Exhibit
10.2


 


EMPLOYMENT
AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


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


 


AGREEMENT


 


1.            Employment.


 


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


 


2.            Effective
Date and Term.


 


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


 


3.            Compensation
and Benefits.


 


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


 




     


     


    

 


3.1          Base
Salary. During the Employment Period, Company shall pay to Executive an annual base salary at a rate of $200,000 per annum,
subject to all appropriate withholding taxes, which base salary shall be payable in accordance with Company’s normal payroll
practices and procedures (but no less frequently than monthly). Executive’s base salary shall be reviewed annually prior
to the beginning of each fiscal year of Company during the Employment Period by the Board, or a committee of the Board, and may
be increased, in the sole discretion of the Board, or such committee of the Board. For purposes of this Agreement, the term “Fiscal
Year” shall mean the fiscal year of Company. Executive’s base salary, as in effect from time to time, is hereinafter
referred to as the “Base Salary.”


 


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


 


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


 


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


 


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


 




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


 


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


 


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


 


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


 




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4.            Termination
of the Services.


 


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


 


4.1           Termination
upon Death or Disability of Executive.


 


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


 


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


 


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


 


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


 


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


 


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


 




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


 


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


 


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


 


4.4          Termination
by Executive for Good Reason.


 


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


 


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


 


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


 


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


 




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


 


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


 


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


 


(i)          an
amount equal to one (1) times Base Salary, payable as follows: (i) fifty percent (50%) of the amount shall be paid in a single
lump sum amount within 10 days after the date by which Executive signs and returns a Release (and any revocation period has lapsed
or expired) as provided for in Paragraph 4.7 below (presuming such Release has not been revoked); and (ii) the remaining fifty
percent (50%) of the amount shall be paid in equal monthly installments over a six (6) month period on the first day of each month,
commencing with the first day of the month immediately following payment of the first fifty percent (50%) installment.


 




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


 


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


 


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


 


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


 


(i)          At
all times throughout Executive’s employment with the Company, Company shall pay the premiums for a term life insurance policy
with a death benefit of no less than Two Hundred Fifty Thousand Dollars ($250,000). Executive shall be the named insured and shall
be the sole owner of the policy. Executive shall have the sole right to name all beneficiaries to the policy in his sole discretion.
In the event that Executive’s employment with the Company terminates for any reason other than his death, Executive shall
have the right to maintain the term life insurance policy at his sole expense. ; and


 


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


 




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


 


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


 


(i)          an
amount equal to six (6) months of the Base Salary, payable 50% in a lump sum amount within 10 days after the date by which Executive
signs and returns a Release (and any revocation period has lapsed or expired) as provided for in Paragraph 4.7 below (presuming
such Release has not been revoked) and the remaining 50% over a period of three (3) months thereafter.


 


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


 


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


 


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


 




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


 


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


 


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


 




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5.            Change
in Control. 


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 




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


 


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


 


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


 


6.            Restrictive
Covenant Agreement.


 


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


 


7.            Miscellaneous.


 


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


 


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


 




     11 


     


    

 


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


 


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


 


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


 


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


 


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




 


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


 




     12 


     


    

 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 




     13 


     


    

 


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


 


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


 


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


 


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


 




     14 


     


    

 


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


 


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


 


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


 




     15 


     


    

 


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


 


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


 




     16 


     


    

 


Schedule 1


 


PERFORMANCE BONUS


 


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


 


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


 


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



 


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


 


Some examples as to how the calculation works:


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



 


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


Payments:


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


 




     Schedule 1 


     


    

 


Exhibit A


 


SEPARATION AND CONFIDENTIALITY AGREEMENT


AND GENERAL AND SPECIAL RELEASE


 


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


 


RECITALS


 


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


 


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


 


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


 


AGREEMENT


 


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


 


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


 


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


 




     Exhibit A – Page 1 


     


    

 


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


 


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


 


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


 


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.


 




     Exhibit A – Page 2 


     


    

 


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


 


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


 


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


 


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


 


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


 




     Exhibit A – Page 3 


     


    

 


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


 


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


 


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


 


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


 


	 	By: 	
	 		
	 	Its:	 


 


 


	 	EMPLOYEE:
	 	 


 




     Exhibit A – Page 4 


     


    

 


Exhibit B


 


Summit Healthcare REIT, Inc.

Nondisclosure, Intellectual Property and Nonsolicitation Agreement


 


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


 


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


 


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


 


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


 


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


 


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


 




    Exhibit B – Page 1 


     


    

 


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


 


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


 


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


 


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


 


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


 


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


 


2.             Nonsolicitation;
Non-Disparagement.


 


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


 




    Exhibit B – Page 2 


     


    

 


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


 


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


 


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


 


3.             Assignment
of Intellectual Property.


 


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


 




    Exhibit B – Page 3 


     


    

 


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


 


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


 


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


 


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


 


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


 




    Exhibit B – Page 4 


     


    

 


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


 


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


 


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


 


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


 


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


 




    Exhibit B – Page 5 


     


    

 


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


 


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


 


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


 


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




    Exhibit B – Page 6 


     


    

 


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


 








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


 




    Exhibit B – Page 7