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Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 19th day of October, 2021 (the “Effective Date”), by and between Summit Healthcare REIT, Inc., a Maryland corporation (“Company”), and Elizabeth Pagliarini, an individual resident in the State of California (“Executive”).
RECITALS
WHEREAS, Company desires to continue to employ Executive as the Chief Operating Officer and Chief Financial Officer of Company as of the Effective Date, subject to the terms and conditions of this Agreement; and
WHEREAS, Executive desires to be employed by Company in the aforesaid capacity, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows, effective as of the Effective Date:
AGREEMENT
1.Employment.
Company hereby agrees to employ Executive, and Executive hereby accepts employment, as Chief Operating Officer and Chief Financial Officer (“COO/CFO”) of Company, pursuant to the terms of this Agreement.  Executive shall have the duties and responsibilities, and shall perform such administrative and managerial services customary to the position of COO/CFO, or as shall be reasonably delegated or assigned to Executive by the Chief Executive Officer (“CEO”) from time to time.  Executive’s duties and responsibilities shall include: responsibility for all aspects of financial reporting, banking and lending relationships, treasury, external audit, tax, risk and insurance, internal controls, investor services, IT/systems, management reporting, budgeting, cash projection and personnel functions; collaboration with the executive team on strategy development and implementation, profitability initiatives, and other operational matters; regular communications with and reporting to the Board; and equity and debt capital raising.  Executive shall report directly to the CEO and shall directly supervise the Controller and the HR Manager, and shall indirectly supervise all other members of the finance department.  Executive shall devote Executive’s full business time and attention to her responsibilities hereunder; provided that Executive shall be entitled to devote time to outside boards of directors, personal investments and civic and charitable activities, so long as such activities do not materially interfere with or conflict with Executive’s duties hereunder.
2.Effective Date and Term.
The term of Executive’s employment by Company under this Agreement shall commence on the Effective Date and shall continue until the third (3rd) anniversary of the Effective Date
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(the “Employment Period”).  Executive’s employment and the Employment Period may only be terminated as provided by this Agreement.
3.Compensation and Benefits.
In consideration for the services Executive shall render under this Agreement, Company shall provide to Executive the following compensation and benefits:
3.1Base Salary.  During the Employment Period, Company shall pay to Executive an annual base salary at a rate of $400,000 per annum, subject to all appropriate withholding taxes, which base salary shall be payable in accordance with Company’s normal payroll practices and procedures (but no less frequently than monthly).  Executive’s base salary shall be reviewed annually prior to the beginning of each fiscal year of Company during the Employment Period by the Board of Directors (the “Board”), or a committee of the Board, and may be increased, in the sole discretion of the Board, or such committee of the Board.  For purposes of this Agreement, the term “Fiscal Year” shall mean the fiscal year of Company. Executive’s base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary.”
3.2Executive Compensation Plan.  Executive shall be eligible to receive bonuses in accordance with the 2021 Final Executive Compensation Plan (“Plan”), attached hereto as Exhibit A, and in accordance with any subsequently adopted amendments to that Plan, or any newly adopted executive compensation plan.  Capital Raise Bonuses shall be paid at the conclusion of each transaction.  Cash Bonuses for reaching MBOs shall be paid out after the provision of the outside auditor’s opinion with respect to the completion of the Company’s audited financials for the applicable Fiscal Year.
3.3Benefits.  During the Employment Period and as otherwise provided hereunder, Executive shall be entitled to the following:
3.3.1Paid Time-Off.  Executive shall not be limited in any way to any number of days of paid time off, irrespective of the Company’s employee handbook then in effect, or otherwise.
3.3.2Participation in Benefit Plans.  Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by Company and generally available to Company’s senior executive employees, as in effect from time to time in accordance with the Company’s employee handbook (collectively, “Employee Benefit Plans”) to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans.  Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion subject to the terms of such Employee Benefit Plan and applicable law.
3.3.3Perquisites.  Executive shall be entitled to such other benefits and perquisites that are generally available to Company’s senior executive employees and as provided in accordance with Company’s plans, practices, policies and programs for senior executive employees of Company.
3.3.4Indemnification.  To the fullest extent permissible under applicable law, Executive shall be entitled to indemnification and Board and officers’ insurance coverage, to the
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extent made available to other Board members and senior executives, in accordance with applicable policies and procedures of Company for expenses incurred or damages paid or payable by Executive with respect to a claim against Executive based on actions or inactions by Executive in her capacity as a senior executive or member of the Board of Company.  To the extent other managers and senior executives and members of the Board of Company are, or are made a, party to an indemnification agreement, Company shall also enter into an indemnification agreement with Executive in the same form as the indemnification agreements, if any, to which all other managers and senior executives and members of the Board of Company are, or are made, a party.  The Company will use its commercially reasonable efforts to obtain customary directors and officers insurance, consistent with past practice.
3.4Expenses.  Company shall reimburse Executive for business expenses incurred by Executive in the performance of her duties under this Agreement from time to time, in accordance with the Company’s employee handbook then in effect.
3.5Equity Interests.  Company has previously granted to Executive stock options to acquire a certain number of shares of common stock granted with an exercise price equal to then fair market value (the “Initial Equity Award”).  Thereafter, the Company granted Executive additional stock options to acquire shares of common stock in amounts determined by the Board (or such committee) in their sole and absolute discretion (any, the “Subsequent Equity Award”).  The terms of the Initial Equity Award and any Subsequent Equity Award are set forth in separate grant agreement(s).  Future Equity Interests may be granted to Executive in the sole and absolute discretion of the Board.
4.Termination of the Services.
Executive’s employment hereunder and the Employment Period may be terminated at any time as follows (the effective date of such termination hereinafter referred to as the “Termination Date”).
4.1Termination upon Death or Disability of Executive.
4.1.1Executive’s employment hereunder and the Employment Period shall terminate immediately upon the death of Executive. In such event, all rights of Executive and/or Executive’s estate (or named beneficiary) shall cease except for the right to receive payment of the amounts set forth in Section 4.5 of the Agreement.
4.1.2Company may terminate Executive’s employment hereunder and the Employment Period upon the disability of Executive.  For purposes of this Agreement, Executive shall be deemed to be “disabled” if Executive suffers any physical or mental incapacity that renders her unable to engage in any substantial gainful activity by reason of any medically-determinable physical or mental impairment which lasts for a continuous period of not less than six (6) months.  In the event of a dispute as to whether Executive is disabled, Company may refer Executive to a licensed practicing board certified medical doctor (in the field of dispute) mutually selected by the Company and Executive (and in the event that Company and Executive are unable to agree upon such a doctor, they shall each select one doctor and those two shall select a third doctor whose opinion will be determinative) and Executive agrees to submit
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to such tests and examination as such medical doctor shall deem appropriate to determine Executive’s capacity to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.  In such event, the parties hereby agree that the decision of such medical doctor as to the disability of Executive shall be final and binding on the parties.  Any termination of the Employment Period under this Section 4.1.2 shall be effected without any adverse effect on Executive’s rights to receive benefits under any disability policy of Company, but shall not be treated as a termination without Cause.
4.2Termination by Company for Cause. Company may terminate Executive’s employment hereunder and the Employment Period for Cause (as defined herein) upon written notice to Executive, which termination shall be effective on the date specified by Company in such notice. For purposes of this Agreement, the term “Cause” shall mean only:
4.2.1Executive’s conviction of, or plea of guilty or nolo contendere to, a crime or offense (i) involving fraud, embezzlement or moral turpitude or (ii) involving the property of Company that results in a material loss to Company; provided that, in the event that Executive is arrested for such a crime or offense, then Company may, at its option, place Executive on paid leave of absence, pending the final outcome of such arrest;
4.2.2 Executive’s violation of the law which results in a conviction, which violation in the reasonable opinion of the Board, after consultation with outside independent counsel (appointed with concurrent approval by Board and Executive), is material and injurious to Company ; or
4.2.3Executive’s material breach of any material agreement with, or material policy of, Company.
Notwithstanding any provision to the contrary, no Cause shall be deemed to exist with respect to any acts or omissions under Paragraph 4.2.3 unless and until Company has provided Executive with notice in writing setting forth in detail all acts or omissions that purportedly would give rise to Cause, and Executive fails to cure such alleged issues within 60 days after receipt of such written notice. If Executive does so effect a cure, the Cause notice shall be deemed rescinded and of no force or effect; provided, however, that Executive shall have no more than one opportunity to “cure” in any 12 month period with respect to any specific delineated issue creating “Cause” under Paragraph 4.2.3.
4.3Termination without Cause; Termination by Executive without Good Reason.  Executive may terminate her employment and the Employment Period at any time for any reason upon thirty (30) days’ prior written notice to Company.  Company may terminate Executive’s employment and the Employment Period without Cause, upon thirty (30) days’ prior written notice to Executive; provided that, Company shall have the option to provide Executive with a lump sum payment equal to thirty (30) days’ Base Salary in lieu of such notice, which shall be paid in a lump sum within thirty (30) days’ of the date of delivery of such notice of termination to Executive, and for all purposes of this Agreement, the Executive’s Termination Date shall be the date on which such notice of termination is delivered to Executive.  Upon termination of Executive’s employment with Company for any reason, Executive shall be deemed to have resigned from all positions with Company and its subsidiaries, the Board and
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any boards of directors or managers of any of Company’s subsidiaries and affiliates (provided that any such deemed resignations shall not affect Executive’s entitlement (if any) to severance pay and benefits hereunder).
4.4Termination by Executive for Good Reason.
4.4.1Executive may terminate Executive’s employment and the Employment Period, in accordance with the process set forth below for Good Reason. For purposes of this Agreement “Good Reason” shall mean the occurrence of any of the following after the Effective Date:
(i)a failure to pay or reduction in the Base Salary; or
(ii)a material diminution in, or other substantial adverse alteration in, the nature or scope of Executive’s authority, title, duties and responsibilities (including reporting responsibilities) with Company as set forth in this Agreement; or
(iii)Executive has been asked to relocate her principal place of business to a location that is more than thirty (30) miles from Company’s offices located in Lake Forest, CA.
4.4.2Upon the occurrence of an event constituting Good Reason, Executive shall have the right to terminate her employment hereunder and receive the benefits set forth in Section 4.5 below, upon delivery of written notice to Company as follows:  (i) with respect to any basis for Good Reason claimed under Paragraph 4.4.1(i) such termination shall be effective no later than the close of business on the tenth (10th) day following the date of the written notice of Good Reason (which must be provided with fifteen (15) days of such occurrence) unless Company has cured such deficiency prior to that tenth day; (ii) with respect to any basis for Good Reason claimed under Paragraph 4.4.1(ii) or 4.4.1(iii) such termination shall be effective no later than the close of business on the sixtieth (60th) day following the date of the written notice of Good Reason unless Company has cured such deficiency prior to that sixtieth day.  If Company so effects a cure within the timeframes set forth above, the Good Reason notice shall be deemed rescinded and of no force or effect; provided, however, that Company shall have no more than one opportunity to “cure” in any 12 month period with respect to any issue creating “Good Reason” under Paragraph 4.4.1.  Executive shall otherwise have been deemed to terminate the Employment Period as a result of a Good Reason no later than five (5) days after the lapse of the time set forth for cure as set forth above without the necessity of any action, and the effective date of a Good Reason termination shall be the date of Executive’s “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)).
4.5Rights upon Termination.  Upon termination of Executive’s employment and the Employment Period, the following shall apply:
4.5.1Termination by Company Without Cause or for Good Reason.  If Company terminates Executive’s employment and the Employment Period without Cause, or if Executive terminates Executive’s employment and the Employment Period for Good Reason, Executive shall be entitled to receive payment of the Accrued Amounts in lump sum form immediately on the Termination Date; provided, however, that payments for any unreimbursed expenses may be paid within ten (10) days after the Termination Date if the additional time is
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reasonably required to calculate those amounts. The term “Accrued Amounts” means (A) any Base Salary amounts that have accrued but have not been paid as of the Termination Date and (B) any accrued but unused paid time off, and reimbursement for any expense reimbursable under this Agreement.  Any vested benefits payable to Executive hereunder accrued through the Termination Date shall be paid to Executive pursuant to the terms of the plan(s) providing said benefits. In addition, subject to Section 4.7 below, Company shall, subject to Section 7.14, be obligated to pay Executive (or provide Executive with) the following benefits as severance:
(i)an amount equal to two (2) times Base Salary, payable as follows: (i) fifty percent (50%) of the amount shall be paid in a single lump sum amount within 10 days after the date by which Executive signs and returns a Release (and any revocation period has lapsed or expired) as provided for in Paragraph 4.7 below (presuming such Release has not been revoked); and (ii) the remaining fifty percent (50%) of the amount shall be paid in equal monthly installments over a twelve (12) month period on the first day of each month, commencing with the first day of the month immediately following payment of the first fifty percent (50%) installment;
(ii)if the Executive timely and properly elects continuation coverage under COBRA, Company shall reimburse Executive for the monthly COBRA premium paid by Executive and her dependents, and such reimbursement shall be paid to Executive on the 1st day of the month immediately following the month in which Executive timely remits the premium payment; provided that Executive shall be eligible to receive such reimbursement until the earliest of (A) the eighteen (18) month anniversary of the Termination Date; and (B) the date on which Executive becomes eligible to enroll in comparable coverage with another employer; and
(iii)all options granted under the Initial Equity Award or any Subsequent Equity Award and all other equity awards that otherwise were unvested shall immediately and fully accelerate and shall be deemed to be fully vested.  In addition, Executive shall have the right to exercise any such option up until the earlier of (i) the date that the option otherwise would have expired had Executive remained employed with Company; or (ii) seven (7) years from the date of the termination of employment.
4.5.2Termination With Cause by Company or Without Good Reason by Executive.  If Company terminates Executive’s employment and the Employment Period with Cause, or if Executive terminates Executive’s employment and the Employment Period other than as a result of a Good Reason, Company shall, subject to Section 7.14, be obligated to pay Executive the Accrued Amounts in lump sum form immediately on the Termination Date; provided, however, that payments for any unreimbursed expenses may be paid within ten (10) days after the Termination Date if the additional time is reasonably required to calculate those amounts.
4.5.3Termination Upon Death or Disability.  If Executive’s employment and the Employment Period are terminated because of the death or disability of Executive, Company shall, subject to Section 7.14, be obligated to pay Executive or, if applicable, Executive’s estate, the Accrued Amounts in lump sum form immediately on the Termination Date; provided, however, that payments for any unreimbursed expenses may be paid within ten (10) days after the Termination Date if the additional time is reasonably required to calculate those amounts. In
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addition, subject to Section 4.7 below, Company shall, subject to Section 7.14, be obligated to pay Executive or Executive’s estate (or provide Executive or Executive’s estate with) the following benefits as severance:
(i)At all times throughout Executive’s employment with the Company, Company shall pay the premiums for a term life insurance policy with a death benefit of no less than Five Hundred Thousand Dollars ($500,000).  Executive shall be the named insured and shall be the sole owner of the policy.  Executive shall have the sole right to name all beneficiaries to the policy in her sole discretion.  In the event that Executive’s employment with the Company terminates for any reason other than her death, Executive shall have the right to maintain the term life insurance policy at her sole expense; and
(ii)if the Executive and/or her dependents timely and properly elects continuation coverage under COBRA, Company shall reimburse Executive and/or Executive’s dependents for the monthly COBRA premium paid by Executive and/or her dependents, and such reimbursement shall be paid to Executive and/or Executive’s dependents on the 1st day of the month immediately following the month in which Executive and/or Executive’s dependents timely remits the premium payment; provided that Executive and/or Executive’s dependents shall be eligible to receive such reimbursement until the earliest of (A) nine (9) month anniversary of the Termination Date; and (B) the date on which Executive and/or Executive’s dependents become eligible to enroll in comparable coverage with another employer; and
(iii)fifty percent (50%) of all options granted under the Initial Equity Award or any Subsequent Equity Award and all other equity awards that otherwise were unvested at the time of the Termination Date shall immediately and fully accelerate and shall be deemed to be fully vested.  In addition, Executive or Executive’s estate shall have the right to exercise any such option up until the earlier of (i) the date that the option otherwise would have expired had Executive remained employed with Company; or (ii) seven (7) years from the date of the termination of employment.
4.5.4Termination Upon Failure to Renew Agreement.  If thirty days after the expiration of the Employment Period, the Company and the Executive do not enter into an agreement similar to this Agreement and Executive terminates her employment hereunder, then Executive shall be entitled to receive payment of the Accrued Amounts in lump sum form immediately on the Termination Date; provided, however, that payments for any unreimbursed expenses may be paid within ten (10) days after the Termination Date if the additional time is reasonably required to calculate those amounts.  In addition, subject to Section 4.7 below, Company shall, subject to Section 7.14, be obligated to pay Executive (or provide Executive with) the following benefits as severance:
(i)an amount equal to twelve (12) months of the Base Salary, payable 50% in a lump sum amount within 10 days after the date by which Executive signs and returns a Release (and any revocation period has lapsed or expired) as provided for in Paragraph 4.7 below (presuming such Release has not been revoked) and the remaining 50% over a period of six (6) months thereafter;
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(ii)if the Executive timely and properly elects continuation coverage under COBRA, Company shall reimburse Executive for the monthly COBRA premium paid by Executive and her dependents, and such reimbursement shall be paid to Executive on the 1st day of the month immediately following the month in which Executive timely remits the premium payment; provided that Executive shall be eligible to receive such reimbursement until the earliest of (A) the eighteen (18) month anniversary of the Termination Date; and (B) the date on which Executive becomes eligible to enroll in comparable coverage with another employer; and
(iii)all options granted under the Initial Equity Award or any Subsequent Equity Award and all other equity awards that otherwise were unvested shall immediately and fully accelerate and shall be deemed to be fully vested.  In addition, Executive shall have the right to exercise any such option up until the earlier of (i) the date that the option otherwise would have expired had Executive remained employed with Company; or (ii) seven (7) years from the date of the termination of employment.
4.6Effect of Notice of Termination.  Any notice of termination by Company, whether for Cause or without Cause, may specify that, during the notice period, Executive need not attend to any business on behalf of Company.
4.7Requirement of a Release; Exclusivity of Severance Payments under this Agreement.  As a condition to the receipt of the severance payments to be provided to Executive pursuant to Section 4.5.1, upon termination of Executive’s employment, Executive shall (i) execute and deliver to Company a general release of employment claims against Company and its affiliates in substantially the form attached hereto as Exhibit B within twenty-one (21) days following the Termination Date and (ii) continue to comply with the restrictive covenants set forth in the Nondisclosure, Intellectual Property and Non-Solicitation Agreement attached hereto as Exhibit C (the “Non-Solicitation Agreement”).  In the event Executive challenges or threatens to challenge the validity of these covenants or has breached any material provision of the Non-Solicitation Agreement, all severance payments under this Section 4 shall cease immediately and Executive shall forfeit her right to any future severance payments.  In addition, the severance payments and termination benefits to be provided to Executive pursuant to this Section 4 upon termination of Executive’s employment shall constitute the exclusive payments in the nature of severance or termination pay or salary continuation which shall be due to Executive upon a termination of employment and shall be in lieu of any other such payments under any severance plan, program, policy or other arrangement which has heretofore been or shall hereafter be established by Company or any of its affiliates.
4.8Return of Property.  Except as otherwise permitted by Company in writing, all property of Company, including, without limitation, records, designs, plans, manuals, guides, computer programs, memoranda, pricing lists, devices, processes, pricing policies or methods and other property used by or delivered to Executive by or on behalf of Company or Company’s clients (including, without limitation, clients obtained for Company by Executive), all records and data compiled by Executive that pertain to the business of Company and all cell phones, computers and other devices owned or leased by Company shall be and remain the property of Company, shall be subject at all times to Company’s discretion and control, and shall be delivered and tendered to Company by Executive without the necessity of Company’s request following the termination of Executive’s employment hereunder; provided however Executive
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shall retain copies of her personal records and files and any other material necessary to enforce this Agreement.  Likewise, all correspondence with clients or representatives, reports, records, charts, files, advertising materials and any data collected by Executive, or by or on behalf of Company or its representatives and in Executive’s possession or control, shall be delivered by Executive promptly to Company without the necessity of Company’s request following the termination of Executive’s employment hereunder.
4.9Cooperation.  Executive agrees that during the Employment Period, during the Severance Period or otherwise following termination of employment for any reason, Executive shall, at Company’s sole expense, upon reasonable advance notice, reasonably assist and cooperate with Company with regard to any investigation or litigation related to a matter or project in which Executive was involved during Executive’s employment so long as such assistance does not unreasonably interfere with Executive’s time or other responsibilities.  Company shall reimburse Executive for all reasonable and necessary out-of-pocket expenses related to Executive’s services under this Section 4.9 within thirty (30) business days after Executive submits to Company appropriate receipts and expense statements.  In addition, in the event that such cooperation is required more than one year after the termination of Executive’s employment, Executive shall be compensated at a reasonable hourly rate for all time spent providing assistance to Company (other than providing actual testimony in response to a subpoena or other similar legal process).
5.Change in Control.
5.1Effect of a Change in Control.  Notwithstanding anything contained herein to the contrary, in the event that the Company undergoes a Change in Control (as defined in Section 5.2 hereof) during the Employment Period or within 6 months after the termination of Executive’s employment, other than for Cause, then:
5.1.1Change in Control Bonus.  The Company (or any successor entity) shall pay to the Executive a lump sum bonus amount equal to three (3) times Executive’s Base Salary.  Such bonus shall be paid to Executive in full simultaneously upon the close of the transaction that has created the Change of Control.
5.1.2 Stock Awards.  Executive shall immediately become vested in any unvested stock options and any other equity awards granted to the Executive by the Company prior to the Change in Control.
5.2Definition.  For purposes hereof, a “Change in Control” shall mean a Change of Control for purposes of Section 409A of the Code plus the occurrence of any of the following:
5.2.1the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934 (“Act”));
5.2.2any person or group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Act, except that a person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is
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exercisable immediately or only after the passage of time), directly or indirectly, of more than 50 percent of the total voting power of the voting stock of the Company, including by way of merger, consolidation or otherwise; provided, however, that for purposes of this Agreement, the following acquisitions shall not constitute a Change in Control: (i) any acquisition by any employee benefit plan sponsored or maintained by the Company or any affiliate, or (ii) any acquisition which complies with clauses (i), (ii) and (iii) of subsection 5.2.4 below;
5.2.3 during any period of twelve (12) consecutive months, Present and/or New Directors cease for any reason to constitute a majority of the Board;
5.2.4the consummation of a reorganization, recapitalization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Company”), or (y) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the shares of voting stock of the Company that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the shares of voting stock of the Company were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power was among the holders of the shares of voting stock of the Company that were outstanding immediately prior to the Business Combination, (ii) no person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company) and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination; or
5.2.5the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
For purposes of this Section 5.2, the following terms have the meanings indicated: “Present Directors” shall mean individuals who at the beginning of any one year period were members of the Board.  “New Directors” shall mean any directors whose election by the Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company who, at the time of such vote, were either Present Directors or New Directors but excluding any such individual whose initial assumption of office occurs solely as a result of an actual or threatened proxy contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board.
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6.Non-Solicitation Agreement.
Executive expressly acknowledges and agrees that, as a condition to Executive’s employment with Company pursuant to this Agreement, Executive has executed the Non-Solicitation Agreement attached hereto as Exhibit C and will comply with the provisions thereof.
7.Miscellaneous.
7.1Valid Obligation. This Agreement has been duly authorized, executed and delivered by Company and has been duly executed and delivered by Executive and is a legal, valid and binding obligation of Company and of Executive, enforceable in accordance with its terms.
7.2No Conflicts. Executive represents and warrants that the performance by her of her duties hereunder will not violate, conflict with, or result in a breach of any provision of, any agreement to which she is a party. Executive has previously provided to Company the agreements and details regarding Executive’s most recent employment.
7.3Applicable Law.  This Agreement shall be construed in accordance with the laws of the State of California, without reference to California’s choice of law statutes or decisions.
7.4Severability. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions hereof shall not affect the validity or enforceability of any other provision. In the event any clause of this Agreement is deemed to be invalid, the parties shall endeavor to modify that clause in a manner which carries out the intent of the parities in executing this Agreement.
7.5No Waiver. The waiver of a breach of any provision of this Agreement by any party shall not be deemed or held to be a continuing waiver of such breach or a waiver of any subsequent breach of any provision of this Agreement or as nullifying the effectiveness of such provision, unless agreed to in writing by the parties.
7.6Notices. All demands, notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be (i) personally delivered or (ii) sent in PDF form by electronic mail (with a confirmation copy sent by one of the other methods authorized in this Section), or (iii) by commercial overnight delivery service or certified or registered mail (return receipt requested), to the parties at the addresses set forth below (postage prepaid):
	To Company:
	Summit Healthcare REIT, Inc.

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	2 South Pointe Drive

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	Suite 100

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	Lake Forest, CA 92630

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	Attention: Chair, Compensation Committee



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	To Executive:
	At the address, electronic mail or fax number most recently contained in Company’s records.



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Notices shall be deemed given upon the earliest to occur of (i) receipt by the party to whom such notice is directed, if hand delivered; (ii) if sent by electronic mail, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent (and if sent via electronic mail, evidenced by an electronic “return receipt” or confirmation reply by the recipient or if sent after 5:00 p.m. Central Time, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) after which such notice is sent; or (iii) on the first business day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the commercial carrier if sent by commercial overnight delivery service or the third business day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited in the United States mail if sent by certified or registered mail. Each party, by notice duly given in accordance therewith may specify a different address for the giving of any notice hereunder.
7.7Assignment of Agreement. This Agreement shall be personal to Executive for all purposes and shall not be assigned by the Executive.  Company shall assign this Agreement to any successor to all or substantially all of the business or assets of Company and/or otherwise use its commercially reasonable efforts to ensure that such successor assumes all obligations to Executive under this Agreement and/or provides in any transaction to otherwise cover such obligations to Executive prior to any close or windup of the Company. This Agreement shall inure to the benefit of Company and permitted successors and assigns.
7.8Entire Agreement; Amendments. Unless specifically provided herein, this Agreement contains the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.  Executive acknowledges that she is not relying upon any representations or warranties concerning her employment by Company except as expressly set forth herein. No amendment or modification to the Agreement shall be valid except by a subsequent written instrument executed by the parties hereto.
7.9Dispute Resolution and Governing Law. The following procedures shall be used in the resolution of disputes:
7.9.1Dispute. In the event of any dispute or disagreement between the parties under this Agreement, the disputing party shall provide written notice to the other party that such dispute exists. The Executive and the Chairman of the Compensation Committee of the Board will then make a good faith effort to resolve the dispute or disagreement. If the dispute is not resolved upon the expiration of fifteen (15) days from the date a party receives such notice of dispute, the matter may then be submitted to litigation as set forth in Section 7.9.2.
7.9.2Governing Law and Venue.  This Agreement and any action related thereto will be governed, controlled, interpreted, and defined by and under the laws of the State of California as applied to transactions taking place wholly within California between California
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residents excluding that body of laws related to conflict of laws.  All disputes will be resolved in state or federal court in the State of California, County of Orange as the exclusive forum and all parties expressly consent to the personal jurisdiction of such court(s).
7.10Survival. For avoidance of doubt, the provisions of Sections 4.5, 4.7, 5, 6 and 7 of this Agreement shall survive the expiration or earlier termination of the Employment Period.
7.11Headings. Section headings used in this Agreement are for convenience of reference only and shall not be used to construe the meaning of any provision of this Agreement.
7.12Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.  Any executed counterpart returned by facsimile or PDF shall be deemed an original executed counterpart.
7.13Taxes. Executive shall be solely responsible for taxes imposed on Executive by reason of any compensation and benefits provided under this Agreement and all such compensation and benefits shall be subject to applicable withholding.
7.14Section 409A of the Code. It is intended that this Agreement will comply with Section 409A of the Internal Revenue Code (and any regulations and guidelines issued thereunder) (“Code”) to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. If an amendment of the Agreement is necessary in order for it to comply with Section 409A, the parties hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure by Company in good faith to act, pursuant to this Section 7.14, shall subject Company to any claim, liability, or expense, and Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes pursuant to Section 409A.
In addition, notwithstanding any provision to the contrary in this Agreement, if Executive is deemed on the date of her “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code (the “Delayed Payments”), such payment shall not be made prior to the earlier of (i) the expiration of the six (6) month period measured from the date of her “separation from service” and (ii) the date of her death. Any payments due under this Agreement other than the Delayed Payments shall be paid in accordance with the normal payment dates specified herein. In no case will the delay of any of the Delayed Payments by Company constitute a breach of Company’s obligations under this Agreement. For the provision of payments and benefits under this Agreement upon termination of employment, to the extent necessary to comply with Section 409A of the Code, reference to Executive’s “termination of employment” (and corollary terms) with Company shall be construed to refer to Executive’s “separation from service” from Company (as determined under Treas. Reg. Section 1.409A-1(h) with the work threshold of less than fifty percent (50%) of the prior level of services, as uniformly applied by Company) in tandem with Executive’s termination of employment with Company.  For purposes of this Agreement, all rights to payments and benefits hereunder shall
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be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.
In addition, to the extent that any reimbursement or in-kind benefit under this Agreement or under any other reimbursement or in-kind benefit plan or arrangement in which Executive participates during the term of Executive’s employment under this Agreement or thereafter provides for a “deferral of compensation” within the meaning of Section 409A of the Code, (i) the amount eligible for reimbursement or in-kind benefit in one calendar year may not affect the amount eligible for reimbursement or in-kind benefit in any other calendar year, (ii) the right to reimbursement or an in-kind benefit is not subject to liquidation or exchange for another benefit, and (iii) subject to any shorter time periods provided herein or in the expense reimbursement policies of Company, any such reimbursement of an expense or in-kind benefit must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.
If the sixty (60)-day period following a “separation from service” begins in one calendar year and ends in a second calendar year (a “Crossover 60-Day Period”), then any severance payments contingent upon a release and that would otherwise occur during the portion of the Crossover 60-Day Period that falls within the first year will be delayed and paid in a lump sum during the portion of the Crossover 60-Day Period that falls within the second year.
7.15280G Excise Tax.  In the event that any economic benefit, payment or distribution by the Company to or for the benefit of Executive, whether paid, payable, distributed or distributable, including, if applicable, the vesting of Executive’s stock options (hereinafter, the “Total Payments”), would result in all or a portion of such Total Payments being subject to excise tax under Section 4999 of the Code, or any interest or penalties with respect to such excise tax (such excise tax and any applicable interest and penalties, collectively referred to in this Agreement as the “Excise Tax”), then Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) equal to the Excise Tax imposed on the Total Payments.
All determinations required to be made under this Section 7.15 shall be made by the Company’s regular outside independent public accounting firm immediately prior to the event triggering the payments that are subject to the Excise Tax, which firm must be reasonably acceptable to Executive (the “Accounting Firm”).  The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and Executive.  Any determination by the Accounting Firm shall be binding on the Company and Executive.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7.15, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm’s determination, but by no later than the end of Executive’s taxable year next following Executive’s taxable year in which Executive remits the related taxes.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written, to be effective at the Effective Date.
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	EXECUTIVE

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	/s/ Elizabeth Pagliarini

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	Elizabeth Pagliarini

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	SUMMIT HEALTHCARE REIT, INC.

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	/s/ J. Steven Roush

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	By: J. Steven Roush

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	Title: Chairman



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2021 FINAL EXECUTIVE COMPENSATION PLAN
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Exhibit A – Page 1



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SEPARATION AND CONFIDENTIALITY AGREEMENT
AND GENERAL AND SPECIAL RELEASE
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This Separation and Confidentiality Agreement and General and Special Release (the “Agreement”) is entered into as of this _____________ (the “Effective Date”), by and between Elizabeth Pagliarini (the “Employee”), on the one hand, and Summit Healthcare REIT, Inc., a Maryland corporation, (the “Company”), on the other hand (collectively, the “Parties”).
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RECITALS
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WHEREAS, Employee is employed as an Executive of the Company, pursuant to the certain Employment Agreement dated _____________ (the “Employment Agreement”);
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WHEREAS, the Company and Employee desire to separate Employee’s employment relationship from the Company and to resolve any potential disputes in an orderly manner.  In addition, the Company wishes to continue to safeguard its proprietary and confidential information;
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THEREFORE, in consideration of the above recitals which are incorporated by reference and the promises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the Parties agree as follows:
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AGREEMENT
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1.Employee’s Employment.  Pursuant to Paragraph __ of the Employment Agreement, Employee’s employment with Company has terminated as of the Effective Date.
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2.Payment.  In consideration for Employee’s release of any and all claims she may have against the Company, if any, including those specified in section 4 below, Company shall provide to Employee all compensation and benefits provided for under Paragraph ___ of the Employment Agreement, within the time frame specified therein.
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3.No Claims or Lawsuits.  Employee represents and warrants that she has not sold, transferred, conveyed, filed, claimed or asserted any complaints, claims, charges, lawsuits or actions against the Released Parties (defined below) with any state, federal, or local governmental agency or court or arbitrator and that he/she will not do so at any time hereafter, and that if any agency, court, or arbitrator assumes jurisdiction of any complaint, claim, lawsuit or action against the Released Parties, to the extent Employee will threaten or take actions to cause that agency, court, or arbitrator to withdraw from or dismiss with prejudice the matter; provided, however, nothing in this provision shall be deemed to purport to require Employee to take any such action if prohibited by law.
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4.No Admission.  This Agreement and compliance with this Agreement shall not constitute an admission by the Company or the Employee of any liability whatsoever, or as an admission by the Company or the Employee of any violation of the rights of Employee
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Exhibit B – Page 1



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or any person, Company or any violation of any order, law, statute, duty, or contract whatsoever against Employee, Company, or any person.  The Company and Employee specifically denies and disclaims any liability to one another or to any other person for any alleged violation of the rights of Employee, Company or any person, or for any alleged violation of any order, law, statute, duty, or contract on the part of the Company, its employees or agents or affiliated entities or their employees or agents or on the part of Employee.
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5.General and Special Release.  As a material inducement for the Company to enter into this Agreement, and except for those obligations created by or arising out of this Agreement, Employee does hereby covenant not to sue and acknowledges complete full and complete satisfaction of and forever and completely releases, discharges, holds harmless and indemnifies the Company, its parent, subsidiary and affiliated corporations and entities, and their respective past and present officers, directors, managers, employees, agents, attorneys, insurers, successors and assigns (collectively, “Released Parties”) from any and all claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, choate or inchoate, of whatever kind or nature in law, equity or otherwise that Employee had, now has or at any time has held, or may hereafter claim to have against the Released Parties, arising out of or relating in any way to Employee’s hiring by, employment with, under the Employment Agreement (or any agreement entered into in connection with that agreement) or otherwise, or termination, firing, resignation or separation from the Company or otherwise relating to any of the Released Parties on or prior to the Effective Date.  Without limiting the generality of the foregoing, such release shall include any claims whatsoever under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (“ADEA”), as amended by the Older Workers’ Benefit Protection Act of 1990 (29 U.S.C. §§ 621, et seq.), the Americans with Disabilities Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974, as amended, the California Fair Employment and Housing Act, the California Family Rights Act, the California Labor Code, or any other federal, state or local law, regulation or ordinance or any common law theories, breach of contract, defamation, retaliation, violation of public policy, invasion of privacy, severance pay, bonus or similar benefit, pension, retirement, overtime pay, wages, penalties, life insurance, health or medical insurance or any other fringe benefit, or disability.  Nothing in this Agreement shall be deemed to release claims that cannot be waived as a matter of law or from interfering with Employee’s protected right to file a charge with, or participate in an investigation or proceeding conducted by, the EEOC; or any other state, federal or local government entity.
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Employee expressly waives all rights afforded by Section 1542 of the Civil Code of the State of California (“Section 1542”) with respect to Released Parties.  Section 1542 states as follows:
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
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Exhibit B – Page 2



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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee understands and agrees that this Agreement is intended to include all claims, if any, which Employee may have and which Employee does not now know or suspect to exist in Employee’s favor against the Released Parties and that this Agreement extinguishes those claims.
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ADEA.  Employee acknowledges that she is knowingly and voluntarily waiving and releasing any rights she may have under the federal Age Discrimination in Employment Act of 1967, as amended (the “ADEA”).  Employee also acknowledges that the consideration given for the waiver in the above paragraph is in addition to anything of value to which Employee was already entitled.  Employee is advised by this writing, as required by the ADEA that:  (a) Employee’s waiver and release do not apply to any claims that may arise after Employee signs this Agreement; (b) Employee should consult with an attorney prior to executing this release; (c) Employee has twenty-one (21) days within which to consider this release (although Employee may choose to voluntarily execute this release earlier); (d) Employee has seven (7) days following the execution of this release to revoke this Agreement; and (e) this Agreement will not be effective until the eighth day after this Agreement has been signed both by Employee and by the Company, provided that Employee has not earlier revoked this Agreement and Employee will not receive any of the benefits specified by this Agreement until after it becomes effective.
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6.Confidentiality of Agreement.  Employee agrees not to disclose the terms of this Agreement, or the fact of its existence or execution, to anyone other than his/her family, attorneys, governmental taxing authorities or other administrative agencies (the “Non-Disclosure Obligations”), or pursuant to a subpoena or order of a court reasonably believed by Employee to be a court of proper jurisdiction, provided, however, prior to such disclosure, Employee shall give the Company notice of such inquiry, subpoena or process as soon as possible upon receipt or knowledge thereof in writing and in any event with sufficient notice to permit Company to object or otherwise seek to quash the subpoena.
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7.Binding Effect.  This Agreement shall be binding upon the Parties and their respective heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the parties and their respective heirs, administrators, representatives, executors, successors and assigns.
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8.Governing Law.  This Agreement shall be governed by and construed and enforced pursuant to the laws of the State of California applicable to contracts made and entirely to be performed therein, without regard to its conflict of laws provisions.
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9.Entire Agreement; Modification.  This Agreement constitutes the entire understanding among the Parties and may not be modified without the express written consent of the Parties.  This Agreement supersedes all prior written and/or oral and all contemporaneous oral agreements, understandings and negotiations regarding the subject matter hereof.  If any individual term or condition of this Agreement is found to be unenforceable, that term or
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Exhibit B – Page 3



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condition shall be deemed stricken and the other terms and conditions shall remain in full force and effect.
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10.Governing Law and Venue.  This Agreement and any action related thereto will be governed, controlled, interpreted, and defined by and under the laws of the State of California as applied to transactions taking place wholly within California between California residents excluding that body of laws related to conflict of laws.  All disputes will be resolved in state or federal court in the State of California, County of Orange as the exclusive forum and all parties expressly consent to the personal jurisdiction of such court(s).
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11.Counterparts.  This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original.  Photographic and facsimile copies of such signed counterparts may be used in lieu of the originals for any purpose.
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Employee and Company each affirm that they have read and understand this Agreement and hereby agree to voluntary sign it as of the Effective Date.  Employee and Company each declare under penalty of perjury that the foregoing is true and correct.
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	By: 
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	Its:
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	EMPLOYEE:

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Exhibit B – Page 4



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Exhibit C
Exhibits intentionally omitted

Exhibit C – Page 1