Exhibit 10.1

MANAGEMENT SERVICES AGREEMENT

by and between

INTEGRATED SENIOR LIVING, LLC

(Management Company)

and

CHP ISLE AT WATERCREST–MANSFIELD TX TENANT CORP.

(Tenant)

Isle at Watercrest - Mansfield

200 East Debbie Lane

Mansfield, TX 76063

May 5, 2014

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MANAGEMENT SERVICES AGREEMENT

THIS MANAGEMENT SERVICES AGREEMENT, is made as of the 5th day of May, 2014 (the
“Effective Date”) by and between CHP ISLE AT WATERCREST–MANSFIELD TX TENANT
CORP., a Delaware corporation (“Tenant”), and INTEGRATED SENIOR LIVING, LLC, a
Texas limited liability company (hereinafter “Management Company”).

WITNESSETH:

WHEREAS, CHP Isle at Watercrest – Mansfield TX Owner, LLC, a Delaware limited
liability company (“Landlord”), is the owner of that certain assisted living and
Alzheimer’s care facility known as “Isle at Watercrest - Mansfield” located at
200 East Debbie Lane, Mansfield, TX 76063 (the “Facility”) and all of the
furniture, furnishings, equipment and other personal property located at the
Facility; and

WHEREAS, Tenant and Landlord have entered into a lease agreement with respect to
the Facility; and

WHEREAS, Tenant wishes to engage Management Company, and Management Company
wishes to provide certain services to Tenant during the term of this Agreement,
relating to the management of the Facility, on the terms and conditions set
forth herein.

NOW, THEREFORE, the parties hereto, intending to be legally bound, in
consideration of the mutual provisions and covenants herein contained, agree as
follows:

ARTICLE 1.

1.1 Definitions. The following terms shall have the meanings set forth below
when capitalized herein:

“Adjusted NOI” means an amount equal to NOI less the FF&E Reserve Payment.

“Administrator” means such individual employed by Management Company, at the
expense of the Facility as an Operating Expense. The Administrator will be under
the direct supervision of the Management Company, who is responsible for the
daily management of the Facility.

“Affiliate” means the following meaning: two entities are “Affiliates” if

(a) one of the entities is a Subsidiary of the other entity;

(b) both of the entities are Subsidiaries of the same entity; or

(c) both of the entities are Controlled by the same Person.

“Affiliated Agreements” means those certain Management Services Agreements by
and between Management Company or RES ICD Management LP, a Texas limited
partnership d/b/a

 

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Integrated Property Management, and certain Affiliates of Tenant dated of even
date herewith and more particularly described on Schedule 1.1 attached hereto
and by this reference made a part hereof.

“Agreement” means this Management Services Agreement, together with any
amendments hereto entered into by the parties from time to time.

“Budget” shall have the meaning set forth in Section 2.5.

“Business Day” means any day other than a Saturday, Sunday or legal holiday in
the State of Texas.

“Capital Expenditures” means certain expenses for renovations, replacements,
maintenance, alterations, improvements or renewals to the Facility that are
typically classified as capital expenditures in accordance with GAAP; provided
however, the parties acknowledge and agree that unit turnover costs shall not be
deemed to be Capital Expenditures.

“Control” means:

(a) the right to exercise, directly or indirectly, a majority of the votes which
may be voted at a meeting of (i) the shareholders of the corporation, in the
case of a corporation, (ii) the shareholders of the general partner, in the case
of a limited partnership, or (iii) the equity holders or other voting
participants of a Person that is not a corporation or limited partnership; or

(b) the right to elect or appoint, directly or indirectly, a majority of (i) the
directors of the corporation, in the case of a corporation, (ii) the directors
of the general partner, in the case of a limited partnership, or (iii) a
majority of the Persons who have the right to manage or supervise the management
of the affairs and business of a Person that is not a corporation or limited
partnership,

(c) and “Controlled” has a corresponding meaning.

“Effective Date” shall have the meaning set forth in the first paragraph of this
Agreement.

“Emergency and Evacuation Procedures” shall have the meaning set forth in
Section 2.4.

“Facility” shall have the meaning set forth in the recitals.

“Facility Mortgage” means any mortgage or deed of trust secured by the Facility.

“Facility Operational Materials” shall have the meaning set forth in
Section 2.13.

“Fiscal Year” means each calendar year during the Term. The period from the
Effective Date through December 31, 2014 shall be the first Fiscal Year.

“Fixed Asset Supplies” means supply items necessary for the operation of the
Facility.

“FF&E Reserve” shall have the meaning set forth in Section 2.7.

 

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“FF&E Reserve Payment” means the amount equal to $500 multiplied by the total
number of rental units on an annual basis (but prorated for any partial Fiscal
Year during the Term), and increasing on each Increase Date by three percent
(3%) over the FF&E Reserve Payment for the prior year, and as may be further
adjusted by Tenant and Management Company in connection with the required
amounts set forth in the approved Budget pursuant to the terms of Section 2.5.

“GAAP” means generally accepted accounting principles in the United States.

“HIPAA” shall have the meaning set forth in Section 8.12.

“Increase Date” means January 1st of each Fiscal Year, with the first Increase
Date being January 1, 2015.

“Inventories” means inventories as defined by GAAP and provisions in storerooms,
medical supplies, other merchandise intended for sale, mechanical supplies,
stationery and other expenses, supplies and similar items.

“Landlord” shall have the meaning set forth in the recitals.

“Legal Requirements” means any (i) law, code, rule, ordinance or regulation
applicable to Tenant, Management Company and/or the Facility or the operation
thereof; (ii) any order of any governmental authority having jurisdiction over
Tenant, Management Company and/or the Facility or the operation thereof; and
(iii) any law, code, rule, regulation, bulletin, decision, ruling or opinion
applicable to reimbursement by Medicare, Medicaid or any other governmental
healthcare program for services or items rendered by the Facility.

“Licenses” shall have the meaning set forth in Section 2.2.

“Management Company” shall have the meaning set forth in the recitals.

“Management Company Default” shall have the meaning set forth in Section 7.1.

“Management Company Expenses” shall mean those expenses that, unless otherwise
approved as a part of the Budget, or otherwise approved by Tenant, shall be paid
by Management Company without reimbursement by Tenant:

(i) any expenses for Management Company’s corporate office physical plant,
equipment or supplies;

(ii) any overhead expense of Management Company incurred in its general offices
or salaries of any non-Facility specific executive personnel of Management
Company, but excluding Management Company personnel allocated to initiatives for
the Facility such as additional marketing or special capital projects as
contained in the Budget or approved in writing by the Tenant;

(iii) salaries, wages, and expenses allocable to any personnel (excluding any on
site office manager) for activities with regard to providing in-house accounting
services;

 

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(iv) any salaries, wages, and expenses for any corporate office personnel
located at the Facility;

(v) any computer time, equipment, payroll processing service or other expense
used or incurred in processing payroll as such expense relates to non-Facility
specific Management Company personnel employed by the Management Company, the
books and records of the Facility or in preparing any statements or reports
(other than the annual audits, tax returns and/or specialized reports required
by outside agencies). Payroll processing charges relating to Management Company
personnel who are employed at the Facility will be the responsibility of the
Tenant.

“Management Company Losses” shall have the meaning set forth in Section 8.1.

“Management Fee” shall have the meaning set forth in Section 3.1.

“Mortgagee” means the holder of any Facility Mortgage.

“NOI” means Revenues less Operating Expenses.

“Operating Account” shall have the meaning set forth in Section 2.7(a).

“Operating Expenses” means any or all, as the context requires, of the
following: (i) all costs and expenses incurred in connection with the operation,
management and maintenance of the Facility, including, without limitation, all
administrative, financial reporting, and general expenses, expenses relating to
employment of employees at the Facility (“at cost” with no additional fee or
mark-up including salaries, payroll taxes, benefits, cost of payroll, etc);
(ii) advertising and business promotion expenses; (iv) Management Fees; (v) the
cost of Inventories and Fixed Asset Supplies consumed in the operation of the
Facility; (vi) costs and expenses for preparation of claims and billing
submissions and collection of Receivables and other monies; (vii) insurance
costs; (viii) all real property and personal property taxes and assessments;
(ix) those costs and expenses that are expressly identified as Operating
Expenses in this Agreement; (x) budgeted costs related to accounting software
fees and Management Company’s server utilization fees; (xi) costs incurred to
prepare a unit for an incoming resident; (xiii) costs of maintenance and repairs
not included in Capital Expenditures; (xiv) food; (xv) cost of compliance with
Legal Requirements; (xvi) expenses related to the provision of services
including, except to the extent billed directly to the Resident, home health
services; and (xvii) any other non capital costs and expenses incurred in
connection with the operation of the Facility or as are specifically provided
for elsewhere in this Agreement. Operating Expenses shall not include any
Management Company Expenses or deductions for interest for property debt
service, or depreciation or amortization, income, taxes, franchise taxes or
similar taxes, or rent payable from Tenant to Landlord pursuant to the lease for
the Facility, or costs relating to the Landlord’s or Tenant’s ownership
structure (all of which shall be paid directly by Landlord or Tenant, as the
case may be).

 

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“Performance Threshold” means One Million One Hundred Twenty-Four Thousand Two
Hundred Fifty and No/100 Dollars ($1,124,250.00) for the partial Fiscal Year
ending December 31, 2014; One Million Seven Hundred Twenty-Nine Thousand and
No/100 Dollars ($1,729,000.00) for the Fiscal Year ending December 31, 2015, and
each Fiscal Year thereafter increasing each Increase Date by three percent
(3%) over the previous year.

“Person” means any natural person, firm, corporation, general or limited
partnership, limited liability company, association, joint venture, trust,
estate, Governmental Authority or other legal entity, in each case whether in
its own or a representative capacity.

“Purchase and Sale Agreement” shall have the meaning set forth in the recitals.

“Receivables” shall mean all billed and unbilled accounts receivable, trade
receivables, work in progress, notes receivable and other receivables arising
out of or related to the Facility.

“Revenues” means, for the applicable period of time, but without duplication,
all gross revenues and receipts of every kind derived by or for the benefit of
Tenant, Management Company or their affiliates from operating or causing the
operation of the Facility and all departments and parts thereof, determined in
accordance with GAAP for each accounting period (with the exception of any
pass-through fees), including, but not limited to: income from both cash and
credit transactions (after reasonable deductions for rent concessions or rebates
given, paid or returned in ordinary course of obtaining Revenues, bad debt
allowance, discounts for prompt or cash payments, refunds and credit card
payment fees) from rental or subleasing of every kind; community fees; monthly
occupancy fees; healthcare fees and ancillary service fees received pursuant to
various agreements with residents of the Facility; license, lease and concession
fees and rentals, off premises catering, if any, and parking; income from
vending machines; proceeds, if any, from business interruption (but only to the
extent it reimburses Tenant for lost income and not for additional or other
expenses) or other loss of income insurance; club membership fees; income from
food and beverage and catering sales; wholesale and retail sales of merchandise
(other than proceeds from the sale of furnishings, fixtures and equipment no
longer necessary to the operation of the Facility); and service charges, to the
extent not distributed to employees at the Facility as gratuities; all
determined in accordance with GAAP; provided, however, that Revenues shall not
include the following: (i) management fees or reimbursements paid by Tenant to
Management Company pursuant to this Agreement; (ii) gross receipts of revenue
generated by lessees, sublessees, licensees or concessionaires and not paid to
Tenant, Management Company or their affiliates; (iii) gratuities to employees at
the Facility; (iv) federal, state or municipal excise, sales, occupancy, use or
similar taxes collected directly from residents or guests of the Facility or
included as part of the sales price of any goods or services; (v) proceeds of
any insurance policy (except for loss of income insurance as provided above) or
condemnation or other taking; (vi) any proceeds from any sale of the Facility or
any other capital transaction; (vii) proceeds of any financing or refinancing of
any debt encumbering the Facility or any portion thereof; (viii); proceeds from
the disposition of furnishings, fixtures and equipment or any capital asset no
longer necessary for the operation of the Facility; (ix) interest received or
accrued with respect to amounts deposited in any operating or reserve accounts
of the Facility; (x) security deposits until such time as the same are applied
to current fees due for services rendered for the Facility; (xi) awards of
damages, settlement proceeds and other payments received by Tenant in respect of
any litigation other than litigation

 

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to collect fees due for services rendered from the Facility or otherwise
compensating Tenant or Landlord for lost revenue; and (xii) payments under any
policy of title insurance. Any community fees or deposits or other amounts that
are refunded to a resident shall be credited against Revenues during the month
in which such refunds are made, if previously included in Revenues.

“Subsidiary” means, in respect of any Person:

(a) any corporation of which more than 50% of the outstanding capital stock
having ordinary voting power to elect the majority of the board of directors of
such corporation is at the time directly or indirectly owned by (i) such Person,
(ii) such Person and one or more subsidiaries of such Person, or (iii) one or
more subsidiaries of such Person; or

(b) any limited or general partnership, joint venture, limited liability company
or other entity as to which (i) such Person, (ii) such Person and one or more of
its subsidiaries, or (iii) one or more subsidiaries of such Person owns, more
than a 50% ownership, equity or similar interest or has power to direct or cause
the direction of management and policies, or the power to elect the general
partner or managing partner (or equivalent thereof), of such limited or general
partnership, joint venture, limited liability company or other entity, as the
case may be.

“Tenant” shall have the meaning set forth in the first paragraph of this
Agreement.

“Tenant Default” shall have the meaning set forth in Section 7.2.

“Tenant Losses” shall have the meaning set forth in Section 8.2.

“Term” shall have the meaning set forth in Section 2.1.

1.2 Recitals. The recitals set forth above are hereby incorporated as if set
forth herein in their entirety.

ARTICLE 2.

OPERATING TERMS AND APPOINTMENT AND EMPLOYMENT OF

MANAGEMENT COMPANY AS AGENT AND GENERAL MANAGEMENT COMPANY

OF THE FACILITY

2.1 Term. The term of this Agreement shall commence on the Effective Date and
shall continue for a period of five (5) years thereafter subject to earlier
termination as set forth in Article 7 hereof (the “Term”).

2.2 Employment of Management Company. Tenant hereby appoints Management Company
as the sole and exclusive manager of the Facility and subject to Tenant’s
ultimate responsibilities as the holder of the Licenses (as defined below) and
in accordance with all Legal Requirements, Management Company agrees to act as
the manager of the Facility. In connection therewith, Management Company shall
supervise, direct and control the day to day business activities and management
of the Facility and all phases of its management in the name of and on behalf of
Tenant upon the terms and conditions hereinafter stated. Management Company
shall

 

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be responsible for managing the Facility in a professional, competent and
business-like manner, in material compliance with all Legal Requirements and the
terms and provisions of this Agreement. Management Company shall, subject to
compliance of Tenant with its obligations hereunder, do all things as may be
reasonably required to maintain and preserve all necessary licenses, permits,
authorizations, certifications and approvals to operate the Facility so as to
comply with all applicable Legal Requirements (collectively, the “Licenses”);
provided, however, and notwithstanding any other provisions of this Agreement to
the contrary, Management Company shall not be required to expend its own funds
in performing any of its obligations herein other than general company matters
of Management Company that would be a cost of doing business of Management
Company even if this Agreement did not exist (such as maintaining its limited
liability company status in Texas, etc.) Except as provided for herein,
Management Company makes no warranties, express or implied, and shall not assume
any financial or other responsibilities in connection with its obligations
hereunder and shall not be obligated to contribute its own funds in connection
with the management of the Facility.

2.3 Retention of Legal Ownership by Tenant. Tenant shall at all times continue
to exercise legal ownership and control over the assets and operations of the
Facility, and Management Company shall perform its responsibilities as described
in this Agreement as agent to Tenant in accordance with written policies and
directives adopted by Tenant. By entering into this Agreement, Tenant does not
delegate to Management Company any of the powers, duties, and responsibilities
vested in the Tenant by Legal Requirements, or by its Certificate of
Incorporation or Bylaws. Management Company will propose written policies and
directives from time to time for adoption by the Tenant. Tenant, may, according
to the terms of this Agreement (i) direct Management Company to implement
existing policies and procedures at the Facility as approved by Management
Company, (ii) consent to the adoption of policies and procedures at the Facility
recommended by Management Company, or (iii) adopt as the policies and procedures
of the Facility the Tenant’s own proposals as approved by Management Company,
subject to any limitations stated herein. Whenever this Agreement calls for the
approval of Tenant, such approval shall be expressed in writing, which may be by
email, and executed by a duly authorized officer of Tenant. In the absence of
any requirement for Tenant consent, then Management Company shall be entitled,
to the extent permitted by Legal Requirements, to rely upon its business
judgment, consistent with the terms of this Agreement and the Budget, and act
accordingly as agent for the Tenant. Notwithstanding anything herein to the
contrary, Tenant shall have all the requisite power and authority to operate the
Facility as required by Legal Requirements.

2.4 Management Services to be Provided by Management Company. During the Term,
Management Company shall, as agent and on behalf of Tenant, manage all aspects
of the day-to-day operation of the Facility. Management Company shall act in
good faith and use its best reasonable efforts to perform its obligations
hereunder. In connection therewith, to the extent permitted by Legal
Requirements and in accordance with the Budget, Management Company (either
directly or through supervision of Management Company employees at the
Facility):

 

  (a)

Select, employ, supervise, train and discharge as employees at the Facility, an
adequate staff of housekeepers, maintenance, food service, activity, office and
other employees, including an Administrator (who may be replaced, from time to
time), and promote, direct, assign and discharge all

 

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  such employees at Management Company’s sole discretion. All costs and expenses
relating to employees at the Facility, including compensation and benefits,
shall constitute an Operating Expense to be paid or reimbursed at Management
Company’s cost, without additional mark-up. Management Company shall provide for
and maintain a basic employee training and testing program with objective
standards for all categories of employees which meets or exceeds all
governmental and industry requirements for minimum levels of training and
degrees of experience, all as specified in the employee, operating procedure or
other similar manual for the Facility, and will provide at least the State of
Texas minimum required level of staffing for all categories of employees.
Management Company shall provide for and maintain fidelity bonds and other
appropriate protections with respect to any person with access to funds
belonging to the Facility.

 

  (b) Establish general salary scales, personnel policies and appropriate
employee benefits for all Management Company employees. Employee benefits may
include insurance benefits, incentive plans for key employees, and holiday,
vacation, personal leave and sick leave policy, consistent with the current
policies of the Management Company;

 

  (c) Issue appropriate bills for services and materials furnished by the
Facility and use its commercially reasonable efforts to collect Receivables and
monies owed to the Facility; design and maintain customary accounting, billing,
resident and collection records; and prepare and file insurance, and any and all
other necessary or desirable applications, reports and claims related to revenue
production. All rates for services provided by Tenant and for the use of the
Facility, and any changes therein, shall be subject to approval through the
Budget. Tenant expressly assigns, to the extent permitted by Legal Requirements,
to Management Company the full right, power and authority as its agent to
administer, process and collect on Tenant’s behalf and in its name, all
Receivables and monies owed to the Facility. Any and all refunds, volume
discounts, rebates, reduced rates for timely payment, or other benefits derived
from business done at, on or through the Facility shall be credited to Tenant
and not to Management Company;

 

  (d) Plan, supervise and conduct a program of regular maintenance and repair of
the Facility. Management Company shall not make any additions to the Facility
increasing or decreasing the square foot area, unit count, or licensed bed
capacity, without the prior written approval of Tenant. Management Company shall
maintain a maintenance log of all repairs, replacements or improvements made to
the Facility which are capitalized under generally accepted accounting
principles;

 

  (e)

Provide directly, or through contracts, all necessary services, food, beverages,
cleaning and other supplies, equipment, furniture and furnishings for the
operation and maintenance of for the account of

 

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  Tenant. Unless the consent of Tenant is otherwise obtained, all contracts or
agreements entered into by Management Company for the account of the Tenant
shall be for a term of one (1) year or less (unless for an amount of less than
$10,000 in expected annual compensation for certain contracts that customarily
have a term of more than one year (such as elevator maintenance contracts)) and
be less than $25,000 (or $50,000, provided such contract may be terminated by
Tenant without fee or penalty upon no more than thirty (30) days’ notice) in
expected annual compensation, and shall provide for payments within the then
current Budget. To the extent permitted by Legal Requirements and the terms
offered by vendors, Management Company will offer to the Facility the
opportunity to participate in any group or volume purchasing contracts in which
the Management Company may from time to time participate wherein such
participation by the Facility, in the sole opinion of Management Company, is
deemed to be appropriate and practical, provided that if any such group or
volume purchasing contract provides for an administrative fee payable to
Management Company or its Affiliates, (i) such administrative fee shall be first
disclosed to Tenant before the Facility participates in such contract and
(ii) Tenant shall have the right to disapprove the Facility’s participation in
such contract. The Facility shall receive, pro rata if applicable, the financial
benefits of any purchasing contract concessions, discounts or rebates with
respect to any such contracts in which it participates. Any contracts, the
expense of which is not provided for in the Budget, will be subject to the
approval of the Tenant.

 

  (f) Administer, supervise and schedule resident and other services of the
Facility as required under any residency agreement, including the provision of
food, and other ancillary services;

 

  (g) Provide for the orderly payment of accounts payable, employee payroll,
taxes, insurance premiums and all other customary obligations of the Facility,
and timely file all applicable sales tax and/or personal property tax returns
for the Facility;

 

  (h) Institute standards and procedures for admitting and discharging
residents, for charging residents for services and for collecting the charges
from residents or third parties;

 

  (i) Furnish to the Facility any and all policy manuals needed for the
operation of the Facility and propose revisions to said policy manuals as is
needed from time to time to assure, to the best of Management Company’s ability,
that the Facility complies with all applicable Legal Requirements, provided that
the foregoing does not constitute a guaranty of such compliance by Management
Company. All manuals, procedures, guidelines, work product, and other materials
generated by Management Company, however, are and shall remain the physical and
intellectual property of Management Company and shall remain the exclusive
property of Management Company even upon the expiration or termination of this
Agreement;

 

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  (j) If requested by Tenant, procure, to the extent commercially available, the
insurance set forth in Article 5 and Exhibit A or as may be required from time
to time by a Mortgagee.

 

  (k) Negotiate and enter into, in the name of and on behalf of Tenant, such
agreements, contracts and orders on a competitive price basis as it may deem
necessary or advisable for the furnishing of services, concessions and supplies
for the operation and maintenance of the Facility, subject to the limitations
set forth in Section 2.4(e).

 

  (l) Handle and settle all employee relations matters, provided however, that
except as may be required by any Legal Requirements, without the prior
participation and consent of Tenant, which may be withheld in its sole and
absolute discretion, Management Company shall not contact, recognize, initiate
or respond formally to communication with any organized labor union regarding
the Facility by any means including, without limitation, execution of any
instrument which recognizes any labor union with respect to employees at the
Facility, any collective bargaining agreement, neutrality or any labor contract
resulting therefrom non-voluntarily agree to collectively bargain with employees
in any proposed bargaining unit at the Facility;

 

  (m) Assist Tenant in obtaining or maintaining Licenses required by Legal
Requirements for the operation of the Facility;

 

  (n) Maintain an accounting and internal control system using accounts and
classifications consistent with those used in similar communities and as may be
directed by Tenant from time to time, including suitable books and records of
control and accounts as are necessary or required in order to comply with all
Legal Requirements;

 

  (o) Coordinate the provision of home health care and other ancillary services
to residents of the Facility as Management Company may deem reasonable,
necessary or desirable in connection with the management of the Facility;

 

  (p)

Prepare and present to on-site personnel written emergency and evacuation
procedures for the protection, warning, and safe and timely evacuation of all
residents, guests, invitees, and staff from the Facility (the “Emergency and
Evacuation Procedures”). Management Company agrees to consult with insurance
carrier loss prevention consultants if so required by Tenant, and to change such
Emergency and Evacuation Procedures if reasonably recommended by them; provided,
that the Emergency and Evacuation Procedures shall at all times comply with
applicable governmental

 

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  requirements. Management Company shall take such steps as it deems appropriate
to assure the proper training of the Management Company employees, and shall
assure that all residents receive and are knowledgeable about such Emergency and
Evacuation Procedures.

 

  (q) Management Company shall take such action as shall be necessary to ensure
that the Facility and the management thereof by Management Company comply in all
material respects with all Legal Requirements applicable to the Facility or the
management thereof by Management Company, including any Legal Requirements
applicable to assisted living and Alzheimer’s care communities owned by
for-profit organizations. Each party shall promptly provide to the other party
within ten (10) days after receipt, all notices, reports or correspondence from
governmental agencies that assert deficiencies or charges against the Facility
or that otherwise relate to the suspension, revocation, or any other action
adverse to any License, all plans of correction submitted in response thereto
and all correspondence relating thereto.

 

  (r) Management Company shall take such action as may be necessary to comply
promptly with any and all orders, evaluations, reports, or other Legal
Requirements or, with Tenant’s prior consent, appeal or otherwise contest any
action taken by any governmental agency against the Facility. In connection with
any such appeal, Tenant shall adequately secure and protect the Management
Company from loss, cost, damage or expense by bond or other means reasonably
satisfactory to Management Company in order to contest by proper legal
proceedings the validity of any such Legal Requirement. Notwithstanding the
foregoing, Tenant shall have no obligation to secure and protect Management
Company from any loss, cost, damage or expense that arises directly out of
Management Company’s breach of any of its covenants under this Agreement.
Tenant, after having given its written approval, shall cooperate with Management
Company with regard to the contest, and Tenant shall pay all reasonable
attorneys’ fees incurred with regard to the contest from the Operating Accounts.
Counsel for any such contest shall be selected by Management Company and
approved by Tenant. Management Company shall, with the consent of Tenant and at
Tenant’s cost and expense, process all third party payment claims for the
services provided at the Facility, including, without limitation, consent to the
exhaustion of all applicable administrative proceedings or procedures,
adjustments and denials by governmental agencies or their fiscal intermediaries
as third party payors.

 

  (s)

To the extent modification of this Agreement is required to comply with Legal
Requirements, Management Company and Tenant agree to make such modification to
cause this Agreement to comply with all Legal Requirements. Expenses incurred as
the result of the noncompliance, cure and/or appeal shall be the responsibility
of Tenant. Management Company, however, shall not take any action under this
Section so long as

 

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  Management Company has been informed that Tenant is contesting, or has
affirmed its intention to contest any such order or requirement, unless a
failure to comply promptly with any such order or requirement would expose
Management Company to civil or criminal liability.

 

  (t) Management Company immediately shall deliver to Tenant copies of all
notices received by it or received at the Facility from any Mortgagee.

 

  (u) Oversee all capital projects involving Capital Expenditures set forth in
the Approved Capital Budget provided however that for any major capital
improvement, addition, or replacement wherein the estimated cost exceeds $10,000
or involves more than one contractor with whom Tenant must directly contract,
the Management Company or Tenant may identify and contract with an independent
consultant to provide construction planning and supervision of any such major
capital improvement project or addition, or the Tenant may authorize the
Management Company to provide these services on reasonable terms mutually agreed
to in advance by Tenant and Management Company. Except as otherwise approved in
writing by an officer or authorized representative of Tenant, all Capital
Expenditures shall be made only in accordance with an Approved Capital Budget.
In the event of any emergency requiring prompt action for the protection and
safety of the Facility or the residents and staff therein, in which it is not
practicable to obtain prior approval from the Tenant or a representative of the
Tenant, Management Company shall be entitled to take any required or necessary
action without Tenant’s prior approval. Management Company shall provide a
report to Tenant as soon as practicable outlining the emergency situation and
the actions taken.

 

  (v) Management Company shall establish and maintain records and procedures to
account for any resident funds deposited with the Facility. One or more
“Resident Trust Accounts” shall be established in accordance with the terms
hereof and all disbursements therefrom and records and procedures relating
thereto shall conform with the requirements of third party reimbursement,
licensure and all other applicable requirements and the terms hereof.

 

  (w) Management Company shall maintain adequate systems and procedures governed
by written policies and procedures covering all aspects of its operational and
fiscal processes and sufficient to ensure that the Facility’s assets and
business are safeguarded in all material respects.

2.5 Budget.

 

  (a) The Approved Operating Budget and Approved Capital Budget for Fiscal Year
2014 is attached hereto as Exhibit B.

 

  (b)

For each Fiscal Year thereafter, Management Company shall submit to

 

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  Tenant, at least 60 days prior to the beginning of such Fiscal Year during the
Term, an annual budget covering the operations of, and proposed Capital
Expenditures to be made with respect to, the Facility containing the following
items:

(i) A capital expenditure budget (the “Proposed Capital Budget”) setting forth,
on an accrual basis, an estimate of the Capital Expenditures to be incurred for
the Facility, on a monthly basis for the next Fiscal Year. Tenant may approve or
reject each proposed Capital Expenditure, except those required by Legal
Requirements. All Capital Expenditures shall be paid from the FF&E Reserve;
provided, however, that Capital Expenditures that do not qualify under the
Facility Mortgage for payment from the FF&E Reserve shall be paid for from the
Operating Account. Notwithstanding anything herein to the contrary, if and as
required pursuant to any Facility Mortgage, the Proposed Capital Budget shall
generally provide for at least $500 per unit of Capital Expenditures for the
Facility to be expended from the FF&E Reserve on a rolling twelve (12) month
basis;

(ii) An operating budget (the “Proposed Operating Budget”) setting forth, on an
accrual basis, an estimate of the following items for the Facility, on a monthly
basis for the next Fiscal Year:

(a) unit occupancy;

(b) Revenues;

(c) Operating Expenses, including the costs for repairs and maintenance not
included in Capital Expenditures

(d) expenditures for advertising, promotion, and personnel training programs to
be undertaken by Management Company; and

(e) Management Fees.

 

  (c)

Tenant shall approve or disapprove of the Proposed Operating Budget and Proposed
Capital Budget in writing to Management Company, detailing the basis for
disapproval, within thirty (30) days after receipt. If Tenant does not approve
or disapprove of the Proposed Operating Budget or Proposed Capital Budget within
such thirty (30) day period then Tenant shall be deemed to have approved the
Proposed Operating Budget or Proposed Capital Budget, as applicable. If Tenant
disapproves the Proposed Operating Budget or Proposed Capital Budget, Management
Company will resubmit the Proposed Operating Budget or Proposed Capital Budget
within fifteen (15) days after initial rejection. Tenant shall approve or
disapprove any such resubmitted Proposed Operating Budget or Proposed Capital
Budget within fifteen (15) days of its receipt thereof. The Tenant shall not
unreasonably withhold its approval of any Proposed Operating Budget or Proposed
Capital Budget submitted by the

 

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  Management Company. The Operating Budget and the Capital Budget as so finally
approved by Tenant shall constitute the “Approved Operating Budget” and the
“Approved Capital Budget”, respectively, for purposes hereof. The Approved
Operating Budget and the Approved Capital Budget shall be known collectively as
the “Budget” for purposes hereof. Should the budgeting process be delayed for
any reason, until such delay is resolved Management Company will manage the
Facility under the prior Fiscal Year’s Budget adjusted for the change in the
Consumer Price Index from the year, and adjusting for occupancy changes on a per
resident day basis, except for uncontrollable Operating Expenses (taxes,
insurance, utilities, etc.), which shall be increased to reflect the actual
increase in the cost of such Operating Expenses.

 

  (d) An Approved Operating Budget shall constitute authorization for Management
Company to expend funds to manage the Facility pursuant to such Approved
Operating Budget, and Management Company may do so without further approval.
Management Company shall use its best efforts to adhere to the Approved
Operating Budget provided, however, that Management Company may exceed the
Approved Operating Budget for any given month provided the excess expenditure
does not exceed the greater of 10% or $10,000 for each operating expense
functional line item of the Approved Operating Budget provided that aggregate
Operating Expenses shall not exceed the total amount therefore set forth in the
Operating Budget without Tenant approval.

 

  (e) If at any time circumstances indicate that the Approved Operating Budget
does not properly take into account the projected needs of the Facility,
Management Company shall notify Tenant of the same and shall submit to Tenant a
proposed revision to the Approved Operating Budget which Tenant shall approve or
disapprove within thirty (30) days after submission. If the proposed revision is
disapproved by Tenant, Tenant and Management Company shall endeavor to agree on
a revised Approved Operating Budget. Once and if approved, Management Company’s
authority as to any revised Approved Operating Budget is the same as that
authorized for the original Approved Operating Budget.

 

  (f) The Approved Capital Budget shall constitute authorization for Management
Company to make the Capital Expenditures contemplated thereby. If Management
Company believes the purchase or installation of new or replacement equipment or
other capital items not contemplated by the Approved Capital Budget is or will
be necessary or desirable, Management Company shall advise Tenant thereof, but
shall cause such items to be purchased and installed only after obtaining the
prior written authorization of Tenant.

 

14

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2.6 Reports to Tenant.

 

  (a) During the Term, Management Company shall deliver to Tenant the following
statements for the Facility prepared in accordance with GAAP applied
consistently from period to period (which shall be certified by an officer of
Management Company as being true and accurate in all material respects) by the
fifteenth (15th) calendar day of the month, except for the Rent Roll which shall
be submitted no later than the fifth (5th) Business Day of the month, and except
for those items set forth immediately below at Sections 2.6(a)(ii) and 2.6(a)(x)
which shall be submitted no later than the tenth (10th) calendar day of the
month:

(i) Balance sheet and income statement (in Microsoft Excel format or YARDI, to
the extent compatible with Excel);

(ii) Trial balance with 3 columns (balance forward, net debits/credit, and
ending balance in Microsoft Excel format)

(iii) Rent Roll;

(iv) Report of daily census for the month;

(v) Marketing report in a form used for such reports by the Management Company
internally;

(vi) Twelve month rolling cash flow projection;

(vii) Detail of Management Fee calculations;

(viii) Capital Expenditure reconciliation to the Approved Capital Budget;

(ix) Disclosure of any material communications with regulatory agencies and
state surveys;

(x) Reconciliation Statement that sets forth any activity in the equity account
of Tenant resulting from additional deposits into or withdrawals from the FF&E
Reserve or the Operating Account by Tenant or one of its Affiliates, together
with underlying documentation (including, but not limited to, invoices and
contracts);

(xi) Most recent sales tax and personal property tax filings, if and as
applicable, with the monthly reporting submittals; and

(xii) any other information relating to the Facility reasonably requested by
Tenant.

 

15

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  (b) As an Operating Expense, prepare the following reports consistent with
GAAP (which reports shall be certified by an officer of Management Company as
being true and accurate in all material respects) to be submitted to Tenant
within fifteen (15) days after the end of each calendar quarter (other than the
item to be delivered pursuant to Section 2.6(b)(i) which is to be submitted
within fifteen (15) days after the end of each February, May, August and
December);

(i) All balance sheet reconcilement;

(ii) Check register from the first day of the subsequent month to search for
unrecorded liabilities;

(iii) Certification executed by the CFO of Management Company in the form
attached hereto as Exhibit C; and

(iv) Management Company will cooperate in providing other reports as reasonably
requested by the Tenant.

If due to extraordinary circumstances, Management Company identifies
expenditures after the last day of the month which are in fact properly
chargeable to that month but which are not reflected on statements submitted
pursuant to this Section, Management Company shall promptly notify Tenant of
said expenditures, if material. All statements required by this Section shall be
prepared in accordance with GAAP.

 

  (c) As an Operating Expense, Management Company shall prepare the following
final reports consistent with GAAP (which shall be certified by an officer of
Management Company as being true and accurate in all material respects) and
management status reports of the Facility, to be submitted to Tenant within
seventy-five (75) days after the end of each Fiscal Year:

(i) Balance sheet and income statement;

(ii) Revenues, Operating Expenses, and NOI;

(iii) Calculations of Management Fee;

(iv) Fixed asset additions;

(v) Capital expense reconciliation to the Approved Capital Budget;

(vi) Management Company will cooperate in providing other reports as reasonably
requested by Tenant.

 

  (d) Management Company shall also provide any assistance as reasonably
requested by the independent accountants for the Facility, selected by Tenant,
in the preparation of audited financial statements for the Facility. Such
audited financial statements shall be prepared at Tenant’s expense in accordance
with GAAP and delivered to Management Company and Tenant.

 

16

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  (e) Management Company shall also provide the following services related to
the monthly and annual reports:

(i) Management Company shall make available to Tenant for inspection and/or
copying by Tenant upon request, all books, records and financial data relating
to the Facility in Management Company’s possession. Tenant shall notify the
Management Company at least five (5) Business Days in advance of such inspection
and shall conduct such inspection during mutually agreeable business hours.

(ii) Management Company shall reasonably assist the Tenant and its accountants
in preparing and delivering to any lender any required monthly and annual
reports.

(iii) Management Company shall provide Tenant annually with information
concerning any new competing community, and shall provide Tenant annually with
any revisions to the Marketing Plan for the Facility, and an annual competitive
analysis showing the Facility’s position in the market with a survey of
pertinent data of competing communities (to the extent requested by Tenant).

2.7 Bank Accounts and Cash Balance.

 

  (a) Management Company shall deposit all Revenues received into a separate,
segregated bank account (the “Operating Account”) established in Tenant’s name
at a bank approved by Tenant and Management Company, and shall supervise the
disbursements from the Operating Account on behalf of Tenant of such amounts and
at such times as the same are required in Management Company’s reasonable
business judgment, and in accordance with the provisions of this Agreement.
Management Company shall discharge such supervisory responsibilities in
accordance with reasonable and customary business standards and practices. All
Operating Expenses shall be paid out of the Operating Account. The Management
Fees shall be paid out of the Operating Account. Tenant and Management Company
shall specify the signatory or signatories of Management Company required on all
checks or other documents of withdrawal submitted by Management Company on the
Operating Account. Funds in the Operating Accounts shall not be commingled with
any other funds controlled by Management Company, unless approved by Tenant and
will be disbursed only in accordance with this Agreement and, from time to time,
upon the specific instructions of Tenant. Management Company shall not withdraw
any monies from the Operating Account to pay any item other than Operating
Expenses permitted pursuant to the Approved Operating Budget or the Approved
Capital Budget, as applicable, including the Management Fee and all amounts due
Management Company or its affiliates pursuant to any other agreement in respect
of the Facility, or any emergency expenses pursuant to Section 2.4 hereof.

 

17

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  (b) Landlord shall establish a reserve account (the “FF&E Reserve”) at a bank
approved by Management Company, such approval not to be unreasonably withheld or
delayed. Each month during the Term, Management Company shall transfer into the
FF&E Reserve an amount equal to one twelfth (1/12) of the FF&E Reserve Payment.
Transfers into the FF&E Reserve shall be made on or before the fifteenth
(15th) day of each month. Funds deposited into the FF&E Reserve shall be
disbursed in accordance with the Approved Capital Budget. Management Company and
Tenant or Landlord shall each be signatories on the FF&E Reserve, but the
Landlord shall be the account holder and all funds contained therein shall be
the property of Landlord.

 

  (c) All rights granted to Management Company under the terms of this
Agreement, including the payment of Management Fees, are and shall be
subordinate to the liens of lenders securing the current indebtedness of Tenant
(however, any Management Fees which are not paid due to the foregoing
subordination provision shall accrue and Management Company shall have the right
to terminate this Agreement in accordance with the terms of Section 7.2(d)).

 

  (d) Tenant will maintain a minimum cash balance of $50,000 in the Operating
Account. Tenant will also fund all reasonable cash requests of the Management
Company to maintain the foregoing cash balance in the Operating Account. Without
limiting the foregoing, on the Effective Date, Tenant will fund the Operating
Account with $50,000.

2.8 Licenses, Permits and Certification.

 

  (a) Management Company, as agent of Tenant, shall assist Tenant in its
application for and maintenance, in Tenant’s name of all Licenses from all
governmental agencies which have jurisdiction over the Tenant and operation of
the Facility.

 

  (b) Neither Tenant nor Management Company shall knowingly take any action or
fail to take any action which could reasonably be expected to cause a
governmental authority having jurisdiction over the operation of the Facility to
institute any proceeding to suspend, rescind or revoke any License.

2.9 Intentionally deleted.

2.10 Quality Controls. Management Company shall activate and maintain on a
continuing basis, a quality assurance program which provides objective
measurements of the quality of services provided at the Facility. In connection
therewith, Management Company shall utilize such techniques (e.g. resident
interviews and periodic inspections) as Management Company may reasonably deem
necessary to maintain the quality of the Facility.

 

18

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2.11 Use of Management Company’s Personnel. Representatives of Management
Company shall visit the Facility as often as Management Company deems necessary.
All out-of-pocket expenses arising from travel and lodging connected with such
visitations shall be borne by the Management Company, except personnel that
float between properties and any travel beyond fifty (50) miles if such
arrangement can be shown to reduce overall employment costs at the Facility and
except that the actual cost of Management Company’s officers’ and employees’ air
travel to or from the Facility shall be paid as an Operating Expense from the
Operating Account; provided however, (i) no other incidental costs of Management
Company’s officers’ and employees’ related to such travel, such as but not
limited to the costs of ground travel, lodging and food, shall be an Operating
Expense and (ii) in the event that the Management Company’s officers’ or
employees’ conduct business unrelated to the management of the Facility during
such trip, then the Operating Expense for the air travel pursuant to this
section shall be a portion of such costs representing a reasonable and equitable
allocation of such costs to the Facility.

2.12 Taxes. Any applicable income taxes of Tenant, any federal, state or local
taxes, assessments or other governmental charges imposed on the Facility are the
obligations of Tenant, not of Management Company, and all of the foregoing, with
the exception of any applicable income taxes (which shall be paid directly by
Tenant), shall be paid out of the Operating Account of the Facility. With the
Tenant’s prior written consent, Management Company may, and at Tenant’s
direction shall, contest the validity or amount of any such tax or imposition on
the Facility in the same manner as described in Section 2.4(a) hereof.
Management Company, on behalf of Tenant, shall cause all Social Security and
federal and state income tax withholding and other employee taxes related to the
Management Company’s employees which may be due and payable to be paid promptly
from the Operating Account of the Facility before the payment of any other
Operating Expenses therefrom. To the extent that there are insufficient funds in
the Operating Account to pay taxes, assessments or other governmental charges
imposed on the Facility when due, Tenant shall pay, from its own funds, such
taxes, assessments or other governmental charges imposed on the Facility when
due.

2.13 Information Regarding the Facility. Management Company shall maintain and
provide to Tenant, upon Tenant’s request or upon termination of this Agreement,
a complete set of the following:

 

  (a) books and records of the Facility held by Management Company;

 

  (b) personal property relating to the Facility;

 

  (c) service contracts relating to the Facility;

 

  (d) all necessary records relating to the operation of the Facility and the
personal property located at the Facility belonging to Tenant;

 

  (e) all licenses, permits, operating or occupancy certificates, employment
contracts, service contracts, cooperation agreements, and transfer or
transportation agreements, relating to the maintenance and operation of the
Facility; and

 

19

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  (f) a copy of the Management Company’s documented crisis and/or disaster
communication and management plan for the Facility in form and substance
required by applicable Legal Requirements.

Management Company shall be responsible for the due and proper maintenance of
all items on the foregoing lists at the expense of Tenant.

Management Company, upon request by the Tenant, will make available for review
at the corporate offices of Management Company to the Tenant, all facility
operational materials, including policy and procedure manuals and standard
operational materials and other similar materials. Management Company agrees to
change any policy and/or procedure which violates any Legal Requirement. In
addition, if Tenant requests any other change, Management Company and Tenant
will work together to revise such operational policies and procedures but will
not be required to implement changes which are based solely on business
considerations. Any and all changes in the standard management program of the
Management Company will be documented and clearly expressed in the “Policies and
Procedures Exceptions Manual” which will be maintained in the Facility. This
Manual and the standard operational materials, together, will comprise the
“Facility Operational Materials”.

ARTICLE 3.

MANAGEMENT FEE

3.1 Management Fee. Management Company shall receive five percent (5%) of the
gross collected Revenues received each month (“Management Fee”). The Management
Fee for each month shall be paid to the Management Company from the Operating
Account of the Facility no later than fifteen (15) days following the end of
that month.

ARTICLE 4.

OTHER TRANSACTIONS WITH MANAGEMENT COMPANY OR ITS AFFILIATES

4.1 Transactions with Management Company and Its Affiliates. Notwithstanding
anything else herein contained, Management Company shall not, without the prior
written consent of Tenant after full disclosure by Management Company of such
affiliation and interest, cause Tenant to enter into any contract with
Management Company or any Affiliate thereof for services required to be provided
by Management Company under this Agreement, or pay any amount to Management
Company or its Affiliates, other than Management Fees described in Article 3
hereof, or reimbursement of bona fide expenses to unrelated third parties.

 

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ARTICLE 5.

INSURANCE

5.1 Insurance. Management Company shall procure and maintain (or Tenant shall
procure and maintain, at Tenant’s election), as an Operating Expense and with
the prior written approval of Tenant, insurance as required and set forth in
Exhibit A to this Agreement. As of the Effective Date, Tenant or Landlord shall
procure and maintain as an Operating Expense the property insurance required
pursuant to this Agreement and Management Company shall procure and maintain as
an Operating Expense the liability insurance required pursuant to this
Agreement. The carrier and the amount of coverage of each policy of insurance
shall be satisfactory to Tenant. Management Company shall be designated as a
named insured with Tenant included as an additional insured and/or loss payee
under each insurance policy procured by Management Company. Tenant or Landlord
may elect, in its sole discretion, to procure and maintain as an Operating
Expense some or all insurance policies required and set forth on Exhibit A,
except for Management Company’s Workers’ Compensation, Employer’s Liability, and
Professional Liability insurance policies, upon thirty (30) days written notice
to Management Company. In the event Tenant or Landlord elects to procure
directly any of the required insurance policies, then Tenant or Landlord shall
be the named insured under each policy and Management Company shall be named as
an additional insured.

ARTICLE 6.

REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties of Tenant. Tenant makes the following
representations and warranties which are material representations and warranties
upon which Management Company relied as an inducement to enter into this
Agreement:

 

  (a) Status of Tenant. Tenant is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware qualified in
other jurisdictions where necessary in order to conduct its business and has all
necessary power to carry on its business as now being conducted, to operate its
properties as now being operated, to carry on its contemplated business, to
enter into this Agreement and to observe and perform its terms.

 

  (b) Authority of Due Execution. Tenant has full power and authority to execute
and deliver this Agreement and all related documents and to carry out the
transactions contemplated herein; which actions will not with the passing of
time, the giving of notice, or both, result in a default under or a breach or
violation of (i) the Tenant’s Articles of Organization or Operating Agreement;
or (ii) any Legal Requirement, or any Facility Mortgage, note, bond, indenture,
agreement, lease, license, permit or other instrument or obligation to which
Tenant is now a party or by which Tenant or any of its assets may be bound or
affected.

 

  (c) Litigation. There is no litigation, claim, investigation, challenge or
other proceeding pending or, to the knowledge of Tenant, threatened against
Tenant, its properties or business which seeks to enjoin or prohibit it from
entering into this Agreement.

 

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6.2 Representation and Warranties of Management Company. Management Company
makes the following representations and warranties which are material
representations and warranties upon which Tenant relied as an inducement to
enter this Agreement.

 

  (a) Status of Management Company. Management Company is a limited liability
company duly formed and validly existing in good standing under the laws of the
State of Texas, and has all necessary power to carry on its business as now
being conducted, to carry on its contemplated business, to enter into this
Agreement and to observe and perform its terms.

 

  (b) Authority and Due Execution. Management Company has full power and
authority to execute and to deliver this Agreement and all related documents and
to carry out the transactions contemplated herein; which actions will not with
the passing of time, the giving of notice, or both, result in a default under or
a breach or violation of (i) Management Company’s Certificate of Formation or
Limited Liability Company Agreement , or (ii) any Legal Requirement, or any
Facility Mortgage, note, bond indenture, agreement, lease, license, permit or
other instrument or obligation to which Management Company is now a party or by
which Management Company or any of its assets may be bound or affected. This
Agreement constitutes a valid and binding obligation of Management Company,
enforceable in accordance with its terms, except to the extent that is
enforceability is limited by applicable bankruptcy, reorganization, insolvency,
receivership or other laws of general application or equitable principals
related to or affecting the enforcement of creditor’s rights.

 

  (c) Litigation. There is no litigation, claim, investigation, challenge or
other proceeding pending or, to the knowledge of Management Company, threatened
against Management Company, its properties or business which seeks to enjoin or
prohibit it from entering into this Agreement.

 

  (d)

Eligible Independent Contractor. Management Company is and shall at all times be
an “eligible independent contractor” as defined in Section 856(d)(9) of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”) (and
taking into account the restrictions on ownership of the Management Company by
shareholders of CHP Healthcare Properties, Inc., and restrictions on ownership
of CHP Healthcare Properties, Inc., by owners of the Management Company set
forth in Section 856(d)(3)), and Management Company will and shall cause the
Facility to be managed in such a manner so that it qualifies as a “qualified
health care facility” within the meaning of Section 856(e)(6)(D) of the Code at
all times. In the event that Tenant reasonably concludes that the terms of this
Agreement will have any effect as to cause the rent under

 

22

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  Tenant’s lease of the Facility to fail to qualify as “rents from real
property” within the meaning of Section 856(d) of the Internal Revenue Code,
Management Company hereby agrees to enter into an amendment to this Agreement as
proposed by Tenant modifying such terms in such a way as to cause rent under
Tenant’s lease of the Facility to so qualify as “rent from real property” in the
reasonable opinion of Tenant and its counsel; provided however, no such
modifications shall affect the amount of Management Fees or the practical
realization of the rights and benefits of the Management Company hereunder.

 

  (e) Ownership of Management Company. Attached hereto as Schedule 6.2(e) is a
true and accurate organizational chart depicting the ownership structure of
Management Company.

ARTICLE 7.

TERMINATION

7.1 Tenant Termination. Tenant shall have the right to terminate this Agreement,
without paying any fee or penalty, when and if one of the following events occur
(hereinafter collectively referred to as “Management Company Default”), after
which Tenant shall have the right – but not the obligation – to declare a
termination of this Agreement in accordance with the termination protocols set
forth below:

 

  (a) appointment of a receiver or trustee to manage the assets of Management
Company;

 

  (b) assignment for the benefit of creditors of the assets of Management
Company;

 

  (c) suspension, termination or revocation of any material License, with no
further opportunity to appeal or contest such suspension, termination or
revocation;

 

  (d) Management Company’s gross negligence or willful misconduct;

 

  (e) any voluntary act of bankruptcy by Management Company, or any involuntary
bankruptcy proceeding commenced against Management Company and not dismissed
within sixty days of the commencement thereof;

 

  (f) Management Company’s breach of any provisions of this Agreement, where
such breach has not been cured within thirty (30) days after the giving of
written notice specifying the nature of the breach or such longer period as may
reasonably be required to diligently effect such cure; and/or

 

  (g)

Any “Management Company Default” by Management Company under any of the
Affiliated Agreements; provided, however, Tenant and

 

23

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  Management Company hereby agree that the failure of a facility under an
Affiliated Agreement to satisfy the performance termination test set forth in
Section 7.3 (Performance Termination) of such Affiliated Agreement shall not
constitute a “Management Company Default” by Management Company under such
Affiliated Agreement.

7.2 Management Company Termination. Management Company shall have the right to
terminate this Agreement without receiving any fee or payment, if and when one
of the following events occur (hereinafter “Tenant Default”), after which
Management Company shall have the right – but not the obligation – to declare a
termination of this Agreement in accordance with the termination protocols set
forth below:

 

  (a) appointment of a receiver or trustee to manage the assets of Tenant;

 

  (b) assignment for the benefit of creditors of the assets of Tenant, except
Management Company shall agree to enter into any agreements which may be
required on behalf of the Mortgagee in order for the Landlord to obtain
financing, so long as the Management Fees and other amounts due to Management
Company set forth herein are not materially affected;

 

  (c) any voluntary act of bankruptcy by Tenant, or any involuntary proceeding
commenced against Tenant and not dismissed within sixty days of the commencement
thereof;

 

  (d) failure by Tenant to pay Management Company in accordance with Article 3
hereof within ten (10) calendar days after such amount becomes due; and/or

 

  (e) Tenant’s breach of any provision of this Agreement, where such breach has
not been cured within thirty (30) days after the giving of written notice
specifying the nature of the breach or such longer period as may reasonably be
required to diligently effect such cure.

7.3 Performance Termination. Commencing with the expiration of Fiscal Year 2014,
in the event that Adjusted NOI does not equal or exceed the Performance
Threshold, then the Tenant shall have the option to terminate this Agreement by
providing a ninety (90) day written notice to the Management Company. To
terminate this Agreement, Tenant must deliver written notice of such election to
Management Company no later than sixty (60) days following Tenant’s receipt of
the annual financial reports for such Fiscal Year.

7.4 Notwithstanding anything else herein contained, neither party shall have the
right to terminate this Agreement as a result of any of the reasons set forth in
Section 7.1(f) or in Section 7.2(e) above, if the event is caused by strikes,
other labor disturbances, fires, windstorm, earthquake, arbitrary and capricious
action by third party payors, war or other state of national emergency,
terrorism, or acts of God, in which the negligence of the party seeking to avoid
termination is not a materially contributing factor to the occurrence of such
event.

 

24

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7.5 At any time during the Term, Tenant shall have the right to terminate this
Agreement for any reason or for no reason upon sixty (60) days prior written
notice to Management Company and payment to the Management Company, upon the
effective date of such termination, of an amount equal to the lesser of (i) the
average of the Management Fee for the prior three (3) months multiplied by
twenty-four (24) or (ii) the average of the Management Fee for the prior three
(3) months multiplied by the number of months remaining in the Term.

7.6 Tenant has the option to terminate this Agreement in the event Landlord
sells the Facility to an unaffiliated third party who does not elect to assume
this Agreement, which termination shall require at least sixty (60) days prior
written notice to Management Company. In such event, Tenant shall not be
obligated to pay any fee or penalty as a result of such termination.

7.7 Either party has the option to terminate this Agreement without payment of
fee or penalty upon 30 days prior written notice to the other upon the
occurrence of either of the following events:

 

  (a) The Facility or any material portion thereof is damaged or destroyed to
the extent that in the written opinion of an independent architect or engineer
reasonably acceptable to both parties: (1) it is not practicable or desirable to
rebuild, repair or restore the Facility to its condition immediately preceding
such damage within a period of six months; or (2) the conduct of normal
operations of the Facility is interrupted for a period of six months or more; or

 

  (b) Title to the temporary use of all or substantially all of the Facility is
taken under the exercise of the power of eminent domain by the government
authority or person, firm or corporation acting under governmental authority
which in the opinion of an independent architect or engineer reasonably
acceptable to both parties, prevents or is likely to prevent the conduct of
normal operations at the Facility for a period of at least six months.

 

  (c) If the termination occurs as a result of any of the events described in
clause (a) of this Section 7.7, and if Tenant or any Affiliate thereof rebuilds,
restores or otherwise rearranges the Facility and recommences operations
thereof, Tenant shall give Management Company the first option to manage the
Facility under the same terms, conditions and fees as provided herein.

7.8 Tenant, at the direction of a lender holding a first lien security
instrument encumbering the Facility (“Lender”), or Lender shall have the option
to terminate this Agreement, without fee or penalty subject to the rights of the
Management Company herein, upon ten (10) days’ prior written notice to the
Management Company in connection with a foreclosure or delivery of a deed in
lieu that is related to any first lien security instrument held by Lender and
encumbering the Facility, without any further obligation to the Management
Company (except for any accrued management fees for previous periods which have
not been paid which shall be the obligation of Tenant but not Lender).

 

25

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7.9 Intentionally Omitted.

7.10 Management Company’s Obligations After Termination or Expiration of
Agreement. Upon the expiration or termination of this Agreement, Management
Company shall, if requested:

 

  (a) deliver to Tenant, or such other person or persons designated by Tenant,
copies of all books and records of the Facility and all funds in the possession
of Management Company belonging to Tenant or received by Management Company
pursuant to the terms of this Agreement;

 

  (b) assign, transfer, or convey to Tenant, or such other person or persons
designated by Tenant, all service contracts and personal property relating to or
used in the operation and maintenance of the Facility, except any personal
property which was paid for and is owned by Management Company; and

 

  (c) remove, at Management Company’s expense, all signs that it may have placed
at the Facility indicating that it is the Management Company of same and replace
and restore the damage resulting therefrom.

Upon any termination or the expiration pursuant to this Section, the obligations
of the parties hereto (except those specified as surviving) shall cease as of
the date specified in the notice of termination, except that Management Company
shall comply with the applicable provisions of this Section and shall be
entitled to receive any and all compensation which may be due Management Company
hereunder through the effective date of such termination or expiration.

ARTICLE 8.

MISCELLANEOUS COVENANTS

8.1 Indemnification by Tenant. Subject to the limitations set forth in this
Article 8, Tenant agrees to indemnify and hold harmless Management Company
against and with respect to any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties, and reasonable attorneys’ fees and expenses,
costs of litigation and costs of investigation (but not including any
adjustments or credits expressly provided for in this Agreement) (together
referred to as “Management Company Losses”):

 

  (a) resulting from any breach of a representation or warranty contained in
Section 6.1 of this Agreement;

 

  (b) resulting from gross negligence or willful misconduct of Tenant in
exercising its duties and responsibilities hereunder;

 

  (c) Tenant’s uncured breach of this Agreement;

 

26

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  (d) arising out of or resulting from the ownership, operation, use or control
of the Facility at any time during the Term, including without limitation, any
and all liabilities which relate to events occurring during the Term, except for
those caused by or arising out of the gross negligence or willful misconduct of
Management Company and except to the extent subject to Management Company’s
indemnity of Tenant provided in Section 8.2 below;

 

  (e) arising out of or resulting from any claim asserted by or on behalf of any
Employee at the Facility for any act or omission occurring at any time during
the Term, except for those caused by or arising out of the gross negligence or
willful misconduct of Management Company and except to the extent subject to
Management Company’s indemnity of Tenant provided in Section 8.2 below; or

 

  (f) directly arising out of Landlord’s or Tenant’s failure to initiate Capital
Expenditures previously requested by Management Company that results in personal
injury of a resident of the Facility, provided that Management Company’s gross
negligence or willful misconduct was not a contributing factor with respect to
such injury.

8.2 Indemnification by Management Company. Subject to the limitations set forth
in this Article 8, Management Company hereby agrees to indemnify and hold
harmless Tenant against and with respect to any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties, and reasonable attorneys’ fees and
expenses, costs of litigation and costs of investigation (but not including any
adjustments or credits expressly provided for in this Agreement) (“Tenant
Losses”):

 

  (a) resulting from a material breach of a representation or warranty contained
in Section 6.2 of this Agreement;

 

  (b) resulting from gross negligence or willful misconduct of Management
Company in exercising its duties and responsibilities hereunder; or

 

  (c) Management Company’s uncured material breach of this Agreement.

8.3 Additional Covenants of Management Company. Management Company hereby makes
the additional covenants set forth in this Section, which are material covenants
and upon which Tenant relies as an inducement to enter into this Agreement:

 

  (a)

Assignment. Management Company may not assign its rights and obligations
hereunder without Tenant’s prior approval, which shall not be unreasonably
withheld as more particularly set forth in this Section 8.3(a). For purposes of
this Section 8.3(a), a change in fifty percent (50%) or more in the ownership or
control, whether direct or indirect, of Management Company, shall be deemed to
be an effective assignment of this Agreement requiring Tenant’s prior approval.
Tenant shall consent to such an assignment or change in the ownership or control
of Management

 

27

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  Company in the event that the proposed transferee or the transferee’s owners
(collectively, the “Transferee”) meets the following criteria: (a) the
Transferee has the financial capacity that equals or exceeds that which
Management Company has as of the date of this Agreement; (b) such Transferee is
known to be of good character and in good standing in its current business
dealings; (c) such Transferee is experienced in the senior living facility
industry; and (d) such Transferee has all licenses and industry approvals that a
manager must hold to manage the Facility. For purposes of clarification, it
shall not be deemed unreasonable for Tenant to withhold consent to any such
transfer if the Transferee lacks, in Tenant’s reasonable opinion, (x) the
financial wherewithal, (y) the character (which determination may be made, in
whole or in part, based on Tenant’s or its Affiliate’s past dealings with the
intended transferee), or (z) the quality and relevant experience necessary to
satisfy the obligations of Tenant hereunder. Any proposed Transferee shall be
required to provide adequate assurances to Tenant: (l) that Revenues shall not
decline substantially after the date of such transfer; (m) of the continuous
operation of the Facility in strict accordance with the requirements of this
Agreement; and (n) of such other matters as Tenant may reasonably require at the
time of such transfer. Notwithstanding the foregoing, any change in ownership or
control that directly results from the death of any person with a controlling
interest in Management Company shall not be subject to this Section 8.3 provided
that the individuals managing the day-to-day operations at the Facility remain
substantially the same following the transfer of ownership or control and the
new controlling person or owner satisfies the criteria stated in items (x), (y),
and (z) of this Section 8.3. Notwithstanding the foregoing, Management Company
shall use commercially reasonable efforts to provide written notice to Tenant in
the event that there is any change in the ownership of Management Company,
whether direct or indirect, regardless of whether such change constitutes a
change of more than fifty percent (50%) of the direct or indirect ownership of
Management Company, which notice shall be delivered no later than five
(5) Business Days following the effectuation of any such change. Management
Company shall also provide Tenant with an updated organizational chart showing
the direct and indirect ownership interests in and to Management Company that is
true, complete and correct within five (5) days of receipt of Tenant’s written
request therefore.

 

  (b) Tenant Assignment. Management Company acknowledges and agrees that Tenant
may assign its rights and obligations under this Agreement without prior
approval of Management Company to an Affiliate of Tenant or to a third party in
connection with the sale of the Facility.

 

  (c)

Transfer of Residents. Management Company agrees that it will not, as long as it
manages for Tenant under this Agreement, without the prior written consent of
the Tenant, encourage or solicit the transfer of any resident of the Facility to
another facility in which Management Company

 

28

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  has an interest which is not owned by Tenant, unless the physical or medical
condition of the resident indicates that such a transfer would be appropriate.
The Management Company may, however, freely discuss and not inhibit such a
transfer when the original basis for the subject resident to be admitted to the
Tenant’s Facility was to acquire temporary accommodations until a room became
available in another facility where the resident prefers to live.

 

  (d) Non-Compete. Management Company hereby covenants and agrees that, for a
period commencing on the Effective Date and ending one (1) year following the
expiration or earlier termination of this Agreement, Management Company shall
not, and shall cause all of its Subsidiaries and Affiliates (each, a “Covered
Person”) not to, either (1) Compete, directly or indirectly, with the Facility
by engaging, in any capacity, in operating or managing a senior living facility
within five (5) driving miles of the Facility or (2) specifically solicit any
employees of the Facility for employment at other facilities owned or controlled
by a Covered Person (provided nothing herein shall prevent a Covered Person from
hiring any employee of the Facility who responds to a Covered Person’s
advertisement or other notice that is not specifically targeted at employees of
the Facility). For purposes of this provision, “Compete” means (i) to, directly
or indirectly, conduct, facilitate, participate or engage in, or bid for or
otherwise pursue a business, whether as a principal, sole proprietor, partner,
stockholder, or agent of, or consultant to or manager for, any Person, or
(ii) to, directly or indirectly, have any ownership interest in any Person or
business which conducts, facilitates, participates or engages in, or bids for or
otherwise pursues a business, whether as a principal, sole proprietor, partner,
stockholder, or agent of, or consultant to or manager for, any such Person, in
each case except as a passive investor with a non-controlling interest in such
Person. Notwithstanding the foregoing, this Section 8.3(d) shall not apply to or
in any way prohibit or restrict any existing ownership interests or operations
of a Covered Person as of the Effective Date. The parties recognize and
acknowledge that a breach of this Section 8.3(d) by Management Company or any of
its Subsidiaries or Affiliates will cause irreparable and material loss and
damage to Tenant and hereby consent to the granting by any court of competent
jurisdiction of an injunction or other equitable relief, without the necessity
of posting a bond, cash or otherwise, and without the necessity of actual
monetary loss being proved or Tenant’s establishing the inadequacy of any remedy
at law, and order that the breach or threatened breach of such provisions may be
effectively restrained. The provisions of this Section 8.3(d) shall expressly
survive the expiration or earlier termination of this Agreement. This provision,
however, shall not apply following any termination of this Agreement arising out
of Section 7.2, Section 7.6 or if the Agreement is deemed void ab initio
pursuant to Section 7.9.

 

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  (e) Non-Solicitation. Management Company agrees not to directly or indirectly
solicit, divert or accept business from any customer, supplier, distributor or
manufacturer of or to the Facility to the detriment of Tenant or any Affiliate
of Tenant, or otherwise interfere with the relationship between Tenant or any
Affiliate of Tenant in connection with the Facility and any customer, supplier,
distributor or manufacturer of or to Tenant or any Affiliate of Tenant to the
detriment of Tenant or any Affiliate of Tenant in connection with the Facility.
The parties recognize and acknowledge that a breach of this Section 8.3(e) by
Management Company or any of its Subsidiaries or Affiliates will cause
irreparable and material loss and damage to Tenant and hereby consent to the
granting by any court of competent jurisdiction of an injunction or other
equitable relief, without the necessity of posting a bond, cash or otherwise,
and without the necessity of actual monetary loss being proved or Tenant’s
establishing the inadequacy of any remedy at law, and order that the breach or
threatened breach of such provisions may be effectively restrained. The
provisions of and obligations under this Section 8.3(e) shall apply throughout
the Term and shall expressly survive the expiration or earlier termination of
this Agreement for a period of one (1) year following such expiration or earlier
termination. This provision, however, shall not apply following any termination
of this Agreement arising out of Section 7.2, Section 7.6 or if the Agreement is
deemed void ab initio pursuant to Section 7.9.

 

  (f)

Right of First Opportunity. Management Company hereby covenants and agrees that,
for a period commencing on the Effective Date and ending one (1) year following
the expiration or earlier termination of this Agreement, Management Company
shall not, and shall cause any Covered Person not to develop, acquire or lease a
senior living facility within five (5) driving miles of the Facility (a
“Competitive Property”) without first offering Tenant an opportunity to
co-invest in the Competitive Property as set forth in this paragraph. If a
Covered Person desires to develop, own, or lease a Competitive Property,
Management Company shall deliver the following notices to Tenant: (1) written
notice to Tenant promptly upon any Covered Person commencing substantive
analysis, planning and or underwriting activities with respect to the potential
development, acquisition or leasing of a Competitive Property (the “Competitive
Property Notice”), including a detailed written description of the Competitive
Property or, in the case of a potential development of a Competitive Property, a
detailed written description of the proposed location of such Competitive
Property and a general description, to the extent available, of the type, size
and scope of the Competitive Property to be developed, and (2), upon finalizing
the terms of the proposed investment in the Competitive Property that was
subject to the Competitive Property Notice, written notice of such proposed
investment including a detailed written description thereof (the “Investment
Notice”), not less than thirty (30) days prior to the day on which the proposed
investment is expected to close after commercially reasonable efforts by the
applicable Covered Person to coordinate its process to give the Tenant maximum
knowledge and information

 

30

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  regarding such potential Competitive Property investment, together with any
and all investment memoranda, investment summaries, projections, pro forma
financial statements and other materials reasonably required to evaluate the
proposed investment, including those that may be reasonably requested by the
Tenant after its receipt of the Investment Notice (collectively, the “Investment
Materials”). Following delivery of an Investment Notice, Tenant shall have the
right, exercisable by delivering written notice to the Management Company within
twenty (20) days after their receipt of the Investment Notice (the “Response
Period”), to elect to, or to have an Affiliate, invest with such Covered Person
(which investment shall be in place of any investment otherwise to have been
made by any third party(ies)). In such event, the investment shall have the
economic terms provided in the Investment Notice (which shall be no worse than
the most favored terms provided prior to the expiration of the Response Period
to any other unaffiliated potential or actual investor with respect to such
potential Competitive Property investment). Throughout the Response Period,
Management Company agrees to negotiate in good faith with the Tenant regarding
the terms of and all other matters relating to such Competitive Property
investment. If Tenant delivers written notice to the Management Company stating
that it and/or its Affiliates have elected not to invest in the Competitive
Property, or if the Tenant fails to deliver a written notice to the Management
Company by the expiration of the Response Period stating that it and/or its
Affiliates have elected to invest in the Competitive Property, then the Covered
Person shall have the right to pursue the Competitive Property with a third
party other than the Tenant and/or its Affiliates, so long as the economic terms
of the investment do not demonstrably change favorably to the investor by more
than seven percent (7%) (and if the terms do so change, a new right of first
opportunity to Tenant shall be triggered hereunder). Tenant’s election (or
deemed election) not to invest in a Competitive Property shall not be deemed an
election by Tenant with respect to any future Competitive Property, and the
Tenant’s right with respect to any such future Competitive Property shall be
subject to the requirements of this Section 8.3(f). This provision, however,
shall not apply following any termination of this Agreement arising out of
Section 7.2, Section 7.6, or if the Agreement is deemed void ab initio pursuant
to Section 7.9.

8.4 Additional Covenants of Tenant. Tenant hereby makes the additional covenants
set forth in this Section, which are material covenants and upon which
Management Company relies as an inducement to enter into this Agreement:

 

  (a) Tenant will cooperate with Management Company in every reasonable respect
and will furnish Management Company with all information required by it for the
performance of its services hereunder and will permit Management Company to
examine and copy any data in the possession or control of Tenant affecting
Management Company and/or operation of the Facility and will in every way
cooperate with Management Company to enable Management Company to perform its
services hereunder.

 

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  (b) Tenant will examine documents submitted by Management Company and render
decisions pertaining thereto, when required, promptly to avoid unreasonable
delay in the progress of Management Company’s work. Tenant agrees that it will
not unreasonably fail to execute and deliver all applications and other
documents that may be deemed by Management Company to be necessary or proper to
be executed by Tenant in connection with the Facility, subject to the
limitations in this Agreement with respect to the Budget and other rights of
Tenant.

 

  (c) Tenant acknowledges that Management Company retains all ownership and
other rights in all proprietary systems, manuals, materials, trade names,
branding and other information, in whatever form, developed by Management
Company in the performance of its services hereunder (other than any trademarks,
trade names or other intellectual property acquired by Tenant or Landlord in
connection with the acquisition of the Facility), and nothing contained in this
Agreement shall be construed as a license or transfer of such information either
during the Term or thereafter. Upon termination of this Agreement all such
proprietary systems manuals, materials and other information in whatever form
shall be removed from the Facility by Management Company.

 

  (d) Tenant shall comply with all Legal Requirements which are applicable to
Tenant provided that Tenant, at its sole expense and without cost to Management
Company, shall have the right to contest by proper legal proceedings the
validity, so far as applicable to it, of any such Legal Requirement, provided
that such contest shall not result in a suspension of operations of the
Facility. Notwithstanding the foregoing, however, Tenant shall not be deemed to
be in breach of the covenant contained in this clause (d) if Tenant’s failure to
so comply is the result of a failure by Management Company to comply with any of
its obligations under this Agreement.

8.5 Binding Agreement. The terms, covenants, conditions, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto, their successors and assigns.

8.6 Relationship of Parties. Nothing contained in this Agreement shall
constitute or be construed to be or to create a partnership, joint venture or
lease between Tenant and Management Company with respect to the Facility.
Management Company shall have no right or authority, express or implied, to
commit or otherwise obligate Tenant in any manner whatsoever except to the
extent specifically provided in this Agreement.

 

32

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8.7 Notices.

 

  (a) If Management Company shall desire the approval of Tenant to any matter,
Management Company will give written notice by mail or email to Tenant that it
requests such approval, specifying in the notice the matter as to which approval
is requested and reasonable detail respecting the matter. If Tenant shall not
respond negatively in writing by mail or email and to the notice within 10 days
after the sending thereof (unless some other period for response is specified in
this Agreement), Management Company may send a second such notice in such
fashion to Tenant. If Tenant shall not respond negatively in writing by mail or
email to the second notice within five days after the sending thereof (unless
some other period for response is specified in this Agreement), Tenant shall be
deemed to have approved the matter referred to in the notice. Any provisions
hereto to the contrary notwithstanding in emergency situations (as determined by
Management Company), Management Company shall not be required to seek or obtain
Tenant’s approval for any actions or omissions which Management Company, in its
sole judgment, deems necessary or appropriate to respond to such situations,
provided Management Company promptly thereafter reports such action or omission
to Tenant in writing, by mail and by email.

 

  (b) All notices, demands and requests contemplated hereunder by either party
to the other shall be in writing and shall be delivered by hand, transmitted by
overnight courier or mailed, postage prepaid, registered or certified mail,
return receipt requested:

 

  (i) To Tenant, by addressing the same to:

CHP Isle at Watercrest–Mansfield TX Tenant Corp. c/o CNL

Healthcare Properties, Inc.

CNL Center at City Commons

450 South Orange Avenue, 12th Floor

Orlando, Florida 32801-3736

Attn: Holly J. Greer, Esq., SVP and General Counsel

With a copy to:

Lowndes Drosdick Doster Kantor and Reed, P.A.

215 North Eola Drive

Post Office Box 2809

Orlando, Florida 32802-2809

Attn: William T. Dymond, Jr., Esq.

 

  (ii) To Management Company, by addressing the same to:

Integrated Senior Living, LLC3110 W. Southlake Blvd.

Suite 120

Southlake, Texas 76092

Attn: Mr. Richard E. Simmons

 

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and

South Bay Partners, Ltd.

5307 East Mockingbird Lane

Suite 1010

Dallas, Texas 75206

Attention: Mr. Charles D. Hammonds

With a copy to:

Arent Fox LLP

1717 K Street, N.W.

Washington, D.C. 20036-5342

Attn: Kenneth S. Jacob, Esq.

or to such other address or to such other person as may be designated by notice
given from time to time during the Term by one party to the other. Any notice
hereunder shall be deemed given three (3) days after mailing, if given by
mailing in the manner provided above, or on the next Business Day following the
date delivered or transmitted if given by hand or overnight courier.

8.8 Entire Agreement: This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter and no prior oral or written,
and no contemporaneous oral representations or agreements between the parties
with respect to the subject matter of this Agreement shall be of force and
effect. Any additions, amendments or modifications to this Agreement shall be of
no force and effect unless in writing and signed by both Tenant and Management
Company.

8.9 Governing Law. This Agreement has been executed and delivered in the State
of Texas and all of the terms and provisions hereof and the rights and
obligations of the parties hereto shall be construed and enforced in accordance
with the laws thereof.

8.10 Captions and Headings. The captions and headings throughout this Agreement
are for convenience and reference only, and the words contained therein shall in
no way be held or deemed to define, limit, describe, explain, modify, amplify or
add to the interpretation, construction or meaning of any provision of or the
scope or intent of this Agreement nor in any way affect this Agreement.

8.11 Non-Recourse Nature of Tenant’s Obligation. Notwithstanding anything else
herein contained, the obligations of Tenant hereunder shall be limited to its
interest in the Facility and the revenues thereof and Receivables and accounts
related thereto, and Management Company shall have no right to proceed against
any other assets of Tenant to satisfy any obligation of Tenant. No officer,
director, or member of Tenant shall have any personal liability hereunder.

8.12 HIPAA Compliance. The parties agree that, to the extent required by Legal
Requirements, the services provided under this Agreement will comply in all
material respects

 

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with all federal and state-mandated regulations, rules, or orders applicable to
the services provided herein, including but not limited to regulations
promulgated under Title II, Subtitle F of the Health Insurance Portability and
Accountability Act (Public Law 104-91) (“HIPAA”).

8.13 Additional Reports. In connection with Tenant’s responsibility to maintain
effective internal controls over financial reporting and the Tenant’s
requirements for complying with the Sarbanes Oxley Act of 2002, Management
Company hereby agrees to provide, as an Operating Expense, access and reasonable
assistance as may be requested by Tenant that will allow Tenant to conduct
activities necessary to satisfy its responsibilities, as previously outlined,
including, without limitation, the activities stipulated by the Public Company
Accounting Oversight Board in its 2004-1, or other similarly promulgated
guidance by other regulatory agencies. Management Company hereby agrees to
provide, at Tenant’s request and as an Operating Expense, (i) evidence of
Management Company documented policies regarding “whistleblower” procedures and
regarding the reporting of fraud or misstatements involving Facility financial
reporting, and (ii) access for the Tenant to conduct such procedures as Tenant
reasonably considers necessary to make a determination that Management Company
has maintained an effective system of internal controls over financial
reporting. In addition to the foregoing, Management Company shall provide Tenant
with access to the books and records of the Facility in order to perform
miscellaneous other internal audit procedures as deemed reasonably appropriate
by Tenant. Notwithstanding the other terms, covenants and conditions of this
Section 8.13, the parties acknowledge and agree that Management Company shall
have no responsibility or obligation with regard to Tenant’s obligations
stipulated by the Public Company Accounting Oversight Board or under the
Sarbanes Oxley Act of 2002, except to comply with requests which may be made by
Tenant under this Section 8.13.

(Signature Page to Follow)

 

35

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IN WITNESS WHEREOF, the parties hereto have executed, sealed and delivered this
Agreement through their duly authorized representatives, as of the day and year
first above written.

 

TENANT:     CHP ISLE AT WATERCREST–MANSFIELD TX TENANT CORP., a Delaware
corporation     By:  

/s/ Tracey B. Bracco

    Name:  

Tracey B. Bracco

    Title:  

Vice President

MANAGEMENT COMPANY:     INTEGRATED SENIOR LIVING, LLC, a Delaware limited
liability company     By:  

/s/ Richard E. Simmons

    Name:  

Richard E. Simmons

    Title:  

Member

--------------------------------------------------------------------------------

EXHIBIT A

REQUIRED INSURANCE

[Intentionally Omitted]

EXHIBIT B

2014 Approved Operating Budget

[Intentionally Omitted]

EXHIBIT C

QUARTERLY CERTIFICATION

[Intentionally Omitted]

SCHEDULE 1.1

AFFILIATED AGREEMENTS

[Intentionally Omitted]

SCHEDULE 6.2(E)

MANAGEMENT COMPANY ORGANIZATIONAL CHART

[Intentionally Omitted]