object code, program libraries, interface specifications,
analyses, tests, notes, designs, diagrams, customer lists, customer contracts,
compiled historic customer information, sales support and end user support
practices and procedures, quality assurance, business plans and strategies,
tactics, methods, pricing, fees, pricing and profitability factors, marketing
materials, training materials, research, marketing strategies, personnel
information, including, without limitation, personnel lists, resumes, personnel
data, salary information, organizational structure and performance evaluations,
other confidential information concerning the Company’s business, and
information from or about the Company’s customers that the Company’s customers
expressly wish, and may reasonably expect, to be kept confidential
(collectively, “Confidential Information”). As used herein, the term
“Confidential Information” shall not include any knowledge or information gained
without a breach of this Agreement on a non-confidential basis from a person who
is not legally prohibited from transmitting the information to Employee, general
industry and other knowledge previously known by Employee, information required
to be disclosed by Employee because of legal process, subpoena or other similar
method or is or becomes publicly known through no wrongful act of the Employee.
Employee acknowledges that the Confidential Information including, without
limitation, trade secrets, is the property of the Company and is a valuable and
unique asset of the Company’s business. Employee also acknowledges that
disclosure or misuse of Confidential Information from or about the Company or
the Company’s customers may harm the Company and its customers. Therefore,
Employee agrees that during the Restricted Period, except as part of his duties
and responsibilities as an employee of the Company, he:

 

Exhibit B – Page 1

 

 

(a)          will not, at any time, in whole or in part, directly, divulge or
disclose any Confidential Information to any person or entity, unless in
response to a subpoena or similar legal process or to discovery proceedings or
based upon advice of counsel that such disclosure is necessary under applicable
law or regulation; provided, however, that Employee shall promptly notify the
Company of any such request and reasonably cooperate with efforts by the
Company, at Company’s sole expense, to obtain an appropriate protective order or
other assurance satisfactory to the Company of confidential treatment for the
information required to be so disclosed;

 

(b)          will not, at any time, in whole or in part, directly or indirectly,
use any Confidential Information for his own benefit or for the benefit of any
other person or entity;

 

(c)          will take all commercially reasonable steps to safeguard
Confidential Information that is within his possession or control and to protect
such information against disclosure, misuse, loss or theft;

 

(d)          will not, at any time, make unauthorized copies of any portion of
any Confidential Information;

 

(e)          will adopt and implement all procedures prescribed from time to
time by the Company to prevent unauthorized use or disclosure of Confidential
Information; and

 

(f)          will, upon termination of his employment for any reason,
immediately cease to use the Confidential Information, and will return to the
Company (or destroy, if so directed by the Company) all Confidential Information
(originals and copies including, without limitation, all Confidential
Information stored electronically or otherwise) in his possession, custody
and/or control; provided however Employee shall retain such information
necessary to enforce this Agreement.

 

2.           Nonsolicitation; Non-Disparagement.

 

(a)          Employee covenants and agrees that, during the Restricted Period,
he will not, directly or indirectly, whether for his own benefit or for the
benefit of any other person or entity, solicit, induce, or attempt to induce any
customer, joint venture partner, lender or investor of the Company with which
the Employee had substantive and material contact or supervisory responsibility
to cease doing business with or make or modify their relationship with the
Company.

 

Exhibit B – Page 2

 

 

(b)          Employee further covenants and agrees that, during the Restricted
Period, he will not, directly or indirectly, whether for his own benefit or for
the benefit of any other person or entity directly solicit, any executive,
employee or independent contractor of the Company with whom Employee directly
supervised or with whom reported directed to Employee to cease or modify
its/his/her relationship with Company; provided, however, a general
advertisement or notifying individuals of the Employee’s new employment shall
not be considered solicitation.

 

(c)          Employee covenants and agrees that, during the Restricted Period,
he will not at any time make, publish or communicate to any person or entity or
in any public forum any defamatory or disparaging remarks, comments or
statements concerning the Company or its businesses, or any of its officers,
managers, employees, joint venture partners, lenders or investors, provided
however the recitation of the truth shall not be a violation of this Section.
Company covenants and agrees that, during the Restricted Period, the members of
the board of directors, will not at any time make, publish or communicate to any
person or entity or in any public forum any defamatory or disparaging remarks,
comments or statements concerning the Employee, provided however the recitation
of the truth shall not be a violation of this Section.

 

(d)          Employee agrees that in the event a court determines the length of
time or the geographic area or activities prohibited under this Section 2 are
too restrictive to be enforceable, the court may reduce the scope of the
restriction to the extent necessary to make the restriction enforceable, to the
extent authorized by applicable law.

 

3.           Assignment of Intellectual Property.

 

(a)          Employee agrees to and hereby does grant and assign to the Company
any interest in and all rights and title to (including, without limitation,
rights to patents, copyrights and all other proprietary interests) any and all
inventions, original works of authorship, developments, concepts, improvements,
designs, discoveries, software, source code, object code, creations,
developments, ideas, or trade secrets that Employee (either alone or with
others) makes, creates, conceives, invents, discovers, develops, or reduces to
practice during the Employment Period under the Employment Agreement of time
that (i) relates to the business of the Company or the Company’s actual or
demonstrably anticipated research or development, (ii) results from any work
Employee performed for the Company, or (iii) results from the use of the
Company’s time, equipment, supplies, facilities, property, trade secrets or
other Confidential Information (“Intellectual Property”). Any such assignment of
Intellectual Property shall occur regardless whether or not it is patentable or
registrable under copyright or similar statutes or subject to analogous
protection. Any such assignment shall be without additional compensation to
Employee. Employee acknowledges that he has and shall have no intellectual
property or other right, title or interest in or to any such Intellectual
Property. Employee will promptly disclose and deliver such Intellectual Property
to the Company and, at the request of and without charge to the Company,
Employee will do all things deemed by the Company to be reasonably necessary to
perfect title to the Intellectual Property in the Company and to assist in
obtaining for the Company such patents, copyrights or other protection as may be
provided under law and desired by the Company, including, without limitation,
executing and signing any and all relevant applications, assignments, or other
instruments. Employee further agrees to provide, at the Company’s request,
declarations and affidavits and to give testimony, in depositions, hearings, or
trials, in support of any of Company’s rights hereunder. These obligations
continue even after any termination of the employment relationship. In the event
the Company is unable, after reasonable effort, to secure Employee’s signature
on any document or documents needed to apply for or prosecute any patent,
copyright or other right or protection, for any reason whatsoever, Employee
hereby irrevocably designates and appoints the Company and its duly authorized
officers and agents as his agent and attorney-in-fact to act for and on his
behalf to execute and file any such application or other document and to do all
other lawfully permitted acts to further the prosecution and issuance of
patents, copyrights, or similar protections thereon with the same legal force
and effect as if executed by his.

 

Exhibit B – Page 3

 

 

(b)          Employee acknowledges that all original works of authorship,
including, without limitation, software, manuals and documentation, that have
been or may be created by Employee during and within the scope of employment are
and shall be “works-for-hire” and the sole property of the Company.

 

(c)          Notwithstanding any provision of this Agreement, Employee
understands and agrees that Employee is not being required to assign, and will
not be deemed to have assigned, the following:

 

(i)          any inventions that the Employee developed entirely on his or his
own time without using the Company’s equipment, supplies, facilities, or trade
secret information except for those inventions that either: (1) relate at the
time of conception or reduction to practice of the invention to the Company’s
business, or actual or demonstrably anticipated research or development of the
Company; or (2) result from any work performed by the Employee for the Employer.

 

(ii)         Inventions, developments and intangible interests and properties
(i.e., patents, patent applications, intellectual property, copyrights, trade
secrets, and trademarks) that Employee made prior to starting employment with
the Company. To avoid any uncertainty, Employee agrees to set forth as an
Exhibit to this Agreement, any inventions, developments and intangible interests
that he owns or has an interest in at the time of execution of this Agreement;

 

4.           Prior Employment. The Company does not want, and Employee is not
permitted to bring to the Company or use any confidential information of a prior
employer or its clients. Employee hereby represents and warrants to the Company
that the execution, delivery and performance of this Agreement by Employee does
not and shall not conflict with, breach, violate or cause a default under any
contract or agreement, to which Employee is a party or by which he is bound. The
Company acknowledges receipt of the employment agreement and related terms and
conditions of Employee’s current employment.

 

Exhibit B – Page 4

 

 

5.          Remedy for Breach. Employee expressly acknowledges and agrees that
any breach or threatened breach of the provisions of this Agreement shall, to
the extent permitted by a court with jurisdiction therefor, entitle the Company,
in addition to any other legal remedies available to it, to seek injunctive
relief, to prevent any violation of this Agreement without the necessity of the
Company posting bond or furnishing other security and without proving special
damages or irreparable injury. Employee recognizes, acknowledges and agrees that
such injunctive relief may be necessary to protect the Company’s legitimate
business interests. Employee further acknowledges that the restrictions set
forth above in Sections 1 and 2 including, without limitation, the time periods
and activity limitations, are reasonable and necessary for the protection of the
Company’s legitimate business interests; that such restrictions do not impose an
undue hardship on Employee or otherwise preclude Employee from obtaining gainful
employment; that irreparable injury will result to the Company if Employee
violates such restrictions; and that, in the event of Employee’s actual
violation of such restrictions, monetary damages may not be an adequate remedy
for any such breach and the Company may have no adequate remedy at law. Employee
further acknowledges and agrees that the existence of any claims which Employee
may have against the Company, whether under this Agreement or otherwise, will
not be a defense to the enforcement by the Company of any of its rights under
this Agreement.

 

6.          Expenses. In any dispute arising under or related to this Agreement
(including an alleged breach thereof) or any proceeding relating to the
enforcement of this Agreement, the prevailing party will be entitled to an award
of its costs and expenses (including, without limitation, reasonable attorneys’
fees and expenses) incurred in such action from the non-prevailing party within
thirty (30) days following the final settlement of such dispute.

 

7.          Tolling of Restrictive Periods. If Employee is found by a
non-appealable order by a court in the relevant jurisdiction to have violated
any of the restrictions set forth in this Agreement, the time period for such
restrictions shall be extended for a period of time equal to the period during
which Employee is found to be in violation of this Agreement.

 

8.          Invalidity of Any Provision. It is the intention of the parties
hereto that this Agreement shall be enforced to the fullest extent permissible
under the laws and public policies of each state and jurisdiction in which such
enforcement is sought, but that the unenforceability (or the modification to
conform with such laws or public policies) of any provision hereof shall not
render unenforceable or impair the remainder of this Agreement which shall be
deemed amended to delete or modify, as necessary, the invalid or unenforceable
provisions. Further, in the event that any part or provision hereof shall be
declared by a court of competent jurisdiction to exceed the maximum time period
or restriction such court deems reasonable and enforceable, then the parties
expressly authorize the court to modify such part or provision so that it may be
enforced to the maximum extent permitted by law.

 

9.          Governing Law and Venue. This Agreement and any action related
thereto will be governed, controlled, interpreted, and defined by and under the
laws of the State of California as applied to transactions taking place wholly
within California between California residents excluding that body of laws
related to conflict of laws. All disputes will be resolved in state or federal
court in the State of California, County of Orange as the exclusive forum and
all parties expressly consent to the personal jurisdiction of such court(s). The
Parties further agree that in any proceeding to enforce the terms of this
Agreement, the prevailing party will be entitled to his/her/its reasonable
attorneys' fees and costs incurred by him/her/it in connection with resolution
of the dispute in addition to any other relief granted.

 

Exhibit B – Page 5

 

 

10.         Waiver of Breach. The waiver by the Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.

 

11.         Successors and Assigns; Meaning of “Company”. This Agreement shall
inure to the benefit of and be binding upon Employee and his estate, the
Company, its subsidiaries and affiliates, and each of their respective
successors and assigns, including any successor to the Company. For purposes of
this Agreement, the term “Company” shall include any subsidiary, division,
predecessor, successor or assign of the Company.

 

12.         Entire Agreement. This Agreement contains the entire agreement of
the parties. This Agreement may not be changed orally but only by an agreement
in writing signed by the party against whom enforcement of any waiver, changes,
modification, extension, or discharge is sought.

 

13.         Assistance of Counsel. Employee acknowledges that he has read and
understands this Agreement in its entirety before signing the Agreement, and
that Employee has had an opportunity to consult with counsel of his choice
before doing so.

 

Exhibit B – Page 6

 

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.

 

EMPLOYEE:   SUMMIT HEALTHCARE REIT, INC.       /s/ Kent Eikanas   By: /s/ Paul
Danchik             Title:  Independent Director         Date: September 23,
2015   Date:  September 23, 2015

 

Exhibit B – Page 7