Management Services Agreement



 Exhibit 10.2 

MANAGEMENT SERVICES AGREEMENT 

by and between 
 JERRY
ERWIN ASSOCIATES, INC. (d/b/a JEA SENIOR LIVING) 
 (Management Company) 

and 
 CHP ISLE AT
WATERCREST-BRYAN TX TENANT CORP. 
 (Tenant) 

Isle at Watercrest 
 4091
Eastchesester Drive 
 Bryan, TX 77802 

April 21, 2013 







 MANAGEMENT SERVICES AGREEMENT 

THIS MANAGEMENT SERVICES AGREEMENT, is made as of the 21st day of April, 2014 (the “Effective Date”) by and between
CHP ISLE AT WATERCREST-BRYAN TX TENANT CORP., a Delaware corporation (“Tenant”), and JERRY ERWIN ASSOCIATES, INC. (d/b/a JEA SENIOR LIVING) (hereinafter “Management Company”). 

WITNESSETH: 

WHEREAS, Landlord is the owner of that certain assisted living, Alzheimer’s care and skilled nursing facility known as “Isle
at Watercrest” located at 4091 Eastchester Road, Bryan, Texas 77802 (the “Facility”) and all of the furniture, furnishings, equipment and other personal property located at the Facility; and 

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

WHEREAS, Tenant wishes to engage Management Company, and Management Company wishes to provide certain services to Tenant during the
term of this Agreement, relating to the management of the Facility, on the terms and conditions set forth herein. 
 NOW, THEREFORE,
the parties hereto, intending to be legally bound, in consideration of the mutual provisions and covenants herein contained, agree as follows: 

ARTICLE 1. 
 1.1
Definitions. The following terms shall have the meanings set forth below when capitalized herein: 
 “Adjusted
NOI” means an amount equal to NOI less the FF&E Reserve Payment. 
 “Administrator” means such individual
employed by Management Company, at the expense of the Facility as an Operating Expense. The Administrator will be under the direct supervision of the Management Company, who is responsible for the daily management of the Facility. 

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

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

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

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

“Affiliated Agreements” means those certain Management Services Agreements by and between Manager and certain Affiliates of
Tenant dated of even date herewith and more particularly described on Schedule 1.1 attached hereto and by this reference made a part hereof. 

  
 1 








 “Agreement” means this Management Services Agreement, together with any
amendments hereto entered into by the parties from time to time. 
 “Budget” shall have the meaning set forth in
Section 2.5. 
 “Business Day” means any day other than a Saturday, Sunday or legal holiday in the State of
Texas. 
 “Capital Expenditures” means certain expenses for renovations, replacements, maintenance, alterations,
improvements or renewals to the Facility that are typically classified as capital expenditures in accordance with GAAP; provided however, the parties acknowledge and agree that unit turnover costs shall not be deemed to be Capital Expenditures. 

“Control” means: 

(a) the right to exercise, directly or indirectly, a majority of the votes which may be voted at a meeting of (i) the shareholders of the
corporation, in the case of a corporation, (ii) the shareholders of the general partner, in the case of a limited partnership, or (iii) the equity holders or other voting participants of a Person that is not a corporation or limited
partnership; or 
 (b) the right to elect or appoint, directly or indirectly, a majority of (i) the directors of the corporation, in the
case of a corporation, (ii) the directors of the general partner, in the case of a limited partnership, or (iii) a majority of the Persons who have the right to manage or supervise the management of the affairs and business of a Person
that is not a corporation or limited partnership, 
 (c) and “Controlled” has a corresponding meaning. 

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

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

“Existing Manager Facilities” means Hudson Creek Alzheimer’s Special Care Center located at 2850 Coppercrest Drive in
Bryan, Texas and Cedar Ridge Alzheimer’s Special Care Center located at 2100 S. Lakeline Boulevard in Cedar park, Texas. 

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

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

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

“Fiscal Year” means each calendar year during the Term. The period from the Effective Date through December 31, 2014
shall be the first Fiscal Year. 
 “Fixed Asset Supplies” means supply items necessary for the operation of the Facility.

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

  
 2 








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

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

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

“Increase Date” means January 1st of each Fiscal Year, with the
first Increase Date being January 1, 2015. 
 “Inventories” means inventories as defined by GAAP and provisions in
storerooms, medical supplies, other merchandise intended for sale, mechanical supplies, stationery and other expenses, supplies and similar items. 

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

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

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

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

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

“Management Company Expenses” shall mean those expenses that, unless otherwise approved as a part of the Budget, or
otherwise approved by Tenant, shall be paid by Management Company without reimbursement by Tenant: 
 (i) any expenses for
Management Company’s corporate office physical plant, equipment or supplies; 
 (ii) any overhead expense of Management
Company incurred in its general offices or salaries of any non-Facility specific executive personnel of Management Company, but excluding Management Company personnel allocated to initiatives for the Facility such as additional marketing or special
capital projects as contained in the Budget or approved in writing by the Tenant; 
 (iii) salaries, wages, and expenses
allocable to any personnel for activities with regard to providing in-house accounting services; 

  
 3 








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

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

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

“Mortgagee” means the holder of any Facility Mortgage. 

“NOI” means Revenues less Operating Expenses. 

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

“Operating Expenses” means any or all, as the context requires, of the following: (i) all costs and expenses incurred in
connection with the operation, management and maintenance of the Facility, including, without limitation, all administrative, financial reporting, and general expenses, expenses relating to employment of employees at the Facility (“at
cost” with no additional fee or mark-up including salaries, payroll taxes, benefits, cost of payroll, etc); (ii) advertising and business promotion expenses; (iv) Management Fees; (v) the cost of Inventories and Fixed Asset
Supplies consumed in the operation of the Facility; (vi) costs and expenses for preparation of claims and billing submissions and collection of Receivables and other monies; (vii) insurance costs; (viii) all real property and personal
property taxes and assessments; (ix) those costs and expenses that are expressly identified as Operating Expenses in this Agreement; (x) budgeted costs related to accounting software fees and Management Company’s server utilization
fees; (xi) costs incurred to prepare a unit for an incoming resident; (xiii) costs of maintenance and repairs not included in Capital Expenditures; (xiv) food; (xv) cost of compliance with Legal Requirements; (xvi) expenses
related to the provision of services including, except to the extent billed directly to the Resident, home health services; and (xvii) any other non-capital costs and expenses incurred in connection with the operation of the Facility or as are
specifically provided for elsewhere in this Agreement. Operating Expenses shall not include any Management Company Expenses or deductions for interest for property debt service, or depreciation or amortization, income, taxes, franchise taxes or
similar taxes, or rent payable from Tenant to Landlord pursuant to the lease for the Facility, or costs relating to the Landlord’s or Tenant’s ownership structure (all of which shall be paid directly by Landlord or Tenant, as the case may
be). 
 “Performance Threshold” means, for the first Fiscal Year (or partial Fiscal Year), Three Hundred Six Thousand Three
Hundred Ninety-Two and 00/100 Dollars ($306,392.00) (which amount shall be prorated for any partial Fiscal Year); commencing in the second Fiscal Year and continuing for the remainder of the Term, for the applicable Fiscal Year an amount equal to
eighty-five percent (85%) of the anticipated Net Operating Income set forth in the Approved Operating Budget for such Fiscal Year. 

  
 4 








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

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

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

  
 5 








 “Subsidiary” means, in respect of any Person: 

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

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

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

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

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

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

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

ARTICLE 2. 
 OPERATING
TERMS AND APPOINTMENT AND EMPLOYMENT OF MANAGEMENT COMPANY AS AGENT AND GENERAL MANAGEMENT COMPANY OF THE FACILITY 
 2.1
Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of five (5) years thereafter subject to earlier termination as set forth in Article 7 hereof (the “Term”). 

2.2 Employment of Management Company. Tenant hereby appoints Management Company as the sole and exclusive manager of the Facility
and subject to Tenant’s ultimate responsibilities as the holder of the Licenses (as defined below) and in accordance with all Legal Requirements, Management Company agrees to act as the manager of the Facility. In connection therewith,
Management Company shall supervise, direct and control the day to day business activities and management of the Facility and all phases of its management in the name of and on behalf of Tenant upon the terms and conditions hereinafter stated.
Management Company shall be responsible for managing the Facility in a professional, competent and business-like manner, in material compliance with all Legal Requirements and the terms and provisions of this Agreement. Management Company shall,
subject to compliance of Tenant with its obligations 

  
 6 








 
hereunder, do all things as may be reasonably required to maintain and preserve all necessary licenses, permits, authorizations, certifications and approvals to operate the Facility so as to
comply with all applicable Legal Requirements (collectively, the “Licenses”); provided, however, and notwithstanding any other provisions of this Agreement to the contrary, Management Company shall not be required to expend its own
funds in performing any of its obligations herein other than general company matters of Management Company that would be a cost of doing business of Management Company even if this Agreement did not exist (such as maintaining its corporate status in
Washington, etc.) Except as provided for herein, Management Company makes no warranties, express or implied, and shall not assume any financial or other responsibilities in connection with its obligations hereunder and shall not be obligated to
contribute its own funds in connection with the management of the Facility. 
 2.3 Retention of Legal Ownership by Tenant.
Tenant shall at all times continue to exercise legal ownership and control over the assets and operations of the Facility, and Management Company shall perform its responsibilities as described in this Agreement as agent to Tenant in accordance with
written policies and directives adopted by Tenant. By entering into this Agreement, Tenant does not delegate to Management Company any of the powers, duties, and responsibilities vested in the Tenant by Legal Requirements, or by its Articles of
Organization or Operating Agreement. Management Company will propose written policies and directives from time to time for adoption by the Tenant. Tenant, may, according to the terms of this Agreement (i) direct Management Company to implement
existing policies and procedures at the Facility as approved by Management Company, (ii) consent to the adoption of policies and procedures at the Facility recommended by Management Company, or (iii) adopt as the policies and procedures of
the Facility the Tenant’s own proposals as approved by Management Company, subject to any limitations stated herein. Whenever this Agreement calls for the approval of Tenant, such approval shall be expressed in writing, which may be by email,
and executed by a duly authorized officer of Tenant. In the absence of any requirement for Tenant consent, then Management Company shall be entitled, to the extent permitted by Legal Requirements, to rely upon its business judgment, consistent with
the terms of this Agreement and the Budget, and act accordingly as agent for the Tenant. Notwithstanding anything herein to the contrary, Tenant shall have all the requisite power and authority to operate the Facility as required by Legal
Requirements. 
 2.4 Management Services to be Provided by Management Company. During the Term, Management Company shall, as
agent and on behalf of Tenant, manage all aspects of the day-to-day operation of the Facility. Management Company shall act in good faith and use its best reasonable efforts to perform its obligations hereunder. In connection therewith, to the
extent permitted by Legal Requirements and in accordance with the Budget, Management Company (either directly or through supervision of Management Company employees at the Facility): 

 

	 	(a)	 Select, employ, supervise, train and discharge as Facility employees, an adequate staff of housekeepers, maintenance, food service, activity, office
and other employees, including an Administrator (who may be replaced, from time to time), and promote, direct, assign and discharge all such employees at Management Company’s sole discretion. All costs and expenses relating to Facility
employees, including compensation and benefits, shall constitute an Operating Expense to be paid or reimbursed at 



  
 7 









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

  

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

  

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

  

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

  

	 	(e)	 Provide directly, or through contracts, all necessary services, food, beverages, cleaning and other supplies, equipment, furniture and furnishings for
the operation and maintenance of for the account of Tenant. Unless the consent of Tenant is otherwise obtained, all contracts or agreements entered into by Management Company for the account of the Tenant shall be for a term of one (1) year or
less (unless for an amount 



  
 8 









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

  

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


 

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

  

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


 

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



  
 9 









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


 

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

  

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

  

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

  

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

  

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


  

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


  
 10 









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

  

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

  

	 	(s)	To the extent modification of this Agreement is required to comply with Legal Requirements, Management Company and Tenant agree to make such modification to cause this Agreement to comply with all Legal Requirements.
Expenses incurred as the result of the noncompliance, cure and/or appeal shall be the responsibility of Tenant. Management Company, however, shall not take any action under this Section so long as Management Company has been informed that Tenant is
contesting, or has affirmed its intention to contest any such order or requirement, unless a failure to comply promptly with any such order or requirement would expose Management Company to civil or criminal liability. 


  
 11 









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


 

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

  

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


  

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

 2.5 Budget. 

 

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

  

	 	(b)	For each Fiscal Year thereafter, Management Company shall submit to Tenant, at least 60 days prior to the beginning of such Fiscal Year during the Term, an annual budget covering the operations of, and proposed Capital
Expenditures to be made with respect to, the Facility containing the following items: 


  
 12 








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

(a) unit occupancy; 

(b) Revenues; 

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

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

(e) Management Fees. 
  

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



  
 13 









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


 

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

  

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


 

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

 2.6 Reports to Tenant. 

 

	 	(a)	 During the Term, Management Company shall deliver to Tenant the following statements for the Facility prepared in accordance with GAAP applied
consistently from period to period (which shall be certified by an 



  
 14 









	 	
officer of Management Company as being true and accurate in all material respects) by the tenth (10th) calendar day of the month, except
for the Rent Roll which shall be submitted within the fifth (5th) Business Day of the month and trued up as of the fifteenth (15) calendar day of the month: 


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

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

(iii) Rent Roll; 

(iv) Report of daily census for the month; 

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

(vi) Twelve month rolling cash flow projection; 

(vii) Detail of Management Fee calculations; 

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

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

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

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

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

 

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


  
 15 








 (i) All balance sheet reconcilement; 

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

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

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

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

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


(i) Balance sheet and income statement; 

(ii) Revenues, Operating Expenses, and NOI; 

(iii) Calculations of Management Fee; 

(iv) Fixed asset additions; 

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

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

 

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


  
 16 









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


(i) Management Company shall make available to Tenant for inspection and/or copying by Tenant upon request, all books, records
and financial data relating to the Facility in Management Company’s possession. Tenant shall notify the Management Company at least five (5) Business Days in advance of such inspection and shall conduct such inspection during mutually
agreeable business hours. 
 (ii) Management Company shall reasonably assist the Tenant and its accountants in preparing and
delivering to any lender any required monthly and annual reports. 
 (iii) Management Company shall provide Tenant annually
with information concerning any new competing community, and shall provide Tenant annually with any revisions to the Marketing Plan for the Facility, and an annual competitive analysis showing the Facility’s position in the market with a survey
of pertinent data of competing communities (to the extent requested by Tenant). 
 2.7 Bank Accounts and Cash Balance. 

 

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


 

	 	(b)	 Landlord shall establish a reserve account (the “FF&E Reserve”) at a bank approved by Manager, such approval not to be
unreasonably withheld or delayed. Each month during the Term, Management Company shall transfer into the FF&E Reserve an amount equal to one twelfth (1/12) of 



  
 17 









	 	
the FF&E Reserve Payment. Transfers into the FF&E Reserve shall be made on or before the fifteenth (15th) day of each month.
Funds deposited into the FF&E Reserve shall be disbursed in accordance with the Approved Capital Budget. Manager and Tenant or Landlord shall each be signatories on the FF&E Reserve, but the Landlord shall be the account holder and all funds
contained therein shall be the property of Landlord. 

  

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


 

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

 2.8
Licenses, Permits and Certification. 
  

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

  

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

 2.9 Medicare. Tenant and
Landlord shall have the right, at all reasonable times during the usual business hours of the Facility, to audit, examine and make copies of books of account (including, without limitation, all books and patient records, billing records, business
records and any other records of all billings by or on behalf of Manager to any patient, third party payer and/or the United States Government or any of its agencies for services rendered at the Facility) maintained by Manager with respect to the
Facility. Such right may be exercised through any agent or employee designated by Tenant or by an independent public accountant designated by Tenant. Further, at the end of the Term of this Agreement, or upon other termination of this Agreement, as
provided herein, copies of all books and patient records, billing records, business records and any other records kept for the Facility, including all records kept on electronic media, and accounts and funds belonging to each Facility, are to be
promptly delivered to Tenant in a form readable by generally available software. 

  
 18 








 In the event any audit conducted by Tenant or Landlord causes Tenant or Landlord to question any
amount billed by or on Manager’s behalf to any patient, third party payer and/or the United States Government or any agency thereof for services rendered at the Facility, Tenant or Landlord shall provide Manager with written notice of the
amounts in question. If Tenant, Landlord and Manager are unable to resolve such matters to Tenant and Landlord’s satisfaction within sixty (60) days after such written notice, Tenant and Landlord shall each have the right to bring
such amounts to the attention of the appropriate person, or the United States Government or the appropriate agency thereof, and Tenant shall have the right to terminate this Agreement on sixty (60) days written notice to Manager and
Landlord.
 Manager shall repay to any patient, third party payer and/or the United States of America or to the appropriate agency thereof,
any amounts received by Manager and not remitted to Tenant and which are finally determined to have been improperly billed by or on behalf of Manager for services rendered at the Facility (which amounts shall be a Facility Expense only to the extent
they were originally included in Gross Revenue), and Manager shall pay any interest, fines and penalties thereon. For purposes of this paragraph, an amount shall be finally determined to have been improperly billed if such determination has
been made by an agency of the United States of America or by a court of law, and such determination is not subject to further appeal. Manager will defend, indemnify and hold Tenant and Landlord (and any of their Affiliates, their respective
directors, officers, shareholders, employees and agents) harmless from and against any claims, losses, expenses, costs, suits, actions, proceedings, demands or liabilities (including, without limitation, interest, fines and penalties) that are
asserted against, or sustained or incurred by them and that arise out of allegations of improper billing by or on behalf of Manager to any patient, third party payer and/or the United States of America or any agency thereof for services rendered at
the Facility, whether or not such allegations are true. The scope of the foregoing indemnities includes any and all reasonable costs and expenses incurred during any investigation of or in any proceeding to defend any indemnified claim, or to
enforce the indemnity, or for any or all of such purposes. If Tenant or Landlord notifies Manager in writing of the terms of a proposed settlement of an indemnified claim that are acceptable to Tenant or Landlord, Manager agrees that it will
not unreasonably withhold or delay its approval of such settlement. The Manager’s obligations hereunder shall survive the termination of this Agreement. 

2.10 Quality Controls. Management Company shall activate and maintain on a continuing basis, a quality assurance program which
provides objective measurements of the quality of services provided at the Facility. In connection therewith, Management Company shall utilize such techniques (e.g. resident interviews and periodic inspections) as Management Company may reasonably
deem necessary to maintain the quality of the Facility. 
 2.11 Use of Management Company’s Personnel. Representatives of
Management Company shall visit the Facility as often as Management Company deems necessary. All out-of-pocket expenses arising from travel and lodging connected with such visitations shall be borne by the Management Company, except personnel that
float between properties and any travel beyond fifty (50) miles if such arrangement can be shown to reduce overall employment costs at the Facility and except that the actual cost of Management Company’s officers’ and employees’
air travel to or from the Facility shall be paid as an Operating Expense from the Operating Account; provided however, (i) no other incidental costs of Management Company’s officers’ 

  
 19 








 
and employees’ related to such travel, such as but not limited to the costs of ground travel, lodging and food, shall be an Operating Expense and (ii) in the event that the Management
Company’s officers’ or employees’ conduct business unrelated to the management of the Facility during such trip, then the Operating Expense for the air travel pursuant to this section shall be a portion of such costs representing a
reasonable and equitable allocation of such costs to the Facility. 
 2.12 Taxes. Any applicable income taxes of Tenant, any
federal, state or local taxes, assessments or other governmental charges imposed on the Facility are the obligations of Tenant, not of Management Company, and all of the foregoing, with the exception of any applicable income taxes (which shall be
paid directly by Tenant), shall be paid out of the Operating Account of the Facility. With the Tenant’s prior written consent, Management Company may, and at Tenant’s direction shall, contest the validity or amount of any such tax or
imposition on the Facility in the same manner as described in Section 2.4(a) hereof. Management Company, on behalf of Tenant, shall cause all Social Security and federal and state income tax withholding and other employee taxes related
to the Management Company’s employees which may be due and payable to be paid promptly from the Operating Account of the Facility before the payment of any other Operating Expenses therefrom. 

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

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

  

	 	(b)	personal property relating to the Facility; 

  

	 	(c)	service contracts relating to the Facility; 

  

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


 

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

  

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


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

Management Company, upon request by the Tenant, will make available for review at the corporate offices of Management Company to the Tenant,
all facility operational materials, including policy and procedure manuals and standard operational materials and other similar materials. Management Company agrees to change any policy and/or procedure which violates


  
 20 








 
any Legal Requirement. In addition, if Tenant requests any other change, Management Company and Tenant will work together to revise such operational policies and procedures but will not be
required to implement changes which are based solely on business considerations. Any and all changes in the standard management program of the Management Company will be documented and clearly expressed in the “Policies and Procedures
Exceptions Manual” which will be maintained in the Facility. This Manual and the standard operational materials, together, will comprise the “Facility Operational Materials”. 

ARTICLE 3. 
 MANAGEMENT
FEE 
 3.1 Management Fee. Management Company shall receive five percent (5%) of the gross collected Revenues
received each month (“Management Fee”). The Management Fee for each month shall be paid to the Management Company from the Operating Account of the Facility no later than fifteen (15) days following the end of that month. 

ARTICLE 4. 
 OTHER
TRANSACTIONS WITH MANAGEMENT COMPANY OR ITS AFFILIATES 
 4.1 Transactions with Management Company and Its Affiliates.
Notwithstanding anything else herein contained, Management Company shall not, without the prior written consent of Tenant after full disclosure by Management Company of such affiliation and interest, cause Tenant to enter into any contract with
Management Company or any Affiliate thereof for services required to be provided by Management Company under this Agreement, or pay any amount to Management Company or its Affiliates, other than Management Fees described in Article 3 hereof, or
reimbursement of bona fide expenses to unrelated third parties. 
 ARTICLE 5. 

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

  
 21 








 
Management Company’s Workers’ Compensation, Employer’s Liability, and Professional Liability insurance policies, upon thirty (30) days written notice to Management Company. In
the event Tenant or Landlord elects to procure directly any of the required insurance policies, then Tenant or Landlord shall be the named insured under each policy and Management Company shall be named as an additional insured. 

ARTICLE 6. 

REPRESENTATIONS AND WARRANTIES 

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

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


  

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


 

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

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

 

	 	(a)	Status of Management Company. Management Company is an S-corp. duly organized and validly existing in good standing under the laws of the State of Washington and qualified to do business in the State of Texas,
and has all necessary power to carry on its business as now being conducted, to carry on its contemplated business, to enter into this Agreement and to observe and perform its terms. 


  
 22 









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

  

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

  

	 	(d)	Management Company is and shall at all times be an “eligible independent contractor” as defined in Section 856(d)(9) of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”) (and taking into account the restrictions on ownership of the Management Company by shareholders of CHP Healthcare Properties, Inc., and restrictions on ownership of CHP Healthcare Properties, Inc., by owners of the
Management Company set forth in Section 856(d)(3)), and Management Company will and shall cause the Facility to be managed in such a manner so that it qualifies as a “qualified health care facility” within the meaning of
Section 856(e)(6)(D) of the Code at all times. In the event that Tenant reasonably concludes that the terms of this Agreement will have any effect as to cause the rent under Tenant’s lease of the Facility to fail to qualify as “rents
from real property” within the meaning of Section 856(d) of the Internal Revenue Code, Management Company hereby agrees to enter into an amendment to this Agreement as proposed by Tenant modifying such terms in such a way as to cause rent
under Tenant’s lease of the Facility to so qualify as “rent from real property” in the reasonable opinion of Tenant and its counsel; provided however, no such modifications shall affect the amount of Management Fees or the practical
realization of the rights and benefits of the Management Company hereunder. 

  

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


  
 23 








 ARTICLE 7. 

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

 

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

  

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

  

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


 

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

  

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


 

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

  

	 	(g)	Any “Management Company Default” by Management Company under any of the Affiliated Agreements. 


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

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

  

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


  
 24 









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


 

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


 

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

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

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

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

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

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

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


  
 25 









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


 

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


7.8 Tenant, at the direction of a lender holding a first lien security instrument encumbering the Facility (“Lender”), or
Lender shall have the option to terminate this Agreement, without fee or penalty subject to the rights of the Management Company herein, upon ten (10) days’ prior written notice to the Management Company in connection with a foreclosure or
delivery of a deed in lieu that is related to any first lien security instrument held by Lender and encumbering the Facility, without any further obligation to the Management Company (except for any accrued management fees for previous periods which
have not been paid which shall be the obligation of Tenant but not Lender). 
 7.9 Automatic Termination. This Agreement shall
be deemed to be void ab initio in the event the Purchase and Sale Agreement terminates without Landlord acquiring the Facility. 
 7.10
Management Company’s Obligations After Termination or Expiration of Agreement. Upon the expiration or termination of this Agreement, Management Company shall, if requested: 

 

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

  

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

  

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



  
 26 








 Upon any termination or the expiration pursuant to this Section, the obligations of the parties
hereto (except those specified as surviving) shall cease as of the date specified in the notice of termination, except that Management Company shall comply with the applicable provisions of this Section and shall be entitled to receive any and all
compensation which may be due Management Company hereunder through the effective date of such termination or expiration. 
 ARTICLE 8.

 MISCELLANEOUS COVENANTS 

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

 

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

  

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

  

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

  

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


  

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


 

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


  
 27 








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

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

  

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


 

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

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

 

	 	(a)	 Assignment. Management Company may not assign its rights and obligations hereunder without Tenant’s prior approval, which shall not be
unreasonably withheld as more particularly set forth in this Section 8.3(a). For purposes of this Section 8.3(a), a change in fifty percent (50%) or more in the ownership or control, whether direct or indirect, of
Management Company, shall be deemed to be an effective assignment of this Agreement requiring Tenant’s prior approval. Tenant shall consent to such an assignment or change in the ownership or control of Management Company in the event that the
proposed transferee or the transferee’s owners (collectively, the “Transferee”) meets the following criteria: (a) the Transferee has the financial capacity that equals or exceeds that which Management Company has as of the
date of this Agreement; (b) such Transferee is known to be of good character and in good standing in its current business dealings; (c) such Transferee is experienced in the senior living facility industry; and (d) has all licenses
and industry approvals that a manager must hold to manage the Facility. For purposes of clarification, it shall not be deemed unreasonable for Tenant to withhold consent to any such transfer if the Transferee lacks, in Tenant’s reasonable
opinion, (x) the financial wherewithal, (y) the character (which determination may be made, in whole or in part, based on Tenant’s or its Affiliate’s past dealings with the intended transferee), or (z) the quality and
relevant experience necessary to satisfy the obligations of Tenant hereunder. Any proposed transferee shall be required to provide adequate assurances to Tenant: (l) that Revenues shall not decline substantially after the date of such transfer;
(m) of the continuous operation of the Facility in strict accordance with the requirements of this Agreement; and (n) of such other matters as Tenant may reasonably require at the time of such transfer.




  
 28 









	 	
Notwithstanding the foregoing, any change in ownership or control that directly results from the death of any person with a controlling interest in Management Company shall not be subject to this
Section 8.3 provided that the individuals managing the day-to-day operations at the Facility remain substantially the same following the transfer of ownership or control and the new controlling person or owner satisfies the criteria
stated in items (x), (y), and (z) of this Section 8.3. Notwithstanding the foregoing, Management Company shall use commercially reasonable efforts to provide written notice to Tenant in the event that there is any change in the
ownership of Management Company, whether direct or indirect, regardless of whether such change constitutes a change of more than fifty percent (50%) of the direct or indirect ownership of Management Company, which notice shall be delivered no
later than five (5) Business Days following the effectuation of any such change. Management Company shall also provide Tenant with an updated organizational chart showing the direct and indirect ownership interests in and to Management
Company that is true, complete and correct within five (5) days of receipt of Tenant’s written request therefore. 

  

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

  

	 	(c)	Transfer of Residents. Management Company agrees that it will not, as long as it manages for Tenant under this Agreement, without the prior written consent of the Tenant, encourage or solicit the transfer of any
resident of the Facility to another facility in which Management Company has an interest which is not owned by Tenant, except to one of the Existing Manger Facilities, but then only if the physical or medical condition of the resident indicates that
such a transfer would be appropriate. The Management Company may, however, freely discuss and not inhibit such a transfer when the original basis for the subject resident to be admitted to the Tenant’s Facility was to acquire temporary
accommodations until a room became available in another facility where the resident prefers to live. 

  

	 	(d)	 Non-Compete. Management Company hereby covenants and agrees that, for a period commencing on the Effective Date and ending one (1) year
following the expiration or earlier termination of this Agreement, Management Company shall not, and shall cause all of its Subsidiaries and Affiliates (each, a “Covered Person”) not to, either (1) Compete, directly or
indirectly, with the Facility by engaging, in any capacity, in operating or managing a senior living facility within five (5) driving miles of the Facility or (2) specifically solicit any employees of the Facility for employment at other
facilities owned or controlled by a Covered Person (provided nothing herein shall prevent a Covered Person from hiring any 



  
 29 









	 	
employee of the Facility who responds to a Covered Person’s advertisement or other notice that is not specifically targeted at employees of the Facility and nothing herein shall be deemed to
prohibit Manager from transferring employees between the Facility and one of the Existing Manager Facilities in the ordinary course of business). For purposes of this provision, “Compete” means (i) to, directly or indirectly,
conduct, facilitate, participate or engage in, or bid for or otherwise pursue a business, whether as a principal, sole proprietor, partner, stockholder, or agent of, or consultant to or manager for, any Person, or (ii) to, directly or
indirectly, have any ownership interest in any Person or business which conducts, facilitates, participates or engages in, or bids for or otherwise pursues a business, whether as a principal, sole proprietor, partner, stockholder, or agent of, or
consultant to or manager for, any such Person, in each case except as a passive investor with a non-controlling interest in such Person. Notwithstanding the foregoing, this Section 8.3(d) shall not apply to or in any way prohibit or
restrict any existing ownership interests or operations of a Covered Person as of the Effective Date, including but not limited to the Existing Manger Facilities. The parties recognize and acknowledge that a breach of this Section 8.3(d)
by Management Company or any of its Subsidiaries or Affiliates will cause irreparable and material loss and damage to Tenant and hereby consent to the granting by any court of competent jurisdiction of an injunction or other equitable relief,
without the necessity of posting a bond, cash or otherwise, and without the necessity of actual monetary loss being proved or Tenant’s establishing the inadequacy of any remedy at law, and order that the breach or threatened breach of such
provisions may be effectively restrained. The provisions of this Section 8.3(d) shall expressly survive the expiration or earlier termination of this Agreement. This provision, however, shall not apply following any termination of this
Agreement arising out of Section 7.2, Section 7.6 or if the Agreement is deemed void ab initio pursuant to Section 7.9. 

  

	 	(e)	 Non-Solicitation. Management Company agrees not to directly or indirectly solicit, divert or accept business from any customer, supplier,
distributor or manufacturer of or to the Facility to the detriment of Tenant or any Affiliate of Tenant, or otherwise interfere with the relationship between Tenant or any Affiliate of Tenant in connection with the Facility and any customer,
supplier, distributor or manufacturer of or to Tenant or any Affiliate of Tenant to the detriment of Tenant or any Affiliate of Tenant in connection with the Facility. The parties recognize and acknowledge that a breach of this
Section 8.3(e) by Management Company or any of its Subsidiaries or Affiliates will cause irreparable and material loss and damage to Tenant and hereby consent to the granting by any court of competent jurisdiction of an injunction or
other equitable relief, without the necessity of posting a bond, cash or otherwise, and without the necessity of actual monetary loss being proved or Tenant’s establishing the inadequacy of any remedy at law, and order that the breach or
threatened 



  
 30 









	 	
breach of such provisions may be effectively restrained. The provisions of and obligations under this Section 8.3(e) shall apply throughout the Term and shall expressly survive the
expiration or earlier termination of this Agreement for a period of one (1) year following such expiration or earlier termination. This provision, however, shall not apply following any termination of this Agreement arising out of
Section 7.2, Section 7.6 or if the Agreement is deemed void ab initio pursuant to Section 7.9. 


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

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

  

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

  

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

  

	 	(d)	 Tenant shall comply with all Legal Requirements which are applicable to Tenant provided that Tenant, at its sole expense and without cost to
Management Company, shall have the right to contest by proper legal proceedings the validity, so far as applicable to it, of any such Legal Requirement, provided that such contest shall not result in a suspension of operations of the Facility.
Notwithstanding the foregoing, however, Tenant 



  
 31 









	 	
shall not be deemed to be in breach of the covenant contained in this clause (d) if Tenant’s failure to so comply is the result of a failure by Management Company to comply with any of
its obligations under this Agreement. 

 8.5 Binding Agreement. The terms, covenants, conditions, provisions and
agreements herein contained shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. 
 8.6
Relationship of Parties. Nothing contained in this Agreement shall constitute or be construed to be or to create a partnership, joint venture or lease between Tenant and Management Company with respect to the Facility. Management
Company shall have no right or authority, express or implied, to commit or otherwise obligate Tenant in any manner whatsoever except to the extent specifically provided in this Agreement. 

8.7 Notices. 
  

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

  

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


  
 32 









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

 CHP Isle at Watercrest-Bryan TX Tenant Corp. 

c/o CNL Healthcare Properties, Inc. 

CNL Center at City Commons 
 450
South Orange Avenue, 12th Floor 
 Orlando, Florida 32801-3736 

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

With a copy to: 
 Lowndes
Drosdick Doster Kantor and Reed, P.A. 
 215 North Eola Drive 

Post Office Box 2809 
 Orlando,
Florida 32802-2809 
 Attn: William T. Dymond, Jr., Esq. 
  

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

 JEA Senior Living 

12115 NE 99th Street, Suite 1800 

Vancouver, WA 98682 
 Attn: Cody
Erwin 
 With a copy to: 

Cherry Peterson Landry Albert LLP 

8350 N. Central Expressway, Suite 1500 

Dallas, Texas 75206 
 Attn:
Terry Landry, Esq. 
 or to such other address or to such other person as may be designated by notice given from time to time during the
Term by one party to the other. Any notice hereunder shall be deemed given three (3) days after mailing, if given by mailing in the manner provided above, or on the next Business Day following the date delivered or transmitted if given by hand
or overnight courier. 
 8.8 Entire Agreement: This Agreement contains the entire agreement between the parties hereto with
respect to the subject matter and no prior oral or written, and no contemporaneous oral representations or agreements between the parties with respect to the subject matter of this Agreement shall be of force and effect. Any additions, amendments or
modifications to this Agreement shall be of no force and effect unless in writing and signed by both Tenant and Management Company. 
 8.9
Governing Law. This Agreement has been executed and delivered in the State of Texas and all of the terms and provisions hereof and the rights and obligations of the parties hereto shall be construed and enforced in accordance with the
laws thereof. 

  
 33 








 8.10 Captions and Headings. The captions and headings throughout this Agreement are
for convenience and reference only, and the words contained therein shall in no way be held or deemed to define, limit, describe, explain, modify, amplify or add to the interpretation, construction or meaning of any provision of or the scope or
intent of this Agreement nor in any way affect this Agreement. 
 8.11 Non-Recourse Nature of Tenant’s Obligation.
Notwithstanding anything else herein contained, the obligations of Tenant hereunder shall be limited to its interest in the Facility and the revenues thereof and Receivables and accounts related thereto, and Management Company shall have no right to
proceed against any other assets of Tenant to satisfy any obligation of Tenant. No officer, director, or member of Tenant shall have any personal liability hereunder. 

8.12 HIPAA Compliance. The parties agree that, to the extent required by Legal Requirements, the services provided under this
Agreement will comply in all material respects with all federal and state-mandated regulations, rules, or orders applicable to the services provided herein, including but not limited to regulations promulgated under Title II, Subtitle F of the
Health Insurance Portability and Accountability Act (Public Law 104-91) (“HIPAA”). 
 8.13 Additional Reports.
In connection with Tenant’s responsibility to maintain effective internal controls over financial reporting and the Tenant’s requirements for complying with the Sarbanes Oxley Act of 2002, Management Company hereby agrees to provide, as an
Operating Expense, access and reasonable assistance as may be requested by Tenant that will allow Tenant to conduct activities necessary to satisfy its responsibilities, as previously outlined, including, without limitation, the activities
stipulated by the Public Company Accounting Oversight Board in its 2004-1, or other similarly promulgated guidance by other regulatory agencies. Management Company hereby agrees to provide, at Tenant’s request and as an Operating Expense,
(i) evidence of Management Company documented policies regarding “whistleblower” procedures and regarding the reporting of fraud or misstatements involving Facility financial reporting, and (ii) access for the Tenant to conduct
such procedures as Tenant reasonably considers necessary to make a determination that Management Company has maintained an effective system of internal controls over financial reporting. In addition to the foregoing, Management Company shall provide
Tenant with access to the books and records of the Facility in order to perform miscellaneous other internal audit procedures as deemed reasonably appropriate by Tenant. Notwithstanding the other terms, covenants and conditions of this
Section 8.13, the parties acknowledge and agree that Management Company shall have no responsibility or obligation with regard to Tenant’s obligations stipulated by the Public Company Accounting Oversight Board or under the Sarbanes
Oxley Act of 2002, except to comply with requests which may be made by Tenant under this Section 8.13. 
 (Signature Page to
Follow) 

  
 34 








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

							
	TENANT:	 		 	CHP ISLE AT WATERCREST-BRYAN TX TENANT CORP., a Delaware corporation
				
		 		 	By:	 	/s/ Tracey B. Bracco
		 		 	Name:	 	Tracey B. Bracco
		 		 	Title:	 	Vice President
			
	MANAGEMENT COMPANY:	 		 	JERRY ERWIN ASSOCIATES, INC. (d/b/a JEA SENIOR LIVING), a Washington corporation
				
		 		 	By:	 	/s/ W. Cody Erwin
		 		 	Name:	 	W. Cody Erwin
		 		 	Title:	 	COO








 EXHIBIT A 

REQUIRED INSURANCE 

[Intentionally Omitted] 

EXHIBIT B 
 2014
Approved Operating Budget and Approved Capital Budget 
 [Intentionally Omitted] 

EXHIBIT C 

QUARTERLY CERTIFICATION 

[Intentionally Omitted] 

SCHEDULE 1.1 

AFFILIATED AGREEMENTS 

[Intentionally Omitted] 

SCHEDULE 6.2(E) 

MANAGEMENT COMPANY ORGANIZATIONAL CHART 

[Intentionally Omitted]