Exhibit 10.1





 


TERM LOAN
AND SECURITY AGREEMENT


 


between


 


SUMMIT
APPLETON, LLC,

a DELAWARE limited liability company,

SUMMIT CARRINGTON MANOR, LLC,

a DELAWARE limited liability company,

SUMMIT MARLA VISTA MANOR, LLC,

a DELAWARE limited liability company,

SUMMIT MARLA VISTA GARDENS, LLC

a DELAWARE limited liability company



as Borrowers,



and


 


PACIFIC WESTERN BANK




 


as
Lender


 


CAROLINA
MANOR

cARRINGTON mANOR

mARLA vISTA mANOR

mARLA vISTA gARDENS



NOVEMBER 2, 2015


 




     


     


    

 


TABLE OF CONTENTS


 


	 	 	Page
	I.	DEFINITIONS/GENERAL TERMS	1
	 	 	 
	II.	ADVANCES, PAYMENT AND INTEREST	2
	 	 	 	 
	 	2.1	Loan	2
	 	 	 	 
	 	2.2	Evidence of Loan	2
	 	 	 	 
	 	2.3	Interest Rate; Default Interest Rate; Late Charge	2
	 	 	 	 
	 	2.4	Payment	3
	 	 	 	 
	 	2.5	Prepayment	3
	 	 	 	 
	 	2.6	Reserved	4
	 	 	 	 
	 	2.7	Payment Account	4
	 	 	 	 
	 	2.8	Promise to Pay; Manner of Payment	5
	 	 	 	 
	 	2.10	Increased Costs; Capital Adequacy	6
	 	 	 	 
	 	2.11	Partial Releases.	8
	 	 	 	 
	III.	FEES AND OTHER CHARGES; RESERVES; CASH MANAGEMENT	10
	 	 	 	 
	 	3.1	Commitment Fee	10
	 	 	 	 
	 	3.2	Lawful Limits	10
	 	 	 	 
	 	3.3	CapEx Reserve	10
	 	 	 	 
	 	3.4	Tax and Insurance Reserve	11
	 	 	 	 
	 	3.5	Debt Service Reserve	12
	 	 	 	 
	 	3.6	Repair and Remediation	13
	 	 	 	 
	 	3.7	Additional Provisions Relating to Reserves and Other Accounts	13
	 	 	 	 
	IV.	SECURITY	14
	 	 	 	 
	 	4.1	General Security Obligations	14
	 	 	 	 
	 	4.2	Grant of Security Interest	14
	 	 	 	 
	V.	REPRESENTATIONS AND WARRANTIES	15
	 	 	 	 
	 	5.1	Organization and Authority; Investment Company	16
	 	 	 	 
	 	5.2	Loan Documents	16
	 	 	 	 
	 	5.3	Subsidiaries, Capitalization and Ownership Interests	17
	 	 	 	 
	 	5.4	Property Matters	17
	 	 	 	 
	 	5.5	Other Agreements	19
	 	 	 	 
	 	5.6	Litigation	19
	 	 	 	 
	 	5.7	Tax Returns; Governmental Reports	20


 




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	 	5.8	Financial Statements and Reports	20
	 	 	 	 
	 	5.9	Compliance with Law	20
	 	 	 	 
	 	5.10	Intellectual Property	21
	 	 	 	 
	 	5.11	Burdensome Agreements	21
	 	 	 	 
	 	5.12	No Default	21
	 	 	 	 
	 	5.13	Disclosure	21
	 	 	 	 
	 	5.14	Existing Indebtedness; Investments, Guarantees and Certain Contracts	22
	 	 	 	 
	 	5.15	Other Agreements	22
	 	 	 	 
	 	5.16	Insurance	22
	 	 	 	 
	 	5.17	Names; Location of Offices, Records and Collateral	22
	 	 	 	 
	 	5.18	Non-Subordination	22
	 	 	 	 
	 	5.19	Property Management Agreement	22
	 	 	 	 
	 	5.20	Healthcare Matters	23
	 	 	 	 
	 	5.21	First Priority Lien	24
	 	 	 	 
	 	5.22	Special-Purpose Entity;	25
	 	 	 	 
	 	5.23	Bankruptcy	25
	 	 	 	 
	 	5.24	Survival; Diligent Inquiry	25
	 	 	 	 
	 	5.25	Anti-Terrorism; OFAC	25
	 	 	 	 
	 	5.26	[Reserved.]	26
	 	 	 	 
	 	5.27	Solvency	26
	 	 	 	 
	VI.	AFFIRMATIVE COVENANTS	26
	 	 	 	 
	 	6.1	Financial Statements, Reports and Other Information	26
	 	 	 	 
	 	6.2	Payment of Obligations	30
	 	 	 	 
	 	6.3	Conduct of Business and Maintenance of Existence and Assets	30
	 	 	 	 
	 	6.4	Compliance with Legal and Other Obligations	30
	 	 	 	 
	 	6.5	Insurance	30
	 	 	 	 
	 	6.6	True Books	35
	 	 	 	 
	 	6.7	Inspection; Periodic Audits	36
	 	 	 	 
	 	6.8	Further Assurances; Post Closing	36
	 	 	 	 
	 	6.9	Payment of Indebtedness	37
	 	 	 	 
	 	6.10	Lien Searches	37
	 	 	 	 
	 	6.11	Use of Proceeds	37
	 	 	 	 
	 	6.12	Collateral Documents; Security Interest in Collateral	37
	 	 	 	 
	 	6.13	Taxes and Other Charges	38


 




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	 	6.14	Payment of Utilities, Assessments, Charges, Etc.	38
	 	 	 	 
	 	6.15	Waste; Alteration of the Property	38
	 	 	 	 
	 	6.16	Management	39
	 	 	 	 
	 	6.17	Rents and Profits	39
	 	 	 	 
	 	6.18	Hazardous Materials and Environmental Concerns	39
	 	 	 	 
	 	6.19	Casualty and Condemnation	40
	 	 	 	 
	 	6.20	omitted .	43
	 	 	 	 
	 	6.21	Facility Operations	43
	 	 	 	 
	 	6.22	Accounts	44
	 	 	 	 
	 	6.23	Operations and Maintenance Programs	44
	 	 	 	 
	VII.	NEGATIVE COVENANTS	44
	 	 	 	 
	 	7.1	Financial Covenants	44
	 	 	 	 
	 	7.2	Indebtedness	44
	 	 	 	 
	 	7.3	Liens	45
	 	 	 	 
	 	7.4	Investments; New Facilities or Collateral; Subsidiaries	45
	 	 	 	 
	 	7.5	Distributions; Redemptions	46
	 	 	 	 
	 	7.6	Transactions with Affiliates	46
	 	 	 	 
	 	7.7	Charter Documents; Fiscal Year; Dissolution; Use of Proceeds	47
	 	 	 	 
	 	7.8	Truth of Statements	47
	 	 	 	 
	 	7.9	IRS Form 8821	47
	 	 	 	 
	 	7.10	Alienation and Further Encumbrances	48
	 	 	 	 
	 	7.11	Zoning; Use	49
	 	 	 	 
	 	7.12	Leases; Operating Lease	50
	 	 	 	 
	 	7.13	Patient Records	50
	 	 	 	 
	 	7.14	Easements and Rights-of-Way	50
	 	 	 	 
	 	7.15	Certain Specific Agreements	51
	 	 	 	 
	VIII.	EVENTS OF DEFAULT	51
	 	 	 	 
	 	8.1	Events of Default	51
	 	 	 	 
	 	8.2	Remedies	55
	 	 	 	 
	 	8.3	Advances to Protect Property	56
	 	 	 	 
	 	8.4	Application of Proceeds	56
	 	 	 	 
	 	8.5	Rights of Lender to Appoint Receiver	56
	 	 	 	 
	 	8.6	Rights and Remedies Not Exclusive	57


 




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	IX.	DIVERSION	57
	 	 	 	 
	 	9.1	Reserved	57
	 	 	 	 
	 	9.2	Diversion	57
	 	 	 	 
	X.	WAIVERS AND JUDICIAL PROCEEDINGS	57
	 	 	 	 
	 	10.1	Waivers	57
	 	 	 	 
	 	10.2	Delay; No Waiver of Defaults	58
	 	 	 	 
	 	10.3	Jury Waiver	58
	 	 	 	 
	 	10.4	Cooperation in Discovery and Litigation	59
	 	 	 	 
	XI.	EFFECTIVE DATE AND TERMINATION	59
	 	 	 	 
	 	11.1	Effectiveness and Termination	59
	 	 	 	 
	 	11.2	Survival	59
	 	 	 	 
	XII.	MISCELLANEOUS	59
	 	 	 	 
	 	12.1	Governing Law; Jurisdiction; Service of Process; Venue	59
	 	 	 	 
	 	12.2	Successors and Assigns; Participations; New Lenders	60
	 	 	 	 
	 	12.3	Application of Payments	61
	 	 	 	 
	 	12.4	Indemnity	62
	 	 	 	 
	 	12.5	Notice	62
	 	 	 	 
	 	12.6	Severability; Captions; Counterparts; Facsimile Signatures	63
	 	 	 	 
	 	12.7	Expenses; Periodic Lien Searches; Fees for In-House Counsel	63
	 	 	 	 
	 	12.8	Entire Agreement	64
	 	 	 	 
	 	12.9	Lender Approvals and Discretion	64
	 	 	 	 
	 	12.10	Publicity and Confidentiality	64
	 	 	 	 
	 	12.11	Release of Lender	66
	 	 	 	 
	 	12.12	Agent	66
	 	 	 	 
	 	12.13	Concerning Joint and Several Liability of Borrowers	67
	 	 	 	 
	 	12.14	Borrowers Agent	68
	 	 	 	 
	 	12.15	Taxes	68
	 	 	 	 
	 	12.16	Loan Agreement Controls	70
	 	 	 	 
	 	12.17	Loan Party Obligations	70
	 	 	 	 
	 	12.18	U.S. Patriot Act Notice	71
	 	 	 	 
	Borrowers and Lender have executed this Loan Agreement as of the Closing Date.	 
	 	 	 	 
	 	1.1	Fixed Charge Coverage Ratio	A-1


 




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TERM LOAN
AND SECURITY AGREEMENT


 


THIS TERM LOAN AND
SECURITY AGREEMENT (this “Loan Agreement”) is dated as of November 2, 2015 and is entered into between
SUMMIT APPLETON, LLC, a Delaware
limited liability company, SUMMIT CARRINGTON MANOR, LLC, a Delaware limited
liability company, SUMMIT MARLA VISTA MANOR, LLC, a Delaware limited liability
company, SUMMIT MARLA VISTA GARDENS, LLC, a Delaware limited liability company
(each of the foregoing, a “Borrower”, and collectively, “Borrowers”), and
PACIFIC WESTERN BANK, a California state-chartered bank (“Lender”).


 


Recitals


 


A.       Borrowers have
requested that Lender make a loan (the “Loan”) to Borrowers in the principal amount of $13,500,000 (the “Loan
Amount”). The proceeds of the Loan will be used by Borrowers to acquire the following assisted living and memory care
facilities (individually, a “Facility”; collectively, the “Facilities”) known as “Carolina
Manor” located in Appleton, Wisconsin; “Carrington Manor” located in Green Bay Wisconsin; “Marla Vista
Manor” located in Green Bay, Wisconsin; and “Marla Vista Gardens” located in Green Bay, Wisconsin and more particularly
described on Exhibit “A” to this Agreement..


 


B.       Borrowers have
leased the Facilities to each of the Operators (as defined in Appendix B) pursuant to an Operating Lease (as
defined in Appendix B), and each of the Operators will operate the Facility it leases. Borrowers and Operators
are not Affiliates.


 


C.       Lender is willing
to make the Loan to Borrowers upon the terms and subject to the conditions contained in this Loan Agreement.


 


Agreement


 


Borrowers and Lender, therefore, agree
as follows:


 


		I.	DEFINITIONS/GENERAL TERMS



 


Certain terms are defined
in Appendix A and Appendix B. Unless otherwise specified in this Loan Agreement, any agreement
or contract referred to in this Loan Agreement (including the Loan Documents) means such agreement or contract as the same may
from time to time be renewed, modified, amended, restated, consolidated, substituted or replaced. Unless otherwise specified, all
accounting terms used but not defined in the Loan Documents have the meanings given to such terms in, and shall be interpreted
in accordance with, GAAP. Wherever used in the Loan Documents, the term “including” means “including without
limitation.”


 




    	1 



     


    

 


		II.	ADVANCES, PAYMENT AND INTEREST



 


		2.1	Loan



 


Subject to the terms
and conditions set forth in this Loan Agreement, Lender agrees to make the Loan to Borrowers on the Closing Date. The Loan will
consist of a single advance equal to the Loan Amount, to be disbursed to such account or accounts as Borrowers may request in writing.
The Loan is not a revolving credit facility, and any repayments of principal may not be re-borrowed.


 


		2.2	Evidence of Loan



 


(a)       Lender shall maintain,
in accordance with its usual practice, an account evidencing the indebtedness to Lender resulting from the making of the Loan,
including the amounts of principal and interest payable and paid to Lender. The entries made in this account shall be prima facie
evidence of the existence and amounts of the obligations recorded in such account, but the failure of Lender to maintain such account
or any error in such account shall not in any manner affect the obligations of Borrowers to repay the Obligations in accordance
with their terms.


 


(b)       Borrowers have
executed and delivered for the benefit of Lender one or more promissory notes or other evidence of indebtedness in an aggregate
principal amount equal to the Loan Amount in substantially the form of Exhibit B. All references to “Note”
or “Notes” in the Loan Documents means the notes, if any, issued (and not returned to Borrowers for cancellation)
under this Loan Agreement. Lender may, in its sole discretion, decide to cancel any Note issued under this Loan Agreement
without affecting Borrowers’ liability with respect to the Loan or Borrowers’ obligation to pay all amounts outstanding.
In such event, Lender may evidence the obligations of Borrowers to Lender on its books and records, which shall constitute prima
facie evidence of the existence and amounts of the obligations recorded in such books and records.


 


		2.3	Interest Rate; Default Interest Rate; Late Charge



 


(a)       Except as otherwise
provided in this Loan Agreement, the principal balance of the Loan shall bear interest at a fluctuating per annum rate of interest
equal to the LIBOR Rate plus 4.50%; but for the purpose of calculating interest under this Loan Agreement, the LIBOR Rate shall
not be less than 0.19% (the “Applicable Interest Rate”).


 


(b)       Interest on the
outstanding principal balance of the Loan shall be calculated on a 360-day year and will be paid for the actual number of days
elapsed for any whole or partial month in which interest is being calculated. In computing the number of days during which interest
accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and
the day on which funds are repaid shall be included unless repayment is credited prior to 12:00 p.m. Eastern time.


 


(c)       Each determination
of the Applicable Interest Rate by Lender shall be conclusive and binding on Borrowers absent manifest error.


 




    	2 



     


    

 


(d)       Upon the occurrence
and during the continuation of an Event of Default, the Obligations shall bear interest at the Default Interest Rate. This Default
Interest Rate shall continue post-judgment and subsequent to the date that the provisions of any applicable Debtor Relief Law are
exercised against any Borrower unless the statutory post-judgment rate of interest is higher. In this case such statutory rate
shall apply. The Default Interest Rate shall continue unless and until all existing Events of Default are waived in writing in
accordance with the terms of this Loan Agreement (or the Loan has been reinstated pursuant to the requirements of applicable law).
This clause shall not be construed, however, as an agreement or privilege to extend the due date of any payment, nor as a waiver
of any other right or remedy accruing to Lender by reason of the occurrence of any Default or Event of Default. If the Default
Interest Rate would otherwise exceed the maximum rate permitted by applicable law, the Default Interest Rate will be limited to
the maximum rate permitted by applicable law.


 


(e)       If any sum payable
to Lender under this Loan Agreement is not paid on or before the date when due, if any, Borrowers shall pay to Lender upon demand
an amount equal to the lesser of (i) 5.00% of such unpaid sum or (ii) the maximum amount permitted by applicable law,
in either case to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender
for the loss of the use of such delinquent payment.


 


		2.4	Payment



 


Borrowers unconditionally
promise to pay to Lender principal and interest under this Loan Agreement as follows:


 


(a)       beginning on December 5,
2015 (the “First Payment Date”) and on the fifth day of each subsequent calendar month (each such date, including
the First Payment Date, a “Payment Date”), Borrowers shall pay all accrued and unpaid interest on the outstanding
principal balance of the Loan calculated at the Applicable Interest Rate;


 


(b)       on each Payment
Date commencing with May 5, 2017, in addition to the payment of interest described in Section 2.4(a), Borrowers
shall make a payment in the amount set forth in Schedule 2.4(b) (each, an “Amortization Payment”);
and


 


(c)       on the Maturity
Date, Borrowers shall pay the entire outstanding principal balance of the Note, together with accrued and unpaid interest and any
other amounts due under the Loan Documents.


 


		2.5	Prepayment



 


(a)       The outstanding
principal balance of the Loan may not be prepaid, in whole or in part, prior to November 5, 2017 (the “Lockout Expiration
Date”). If, however, the Loan is for any reason prepaid or accelerated at any time prior to the Lockout Expiration Date
(except for refinancings permitted under Section 2.5(c) and except for an acceleration due to Casualty/Condemnation Event
at the Property when no Event of Default exists), in addition to paying all other amounts due and payable under this Loan Agreement,
Borrowers shall pay Lender the Lockout Termination Fee as liquidated damages for such prohibited prepayment.


 




    	3 



     


    

 


(b)       The outstanding
principal balance of the Loan may be prepaid in whole (but not in part), at any time after the Lockout Expiration Date if (i) written
notice (the “Prepayment Notice”) of such prepayment specifying the intended date of prepayment is received by
Lender not less than 60 days prior to the date of such prepayment, and (ii) such prepayment is accompanied by all interest
accrued under this Loan Agreement and all other sums due under this Loan Agreement and any other Loan Document. No tender of a
prepayment of the Loan shall be effective unless accompanied by all amounts due under the Loan Documents. If these requirements
are satisfied, Borrowers may prepay the Loan on the intended prepayment date set forth in any permitted Prepayment Notice or within
30 days thereafter. If Borrowers do not prepay the Loan within 30 days after the date of prepayment specified in the
Prepayment Notice, then (a) the Prepayment Notice shall lapse, and Borrowers shall then be required to deliver a new Prepayment
Notice to prepay the Loan in accordance with this Section 2.5 and (b) Borrowers shall pay to Lender upon
demand any expenses of Lender attributable to Borrowers’ failure to have made the specified prepayment (including all internal
and external attorneys’ fees and costs). No tender of a prepayment of the Loan that is made more than 30 days following
the date specified in the Prepayment Notice shall be effective, and Lender shall not be obligated to accept such prepayment. Partial
prepayments of the Loan shall not be permitted, except for partial prepayments resulting from Lender applying insurance proceeds
or condemnation awards to reduce the outstanding principal balance of the Loan or as otherwise specifically permitted in this Agreement,
in which case, provided no Default or Event of Default exists, no Lockout Termination Fee shall be due.


 


(c)       Notwithstanding
anything to the contrary in Section 2.5(a), Borrowers may (subject to the terms and conditions of Section 2.5(b))
prepay the Loan in full (or in part pursuant to the terms and conditions of Section 2.11) , without the payment of
the Lockout Termination Fee, after November 5, 2016 in connection with any refinancing provided under a program sponsored by HUD.


 


(d)       From and after
the Lockout Expiration Date, subject to the requirements set forth in Section 2.5(b), Borrowers may prepay the
Loan in full and without payment of the Lockout Termination Fee.


 


(e)       If such acceleration
is during any period when any Lockout Termination Fee is payable pursuant to the provisions of this Loan Agreement, then, in addition
to all of the foregoing, the Lockout Termination Fee shall also then be immediately due and payable to the same end as though Borrowers
were prepaying the entire Loan on the date of such acceleration.


 


		2.6	Reserved



 


		2.7	Payment
                                         Account



 


(a)       Borrowers shall
cause all rents and other amounts due and payable under each Operating Lease to be paid directly to a noninterest-bearing account
or accounts in each Borrower’s name with Lender (collectively, the “Payment Accounts”; individually, a
“Payment Account”). Borrowers shall (i) notify each Operator that all rents and other amounts due and payable
under each Operating Lease must be wired or deposited directly into the applicable Payment Account and (ii) receive in trust
for the benefit of Lender and deposit or cause to be deposited into the applicable Payment Account, immediately upon receipt, any
and all rents or other amounts received by Borrowers.


 


(b)       Provided no Event
of Default has occurred or would result from withdrawal of funds, Borrowers shall be entitled to withdraw funds from the Payment
Accounts.


 




    	4 



     


    

 


(c)       If an Event of
Default exists, Borrowers shall have no right to withdraw funds from the Payment Accounts and Lender shall have the right, in its
sole and absolute discretion to hold such funds as additional collateral or to apply such amounts to amounts due under this Loan
Agreement or the other Loan Documents (including principal, interest and reserves) in such order and manner as Lender determines.


 


(d)       If an Event of
Default has occurred but is subsequently waived by Lender, Borrowers shall have no right to withdraw funds from the Payment Accounts
and Lender shall thereafter have the right, on each Payment Date, and on any other Business Day as Lender deems appropriate to
apply all funds paid directly to Lender or deposited into the Payment Accounts to amounts due under this Loan Agreement or the
other Loan Documents (including principal, interest and reserves) in such order and manner as Lender determines. If, after payment
of all Obligations due and payable, and the deposit of all Reserves, in each case in collected funds, a credit balance exists with
respect to the funds paid directly to Lender or within the Payment Account on a Payment Date, then upon written request from Borrowers,
so long as no unwaived Default or Event of Default then exists and is continuing, such credit balance shall be released to Borrowers.


 


		2.8	Promise
                                         to Pay; Manner of Payment



 


Borrowers absolutely
and unconditionally promise to pay principal, interest and all other amounts payable under this Loan Agreement, or under any other
Loan Document, without any right of rescission and without any deduction, including any deduction for any setoff, counterclaim
or recoupment. All payments made by Borrowers shall be made by wire transfer on the date when due, without offset or counterclaim,
in U.S. Dollars, in immediately available funds to such account as may be indicated in writing by Lender to Borrowers from time
to time. Any payment received after 11:00 a.m. Eastern Time on the date when due shall be deemed received on the following
Business Day. Whenever any payment under this Loan Agreement is due or becomes due and payable on a day other than a Business Day,
the due date of such payment shall be extended to, and such payment shall be made on, the next Business Day, and such extension
of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during
such extension) and/or fees, as the case may be.


 


		2.9	Unavailability of LIBOR.



 


(a)Notwithstanding
anything to the contrary in this Loan Agreement, (i) if at any time, any applicable Change in Law makes it unlawful for Lender
to make or maintain the indebtedness evidenced by the Loan in eurodollars or (ii) if at the time of or prior to any determination
of the Applicable Interest Rate, Lender determines (which determination shall be conclusive in the absence of manifest error) that
by reason of circumstances affecting the London interbank market generally, (A) deposits in United States Dollars in the relevant
amounts and of the relevant maturity are unavailable to Lender in the London interbank market, (B) the Applicable Interest
Rate does not adequately or fairly reflect the cost to Lender of making or maintaining the Loan due to changes in administrative
costs, fees, tariffs or taxes or other matters outside of Lender’s reasonable control or (C) adequate and fair means
do not or will not exist for determining the Applicable Interest Rate, then Lender shall promptly notify Borrowers, and the Loan
shall bear interest, and continue to bear interest until Lender determines that the applicable circumstance described in the foregoing
clauses (A), (B) or (C) no longer pertains, at a fluctuating rate per annum based on a substitute index selected by Lender
plus a suitable margin to approximate, in Lender’s judgment, the return that Lender would have received if the circumstance
had not occurred.


 




    	5 



     


    

 


(b)       Notwithstanding anything
to the contrary in this Loan Agreement, if:


 


		(i)	the circumstances described in Section 2.9(a) occur; or



 


		(ii)	Borrowers fail to make a prepayment of the Loan as permitted under this Loan Agreement that Borrowers
had notified Lender in writing Borrowers would make;



 


and the result is to increase the cost
to Lender of maintaining the Loan or to reduce any amount receivable by Lender under this Loan Agreement or to cause Lender to
incur any other cost, loss or expense, including any interest or fees that are payable by Lender to lenders of funds actually obtained
by Lender, then Borrowers shall pay to Lender, on the second Business Day following Lender’s demand, any additional amounts
necessary to compensate Lender for such cost, loss, expense or reduced amount receivable. If Lender becomes entitled to claim any
additional amounts pursuant to this Section 2.9(b), Lender shall promptly notify Borrowers of the event by reason
of which Lender has become so entitled and shall certify in reasonable detail any additional amounts so payable. Such certification
submitted by Lender to Borrowers shall be conclusive absent manifest error.


 


		2.10	Increased
                                         Costs; Capital Adequacy



 


(a)       If any Change
in Law shall:


 


		(i)	impose, modify or deem applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, Lender (except any such reserve requirement reflected in the Applicable
Interest Rate); or



 


		(ii)	impose on Lender or the London interbank market any other condition affecting this Loan
Agreement or the Loan;



 


and such Change in Law increases the cost
to Lender of making or maintaining the Loan (or of maintaining its obligation to make the Loan) or reduces the amount of
any sum received or receivable by Lender under this Loan Agreement (whether of principal, interest or otherwise), then Borrowers
shall pay to Lender such additional amount or amounts as will compensate Lender for such additional costs incurred or reduction
suffered.


 


(b)If Lender determines
that any Change in Law regarding capital requirements  has or would have the effect of reducing the rate of return on Lender’s
capital or on the capital of Lender’s holding company, if any, as a consequence of this Loan Agreement or the
Loan made by Lender to a level below that which Lender or Lender’s holding company, as applicable, could have achieved
but for such Change in Law (taking into consideration Lender’s policies and the policies of Lender’s holding
company, as applicable, with respect to capital adequacy), then from time to time Borrowers shall pay to Lender such additional
amount or amounts as will compensate Lender’s holding company, as applicable, for any such reduction suffered.


 




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(c)       A certificate
of Lender setting forth the amount or amounts necessary to compensate Lender or Lender’s holding company, under Sections 2.10(a)
or 2.10(b) and evidence of the Change in Law, shall be delivered to Borrowers and shall be conclusive absent manifest
error. Subject to Section 2.10(f), Borrowers shall pay Lender the amount shown as due on any such certificate within thirty (30) days
after receipt.


 


(d)       Failure or delay
on the part of Lender to demand compensation pursuant to this Section 2.10 shall not waive Lender’s
right to demand such compensation; provided that Borrowers shall not be required to compensate Lender under this Section 2.10
for any increased costs or reductions incurred more than 180 days prior to the date Lender notifies Borrowers of the Change
in Law giving rise to such increased costs or reductions and of Lender’s intention to claim compensation for such increased
costs or reduction; provided further that, if the Change in Law giving rise to such increased costs or reductions
is retroactive, then such 180-day period will be extended to include the period of such retroactive effect.


 


(e)       Notwithstanding
anything to the contrary in this Loan Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a Change in Law and/or a change
in capital adequacy requirements, as applicable, regardless of the date enacted, adopted or issued.


 


(f)       Notwithstanding
anything to the contrary in this Loan Agreement, if any Change in Law affects Lender and results in Borrowers having to pay additional
amounts to Lender to compensate Lender for such additional costs incurred or reduction suffered, Borrowers shall have the right
to prepay the Loan pursuant to Section 2.5 (without the obligation to pay the Lockout Termination Fee, even if such
prepayment is made prior to the Lockout Expiration Date). Such payment shall be made upon not more than 150 days’ notice
on the Payment Date specified in any Prepayment Notice given to Lender. If Borrowers fail to make the prepayment on the Prepayment
Date specified in the Prepayment Notice, Borrowers shall pay to Lender: (i) interest at the Default Interest Rate from the
scheduled date of prepayment through the later to occur of the next occurring scheduled Payment Date or the date when the Loan
is prepaid, (ii) such additional amounts to compensate Lender for the additional costs incurred or reduction suffered from
the Change in Law from inception through the date of prepayment of the Loan; and (iii) such additional expenses of Lender, if any,
attributable to such prepayment (and for avoidance of doubt, such reimbursement of additional expenses shall specifically exclude
any special or punitive damages).


 




    	7 



     


    

 


		2.11	Partial
                                         Releases.



 


(a)General Provisions.
Notwithstanding anything contained in this Agreement, the Note, the Security Instruments or any of the other Loan Documents to
the contrary, upon the request of Borrowers, after the Lockout Expiration Date (or after November 5, 2016 in connection with the
refinance any of the Facilities under a program sponsored by HUD, so long as Borrowers satisfy the other applicable requirements
of this Section 2.11), Lender agrees to release up to two (2) Facilities (each, a “Partial Release Project”) from
the lien of the related Security Instruments and the other Loan Documents, provided that Lender determines all of the following
terms and conditions are satisfied (such release herein called a “Partial Release”):


 


(i)          After
giving effect to a Partial Release and payment of the Partial Release Price there shall be at least two (2) Facilities (and with
at least sixty (60) residential units) remaining as security for the Loan.


 


(ii)         No
Default shall exist and no Event of Default or Material Adverse Change has occurred, and Borrowers shall certify in writing to
the Lender that no Default, Event of Default or Material Adverse Change shall exist immediately after giving effect to the applicable
Partial Release and the execution and delivery of all documents connected therewith.


 


(iii)        Borrowers
shall deliver, together with such request for the Partial Release, a pro forma compliance certificate in form and substance satisfactory
to Lender in its sole discretion showing that, on a pro forma basis, after giving effect to such Partial Release, the Leverage
Ratio and Rent Coverage Ratio will be equal to or greater than the Leverage Ratio and Rent Coverage Ratio immediately prior to
such Partial Release.


 


(iv)        Borrowers
shall provide written notice to Lender of their desire to have the applicable Partial Release Project released as security for
the Loan, and provide Lender with all information (including any purchase and sale agreement and proposed partial release forms) and
documents relating to such release at least thirty (30) days prior to the closing of the sale or refinancing of the Partial
Release Project and such partial release forms must be reasonably satisfactory to Lender in form and substance in its sole discretion.


 


(v)       Such
release will not affect the priority of lien or liens on the remainder of the Property, or Lenders’ rights in and to the
remainder of the Property.


 


(vi)       Borrowers
shall pay all reasonable expenses of Lender, including reasonable attorneys’ fees and expenses and internal fees of in-house
counsel, title insurance premiums, recording costs and similar costs in connection with the Partial Release.


 


(vii)       Borrowers
shall have paid to Lender a release price to be applied against the outstanding principle balance of the Loan in the following
amount for each of the designated Facilities below:


 




    	8 



     


    

  


	Facility	 	Release Price	 
	Carolina Manor	 	$	5,797,000	 
	Carrington Manor	 	$	2,387,000	 
	Marla Vista Manor	 	$	4,853,200	 
	Marla Vista Gardens	 	$	1,812,800	 



 


(viii)     The
corresponding Operating Lease with respect to the applicable Partial Release Project will no longer be cross-defaulted with the
Operating Leases for the Facilities that remain as collateral.


 


(ix)       Lender
shall receive such title insurance endorsements and such other documents as it may require in its sole discretion, including partial
release endorsements.


 


(x)         the Facility being
released shall be transferred to a third-party that is not controlled by, or under common control with, any Loan Party pursuant
to a bona-fide third party sale; provided, however, that this subparagraph (x) shall not apply in the event Borrowers refinance
any of the Facilities under a program sponsored by HUD, so long as Borrowers satisfy the other applicable requirements of this
Section 2.11;


 


(xi)       the purchase
agreement and all other documents relating to such sale are satisfactory to Lender in its sole discretion;


 


(xii)        In no event may
Marla Vista Manor or Marla Vista Gardens be released unless both of such Facilities are being released concurrently pursuant to
the terms and conditions hereof;


 


(xiii)      the Leverage Ratio as of the end
of the last Test Period would not have exceeded 9.00 to 1.00 if the Facility being released had not been included in calculation
of the Leverage Ratio; and


 


(xiv)      the Rent Coverage
Ratio as of the end of the last Test Period would have been greater than 1.15 to 1.00 if the Facility being released had not been
included in calculation of the Rent Coverage Ratio.


 




    	9 



     


    

 


		III.	FEES AND OTHER CHARGES; RESERVES; CASH MANAGEMENT



 


		3.1	Commitment
                                         Fee



 


In partial consideration
of Lender’s agreement to make the Loan, Borrowers shall pay to Lender at Closing a nonrefundable commitment fee equal to
one-half percent (0.50%) of the Loan Amount (the “Commitment Fee”).


 


		3.2	Lawful
                                         Limits



 


In no contingency or
event whatsoever, whether by reason of acceleration or otherwise, will the interest and other fees and charges paid or agreed to
be paid to Lender for the use, forbearance or detention of money under this Loan Agreement exceed the maximum rate permissible
under applicable law that a court of competent jurisdiction, in a final determination, deems applicable to this Loan Agreement.
If, due to any circumstance, fulfillment of any provision of this Loan Agreement, at the time performance of such provision will
be due, will exceed any such limit, then the obligation to be so fulfilled shall be reduced to such lawful limit, and, if Lender
shall have received interest or any other charges of any kind that might be deemed to be interest under applicable law in excess
of the maximum lawful rate, then such excess shall be applied first to any unpaid fees and charges under this Loan Agreement (which
do not exceed such limit), then to the unpaid principal balance under this Loan Agreement, and if the then-remaining excess interest
is greater than the unpaid principal balance, Lender shall promptly refund such excess amount to Borrowers and this Loan Agreement
shall be deemed amended to provide for such permissible rate. In determining whether or not the interest paid or payable, under
any specific contingency, exceeds the highest lawful rate, Borrowers and Lender will, to the maximum extent permitted under applicable
law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects of such voluntary prepayments, and (c) “spread” the total amount of interest throughout
the entire term of the Loan so that the interest rate does not exceed the highest lawful rate of interest. The terms and provisions
of this Section 3.2 shall control to the extent any other provision of any Loan Document is inconsistent with
this Section 3.2.


 


		3.3	CapEx
                                         Reserve



 


(a)       Borrowers shall establish
and maintain at all times until indefeasible payment in full of the Obligations a reserve funded by Borrowers and held by Lender
for payment of costs and expenses associated with Capital Improvements (the “CapEx Reserve”).


 


(b)       On each Payment Date,
Borrowers shall deliver to Lender, in addition to the monthly payments due under this Loan Agreement, an amount equal to $33.34
for each residential unit at each of the Facilities (the “CapEx Reserve Payment”) to be deposited into the CapEx
Reserve. If at any time Lender notifies Borrowers in writing that Lender has good faith grounds to believe that amounts on deposit
in the CapEx Reserve may be inadequate to cover Capital Improvements anticipated in good faith by Lender to be necessary, the CapEx
Reserve Payment shall be increased to the amount specified by Lender in such notice, and Borrowers shall deliver to Lender such
increased CapEx Reserve Payment on each Payment Date occurring after the date that is 30 days after the date of such notice.


 




    	10 



     


    

 


(c)       So long as no Default
has occurred and is continuing and no Event of Default has occurred, Lender will disburse to Borrowers from the CapEx Reserve (but
in no event to exceed amounts on deposit in the CapEx Reserve) within 10 days after Borrowers’ written request (and
provision to Lender of any supporting documentation required by Lender), the costs and expenses of installing or constructing any
Capital Improvement, provided such written notice includes a detailed description of the Capital Improvements installed or constructed
together with (i) a certification by Borrowers (or the Operators) that the Capital Improvements have been completed in accordance
with applicable legal requirements, and (ii) such additional supporting evidence as may be requested by Lender in its judgment,
including such items as invoices, receipts or other evidence verifying the cost of the Capital Improvements, affidavits and/or
lien waivers from those providing work or supplies, a certification from an inspecting architect or other third party acceptable
to Lender describing the completed Capital Improvements and verifying their completion and value, and evidence that all necessary
or required approvals or consents from Governmental Authorities have been obtained. Lender shall not be required to make disbursements
from the CapEx Reserve more than once in any 30-day period. In making any disbursement from the CapEx Reserve, Lender shall be
entitled to rely on Borrowers’ written request and supporting documentation without any inquiry into the accuracy, validity
or contestability of any such amount or the nature or necessity of the materials provided or the work performed.


 


(d)       Lender may, at any
time and from time to time, at Borrowers’ expense, make or cause to be made inspections of any Facility. If any inspection
report from any such inspection recommends that Capital Improvements are required, Lender may provide Borrowers with a written
description of such Capital Improvements and Borrowers shall complete those Capital Improvements to the reasonable satisfaction
of Lender within 90 days after the receipt of such description from Lender.


 


		3.4	Tax
                                         and Insurance Reserve



 


(a)       Borrowers shall
establish and maintain at all times until indefeasible payment in full of the Obligations a reserve funded by Borrowers and held
by Lender for payment of real estate taxes and assessments and insurance premiums on the Property (the “Tax and Insurance
Reserve”).


 


(b)       As of the Closing
Date, Borrowers have deposited with Lender $22,550 for purposes of real estate taxes and assessments, and $3,710 for purposes of
insurance premiums to be held in the Tax and Insurance Reserve. On each Payment Date, Borrowers shall deliver to Lender, in addition
to the monthly payments due under this Loan Agreement, an amount determined by Lender to be sufficient (when added to the monthly
deposits described in this Section 3.4) to pay the next due annual installment of real estate taxes and assessments
on the Property at least one month prior to the delinquency date of such real estate taxes and assessments (if paid in one installment)
and the next due annual insurance premiums with respect to the Property at least one month prior to the due date of such insurance
premiums (the “Tax and Insurance Reserve Payment”); provided, at all times, the amount on deposit in the Tax
and Insurance Reserve shall not be less than the amount determined by Lender to be sufficient.


 




    	11 



     


    

 


(c)       Borrowers shall
pay, on or prior to the applicable due date, all real estate taxes and assessments and insurance premiums required to be paid by
Borrowers under this Loan Agreement, and so long as no Event of Default has occurred, Lender shall reimburse Borrowers (to the
extent of available funds in the Tax and Insurance Reserve, subject to the proviso in Section 3.4(b)) for the
payment of such real estate taxes and assessments and insurance premiums within 30 days after the receipt by Lender from Borrowers
of paid receipts.


 


(d)       Lender, at any
time upon notice to Borrowers, may elect (but shall have no obligation), but shall, at the request of Borrowers for so long as
no Event of Default has occurred, pay real estate taxes and assessments and insurance premiums from the Tax and Insurance Reserve
in accordance with this Section 3.4. If Lender makes such election, so long as no Event of Default has occurred,
all sums in the Tax and Insurance Reserve will be held by Lender in the Tax and Insurance Reserve to pay such real estate taxes
and assessments and insurance premiums in one installment before the sums become delinquent. If Lender makes such election, Borrowers
shall be responsible for ensuring the receipt by Lender, at least 30 days prior to the respective due date for the payment
thereof, of all bills, invoices and statements for all real estate taxes and assessments and insurance premiums to be paid from
the Tax and Insurance Reserve, and so long as no Default has occurred and is continuing and no Event of Default has occurred, Lender
shall pay the Governmental Authority or other party entitled thereto directly to the extent funds are available for such purpose
in the Tax and Insurance Reserve. In making any payment from the Tax and Insurance Reserve, Lender will be entitled to rely on
any bill, statement or estimate procured from the appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into the accuracy, validity, enforceability or contestability
of any tax, assessment, valuation, sale, forfeiture, tax lien or title or claim thereof. If, at any time, Lender determines the
Tax and Insurance Reserve does not contain sufficient funds to pay the real estate taxes and assessments and insurance premiums
when the same become due and payable, Borrowers shall, within 10 days after receipt of written notice thereof, deposit with
Lender the full amount of any such deficiency.


 


		3.5	Debt
                                         Service Reserve



 


(a)       Borrowers shall
establish and maintain at all times until indefeasible payment in full of the Obligations a reserve funded by Borrowers and held
by Lender for the potential payment of debt service (the “Debt Service Reserve”).


 


(b)       Subject to Section 3.5(e),
Borrowers shall deposit with Lender $160,000 to be held in the Debt Service Reserve. It is the parties’ intention that at
all times until indefeasible payment in full of the Obligations the Debt Service Reserve must hold funds sufficient to satisfy
two months of debt service under the Loan, and upon written demand from Lender, Borrowers shall deposit additional amounts into
the Debt Service Reserve to maintain the Debt Service Reserve at such level.


 


(c)       Notwithstanding
anything to the contrary in the Loan Documents, Lender may apply (but shall have no obligation to apply) amounts held in the Debt
Service Reserve to the Obligations at such times and in such amounts as Lender may from time to time determine in its sole discretion.


 




    	12 



     


    

 


(d)       Borrowers understand
and agree that, notwithstanding the establishment of the Debt Service Reserve, all proceeds of the Loan have been and shall be
considered fully disbursed and shall bear interest and be payable on the terms provided in this Loan Agreement.


 


(e)       Notwithstanding
the foregoing provisions of this Section 3.5, if Borrowers deposit into an account designated by Lender (the “Deposit
Account”) the entire amount of the “Lease Deposit” (as defined in each Operating Lease) payable under the
Operating Leases, and at least $300,000 remains on deposit in the Deposit Account, Borrowers shall not be required to deposit the
Debt Service Reserve with Lender. If no Event of Default exists, Borrowers may withdraw funds from the Deposit Account but only
if Borrowers make the deposit otherwise required under Section 3.5(b).


 


		3.6	Repair
                                         and Remediation



 


(a)       Prior to the execution
of this Loan Agreement, Lender has caused the Property to be inspected and such inspection has revealed that the Property is in
need of certain maintenance, repairs and/or remedial or corrective work, as more particularly described in those certain property
condition reports (collectively, the “PCRs”) dated September 4, 2015 and prepared by Metropolitan Solutions
(the “Required Work”). Borrowers acknowledge that they have received and reviewed the PCRs.


 


(b)       [omitted]


 


(c)       Borrowers shall
cause the Required Work to be completed, performed, remediated and corrected to the satisfaction of Lender and as necessary to
bring the Property into compliance with all applicable laws, ordinances, rules and regulations on or before the date that is ninety
(90) days from the date of this Loan Agreement, as such time period may be extended in writing by Lender in its sole discretion.


 


		3.7	Additional
                                         Provisions Relating to Reserves and Other Accounts



 


(a)       Without limitation
on the other terms and conditions contained in this Loan Agreement, Borrowers authorize and consent to the accounts into which
the Reserves have been (or will be) deposited being held in Lender’s name or the name of any entity servicing the Loan for
Lender and agrees that Lender, or at Lender’s election, its servicing agent, shall have exclusive control over such accounts.
Notice of the assignment and security interest granted to Lender in this Loan Agreement may be delivered by Lender at any time
to the financial institution where the Reserves have been established, and Lender, or such servicing entity, shall have possession
of all passbooks or other evidences of such accounts. Borrowers hereby indemnify and hold Lender harmless with respect to all risk
of loss regarding amounts on deposit in the Reserves, except to the extent that any such loss is caused by the gross negligence
or intentional misconduct of Lender. Borrowers knowingly, voluntarily and intentionally stipulate, acknowledge and agree that the
advancement of the funds from the Reserves as set forth in this Loan Agreement is at Borrowers’ direction and is not the
exercise by Lender of any right of set-off or other remedy upon the occurrence of a Default or an Event of Default. Upon the occurrence
of an Event of Default, Lender may, without notice or demand on Borrowers, at its option: (A) withdraw any or all of the funds
(including interest) then remaining in the Reserves and apply the same, after deducting all costs and expenses of safekeeping,
collection and delivery (including reasonable attorneys’ fees, costs and expenses) to the Obligations in such manner as Lender
shall deem appropriate in its sole discretion, (B) exercise any and all rights and remedies of a secured party under any applicable
Uniform Commercial Code, or (C) exercise any other remedies available at law or in equity. The application of the funds contained
in the Reserves shall be deemed to cure any Default or Event of Default.


 




    	13 



     


    

 


(b)       The Reserves are
solely for the protection of Lender and entail no responsibility on Lender’s part beyond the payment of the respective costs
and expenses in accordance with the terms of this Loan Agreement and beyond the allowing of due credit for the sums actually received.
Upon assignment of the Security Instruments by Lender, any funds in the Reserves shall be turned over to the assignee and any responsibility
of Lender, as assignor, with respect to any funds in the Reserve shall terminate. The Reserves shall not, unless otherwise explicitly
required by applicable law, be or be deemed to be escrow or trust funds, but, at Lender’s option and in Lender’s discretion,
may either be held in a separate account or be commingled by Lender with the general funds of Lender. Upon full payment of the
Obligations in accordance with the terms of this Loan Agreement or at such earlier time as Lender may elect, the balance in the
Reserves then in Lender’s possession shall be paid to Borrowers and no other party shall have any right or claim to the Reserves.
Any amounts received by Lender from Borrowers may be invested by Lender (or its servicer) for Lender’s benefit, and Lender
shall not be obligated to pay, or credit, any interest earned thereon to Borrowers.


 


(c)       To the extent
funds are held in the Payment Account or the Deposit Account or are otherwise held by Lender, Lender shall not be obligated to
pay, or credit, any interest earned on any Reserves to Borrowers.


 


(d)       After indefeasible
payment in full of all Obligations and release by Lender of the liens of the Security Instruments, Lender shall disburse to Borrowers
all amounts remaining in the Reserves.


 


		IV.	SECURITY



 


		4.1	General
                                         Security Obligations



 


The Obligations are to
be secured by Liens granted under this Loan Agreement and pursuant to the Security Documents. At the Closing or at any other time
within 60 days of Lender’s request, Borrowers shall establish deposit account control agreements, in form and substance
reasonably satisfactory to Lender, over any and all Accounts of Borrowers, including any Accounts established after the Closing
Date.


 


		4.2	Grant
                                         of Security Interest



 


To secure the payment
and performance of the Obligations, each of the Borrowers hereby grants to Lender a continuing security interest in and lien upon,
and pledges to Lender, all of its right, title and interest in and to all personal property of Borrowers, whether now owned or
hereafter acquired, including the following:


 




    	14 



     


    

 


(a)       all tangible personal
property, including all present and future “Inventory” and “Equipment” (as defined in the UCC) (including
items of equipment that are or become Fixtures);


 


(b)       all sums on deposit
or due under the Loan Documents including (i) the Payment Account, the CapEx Reserve, the Deposit Account, the Tax and Insurance
Reserve, and the Debt Service Reserve (collectively, the “Reserves”), (ii) the accounts into which the
Reserves have been deposited, (iii) all insurance on such accounts, (iv) all accounts, contract rights and general intangibles
or other rights and interests pertaining to the Reserves, (v) all sums in the Reserves or represented by the Reserves, (vi) all
instruments and documents now or hereafter evidencing the Reserves or such accounts, and (vii) all powers, options, rights,
privileges and immunities pertaining to the Reserves (including the right to make withdrawals from the Reserves);


 


(c)       all intangible
personal property, including all present and future Accounts (including the Payment Account), contract rights, General Intangibles,
Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Letter of Credit Rights, Supporting Obligations (as
such terms are defined in Appendix B or in the UCC), rights to the payment of money or other forms of consideration
of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property
relating to or arising out of any of the foregoing;


 


(d)       all Government
Contracts and rights under such Government Contracts and the related Government Accounts; but Lender shall not have a security
interest in any rights under any Government Contract of Borrowers or in the related Government Account where the taking of such
security interest would violate an express prohibition contained in the Government Contract (for purposes of this limitation, the
fact that a Government Contract is subject to, or otherwise refers to, Title 31, § 203 or Title 41, § 15
of the United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable
law, unless in any case consent is otherwise validly obtained; and


 


(e)       any and all additions
and accessions to any of the foregoing, and any and all replacements, substitutions, products and proceeds (including insurance
proceeds) of any of the foregoing.


 


Each Borrower hereby authorizes Lender
to file Uniform Commercial Code financing statements in such jurisdiction and with such filing offices as Lender, in its sole discretion,
believes is necessary or desirable to perfect the foregoing security interest of the Lender without need of any signature of any
Borrower. Any such financing statements may indicate and/or describe the collateral as “all assets of the debtor, whether
now owned or existing or hereafter acquired or arising”, “all personal property of the debtor, whether now owned or
existing or hereafter acquired or arising” or words of similar effect and/or meaning.


 


		V.	REPRESENTATIONS AND WARRANTIES



 


Borrowers represent
and warrant to Lender as of the Closing Date:


 




    	15 



     


    

 


		5.1	Organization
                                         and Authority; Investment Company



 


Each Loan Party (i) is
duly organized, validly existing and in good standing under the laws of its State of formation, (ii) has all requisite power
and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan
Documents, (iii) is duly qualified to do business in every jurisdiction in which failure to qualify could reasonably be expected
to have a Material Adverse Effect, and (iv) has all requisite power and authority (A) to execute, deliver and perform
its obligations under the Loan Documents to which it is a party, (B) to borrow under this Loan Agreement, (C) to consummate
the transactions contemplated under the Loan Documents, and (D) to grant the Liens pursuant to the Security Documents. No
Loan Party is an “investment company” registered or required to be registered under the Investment Company Act of 1940,
as amended, or is controlled by such an “investment company.”


 


		5.2	Loan
                                         Documents



 


The execution, delivery
and performance by each Loan Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated
by the Loan Documents, (i) have been duly authorized by all requisite action of each Loan Party and have been duly executed
and delivered by or on behalf of each Loan Party; (ii) do not violate any provisions of (A) applicable laws, (B) any
order of any Governmental Authority binding on any Loan Party or any of their respective properties, or (C) the applicable
governing agreement or document of any Loan Party, or any agreement between any Loan Party and its stockholders, members, partners
or equity owners or among any such stockholders, members, partners or equity owners; (iii) are not in conflict with, and do
not result in (A) a Default or Event of Default or (B) an event, fact, condition or circumstance that, with notice or
passage of time, or both, could constitute or result in a conflict, breach, default or event of default under, any indenture, agreement
or other instrument to which any Loan Party is a party, or by which the properties or assets of any Loan Party are bound, the effect
of which could reasonably be expected to have a Material Adverse Effect or could reasonably be expected to cause a Liability Event;
(iv) except as set forth in the Loan Documents for the benefit of Lender, will not result in the creation or imposition of
any Lien of any nature upon any of the properties or assets of any Loan Party, and (v) do not require the consent, approval
or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person except as has
been obtained or filed and which is set forth on Schedule 5.2. Each of the Loan Documents to which each Loan
Party is a party constitutes the legal, valid and binding obligation of each applicable Loan Party, enforceable against each applicable
Loan Party in accordance with its terms, subject to the effect of bankruptcy, moratorium, insolvency, reorganization or other similar
laws affecting the enforceability of creditors’ rights generally and to the effect of general principles of equity that may
limit the availability of equitable remedies (whether in a proceeding at law or in equity).


 




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		5.3	Subsidiaries,
                                         Capitalization and Ownership Interests



 


The organizational chart
attached as Schedule 5.3A is true, correct, complete and not misleading in any respect. Without limitation,
no Loan Party has any Subsidiaries except as set forth on such organizational chart. The authorized and issued capitalization (or,
as applicable, the outstanding membership and economic interests) of each Loan Party, the number and class of equity securities
and/or ownership, voting or partnership interests issued and outstanding of each Loan Party and the record and beneficial owners
thereof (including options, warrants and other rights to acquire any of the foregoing) are set forth on Schedule 5.3(B).
The membership or partnership interests of each Loan Party that is a limited partnership or a limited liability company are not
certificated, the documents relating to such membership or partnership interests do not expressly state that such interests are
governed by Article 8 of the UCC, and no such membership or partnership interests are held in a securities account. The outstanding
equity securities and/or ownership, voting, membership, economic or partnership interests of each Loan Party have been duly authorized
and validly issued and are fully paid and non-assessable, and each Person listed on Schedule 5.3(B) owns beneficially
and of record all the equity securities and/or ownership, voting, membership or economic interests it is listed as owning. Schedule 5.3B
also lists the directors, members, managers and/or partners of each Loan Party. Except as listed on Schedule 5.3B,
no Loan Party owns an interest or participates or engages in any joint venture, partnership or similar arrangements with any Person.
Schedule 5.3C lists (a) each Pledging Entity, each of whom is executing a Pledge and Security Agreement
at the Closing, and (b) each other owner of a direct or indirect interest in each Borrower.


 


		5.4	Property
                                         Matters



 


(a)       Borrowers have
good, marketable and indefeasible fee simple title to the Real Estate and marketable title to the balance of the Property, subject
only to those matters expressly set forth on the Title Policy (the “Permitted Exceptions”), and have full power
and lawful authority to grant, bargain, sell, convey, assign, transfer and encumber its interest in the Property in the manner
and form done or intended pursuant to this Loan Agreement or to any other Loan Document. None of the Permitted Exceptions materially
interfere with the security intended to be provided by any of the Security Instruments, the current primary use of the Real Estate
or the current ability of the Property to generate income sufficient to service the Loan. Each Borrower shall preserve its interest
in and title to the Property and will forever warrant and defend the same to Lender against any and all claims whatsoever and will
forever warrant and defend the validity and priority of the liens and security interests created by the Loan Documents against
the claims of all Persons, subject to the Permitted Exceptions. This warranty of title and the obligations under this paragraph
will survive the foreclosure, exercise of any power of sale or other enforcement of the Security Instrument and shall inure to
the benefit of and be enforceable by Lender if Lender acquires title to the Property pursuant to any foreclosure, exercise of any
power of sale or otherwise.


 


(b)       To Borrowers’
Knowledge, and except as disclosed in any zoning report or property condition report delivered to Lender prior to the Closing Date,
the Real Estate and its intended use comply with all applicable laws and regulations. Each parcel of Land constitutes a separate
tax parcel for purposes of ad valorem taxation. Borrowers have received no notice (and have no knowledge) that the Real Estate
requires any rights over, or restrictions against, other property to comply with applicable laws or to be used for its intended
purpose. Each Facility is taxed separately without regard to any other real estate and constitutes a legally subdivided lot under
all applicable legal requirements (or, if not subdivided, no subdivision or platting of any Facility is required under applicable
legal requirements), and for all purposes may be mortgaged, conveyed, pledged, hypothecated, assigned or otherwise dealt with as
an independent parcel;


 




    	17 



     


    

 


(c)       All utility services
necessary and sufficient for the full use, occupancy, operation and disposition of the Real Estate for its intended purposes are
in place, including water, storm sewer, sanitary sewer, gas, electric, cable and telephone facilities, through public rights-of-way
or private easements reflected in the Title Insurance Policy;


 


(d)       All streets, roads,
highways, bridges and waterways necessary for access to and full use, occupancy, operation and disposition of the Real Estate have
been completed, have been dedicated to and accepted by the appropriate municipal authority and are open and available to the Real
Estate without further condition or cost to Borrowers;


 


(e)       As of the date
of this Loan Agreement (i) the Real Estate is free from delinquent taxes and assessments of every kind, and (ii) no part
of the Real Estate has been taken in condemnation, eminent domain or like proceeding nor is any such proceeding pending or to Borrowers’
Knowledge, threatened or contemplated;


 


(f)       Except as disclosed
in any real property survey delivered or made available to Lender prior to the Closing Date, no improvements on adjoining properties
encroach upon the Land. To Borrowers’ Knowledge, each Facility is structurally sound, in good repair and free of defects
in materials and workmanship and has been constructed and installed in substantial compliance with the plans and specifications
relating to the Facilities. To the knowledge of Borrowers, all major building systems located within the Improvements, including
the heating and air conditioning systems and the electrical and plumbing systems, are in good working order and condition;


 


(g)       Except for the
Operating Leases, there are no leases or subleases affecting any portion of the Property. The Operating Leases comply in all material
respects with all applicable laws. There is a cumulative $353,199.95 security deposit held or required under the Operating Leases.
Rent payments under each Operating Lease are due on a monthly basis and no rent payment any Operating Lease has been paid more
than 30 days in advance. No rents or charges under any Operating Leases have been waived, released, or otherwise discharged
or compromised. There are no outstanding options or rights of first offer or refusal to purchase all or any portion of the Property
or Borrowers’ interest in the Property or any portion of the Property;


 


(h)       No contract (including
any Operating Lease), easement, right of way, permit or declaration (collectively, “Property Agreements”) provides
any party with the right to obtain a lien or encumbrance upon all or any portion of the Property. Borrowers have delivered to Lender
true, correct and complete copies of all Property Agreements and no default exists or would exist, with the passing of time or
the giving of notice, or both, under any Property Agreement that could reasonably be expected to have a Material Adverse Effect;


 


(i)         To
Borrowers’ Knowledge, no right of offset or recoupment exists respecting continued contributions to be made by any party
under any Property Agreement. No material exclusions or restrictions on the utilization, leasing or improvement of the Property
(including non-compete agreements) exist in any Property Agreement;


 




    	18 



     


    

 


(j)         The Real Estate
forms no part of any property owned, used or claimed by any Loan Party as a residence or business homestead and is not exempt from
forced sale under the laws of the State in which the Real Estate is located. Borrowers disclaim and renounce each and every claim
to all or any portion of the Real Estate as a homestead. The Loan is made and transacted solely for business, investment, commercial
or other similar purposes; and


 


(k)       The Real Estate
is used only for the purpose set forth in Recital A of this Loan Agreement, and shall not be used for any other purpose
whatsoever.


 


		5.5	Other
                                         Agreements



 


No Loan Party is (i) a
party to any judgment, order or decree or any agreement, document or instrument, or subject to any restriction, that would adversely
affect its ability to execute and deliver, or perform under, any Loan Document or to pay the Obligations or which could have a
Material Adverse Effect, (ii) in default in the performance, observance or fulfillment of any obligation, covenant or condition
contained in any agreement, document or instrument to which it is a party or to which any of its properties or assets are subject,
which default, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse
Effect or could reasonably be expected to cause a Liability Event, nor is there any event, fact, condition or circumstance that,
with notice or passage of time or both, could constitute or result in a conflict, breach, default or event of default under, any
of the foregoing that, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect. No Loan Party is a party or subject to any agreement, document or instrument with respect to, or obligation to
pay any, service or management fee with respect to, the ownership, operation, leasing or performance of any Facility other than
the Operating Leases, nor is there any property manager with respect to any Facility (whether or not any of Borrowers is a party
to such agreement or arrangement) other than pursuant to the Property Management Agreement.


 


		5.6	Litigation



 


There is no action, suit,
proceeding or investigation pending or, to Borrowers’ Knowledge, threatened against any Loan Party or pertaining to any Facility
other than a suit against Guarantor disclosed on Schedule 5.6. None of the foregoing (i) questions the validity of
any of the Loan Documents or the right of any Loan Party to enter into any Loan Document or to consummate the transactions contemplated
by the Loan Documents, (ii) could reasonably be expected to be or have, either individually or in the aggregate, any Material
Adverse Change or Material Adverse Effect or could reasonably be expected to cause a Liability Event, or (iii) could reasonably
be expected to result in any Change of Control or other change in the current ownership, control or management of any Loan Party.
No Loan Party is a party or subject to any order, writ, injunction, judgment or decree of any Governmental Authority, and no Loan
Party is a party to any of the foregoing where any of the same could reasonably be expected to have or result in a Material Adverse
Effect. There is no action, suit, proceeding or investigation initiated by any Borrowers (or, to Borrowers’ Knowledge, any
Operator) currently pending.


 




    	19 



     


    

 


		5.7	Tax
                                         Returns; Governmental Reports



 


No Loan Party (i) has
received any oral or written communication from the Internal Revenue Service with respect to any investigation or assessment relating
to such Loan Party directly, or relating to any consolidated tax return that was filed on behalf of such Loan Party; (ii) is
aware of any year that remains open pending tax examination or audit by the IRS and (iii) is aware of any information that
could give rise to an IRS tax liability or assessment. Each Loan Party has (i) filed all federal, state, foreign (if applicable)
and local tax returns and other reports that are required by law to be filed by such Loan Party and (ii) paid all taxes, assessments,
fees and other governmental charges, including payroll and other employment related taxes, that are due and payable, except only
for items that such Loan Party is currently contesting in good faith and for which such party has maintained adequate reserves
under GAAP, as such items are listed on Schedule 5.7.


 


		5.8	Financial
                                         Statements and Reports



 


All financial statements
and other financial information that have been or may hereafter be delivered to Lender by any Loan Party are accurate and complete
and have been prepared in accordance with GAAP, consistently applied with prior periods. No Loan Party has any material obligations
or liabilities not disclosed in such financial information or statements, and since the date of the most recent financial statements
submitted to Lender, there has not occurred any Material Adverse Change or Material Adverse Effect or Liability Event or, to Borrowers’
Knowledge, any other event or condition that could reasonably be expected to have a Material Adverse Effect or cause or constitute
a Liability Event.


 


		5.9	Compliance
                                         with Law



 


Each Loan Party (i) is
in compliance with all laws, statutes, rules, regulations, ordinances and tariffs of all Governmental Authorities applicable to
such Loan Party and/or such Loan Party’s business, assets and operations, including applicable requirements of the Standards
for Privacy of Individually Identifiable Health Information that were promulgated pursuant to the Health Insurance Portability
and Accountability Act of 1996 (“HIPAA”), ERISA and Healthcare Laws, and (ii) is not in violation of any
order of any Governmental Authority or other board or tribunal, except where noncompliance or violation could not reasonably be
expected to have a Material Adverse Effect. There is no event, fact, condition or circumstance that, with notice or the passage
of time, or both, could constitute or result in any noncompliance with, or any violation of, any of the foregoing, in each case
except where noncompliance or violation could not reasonably be expected to have a Material Adverse Effect. No Loan Party has received
any notice that it is not in compliance with any of the requirements of any of the foregoing, except for items that could not reasonably
be expected to have or result in a Material Adverse Effect. No Loan Party has (a) engaged in any Prohibited Transactions as
defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated under the Internal Revenue Code of 1986, (b) failed to meet any applicable minimum funding requirements
under Section 302 of ERISA in respect of its plans and no funding requirements have been postponed or delayed, (c) knowledge
of any amounts due but unpaid to the Pension Benefit Guaranty Corporation, or of any event or occurrence that would cause the Pension
Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any of the employee benefit plans,
(d) fiduciary responsibility under ERISA for investments with respect to any plan existing for the benefit of Persons other
than its employees or former employees, or (e) withdrawn, completely or partially, from any multi-employer pension plans so
as to incur liability under the Multi-Employer Pension Plan Amendments of 1980, except where noncompliance could not reasonably
be expected to have or result in a Material Adverse Effect. There exists no event with respect to any Loan Party described in Section 4043
of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the 30-day notice period contained in 12 C.F.R.
§ 2615.3 has not been waived, except where such event could not reasonably be expected to have or result in a Material
Adverse Effect.


 




    	20 



     


    

 


		5.10	Intellectual
                                         Property



 


Each Loan Party has full legal right to
possess and use any and all patents, patent applications, trademarks, trademark applications, service marks, registered copyrights,
copyright applications, copyrights, trade names, trade secrets, and software licenses necessary for the conduct of its business
(collectively, the “Intellectual Property”). A schedule of all Intellectual Property consisting of names used
in connection with the conduct of the business of each Loan Party is set forth on Schedule 5.10. No Loan Party
is in violation or noncompliance with any condition or requirement of the right to possess or use any Intellectual Property.


 


		5.11	Burdensome
                                         Agreements



 


No Loan Party is a party
to or subject to any agreement, instrument or restriction that is so unusual or burdensome that it could reasonably be expected
to have a Material Adverse Effect or result in a Liability Event.


 


		5.12	No
                                         Default



 


No Default or Event of
Default exists.


 


		5.13	Disclosure



 


No Loan Document or any
other agreement, document, instrument, affidavit, certificate, or statement or any other data furnished to Lender by or on behalf
of any Loan Party in connection with the transactions contemplated by the Loan Documents, or any representation or warranty made
by any Loan Party in any Loan Document, contains any untrue statement of material fact or omits to state any fact necessary to
make the statements in the Loan Documents not materially misleading. To Borrowers’ Knowledge, there is no fact known to any
Loan Party that has not been disclosed to Lender in writing which could reasonably be expected to have a Material Adverse Effect
or result in a Liability Event.


 




    	21 



     


    

 


		5.14	Existing
                                         Indebtedness; Investments, Guarantees and Certain Contracts



 


Except for Permitted
Indebtedness, no Loan Party has any outstanding Indebtedness, whether secured or unsecured, direct or indirect, contingent, joint,
several or otherwise. Each Loan Party has performed all obligations required to be performed by such Loan Party in connection with
any Permitted Indebtedness and there has occurred no breach, default or event of default under any document evidencing any Permitted
Indebtedness and no fact, circumstance, condition or event has occurred that, with the giving of notice or passage of time or both,
could constitute or result in a breach, default or event of default under any Permitted Indebtedness.


 


		5.15	Other
                                         Agreements



 


Except for the Charter
and Good Standing Documents of each of the Loan Parties and as otherwise set forth on Schedule 5.15, there are
no existing or proposed agreements, arrangements, understandings or transactions between (A) either of Borrowers or any other
Loan Party on the one hand, and (B) any Loan Party or any of Borrowers’ or any other Loan Party’s officers, members,
managers, directors, stockholders, partners, other interest holders, employees or Affiliates or any members of their respective
immediate families, on the other hand.


 


		5.16	Insurance



 


All insurance policies
required pursuant to Section 6.5 are in full force and effect. All such insurance policies are listed and described
on Schedule 5.16.


 


		5.17	Names;
                                         Location of Offices, Records and Collateral



 


During the preceding
five years, no Loan Party has conducted business under or used any name (whether corporate, partnership or assumed) other than
its current name, except as shown on Schedule 5.17. Each Loan Party is the sole owner of its current name and
of any names listed on Schedule 5.17, and any and all business done and invoices issued in such names are such
Loan Party’s sales, business and invoices. Each trade name of a Loan Party represents a division or trading style of such
Loan Party. Each Loan Party maintains its places of business and chief executive offices only at the locations set forth on Schedule 5.17,
and all Accounts of each Loan Party arise, originate and are located, and all of the Collateral and all books and records in connection
with the Collateral or in any way relating to the Collateral or evidencing the Collateral are located and shall be located only
in and at such locations. All of the Collateral is located only in the continental United States.


 


		5.18	Non-Subordination



 


The Obligations are not
subordinated in any way to any other obligations of any Loan Party or to the rights of any other Person.


 


		5.19	Property
                                         Management Agreement



 


No Borrower is a party
to any management agreement (whether a property management agreement or asset management agreement or otherwise with respect to
the management of the Property or Borrowers).


 




    	22 



     


    

 


		5.20	Healthcare
                                         Matters



 


(a)       All Licenses and
Permits have been obtained or will be obtained in due course by the Operators within one hundred five (105) days after the Closing
Date, and are or will be in full force and effect when obtained (and an interim arrangement has been entered into with the existing
licensees of the Facilities for the operation of the Facilities pursuant to the existing Licenses and Permits). Borrowers and/or
Operators own and/or possess, and hold free from restrictions or conflicts with the rights of others, all such Licenses and Permits;


 


(b)       Each Facility
is duly licensed as the type of facility set forth on Schedule 5.20, as required under the applicable laws of
the state specified on Schedule 5.20. The licensed bed capacity of each Facility is as specified on Schedule 5.20.
Neither any Borrower nor any Operator has applied to reduce the number of licensed or certified beds or to move the right to any
and all of the licensed or certified beds to any other location and there are no proceedings pending or contemplated to move or
reduce the number of licensed or certified beds. Schedule 5.20 lists the Operator of each Facility.


 


(c)       Borrowers and,
if applicable, to Borrowers’ Knowledge, each Operator (and, in any event, the operation of each Facility) are in compliance
in all material respects with all applicable provisions of the laws, ordinances, statutes, regulations, orders. standards, policies,
restrictions, or rules of any Governmental Authority having jurisdiction over the operation of each Facility, including (1) health
and fire safety codes and (2) Medicaid, or other federal, state, local or intermediary laws, rules, regulations or published
interpretations or policies relating to the prevention of fraud, abuse, false claims, neglect or mistreatment. Each Borrower and
to Borrowers’ Knowledge, each Operator are in compliance in all material respects with the requirements for participation
in the Medicaid Programs. Each Borrower, and to Borrowers’ Knowledge, each Operator, as applicable, is in conformance with
all insurance, reimbursement and cost reporting requirements, and has a current provider agreement under Title XVIII and/or XIX
of the Social Security Act or any other applicable laws or regulations for reimbursement for the types of care or services provided
at each Facility.


 


(d)       No Loan Party
and, to Borrowers’ knowledge, no Operator is a target of, participant in, or subject to any action, proceeding, suit, audit,
investigation or sanction by any Governmental Authority or any other administrative or investigative body or entity or any other
third party or any patient or resident (including whistleblower suits, or suits brought pursuant to federal or state False Claims
Acts, and Medicaid/State fraud/abuse laws) that may result in the imposition of a fine, penalty, alternative, interim or final
sanction, a lower rate certification, recoupment, recovery, suspension or discontinuance of all or part of reimbursement from any
Governmental Authority, third-party payor, insurance carrier or private payor, a lower reimbursement rate for services rendered
to eligible patients, or any other civil or criminal remedy, or that could have a Material Adverse Effect on any Loan Party or
the operation of any Facility, or which could result in the appointment of a receiver or manager, or in the revocation, transfer,
surrender, suspension or other impairment of a License or Permit, nor has any such action, proceeding, suit, investigation proceeding
or audit been threatened.


 




    	23 



     


    

 


(e)       To Borrowers’
Knowledge, there are no agreements with residents of any Facility, or with any other Persons that deviate in any adverse respect
from, or that conflict with, any legal requirements. To Borrowers’ Knowledge, all resident records at each Facility, including
patient and/or resident account records, are maintained at such Facility and are true and correct in all material respects.


 


(f)       Neither the execution
and delivery of the Loan Documents, nor any Loan Party’s (nor, to Borrower’s Knowledge, any Operator’s) performance
under the Loan Documents, the recordation of any Security Instrument nor the exercise of any remedies by Lender (i) will adversely
affect any Loan Party’s (or Operator’s) right to receive, as applicable, Medicaid, insurance company, managed care
company, or other third party insurance payments or reimbursements or to receive private payor payments or reimbursements, (ii) will,
as applicable, materially reduce the Medicaid, insurance company, managed care company, or other third party insurance payments
or reimbursements or materially reduce private payor payments or reimbursements that such Loan Party (or Operator) is receiving
as of the date of this Loan Agreement, or (iii) will adversely affect the Licenses or Permits.


 


(g)       No Loan Party
(nor, to Borrower’s Knowledge, any Operator) is a participant in any federal, state or local program whereby any federal,
state or local government or quasi-governmental body, or any intermediary, agency, board or other authority or entity may have
the right to recover funds by reason of the advance of federal, state or local funds, including those authorized under the Hill-Burton
Act (42 U.S.C. 291, et seq.), other than the Medicaid programs. No Loan Party (or, to Borrower’s knowledge, any Operator)
has received notice of, and no Loan Party is aware of, any violation of applicable antitrust laws.


 


(h)       To Borrower’s
knowledge, each Operator’s private payor, Medicaid, and/or managed care company, insurance company or other third party insurance
accounts receivable are free of any liens.


 


(i)         No
Loan Party (nor, to Borrower’s Knowledge, any Operator) is a party to any collective bargaining agreement or other labor
contract applicable to persons employed by it and there are no threatened or pending labor disputes at any of the Facilities. No
Loan Party is or has been involved in any labor dispute, strike, walkout or union organization that could reasonably be expected
to have a Material Adverse Effect.


 


(j)        Each Loan Party
(and, to Borrowers’ Knowledge, to the extent applicable, each Operator) has maintained in all material respects all records
required to be maintained by the Joint Commission, the Food and Drug Administration, Drug Enforcement Agency and State Boards of
Pharmacy and the federal and state Medicaid programs as required by the Healthcare Laws and there are no presently existing circumstances
that could reasonably be expected to result in material violations of the Healthcare Laws, except where any of the foregoing could
not reasonably be expected to result in or have a Material Adverse Effect. No event has occurred that constitutes or could constitute
a Liability Event.


 


		5.21	First
                                         Priority Lien



 


Upon the execution, delivery,
filing and/or recordation of the Security Instruments, Lender will have a good, valid and perfected first priority Lien and security
interest in the Property, subject to no transfer or other restrictions or Liens of any kind in favor of any other person except
for Permitted Liens. No financing statement relating to any of the Collateral is on file in any public office except those on behalf
of Lender.


 




    	24 



     


    

 


		5.22	Special-Purpose
                                         Entity;



 


Each Borrower is (and
has been since its formation) a Special Purpose Entity whose sole asset is the Facility that it owns and the personal property
owned by each such Borrower and utilized in the ownership or operation thereof. Notwithstanding anything to the contrary in this
Loan Agreement, so long as any portion of the Obligations remains outstanding, each Borrower shall be a Special-Purpose Entity
whose sole asset is the applicable Facility that it owns and the personal property utilized in the ownership or operation of such
Facility.


 


		5.23	Bankruptcy



 


No bankruptcy or insolvency
proceedings are pending or contemplated by any Loan Party.


 


		5.24	Survival;
                                         Diligent Inquiry



 


Borrowers make the representations
and warranties contained in this Loan Agreement and the other Loan Documents with the knowledge and intention that Lender is relying
and will rely on such representations and warranties, and having made all diligent inquiry of each of the Loan Parties (and each
Operator). All such representations and warranties will survive the execution and delivery of this Loan Agreement and the funding
of the Loan.


 


		5.25	Anti-Terrorism;
                                         OFAC



 


(a)       No Loan Party,
nor any Person controlling or controlled by any Loan Party, nor any Person having a beneficial interest (whether direct or indirect)
in any Loan Party, nor any Person for whom any Loan Party is acting as agent or nominee in connection with this transaction (“Transaction
Persons”) (i) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1
of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions
prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of
Section 2 of such executive order, or (iii) is a Person on the list of Specially Designated Nationals and Blocked Persons
or is in violation of the limitations or prohibitions under any other OFAC regulation or executive order.


 


(b)       No part of the
proceeds of the Loan will be used, directly or indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended.


 


(c)       Each Borrower
acknowledges by executing this Loan Agreement that Lender has notified the Loan Parties that, pursuant to the requirements of the
Patriot Act, Lender is required to obtain, verify and record such information as may be necessary to identify the Loan Parties
(including the name and address of each Loan Party) in accordance with the Patriot Act.


 




    	25 



     


    

 


		5.26	[Reserved.]



 


		5.27	Solvency



 


Each Borrower is and
will remain solvent after giving effect to the transactions and the Indebtedness contemplated by this Loan Agreement and the other
Loan Documents. Each Borrower has the financial resources and ability to meet its obligations and liabilities as they become due,
to the effect that as of the Closing Date and after giving effect to the transactions and the Indebtedness contemplated by this
Loan Agreement and the other Loan Documents (i) the assets of each Borrower, at a fair valuation, exceed the total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) of Borrowers, respectively, and (ii) no unreasonably
small capital base with which to engage in Borrowers’ anticipated business exists with respect to Borrowers.


 


		VI.	AFFIRMATIVE COVENANTS



 


Borrowers agree that,
until full performance and indefeasible payment in full in cash of all the Obligations:


 


		6.1	Financial
                                         Statements, Reports and Other Information



 


(a)       Financial Reports.
Borrowers shall furnish or cause to be furnished to Lender (i) as soon as available and in any event within 120 days
after the end of each fiscal year of Borrowers, unaudited (or audited, if available) annual financial statements of Borrowers and
each Operator including the notes to such financial statements, consisting of a consolidating balance sheet at the end of such
completed fiscal year and the related consolidating statements of income and expense and cash flow for such completed fiscal year,
which financial statements shall be prepared and certified without qualification by an authorized officer of Borrowers and each
Operator, and (ii) as soon as available and in any event within 45 days after the end of each calendar month, unaudited
monthly and quarterly consolidating financial statements with respect to Borrowers and each Operator and within 45 days after
the end of each calendar quarter, unaudited quarterly financial statements with respect to Borrowers and each Operator,
in each case, consisting of a balance sheet and statements of income and, in the case of Borrowers, cash flow, and also with respect
to each Facility consisting of a balance sheet and statements of income, cash flows (in the case of Borrower only and not Operators),
occupancy, payor mix, and expense relating to the Facilities together with (X) monthly census and revenue information of the
Facilities as of the end of such month in sufficient detail to show by patient-mix and revenue-mix the average monthly census of
the Facilities. In addition, Borrowers shall cause Guarantor to furnish to Lender as soon as available and in any event within
120 days after the end of each fiscal year of Guarantor, (i) audited annual consolidated financial statements of Guarantor,
including the notes thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related
consolidated statements of income and expense for such completed fiscal year, which financial statements shall be prepared and
certified without qualification by an independent certified public accounting firm satisfactory to Lender and accompanied by related
management letters, if available, and (ii) personal financial statements of each Guarantor that is an individual, in form
and substance satisfactory to Lender. All such financial statements will be prepared in accordance with GAAP consistently applied
with prior periods. On a quarterly basis, Borrowers shall also deliver (and will cause Guarantor to deliver) a certificate of its
chief financial officer or manager, or other authorized representative as appropriate, stating that (A) Borrowers (or Guarantor,
as applicable) has reviewed the relevant terms of the Loan Documents and the condition of Borrowers (or Guarantor, as applicable),
(B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing,
specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto,
(C) all financial covenants set forth in Appendix A are being fully complied with. Such certificate shall
be accompanied by the calculations necessary to show compliance with the financial covenants in a form satisfactory to Lender.


 




    	26 



     


    

 


(b)       Other Materials.
Borrowers shall furnish or cause to be furnished to Lender as soon as available, and in any event within 10 days after the
preparation or issuance thereof or at such other time as set forth below: (i) copies of such financial statements (other than
those required to be delivered pursuant to Section 6.1(a)) prepared by, for or on behalf of a Loan Party and
any other notes, reports and other materials related thereto, including any pro forma financial statements, (ii) any reports,
returns, information, notices and other materials that such Loan Party shall send to its stockholders, members, partners or other
equity owners at any time, (iii) all Medicaid cost reports and other documents and materials relating to any Facility filed
by any Loan Party and any other reports, materials or other information regarding or otherwise relating to Medicaid relating to
any Facility prepared by, for or on behalf of a Loan Party including (A) copies of licenses and permits required by any applicable
federal, state, foreign or local law, statute, ordinance or regulation or Governmental Authority for the operation of each Facility,
(B) Medicaid provider numbers and agreements relating to each Facility, (C) state surveys pertaining to any Facility
and (D) participating agreements relating to medical plans relating to any Facility, (iv) within 15 days after the
end of each calendar month for such month, (A) a report of the status of all payments, denials and appeals of all Medicaid
Accounts relating to each Facility, (B) a sales and collection report and accounts receivable and accounts payable aging schedule
for each Facility, including a report of sales, credits issued and collections received, all such reports showing a reconciliation
to the amounts reported in the monthly financial statements, (v) promptly upon receipt thereof, copies of any reports submitted
to any Loan Party by its independent accountants relating to any Facility and in connection with any interim audit of the books
of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants,
(vi) a report of census and occupancy for each Facility by payor type, (vii) within 45 days after the end of each calendar
quarter, a report calculating and detailing the provider taxes due and paid for the quarter along with evidence of payment, and
(viii) such additional information, documents, statements, reports and other materials relating to any Facility as Lender
may reasonably request from a credit or security perspective or otherwise from time to time.


 




    	27 



     


    

 


(c)       Notices.
Borrowers shall promptly, and in any event within five (5) days after any Loan Party or any authorized officer, member, manager
or employee of such Loan Party obtains knowledge thereof, notify Lender in writing (i) with respect to any Loan Party (or
any Operator) or Facility of any pending or threatened litigation, suit, investigation, arbitration, dispute resolution proceeding
or administrative proceeding brought or initiated by any Loan Party or otherwise affecting or involving or relating to any Loan
Party or any Operator or any of its property or assets (including the Facilities) to the extent (A) the amount in controversy
exceeds $100,000, or (B) to the extent any of the foregoing seeks injunctive relief, (ii) with respect to any Loan Party
or any Operator, of any of the matters set forth in subparagraph (i) that could reasonably be expected to have or result in
a Material Adverse Effect or a Liability Event, (iii) of any Default or Event of Default, which notice shall specify the nature
and status thereof, the period of existence thereof and what action is proposed to be taken with respect thereto, (iv) of
any other development, event, fact, circumstance or condition that could reasonably be expected to have a Material Adverse Effect
or cause a Liability Event, in each case describing the nature and status thereof and the action proposed to be taken with respect
thereto, (v) of any notice received by a Loan Party from any payor of a claim, suit or other action such payor has, claims
or has filed against any Loan Party where any of the foregoing (A) relate to any Facility or Collateral or could reasonably
be expected to have or result in, individually or in the aggregate, a Material Adverse Effect or Liability Event, (vi) of
any matter(s) affecting the value, enforceability or collectability of any of the Collateral, including claims or disputes in the
amount of $100,000 or more, singly or in the aggregate, in existence at any one time, (vii) of any notice given by a Loan
Party to any other lender of Borrowers and shall furnish to Lender a copy of such notice, (viii) of receipt of any notice
or request from any Governmental Authority or governmental payor regarding any liability or claim of liability, (ix) of receipt
of any notice by any Loan Party regarding the appointment or termination of any manager of the Facilities, or (x) if any Account
relating to any Facility becomes evidenced or secured by an Instrument or Chattel Paper.


 


(d)       Consents.
Borrowers shall obtain and deliver from time to time all required consents, approvals and agreements from such third parties as
Lender shall determine are necessary or desirable in its discretion and that are satisfactory to Lender with respect to (i) the
Loan Documents and the transactions contemplated by the Loan Documents and (ii) (A) claims against any Loan Party or
the Collateral, and/or (B) any agreements, consents, documents or instruments to which any Loan Party is a party or by which
any properties or assets of any Loan Party or any of the Collateral is or are bound or subject, including the Subordination Agreements
and the Pledge and Security Agreements.


 


(e)       Operating Budget.
Borrowers shall (and will cause each Operator to) furnish to Lender on or prior to the Closing Date and for each fiscal year of
Borrowers or each Operator after the Closing Date not less than 30 days prior to the commencement of each such fiscal year,
consolidating month by month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash
flow reports of and for the Facilities for such upcoming fiscal year (including an income statement for each month and a balance
sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied
with prior periods. Such Operating Budget shall include a capital budget outlining a program of capital expenditures and an operating
budget setting forth an estimate of operating revenues and expenses, in each case as required under each Operating Lease.


 


(f)       Provider Agreements.
Borrowers shall furnish Lender, within 30 days of the receipt by any Borrower or any other Loan Party, with complete copies of
the annual Medicaid provider agreement(s) and the annual Medicaid reimbursement rate sheets related to each Facility and shall
cause each Operator to timely furnish such information to Borrower and Lender.


 




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(g)       Operating Lease
Information. Borrowers shall furnish Lender, within five Business Days of receipt, with a copy of any material notice or material
correspondence delivered or received by Borrowers under each Operating Lease. Borrowers shall cause each Operator to deliver to
Lender any and all reports, statements, inspections contemporaneously with the delivery thereof by and from any Operator to any
Borrower.


 


(h)       Accreditation
Report, etc. Borrowers shall furnish Lender, within five Business Days after receipt by Borrowers or any other Loan Party,
with a complete copy of any Medicaid or other licensing or accreditation or ranking agency or entity survey, report, warning letter,
or notice, and any statement of deficiencies, and within the time period required by the particular agency for furnishing a plan
of correction also furnish or cause to be furnished to Lender a copy of the plan of correction generated from such survey, report,
warning letter, or notice, and any correspondence related thereto, and correct or cause to be corrected any deficiency, the curing
of which is a condition of continued licensure or of full participation in Medicaid or a care program offered by an insurance company,
managed care company, or other third party payor by the date required for cure by such agency or entity (plus extensions granted
by such agency or entity).


 


(i)          Notices
of Non-Compliance.  Borrowers shall furnish Lender, within 10 days after receipt by Borrowers or any other Loan Party,
with complete copies of any other material notices or charges issued relating to the non-compliance by any Loan Party or of the
Facilities with any Governmental Authority, insurance company, managed care company, or other third-party payor laws, regulations,
requirements, licenses, permits, certificates, authorizations or approvals and any other reports, materials or other information
regarding or otherwise relating to Medicaid prepared by, for, or on behalf of Borrowers or any other Loan Party or relating to
any of the Facilities.


 


(j)        Non-Compliance
Special Remedy. If any of the materials required in this Section 6.1 are not furnished to Lender within
the applicable time periods, or Lender has objections to the form, manner of preparation or methodology of any of the foregoing,
and, in any of such events, such matter is not addressed to Lender’s reasonable satisfaction within 10 days after written
notice from Lender to Borrowers, specifying the objections in reasonable detail, then, in addition to any other rights and remedies
of Lender contained in this Loan Agreement, Lender shall have the right, but not the obligation, to obtain the same by means of
an audit by an independent certified public accountant selected by Lender, in which event Borrowers agree to pay, or to reimburse
Lender for, any expense of such audit and further agrees to provide all necessary information to such accountant and to otherwise
cooperate in the making of such audit. Borrower agrees that any and all materials furnished under this Loan Agreement may be released
and made available to such parties as Lender or Lender’s servicer deems appropriate.


 




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		6.2	Payment
                                         of Obligations



 


Borrowers shall make
full and timely indefeasible payment in cash of the principal of and interest on the Loan and of all other Obligations.


 


		6.3	Conduct
                                         of Business and Maintenance of Existence and Assets



 


Borrowers shall, and
shall cause each Operator to: (i) conduct its business and operate the Facilities in accordance with good business practices
customary to the industry; (ii) collect its Accounts in the Ordinary Course; (iii) maintain all of its material properties,
assets and equipment used or useful in its business in good repair, working order and condition (normal wear and tear) excepted
and except as may be disposed of in the Ordinary Course and in accordance with the terms of the Loan Documents); (iv) from
time to time make all necessary or desirable repairs, renewals and replacements to the Facilities; (v) maintain and keep in
full force and effect its existence and all material Permits, Licenses and qualifications to do business and good standing in each
jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits, Licenses or qualification
necessary and in which failure to maintain such Permits, Licenses or qualification could reasonably be likely to have a Material
Adverse Effect or cause a Liability Event; and (vi) remain in good standing and maintain operations in all jurisdictions in
which the Facilities are located.


 


		6.4	Compliance
                                         with Legal and Other Obligations



 


(a)       Borrowers shall,
and will cause each Loan Party (and each Operator) to: (i) comply with all laws, statutes, rules, regulations, ordinances
and tariffs of all Governmental Authorities applicable to it or its business, assets or operations, including applicable requirements
of all Environmental Laws and the Standards for Privacy of Individually Identifiable Health Information that were promulgated pursuant
to HIPAA; (ii) pay all taxes (including provider taxes, bed taxes and similar taxes), assessments, fees, governmental charges,
claims for labor, supplies, rent and all other obligations or liabilities of any kind, except liabilities being contested in good
faith in accordance with applicable law and against which adequate reserves have been established (but such contest and reserves
shall be permitted only if no offset rights or liens against the Collateral could result); (iii) perform in accordance with
its terms each contract, agreement or other arrangement to which it is a party or by which it or any of the Collateral is bound,
except where the failure to comply, pay or perform could not reasonably be expected to have a Material Adverse Effect or cause
a Liability Event; (iv) obtain, maintain and comply with all Licenses and Permits necessary to conduct its business and comply
with any new or additional requirements that may be imposed on it or its business; and (v) properly file all Medicaid cost
reports, if applicable.


 


(b)       Borrowers shall
take all action necessary to maintain each of their status as a Special-Purpose Entity.


 


		6.5	Insurance



 


Borrowers shall, at Borrowers’
sole expense, maintain or cause to be maintained the following insurance coverages with respect to the Property at all times while
any portion of the Obligations remains outstanding:


 




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(a)       Insurance against
loss or damage to the Property by fire, casualty and other hazards as now or subsequently may be covered by an “all-risk”
policy, with coverage for earthquake in amounts and in form satisfactory to Lender, and such endorsements as Lender may from time
to time reasonably require and which are customarily required by institutional lenders of similar properties similarly situated,
and which coverage shall also meet the following requirements:


 


		(i)	The amount of such property insurance shall be not less than 100% of the full replacement cost
of the Improvements, furniture, furnishings, fixtures, equipment and other items (whether personalty or fixtures) included in the
Property and owned by Borrowers from time to time, without reduction for depreciation. The determination of the replacement cost
amount shall be adjusted annually to comply with the requirements of the Insurer issuing such coverage or, at Lender’s election,
by reference to such indexes, appraisals or information as Lender determines in its discretion. Full replacement cost, as used
in this Loan Agreement, means, with respect to the Improvements, the cost of replacing the Improvements without regard to deduction
for depreciation, exclusive of the cost of excavations, foundations and footings below the lowest basement floor, and means, with
respect to such furniture, furnishings, fixtures, equipment and other items, the cost of replacing the same.



 


		(ii)	Each such policy or policies of property insurance shall contain the following provisions, all
subject to Lender’s approval in form and content: (A) a replacement cost endorsement; (B) either an agreed amount
endorsement (to waive the operation of any coinsurance provisions) or a waiver of any co-insurance provisions; (C) law and
ordinance coverage in an amount satisfactory to Lender; and (D) coverage for interruption in utility services.



 


(b)       Business Income
including rental value and Extra Expense insurance covering the same perils of loss as are required to be covered by the property
insurance required pursuant to Section 6.5(a) and meeting the following requirements:


 


		(i)	The amount of such insurance shall be not less than the projected gross revenue from the Facilities
for a period of one year. The amount of such insurance shall be determined prior to the date of this Loan Agreement and at least
once each year thereafter based on Borrowers’ reasonable estimate of the gross revenue from the Facilities for the succeeding
36-month period; or, at Lender’s election in its discretion, by reference to such indexes, appraisals or information as Lender
determines.



 




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		(ii)	Each such policy or policies shall contain the following provisions, all subject to Lender’s
approval in form and content: (i) either an agreed amount endorsement (to waive the operation of any co-insurance provisions)
or a waiver of any co-insurance provisions; (ii) law and ordinance coverage in an amount satisfactory to Lender; (iii) an
extended period of indemnity endorsement providing that after the repair of any physical loss to the Property, the continued loss
of income will be insured until the earlier of the time that (a) such income returns to the same level as it was at prior
to the date on which the physical loss occurred or (b) 12 months from the date that the Property is repaired or replaced
and operations are resumed in the manner that such operations were conducted prior to the date of the physical loss to the Property
giving rise to such insurance obligation, which payments shall be made notwithstanding the expiration of the policy prior to the
end of such period.



 


(c)       Broad form boiler
and machinery insurance covering the major components of the central heating, air conditioning and ventilating systems, boilers,
other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed
in the Improvements, in an amount equal to 100% of the full replacement cost of the Improvements. Such policy or policies shall
insure against physical damage to and loss of occupancy and use of the Improvements arising out of an accident or breakdown covered
under such policy or policies and shall include all of the following coverage: (A) business interruption including rental
value, (B) extra expense, (C) consequential damage and (D) interruption in utility services power supply.


 


(d)       If the Real Estate
or any part thereof is identified by the Secretary of Housing and Urban Development as being situated in an area now or subsequently
designated as having special flood hazards (including those areas designated as Zone A or Zone V), flood insurance in an amount
equal to 100% of the lesser of the (A) replacement value of the Improvements or (B) maximum amount of flood insurance
available.


 


(e)       During the period
of any construction on the Real Estate or renovation or alteration of the Improvements, a so-called “Builder’s All-Risk
Completed Value” or “Course of Construction” insurance policy in non-reporting form for any improvements under
construction, including for demolition and increased cost of construction or renovation, in an amount equal to 100% of the estimated
replacement cost on the date of completion, including “soft cost” coverage, and workers’ compensation and employers
liability insurance covering all persons engaged in such construction, in an amount at least equal to the minimum required by law.
In addition, each contractor and subcontractor shall be required to provide Borrowers with a certificate of insurance for (i) workers’
compensation and employers liability insurance covering all persons engaged by such contractor or subcontractor in such construction
in an amount at least equal to the minimum required by law, and (ii) general liability insurance showing minimum limits of
at least $5,000,000, including coverage for premises/operations and products and completed operations. Each contractor and subcontractor
also shall cover Lender and Borrowers as additional insureds under such liability policy and shall defend, indemnify and hold Lender
and Borrowers harmless from and against any and all claims, damages, liabilities, costs and expenses arising out of, relating to
or otherwise in connection with the performance by each contractor and subcontractor of such construction.


 




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(f)       Commercial general
liability insurance using an “occurrence” based form meeting the following requirements:


 


		(i)	The amount of such liability insurance shall be not less than $1,000,000 per occurrence, $3,000,000
per location aggregate or such lesser amount as Lender in Lender’s discretion may accept, for bodily injury, personal and
advertising injury and property damage. Lender retains the right to periodically review the amount of such liability insurance
being maintained by Borrowers and to require an increase in the amount of such liability insurance should Lender deem an increase
to be reasonably prudent under then-existing circumstances.



 


		(ii)	Each such policy or policies of liability insurance shall (A) provide coverage for claims
for personal injury, advertising injury, bodily injury, death and property damage liability with respect to the applicable Facilities
and operations related thereto, whether on or off the Real Estate; (B) include broad form contractual liability coverage including
coverage for the indemnities contained in Section 12.4.



 


(g)       Professional liability
and malpractice insurance using an “occurrence” based form with limits of at least $1,000,000 per occurrence (claim)/$3,000,000
in the aggregate, and covering acts occurring prior to the date of the Loan. Borrowers shall cause, and cause Operator to cause
each physician or nurse practitioner with clinical privileges at each Facility to carry professional liability and malpractice
insurance with limits of not less than $1,000,000 per occurrence (claim)/$3,000,000 in the aggregate. Lender retains the right
to periodically review the amount of such liability insurance and to require an increase in the amount of the same should Lender
deem an increase to be reasonably prudent under then-existing circumstances.


 


(h)       Motor vehicle
(auto) liability coverage for all owned hired and non-owned automobiles, including rented and leased automobiles, containing minimum
limits per occurrence of greater of $1,000,000 or at such amounts as are in force as of the date of this Loan Agreement.


 


(i)         Workers’
compensation and employers liability insurance or other similar insurance that may be required by governmental authorities or applicable
legal requirements in an amount at least equal to the minimum required by law.


 


(j)       With respect to
the Property, insurance for certified and uncertified acts of terrorism insurance in such amounts as are required by Lender.


 


(k)       Crime coverage
providing blanket employee dishonesty insurance with limits of not less than $500,000.


 




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(l)       Such other insurance
on the Property or on any replacements, supplements or substitutions thereof or additions thereto as may from time to time be reasonably
required by Lender against other insurable hazards or casualties that at the time are commonly insured against in the case of property
similarly situated, due regard being given to the height and type of buildings, their construction, location, use and occupancy.


 


All such insurance required
pursuant to this Section 6.5 shall (i) be issued by companies approved by Lender and licensed to do business
in the state where the Real Estate is located, with a claims paying ability rating of “A” or better by A.M. Best Company;
(ii) contain the complete address of the Real Estate (or a complete legal description), (iii) be for a term of at least
one year, (iv) contain deductibles no greater than $10,000 or as otherwise required by Lender, and (v) be subject to
the approval of Lender as to insurance companies, amounts, content, forms of policies, method by which premiums are paid and expiration
dates, and, in addition, Borrowers shall comply with, or cause to be complied with, each of the following with respect to the insurance
policies required to be maintained pursuant to this Loan Agreement:


 


(1)       Borrowers
shall as of the date of this Loan Agreement deliver to Lender certified copies of such insurance policies or satisfactory certificates
evidencing such insurance;  and evidence satisfactory to Lender in its discretion that such insurance policies have been
paid current as of the date of this Loan Agreement. Thereafter, Borrowers shall deliver to Lender certified copies of any such
insurance policies promptly upon request.


 


(2)       With
respect to insurance policies that require payment of premiums annually, not less than 30 days prior to the expiration dates
of the insurance policies obtained pursuant to this Loan Agreement, subject to Section 3.4(d), Borrowers shall pay such amount.
Not less than 30 days prior to the expiration dates of the insurance policies obtained pursuant to this Loan Agreement, Borrowers
shall deliver to Lender certified copies of the renewals of such policies (or other evidence of renewal satisfactory to Lender)
bearing notations evidencing the payment of premiums or accompanied by other evidence of payment satisfactory to Lender. Borrowers
shall also deliver to Lender certified copies of any such insurance policies promptly upon request.


 


(3)       No premiums
for any policies or policies of insurance required under this Loan Agreement or otherwise held with respect to the Property, shall
be paid by any Borrowers through or by means of any financing arrangement with any third party lender.


 


(4)       All
policies required under this Loan Agreement will contain: (a) a provision that such policies shall not be canceled or amended,
including any amendment that would reduce the scope or limits of coverage or remove any endorsement to such policy or cause the
same to no longer be in full force and effect, or failed to be renewed, without at least 30 days prior written notice to Lender
in each instance; and (b) a waiver of all rights of subrogation against Lender.


 




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(5)       All
policies required or contemplated by Sections 6.5(a)-(e) will name Lender as mortgagee and loss payee, shall
provide for all losses to be payable directly to Lender, and will contain: a standard noncontributing mortgagee provision or endorsement
or its equivalent providing that any loss shall be payable to Lender notwithstanding (a) any negligent or willful acts or
omissions of Borrowers that might otherwise result in forfeiture of such insurance; (b) occupancy or use of any of the Facilities
for purposes more hazardous than those permitted by the terms of such policy; (c) any foreclosure or other action taken by
Lender pursuant to any of the Security Instruments upon the occurrence of an Event of Default; or (d) any change in title
or ownership of the Property.


 


(6)       All
Policies required or contemplated by Sections 6.5(f)-(l) will name Lender as an additional insured.


 


(7)       The
delivery to Lender of the insurance policies or other evidence of insurance as provided above constitutes an assignment of all
proceeds payable under such insurance policies arising out of or related to the applicable Facilities by Borrowers to Lender as
further security for the Obligations. Upon foreclosure of one or more of the Security Instruments, or other transfer of title to
the Property in extinguishment in whole or in part of the Obligations, all right, title and interest of Borrowers in and to all
proceeds payable under such policies then in force concerning the Property shall thereupon vest in the purchaser at such foreclosure,
or in Lender or other transferee upon such other transfer of title.


 


(8)       Approval
of any insurance by Lender shall not be a representation of the solvency of any Insurer or the sufficiency of any amount of insurance.


 


(9)       If Borrowers
fails to provide, maintain, keep in force or deliver and furnish to Lender the policies of insurance required by this Loan Agreement
or evidence of their renewal as required in this Loan Agreement, Lender may, but shall not be obligated to, procure such insurance
and Borrowers shall pay all amounts advanced by Lender, together with interest thereon at the Default Interest Rate from and after
the date advanced by Lender until actually repaid by Borrowers, promptly upon demand by Lender. Any amounts so advanced by Lender,
together with interest thereon, shall be secured by the Security Instruments and by all of the other Loan Documents securing all
or any part of the Obligations. Lender shall not be responsible for nor incur any liability for the insolvency of the Insurer or
other failure of the Insurer to perform, even though Lender has caused the insurance to be placed with the Insurer after failure
of Borrowers to furnish such insurance.


 


		6.6	True
                                         Books



 


Borrowers shall, and,
with respect to each Facility will cause each Operator to: (i) keep true, complete and accurate books of record and account
in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their
dealings and transactions in all material respects; and (ii) set up and maintain on its books such reserves as may be required
by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business,
and include such reserves in its financial statements.


 




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		6.7	Inspection;
                                         Periodic Audits



 


Borrowers shall permit,
and shall cause each Operator to permit the agents, employees or representatives of Lender, at the expense of Borrowers, from time
to time (but no more than once in any calendar year absent the occurrence of an Event of Default) during normal business hours
upon reasonable notice, to (i) visit and inspect Borrowers’ offices or properties or any other place where the Collateral
is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers,
(ii) visit and inspect any Loan Party’s offices or properties related to or involved in the operation of any of the
Facilities and to examine or audit all of its books of account, records, reports and other papers that relate to any of the Facilities
or any of the Collateral, (iii) make copies and extracts from any of the books or records referenced at clauses (i) or
(ii) above subject to the privacy rights of the residents of the Facilities, and (iv) discuss its business, operations, prospects,
properties, assets, liabilities, condition and/or Accounts with its officers and independent public accountants (and by this provision
such officers and accountants are authorized to discuss the foregoing). Borrowers shall immediately reimburse Lender upon demand
and in the manner provided for in Section 2.8 for all costs and expenses incurred by Lender arising out of or
related to any audit conducted by Lender pursuant to this Section 6.7, including all costs and expenses of any
accountant or consultant employed or engaged by Lender for such audit plus all reasonable travel expenses incurred by Lender or
any of its accountants, consultants, or representatives in connection with such audit.


 


		6.8	Further
                                         Assurances; Post Closing



 


(a)At Borrowers’
cost and expense, Borrowers shall, and shall cause each Loan Party to, (i) within five Business Days after Lender’s
demand, take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, assignments,
instructions, instruments, certificates, affidavits or documents as Lender may reasonably request with respect to the purposes,
terms and conditions of the Loan Documents and the consummation of the transactions contemplated by the Loan Documents, whether
before, at or after the execution of the Loan Documents or the occurrence of a Default or Event of Default, (ii) without limiting
and notwithstanding any other provision of any Loan Document, execute and deliver, or cause to be executed and delivered, such
agreements and documents, and take or cause to be taken such actions, and otherwise perform, observe and comply with such obligations,
as are set forth on Schedule 6.8, and (iii) upon the exercise by Lender or any of its Affiliates of any
power, right, privilege or remedy pursuant to any Loan Document or under applicable law or at equity that requires any consent,
approval, registration, qualification or authorization of any Governmental Authority, execute and deliver, or cause the execution
and delivery of, all applications, certificates, instruments and other documents that may be so required for such consent, approval,
registration, qualification or authorization. Without limiting the provisions of this paragraph, upon the exercise by Lender or
any of its Affiliates of any right or remedy under any Loan Document that requires any consent, approval or registration with,
consent, qualification or authorization by, any Person, Borrowers shall execute and deliver, or cause the execution and delivery
of, all applications, certificates, instruments and other documents that Lender or its Affiliate may be required to obtain for
such consent, approval, registration, qualification or authorization.


 




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		6.9	Payment
                                         of Indebtedness



 


Except as otherwise prescribed
in the Loan Documents, Borrowers shall pay, discharge or otherwise satisfy at or before maturity (subject to applicable grace periods
and, in the case of trade payables, to payment practices in the Ordinary Course) all of its material obligations and liabilities,
except when the amount or validity thereof is being contested in good faith by appropriate proceedings, and such reserves as required
by GAAP and Lender may deem proper and necessary in its discretion shall have been made. Except as otherwise prescribed in the
Loan Documents, Borrowers shall cause Guarantor, each Operator (with respect to facilities other than the Facilities) and Pledging
Entity to comply with the provisions of this Section 6.9 except to the extent such failure to comply could not
reasonably be expected to have or result in a Material Adverse Effect.


 


		6.10	Lien
                                         Searches



 


If Liens other than Permitted
Liens exist, Borrowers immediately will take, execute and deliver all actions, documents and instruments necessary to release and
terminate such Liens, and will cause any other Loan Party to do the same to the extent such Liens affect the Collateral.


 


		6.11	Use
                                         of Proceeds



 


Borrowers shall use the
proceeds from the Loan only for the purpose set forth in Recital A.


 


		6.12	Collateral
                                         Documents; Security Interest in Collateral



 


Borrowers shall and will
cause each Loan Party to (i) execute, obtain, deliver, file, register and/or record any and all financing statements, continuation
statements, stock powers, instruments and other documents, or cause the execution, filing, registration, recording or delivery
of any and all of the foregoing, that are necessary or required under law or otherwise or reasonably requested by Lender to be
executed, filed, registered, obtained, delivered or recorded to create, maintain, perfect, preserve, validate or otherwise protect
the pledge of the Collateral to Lender and Lender’s perfected first priority Lien on the Collateral (and Borrowers irrevocably
grant Lender the right, at Lender’s option, to file any or all of the foregoing), (ii) as soon as reasonably practicable
upon learning thereof, report to Lender any reclamation, return or repossession of goods in excess of $25,000 per Facility (individually
or in the aggregate), and (iii) defend the Collateral and Lender’s perfected first priority Lien thereon against all
claims and demands of all Persons at any time claiming the same or any interest therein adverse to Lender, and pay all costs and
expenses (including in-house documentation and diligence fees and legal expenses and reasonable attorneys’ fees and expenses)
in connection with such defense, which may at Lender’s discretion be added to the Obligations.


 




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		6.13	Taxes
                                         and Other Charges



 


(a)       Borrowers shall
promptly and in any event within five Business Days after Borrowers or any officer, manager, member or agent thereof obtains knowledge
thereof, notify Lender in writing of any oral or written communication from the Internal Revenue Service or any other taxing authority
with respect to any (i) tax investigations, relating to any Loan Party directly, or relating to any consolidated tax return
that was filed on behalf of such Loan Party, (ii) notice of tax assessment or possible tax assessment, (iii) years that
are designated open pending tax examination or audit, and (iv) information that could give rise to an IRS tax liability or
assessment.


 


(b)       Borrowers shall
provide to Lender any information regarding the Loan Parties’ payment of payroll taxes as Lender may reasonably request.


 


(c)       Borrowers shall
pay or cause to be paid when due all claims and demands of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Real Estate or the Improvements; but Borrowers shall have the right to contest in good faith any such
claim or demand, so long as (i) it does so diligently, by appropriate proceedings and without prejudice to Lender and (ii) neither
the Property nor any interest therein would be in any danger of sale, loss or forfeiture as a result of such proceeding or contest.
If Borrowers contests any such claim or demand, Borrowers shall promptly notify Lender of such contest and will, within thirty
(30) days of Lender’s request, provide a bond, cash deposit or other security satisfactory to Lender to protect Lender’s
interest and security should the contest be unsuccessful. If Borrowers fail to promptly discharge or provide security against any
such claim or demand, Lender may do so and any and all expenses incurred by Lender, together with interest thereon at the Default
Interest Rate from the date incurred by Lender until actually paid by Borrowers, will be promptly paid by Borrowers on demand and
shall be secured by the Security Instruments and by all of the other Loan Documents securing all or any part of the Obligations.


 


		6.14	Payment
                                         of Utilities, Assessments, Charges, Etc.



 


Borrowers shall pay or
cause to pay when due all utility charges that are incurred in connection with the operation of the Property or which may become
a charge or lien against any portion of the Property for gas, electricity, water and sewer services and all other assessments or
charges of a similar nature, or assessments payable pursuant to any restrictive covenants, whether public or private, affecting
the Real Estate or any portion of the Real Estate, whether or not such assessments or charges are or may become liens on the Real
Estate.


 


		6.15	Waste;
                                         Alteration of the Property



 


Borrowers shall not commit,
suffer or permit any waste on the Real Estate nor take or permit any actions that might invalidate any insurance carried on the
Property. Borrowers shall maintain or cause to be maintained the Property in its current or better condition and repair, ordinary
wear and tear excepted, and shall pay or cause to be paid all costs of operating and maintaining the Property. No part of the Improvements
may be removed, demolished or materially altered, without the prior written consent of Lender which approval shall not be unreasonably
conditioned, withheld, or delayed, and, if required or necessary, the approval or consent of any Governmental Authorities that
have direct or indirect authority or oversight over Borrowers, the Property, or the operations conducted at the Real Estate. Without
the prior written consent of Lender and, if required or necessary, the approval or consent of any Governmental Authorities that
have direct or indirect authority or oversight over Borrowers, the Property, or the operations conducted at the Real Estate, Borrowers
shall not commence or permit any construction of any material improvements on the Real Estate other than improvements required
for the maintenance or repair of the Property.


 




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		6.16	Management



 


The management of the
Property will be by either: (a) Borrowers or an entity affiliated with Borrowers approved by Lender; or (b) a professional
property management company approved by Lender. Property management by an affiliated entity or a professional property management
company shall be pursuant to a written Property Management Agreement approved by Lender and the Property Manager must enter into
a Property Management Fee Subordination Agreement with Lender and in form as required by Lender. In no event shall any such Property
Manager be removed or replaced or the terms of any such Property Management Agreement be modified or amended without the prior
written consent of Lender. Upon the occurrence of any Event of Default under this Loan Agreement or of a default under any such
Property Management Agreement then in effect, which event under any such Property Management Agreement is not cured within any
applicable grace or cure period contained in the Property Management Agreement, Lender shall have the right to terminate, or to
direct Borrowers to terminate, the Property Management Agreement upon 30 days’ notice and to retain, or to direct Borrowers
to retain, a new Property Manager approved by Lender. Borrowers represent and warrant that there is currently no Property Manager
or Property Management Agreement of Borrower relating to any of the Facilities.


 


		6.17	Rents
                                         and Profits



 


All Rents and Profits
of any Borrower generated by or derived from the Operating Leases will first be utilized solely for Borrowers’ current expenses
directly attributable to Borrower’s ownership and operation of the Facilities, including current expenses relating to
Borrowers’ liabilities and obligations with respect to this Loan Agreement and the other Loan Documents, and none of such
Rents and Profits of any Borrower generated by or derived from the Property will be diverted by Borrowers and utilized for any
other purpose unless all such current expenses attributable to the Borrowers’ ownership and operation of the Property have
been fully paid and satisfied.


 


		6.18	Hazardous
                                         Materials and Environmental Concerns



 


The covenants, obligations
and indemnities of the Indemnitor under the Environmental Indemnity are hereby incorporated into this Loan Agreement by reference
as fully as if set forth in this Loan Agreement verbatim. Borrowers agree to perform and comply with all such covenants, obligations
and indemnities in all respects. Borrowers further agree that its liability with respect to such covenants, obligations and indemnities
is a separate, direct and primary obligation of Borrowers under this Loan Agreement, independent of the obligations of any other
Indemnitor under the Environmental Indemnity, and that Borrowers’ obligations under this Section 6.18 are not
intended to be a guaranty of the obligations of any other Indemnitor under the Environmental Indemnity. Borrowers’ obligation
to perform and comply with all such covenants, obligations and indemnities shall be enforceable under this Loan Agreement independently
from the Environmental Indemnity and without regard to whether the Borrower's obligations under the Environmental Indemnity, or
the obligations of any other Indemnitor under the Environmental Indemnity, are released or become unenforceable or whether the
Environmental Indemnity is terminated or released. Lender’s exercise of rights and remedies under the Environmental Indemnity
shall not impair or preclude the Lender's exercise of rights and remedies under this Section 6.18.


 




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		6.19	Casualty
                                         and Condemnation



 


(a)       Borrowers shall
give Lender prompt written notice of the occurrence of any casualty affecting, or the institution of any proceedings for eminent
domain or for the condemnation of, the Property or any portion thereof (each, a “Casualty/Condemnation Event”).
Borrowers assign all insurance proceeds on the Property and all causes of action, claims, compensation, awards and recoveries for
any damage, condemnation or taking of all or any part of the Property or for any damage or injury to it for any loss or diminution
in value of the Property. All such amounts will be paid to Lender. Lender may participate in any suits or proceedings relating
to any such proceeds, causes of action, claims, compensation, awards or recoveries and Lender is authorized, in its own name or
in Borrowers’ name, to adjust any loss covered by insurance or any condemnation claim or cause of action, and to settle or
compromise any claim or cause of action in connection therewith, and Borrowers shall from time to time deliver to Lender any instruments
required to permit such participation, but Lender will not have the right to participate in the adjustment of any loss less than
$50,000. Provided no Event of Default has occurred, Lender shall apply any sums received by it under this Section 6.19
first to the payment of all of its costs and expenses (including reasonable legal fees and disbursements) incurred in obtaining
those sums, and then, as follows:


 


(b)       If Lender receives
insurance proceeds or condemnation awards upon the occurrence of a Casualty/Condemnation Event in an amount not in excess of the
lesser of (i) 5% of the then outstanding principal balance of the Loan and (ii) $250,000 (collectively, the “Threshold
Amount”). Lender will, to the extent such insurance proceeds or condemnation awards are available for such purpose, disburse
to Borrowers the amount paid or incurred by Borrowers as a result of any such Casualty/Condemnation Event for costs and expenses
incurred by Borrowers to repair or restore the Property (collectively, the “Repairs”) pursuant to disbursement
provisions as determined by Lender.


 


(c)       If proceeds or
awards from a Casualty/Condemnation Event exceed the Threshold Amount, Lender may elect, in Lender’s discretion and without
regard to the adequacy of Lender’s security, to (i) accelerate the Maturity Date of the Loan and declare the Obligations
to be immediately due and payable, provided, so long as no Default or Event of Default exists, no termination fee shall be charged,
and apply the remainder of such sums received pursuant to this Section to the payment of the Obligations in whatever order Lender
directs in its discretion (which should be reasonable unless an Event of Default exists), with any remainder being paid to Borrowers,
or (ii) make insurance or condemnation proceeds available to Borrowers for repair or restoration if Borrowers establish to
the satisfaction of Lender, in its sole discretion, that Borrowers otherwise satisfy the requirements of Section 6.19(d).
Should Lender make the election described immediately above in item (ii) of this Section 6.19(c), Borrowers
shall be obligated to undertake restoration and repair of the damaged Improvements consistent with the provisions of this Section 6.19.


 




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(d)If Lender elects
to otherwise make the insurance proceeds or condemnation award available to Borrowers for repair or restoration pursuant to Section 6.19(c),
then if:


 


		(i)	the Property can, in Lender’s Permitted Discretion, with diligent restoration or repair,
be returned to a condition at least equal to the condition thereof that existed prior to the casualty or partial taking causing
the loss or damage by the earlier to occur of the following dates: (A) 6 months after the receipt of insurance proceeds or
condemnation awards by either Borrowers or Lender, and (B) 6 months prior to the Maturity Date, and



 


		(ii)	all necessary governmental approvals can be obtained to allow the rebuilding and re-occupancy of
the Property as described in Section 6.19(d)(i), and



 


		(iii)	there are sufficient sums available (through insurance proceeds or condemnation awards and contributions
by Borrowers, the full amount of which shall at Lender’s option have been deposited with Lender) for such restoration or
repair (including for any reasonable costs and expenses of Lender to be incurred in administering such restoration or repair) and
for payment of principal and interest to become due and payable under this Loan Agreement during such restoration or repair, and



 


		(iv)	the economic feasibility of the Improvements after such restoration or repair will be such that
income from their operation is reasonably anticipated to be sufficient to pay operating expenses of the Property and debt service
on the Loan in full with the same coverage ratio considered by Lender in its determination to make the Loan; and



 


		(v)	Borrowers shall have delivered to Lender, at Borrowers’ sole cost and expense, an appraisal
report from an appraiser, in form and substance, satisfactory to Lender appraising the value of the Property as proposed to be
restored or repaired to be not less than an appraised value of the Property such that the outstanding principal amount of the Loan
is not greater than 75% of such appraised value.



 




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then Lender shall, solely for the purposes
of such restoration or repair, advance so much of the remainder of such sums as may be required to facilitate such restoration
or repair, and any funds deposited by Borrowers for such restoration or repair to Borrowers in the manner and upon such terms and
conditions as would be required by a prudent interim construction lender, including the prior written approval by Lender of plans
and specifications, contractors and the form of construction contracts and the furnishing to Lender of permits, bonds, lien waivers,
invoices, receipts and affidavits from contractors and subcontractors in form and substance reasonably satisfactory to Lender.
Lender shall apply any remaining proceeds for payment of the Obligations in whatever order as Lender directs, or released to Borrowers,
in its discretion. Borrowers shall, in good faith, undertake reasonable efforts to cause the conditions described in this Section 6.19(d)
to be fully satisfied (e.g., Borrowers shall timely make applications for necessary governmental permits, shall order an appropriate
appraisal report, etc.). If such conditions are satisfied, Borrowers shall be obligated to undertake restoration and repair of
the damaged Improvements subject to the terms of this Section 6.19.


 


Any disbursement pursuant to this Section 6.19(d)
of sums by Lender shall, subject to Borrowers’ satisfaction of the provisions of this Section 6.19, be
in a manner to promptly facilitate the restoration or repair of the Property. If Borrowers fail to meet the requirements of this
Section 6.19(d), then Lender may elect in its discretion and without regard to the adequacy of Lender’s
security, to accelerate the Maturity Date and declare any and all of the Obligations to be immediately due and payable and apply
the remainder of such sums to the payment of the Obligations in whatever order Lender directs in its discretion, with any remainder
being paid to Borrowers.


 


(e)Any reduction
in the Obligations resulting from Lender’s application of any sums received by it under this Loan Agreement shall take effect
only when Lender actually receives such sums and elects to apply such sums to the Obligations and, in any event, the unpaid portion
of the Obligations shall remain in full force and effect and Borrowers shall not be excused in the payment thereof. Partial payments
received by Lender, as described in the preceding sentence, shall be applied to the payment of the Obligations in whatever order
Lender directs in its reasonable discretion, with any remainder being paid to Borrowers. If Borrowers undertake to restore or repair
the Property after the occurrence of a casualty or partial taking of the Property as provided above, Borrowers shall promptly and
diligently, at Borrowers’ sole cost and expense and regardless of whether the insurance proceeds or condemnation award, as
appropriate, shall be sufficient for the purpose, restore, repair, replace and rebuild the Property as nearly as possible to their
value, condition and character immediately prior to such casualty or partial taking in accordance with the foregoing provisions
and Borrowers shall pay to Lender all costs and expenses of Lender incurred in administering such rebuilding, restoration or repair,
provided that Lender makes such proceeds or award available for such purpose. Borrowers agrees to execute and deliver from time
to time such further instruments as may be reasonably requested by Lender to confirm the foregoing assignment to Lender of any
award, damage, insurance proceeds, payment or other compensation. Borrowers irrevocably constitute and appoint Lender the attorney-in-fact
of Borrowers (which power of attorney shall be irrevocable so long as any of the Obligations are outstanding, shall be deemed coupled
with an interest, shall survive the voluntary or involuntary dissolution of Borrowers and shall not be affected by any disability
or incapacity suffered by Borrowers subsequent to the date of this Loan Agreement), with full power of substitution, subject to
the terms of this Section, to settle for, collect and receive any such awards, damages, insurance proceeds, payments or other compensation
from the parties or authorities making the same, to appear in and prosecute any proceedings therefor and to give receipts and acquittance
therefor .


 




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	 	6.20	omitted
                                         .



 


		6.21	Facility
                                         Operations



 


Borrowers shall cause
the operations conducted or to be conducted at the Facilities to be conducted at all times in a manner consistent with or better
than the level of operation of each of the Facilities as of the date of this Loan Agreement, and with the level of operation
of other respected facilities in the industry. Without limitation, Borrowers shall:


 


(a)       maintain or cause
to be maintained the standard of care for the residents of each of the Facilities at all times at a level necessary to ensure a
level of quality care for the residents of each of the Facilities comparable to or better than that existing on the date of Closing;


 


(b)       maintain or cause
to be maintained a standard of care in the storage, use, transportation and disposal of all medical equipment, medical supplies,
medical products or gases, and medical waste, of any kind and in any form, that is in accordance with that of the highest prudent
industry standard and in conformity with all applicable regulations and laws;


 


(c)       operate or cause
to be operated the Facilities in a prudent manner in compliance with applicable laws and regulations relating thereto and cause
all Licenses, reimbursement or care contracts, and any other agreements necessary for the certification, licensure, accreditation
or operation of each of the Facilities as may be necessary for participation in the Medicaid reimbursement programs, managed care
company, insurance company, or other third-party payor reimbursement programs to remain in effect without reduction in the number
of licensed beds or beds authorized for use in Medicaid reimbursement programs, managed care company, insurance company, or other
third-party payor reimbursement programs;


 


(d)       take no, nor permit
to be taken any, action that will or could reasonably be expected to result in a reduction, suspension, or elimination of reimbursement
for services from Medicaid, or any managed care company, insurance company, or other third-party payor; and


 


(e)       maintain or cause
to be maintained all deposits, including deposits relating to residents or residency agreements. If such deposits are in cash such
deposits are to be deposited and held by any Borrower or Operator, as the case may be, in accordance with applicable law, at such
commercial or savings bank or banks as may be reasonably satisfactory to Lender. If such deposits are in any other form, such deposits
are to be maintained as Lender may expressly permit. Any bond or other instrument that Borrowers or any Operator, as the case may
be, are permitted to hold in lieu of cash deposits under any applicable legal requirements shall be maintained in full force and
effect unless replaced by cash deposits as described above, shall be issued by an institution reasonably satisfactory to Lender,
shall, if permitted pursuant to any legal requirements, name Lender as payee or Lender thereunder (or at Lender’s option,
be fully assignable to Lender) and shall, in all respects, comply with any applicable legal requirements and otherwise be reasonably
satisfactory to Lender. Borrowers shall, upon request, provide Lender with evidence reasonably satisfactory to Lender of compliance
with the foregoing.


 




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		6.22	Accounts



 


Borrowers shall maintain
all Accounts relating to each Facility with Pacific Western Bank. Notwithstanding the foregoing, Borrowers may maintain Accounts
relating to the Facilities at banks or institutions other than Pacific Western Bank so long as the aggregate amount on deposit
in such Accounts is less than $10,000 at all times.


 


		6.23	Operations
                                         and Maintenance Programs



 


Within ninety (90) days
of the date hereof, Borrowers shall establish and comply with operations and maintenance programs with respect to the Facilities,
in form and substance reasonably acceptable to Lender, which programs shall address any asbestos-containing material or lead based
paint that may now or in the future be detected at or on any of the Facilities. Without limiting the generality of the preceding
sentence, Lender may require (a) periodic notices or reports to Lender in form, substance and at such intervals as Lender may specify,
(b) an amendment to one or more of such operations and maintenance programs to address changing circumstances, laws or other matters,
(c) at Borrowers’ sole expense, supplemental examination of the Facilities by consultants specified by Lender, (d) access
to the Facilities by Lender, its agents or servicer, to review and assess the environmental condition of the Facilities and Borrowers’
compliance with any operations and maintenance programs, and (e) variation of one or more of the operations and maintenance programs
in response to the reports provided by any such consultants.


 


		VII.	NEGATIVE COVENANTS



 


Borrowers agree that,
until full performance and indefeasible payment in full in cash of all the Obligations:


 


		7.1	Financial
                                         Covenants



 


Borrowers shall not violate
or, if applicable, permit any Operator to violate, the financial covenants set forth on Appendix A.


 


		7.2	Indebtedness



 


Borrowers may not create,
incur, assume or suffer to exist any Indebtedness, except the following (collectively, “Permitted Indebtedness”):
(i) Indebtedness under the Loan Documents, (ii) any Indebtedness set forth on Schedule 7.2, (iii) Capitalized
Lease Obligations incurred after the Closing Date and Indebtedness incurred pursuant to purchase money Liens permitted by clause (v)
in the definition of Permitted Liens, provided that the aggregate amount thereof outstanding at any time shall not exceed $100,000
in the aggregate, (iv) Indebtedness in connection with advances made by an Affiliate in order to cure any breach of or failure
to achieve any of the financial covenants set forth on Appendix A or to fund any operating deficits of Borrowers;
provided, however, that such Indebtedness shall be on an unsecured basis, and shall be expressly subordinated by
its terms in right of payment and remedies to all of the Obligations and to all of Lender’s rights under the Loan Documents;
(v) accounts payable to trade creditors and current operating expenses (other than for borrowed money) that are not aged more
than 120 days from the billing date or more than 30 days from the due date, in each case incurred in the Ordinary Course
and paid within such time period, unless the same are being contested in good faith and by appropriate and lawful proceedings and
such reserves, if any, with respect thereto as are required by GAAP and deemed adequate by Borrowers’ independent accountants
shall have been reserved; or in the aggregate outstanding at any one time; provided, however, that such Indebtedness
shall be on an unsecured basis, and expressly subordinated by its terms in right of payment and remedies to all of the Obligations
and to all of Lender’s rights under the Loan Documents. Borrowers shall not make prepayments on any existing or future Indebtedness
to any Person other than to Lender or to the extent specifically permitted by this Loan Agreement or any subsequent agreement between
Borrowers and Lender. If, at any time, a Default or Event of Default exists, no payments shall be made on the Permitted Indebtedness
without Lender’s prior written consent.


 




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		7.3	Liens



 


Except for Permitted
Liens, Borrowers shall not (and shall not permit any Loan Party to) create, incur, assume or suffer to exist any Lien upon, in
or against, or pledge of, (i) any of the Collateral or (ii) )any of its properties or assets or any of its shares, securities
or other equity or ownership or partnership interests, whether now owned or hereafter acquired. Borrowers shall not, and shall
not permit any Loan Party to, assign or transfer any interests in any License or Permit, or any reimbursement or care contracts
related to the Facilities. Each Borrower shall use its commercially reasonable efforts to cause each Operator not to incur, assume
or suffer to exist any Lien except as may be expressly permitted by the terms and conditions of each Operating Lease. Borrower
shall not be in breach of this paragraph if it is contesting involuntary liens (including mechanics’ liens) pursuant to the
terms and conditions of Section 6.13(c).


 


		7.4	Investments;
                                         New Facilities or Collateral; Subsidiaries



 


Borrowers, directly or
indirectly, shall not (i) purchase, own, hold, invest in or otherwise acquire obligations or stock or securities of, or any
other interest in, or all or substantially all of the assets of, any Person or any joint venture, or (ii) make or permit to
exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable for or upon or incur any obligation of any Person (other than those created by the Loan Documents
and Permitted Indebtedness and other than (A) trade credit extended in the Ordinary Course, (B) advances for business
travel and similar temporary advances made in the Ordinary Course to officers, directors and employees, and (C) the endorsement
of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course. Borrowers, directly or indirectly,
shall not purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets other than the Property.
Borrowers shall have no Subsidiaries except as listed on Schedule 5.3(a).


 




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		7.5	Distributions;
                                         Redemptions



 


(a)       Subject to Section
7.5(b) and Section 7.5(c), Borrowers shall not: (i) declare, pay or make any Distributions to any stockholder, member, partner
or other equity owner; or (ii) apply any of its funds, property or assets to the acquisition, redemption or other retirement
of any capital stock or other securities or membership, economic or other interests or of any options to purchase or acquire any
interests in the foregoing (but each Borrower may redeem its capital stock or membership interest from terminated employees pursuant
to, but only to the extent required under, the terms of the related employment agreements as long as no Default or Event of Default
has occurred and is continuing or would be caused by or result from such redemption of capital stock or membership interest).


 


(b)       Notwithstanding
Section 7.5(a), one time in each calendar month, Borrowers may make a Distribution to a stockholder, member,
partner or other equity owner, but only to the extent of Excess Cash Flow, if any, and only so long as: (i) all amounts due
on such Payment Date or otherwise then due under the Loan Documents have been paid; (ii) no Default has occurred and is continuing
or would be caused by or result from such Distributions and no Event of Default has occurred or would be caused by or result from
such Distribution; and (iii) after giving effect to any such proposed Distribution, Borrowers will remain in compliance with
the covenants set forth in Appendix A recomputed for the most recently ended month and quarter for which information
is available (assuming such proposed Distribution was made during the most recently ended month).


 


(c)       Borrowers shall
not make any Distribution of any management, service or related or similar fee to any Person or with respect to any facility owned,
operated or leased by any Borrower except in the manner permitted under any Management Fee Subordination Agreement, provided
that all payments under any Property Management Agreement or any management agreement related to any Facility shall not exceed
5% of the Facility’s revenues for any calendar year during the Term, provided further that Borrowers shall not make
or suffer to exist any Distribution under any Property Management Agreement if a Default or Event of Default has occurred and is
continuing or would result from such Distribution.


 


		7.6	Transactions
                                         with Affiliates



 


(a)       Except as expressly
permitted in the other Loan Documents, Borrowers shall not enter into or consummate any transaction of any kind with any of its
Affiliates or any Guarantor other than: (i) salary, bonus, employee stock options and other compensation and employment arrangements
with directors or officers in the Ordinary Course, provided, that no payment of any bonus shall be permitted if a Default
or Event of Default has occurred and remains in effect or would be caused by or result from such payment, (iii) transactions
on overall terms at least as favorable to Borrowers as would be the case in an arm’s-length transaction between unrelated
parties of equal bargaining power; provided that notwithstanding the foregoing Borrowers shall not (Y) enter into or
consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing
any Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant
to agreement for any Indebtedness of any such Affiliate, or (Z) make any payment to any of its Affiliates in excess of $10,000
without the prior written consent of Lender, and (iv) transactions with Lender or any Affiliate of Lender.


 




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(b)       Borrowers shall
not permit, or otherwise take any action that would result in, either (i) an increase in the accounts receivable to be paid to
Borrowers by any Affiliate of Borrowers, or (ii) a decrease in the accounts payable to be paid by Borrowers to any Affiliate of
Borrowers, if in either case, such action would cause Borrowers not to be in proforma compliance with the financial covenants set
forth in Appendix A or if a Default or Event of Default then exists under any Loan Document.


 


		7.7	Charter
                                         Documents; Fiscal Year; Dissolution; Use of Proceeds



 


Neither any Borrower,
Guarantor nor any Pledging Entities shall (i) amend, modify, restate or change its articles of incorporation or formation,
bylaws, operating agreements or similar charter documents or any Charter Documents, (ii) allow any of its interests to be
certificated, (iii) change its fiscal year, (iv) amend, alter or suspend or terminate or make provisional in any material
way, any License or Permit without the prior written consent of Lender, (v) wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, (vi) change its
name or jurisdiction of organization without the prior written consent of Lender or (vii) use any proceeds of the Loan for
“purchasing” or “carrying” “margin stock” as defined in Regulations T, U or X of the Board
of Governors of the Federal Reserve System or for any other purpose that would be inconsistent with such Regulations T, U
or X or any other regulations of such Board of Governors, or for any purpose prohibited by legal requirements or by the terms and
conditions of the Loan Documents.


 


		7.8	Truth
                                         of Statements



 


Borrowers shall not furnish
(or permit any Loan Party to furnish) to Lender any certificate or other document, instrument or certificate that contains any
untrue statement of a material fact or that omits to state a material fact necessary to make it not misleading in light of the
circumstances under which it was furnished.


 


		7.9	IRS
                                         Form 8821



 


Borrowers shall not,
and shall cause each Loan Party not to, alter, amend, restate or otherwise modify, withdraw, terminate or refile any IRS Form 8821
that Lender requires to be filed.


 




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		7.10	Alienation
                                         and Further Encumbrances



 


(a)       Borrowers acknowledge
that Lender has relied upon the principals of Borrowers and the other Loan Parties and their experience in owning and operating
properties similar to the Property in connection with the closing of the Loan. Accordingly, if the Property or any part of the
Property or interest in the Property shall be sold (including any installment sales agreement), conveyed, disposed of, alienated,
hypothecated, leased (except pursuant to the the Operating Leases), assigned, pledged, mortgaged, further encumbered or otherwise
transferred or Borrowers shall be divested of their respective title to the Property or any interest in the Property, in any manner
or way, whether voluntarily or involuntarily without the prior written consent of Lender being first obtained, which consent may
be withheld in Lender’s sole discretion, and, if required or necessary, the approval or consent of any Governmental Authorities
that have direct or indirect authority or oversight over Borrowers, the Property, or the operations conducted on the Property,
then the same shall constitute an Event of Default under this Loan Agreement and Lender shall have the right, at its option, to
declare any or all of the Obligations, irrespective of the maturity date specified in this Loan Agreement, immediately due and
payable and to otherwise exercise any of its other rights and remedies contained in Article VIII or in any of
the Security Instruments or in any of the other Loan Documents. For purposes of this Section 7.10(a), the sale,
conveyance, transfer, disposition, alienation, hypothecation, pledge or encumbering (whether voluntarily or involuntarily) of all
or any portion of the ownership interest in (or, directly or indirectly through constituent parties, any of the ultimate beneficial
ownership interest in) Borrowers shall be deemed to be a transfer of an interest in the Property. Furthermore, the sale, conveyance,
transfer, disposition, alienation, hypothecation, pledge or encumbering (whether voluntarily or involuntarily) of all or any portion
of the ownership interest in (or, directly or indirectly through constituent parties, any of the ultimate beneficial ownership
interest in) any Guarantor or Pledging Entity shall constitute an Event of Default under this Loan Agreement and Lender shall have
the right to exercise its various remedies described in this Loan Agreement and in the other Loan Documents.


 


(b)       Borrowers shall
not consent to any direct or indirect transfer of any Operating Lease, or any ownership interest in any Operator, or suffer or
permit any direct or indirect sale, conveyance, transfer, disposition, alienation, hypothecation, pledge or encumbering of any
Operating Lease (or any Operator’s interest in an Operating Lease). Borrowers shall use commercially reasonable efforts to
prevent any direct or indirect sale, conveyance, transfer, disposition, alienation, hypothecation, pledge or encumbering of any
Operator’s interest in any Operating Lease or any ownership interest in any Operator that would be in violation of any Operating
Lease. If any direct or indirect sale, conveyance, transfer, disposition, alienation, hypothecation, pledge or encumbering any
Operator’s interest in any Operating Lease or any ownership interest in any Operator occurs in violation of any Operator
Lease, Borrowers shall pursue all rights and remedies against such Operator (but the pursuit of any such rights or remedies shall
be subject to Lender’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed).
Without limitation, Borrowers are not in breach of this paragraph if any direct or indirect sale, conveyance, transfer, disposition,
alienation, hypothecation, pledge or encumbering of any Operating Lease (or any Operator’s interest in an Operating Lease)
occurs without the prior written consent of Borrowers and Lender and is permitted pursuant to the terms and conditions of the applicable
Operating Lease .


 


(c)       Notwithstanding
the foregoing provisions of Section 7.10(a),


 


    (i)          provided
that (A) no Default or Event of Default exists, and (B) no Change of Control would occur, a one-time transfer of the entire interest
of Summit Healthcare Operating Partnership, L.P. in each of Borrowers to Summit Union Life Holdings, LLC shall be permitted provided
that Lender determines, in its Permitted Discretion, that all of the following conditions are satisfied: (1) after the transfers,
the ownership (direct and indirect) of the Borrowers shall be as stated on the organizational chart attached as Schedule 7.10(c);
(2) Borrowers shall have provided Lender with a thirty (30) day advance written notice of the proposed transfer, and all documents
effecting such transfer, all of which shall be satisfactory to Lender in its Permitted Discretion; (3) Lender shall have received
a Pledge and Security Agreement from Summit Union Life Holdings, LLC in form as that provided by Summit Healthcare Operating Partnership,
L.P. (with any reasonable changes required by Lender); (4) Lender shall have received a current UCC search of Summit Union Life
Holdings, LLC confirming that Lender will have a first-priority security interest in the collateral to be provided in such Pledge
and Security Agreement; (5) Lender shall have received such organizational documents (including state, good standing and other
certifications) from Summit Union Life Holdings, LLC and the other entities owning a direct or indirect interest therein as required
by Lender, all of which shall be satisfactory to Lender in its Permitted Discretion; (6) Borrowers shall have certified to
Lender that all terms and conditions (1) – (5) have been satisfied; (7) Lender shall have received, if requested by Lender,
any opinions of counsel for borrower confirming in form and substance as required by Lender in its Permitted Discretion, among
other matters, that the new Pledge and Security Agreement has been duly authorized, executed and delivered and is enforceable in
accordance with its terms, together with any other documents required by Lender in its Permitted Discretion; and (8) Lender shall
have been reimbursed for all costs and expenses of Lender (including attorneys’ fees and costs of internal and external counsel).


 




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  (ii)         if
any Transfer of any interest in any Borrower or Loan Party, whether direct or indirect, would result in any Person owning more
than twenty percent (20%) of the direct or indirect legal, beneficial or economic interest in any Borrower or Loan Party, Borrowers
shall provide Lender with at least thirty (30) days prior written notice of such proposed transfer along with information regarding
such transferee and the principals of such transferee sufficient to assure compliance by Lender with all legal and regulatory requirements
and Lender policies relating to such transfer and transferee, including, without limitation, the Patriot Act and to ensure compliance
with the terms and conditions of Section 7.15 and Section 12.18.


 


		7.11	Zoning;
                                         Use



 


Without the prior written
consent of Lender and, if required or necessary, the approval or consent of any Governmental Authorities that have direct or indirect
authority or oversight over Borrowers, the Property, or the operations conducted at any of the Facilities, Borrowers shall not
seek, make, suffer, consent to or acquiesce in any change in the zoning or conditions of use of the Real Estate or the Improvements.
Borrowers shall comply or cause Operators to comply with and make all payments required under the provisions of any covenants,
conditions or restrictions affecting the Real Estate or the Improvements. Borrowers shall comply or cause Operators to comply with
all existing and future requirements of all Governmental Authorities having jurisdiction over the Property or the operations conducted
at each Facility. Borrowers shall keep or cause Operators to keep all Licenses and Permits in full force and effect. Borrowers
shall cause each Facility to be operated as assisted living and memory care facilities with an aggregate of 45 residential
units for Carolina Manor, 20 residential units for Carrington Manor, 40 residential units for Marla Vista Manor, and 20 residential
units for Marla Vista Gardens for so long as any portion of the Obligations remains outstanding. If, under applicable zoning provisions,
the use of all or any part of the Real Estate or the Improvements is or becomes a nonconforming use, Borrowers shall not cause
or permit such use to be discontinued or abandoned without the prior written consent of Lender and, if required or necessary, the
approval or consent of any Governmental Authorities that have direct or indirect authority or oversight over Borrowers, the Property,
or the operations conducted at any of the Facilities. Further, without Lender’s prior written consent and, if required or
necessary, the approval or consent of any Governmental Authorities that have direct or indirect authority or oversight over Borrowers,
the Property, or the operations conducted at any of the Facilities, Borrowers shall not file or subject any part of the Real Estate
or the Improvements to any declaration of condominium or cooperative or convert any part of the Real Estate or the Improvements
to a condominium, cooperative or other form of multiple ownership and governance.


 




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		7.12	Leases;
                                         Operating Lease



 


(a)       Borrowers shall
not execute any Lease for possession or occupancy of any portion of the Property, except for the Operating Lease.


 


(b)       Borrowers shall
at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained
in each of the Operating Leases on the part of the landlord, lessor or licensor to be kept and performed (prior to expiration of
any applicable notice and cure period). Borrowers shall not do or suffer to be done any act that might result in a default by the
landlord, lessor, licensor or other party under the Operating Lease or allow any Operator to withhold payment of rent. Borrowers
shall not further assign any Operating Lease or any such rents or payments. Borrowers, at no cost or expense to Lender, shall enforce,
short of termination, the performance and observance of each and every condition and covenant of each Operator under each Operating
Lease. Borrowers shall not, without the prior written consent of Lender, modify any Operating Lease, terminate or accept the surrender
of any Operating Lease, or waive or release any other party from the performance or observance of any material obligation or material
condition under any Operating Lease. Borrowers shall not permit the prepayment of any rents under any Operating Lease for more
than one month prior to the due date thereof. Borrowers shall immediately deliver to Lender a copy of any default notice received
or delivered by Borrowers in connection with any Operating Lease. If any Operating Lease has been terminated, pursuant to the terms
and conditions hereof, Borrowers may enter into an agreement for a substitute Operator under a new Operating Lease with the prior
written consent of Lender, such consent not to be unreasonably withheld.


 


		7.13	Patient
                                         Records



 


Borrowers shall not,
and shall not permit any Operator to, assign, transfer or remove any records pertaining to the Facilities, including resident records,
medical and clinical records (except for removal of patient records as directed by the patients or residents that own those records
or as required by law).


 


		7.14	Easements
                                         and Rights-of-Way



 


Borrowers shall not grant
any easement or right-of-way with respect to all or any portion of the Real Estate without the prior written consent of Lender,
but Lender will not unreasonably withhold its consent for access for any utility or other service providers. The purchaser at any
foreclosure sale may, in its discretion, disaffirm any easement or right-of-way granted in violation of any of the provisions of
any Security Instrument and may take immediate possession of the Property free from, and despite the terms of, such grant of easement
or right-of-way. If Lender consents to the grant of an easement or right-of-way, Lender agrees to grant such consent without charge
to Borrowers other than reasonable expenses, including reasonable attorneys’ fees, incurred by Lender in the review of Borrowers’
request and, if applicable, in the preparation of documents relating to the subordination of any Security Instrument to such easement
or right-of-way.


 




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		7.15	Certain
                                         Specific Agreements



 


No Loan Party shall permit
any other Transaction Person, to (i) be or become a Person whose property or interests in property are blocked or subject
to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engage
in any dealings or transactions prohibited by Section 2 of such executive order, or otherwise be associated with any such
Person in any manner violative of Section 2 of such executive order, or (iii) otherwise become a Person on the list of
Specially Designated Nationals and Blocked Persons in violation of the limitations or prohibitions under any other OFAC regulation
or executive order.


 


		VIII.	EVENTS OF DEFAULT



 


		8.1	Events of Default



 


The occurrence of any
one or more of the following shall constitute an “Event of Default” under this Loan Agreement and under the
other Loan Documents:


 


(a)       Borrowers fail
to pay any amount on the Obligations or provided for in any Loan Document (including under Sections 6.2 and 6.9)
when the same becomes due (whether on any Payment Date, at maturity, by reason of acceleration, by notice of intention to prepay,
by required prepayment or otherwise), but it shall not be an Event of Default if Borrower makes such payments within five (5) days
of the date when due (but Borrower shall have this grace period only twice in any 12 month period and there shall be no grace period
for amounts due on the Maturity Date);


 


(b)       any fact, circumstance
or condition was not as represented or warranted in any material respect in any representation, statement or warranty at the time
made or deemed made by any Loan Party in any Loan Document or in any other certificate, document, instrument, report or opinion
delivered to Lender in conjunction with any Loan Document to which it is a party, (ii) any fact, circumstance or condition
ceases to be as represented or warranted in any material respect after the date of the representation or warranty, or (iii) any
representation or warranty of Manager contained in the Property Management Fees Subordination Agreement, if any, or other similar
document delivered to Lender in connection with the Loan proves to have been incorrect or untrue in any material respect when made
or deemed made;


 




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(c)       any Loan Party
violates or breaches, or fails timely to perform, observe or comply with, any covenant, obligation or agreement set forth in any
Loan Document to the extent not otherwise separately identified as an Event of Default; provided only that in the case of the affirmative
covenants contained in Article VI (other than (i) the covenants contained in Sections 6.5, 6.7,
and 6.11, for which no cure right is provided, (ii) the covenants contained in Sections 6.1(a), for
which Borrowers shall have the opportunity to cure any default, breach or failure of performance within 15 days after Lender’s
written notice of such default, breach or failure of performance, and (iii) the covenants contained in Section 6.2
and 6.9, which is covered by Section 8.1(a) above), Borrowers shall have the opportunity to cure any
default, breach or failure of performance under Article VI within 30 days after the first to occur of (i) Lender’s
written notice of such default, breach or failure of performance or (ii) any Borrower’s discovery of such default, breach
or failure of performance; provided Borrowers shall have an additional thirty (30) days to cure such failure if such failure cannot
reasonably be cured within thirty (30) days and Borrowers are diligently undertaking to cure such default, and, in Lender’s
Permitted Discretion, such failure can be reasonably cured within such additional thirty (30) days; provided further, however,
if a Default can be cured by the replacement of the applicable Operator, instead of thirty (30) days, Borrowers shall have an additional
sixty (60) days to cure such failure if such failure cannot reasonably be cured within thirty (30) days and Borrowers are diligently
undertaking to cure such default, and, in Lender’s Permitted Discretion, such failure can be reasonably cured within such
additional sixty (60) days. Without limitation on other terms and conditions contained herein, any replacement Operator shall subject
to Lender’s prior written approval in its Permitted Discretion.


 


(d)       any of the Loan
Documents ceases to be in full force and effect, or any Lien created under this Loan Agreement or any Security Document ceases
to constitute a valid perfected first priority Lien on the Property in accordance with the terms thereof, or Lender ceases to have
a valid perfected first priority security interest or Lien in any of the Property;


 


(e)       one or more tax
assessments, judgments or decrees is rendered against (i) any Borrower, (ii) Guarantor or any Pledging Entity or (iii)
any Facility that, in each case, is not satisfied or stayed within forty-five (45) days;


 


(f)       any default occurs
(x) in the payment of any Indebtedness (other than the Obligations) of Borrowers in excess of $25,000.00 in the aggregate, (y) in
the payment of any Indebtedness of any Loan Party other than Borrowers that could reasonably be anticipated to result in the occurrence
of a Material Adverse Effect, or (z) in the performance, observance or fulfillment of any provision contained in any agreement,
contract, document or instrument to which any Loan Party is a party or to which any of their properties or assets are subject or
bound where such default could reasonably be expected to have a Material Adverse Effect;


 


(g)       any Loan Party
(i) is unable to pay its debts generally as they become due, (ii) has total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) that exceed its assets, at a Fair Valuation, (iii) has an unreasonably small capital
base with which to engage in its anticipated business, (iv) files a petition under any insolvency statute, (v) makes
a general assignment for the benefit of its creditors, (vi) commences a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or any substantial part of its property, (vii) files a petition seeking
reorganization or liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute, (viii) files
an answer consenting to or otherwise acquiesces or joins in an involuntary petition filed against Borrowers by any Person under
any applicable bankruptcy or insolvency law; or (ix) consents to, acquiesces or joins in an application for the appointment
of a custodian, trustee or examiner for Borrowers or any portion of the Property;


 




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(h)       (i) a court
of competent jurisdiction (A) enters an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Loan Party or the whole or any substantial part of any such Person’s properties, which shall continue
unstayed and in effect for a period of 60 days, (B) approves a petition filed against any Loan Party seeking reorganization,
liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute, which is not dismissed within
60 days or, (C) under the provisions of any Debtor Relief Law or other applicable law or statute, assumes custody or
control of any Loan Party or of the whole or any substantial part of any such Person’s properties, which is not irrevocably
relinquished within 60 days, or (ii) there is commenced against any Loan Party any proceeding or petition seeking reorganization,
liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute, which (A) is not unconditionally
dismissed within 60 days after the date of commencement, or (B) the applicable Loan Party, in some fashion, indicates
its approval of or consent to;


 


(i)         Without
limiting the provisions of Section 7.10, (i) any Change of Control occurs or any agreement or commitment
to cause or that may result in any such Change of Control is entered into, (ii) any Material Adverse Effect or Material
Adverse Change occurs or is reasonably expected to occur, (iii) any Liability Event occurs or is reasonably expected to occur,
or (iv) any Loan Party ceases any portion of its business operations as currently conducted or anticipated to be conducted,
except if such cessation is with respect to Guarantor or Pledging Entity and such cessation could not reasonably be expected to
result in or have a Material Adverse Effect;


 


(j)        Lender receives
any indication or evidence that any Loan Party may have directly or indirectly been engaged in any type of activity that, in Lender’s
judgment, might result in forfeiture of any property relating to any Facility or the Collateral to any Governmental Authority,
and such activity continues unremedied for a period of 30 days after written notice from Lender;


 


(k)       a default occurs
under any other Loan Document and such default is not cured within any applicable cure period;


 


(l)        uninsured damage
to, or loss, theft or destruction of, any portion of the Property occurs that exceeds $100,000 per Facility in the aggregate if
such portion of the Property is not repaired or replaced within 60 days of such damage, loss, theft or destruction;


 


(m)      any Loan Party
or any of its members, managers, directors or officers is criminally indicted or convicted under any law that could lead to a forfeiture
of any Collateral or any Licenses or Permits;


 


(n)       the issuance of
any process for levy, attachment or garnishment or execution upon or prior to any judgment against any property or assets of any
Loan Party that, individually or in the aggregate, could be reasonably be expected to have or result in a Material Adverse Effect
and that is not released or discharged within 60 days of issuance;


 


(o)      Borrowers fail
to pay to Lender any sum with respect to any of the Reserves within ten (10) days of written notice of its failure to make such
payment;


 




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(p)       any default under
any Operating Lease by any Borrower that is not cured within the applicable cure period by Borrowers, or any material default occurs
under any Property Management Agreement (if any) that is not cured within the applicable cure period by Borrowers or Manager, as
applicable, or Borrowers do not terminate the applicable Property Management Agreement (if any) and enter into a new Property Management
Agreement in form and substance and with a new manager acceptable to Lender in Lender’s discretion within 30 days of the
occurrence of such default;


 


(q)       any portion of
the Loan is not used for the purpose for which it was advanced;


 


(r)       any Loan Party
challenges the validity or enforceability of any of the Loan Documents;


 


(s)       any insurance
required under this Loan Agreement is terminated or lapsed;


 


(t)       any failure to
comply with any of the financial covenants set forth on Appendix A attached to this Loan Agreement;


 


(u)       any Borrower fails
to cure or abate any violation of any law, order, ordinance, rule or regulation pertaining to the operation of any Facility that
is claimed by any Governmental Authority, or any officer acting on behalf thereof, within the time permitted by such authority
for such cure or abatement;


 


(v)       any proceedings
are instituted against any Loan Party by any Governmental Authority that would or are reasonably likely to result in (i) the
revocation of license granted for the operation of any of the Facilities, (ii) the decertification of any of the Facilities
from participation on the Medicaid reimbursement program or (iii) the issuance of DPNA (denial of payment for new admissions)
or a stop placement order with respect to any Facility.


 




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		8.2	Remedies



 


(a)       Upon the occurrence
of any Event of Default, Lender may, without notice or demand, take any or all of the following actions either individually or
in conjunction with one another: (i) declare all or any portion of the outstanding principal balance of the Loan, all interest
thereon and all other Obligations to be due and payable immediately, in each case without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or further notice of any kind, all of which are expressly waived by Borrowers,
(ii) apply any Reserves held by Lender and any and all sums on deposit in the Payment Account and the Lease Deposit Account
to reduce the Obligations, (iii) foreclose the Liens created under the Security Documents, (iv) realize upon, take possession
of and/or sell any collateral or securities pledged (other than collateral consisting of Accounts owed or owing by Medicaid Account
Debtors absent a court order or compliance with applicable law) with or without judicial process, (v) exercise all rights
and powers with respect to the Property as Borrowers might exercise (other than with respect to collateral consisting of Accounts
owed or owing by Medicaid Account Debtors absent a court order or compliance with applicable law), (vi) collect and send notices
regarding the Property (other than with respect to collateral consisting of Accounts owed or owing by Medicaid Account Debtors
absent a court order or compliance with applicable law), with or without judicial process, (vii) by its own means or with
judicial assistance, enter any premises at which the personal property collateral and/or pledged securities are located, or render
any of the foregoing unusable or dispose of the personal property collateral and/or pledged securities on such premises without
any liability for rent, storage, utilities, or other sums, and Borrowers shall not resist or interfere with such action, (viii) at
Borrowers’ expense, require that all or any part of the personal property collateral be assembled and made available to Lender
at any place designated by Lender, (ix) prohibit any action permitted to be taken under this Loan Agreement and (x) exercise
any and all other remedies available to Lender under this Loan Agreement, under the Security Documents, under any of the other
Loan Documents, under the UCC or otherwise at law or in equity. Lender may take one or more of the actions set forth in the preceding
sentence, the exercise of all or each of which shall not waive any right that Lender may have to exercise any other rights or remedies
set forth in this Loan Agreement, in any Loan Document or available to Lender at law, in equity or under the UCC.


 


(b)       Borrowers agree
that notice received by it at least 15 days before the time of any intended public sale, or the time after that any private
sale or other disposition of personal property collateral is to be made, shall be deemed to be reasonable notice of such sale or
other disposition. If permitted by applicable law, any perishable personal property collateral that threatens to speedily decline
in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrowers. At any sale
or disposition of personal property collateral or securities pledged, Lender may (to the extent permitted by applicable law) purchase
all or any part thereof free from any right of redemption by Borrowers that right is waived and released. Borrowers agree not to,
and not to permit or cause any of their Subsidiaries to, interfere with or impose any obstacle to Lender’s exercise of its
rights and remedies with respect to the personal property collateral or the Property. Lender, in dealing with or disposing of the
personal property collateral or any part thereof, shall not be required to give priority or preference to any item of collateral
or otherwise to marshal assets or to take possession or sell any collateral with judicial process.


 




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		8.3	Advances to Protect Property



 


Without limiting or waiving
any other rights and remedies of Lender under this Loan Agreement, if an Event of Default has occurred, then Lender may, at its
option, with or without notice to Borrowers, make any appearances, disburse or advance any sums and take any actions as may be
necessary or desirable to protect or enforce the security of the Security Documents or to remedy the failure of Borrowers to perform
their agreements (without, however, waiving any Default or Event of Default). Without limitation of the foregoing, Lender, in its
discretion, shall have the right, at any time that Borrowers fail to do so, and from time to time, without prior notice (i) to
obtain insurance covering any of the Property to the extent insurance is required under this Loan Agreement, (ii) to pay for
the performance of any of the Obligations, (iii) to discharge taxes or Liens on any of the Property that are in violation
of any Loan Document, and (iv) to pay for the maintenance and preservation of the Property. Borrowers agree to pay within
five (5) Business Days of demand all expenses of Lender reasonably incurred with respect to the foregoing (including reasonable
fees and disbursements of counsel), together with interest thereon at the Default Interest Rate from and after the date on which
Lender incurs such expenses until reimbursement thereof by Borrowers. Any expenses so incurred by Lender, together with interest
thereon as provided above, shall be additional indebtedness of any of Borrowers secured by the Security Documents and by all of
the other Loan Documents securing all or any part of the Obligations. The necessity for any such actions and of the amounts to
be paid shall be determined by Lender in its discretion. Lender is empowered to enter and to authorize others to enter upon the
Property or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without
becoming liable to any of Borrowers or any person in possession holding under any of Borrowers. The remedies set forth in this
Section 8.4 shall be exercisable by Lender, and any and all payments made or costs or expenses incurred by Lender
in connection therewith shall be secured by the Security Documents and shall, without demand, be immediately repaid by Borrowers
with interest thereon at the Default Interest Rate, notwithstanding the fact that such remedies were exercised and such payments
made and costs incurred by Lender after the filing by any Loan Party of a voluntary case or the filing against any of Borrowers
of an involuntary case pursuant to or within the meaning of the Bankruptcy Reform Act of 1978, as amended (the “Act”),
Title 11 U.S.C., or after any similar action pursuant to any other Debtor Relief Law (whether statutory, common law,
case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable to any Loan
Party, Lender, any guarantor or indemnitor, the obligations or any of the Loan Documents. This indemnity shall survive payment
in full of the Obligations. This Section 8.4 shall not be construed to require Lender to incur any expenses,
make any appearances or take any actions.


 


		8.4	Application of Proceeds



 


In addition to any other
rights, options and remedies Lender has under the Loan Documents, the UCC, at law or in equity, all dividends, interest, rents,
issues, profits, fees, revenues, income and other proceeds collected or received from collecting, holding, managing, renting, selling,
or otherwise disposing of all or any part of the Property or any proceeds thereof upon exercise of its remedies under this Loan
Agreement may be applied to the Obligations by Lender in any manner determined by Lender in its discretion except as may be required
by applicable law.


 


		8.5	Rights of Lender to Appoint Receiver



 


Without limiting and
in addition to any other rights, options and remedies Lender has under the Loan Documents, the UCC, at law or in equity, upon the
occurrence and during the continuance of any Event of Default, Lender shall have the right to apply for and have a receiver appointed
by a court of competent jurisdiction in any action taken by Lender to enforce its rights and remedies in order to manage, protect
and preserve the Property and continue the operation of the business of Borrowers and to collect all revenues and profits thereof
and apply the same to the payment of all expenses and other charges of such receivership including the compensation of the receiver
until a sale or other disposition of such Property shall be finally made and consummated.


 




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		8.6	Rights and Remedies Not Exclusive



 


Lender shall have the
right in its discretion to determine which rights, Liens and/or remedies Lender may at any time pursue, relinquish, subordinate
or modify, and such determination will not in any way modify or affect any of Lender’s rights, Liens or remedies under any
Loan Document, applicable law or equity. The enumeration of any rights and remedies in any Loan Document is not intended to be
exhaustive, and all rights and remedies of Lender described in any Loan Document are cumulative and are not alternative to or exclusive
of any other rights or remedies that Lender otherwise may have. The partial or complete exercise of any right or remedy shall not
preclude any other further exercise of such or any other right or remedy.


 


		IX.	DIVERSION



 


		9.1	Reserved



 


		9.2	Diversion



 


Borrowers acknowledge
that the making of the Loan by Lender to Borrowers is dependent, in part, on the concentration on the Facilities during the Term.
Borrowers further acknowledge that the diversion of residents and/or patient care activities by any Borrower or any other Loan
Party from the Facilities to other properties, if any, owned or operated by any Affiliates of Borrower or any Loan Party may have
a Material Adverse Effect. In connection therewith, absent Lender’s prior written consent, Borrowers covenant and agree that
so long as the Obligations are outstanding except as required for medically appropriate reasons, due to disruptive behavior of
the resident that is detrimental to the applicable Facility, or as required by any Governmental Authority or as requested by a
resident or its family, neither any Borrower nor any Loan Party will recommend or solicit the removal or transfer of any resident
or patient or equipment from the Facilities to any other nursing or healthcare facility, or to any senior housing or retirement
housing facility or otherwise cause the removal or transfer of any resident or patient or equipment from any of the Facilities,
in each case to any other facility owned, operated or managed by any Loan Party or any Operator or any Affiliate thereof.


 


		X.	WAIVERS AND JUDICIAL PROCEEDINGS



 


		10.1	Waivers



 


Borrowers waive setoff,
counterclaim, demand, presentment, protest, all defenses with respect to any and all instruments and all notices and demands of
any description, and the pleading of any statute of limitations as a defense to any demand under any Loan Document. Borrowers waive
any and all defenses and counterclaims any of them may have or could interpose in any action or proceeding brought by Lender to
obtain an order of court recognizing the assignment of, or Lien of Lender in and to, any Property. With respect to any action under
this Loan Agreement, Lender may conclusively rely upon and shall incur no liability to Borrowers in acting upon, any request or
other communication that Lender reasonably believes to have been given or made by a person authorized on Borrowers’ behalf,
whether or not such person is listed on the incumbency certificate pursuant to Section 4.1(c). In each such
case, Borrowers waive the right to dispute Lender’s action based upon such request or other communication, absent manifest
error.


 




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		10.2	Delay;
                                         No Waiver of Defaults



 


No course of action or
dealing, renewal, release or extension of any provision of any Loan Document, or single or partial exercise of any such provision,
or delay, failure or omission on Lender’s part in enforcing any such provision shall affect the liability of any Loan Party
or operate as a waiver of such provision or preclude any other or further exercise of such provision. No waiver by any party to
any Loan Document of any one or more defaults by any other party in the performance of any of the provisions of any Loan Document
shall operate or be construed as a waiver of any future default, whether of a like or different nature, and each such waiver shall
be limited solely to the express terms and provisions of such waiver. Notwithstanding any other provision of any Loan Document,
by completing the Closing under this Loan Agreement and/or by funding the Loan, Lender does not waive any breach of any representation
or warranty of under any Loan Document, and all of Lender’s claims and rights resulting from any such breach or misrepresentation
are specifically reserved.


 


		10.3	Jury
                                         Waiver



 


(a)       EACH PARTY, TO
THE MAXIMUM EXTENT PERMITTED BY LAW, (i) EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH
RESPECT TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY ANY LOAN DOCUMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND (ii) AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS LOAN AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.


 


(b)       If any such claim
or cause of action is brought or filed in any United States federal court sitting in the State of California or in any state court
of the State of California, and the waiver of jury trial set forth in Section 10.3(a) is determined or held
to be ineffective or unenforceable, the parties agree that all claims and causes of action shall be resolved by reference to a
private judge sitting without a jury, pursuant to California Code of Civil Procedure Section 638, before a mutually acceptable
referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Los Angeles County, California. Such
proceeding shall be conducted in Los Angeles County, California, with California rules of evidence and discovery applicable to
such proceeding. If Claims or causes of action are to be resolved by judicial reference, any party may seek from any court having
jurisdiction over such Claims or causes of action any prejudgment order, writ or other relief and have such prejudgment order,
writ or other relief enforced to the fullest extent permitted by law notwithstanding that all claims and causes of action are otherwise
subject to resolution by judicial reference.


 




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		10.4	Cooperation
                                         in Discovery and Litigation



 


In any litigation, arbitration
or other dispute resolution proceeding relating to any Loan Document, Borrowers waive any and all defenses, objections and counterclaims
it may have or could interpose with respect to (i) any of its directors, officers, employees or agents being deemed to be
employees or managing agents of Borrowers for purposes of all applicable law or court rules regarding the production of witnesses
by notice for testimony (whether in a deposition, at trial or otherwise), (ii) Lender’s counsel examining any such individuals
as if under cross-examination and using any discovery deposition of any of them as if it were an evidence deposition, and/or (iii) using
all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested
by Lender, all Persons, documents (whether in tangible, electronic or other form) and/or other things under its control and relating
to the dispute.


 


		XI.	EFFECTIVE DATE AND TERMINATION



 


		11.1	Effectiveness
                                         and Termination



 


Subject to Lender’s
right to terminate this Loan Agreement upon or after any Event of Default, this Loan Agreement shall continue in full force and
effect until the full performance and indefeasible payment in cash of all Obligations.


 


		11.2	Survival



 


All obligations, covenants,
agreements, representations, warranties, waivers and indemnities made by Borrowers in any Loan Document shall survive the execution
and delivery of the Loan Documents, the Closing, the making of the Loan, and any termination of this Loan Agreement until all Obligations
are fully performed and indefeasibly paid in full in cash. The obligations and provisions of Sections 3.2, 3.4,
10.1, 10.2, 10.3, 10.4, 12.1, 12.3, 12.4, 12.6, 12.7, 12.8,
12.9, 12.10, 12.11, 12.14 and 12.15 shall survive termination of the Loan
Documents and any payment, in full or in part, of the Obligations.


 


		XII.	MISCELLANEOUS



 


		12.1	Governing
                                         Law; Jurisdiction; Service of Process; Venue



 


(a)       THIS LOAN AGREEMENT
AND THE OTHER LOAN DOCUMENTS ARE GOVERNED BY FEDERAL LAW AND, FOR THE PURPOSES OF EXPORTATION OF INTEREST AND INTEREST FEES UNDER
FEDERAL LAW, LENDER RELIES ON CALIFORNIA LAW. TO THE EXTENT THAT STATE LAW APPLIES AND IS NOT PREEMPTED BY FEDERAL LAW, THEN PURSUANT
TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS LOAN AGREEMENT WITHOUT
GIVING EFFECT TO ITS CHOICE OF LAW PROVISIONS THAT WOULD RESULT IN APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION. TO THE
EXTENT THAT LENDER HAS GREATER RIGHTS OR REMEDIES UNDER FEDERAL LAW, WHETHER AS A NATIONAL BANK OR OTHERWISE, THIS PARAGRAPH SHALL
NOT BE DEEMED TO DEPRIVE LENDER OF SUCH RIGHTS AND REMEDIES AS MAY BE AVAILABLE UNDER FEDERAL LAW. NOTWITHSTANDING THE FOREGOING,
THE LAWS OF THE STATE IN WHICH THE REAL PROPERTY IS LOCATED SHALL GOVERN AS TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT
OF LIENS AND SECURITY INTERESTS IN PROPERTY LOCATED IN SUCH STATE.


 




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(b)       By execution and
delivery of each Loan Document to which it is a party, each of Borrowers and Lender irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County
and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Loan Agreement, or for recognition or enforcement of any judgment, and
each of the parties to this Loan Agreement irrevocably and unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.
Each of Borrowers and Lender agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Loan Agreement shall affect
any right that either party may otherwise have to bring any action or proceeding relating to this Loan Agreement against the other
party or its properties in the courts of any jurisdiction.


 


(c)       Each of Borrowers
irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now
or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Loan Agreement in
any court referred to in paragraph (a) of this Section 12.1. Each of Borrowers and Lender irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in
any such court.


 


(d)       EACH OF THE PARTIES
TO THIS LOAN AGREEMENT WAIVES PERSONAL SERVICE OF PROCESS AND AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 12.5. NOTHING IN THIS LOAN AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS
LOAN AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.


 


		12.2	Successors
                                         and Assigns; Participations; New Lenders



 


(a)       The Loan Documents
shall inure to the benefit of Lender, Transferees and all future holders of the Loan, any Note, the Obligations and/or any of the
Collateral, and each of their respective successors and assigns. Each Loan Document shall be binding upon the Persons’ other
than Lender that are parties to each Loan Document and their respective successors and assigns, and no such Person may assign,
delegate or transfer any Loan Document or any of its rights or obligations under the Loan Documents without the prior written consent
of Lender (which consent shall be in Lender’s sole discretion. No rights are intended to be created under any Loan Document
for the benefit of any third party, creditor or incidental beneficiary of any Loan Party. Nothing contained in any Loan Document
shall be construed as a delegation to Lender of any other Person’s duty of performance. BORROWER ACKNOWLEDGES AND AGREES
THAT Lender at any time and from time to time may (I) DIVIDE AND RESTATE The Loan
or any note, AND/OR (II) sell, assign or GRANT PARTICIPATING INTERESTS IN OR transfer all or any part of its rights or obligations
under ANY LOAN DOCUMENT, LOANS, ANY NOTE, the obligations AND/OR the collateraL TO OTHER PERSONS (EACH SUCH TRANSFEREE, ASSIGNEE
OR PURCHASER, A “TRANSFEREE”). Borrowers agree to cooperate with Lender in connection with any such restatement,
division, sale, assignment or transfer. Each Transferee shall have all of the rights and benefits with respect to the Loan, Obligations,
any Notes, Collateral and/or Loan Documents held by it as fully as if the original holder thereof, and either Lender or any Transferee
may be designated as the sole agent to manage the transactions and obligations contemplated in the Loan Documents. Notwithstanding
any other provision of any Loan Document, Lender may disclose to any Transferee all information, reports, financial statements,
certificates and documents obtained under any provision of any Loan Document.


 




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(b)       Lender may assign
or pledge all or any portion of the Loan or notes held by it to any Federal Reserve Bank or the United States Treasury as collateral
security to secure obligations of Lender, including any assignment or pledge pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided, that any payment
in respect of such assigned Loan or notes made by Borrowers to or for the account of the assigning or pledging Lender in accordance
with the terms of this Loan Agreement shall satisfy Borrowers’ obligations under this Loan Agreement in respect to such assigned
Loan or notes to the extent of such payment. No such assignment shall release the assigning Lender from its obligations under this
Loan Agreement.


 


		12.3	Application
                                         of Payments



 


To the extent that any
payment made or received with respect to the Obligations is subsequently invalidated, determined to be fraudulent or preferential,
set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other Person under any Debtor
Relief Law, common law or equitable cause or any other law, then the Obligations intended to be satisfied by such payment shall
be revived and shall continue as if such payment had not been received by Lender. Any payments with respect to the Obligations
received shall be credited and applied in such manner and order as Lender shall decide in its sole discretion.


 




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		12.4	Indemnity



 


Each Borrower jointly
and severally shall indemnify Lender, its Affiliates and its and their respective managers, members, officers, employees, Affiliates,
agents, representatives, successors, assigns, accountants and attorneys (collectively, the “Indemnified Persons”)
from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including reasonable fees and disbursements of counsel, allocable costs of in-house
counsel, and in-house diligence fees and expenses) that may be imposed on, incurred by or asserted against any Indemnified Person
with respect to or arising out of, or in any litigation, proceeding or investigation instituted or conducted by any Person with
respect to any aspect of, or any transaction contemplated by or referred to in, or any matter related to, any Loan Document or
any agreement, document or transaction contemplated by any Loan Document, whether or not such Indemnified Person is a party to
such agreement, document or transaction, except to the extent that any of the foregoing results directly from the gross negligence
or willful misconduct of such Indemnified Person as determined by a final non-appealable judgment entered by a court of competent
jurisdiction. If any Indemnified Person uses in-house counsel for any purpose for which any Loan Party is responsible to pay or
indemnify, each Loan Party expressly agrees that its indemnification obligations include reasonable charges for the costs allocable
for such work of such in-house counsel. Lender agrees to give Borrowers reasonable notice of any event of which Lender becomes
aware for which indemnification may be required under this Section 12.4, and Lender may elect (but is not obligated)
to direct the defense of such event, provided that the selection of counsel shall be subject to Borrowers’ consent,
which consent shall not be unreasonably withheld or delayed. Any Indemnified Person may, in its discretion, take such actions as
it deems necessary and appropriate to investigate, defend or settle any event or take other remedial or corrective actions with
respect to such event as may be necessary for the protection of such Indemnified Person or the Collateral. Notwithstanding the
foregoing, if any insurer agrees to undertake the defense of an event (an “Insured Event”), Lender agrees not
to exercise its right to select counsel to defend the event if that would cause any Loan Party’s insurer to deny coverage;
provided, however, that Lender reserves the right to retain counsel to represent any Indemnified Person with respect
to an Insured Event at its sole cost and expense. To the extent that Lender obtains recovery from a third party other than an Indemnified
Person of any of the amounts that any Loan Party has paid to Lender pursuant to the indemnity set forth in this Section 12.4,
then Lender shall promptly pay to such Loan Party the amount of such recovery.


 


		12.5	Notice



 


Any notice or request
under any Loan Document shall be given to any party to this Loan Agreement at such party’s address set forth below, or at
such other address as such party may hereafter specify in a notice given in the manner required under this Section 12.5.
Any notice or request under this Loan Agreement shall be given only by, and shall be deemed to have been received upon (each, a
“Receipt”): (i) registered or certified mail, return receipt requested, on the date on which received as
indicated in such return receipt, (ii) delivery by a nationally recognized overnight courier, one Business Day after deposit
with such courier, or (iii) facsimile or electronic transmission, in each case upon telephone or further electronic communication
from the recipient acknowledging receipt (whether automatic or manual from recipient), as applicable.


 


Borrowers:



c/o Summit Healthcare REIT, Inc.

2 South Pointe Drive, Suite 100

Lake Forest, California 92630

Attn: Elizabeth Pagliarini

Facsimile: (949)535-2054


 




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Lender:



Pacific Western Bank

5404 Wisconsin Avenue, 2nd Floor

Chevy Chase, Maryland 20815

Attention: HRG Portfolio Manager

Facsimile: (301) 841-2334


 


		12.6	Severability;
                                         Captions; Counterparts; Facsimile Signatures



 


If any provision of any
Loan Document is adjudicated to be invalid under applicable laws or regulations, such provision shall be inapplicable to the extent
of such invalidity without affecting the validity or enforceability of the remainder of the Loan Documents that shall be given
effect so far as possible. The captions in the Loan Documents are intended for convenience and reference only and shall not affect
the meaning or interpretation of the Loan Documents. The Loan Documents may be executed in one or more counterparts (which taken
together, as applicable, shall constitute one and the same instrument) and by facsimile transmission, which facsimile signatures
shall be considered original executed counterparts. Each party to this Loan Agreement agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party.


 


		12.7	Expenses;
                                         Periodic Lien Searches; Fees for In-House Counsel



 


(a)       Borrowers shall
pay, whether or not the Closing occurs, all costs and expenses incurred by Lender and/or its Affiliates, including documentation
and diligence fees and expenses, all search, audit, appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses (including UCC and judgment and tax lien searches and UCC filings and fees for post-Closing
UCC and judgment and tax lien searches and wire transfer fees and audit expenses), and reasonable attorneys’ fees and expenses,
(i) in any effort to enforce, protect or collect payment of any Obligation or to enforce any Loan Document or any related
agreement, document or instrument, (ii) in connection with entering into, negotiating, preparing, reviewing and executing
the Loan Documents and/or any related agreements, documents or instruments, (iii) arising in any way out of administration
of the Obligations, (iv) in connection with instituting, maintaining, preserving, enforcing and/or foreclosing on Lender’s
Liens in any of the Collateral or securities pledged under the Loan Documents, whether through judicial proceedings or otherwise,
(v) in defending or prosecuting any actions, claims or proceedings arising out of or relating to Lender’s transactions
with Borrowers or any Loan Party, (vi) in seeking, obtaining or receiving any advice with respect to its rights and obligations
under any Loan Document and any related agreement, document or instrument, and/or (vii) in connection with any modification,
restatement, supplement, amendment, waiver or extension of any Loan Document and/or any related agreement, document or instrument.
All of the foregoing shall be charged to Borrowers’ account and shall be part of the Obligations. If Lender or any of its
Affiliates uses in house counsel for any purpose under any Loan Document for which Borrower is responsible to pay or indemnify,
Borrower expressly agrees that their Obligations include reasonable charges for such work commensurate with the rates that would
otherwise be charged by outside legal counsel selected by Lender or such affiliate in its discretion for the work performed. Without
limiting the foregoing, Borrowers shall pay all taxes (other than taxes based upon or measured by Lender’s income or revenues
or any personal property tax), if any, in connection with the issuance of the Loan and the filing and/or recording of any documents
and/or financing statements.


 




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(b)       Without limitation
of the foregoing, during the continuation of a Default, Lender may conduct title searches and searches of UCC filings and for tax
and judgment liens and conduct audits of financial records related to operation of the Property on an annual basis (or more frequently
in Lender’s discretion), all costs of which shall be paid by Borrowers within 10 days of delivery by Lender of a statement
of account setting forth the amounts due.


 


		12.8	Entire
                                         Agreement



 


This Loan Agreement and
the other Loan Documents to which Loan Parties are a party constitute the entire agreement between the Loan Parties and Lender
with respect to the subject matter of this Loan Agreement and the other Loan Documents, and supersede all prior agreements and
understandings, if any, relating to the subject matter of this Loan Agreement and the other Loan Documents. Any promises, representations,
warranties or guarantees not contained in this Loan Agreement and made after the date hereof shall have no force and effect unless
in writing signed by the applicable Loan Party and Lender. No provision of this Loan Agreement may be changed, modified, amended,
restated, waived, supplemented, discharged, canceled or terminated orally or by any course of dealing or in any other manner other
than by an agreement in writing signed by Lender and the applicable Loan Party. Each party to this Loan Agreement acknowledges
that it has been advised by counsel in connection with the negotiation and execution of this Loan Agreement and is not relying
upon oral representations or statements inconsistent with the terms and provisions of this Loan Agreement.


 


		12.9	Lender
                                         Approvals and Discretion



 


Unless expressly provided
to the contrary, wherever called for in the Loan Documents, any approval, consent, determination, waiver or satisfaction of Lender,
and any exercise of Lender’s discretion or judgment with respect to any matter, shall be at Lender’s sole discretion.


 


		12.10	Publicity
                                         and Confidentiality



 


(a)       Borrowers agree,
and agree to cause each of their Affiliates, (i) not to transmit or disclose provisions of any Loan Document to any Person
(other than to Borrowers’ advisors, officers on a need-to-know basis or as otherwise may be required by law) without Lender’s
prior written consent, (ii) to inform all Persons of the confidential nature of the Loan Documents and to direct them not
to disclose the same to any other Person and to require each of them to be bound by these provisions. Borrowers agree to submit
to Lender and Lender reserves the right to review and approve all materials that Borrowers or any of their Affiliates prepares
that contain Lender’s name or describe or refer to any Loan Document, any of the terms thereof or any of the transactions
contemplated by any Loan Document. Borrowers shall not, and shall not permit any of their Affiliates to, use Lender’s name
(or the name of any of Lender’s Affiliates) in connection with any of its business operations, including advertising, marketing
or press releases or such other similar purposes, without Lender’s prior written consent. Nothing contained in any Loan Document
is intended to permit or authorize Borrowers or any of their Affiliates to contract on behalf of Lender.


 




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(b)       Lender shall exercise
commercially reasonable efforts to maintain in confidence, in accordance with its customary procedures for handling confidential
information, all written non-public information of a Loan Party that any Loan Party furnishes on a confidential basis (“Confidential
Information”), other than any such Confidential Information that becomes generally available to the public or becomes
available to Lender from a source other than a Loan Party and that is not known to such recipient to be subject to confidentiality
obligations; provided, that Lender and its Affiliates shall have the right to disclose Confidential Information to:


 


		(i)	any Loan Party or its Affiliates;



 


		(ii)	such Person’s Affiliates;



 


		(iii)	such Person’s or such Person’s Affiliates’ lenders, funding or financing sources;



 


		(iv)	such Person’s or such Person’s Affiliates’ directors, officers, trustees, partners,
members, managers, employees, agents, advisors, representatives, attorneys, equity owners, professional consultants, portfolio
management services and rating agencies;



 


		(v)	any Person to whom Lender offers or proposes to offer to sell, assign or transfer any Loan or any
part thereof or any interest or participation in the Loan;



 


		(vi)	any Person that provides statistical analysis and/or information services to Lender or its Affiliates;



 


		(vii)	any Governmental Authority to which Lender is subject at the request or pursuant to any requirement
of such Governmental Authority, or in connection with an examination of Lender by any such Governmental Authority; and



 


		(viii)	any Person (A) to the extent required by applicable law, (B) in response to any subpoena
or other legal process or informal investigative demand, (C) in connection with any litigation, or (D) in connection
with the actual or potential exercise or enforcement of any right or remedy under any Loan Document.



 


(c)       Notwithstanding
any provision of any Loan Document, Lender and its Affiliates may (i) disclose a general description of transactions arising
under the Loan Documents for advertising, marketing or other similar purposes, and (ii) use any Loan Party’s name, logo
or other indicia germane to such party in connection with such advertising, marketing or other similar purposes.


 


(d)       The obligations
of Lender and its Affiliates under this Section 12.10 shall supersede and replace any other confidentiality
obligations agreed to by Lender or its Affiliates.


 




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		12.11	Release
                                         of Lender



 


Notwithstanding any other
provision of any Loan Document, each Loan Party voluntarily, knowingly, unconditionally and irrevocably, with specific and express
intent, for and on behalf of itself, its managers, members, directors, officers, employees, stockholders, Affiliates, agents, representatives,
accountants, attorneys, successors and assigns and their respective Affiliates (collectively, the “Releasing Parties”),
fully and completely releases and forever discharges the Indemnified Parties and any other Person or Insurer that may be responsible
or liable for the acts or omissions of any of the Indemnified Parties, or who may be liable for the injury or damage resulting
from such acts or omissions (collectively, with the Indemnified Parties, the “Released Parties”), of and from
any and all actions, causes of action, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever,
at law or in equity, matured or unmatured, vested or contingent, that any of the Releasing Parties has against any of the Released
Parties as of the date of the Closing. Each Loan Party acknowledges that the foregoing release is a material inducement to Lender’s
decision to extend to such Loan Party the financial accommodations under this Loan Agreement and has been relied upon by Lender
in agreeing to make the Loan.


 


Each Loan Party further
specifically waives any rights that it may have under Section 1542 of the California Civil Code (to the extent applicable),
which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST
IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR,” and further waives any similar rights under applicable laws.


 


		12.12	Agent



 


Lender and its successors
and assigns (i) designate and appoint Pacific Western Bank, and its successors and assigns (“PacWest”),
to act as agent for Lender and its successors and assigns under this Loan Agreement and all other Loan Documents, (ii) irrevocably
authorizes PacWest to take all actions on its behalf under the provisions of this Loan Agreement and all other Loan Documents,
(iii) irrevocably authorizes PacWest to exercise all such powers and rights, and to perform all such duties and obligations
under this Loan Agreement and all other Loan Documents, (iv) irrevocably agrees not to take any such action or exercise any
such powers or rights individually or otherwise other than through PacWest in its capacity as agent under this Loan Agreement and
(iv) agrees that any right to control or replace PacWest in its capacity as such agent shall be exercised by at least a majority
in interest of the holders of the obligations. PacWest, on behalf of and for the pro rata benefit of each of the holders of the
Obligations, shall hold all Collateral and receive all payments of principal and interest, fees, charges and collections received
pursuant to this Loan Agreement and all other Loan Documents. Borrowers acknowledge that each Lender and its successors and assigns
transfers and assigns to PacWest the sole and exclusive right to act as Lender’s agent, to hold, possess and/or perfect security
interests in all Collateral, enforce all rights, receive all payments and perform all obligations of Lender contained in this Loan
Agreement and in all of the other Loan Documents. Borrowers shall within 10 Business Days after PacWest’s reasonable
request, take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, amendments,
assignments, instructions or documents as PacWest may request to evidence the appointment and designation of PacWest as agent for
each Lender and any other holders of the Obligations. Borrowers acknowledge and agree that Lender (or PacWest as agent) is authorized
to appoint a servicer of the Loan, which such servicer may be an affiliate of Lender.


 




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		12.13	Concerning
                                         Joint and Several Liability of Borrowers



 


(a)       Each Borrower
hereby accepts joint and several liability under this Loan Agreement and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Lender under this Loan Agreement, for the mutual benefit, directly and indirectly,
of each Borrower and in consideration of the undertakings of each other Borrower to accept joint and several liability for the
Obligations.


 


(b)       Each Borrower,
jointly and severally, irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including any Obligations
arising under this Section 12.13), it being the intention of the parties to this Loan Agreement that all the
Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them.


 


(c)       If and to the
extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event any other Borrowers shall make such payment with
respect to, or perform, such Obligation.


 


(d)       The Obligations
of Borrowers under the provisions of this Section 12.13 constitute the full recourse Obligations of Borrowers
enforceable against each Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or
enforceability of this Loan Agreement or the other Loan Documents or any other circumstance whatsoever as to any other Borrower.


 


(e)       Without limitation,
Schedule 12.13 and each consent, waiver, covenant, condition and other provision of Schedule 12.13
are incorporated in Section 12.13 and made a part of this Section 12.13 by reference as fully as
if set forth in this Loan Agreement verbatim. The Obligations of each Borrower under this Section 12.13 shall
not be diminished or rendered unenforceable by any winding up, reorganization, amalgamation, arrangement, liquidation, reconstruction
or similar proceeding with respect to any reconstruction or similar proceeding with respect to any other Borrower or the Lender.
The joint and several liability of each Borrower under this Loan Agreement shall continue in full force and effect notwithstanding
any absorption, merger, amalgamation or any other change whatsoever in the name, ownership, membership, constitution or place of
formation of any Borrower or the Lender. Each Borrower acknowledges and confirms that it has established its own adequate means
of obtaining from each other Borrower on a continuing basis all information desired by such Borrower concerning the financial condition
of each other Borrower and that each such Borrower shall look to each other Borrower and not to Lender for such Borrower to keep
adequately informed of changes in each of the other Borrowers’ financial conditions.


 




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(f)       The provisions
of this Section 12.13, including without limitation, the provisions incorporated herein by reference from Schedule
12.13, are made for the benefit of the Lender and their respective permitted successors and assigns, and may be enforced
by it or them from time to time against any or all of Borrowers as often as occasion therefore may arise and without requirement
on the part of Lender or such successor or assign first to marshal any of its or their claims or to exercise any of its or their
rights against any of the other Borrowers or to exhaust any remedies available to it or them against any of the other Borrowers
or to resort to any other source or means of obtaining payment of any of the Obligations under this Loan Agreement or to elect
any other remedy. The provisions of this Section 12.13 shall remain in effect until all of the Obligations shall
have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of
the Obligations, is rescinded or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy or reorganization
of any of Borrowers or otherwise, the provisions of this Section 12.13 will forthwith be reinstated in effect,
as though such payment had not been made.


 


		12.14	Borrowers
                                         Agent



 


Each Loan Party irrevocably
appoints Summit Healthcare REIT, Inc. (“Borrowers Agent”) as its agent to act as specified in the Loan Documents
and Borrowers Agent accepts such appointment. Each Loan Party irrevocably authorizes and directs Borrowers Agent to take on its
behalf all actions required of such Person under the Loan Documents, and to exercise all powers and to perform all duties of such
Person under the Loan Documents, including, without limitation: (i) to submit and receive all certificates, notices, elections
and communications and (ii) to receive and disburse the proceeds of the Loan. Any of the foregoing taken or received by Borrowers
Agent on behalf of any Loan Party shall be deemed for all purposes to have been taken or received by such Loan Party and shall
be binding on such Person to the same extent as if directly taken or received by such Loan Party. Notwithstanding anything to the
contrary in this Loan Agreement, Lender may at any time elect to disburse the proceeds of Loan directly to the accounts of Borrowers.


 


		12.15	Taxes



 


(a)       Subject to Section 12.15(f),
any and all payments by or on account of any obligations of Borrowers to Lender under this Loan Agreement or any other Loan Document
shall be made free and clear of, and without deduction or withholding for, any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto (including penalties, interest and additions to tax),
imposed by any Governmental Authority, excluding, in the case of Lender, (i) such taxes (including income taxes or franchise
taxes) as are imposed on or measured by the net income, overall receipts or total capital of Lender by the jurisdiction in which
Lender is organized or maintains a lending office or any political subdivision thereof, and (ii) any branch profits taxes
imposed by the United States of America (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities,
collectively, “Taxes”).


 


(b)       In addition, Borrowers
shall pay to the relevant Governmental Authority any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made under this Loan Agreement or from the execution, delivery or
registration of, or otherwise with respect to, this Loan Agreement or any other Loan Document (collectively, “Other Taxes”).


 




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(c)       Subject to Section 12.15(f),
Borrowers shall indemnify and hold harmless Lender for the full amount of any and all Taxes or Other Taxes (including any Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under this Section 12.15) paid or payable by Lender
and any liability (other than any penalties, interest, additions, and expenses that accrue both after the 180th) day after the
receipt by Lender of written notice of the assertion of such Taxes or Other Taxes and before the date that Lender provides Borrowers
with a certificate relating to such Taxes or Other Taxes pursuant to Section 12.15(i) arising therefrom or with
respect to such Taxes or Other Taxes, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. Payments under this indemnification shall be made within 10 days from the date Lender makes written
demand therefor.


 


(d)       If Borrowers shall
be required by applicable law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable under this Loan
Agreement to Lender, then, subject to Section 12.15(f):


 


		(i)	the sum payable shall be increased to the extent necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section 12.15), Lender receives an amount
equal to the sum it would have received had no such deductions been made;



 


		(ii)	Borrowers shall make such deductions; and



 


		(iii)	Borrowers shall pay the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.



 


(e)       Within 10 days
after the date of any payment by Borrowers of Taxes or Other Taxes to a Governmental Authority, Borrowers shall furnish to Lender
the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to Lender.


 


(f)       Borrowers shall
not be required to pay any additional amounts in respect of United States Federal income tax pursuant to Section 12.15(d)
to Lender or to indemnify Lender pursuant to Section 12.15(c) to the extent that (i) the obligation to
withhold amounts with respect to United States Federal income tax existed on the date Lender became a party to this Loan Agreement
or, with respect to payments to a lending office newly designated by Lender (a “New Lending Office”), the date
Lender designated such New Lending Office with respect to the applicable Loan; provided, however, that this clause (i)
shall not apply to the extent the additional amounts Lender (or any assignee of Lender) through a New Lending Office, would be
entitled to receive (without regard to this clause (i)) do not exceed the additional amounts that the Person making the transfer,
or Lender (or such assignee) making the designation of such New Lending Office, would have been entitled to receive in the absence
of such transfer or designation; or (ii) the Internal Revenue Service has determined (which determination shall be final and
non-appealable) that Lender is treated as a “conduit entity” within the meaning of Treasury Regulation Section 1.881-3
or any successor provision; provided, however, nothing contained in this clause (ii) shall preclude the payment
of additional amounts or indemnity payments by Borrower to the person for whom the “conduit entity” is acting.


 




    	69 



     


    

 


(g)       If Borrowers are
required to pay additional amounts to or for the account of Lender pursuant to this Section 12.15, then Lender
shall use its reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document reasonably
requested by Borrowers or to designate a lending office from a different jurisdiction (if such a lending office exists) so as to
eliminate or reduce any such additional payments by Borrowers that may accrue in the future if such filing or changes, in the Permitted
Discretion of Lender, would not require Lender to disclose information Lender deems confidential and is not otherwise disadvantageous
to Lender.


 


(h)       If Lender, in
its Permitted Discretion, receives a refund of any Taxes or Other Taxes as to which it has been indemnified by Borrowers or with
respect to which Borrowers have paid additional amounts pursuant to this Section 12.15, it shall promptly pay
to Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by
Borrowers under this Section 12.15 with respect to the Taxes or Other Taxes giving rise to such refund) and
any interest paid by the relevant Governmental Authority with respect to such refund, provided, that Borrowers, upon the
request of Lender, shall repay the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to Lender if Lender is required to repay the applicable refund to such Governmental Authority.


 


(i)         Lender,
if claiming reimbursement or compensation pursuant to this Section 12.15, shall deliver to Borrowers a certificate
setting forth in reasonable detail the amount payable to Lender under this Loan Agreement and such certificate shall be conclusive
and binding on Borrowers in the absence of manifest error.


 


(j)         The agreements
and obligations of Borrowers in this Section 12.15 shall survive the payment of all other Obligations.


 


		12.16	Loan
                                         Agreement Controls



 


If there is any inconsistency
between this Loan Agreement and any other Loan Documents, the terms of this Loan Agreement shall control.


 


		12.17	Loan
                                         Party Obligations



 


Wherever this Loan Agreement
contemplates or imposes an obligation on a Loan Party who is not otherwise a party to this Loan Agreement, Borrowers agree that
it shall cause such Loan Party to perform such obligation.


 




    	70 



     


    

 


		12.18	U.S.
                                         Patriot Act Notice



 


Lender notifies Borrowers
that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each
Loan Party, which information includes the name and address of each Loan Party and other information that will allow Lender to
identify each Loan Party in accordance with the Patriot Act. Borrowers shall, promptly following a request by Lender, provide all
documentation and other information that Lender requests in order to comply with its ongoing obligations under applicable “know
your customer” and anti-money laundering rules and regulations, including the Patriot Act. Without limitation, Borrowers
certifies, represents and warrants to Lender as follows:


 


(a)       None of Borrowers
or any direct or (to Borrowers’ Knowledge) indirect owner of any stock, membership interests or other ownership interests
in any of the foregoing is subject to sanctions of the United States government or in violation of any applicable laws relating
to terrorism or money laundering, including Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 25,
2001) (the “Terrorism Executive Order”) or a Person similarly designated under any related enabling legislation
or any other similar executive order (collectively with the Terrorism Executive Order, the “Executive Orders”),
the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public
Law 107-56, the “Patriot Act”), any sanctions and regulations promulgated under authority granted by the Trading
with the Enemy Act, 50 U.S.C. App. 1-44, as amended from time to time, the International Emergency Economic Powers Act,
50 U.S.C. §§ 1701-06, as amended from time to time, the Iraqi Sanctions Act, Publ. L. No. 101-513; United
Nations Participation Act, 22 U.S.C. § 287c, as amended from time to time, the International Security and Development
Cooperation Act, 22 U.S.C. § 2349 aa-9, as amended from time to time, The Cuban Democracy Act, 22 U.S.C. §§ 6001-10,
as amended from time to time, The Cuban Liberty and Democratic Solidarity Act, 18 U.S.C. §§ 2332d and 2339b,
as amended from time to time, and The Foreign Narcotics Kingpin Designation Act, Publ. L. No. 106-120, as amended from time
to time.


 


(b)       None of the Transaction
Persons is (i) listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets
Control, Department of the Treasury, and/or on any other similar list (the “Lists”) maintained by the such office
pursuant to any authorizing statute, Executive Order or regulation or (ii) a Person (a “Designated Person”)
either (A) included within the term “designated national” as defined in the Cuban Assets Control Regulations,
31 C.F.R. Part 515, or (B) designated under Sections 1(a), 1(b), 1(c) or 1(d) of the Terrorism Executive Order
or a Person similarly designated under any related enabling legislation or any other similar Executive Orders.


 


(c)       None of the Transaction
Persons is knowingly or will knowingly (i) conduct any business or engage in making or receiving any contribution of funds,
goods or services to or for the benefit of any Designated Person, (ii) deal in, or otherwise engage in, any transaction relating
to any property or interest in property blocked pursuant to any Executive Order or the Patriot Act, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in any Executive Order or the Patriot Act.


 


[Remainder of Page Intentionally Blank]

Signature Page(s) Follows


 




    	71 



     


    

 


Borrowers and Lender have executed this
Loan Agreement as of the Closing Date.


 


	BORROWERS:	 	 
	 	 	 
	SUMMIT APPLETON, LLC	 	SUMMIT CARRINGTON MANOR, LLC
	a Delaware limited liability company	 	a Delaware limited liability company
	 	 	 
	By:	SUMMIT HEALTHCARE REIT, INC.,	 	By:	SUMMIT HEALTHCARE REIT, INC.,
	 	a Maryland corporation	 	 	a Maryland corporation
	Its:	Manager	 	Its:	Manager
	 	 	 	 	 
	 	By:	/s/ Elizabeth A. Pagliarini	 	 	By:	/s/ Elizabeth A. Pagliarini
	 	Name:	Elizabeth A. Pagliarini	 	 	Name:	Elizabeth A. Pagliarini
	 	Title:	Chief Financial Officer	 	 	Title:	Chief Financial Officer
	 	 	 	 	 
	 	SUMMIT MARLA VISTA MANOR,  LLC	 	 	SUMMIT MARLA VISTA GARDENS, LLC
	 	a Delaware limited liability company	 	 	a Delaware limited liability company
	 	 	 	 	 
	By:	SUMMIT HEALTHCARE REIT, INC.,	 	By:	SUMMIT HEALTHCARE REIT, INC.,
	 	a Maryland corporation	 	 	a Maryland corporation
	Its:	Manager	 	Its:	Manager
	 	 	 	 	 
	 	By:	/s/ Elizabeth A. Pagliarini	 	 	By:	/s/ Elizabeth A. Pagliarini
	 	Name:	Elizabeth A. Pagliarini	 	 	Name:	Elizabeth A. Pagliarini
	 	Title:	Chief Financial Officer	 	 	Title:	Chief Financial Officer


 


	LENDER:	 
	 	 
	PACIFIC WESTERN BANK	 
	a California state-chartered bank	 
	 	 
	By:	/S/ Jason Schwartz	 
	Name:	Jason Schwartz	 
	Title:	SVP, Managing Director	 


 


-Signature Page to Term Loan and Security
Agreement-


 




     


     


    

 


Appendix,
Exhibits and Schedules


 


 


	Exhibit A	Land
	Exhibit B	Promissory Note
	 	 
	Appendix A	Financial Covenants
	Appendix B	Definitions
	Schedule 2.4(b)	Amortization Payments
	Schedule 5.2	Government Approvals
	Schedule 5.3(A)	Organizational Chart
	Schedule 5.3(B)	Equity Holders
	Schedule 5.3(C)	Pledgor
	Schedule 5.6	Litigation
	Schedule 5.7	Items Being Contested
	Schedule 5.10 	Intellectual Property
	Schedule 5.15	Affiliate Agreements
	Schedule 5.16	Insurance
	Schedule 5.17	Business Names and Place(s) of Business
	Schedule 5.20	Healthcare Matters
	Schedule 6.8	Further Assurances/Post-Closing
	Schedule 7.2 	Permitted Indebtedness
	Schedule 7.3	Permitted Liens
	Schedule 7.10(c)	Post-Transfer Organizational Chart
	Schedule 12.13	Suretyship Waivers


 


 




    	1 



     


    

 


EXHIBIT
A



LAND


 


Carolina Manor:


 


All of Lot 1 and part of Lot 2, Volume 9,Certified
Survey Map, Page 1700, Map Number 1700, Document No. 1090225, Outagamie County Records, being located in the Southwest 1/4 of the
Southwest 1/4, Section 16, Town 21 North, Range 17 East, Town of Grand Chute, Outagamie County, Wisconsin, more fully described
as follows:


 


Commencing at the Southwest corner of said
Section 16, thence North 04°01'03" East, 171.77 feet along the West line of the Southwest 1/4; thence South 85°58'57"
East, 30.00 feet to the East line of N. Bluemound Drive and the point of beginning, thence South 42°10'08" East, 78.40
feet to the North right-of-way of County Trunk Highway "OO"; thence South 88°37'35" East, 383.32 feet along
said right-of-way to the west line of the lands described in Jacket 7182, Image 4; thence North 01°19'16" East, 301.11
feet along said lands to the South right-of-way of W. First Avenue; thence North 88°45'19" West, 425.81 feet along said
right-of-way to the East right -of-way of N. Bluemound Drive; thence South 04°01'03" West, 243.59 feet along said right-of-way
to the point of beginning.


 


Tax Key No. 101 070800


Address: 3201 W. First Avenue


 


Carrington Manor:


 


Lots 2, 3 and part of Lot 4 of Certified Survey
Map Numbered 3934, Volume 23, Page 66, as Document No. 1216419, being located in the Northeast 1/4 of the Northeast 1/4 of Section
9, Township 23 North, Range 21 East, in the City of Green Bay, County of Brown, State of Wisconsin, described as follows:


 


Commencing at the Northeast corner of said
Section 9; thence North 88°35'49" West, 815.63 feet along the North line of the Northeast 1/4 of said Section 9; thence
South 00°06'14" West, 40.01 feet to the South line of Finger Road and point of beginning; thence continuing South 00°06'14"
West, 179.18 feet to the South line of Certified Survey Map, Volume 23, Page 66; thence North 88°42'33" West, 309.69 feet
along said South line to the Southwest corner of Lot 2 of said Certified Survey Map; thence North 01°24'18" East, 179.75
feet to the Northwest corner of said Lot 2; thence South 88°35'42" East, 305.62 feet along the North line of said Certified
Survey Map, to the point of beginning.


 


Tax Key No.: 21-118-17


Address: 2626 Finger Road


 


Ex. A – Legal Description


 




    	-1 -



     


    

 


Marla Vista Manor:


 


All of Lots 2 and 3 of the recorded Plat of
Perkins Plaza, (Volume 16, Page 20, as Document Number 784790, Brown county Records), being located in Lot 80 of the Fort Howard
Military Reserve, City of Green Bay, Brown County, Wisconsin also described as follows:


 


Commencing at the Southwest corner of Lot
80 of Fort Howard Military Reserve; thence North 26°20'10" East, 113.25 feet along the Westerly line of said Lot 80; thence
South 63°41'54" East, 172.20 feet to the Southwest corner of Lot 2 of the recorded Plat of Perkins Plaza and the point
of beginning; thence along the East line of Military Avenue Frontage Road 30.14 feet on a curve to the left with a radius of 340.00
feet and a chord bearing of North 06°43'57" East, 30.13 feet; thence continuing along said East line 131.19 feet on a
curve to the right with a radius of 340.00 feet and a chord bearing North 15°14'51" East, 130.38 feet; thence continuing
along said East line North 26°18' 06" East, 61.65 feet to the Northwest corner of Lot 3 of the recorded Plat of Perkins
Plaza; thence South 63°41'54" East, 442.80 feet to the Northeast corner of said Lot 3; thence South 26°18'33"
West, 218.00 feet to the Southeast corner of said Lot 2; thence North 63°41'54" West, 407.68 feet to the point of beginning.


 


Tax Key No.: 6-2775


Address: 1006 N. Military Avenue


 


Marla Vista Gardens:


 


All of Lot 4 of the recorded Plat of Perkins
Plaza (Volume 16, Page 20, Document Number 784790, Brown County Records), being located in Lot 80 of the Fort Howard Military Reserve,
City of Green Bay, Brown County, Wisconsin also described as follows:


 


Commencing at the Southwest corner of Lot
80 of Fort Howard Military Reserve; thence North 26°20'10" East, 331.25 feet along the Westerly line of said Lot 80; thence
South 63°41'54" East, 136.99 feet to the Southwest corner of Lot 4 of the recorded plat of Perkins Plaza and the point
of beginning; thence North 26° 18'06" East, 109.00 feet to the Northwest corner of said Lot 4; thence South 63°41'54"
East, 442.81 feet to the Northeast corner of said Lot 4; thence South 26°18'33" West, 109.00 feet to the Southeast corner
of said Lot 4; thence North 63°41'54" West, 442.80 feet to the point of beginning.


 


Tax Key No.: 6-2777


Address: 1016 N. Military Avenue


 


Ex. A – Legal Description


 




    	-2 -



     


    

 


EXHIBIT
B



FORM OF NOTE





PROMISSORY NOTE


 


	U.S. $13,500,000.00	Dated:  November __, 2015


 


FOR VALUE RECEIVED,
the undersigned, SUMMIT APPLETON, LLC, a Delaware
limited liability company, SUMMIT CARRINGTON MANOR, LLC, a Delaware limited
liability company, SUMMIT MARLA VISTA MANOR, LLC, a Delaware limited liability
company, SUMMIT MARLA VISTA GARDENS, LLC, a Delaware limited liability company
(collectively “Borrowers”) promise to pay to pacific
western BANK (“Lender”) the unpaid principal amount at any time outstanding, which shall not exceed
$13,500,000 (the “Loan”), with interest thereon and all other Obligations with respect to the Loan under the
Term Loan and Security Agreement dated as of even date herewith, between Borrowers and Lender (as it may be amended, supplemented
or otherwise modified from time to time, the “Loan Agreement”), on the Maturity Date or otherwise at the times
and in the manner set forth in the Loan Agreement. Capitalized terms used but not defined in this Note shall have the meanings
given to such terms in the Loan Agreement.


 


1.       Interest
Payments. Borrowers promise to pay interest on the outstanding principal amount of the Loan from the date of funding of
the Loan until such principal amount is irrevocably paid in full in cash pursuant to and as required by the terms of the Loan Agreement.


 


2.       Principal
Payment and Maturity. Unless earlier due and payable or accelerated under the Loan Agreement, this Note shall mature, and
the outstanding principal balance under this Note and other Obligations with respect to the Loan, shall become due and payable
in full on the Maturity Date. Borrowers promise to make all payments of principal as and when required under the Loan Agreement.


 


3.       Late Fee;
Default Interest Rate. Notwithstanding any other provision of this Note, the Default Interest Rate set forth in the Loan
Agreement shall apply to this Note as and when provided in the Loan Agreement.


 


4.       Loan Agreement
and Security Agreement.


 


(a)       This Note is referred
to in, made pursuant to, and entitled to the benefits of, the Loan Agreement. The Loan Agreement, among other things, (i) provides
for the making of the Loan by Lender to Borrowers in the Dollar amount first mentioned above, (ii) contains provisions for
acceleration of the maturity of this Note upon the happening of certain stated events upon the terms and conditions specified in
the Loan Agreement, and (iii) contains provisions defining an Event of Default and the rights and remedies of Lender upon
the occurrence of an Event of Default.


 




    	- 1 -	 	 



     


    

 


(b)       This Note is a
secured note, entitled to the benefits of and security interests granted in, among other things, the Loan Agreement and the other
Security Documents.


 


5.       Prepayments.
This Note may not be prepaid in whole or in part except as provided in the Loan Agreement. No payment or prepayment of any amount
shall entitle any Person to be subrogated to the rights of Lender under this Note or under the Loan Agreement unless and until
the Obligations have been performed in full and paid irrevocably in full in cash and the Loan Agreement has been terminated.


 


6.       Payments
Due on a Day other than a Business Day. If any payment to be made on or under this Note is stated to be due or becomes
due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on,
the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any
interest (at the interest rate then in effect during such extension) and/or fees, as the case may be.


 


7.       Waivers.
Borrowers waive demand, presentment, protest, notice of dishonor or non-payment, as well as all defenses with respect to this Note,
the Loan Agreement and/or any Obligation, notice of acceptance of this Loan Agreement, and all other demands and notices of any
description, except such as are expressly provided for in this Note or in the Loan Agreement. The pleading of any statute of limitations
as a defense to any demand against Borrowers under this Note is expressly waived by Borrowers. No (a) course of action or
dealing, renewal, release or extension of this Note, any Loan Document or any rights under this Note or under any other Loan Document,
(b) release of Borrowers or any other Loan Party under this Note or any other Loan Document, (c) delay, failure or omission
on Lender’s part in enforcing this Note or any other Loan Document or in exercising or enforcing any right, remedy, option
or power under this Note or under any other Loan Document, shall affect the liability of Borrowers or any other Loan Party or operate
as a waiver of such or any other right, remedy, power or option or of any default. Furthermore, no single or partial exercise of
any right, remedy, option or power under this Note or under any other Loan Document shall affect the liability of Borrowers or
any other Loan Party or preclude any other (or further) exercise of such or any other right, remedy, power or option. No waiver
of any one or more defaults in the performance of any of the provisions of this Note shall operate or be construed as a waiver
of any future default or defaults, whether of a like or different nature.


 


		8.	Exercise of Rights.



 


(d)       Lender shall have
the right in its sole discretion to determine which rights, powers, Liens, security interests or remedies Lender may at any time
pursue, relinquish, subordinate or modify or to take any other action with respect to such rights, powers, Liens, security interests
or remedies, and such determination will not in any way modify or affect any of Lender’s rights, powers, Liens, security
interests or remedies under this Note or under any of the Loan Documents, under applicable law or at equity.


 


(e)       The enumeration
of the foregoing rights and remedies is not intended to be exhaustive. The rights and remedies of Lender described in this Note
are cumulative and are not alternative to or exclusive of any other rights or remedies that Lender otherwise may have by contract
or at law or in equity, and the partial or complete exercise of any right or remedy shall not preclude any other further exercise
of such or any other right or remedy.


 




    	- 2 -	 	 



     


    

 


9.       Lawful
Limits. This Note is expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration
or otherwise, shall the interest and other charges paid or agreed to be paid to Lender for the use, forbearance or detention of
money under this Note exceed the maximum rate permissible under applicable law that a court of competent jurisdiction shall, in
a final determination, deem applicable to this Note. If, due to any circumstance whatsoever, fulfillment of any provision of this
Loan Agreement, at the time performance of such provision shall be due, shall exceed any such limit, then, the obligation to be
so fulfilled shall be reduced to such lawful limit, and, if Lender shall have received interest or any other charges of any kind
that might be deemed to be interest under applicable law in excess of the maximum lawful rate, then such excess shall be applied
first to any unpaid fees and charges under this Note, then to unpaid principal balance owed by Borrowers under this Note, and if
the then remaining excess interest is greater than the previously unpaid principal balance under this Note, Lender shall promptly
refund such excess amount to Borrowers and the provisions of this Loan Agreement shall be deemed amended to provide for such permissible
rate.


 


10.     Joint
and Several. The obligations of each Borrower are joint and several.


 


11.     Governing
Law. THIS NOTE AND THE OTHER LOAN DOCUMENTS ARE GOVERNED BY FEDERAL LAW AND, FOR THE PURPOSES OF EXPORTATION OF INTEREST
AND INTEREST FEES UNDER FEDERAL LAW, LENDER RELIES ON CALIFORNIA LAW. TO THE EXTENT THAT STATE LAW APPLIES AND IS NOT PREEMPTED
BY FEDERAL LAW, THEN PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401 THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THIS NOTE WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW PROVISIONS THAT WOULD RESULT IN APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.
TO THE EXTENT THAT LENDER HAS GREATER RIGHTS OR REMEDIES UNDER FEDERAL LAW, WHETHER AS A NATIONAL BANK OR OTHERWISE, THIS PARAGRAPH
SHALL NOT BE DEEMED TO DEPRIVE LENDER OF SUCH RIGHTS AND REMEDIES AS MAY BE AVAILABLE UNDER FEDERAL LAW. NOTWITHSTANDING THE FOREGOING,
THE LAWS OF THE STATE IN THAT THE REAL PROPERTY IS LOCATED SHALL GOVERN AS TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT
OF LIENS AND SECURITY INTERESTS IN PROPERTY LOCATED IN SUCH STATE.


 




    	- 3 -	 	 



     


    

  


	BORROWERS:	 	 
	 	 	 
	SUMMIT APPLETON, LLC	 	SUMMIT CARRINGTON MANOR, LLC
	a Delaware limited liability company	 	a Delaware limited liability company
	 	 	 
	By:	SUMMIT HEALTHCARE REIT, INC.,	 	By:	SUMMIT HEALTHCARE REIT, INC.,
	 	a Maryland corporation	 	 	a Maryland corporation
	Its:	Manager	 	Its:	Manager
	 	 	 	 	 
	 	By:	 	 	 	By:	 
	 	Name:	 	 	 	Name:	 
	 	Title:	 	 	 	Title:	 
	 	 	 	 	 
	 	SUMMIT MARLA VISTA MANOR,  LLC	 	 	SUMMIT MARLA VISTA GARDENS, LLC
	 	a Delaware limited liability company	 	 	a Delaware limited liability company
	 	 	 	 	 
	By:	SUMMIT HEALTHCARE REIT, INC.,	 	By:	SUMMIT HEALTHCARE REIT, INC.,
	 	a Maryland corporation	 	 	a Maryland corporation
	Its:	Manager	 	Its:	Manager
	 	 	 	 	 
	 	By:	 	 	 	By:	 
	 	Name:	 	 	 	Name:	 
	 	Title:	 	 	 	Title:	 


  




    	- 4 -	 	 



     


    

 


APPENDIX
A



FINANCIAL COVENANTS


 


		1.1	Fixed Charge Coverage Ratio



 


The Fixed Charge Coverage
Ratio shall be a minimum of 1.10 to 1.00 for each Test Period.


 


		1.2	Leverage Ratio 



 


The Leverage Ratio
shall not exceed 10.25 to 1.00 for each Test Period.


 


		1.3	Rent Coverage Ratio



 


The Rent Coverage Ratio
shall not be less than 1.05 to 1.00 for each of the first four Test Periods (i.e., the Test Periods ending on December 31, 2015,
March 31, 2016, June 30, 2016, and September 30, 2016) and thereafter shall not be less than 1.10 to 1.00 for each of the following
Test Periods.


 


For purposes of the
covenants set forth in this Appendix A, the terms listed below shall have the following meanings:


 


“Capital Expenditures”
means, for any Test Period, the sum (without duplication) of all expenditures (whether paid in cash or accrued as liabilities)
during the Test Period, that are or should be treated as capital expenditures under GAAP.


 


“Closing Date”
means November__, 2015.


 


“EBITDA”
means, for any Test Period, the sum, without duplication, of the following (determined in accordance with GAAP unless otherwise
defined in this Loan Agreement), on a consolidated basis: Net Income (Borrowers) plus, (a) Interest Expense, (b) income
tax expense (to the extent assessed on Net Income (Borrowers)), (c) depreciation expense, and (d) amortization expense,
minus (a) gains from any sale of assets, other than sales in the Ordinary Course, (b) income tax benefit, and (c) non-cash
revenue, extraordinary or non-recurring revenue and gains.


 


“Facilities
EBITDAR” means, for any Test Period, the sum without duplication of the following for Operators (determined in accordance
with GAAP unless otherwise defined in this Loan Agreement), on a consolidated basis: Net Income (Operators), plus, (a) Interest
Expense, (b) income tax expense (to the extent assessed on Net Income (Operators)), (c) depreciation expense, (d) amortization
expense and (e) rent expense pursuant to the Operatings, minus (a) gains from any sale of assets, other than sales
in the Ordinary Course, (b) income tax benefit, and (c) non-cash revenue, extraordinary or non-recurring revenue and
gains.


 


“Fixed Charge
Coverage Ratio” means, for any Test Period, the ratio of (a) EBITDA of Borrowers for the Test Period, to (b) Fixed
Charges of Borrowers for the Test Period.


 




    	Appendix A-1 



     


    

 


“Fixed Charges”
means, the sum of the following: (a) Total Debt Service, (b) Capital Expenditures (to the extent not already deducted
in the calculation of Net Income), (c) income taxes paid in cash or accrued, and (d) dividends, redemptions, equity repurchases
and/or Distributions paid in cash to the holders of any shares of capital stock or other securities or partnership, membership
or other ownership interest.


 


“GAAP”
means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board and, if applicable, the U.S. Securities and Exchange Commission, or such other principles as may be
approved by a substantial majority of the accounting profession in the United States, that are applicable to the circumstances
as of the date of determination, consistently applied.


 


“Indebtedness”
of any Person means (without duplication): (a) all indebtedness for borrowed money; (b) all earn-out and other obligations of such
Person for the deferred purchase price of property or services (other than current unsecured trade accounts payable and deferred
compensation, if and to the extent (i) such indebtedness is incurred in the Ordinary Course for value received, and (ii) such indebtedness
is paid in the Ordinary Course); (c) the face amount of all letters of credit (and, without duplication, all drafts drawn and reimbursement
obligations with respect thereto), surety bonds and other similar instruments issued for the account of such Person; (d) all obligations
evidenced by notes, bonds, debentures or similar instruments; (e) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by such Person;
(f) all Capital Lease Obligations; (g) the principal balance outstanding under any synthetic lease, off-balance sheet loan
or similar off-balance sheet financing products; (h) all indebtedness referred to in clauses (a) through (g) above secured by (or
for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property
owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness; and (i) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (h)
above.


 


“Intangible
Assets” means all intangible assets (determined in accordance with GAAP unless otherwise defined in this Loan Agreement),
including goodwill, intellectual property, licenses, organizational costs, deferred amounts, covenants not to compete, unearned
income, restricted funds and investments and amounts receivable from Affiliates.


 


“Interest
Expense” means interest expense (determined in accordance with GAAP unless otherwise defined in this Loan Agreement and
including interest expense attributable to Capital Leases) and fees with respect to all outstanding Indebtedness including capitalized
interest but excluding commissions, discounts and other fees owed with respect to letters of credit and bankers’ acceptance
financing.


 


“Leverage
Ratio” means, at any date of determination, the ratio of (i) the Total Debt of Borrowers (including the outstanding
principal balance of the Loan) on such date to (ii) annualized Facilities EBITDAR for the Test Period ending on such date.


 




    	Appendix A-2 



     


    

 


“Net Income
(Borrowers)” means the net income (or loss) determined in accordance with GAAP unless otherwise defined in this Loan
Agreement, provided that there shall be excluded (i) the income (or loss) of any Person in which any other Person (other than
Borrowers) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to a Borrower
by such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Borrower or is merged into
or consolidated with a Borrower or that Person’s assets are acquired by a Borrower, (iii) the income of any Subsidiary
of a Borrower to the extent that the declaration or payment of dividends or similar distributions of that income by that Subsidiary
is not at the time permitted by operation of the terms of the charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) compensation expense resulting from the issuance of capital
stock, stock options or stock appreciation rights issued to former or current employees, including officers, of a Borrower, or
the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected
to be settled by the payment of cash by a Borrower or any affiliate thereof, and (v) compensation expense resulting from the
repurchase of capital stock, options and rights described in clause (iv) of this definition of Net Income (Borrowers).


 


“Net Income
(Operators)” means the net income (or loss) determined in accordance with GAAP unless otherwise defined in this Loan
Agreement, provided that there shall (A) be included as income any amounts received as donations and (B) be excluded (i) the
income (or loss) of any Person in which any other Person (other than Operators) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to an Operator by such Person, (ii) the income (or loss) of any Person
accrued prior to the date it becomes an Operator or is merged into or consolidated with an Operator or that Person’s assets
are acquired by an Operator, (iii) the income of any Subsidiary of an Operator to the extent that the declaration or payment
of dividends or similar distributions of that income by that Subsidiary is not at the time permitted by operation of the terms
of the charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that
Subsidiary, (iv) compensation expense resulting from the issuance of capital stock, stock options or stock appreciation rights
issued to former or current employees, including officers, of an Operator, or the exercise of such options or rights, in each case
to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by an Operator
or any affiliate thereof, and (v) compensation expense resulting from the repurchase of capital stock, options and rights
described in clause (iv) of this definition of Net Income (Operators). Further, to the extent not already deducted in the
determination of net income, Net Income (Operators) shall be reduced by the following amounts: (a) with respect to management
fees attributable to the Facilities, the greater of actual management fees or 5.00% of the revenue of the Facilities, (b) with
respect to replacement costs, the greater of (i) $400 per unit per annum for the Facilities or (ii) actual replacement costs, (c) with
respect to insurance costs, the greater of actual insurance costs or $500 per unit per annum, and (d) with respect to bad debt,
the greater of (i) actual bad debt and (ii) 1% of gross revenue from the Facilities.


 


“Ordinary
Course” means, in respect of any Person, the ordinary course and reasonable requirements of such Person’s
business, as conducted in accordance with past practices, and undertaken in good faith and not for purposes of evading the requirements
and obligations under any provision of any Loan Document or material law.


 




    	Appendix A-3 



     


    

 


“Person”
means an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a
trust, an unincorporated association, a joint venture, a governmental authority or any other entity of whatever nature.


 


“PropCo Costs”
means, to the extent positive, EBITDA of Borrowers less rent revenues.


 


“Rent Coverage
Ratio” means, for any Test Period, the ratio of (i) Facilities EBITDAR to (ii) rent expense of Operators
under the Operating Leases (without giving effect to additions to or subtractions from rent expense as a result of “minimum
rent averaging” accounting standards).


 


“Test Period”
means a period ending on the last day of March, June, September, and December of each year and comprised of the six most recent
calendar months then ended (taken as one accounting period); provided, however, that for the Test Periods ending December 31, 2015,
March 31, 2016, June 30, 2016, and September 30, 2016, each such Test Period shall be comprised of the time period from the Closing
Date through and including the last day of the applicable Test Period (with any calculations to be annualized as applicable).


 


“Total Debt”
means for any Test Period, on a consolidated basis, the total Indebtedness outstanding on such date, and including (not net of)
all discounts, deductions or allocations relating or applicable to or arising from any fees, original issue discount, or equity
or equity participation, whether under GAAP or otherwise.


 


“Total Debt
Service” means the sum of (a) scheduled or other principal payments on Indebtedness (except any revolving
credit facility provided by Lender), and (b) Interest Expense, in each case for such period.


 


		1.4	Cure



 


(a)         Subject to the
limitations set forth in this Section 1.4, Borrowers may cure (and shall be deemed to have cured) an Event of Default as
a result of Borrowers’ failure to comply with the financial covenants set forth in Sections 1.2 or Section 1.3
during any Test Period by making the applicable Equity Cure Contribution. “Equity Cure Contribution” means the
equity contributions made to any Borrower by its members in immediately available funds, designated as an “Equity
Cure Contribution” at the time such funds are contributed and if such funds are immediately paid to Lender.


 


(b)         An Equity Cure
Contribution may cure an Event of Default as a result of Borrowers’ failure to comply with the financial covenants set forth
in Sections 1.2 or Section 1.3 if:


 


(i) Borrowers receive
the Equity Cure Contribution;


 


(ii) such Equity
Cure Contribution is deposited with Lender in an account designated by Lender (which may be commingled with other Lender funds)
within 10 Business Days after the date on which Lender receives Borrowers’ compliance certificate pursuant to Section
6.1(a);


 




    	Appendix A-4 



     


    

 


(iii) for a default
under Section 1.2, such Equity Cure Contribution is an amount that, if it had been applied to the outstanding principal
balance of the Loan in the Test Period in which the violation occurred, then the Leverage Ratio would have been no more than 10.25
to 1.00; and


 


(iv) for a default
under Section 1.3, such Equity Cure Contribution is an amount that, if it had been included in Facilities EBITDAR in the
Test Period in which the violation occurred, then the Rent Coverage Ratio would have complied with the terms of Section 1.3.


 


(c)         Any Equity Cure
Contribution shall be held by Lender as additional collateral for the Loan. If no Default or Event of Default exists, then such
Equity Cure Contribution may be released to Borrowers upon Borrowers’ written request provided the following conditions have
been satisfied for any Test Period thereafter:


 


(i) no Default
or Event of Default has occurred and is continuing;


 


(ii) in the
case of a default under Section 1.2, the Leverage Ratio shall have been no more than 10.25 to 1.00 for two consecutive Test
Periods without consideration of any Equity Cure Contribution; and


 


(iii) in the
case of a default under Section 1.3, the Rent Coverage Ratio requirements under Section 1.3 shall have been satisfied
for two consecutive Test Periods without consideration of any Equity Cure Contribution.


 


(d)         Without limitation
on other terms and conditions contained herein, Borrowers hereby grant to Lender a security interest in any Equity Cure Contribution
to secure performance of all of the Obligations, and Lender shall have all rights and remedies of a secured creditor in connection
therewith (including the right, in its sole discretion, to apply such amounts to outstanding amounts under the Loan if an Event
of Default exists)


 




    	Appendix A-5 



     


    

 


APPENDIX
B



DEFINITIONS


 


“Account Debtor”
means any Person who is obligated under an Account.


 


“Accounts”
means all “accounts” (as defined in the UCC) including accounts, accounts receivables, monies due or to become due
and obligations in any form (whether arising in connection with contracts, contract rights, instruments (as defined in the UCC),
general intangibles (as defined in the UCC) or chattel paper(as defined in the UCC)), in each case whether arising out of goods
sold or services rendered or from any other transaction and whether or not earned by performance, now or hereafter in existence,
and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of
any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.


 


“Advances”
means any disbursements made by Lender above the amount funded to Borrowers at Closing. Any amounts paid by Lender on behalf of
Borrowers or any other Loan Party under any Loan Document shall be an Advance for purposes of this Loan Agreement.


 


“Affiliate”
means, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of
any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person, or (c) which,
directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of
the Securities Exchange Act of 1934, as amended, as the same is in effect on the date of this Loan Agreement) of 10% or more of
any class of the outstanding voting stock, securities or other equity or ownership interests of such Person. For purposes of this
definition, the term “control” (and the correlative terms, “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies,
whether through ownership of securities or other interests, by contract or otherwise.


 


“Agreement”
means this Term Loan and Security Agreement, as it may be modified from time to time.


 


“Applicable
Interest Rate” is defined in Section 2.3(a).


 


“Assignment”
means the Assignment of Leases and Rents of even date herewith made by Borrowers in favor of Lender.


 


“Bank Products
Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit
or debit card, electronic funds transfer and other cash management or depositary arrangements entered into between Borrowers and
Lender or an Affiliate of Lender, in its separate capacity as a party to such Bank Products Agreement.


 


“Borrowers”
is defined in the introductory paragraph.


 




    	Appendix B-1 



     


    

 


“Borrowers
Agent” is defined in Section 12.4(b).


 


“Borrowers’
Knowledge” means the awareness of facts or other information by any officer, director, partner or member of Borrowers
after all diligent inquiry, including, as necessary, inquiry of each Loan Party.


 


“Business
Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in California and New York City
are authorized or required by law to remain closed.


 


“CapEx Reserve”
is defined in Section 3.3.


 


“Capital Expenditures”
means expenditures incurred by Borrowers in connection with the performance of Capital Improvements.


 


“Capital Improvements”
means capital improvements, repairs and replacements of every kind and nature to be performed at the Facilities.


 


“Capital Lease”
means, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is, should be or
should have been recorded as a “capital lease” in accordance with GAAP.


 


“Capitalized
Lease Obligations” means all obligations of any Person under Capital Leases, in each case, taken at the amount thereof
accounted for as a liability in accordance with GAAP.


 


“Casualty/Condemnation
Event” is defined in Section 6.19(a).


 


“Change of
Control” means, with respect to any Loan Party, the occurrence of any of the following: (i) Summit Healthcare REIT, Inc.
shall cease, directly or indirectly, to be responsible for the day-to-day operation, management and administration of any of the
entities that are Borrowers under the Loan Agreement; (ii) a merger, consolidation, reorganization, recapitalization or share
or interest exchange, sale or transfer; (iii) a direct or indirect sale, transfer or other conveyance or disposition, in any
single transaction or series of transactions, of all or substantially all of its assets; (iv) the initial public offering
of its securities; or (v) any transfer in violation of Section 7.10.


 


“Change in
Law” means (a) the adoption of any law, rule or regulation after the date of this Loan Agreement, (b) any change
in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of
this Loan Agreement or (c) compliance by Lender (or, for purposes of Section 2.11 by any lending office
of Lender or by Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this Loan Agreement.


 




    	Appendix B-2 



     


    

 


“Charter and
Good Standing Documents” means, for each Loan Party (i) a copy of the certificate of incorporation or formation
(or other charter document) certified as of a date not more than 45 days before the Closing Date by the applicable Governmental
Authority of the jurisdiction of incorporation or organization of such Loan Party and certified by an officer, manager or member
of such Loan Party as being unmodified and in full force and effect as of the Closing Date, (ii) a copy of the operating agreement,
by-laws or similar organizational documents certified as of a date not more than three Business Days before the Closing Date by
the corporate secretary or assistant secretary or by a manager, member or officer of such Loan Party, (iii) an original certificate
of good standing as of a date acceptable to Lender issued by the applicable Governmental Authority of the jurisdiction of incorporation
or organization of such Loan Party and of every other jurisdiction in which any of Borrowers or Operators has an office or conducts
business or is otherwise required to be in good standing, and (iv) copies of the resolutions of the members or managers (or
other applicable governing body) and, if required, stockholders, members or other equity owners authorizing the execution, delivery
and performance of the Loan Documents to which such Loan Party is a party, certified by an authorized officer or manager of such
Person as of the Closing Date.


 


“Chattel Paper”
means chattel paper as defined in Section 9-102 of the UCC.


 


“Closing”
means the satisfaction, or written waiver by Lender, of all of the conditions precedent required by Lender in its sole discretion
to be satisfied prior to the consummation of the transactions contemplated by this Loan Agreement.


 


“Collateral”
means the Property together with any other collateral granted to Lender to secure the Obligations pursuant to any of the Loan Documents.


 


“Commitment
Fee” is defined in Section 3.1.


 


“Contract”
is defined in the Security Instrument.


 


“Costs”
means any and all costs, expenses, damages, losses, obligations and liabilities (including attorneys’ fees and disbursements),
causes of action, suits, claims, demands and judgments of any nature or description whatsoever that may be imposed upon, incurred
by or awarded against Lender.


 


“Debt Service
Reserve” is defined in Section 3.5.


 


“Debtor Relief
Law” means, collectively, the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time
in effect affecting the rights of creditors generally, as amended from time to time, whether statutory, common law, case law or
otherwise.


 


“Default”
means any event, fact, circumstance or condition that, with the giving of notice or passage of time or both, could constitute or
result in an Event of Default.


 


“Default Interest
Rate” means the Applicable Interest Rate plus an additional 5.00% per annum.


 




    	Appendix B-3 



     


    

 


“Distribution”
means (i) any dividend, distribution or other payment of any kind on any shares of capital stock or other securities or partnership,
membership, economic or other interests, or (ii) any fee, payment, bonus or other remuneration of any kind, or (iii) any
repayment of or debt service on loans or other indebtedness other than the Loan.


 


“Environmental
Indemnity” means the Environmental Indemnity of even date herewith executed and delivered by Borrowers and Guarantor
at or prior to Closing.


 


“Environmental
Laws” means, collectively and each individually, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendment and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act, any other “Superfund” or “Superlien” law, the Occupational
Safety and Health Act and all other federal, state and local and foreign environmental, land use, zoning, health, chemical use,
safety and sanitation laws, including common law, statutes, ordinances and codes relating to the protection of health, safety and
the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal
of Hazardous Substances, in each case, as amended, and the rules, regulations, policies, standards, guidelines, interpretations,
decisions, orders and directives of and agreements entered into with Governmental Authorities with respect thereto, all as may
hereafter be amended, adopted or enacted.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.


 


“Event of
Default” means the occurrence of any event set forth in Article VIII.


 


“Excess Cash
Flow” shall mean, for any fiscal year (or for such other period as may be specifically provided for herein), as calculated
for Borrowers on a consolidated basis, without duplication, an amount equal to the sum of (a) Net Income (Borrowers) (as defined
in Appendix A) for such period, plus (b) an amount equal to the amount of depreciation expenses, amortization expense (including
the amortization of goodwill), accrued non-cash interest expense and all other non-cash charges deducted in arriving at such Net
Income, plus (c) an amount equal to the aggregate net cash proceeds of the sale, lease, transfer or other disposition of
assets by Borrowers during such period to the extent  not required to be applied to mandatory prepayments or payments on the
Loans,  plus (d) an amount equal to the net loss on the sale, lease, transfer or other disposition of assets by Borrowers
during such period to the extent deducted in arriving at such Net Income, plus (e) an amount equal to any tax refunds or
credits received by Borrowers during such period, less (f) an amount equal to the Capital Expenditures (as defined in Appendix
A) of Borrowers for such period, less (g) an amount equal to the sum of all regularly scheduled payments and optional and
mandatory prepayments of principal on Indebtedness for money borrowed of Borrowers actually made during such period to the extent
permitted hereunder, less (h) an amount equal to the net gain on the sale, lease, transfer or other disposition of assets
by Borrowers during such period to the extent included in arriving at such Net Income (Borrowers).


 


“Executive
Order” is defined in Section 12.18(a).


 


“Extension
Term” is defined in Section 2.4 hereof.


 


“Facility”
and “Facilities” are defined in Recital A.


 




    	Appendix B-4 



     


    

 


“Fair Valuation”
means the determination of the value of the consolidated assets of a Person on the basis of the amount that may be realized by
a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to
an interested buyer who is willing to purchase under ordinary selling conditions in an arm’s length transaction.


 


“First Payment
Date” is defined in Section 2.4(a).


 


“Government Account”
means all Accounts arising out of or with respect to any Government Contract.


 


“Governmental
Authority” means any federal, state, municipal, national, local or other governmental department, court, commission,
board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative
or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the
United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.


 


“Government Contract”
means all contracts with a Governmental Authority, and all amendments thereto.


 


“Guarantor”
means Summit Healthcare REIT, Inc., a Maryland corporation.


 


“Guaranty”
means, collectively and individually, all guarantees executed by Guarantor in favor of Lender, including that certain Limited Guaranty
and Indemnity of the date of this Loan Agreement made by Guarantor in favor of Lender.


 


“Hazardous
Substances” means, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, mold, fungus, hazardous materials, hazardous
wastes, special wastes, medical or biohazardous wastes, hazardous or toxic substances or related materials as defined in or subject
to any applicable Environmental Law. It shall not be a default herewith if common office, cleaning and, maintenance, and other
supplies in sufficient quantities to permit the efficient operation of businesses at the Property are used, stored, transported
or disposed of and excludes Hazardous Substances as may be generated, used, stored, transported or disposed in connection with
the permitted uses of the Property, provided that such supplies are stored, contained and otherwise dealt with in accordance with
applicable Environmental Laws.


 


“Healthcare
Laws” means all applicable statutes, laws, ordinances, rules and regulations of any Governmental Authority with respect
to regulatory matters primarily relating to patient healthcare, healthcare providers and healthcare services (including Section 1128B(b)
of the Social Security Act, as amended, 42 U.S.C. Section 1320a 7(b) (Criminal Penalties Involving Medicare or State
Health Care Programs), commonly referred to as the “Federal Anti-Kickback Statute,” and the Social Security Act, as
amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as
“Stark Statute”).


 


“HIPAA”
is defined in Section 5.9.


 




    	Appendix B-5 



     


    

 


“Improvements”
means all buildings, structures and fixtures of every kind and nature situated upon the Land, including the Facilities.


 


“Indemnified
Persons” is defined in Section 12.4.


 


“Insured Event”
is defined in Section 12.4.


 


“Insurer”
means a Person that insures another Person against any costs, losses, damages, or expenses incurred by such other Person.


 


“Intellectual
Property” is defined in Section 5.10.


 


“Inventory”
means all “inventory” (as defined in the UCC) of Borrowers (or, if referring to another Person, of such other Person),
now owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral
security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.


 


“Land”
means collectively the real property more particularly described on Exhibit A.


 


“Lease(s)”
means any lease or license agreement for occupancy of any portion of the Property, excluding contracts to provide healthcare services
to clients of the Facilities that include a right of occupancy.


 


“Lender”
is defined in the introductory paragraph, and includes all Transferees, successors and assigns.


 


“Liability
Event” means any event, fact, condition or circumstance or series thereof (i) in or for which any Loan Party becomes
liable or otherwise responsible for any amount owed or owing to any Medicaid program (or Medicare, if applicable) relating to any
of the Facilities by a provider under common ownership with such Loan Party or any provider owned by such Loan Party pursuant to
any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority after the failure of any such provider
to pay any such amount when owed or owing (beyond notice and cure periods, if any), (ii) in which Medicaid payments (or Medicare,
if applicable) to any Loan Party relating to any of the Facilities are lawfully set off against payments to such Loan Party or
any other Loan Party to satisfy any liability of or for any amounts owed or owing to any Medicaid program (or Medicare, if applicable)
by a provider under common ownership with such Loan Party or any provider owned by such Borrower pursuant to any applicable law,
ordinance, rule, decree, order or regulation of any Governmental Authority, or (iii) any of the foregoing clauses under (i) or
(ii) in each case pursuant to statutory or regulatory provisions that are similar to any applicable law, ordinance, rule, decree,
order or regulation of any Governmental Authority referenced in clauses (i) and (ii) above or successor provisions thereto, in
each case where the existence of such fact, condition or circumstance could, individually or in the aggregate, reasonably be expected
to have or result in a Material Adverse Effect (Individual).


 




    	Appendix B-6 



     


    

 


“LIBOR Rate”
means a variable per annum percentage rate, as of any date of determination (rounded upwards, if necessary, to the nearest
1/100 of 1%) equal to (a) the rate of interest that is identified and normally published by ICE Benchmark Administration Limited
as the offered rate for loans in United States dollars for the period of one month, as published by Reuters, as of 11:00 a.m.
London time as adjusted on a daily basis; divided by (b) the sum of one minus the daily average during
the preceding month of the aggregate maximum reserve requirement (expressed as a decimal) then imposed under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities” (as
defined in Regulation D). If ICE Benchmark Administration and/or Reuters reporting (or another nationally-recognized rate
reporting source acceptable to Lender) no longer reports the LIBOR or Lender determines in good faith that the rate so reported
no longer accurately reflects the rate available to Lender in the London Interbank Market or if such index no longer exists or
accurately reflects the rate available to Lender in the London Interbank Market, Lender may select a replacement index or replacement
page, as the case may be.


 


“Licenses”
means all certificates, certifications, permits, licenses and approvals, including certificates of completion and occupancy, required
for the legal use, occupancy and operation of any of the Facilities for its intended use.


 


“Lien”
means any mortgage, pledge, security interest, encumbrance, restriction, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof), or any
other arrangement pursuant to which title to the property is retained by or vested in some other Person for security purposes.


 


“Loan Amount”
is defined in Recital A.


 


“Loan Document(s)”
means, collectively and each individually, this Loan Agreement, any Note, any Guaranty, any Pledge and Security Agreement, the
Security Instruments, the UCC Financing Statements, any Subordination Agreements, and all other agreements, documents, instruments
and certificates previously or subsequently executed by a Loan Party or delivered by a Loan Party to Lender in connection with
any of the foregoing or the Loan, together with any and all renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements and extensions and modifications of any of the foregoing.


 


“Loan Party”
means, individually and collectively, (i) Borrowers, Guarantor and Pledging Entities and (ii) from and after the date when any
Facility is operated by an Affiliate that is controlled by, or under common control with, any Borrower, Guarantor or Pledging Entity,
each such operator.


 


“Lockout Termination
Fee” means the higher of (I) 1.00% of the principal amount of the Loan outstanding as of the Business Day prior
to the date of prepayment or acceleration (whichever of prepayment or acceleration first occurs) and (II) the product (but
not less than zero) obtained by multiplying (i) the difference between (A) the all-in effective yield (measured as a
percentage per annum) earned by Lender under this Loan Agreement during the three full calendar months immediately preceding the
date of prepayment or acceleration (whichever of prepayment or acceleration first occurs), minus (B) the latest published
rate (as published in The Wall Street Journal) preceding the date of prepayment or acceleration (whichever of prepayment
or acceleration first occurs) if for United States Treasury Notes or Bills (Bills on a discounted basis shall be converted to a
bond equivalent) with a maturity date closest to the Scheduled Maturity Date, multiplied by (ii) the outstanding principal
balance of the Loan as of the Business Day prior to the date of prepayment or acceleration (whichever of prepayment or acceleration
first occurs), multiplied by (iii) the quotient of (a) the number of months (full or partial) then remaining until the
Scheduled Maturity Date, divided by (b) 12.


 




    	Appendix B-7 



     


    

 


“Material
Adverse Effect” or “Material Adverse Change” means any event, condition or circumstance or set of
events, conditions or circumstances or any change(s) that (i) has, had or could reasonably be expected to have any material
adverse effect upon or change in the validity, enforceability or priority of any Loan Document, (ii) has been or could reasonably
be expected to be material and adverse to the value of any of the Property or of Lender’s security interest in or Lien on
the Property, (iii) has or could reasonably be expected to have a material adverse effect on the business, operations, prospects,
properties, assets, liabilities or condition of any Loan Party, either individually or taken as a whole, or (iv) has materially
impaired or could reasonably be expected to materially impair the ability of any Loan Party to perform its obligations or to consummate
the transactions under the Loan Documents to which it is a party.


 


“Maturity
Date” means earlier to occur of (i) the Scheduled Maturity Date, and (ii) the date that Lender accelerates
the maturity of the Loan after the occurrence of an Event of Default.


 


“Medicaid
Account” means any Account with a MedicaidAccount Debtor.


 


“Medicaid
Account Debtor” means any Account Debtor that is (i) the United States of America acting under the Medicaid
program established pursuant to the Social Security Act or any other federal healthcare program, including CHAMPUS, (ii) any
state, territory or the District of Columbia acting pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act, any successor statute or regulation thereto, or any other state health care program or (iii) any agent, carrier,
administrator or intermediary for any of the foregoing.


 


“Note”
is defined in Section 2.2(b).


 


“Obligations”
means all means all present and future obligations, Indebtedness and liabilities of any Loan Party under any Loan Documents or
Bank Products Agreement to Lender or otherwise at any time and from time to time of every kind, nature and description, direct
or indirect, secured or unsecured, joint and several, absolute or contingent, due or to become due, matured or unmatured, now existing
or hereafter arising, contractual or tortious, liquidated or unliquidated, including all applicable fees, charges and expenses
and/or all amounts paid or advanced by Lender on behalf of or for the benefit of any Loan Party for any reason at any time, including
in each case obligations of performance as well as obligations of payment and interest that accrue after the commencement of any
proceeding under any Debtor Relief Law by or against any such Person.


 


“OFAC”
means the U.S. Department of Treasury’s Office of Foreign Asset Control.


 




    	Appendix B-8 



     


    

 


“OFAC Prohibited
Person” means, a country, territory, individual or Person (i) listed on, included within or associated with any
of the countries, territories, individuals or entities referred to on the List of Specially Designated Nationals and Blocked
Persons of The Office of Foreign Assets Control or any other prohibited person lists maintained by governmental authorities,
or otherwise included within or associated with any of the countries, territories, individuals or entities referred to in or prohibited
by OFAC or any other Anti-Money Laundering Laws, or (ii) that is obligated or has any interest to pay, donate, transfer or
otherwise assign any property, money, goods, services, or other benefits from the Property directly or indirectly, to any countries,
territories, individuals or entities on or associated with anyone on such list or in such laws.


 


“Offer”
is defined in Section 9.1.


 


“Operating
Leases” means, collectively, the following leases:  (a) Lease Carrington Assisted Living dated as of November 2,
2015, by and between Summit Carrington Manor, LLC, a Delaware limited liability company, and CSL – Green Bay II, LLC, an
Oregon limited liability company; (b) Lease Carolina Assisted Living dated as of November 2, 2015, by and between Summit Appleton,
LLC, a Delaware limited liability company, and CSL – Appleton, LLC, an Oregon limited liability company; (c) Lease Marla
Vista Assisted Living dated as of November 2, 2015, by and between Summit Marla Vista Manor, LLC, a Delaware limited liability
company, and CSL – Green Bay I, LLC, an Oregon limited liability company; and (d) Lease The Gardens at Marla Vista dated
as of November 2, 2015, by and between Summit Marla Vista Gardens, LLC, a Delaware limited liability company, and CSL –
Green Bay I, LLC, an Oregon limited liability company; together with any amendments thereto approved in writing by Lender and together
with any replacement leases approved in writing by Lender.


 


“Operator”
means any one of the Operators.


 


“Operators”
means, collectively, CSL – Green Bay II, LLC, CSL – Appleton, LLC, and CSL – Green Bay I, each an Oregon
limited liability company.


 


“Other Taxes”
is defined in Section 12.15(b).


 


“PacWest”
is defined in Section 12.12.


 


“Patriot Act”
means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001, Title III of Pub. L. 107-56 (signed into law October 26, 2001), as amended.


 


“Payment Account”
is defined in Section 2.7(a).


 


“Payment Date”
is defined in Section 2.4.


 


“Payment Office”
means the address that may from time to time be designated by notice from Lender to Borrowers to be the Payment Office.


 


“Permit”
means, collectively, all Licenses, powers, permits, franchise agreements, certificates, authorizations, approvals, certificates
of need, provider numbers and other rights necessary or useful for the operation of any Facilities for its intended purpose.


 




    	Appendix B-9 



     


    

 


“Permitted
Discretion” means, with respect to any Person, a determination or judgment made by such Person in good faith in the exercise
of reasonable (from the perspective of a secured lender) credit or business judgment.


 


“Permitted
Exceptions” is defined in Section 5.4(a).


 


“Permitted
Indebtedness” is defined in Section 7.2.


 


“Permitted
Liens” means: (i) Liens under the Loan Documents or otherwise arising in favor of Lender, (ii) Liens imposed
by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained
by such Person in accordance with GAAP to the satisfaction of Lender in its discretion, (iii) (A) statutory Liens of
landlords (provided that any such landlord has executed a Subordination Agreement in form and substance satisfactory to Lender)
and of carriers, warehousemen, mechanics, and materialmen, and (B) other Liens imposed by law or that arise by operation of
law in the Ordinary Course from the date of creation thereof, in each case only for amounts not yet due or that are being contested
in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being
maintained by such Person in accordance with GAAP to the satisfaction of Lender in its discretion, (iv) Liens (A) incurred
or deposits made in the Ordinary Course (including surety bonds and appeal bonds) in connection with workers’ compensation,
unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts
(other than for the repayment of Indebtedness), statutory obligations and other similar obligations, or (B) arising as a result
of progress payments under government contracts, (v) purchase money Liens (A) securing Indebtedness permitted under clause (iii)
above, or (B) in connection with the purchase by such Person of equipment in the normal course of business, provided
that such payables shall not exceed any limits on Indebtedness provided for in this Loan Agreement, shall not encumber any of the
Collateral other than such equipment, and shall otherwise be Permitted Indebtedness under this Loan Agreement, (vi) Liens
necessary and desirable for the operation of such Person’s business, provided Lender has consented to such Liens in
writing before their creation and the priority of such Liens and the debt secured by such Liens are by their terms expressly subject
and subordinate in all respects to the Liens securing the Obligations and all of the rights and remedies of Lender, all in form
and substance satisfactory to Lender in its discretion; (vii) Liens disclosed on Schedule 7.3; and (viii)
Permitted Exceptions, including without limitation easements, encroachments, and any other matters, if any, on the Title Insurance
Policy.


 


“Person”
means an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust,
an unincorporated association, a joint venture, a Governmental Authority or any other entity of whatever nature.


 


“Pledge and
Security Agreement(s)” means, collectively and each individually, the Pledge and Security Agreements made by Pledging
Entities in favor of Lender, as more specifically set forth on Schedule 5.3C.


 




    	Appendix B-10 



     


    

 


“Pledging
Entities” means each interest holder of Borrowers and each of the additional Persons, if any, identified as Pledging
Entities on Schedule 5.3C.


 


“Property”
means, collectively, the Real Estate and all other real and personal property of Borrowers.


 


“Property
Agreements” is defined in Section 5.4(h).


 


“Property
Manager” means any property manager of the Facilities, if any, pursuant to the Property Management Agreement, and any
subsequent manager approved by Lender, in Lender’s discretion.


 


“Property
Management Agreement(s)” means individually or collectively, as the context may require, the property management agreements,
if any, pertaining to the Facilities, in form and substance satisfactory to Lender in Lender’s discretion.


 


“Property
Management Fee Subordination Agreement” means any the Management Fee Subordination Agreement executed in connection herewith,
as the same may be modified, amended or supplemented from time to time.


 


“Real Estate”
means the Land, the Improvements, together with all rights appurtenant thereto.


 


“Receipt”
is defined in Section 12.5.


 


“Rents and
Profits” has the meaning ascribed to such term in the Security Instrument.


 


“Required
Work” is defined in Section 3.6(a).


 


“Reserves”
is defined in Section 4.2(b).


 


“Scheduled
Maturity Date” means November 5, 2018.


 


“Security
Documents” means the Pledge and Security Agreement, the Security Instruments, the Assignments, the UCC Financing Statements
and all other documents or instruments necessary to create or perfect the Liens in the Collateral, as such may be modified, amended
or supplemented from time to time.


 


“Security
Instruments” means those certain Mortgages, Security Agreements and Fixture Filings of even date herewith made by Borrowers
in favor of Lender.


 


“Services”
means medical and health care services provided to a Person, including medical and health care services that are covered by a policy
of insurance issued by an Insurer, physician services, nurse and therapist services, dental services, hospital services, skilled
nursing facility services, comprehensive outpatient rehabilitation services, home health care services, residential and out-patient
behavioral healthcare services.


 




    	Appendix B-11 



     


    

 


“Special-Purpose
Entity” means a corporation, limited liability company, or limited partnership that at all times while the Obligations
are outstanding complies with the following terms and conditions:


 


(i)          Purpose.
Such entity was organized solely for the purpose of owning, financing and/or leasing each of the Facilities as an assisted living
and memory care facility, and selling the Facilities.


 


(ii)         No
Other Business. Such entity has not and will not engage in any business unrelated to owning, financing or leasing each Facility
as an assisted living and memory care facility, as appropriate and selling each such Facility.


 


(iii)        No
Other Assets. Such entity has not and will not have any assets other than those related to its owning, financing or leasing
each Facility an assisted living and memory care facility, as appropriate and selling each such Facility.


 


(iv)        No
Other Indebtedness. Such entity has not and will not have indebtedness other than the Obligations and liabilities in the Ordinary
Course relating to owning, financing or leasing each Facility as an assisted living and memory care facility, as appropriate and
selling each such Facility.


 


(v)       Misunderstandings.
Such entity has not and will not fail to correct any known misunderstanding regarding the separate identity of such entity.


 


(vi)       Separate
Accounts. Such entity has maintained and will maintain its accounts, books and records separate from any other person or entity;
provided, however, that Borrowers’ assets and operations may be included in a consolidated financial statement provided that
appropriate notation shall be made on such consolidated financial statement to indicate that Borrowers is its own separate entity.


 


(vii)       Official
Records. Such entity has maintained and will maintain its books, records, resolutions and agreements as official records, and
will not amend, modify, or alter its articles of organization, certificate of formation, bylaws or other organizational documents
without the prior written consent of Lender.


 


(viii)      Commingling.
Such entity has not and will not commingle its funds or assets with those of any other entity, and such entity has held and will
hold its assets in its own name.


 


(ix)       Own Name.
Such entity has conducted and will conduct its business in its own name.


 


(x)        Separate
Records. Such entity has maintained and will maintain its financial statements, accounting records and other entity documents
separate from any other person or entity; provided, however, that Borrowers’ assets and operations may be included in a consolidated
financial statement provided that appropriate notation shall be made on such consolidated financial statement to indicate that
each of Borrowers is its own separate entity.


 




    	Appendix B-12 



     


    

 


(xi)       Own Liabilities.
Such entity has paid and will pay its own liabilities out of its own funds and assets; provided, however, that Borrowers’
entry into this Loan Agreement, and payment and performance of the Obligations shall not be deemed a violation of this paragraph.


 


(xii)       Formalities.
Such entity has observed and will observe all partnership, corporate or limited liability company formalities, as applicable.


 


(xiii)      Guarantees.
Such entity has not and will not assume or guarantee or become obligated for the debts of any other entity or hold out its credit
as being available to satisfy the obligations of any other entity except for liabilities permitted by the Lender to be guaranteed
and the Obligations.


 


(xiv)      Affiliate
Securities. Such entity has not and will not acquire obligations or securities of its partners, members or shareholders.


 


(xv)       Allocations.
Such entity has allocated and will allocate fairly and reasonably any overhead for shared office space and uses, invoices and checks.


 


(xvi)      Pledges.
Except as otherwise permitted in this Loan Agreement, such entity has not and will not pledge its assets for the benefit of any
other person or entity other than Lender, other than in connection with any loans consented to in writing by Lender, which may
be granted or withheld in Lender’s sole discretion and other than pledges and liens permitted under this Loan Agreement.


 


(xvii)     Identification.
Such entity has held and identified itself and will hold itself out and identify itself as a separate and distinct entity under
its own name and not as a division or part of any other person or entity.


 


(xviii)    Loans.
Such entity has not made and will not make loans to any person or entity.


 


(xix)      No Dissolution.
Such entity has not and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger,
asset sale, transfer of membership interest, or amendment of its certificate of formation or operating agreement.


 


(xx)       Organizational
Documents. (1) Such entity’s articles of organization, certificate of formation and/or operating agreement, as applicable,
shall provide that the vote of a majority-in-interest of the remaining members is sufficient to continue the life of the limited
liability company if a termination event occurs, such as a bankruptcy of any managing member; and (2) if the vote of a majority-in-interest
of the remaining members is not obtained to continue the life of the limited liability company upon a termination event, such entity’s
articles of organization, certificate of formation and/or operating agreement as applicable, provide that the limited liability
company may not liquidate collateral without the consent of Lender.


 


(xxi)       Bankruptcy
Filing. Such entity, without the unanimous consent of all of the members, shall not file a bankruptcy or insolvency petition
or otherwise institute insolvency proceedings with respect to itself or to any other entity in which it has a direct or indirect
legal or beneficial ownership interest, dissolve, liquidate, consolidate, merge, or sell all or substantially all of its assets
or any other entity in which it has a direct or indirect legal or beneficial ownership interest, engage in any other business activity,
or amend its organizational documents.


 




    	Appendix B-13 



     


    

 


(xi)       Divisions.
Such entity has not and will not identify its members, or any affiliates of either of them as a division or part of it.


 


(xxiii)    Arm’s-length
Transactions. Such entity has not entered and will not enter into or be a party to, any transaction with its members or its
affiliates except in the Ordinary Course and on terms that are intrinsically fair and are not less favorable to it than would be
obtained in a comparable arm’s-length transaction with an unrelated third party.


 


“Subordination
Agreement” means, collectively and each individually, the Management Fee Subordination Agreement(s), if any, and the
Operating Lease subordination agreements, and any other subordination agreement(s) executed in connection with the Loan.


 


“Subsidiary”
means, (i) as to Borrowers, any Person in which 50% or more of all equity, membership, partnership or other ownership interests
is owned directly or indirectly by Borrowers or one or more of its Subsidiaries, and (ii) as to any other Person, any Person
in which 50% or more of all equity, membership, partnership or other ownership interests is owned directly or indirectly by such
Person or by one or more of such Person’s Subsidiaries.


 


“Term”
means the period commencing on the Closing Date and ending on the Maturity Date.


 


“Title Company”
means Title Guaranty Company.


 


“Title Insurance
Policy” means an ALTA Lender’s Policy of Title Insurance (2006 form deleting all arbitration and co-insurance provisions,
or such other form as may be approved by Lender, in its discretion) (or multiple title policies) in favor of Lender insuring the
first priority lien of each of the Security Instruments against the Property, together with all endorsements, exceptions, additions
and modifications as Lender shall deem appropriate.


 


“Transaction
Persons” has the meaning provided in Section 5.25.


 


“UCC”
means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions of this Loan Agreement relating to such perfection,
effect of perfection or non-perfection or priority.


 




    	Appendix B-14 



     


    

   


ALL SUBSEQUENT
SCHEDULES HAVE BEEN INTENTIONALLY OMITTED


 




    	Schedule 12.13