Document:

Exhibit 10.1

 

TERM LOAN AND SECURITY AGREEMENT

 

This TERM LOAN AND
SECURITY AGREEMENT (this “Agreement”), dated as of March 30, 2018, is by and between CHP
Friendswood snf, llc, a Delaware limited liability company (the “Borrower”), and CIBC BANK USA
(together with its successors and assigns, the “Lender”).

 

RECITALS:

 

A.           The
Borrower desires to repay the Debt to Be Repaid (as defined below) and has requested that the Lender extend the Loan to allow Borrower
to repay such Debt to be Repaid.

 

B.           The
Borrower desires to secure all of the Liabilities by granting to the Lender, a security interest in and lien upon all of its tangible
and intangible assets, including, without limitation, the Real Property, the Lease Deposit Account and the Cash Loan Guaranty Fund.

 

NOW THEREFORE, in consideration
of the mutual agreements contained herein, and of any loans or other financial accommodations now or hereafter made to or for the
benefit of the Borrower by the Lender, and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto (intending to be legally bound) hereby agree as follows:

 

1.             DEFINITIONS.

 

1.1           General
Terms. When used herein, the following terms shall have the following meanings:

 

“Affiliate”
means, with respect to any Person, any other Person (including, without limitation, to the extent applicable, shareholders, members,
directors, partners, managers, and officers of such Person) directly or indirectly controlling, controlled by, or under direct
or indirect common control with, such Person. A Person shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether
through ownership of voting securities, by contract or otherwise.

 

“Agreement”
means this Term Loan and Security Agreement as the same may be amended, restated, supplemented or otherwise modified from time
to time.

 

“Applicable
Libor Margin” means an amount equal to three hundred seventy-five (375) basis points.

 

“Asset Disposition”
shall mean the sale, lease, assignment or other transfer for value (each a “Disposition”) by any Person of any
asset or right of such Person (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing
to such Person) condemnation, confiscation, requisition, seizure or taking thereof), other than (a) the Disposition of any asset
which is to be replaced, and is in fact replaced, within thirty (30) days with another asset performing the same or a similar function
and (b) the sale or lease of inventory in the ordinary course of business.

 

     

     

    

 

“Assignment
of Rents and Leases” means that certain Assignment of Rents and Leases made by the Borrower, dated of even date herewith,
as the same may be amended, supplemented or modified from time to time.

 

“Bank Product
Agreements” shall mean those certain agreements entered into from time to time by the Borrower with the Lender or any
Affiliate of the Lender concerning Bank Products.

 

“Bank Product
Obligations” shall mean all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing
by the Borrower to the Lender or any Affiliate of the Lender pursuant to or evidenced by the Bank Product Agreements and irrespective
of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising.

 

“Bank Products”
shall mean any service or facility extended to the Borrower by the Lender or any Affiliate of the Lender including: (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) automated clearing house or ACH transactions,
(f) cash management, including controlled disbursement, accounts or services or (g) Interest Rate Protection Agreements.

 

“Base Rate”
means the corporate base rate of interest per annum identified from time to time by the Lender, as its base or prime rate, which
rate shall not necessarily be the lowest rate of interest which the Lender charges its customers plus 150 basis points.
Any change in the Base Rate shall be effective as of the effective date of such change.

 

“Base Rate
Loan” means a Loan that bears interest at an interest rate based on the Base Rate.

 

“Borrower”
has the meaning ascribed to such term in the introductory paragraph.

 

“Borrowing Notice” shall
have the meaning ascribed to such term in Section 2.10 hereof.

 

“Business
Day” means (a) with respect to any borrowing, payment or rate selection of Libor Loans, a day other than Saturday or
Sunday on which banks are open for business in Chicago, Illinois and on which dealings in United States dollars are carried on
in the London interbank market and (b) for all other purposes, a day other than Saturday or Sunday on which banks are open for
business in Chicago, Illinois.

 

“Capital Expenditures”
means, as to any Person, any and all expenditures of such Person for fixed or capital assets, including, without limitation, the
incurrence of Capitalized Lease Obligations, all as determined in accordance with GAAP, except that Capital Expenditures shall
not include expenditures for fixed or capital assets to the extent such expenditures are paid for or reimbursed from the proceeds
of insurance or the sale of other fixed or capital assets, to the extent permitted hereunder.

 

“Capital Securities”
shall mean, as to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or
non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the date hereof, including common
shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership
or any other equivalent of such ownership interest.

 

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“Capitalized
Lease Obligations” means any amount payable with respect to any lease of any tangible or intangible property (whether
real, personal or mixed), however denoted, which either (i) is required by GAAP to be reflected as a liability on the face of the
balance sheet of the lessee thereunder or (ii) based on actual circumstances existing and ascertainable, either at the commencement
of the term of such lease or at any subsequent time at which any property becomes subject thereto, can reasonably be anticipated
to impose on such lessee substantially the same economic risks and burdens, having regard to such lessee’s obligations and
the lessor’s rights thereunder both during and at the termination of such lease, as would be imposed on such lessee by any
lease which is required to be so reflected or by the ownership of the leased property.

 

“Cash Loan
Guaranty Fund” means a reserve account maintained with the Lender into which scheduled installments of principal paid
by Borrower are deposited as more fully described in Section 2.1 hereof.

 

“CERCLA”
means the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq.,
as amended.

 

“CHAMPUS”
means the Civilian Health and Medical Program of the Uniformed Service, a part of TRICARE, a medical benefits program supervised
by the U.S. Department of Defense.

 

“Change of
Control” shall mean the occurrence of any of the following events: (a) Summit or one of its Affiliates shall cease to
control the Parent, (b) Summit or its Affiliates shall cease to, directly or indirectly, own and control 90% of each class of the
outstanding Capital Securities of Parent, (c) the Parent shall cease to, directly or indirectly, own and control 100% of each class
of the outstanding Capital Securities of the Borrower or (d) there shall be a change in ownership of the Operating Company. For
the purpose hereof, the terms “control” or “controlling” shall mean the possession of the power to direct,
or cause the direction of, the management and policies of the Borrower by contract or voting of securities or ownership interests.

 

“Change in
Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect
of any law, rule, regulation, policy, guideline, directive or treaty, (b) any change in any law, rule, regulation, policy, guideline,
directive or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority
or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental
Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision
(or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel
III, shall in each case be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

 

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“Closing Date” means
March 30, 2018.

 

“Closing Date
Distribution” means a distribution by Borrower to Parent to be made on the Closing Date in an amount not to exceed One
Million Seven Hundred Seven Thousand Six Hundred Eighty-Four and 07/100 Dollars ($1,707,684.07) with proceeds of the Initial Loan
Advance.

 

“CMS”
means the Centers for Medicare and Medicaid Services of HHS and any Person succeeding to the functions thereof.

 

“Code”
or “Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as adopted in the
State of Illinois; provided, however, that if, by reason of mandatory provisions of Law, any or all of the attachment, perfection
or priority of, or remedies with respect to, Lender’s Lien on the Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of Illinois, the term “Uniform Commercial Code” or “UCC”
or “Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions
of this Agreement or the other Financing Agreements relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions; provided further that, to the extent that the Uniform Commercial
Code of a particular jurisdiction is used to define a term herein or in any Financing Agreement and such term is defined differently
in different Articles or Divisions of such Uniform Commercial Code, then the definition of such term contained in Article or Division
9 of such Uniform Commercial Code shall control.

 

“Collateral”
shall have the meaning ascribed to such term in Section 6.1 hereof.

 

“Collateral
Assignment of Agreements” means that certain Collateral Assignment of Material Agreements executed by Borrower in favor
of Lender dated as of the date hereof pursuant to which the Borrower collaterally assigns all of its rights under certain agreements,
including, without limitation, each QIPP Agreement under which the Borrower has any rights.

 

“Commitment”
shall have the meaning ascribed to such term in Section 2.1 hereof.

 

“Commodity
Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor
statute.

 

“Conversion
Date” means a date on which any portion of the Loan is converted from a Base Rate Loan to a Libor Loan.

 

“Credit Parties”
means the Parent, the Borrower and any other Person that is joined to this Agreement or provides a guaranty of the Liabilities.

 

“Debt to be
Repaid” means the Indebtedness listed on Schedule 9.1.

 

“Default”
means an event, circumstance or condition which through the passage of time or the service of notice or both would (assuming no
action is taken to cure the same) mature into an Event of Default.

 

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“Default Rate”
shall have the meaning ascribed to such term in Section 2.5(a) hereof.

 

“Deposit Accounts”
means any deposit, securities, operating, lockbox, cash collateral and blocked account, together with any funds, instruments or
other items credited to any such account from time to time, and all interest earned thereon, including, without limitation, the
Lease Deposit Account.

 

“Depreciation”
shall mean the total amounts added to depreciation, amortization, obsolescence, valuation and other proper reserves, as reflected
on any Person’s financial statements and determined in accordance with GAAP.

 

“Duly Authorized
Person” means the manager of any Credit Party or any duly authorized person of such Credit Party designated by such manager.

 

“EBITDA”
means with respect to any Person, for any period of determination, the sum for such period of: (i) Net Income for such period,
plus (ii) Interest Charges for such period, plus (iii) federal and state income taxes paid in cash during such period,
plus (iv) Depreciation, consistently applied.

 

“EBITDAR”
means with respect to the Operating Company, but limited, however, to the Operating Company’s operation of the Facility,
for any period of determination, the sum for such period of: (i) Net Income for such period, plus (ii) Interest Charges
for such period, plus (iii) federal and state income taxes paid in cash during such period, plus (iv) Depreciation,
consistently applied plus (v) Rent Expense minus (vi) any QIPP Supplemental Payments; provided, however, that for
purposes of calculating EBITDAR of the Operating Company, the aggregate expenses associated with management fees paid by the Operating
Company during any period of determination shall be deemed to be equal to the greater of (y) five (5%) of the gross revenues of
the Operating Company (excluding, however, any revenue derived from QIPP Supplemental Payments) or (z) the actual amount paid by
the Operating Company in respect of management fees during such period.

 

“Environmental
Indemnity Agreement” means that certain Environmental Indemnity Agreement of even date herewith made by the Borrower
in favor of the Lender, in form and substance acceptable to the Lender, as the same may be amended or modified from time to time

 

“Environmental
Laws” means all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards, regulations
and common law, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for
or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient
air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Without
limiting the generality of the foregoing, Environmental Laws include CERCLA, the Hazardous Materials Transportation Authorization
Act of 1994 (49 U.S.C. §§ 5101 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§
136 et seq.), the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.), the Toxic Substance Control
Act (15 U.S.C. §§ 2601 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Occupational Safety and Health Act (29 U.S.C. §§
651 et seq.), and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any rules and regulations
promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification
or approval statutes, and all common law relating to Hazardous Substances, or protection or restoration of, or liability for damage
to, human health, the environment or natural resources.

 

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“Environmental
Notice” means any summons, citation, written directive, written information request, written notice of potential responsibility,
notice of deficiency or violation, written order, written claim, written complaint, investigation, proceeding, judgment, or letter
to the Borrower or any officer thereof from the United States Environmental Protection Agency or other federal, state or local
agency or authority, or any other Person concerning any intentional or unintentional act or omission that involves Management of
Hazardous Substances on or off the Real Property that could reasonably be expected to result in the Borrower incurring a material
liability or that could reasonably be expected to have a Material Adverse Effect, or the imposition of any Lien on any property
of Borrower, or any alleged violation of or responsibility under Environmental Laws that is reasonably likely to result in the
Borrower incurring a material liability or that is reasonably likely to have a Material Adverse Effect, and, after reasonable inquiry,
any knowledge of any facts that is reasonably likely to give rise to any of the foregoing.

 

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

 

“ERISA Affiliate”
means any corporation, trade or business, which together with any Credit Party would be treated as a single employer under Section
4001 of ERISA.

 

“Event of
Default” shall have the meaning ascribed to such term in Section 10.1 hereof.

 

“Excluded
Swap Obligation” means, with respect to any guarantor of all or any part of the Liabilities, including the grant or pledge
of a security interest to secure such Liabilities, any Swap Obligation if, and to the extent that, the applicable guaranty or grant,
pledge or security interest provided by such Person with respect to the Liabilities is or becomes illegal under the Commodity Exchange
Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation
of any thereof) by virtue of such Person’s failure for any reason to constitute an “eligible contract participant”
as defined in the Commodity Exchange Act and the regulations thereunder at the time such applicable guaranty or grant or pledge
of security interest becomes effective with respect to such Swap Obligation, but such exclusion shall only be effective for so
long as the applicable guaranty or grant of security interest or pledge continues to be illegal.

 

“Facility”
means the 150-licensed unit (currently designated for 137 units) skilled nursing facility known as Friendship Haven Healthcare
and Rehabilitation Center located at 1500 Sunset Dr, Friendswood, TX 77546 operated by the
Operating Company.

 

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“Financing
Agreements” means, this Agreement, the Assignments of Rents and Leases, the Collateral Assignment of Agreements, the
Environmental Indemnity Agreement, the Note, the Mortgages, the Pledge Agreement, any Interest Rate Protection Agreement, any Bank
Product Agreement, and any other instrument, document or agreement executed or delivered in connection with this Agreement or any
of the foregoing, in each case evidencing, securing or relating to the Loans and the Liabilities, whether heretofore, now, or hereafter
executed by or on behalf of any Credit Party, any Affiliate of the Credit Parties, or any other Person, and delivered to or in
favor of the Lender, together with all agreements and documents referred to therein or contemplated thereby, as each may be amended,
modified, replaced, restated or supplemented from time to time.

 

“Fiscal Quarter”
means the three (3) month period ending on each March 31, June 30, September 30 and December 31 of each calendar year.

 

“Fiscal Year”
means the twelve (12) month period commencing on January 1 and ending on December 31 of each calendar year.

 

“Fixed Charge
Coverage Ratio” means, for any period of determination, on a trailing twelve-month basis, the ratio of (a) EBITDA of
the Borrower, to (b) Fixed Charges; provided, however, that for purposes of (i) the Fiscal Quarter ending June 30, 2018,
the Fixed Charge Coverage Ratio shall be tested on a trailing three month basis multiplied by 4, (ii) the Fiscal Quarter ending
September 30, 2018, the Fixed Charge Coverage Ratio shall be tested on a trailing six month basis multiplied by 2, (iii) the Fiscal
Quarter ending December 31, 2018, the Fixed Charge Coverage Ratio shall be tested on a trailing nine month basis multiplied by
1.33 and (iv) the Fiscal Quarter ending March 31, 2019 and each Fiscal Quarter thereafter, the Fixed Charge Coverage Ratio shall
be tested on a trailing twelve month basis.

 

“Fixed Charges”
means, for any period of determination, the sum of, without duplication, (a) the aggregate amount of any and all advances and distributions
made by Borrower or to any Person, including, without limitation, to any Affiliate of the Borrower during such period, (b) Interest
Charges of the Borrower for Indebtedness that is paid or becomes due during such period, (c) regularly scheduled principal payments
made by the Borrower for Indebtedness during such period, (d) unfinanced Capital Expenditures of the Borrower made during such
period and (e) payments made by Borrower in respect of federal, state and local taxes during such period, including taxes assessed
in connection with Real Property.

 

“GAAP”
means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards
Board (or any successor authority) that are applicable to the circumstances as of the date of determination.

 

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“General Intangibles”
means “general intangibles” as defined in the Code, including, without limitation, any and all general intangibles,
choses in action, causes of action, rights to the payment of money (other than accounts receivable), and all other intangible personal
property of the Borrower of every kind and nature wherever located and whether currently owned or hereafter acquired by the Borrower
(other than accounts receivable), including, without limitation, corporate or other business records, inventions, designs, patents,
patent applications, service marks, service mark applications, trademark applications, brand names, tradenames, trademarks and
all goodwill symbolized thereby and relating thereto, tradestyles, trade secrets, registrations, computer software, advertising
materials, distributions on certificated and uncertificated securities, investment property, securities entitlements, goodwill,
operational manuals, product formulas for industrial processes, blueprints, drawings, copyrights, copyright applications, rights
and benefits under contracts, licenses, license agreements, permits, approvals, authorizations which are associated with the operation
of the Borrower’s business and granted by any Person, franchises, customer lists, deposit accounts, tax refunds, tax refund
claims, and any letters of credit, guarantee claims, security interests or other security held by or granted to the Borrower to
secure payment by an account debtor of any of Borrower’s accounts receivable, and, to the maximum extent permitted by applicable
law, any recoveries or amounts received in connection with any litigation or settlement of any litigation.

 

“Hazardous
Substances” means any substance, material or waste that is regulated by, or forms the basis of liability now or hereafter
under, any Environmental Laws, including any material or substance that is (a) defined as a “solid waste,” “hazardous
waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special
waste,” “toxic substance,” “medical wastes” or other similar term or phrase under any Environmental
Laws, or (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive
substance.

 

“Healthcare
Laws” means all applicable laws relating to the possession, control, warehousing, marketing, sale and distribution of
pharmaceuticals, the operation of medical or senior housing facilities (such as, but not limited to, nursing homes, skilled nursing
facilities, rehabilitation hospitals, intermediate care facilities, assisted living and adult care facilities and other long-term
care facilities), patient healthcare, patient healthcare information, patient abuse, the quality and adequacy of medical care,
rate setting, equipment, personnel, operating policies, fee splitting, including, without limitation, (a) all federal and state
fraud and abuse laws, including, but not limited to the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(6)), the Stark
Law (42 U.S.C. §1395nn), the civil False Claims Act (31 U.S.C. §3729 et seq.); (b) HIPAA, (c) Medicare; (d) Medicaid;
(e) TRICARE and CHAMPUS; (f) QIPP, (g) quality, safety and accreditation standards and requirements of all applicable state laws
or regulatory bodies; (h) all laws, policies, procedures, requirements and regulations pursuant to which licenses, approvals and
accreditation certificates are issued in order to operate medical or senior housing facilities; and (i) any and all other applicable
health care laws (whether federal, state/commonwealth, or otherwise), regulations, manual provisions, policies and administrative
guidance, as each of the foregoing may be amended from time to time.

 

“HHS”
means the United States Department of Health and Human Services and any Person succeeding to the functions thereof.

 

“HHSC”
means the Texas Health and Human Services Commission.

 

“HIPAA”
means the Health Insurance Portability and Accountability Act of 1996, as the same may be amended, modified or supplemented from
time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

 

    	 	- 8 -	 

     

    

 

“Hospital
District” means Winnie-Stowell Hospital District, a political subdivision of the State of Texas organized pursuant to
Tex. Const. Art. IX, Section 9 and Chapter 286 of the Texas Health and Safety Code, as amended.

 

“Indebtedness”
with respect to any Person means, as of the date of determination thereof, (a) all of such Person’s indebtedness for borrowed
money, (b) all indebtedness of such Person or any other Person secured by any Lien with respect to any property or asset owned
or held by such Person, regardless whether the indebtedness secured thereby shall have been assumed by such Person or such Person
has become liable for the payment thereof, (c) all Capitalized Lease Obligations, or conditional sale or other title retention
agreement with respect to property used and/or acquired by such Person even though the rights and remedies of the lessor, seller
and/or lender thereunder are limited to repossession of such property, (d) all unfunded pension fund obligations and liabilities,
(e) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (f) all obligations in respect
of letters of credit, whether or not drawn, and bankers’ acceptances issued for the account of such Person, (g) deferred
and/or accrued taxes, (h) all guarantees by such Person, or any undertaking by such Person to be liable for, the debts or obligations
of any other Person and (i) all other indebtedness of such Person, now or hereafter owing, due or payable, however evidenced, created,
incurred or owing and however arising, which is customarily identified as indebtedness on a balance sheet or financial statement.

 

“Indemnified
Parties” shall have the meaning ascribed to such term in Section 11.16 hereof.

 

“Initial Loan
Advance” has the meaning ascribed to such term in Section 2.1 hereof.

 

“Interest
Charges” shall mean, as to any Person, for any period, the sum of: (a) all interest, charges and related expenses payable
with respect to that fiscal period to a lender in connection with borrowed money or the deferred purchase price of assets that
are treated as interest in accordance with GAAP, plus (b) the portion of Capitalized Lease Obligations with respect to that
fiscal period that should be treated as interest in accordance with GAAP, plus (c) all charges paid or payable (without
duplication) during that period with respect to, in the case of the Borrower or the Operating Company, any Interest Rate Protection
Agreements.

 

“Interest
Rate Protection Agreement” means any interest rate, currency or commodity swap agreement, cap agreement or collar agreement
or any other so-called “swap” agreement, or similar arrangement entered into at any time with the intent of protecting
against fluctuations in interest rates, between any Credit Party and the Lender (or any Affiliate of the Lender) relating to any
of the Liabilities, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Lease Deposit
Account” has the meaning set forth in Section 8.9 of this Agreement.

 

    	 	- 9 -	 

     

    

 

“Liabilities”
means any and all of any Credit Party’s liabilities, obligations and Indebtedness to the Lender of any and every kind and
nature, whether heretofore, now or hereafter owing, arising, due or payable and howsoever evidenced, created, incurred, acquired,
or owing, whether primary, secondary, direct, indirect, contingent, absolute, fixed or otherwise (including, without limitation,
payments of or for principal, interest, default interest, fees, costs, expenses, and/or indemnification, and obligations of performance,
and any interest that accrues after commencement of any insolvency or bankruptcy proceeding regardless of whether allowed or allowable
in whole or in part as a claim in any such insolvency or bankruptcy proceeding), under, evidenced by or relating to this Agreement
(including, without limitation, the Loan) or the other Financing Agreements to which any Credit Party is a party (including, without
limitation, any Interest Rate Protection Agreement), all Bank Product Obligations, and any refinancings, substitutions, extensions,
renewals, replacements and modifications for or of any or all of the foregoing; provided, however, that with respect
to any guarantor of the Liabilities, the Liabilities shall not include any Excluded Swap Obligation in respect of such Person.

 

“Libor Base
Rate” means a rate of interest equal to (a) the per annum rate of interest at which United States dollar deposits for
a period equal to the relevant Libor Interest Period are offered in the London Interbank Eurodollar market at 11:00 a.m. (London
time) two Business Days prior to the commencement of such Libor Interest Period (or three Business Days prior to the commencement
of such Libor Interest Period if banks in London, England were not open and dealing in offshore United States dollars on such second
preceding Business Day), as displayed in the Bloomberg Financial Markets system (or other authoritative source selected by the
Lender in its sole discretion), divided by (b) a number determined by subtracting 1.00 from the then stated maximum reserve percentage
for determining reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities
as defined in Regulation D (or any successor category of liabilities under Regulation D) such rate to remain fixed for such Libor
Interest Period. The Lender’s determination of the Libor Base Rate shall be conclusive, absent manifest error.

 

“Libor Interest
Period” means, with respect to a Libor Loan, (i) for the initial Libor Interest Period, the period commencing on the
Closing Date and ending April 5, 2018 and (ii) for each Libor Interest Period thereafter, successive one (1) month periods; provided,
however, that:  (a) each Libor Interest Period occurring after the initial Libor Interest Period of any Libor Loan
shall commence on the day on which the preceding Libor Interest Period for such Libor Loan expires, with interest for such day
to be calculated at the Libor Rate in effect for the new Libor Interest Period; (b) whenever the last day of any Libor Interest
Period would otherwise occur on a day other than a Business Day, the last day of such Libor Interest Period shall be extended to
occur on the next succeeding Business Day; (c) whenever the first day of any Libor Interest Period occurs on a date for which there
is no numerically corresponding date in the month in which such Libor Interest Period terminates, such Libor Interest Period shall
end on the last day of such month, unless such day is not a Business Day, in which case the Libor Interest Period shall terminate
on the first Business Day of the following month; and (D) if at any time the Libor Interest Period for a Libor Loan expires less
than one month before the Maturity Date, such Libor Loan shall automatically renew at the then current Libor Rate for a Libor Interest
Period terminating on the Maturity Date.

 

“Libor Loan”
means a Loan which bears interest at a Libor Rate.

 

“Libor Rate”
means, with respect to a Libor Loan for the relevant Libor Interest Period, the sum of the Libor Base Rate applicable to that Libor
Interest Period, plus the Applicable Libor Margin.

 

    	 	- 10 -	 

     

    

 

“Lien”
means any lien, security interest, mortgage, pledge, hypothecation, collateral assignment, or other charge, encumbrance or preferential
arrangement, including, without limitation, the retained security title of a conditional vendor or lessor.

 

“Loan”
shall have the meaning ascribed to such term in Section 2.1 hereof.

 

“Loan Account”
shall have the meaning ascribed to such term in Section 2.3 hereof.

 

“Manage”
or “Management” means to generate, handle, manufacture, process, treat, store, use, re-use, refine, recycle,
reclaim, blend or burn for energy recovery, incinerate, accumulate speculatively, transport, transfer, dispose of, release, threaten
to release or abandon Hazardous Substances.

 

“Management
Agreement” means the Management Agreement dated as of December 1, 2016 by and between the Operating Company and the Management
Company, with respect to the provision of certain services for the Facility.

 

“Management
Company” means HMG Services, L.L.C., a Texas limited liability company.

 

“Material
Adverse Change” or “Material Adverse Effect” means either (a) the termination of the Operating Company’s
continued participation in Medicare or Medicaid reimbursement program for any reason, or (b) any other change, event, action, condition
or effect which, individually or in the aggregate, either (i) impairs the legality, validity or enforceability of this Agreement
or any Financing Agreement, (ii) impairs the fully perfected first priority status of the Liens granted hereunder and under the
Financing Agreements in favor of the Lender in the Collateral or any other assets pledged in favor of Lender to secure the Liabilities
or any portion thereof (subject only to the Permitted Liens) or (iii) materially and adversely affects the business, property or
assets (whether real or personal), operations, performance, or condition (financial or otherwise) of the Borrower or any or all
of the Collateral, or the ability of the Borrower to repay the Liabilities when due or declared due or the ability of any Credit
Party’s ability to perform the obligations under this Agreement and the Financing Agreements to which it is a party.

 

“Maturity
Date” means, the earlier of (i) March 30, 2021, (ii) such other date on which the Commitment shall terminate pursuant
to Section 10.2 hereof, or (iii) such other date as is mutually agreed in writing between the Borrower and the Lender.

 

“Maximum Facility”
means, an amount equal to the lesser of (i) Ten Million Seven Hundred Twenty-Five Thousand and No/100 Dollars ($10,725,000.00),
(ii) 75% of the loan-to-value ratio using an income approach of the Real Property as set forth on the most recent appraisal prepared
and delivered to Lender in accordance with the terms hereof.

 

“Medicaid”
means the medical assistance programs administered by state agencies and approved by CMS pursuant to the terms of Title XIX of
the Social Security Act, codified at 42 U.S.C. 1396 et seq.

 

    	 	- 11 -	 

     

    

 

“Medicare”
means the program of health benefits for the aged and disabled administered by CMS pursuant to the terms of Title XVIII of the
Social Security Act, codified at 42 U.S.C. 1395 et seq.

 

“Mortgage”
means that certain Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing made by the Borrower, dated of even
date herewith, granting and conveying to the Lender a first mortgage Lien on that certain Real Property commonly identified as
the Friendship Haven Healthcare and Rehabilitation Center located at 1500 Sunset Dr, Friendswood,
TX 77546, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Multiemployer
Plan” shall have the meaning ascribed to such term in Section 7.19 hereof.

 

“Net Income”
shall mean, with respect to any Person for any period, the net income (or loss) of such Person for such period as determined in
accordance with GAAP, excluding any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued
operations.

 

“Note”
shall have the meaning ascribed to such term in Section 2.1 hereof.

 

“OFAC Lists”
means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control,
the Department of the Treasury pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 2001) and/or any other list of
terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of or by the Office of Foreign Asset
Control, the Department of the Treasury or pursuant to any other applicable Executive Orders, as such lists may be amended or supplemented
from time to time

 

“Operating
Company” means Friendswood TRS, LLC, a Delaware limited liability company.

 

“Parent”
means collectively, Cornerstone Healthcare Holdings 1, LLC, a Delaware limited liability company and Healthcare Real Estate Holdings,
LLC, a Delaware limited liability company.

 

“PBGC”
shall have the meaning ascribed to such term in Section 7.19 hereof.

 

“Permitted
Liens” shall have the meaning ascribed to such term in Section 9.1 hereof.

 

“Permitted
Prepayment” means the refinancing of the Liabilities in full in cash through the U.S. Department of Housing and Urban
Development.

 

“Person”
means any individual, sole proprietorship, partnership, joint venture, trust, limited liability company, unincorporated organization,
association, corporation, institution, entity, party, or government (whether national, federal, state, provincial, county, city,
municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

 

    	 	- 12 -	 

     

    

 

“Plan”
shall have the meaning ascribed to such term in Section 7.19 hereof.

 

“Pledge Agreement”
means the Pledge Agreement dated as of the Closing Date executed by Parent in favor of the Lender, pursuant to which Parent has
pledged all of the Capital Securities of the Borrower to Lender as security for the Liabilities, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Prepayment
Premium” means, with respect to prepayment of the Loan: (i) two percent (2%) of the amount of the outstanding principal
balance of the Loan prepaid if such prepayment occurs on or prior to the first (1st) year anniversary of the Closing
Date; and (ii) one percent (1%) of the amount of the outstanding principal balance of the Loan prepaid if such prepayment occurs
thereafter and prior to the third (3rd) year anniversary of the Closing Date; provided, however, that, to the extent
any prepayment of the Loan occurs in connection with the Permitted Prepayment, the Prepayment Premium shall be 0%.

 

“Prohibited
Transaction” shall have the meaning ascribed to such term in ERISA.

 

“Property”
means, as applicable, any and all real property owned, leased, sub-leased or used at any time by Borrower, including, without limitation,
the Real Property.

 

“QIPP”
means the Texas Quality Incentive Payment Program adopted by HHSC as described in the regulation proposed in the January 20, 2017,
Texas Register to be codified at 1 Tex. Admin. Code §353.1303, as finally adopted by HHSC, and as amended from time to time.

 

“QIPP Agreement”
means, collectively, (i) the Operations Transfer Agreement by and between the Operating Company and the Hospital District dated
on or around April 1, 2018, (ii) the Management Agreement between the Hospital District and the Operating Company dated on or around
April 1, 2018, (iii) the Agreement and Consent to Sublease among the Borrower, the Operating Company and the Hospital District
dated on or around April 1, 2018 together with each document delivered in connection therewith, including, without limitation,
the Security Agreement and the Sublandlord Collateral Assignment (in each case, as defined therein) and (iv) any other documents
entered into in connection with the Facility’s inclusion in the QIPP.

 

“QIPP Supplemental
Payments” shall mean any payment received by Hospital District (which are subsequently paid to the Operating Company)
from CMS, the State of Texas, HHSC, or any of their respective intermediaries or contractors, including Managed Care Organizations,
for participation in QIPP, relating to services provided to Medicaid residents of the Facility that are in excess of the Medicaid
reimbursement rates.

 

“Real Estate
Lease” means that certain Amended and Restated Lease dated as of January 1, 2018 by and between the Borrower and the
Operating Company regarding the Facility, pursuant to which the Borrower leases the Real Property to the Operating Company and
the related Sublease Agreement dated on or around April 1, 2018 by and between the Operating Company and the Hospital District,
pursuant to which the Operating Company subleases the Real Property to the Hospital District.

 

“Real Property”
means the real estate on which the Facility is located.

 

    	 	- 13 -	 

     

    

 

“Release”
means any actual or threatened spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing of Hazardous Substances into the environment, as “environment” is defined in CERCLA.

 

“Rent Expense”
shall mean all rental or lease expense of the Operating Company in connection with the Facility leased by the Borrower to the Operating
Company.

 

“Respond”
or “Response” means any action taken pursuant to Environmental Laws to correct, remove, remediate, cleanup,
prevent, mitigate, monitor, evaluate, investigate or assess the Release of a Hazardous Substance.

 

“Subordinated
Debt” means any and all Indebtedness owing by the Borrower to a third party that has been subordinated to the Liabilities
in writing on terms and conditions satisfactory to the Lender in its sole and absolute determination.

 

“Subsequent
Draw” means an advance of the Loan equal to the amount of the Maximum Facility minus all amounts of the Loan advanced
on the Closing Date.

 

“Subsequent
Draw Availability Period” means the period commencing on the date that each of the Subsequent Draw Conditions have been
satisfied as determined by the Lender in its sole discretion and continuing for thirty (30) days thereafter.

 

“Subsequent
Draw Conditions” means the following conditions

 

(i)          the
Lender shall have received financial statements of the Operating Company (showing results of the operation of the Facility) for
the Fiscal Year ended December 31, 2017, reviewed by an independent certified public accountants reasonably acceptable to the
Lender, together with, at least, balance sheets and statements of income and cash flow for such period, prepared in conformity
with GAAP and otherwise in in form and substance reasonably acceptable to the Lender;

 

(ii)         the
financial statements referenced in above do not differ in any material respect with the company prepared financial statements
of the Operating Company delivered to the Lender prior to the Closing Date for the Fiscal Year ended December 31, 2017, as determined
by the Lender in its sole discretion; and 

 

(iii)        the
Lender shall have received a request from the Borrower in form and substance acceptable to the Lender requesting that the Lender
make the Subsequent Draw and certifying that, to the knowledge of the Borrower, all Subsequent Draw Conditions have been satisfied;

 

(iv)        no
Material Adverse Change shall have occurred since the Closing Date; and

 

(v)         immediately
before and after giving pro forma effect to the Subsequent Draw Distribution to be made with the proceeds of the Subsequent Draw
(1) no Default or Event of Default has occurred and is continuing and (2) the Borrower shall have delivered to Lender financial
statements necessary to determine current compliance with the financial covenants set forth in Section 9.12 of this Agreement along
with a true, correct and complete copy of the Compliance Certificate showing pro forma effect to the Subsequent Draw and Subsequent
Draw Distribution to be made in connection therewith.

 

    	 	- 14 -	 

     

    

 

“Subsequent Draw Distribution”
means a distribution to be made concurrently with and to the extent the Subsequent Draw is advanced hereunder, such distribution
to be made with the proceeds of the Subsequent Draw by Borrower to Parent and in an amount not to exceed the amount advanced as
the Subsequent Draw.

 

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

 

“Summit Note”
means that certain Amended and Restated Promissory Note dated as of January 1, 2018 made by the Operating Company in favor of Summit
Healthcare Operating Partnership, L.P. in the original principal amount of $1,067,874.00 and only accruing interest upon a default
thereunder at a rate equal to ten percent (10%) per annum, with respect to which $1,001,131.88 remains outstanding as of the Closing
Date.

 

“Summit Note
Subordination Agreement” means that certain Debt Subordination Agreement dated as of the date hereof by and among the
Borrower, Lender, Operating Company and Summit Healthcare Operating Partnership, L.P. pursuant to which the obligations owing under
the Summit Note are subordinated to the obligations of the Operating Company owing to the Borrower under the Real Estate Lease
and the Liabilities, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Swap Obligation”
means any obligation under or pursuant to any Hedging Agreement or any other agreement, contract or transaction that constitutes
a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 

“Tax Code”
shall have the meaning ascribed to such term in Section 7.19 hereof.

 

“Tax Liability
Amount” shall have the meaning ascribed to such term in Section 9.9 hereof.

 

“Taxes”
shall have the meaning ascribed to such term in Section 3.3 hereof.

 

“TRICARE”
means the medical program for active duty members, qualified family members, CHAMPUS eligible retirees and their family members
and survivors, of all uniformed services.

 

1.2           Accounting
Terms. Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily
given to such terms in accordance with GAAP. If changes in GAAP shall be mandated by the Financial Accounting Standards Board or
shall be recommended by the Borrower’s certified public accountants, and such changes would materially modify the interpretation
or computation of the financial covenants set forth in Section 9.12 hereof at the time of execution hereof, then in such
event such changes shall not be followed in calculating such financial covenants.

 

    	 	- 15 -	 

     

    

 

1.3           Others
Defined in Code. All terms contained in this Agreement (and which are not otherwise specifically defined herein) shall have
the meanings provided by the Code to the extent the same are used or defined therein.

 

1.4           Other
Interpretive Provisions.

 

(a)          The
meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa.

 

(b)          Section
and Schedule references are to this Agreement unless otherwise specified. The words “hereof”, “herein”
and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.

 

(c)          The
term “including” is not limiting, and means “including, without limitation”.

 

(d)          In
the computation of periods of time from a specified date to a later specified date, the word “from” means “from
and including”; the words “to” and “until” each mean “to but excluding”, and the word
“through” means “to and including”.

 

(e)          Unless
otherwise expressly provided herein, (i) references to agreements (including this Agreement and the other Financing Agreements)
and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications
thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms
of this Agreement or any Financing Agreement, and (ii) references to any statute or regulation shall be construed as including
all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.

 

2.          COMMITMENT;
INTEREST; FEES.

 

2.1           Loan.
On the terms and subject to the conditions set forth in this Agreement, and provided there does not then exist an Event of Default
and all other conditions have been satisfied (including, without limitation, all conditions set forth in Section 5 and, with respect
to the Subsequent Draw, if any, the Subsequent Draw Conditions), the Lender shall, (i) following the execution of this Agreement
by the Borrower and the Lender, extend in one (1) advance on the Closing Date a term loan (the “Initial Loan Advance”)
to the Borrower in an aggregate principal amount equal to the lesser of (y) Nine Million Seventeen Thousand Three Hundred Fifteen
and 94/100 Dollars ($9,017,315.94) or (z) the Maximum Facility and (ii) at any time requested by the Borrower during the Subsequent
Draw Availability Period, the Subsequent Draw to be extended in one (1) advance (any advance of the Subsequent Draw, together with
the Initial Loan Advance is herein referred to collectively as the “Loan”). The outstanding principal balance
of the Loan shall be repaid by Borrower in principal installments based on a twenty-five (25) year amortization schedule in consecutive
monthly installments as set forth below, provided, however, that unless an Event of Default is in existence or Borrower otherwise
direct Lender in writing, each scheduled installment of principal paid by Borrower following the expiration of the interest only
period shall be deposited into the Cash Loan Guaranty Fund in lieu of releasing such installment to Lender for application to the
outstanding principal balance of the Loan. If the Liabilities are repaid in
full on or before the Maturity Date, the funds contained in the Cash Loan Guaranty Fund shall be released to Borrower in connection
with such repayment.  If the Liabilities are not repaid in full on or before the Maturity Date, or at any time during the
existence of an Event of Default, the funds then contained in the Cash Loan Guaranty Fund shall be released to Lender for application
to the outstanding principal balance of the Liabilities.  For avoidance of doubt, the outstanding principal balance of the
Loan, unreduced by the funds contained in Cash Loan Guaranty Fund, shall bear interest in accordance with Section 2.5.

 

    	 	- 16 -	 

     

    

 

	Closing Date through the	 
	First anniversary of the Closing Date:	$220,000, annually ($18,334/month)
	 	 
	First Anniversary of the	 
	Closing Date through the Second	 
	Anniversary of the Closing Date:	$230,000, annually ($19,167/month)
	 	 
	Second Anniversary of the Closing Date and thereafter:	$240,000 annually ($20,000/month)

 

Each of the foregoing
payments shall be paid together with interest accrued on the Loan, each payable on or before the fifth (5th) day of
each calendar month, commencing on May 5, 2018, and otherwise in accordance with Section 2.5 hereof, with a final installment
of the aggregate unpaid principal balance of the Loan, together with interest accrued thereon, payable on the Maturity Date. Monthly
interest payments on the Loan shall be computed using the interest rate then in effect and based on the outstanding principal balance
of the Loan. Any amounts paid or applied to the principal balance of the Loan (whether by mandatory prepayment or otherwise) may
not be reborrowed hereunder. The Lender's commitment hereunder to make the Loan is hereinafter called the “Commitment”.
At the Maturity Date, the outstanding principal balance of the Loan shall be immediately due and payable, together with any remaining
accrued interest thereon, to Lender by Borrower. The Loan shall be evidenced by a promissory note (hereinafter, as the same may
be amended, modified or supplemented from time to time, and together with any renewals or extensions thereof or exchanges or substitutions
therefor, called the “Note”), duly executed and delivered by the Borrower, in form and substance reasonably
satisfactory to the Lender, with appropriate insertions, dated the Closing Date, payable to the order of the Lender in the principal
amount of Ten Million Seven Hundred Twenty-Five Thousand and No/100 Dollars ($10,725,000.00). THE PROVISIONS OF THE NOTE NOTWITHSTANDING,
THE LOAN SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIEST TO OCCUR OF (X) THE MATURITY DATE; (Y) THE ACCELERATION OF
THE LIABILITIES PURSUANT TO SECTION 10.2 HEREOF; AND (Z) THE TERMINATION OF THIS AGREEMENT (WHETHER BY PREPAYMENT OR OTHERWISE)
IN ACCORDANCE WITH ITS TERMS.

 

    	 	- 17 -	 

     

    

  

2.2           Reserved.

 

2.3           The
Borrower’s Loan Account. The Lender shall maintain a loan account (the “Loan Account”) on its books
for the Borrower in which shall be recorded (a) all advances of the Loan made by the Lender to the Borrower pursuant to this Agreement,
(b) all payments made by the Borrower on or with respect to such Loan, and (c) all other appropriate debits and credits as provided
in this Agreement, including, without limitation, all fees, charges, expenses and interest. All entries in the Loan Account shall
be made in accordance with the Lender’s customary accounting practices as in effect from time to time. The Borrower promises
to pay the amount reflected as owing by Borrower under its Loan Account and all of its other obligations hereunder as such amounts
become due or are declared due pursuant to the terms of this Agreement. Notwithstanding the foregoing, the failure so to record
any such amount or any error in so recording any such amount shall not limit or otherwise affect the Borrower’s obligations
under this Agreement or under the Note to repay the outstanding principal amount of the Loan together with all interest accruing
thereon.

 

2.4           Statements.
The Loan to the Borrower, and all other debits and credits provided for in this Agreement, shall be evidenced by entries made
by the Lender in its internal data control systems showing the date, amount and reason for each such debit or credit. Until such
time as the Lender shall have rendered to the Borrower written statements of account as provided herein, the balance in the Loan
Account, as set forth on the Lender’s most recent computer printout, shall be rebuttably presumptive evidence of the amounts
due and owing the Lender by the Borrower. From time to time the Lender shall render to the Borrower a statement setting forth
the balance of the Loan Account, including principal, interest, expenses and fees. Each such statement shall be subject to subsequent
adjustment by the Lender but shall, absent manifest errors or omissions, be presumed correct and binding upon the Borrower.

 

2.5           Interest.
(a) The Borrower agrees to pay to the Lender interest on the daily outstanding principal balance
of the Loan at the Libor Rate; provided, however, that if Libor Loans are unavailable pursuant to the terms of this Agreement,
then at the Base Rate; provided, however, that immediately following the occurrence and during the continuance of an Event of
Default, and notwithstanding any other provisions of this Agreement to the contrary, the Borrower agrees to pay to the Lender
interest on the outstanding principal balance of the Loans at the per annum rate of three percent (3%) plus the rate otherwise
payable hereunder with respect to such Loans (the “Default Rate”). 

 

(b)          Accrued
interest on each Base Rate Loan (to the extent Libor Loans are unavailable under applicable law or pursuant to the terms of this
Agreement) shall be payable in arrears on or before the fifth (5th) calendar day of each month and at maturity, such
payments to commence on May 5, 2018; provided, however, accrued interest on each Libor Loan shall be payable on the last day of
the Libor Interest Period relating to such Libor Loan and at maturity, commencing with the first such last day of the initial Libor
Interest Period. Monthly interest payments on the Loans shall be computed using the interest rate then in effect and based on the
outstanding principal balance of the Loans. At the Maturity Date, the outstanding principal balance of the Loan shall be immediately
due and payable, together with any remaining accrued interest thereon. Interest shall be computed on the basis of a year of three
hundred sixty (360) days for the actual number of days elapsed. If any payment of principal of, or interest on, the Note falls
due on a day that is not a Business Day, then such due date shall be extended to the next following Business Day, and additional
interest shall accrue and be payable for the period of such extension.

 

    	 	- 18 -	 

     

    

 

2.6           Method
for Making Payments; Authorization to Debit Lease Deposit Account. All payments that the Borrower is required to make to the
Lender under this Agreement or under any of the other Financing Agreements shall be made in immediately available funds not later
than 1:00 p.m. (Chicago time) on the date of payment at the Lender’s office at 120 S. LaSalle St., Chicago, Illinois 60603,
or at such other place as the Lender directs in writing from time to time, or, in the Lender’s sole and absolute discretion,
by appropriate debits to the Lease Deposit Account or other operating accounts of the Borrower. Borrower hereby irrevocably authorizes
and instructs Lender to direct debit any of Borrower’s operating accounts with Lender, including, without limitation, the
Lease Deposit Account, for all principal, interest, fees and expenses due hereunder with respect to the Loan and the Liabilities
or as otherwise is required to be deposited into the Cash Loan Guaranty Fund. Payments made after 1:00 p.m. (Chicago time) shall
be deemed to have been made on the next succeeding Business Day.

 

2.7           Term
of this Agreement. The Borrower shall have the right to terminate this Agreement following prepayment of all of the Liabilities
as provided under Section 2.8 hereof; provided, however, that all of the Lender’s rights and remedies
under this Agreement and the Liens created under Section 6.1 hereof and under any of the other Financing Agreements, shall
survive such termination until all of the Liabilities have been indefeasibly paid in full (including, without limitation, all
default interest and all interest accrued after commencement of any insolvency or bankruptcy proceeding, whether or not the foregoing
would be or is allowed or disallowed in whole or in part in any such insolvency or bankruptcy proceeding), and termination of
the Lender’s Commitment hereunder. In addition, the Liabilities may be accelerated as set forth in Section 10.2 hereof.
Upon the effective date of termination, all of the Liabilities shall become immediately due and payable without notice or demand.
Notwithstanding any termination, until all of the Liabilities shall have been indefeasibly paid and satisfied, the Lender shall
be entitled to retain its Liens in and to all existing and future Collateral.

 

2.8           Optional
Prepayment of Loan. The Borrower may, at its option, permanently prepay, at any time during the term of this Agreement all
of the Loan or any portion thereof but in minimum amounts of no less than Fifty Thousand Dollars ($50,000) or higher increments
of Fifteen Thousand Dollars ($15,000) in excess of such minimum, subject to the following conditions: (i) not less than ten (10)
days prior to the date upon which the Borrower desires to make any such prepayment, Borrower shall deliver to the Lender a written
notice of its intention to prepay all or such portion of the Loan, which notice shall be irrevocable and state the type of Loan
to be prepaid, the amount of the prepayment and the prepayment date, and (ii) the Borrower shall pay (A) the Prepayment Premium,
if applicable, (in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Lender's lost profits as a result of such prepayment), (B) any amount due pursuant
to Section 3.4 hereof, and (C) any amounts due in connection with such prepayment or due under any Interest Rate Protection
Agreement. Any such Prepayment Premium shall constitute a part of the Liabilities and be secured by the Collateral. Prepayments
of the Loan shall be applied against installments payable under such applicable Note in the inverse order of maturity. Amounts
prepaid on account of any of the Loan may not be reborrowed. The parties agree that the Prepayment Premium is not a penalty.

 

    	 	- 19 -	 

     

    

 

2.9           Limitation
on Charges. It being the intent of the parties that the rate of interest and all other charges to the Borrower be lawful,
if for any reason the payment of a portion of the interest or other charges otherwise required to be paid under this Agreement
would exceed the limit which the Lender may lawfully charge the Borrower, then the obligation to pay interest or other charges
shall automatically be reduced to such limit and, if any amounts in excess of such limit shall have been paid, then such amounts
shall at the sole option of the Lender either be refunded to the Borrower or credited to the principal amount of the Liabilities
(or any combination of the foregoing) so that under no circumstances shall the interest or other charges required to be paid by
the Borrower hereunder exceed the maximum rate allowed by applicable law, and Borrower shall not have any action against Lender
for any damages arising out of the payment or collection of any such excess interest.

 

2.10         Method
of Selecting Rate Options; Additional Provisions Regarding Libor Loans. At all times during
the term of this Agreement that Libor Loans are available under applicable law and the terms of this Agreement, the Borrower hereby
selects the Libor Rate with respect to all, but not less than all, of the amount of the Loan from time to time outstanding.
Notwithstanding anything contained herein to the contrary, the Loan shall not bear interest at the Base Rate unless Libor Loans
are unavailable as determined by Lender. Subject to Section 3 of this Agreement, in the event the Lender determines that Libor
Loans are unavailable for any reason, the Loan shall automatically convert to a Base Rate Loan. In such event, the Borrower hereby
agrees that, as soon as Lender has notified Borrower that Libor Loans have become available, the Borrower shall have automatically
be deemed to have selected the Libor Rate with respect to all, but not less than all, of the amount of the Loan outstanding at
such time with a Conversion Date as selected by the Lender. Each Libor Loan shall bear interest from and including the first day
of the Libor Interest Period applicable thereto to (but not including) the last day of such Libor Interest Period at the interest
rate applicable to such Libor Loan. At the end of a Libor Interest Period for an outstanding Libor Loan, as long as no Default
or Event of Default exists at any time, such Loan will automatically be continued for successive Libor Interest Periods subject
to the first proviso in Section 2.5(a) hereof. An outstanding Base Rate Loan may be converted to a Libor Loan as set forth in
this Section 2.10. Unless otherwise agreed to by Lender, the Borrower may not select a Libor Rate for a Loan if there exists a
Default or Event of Default and in such event, Lender may elect to indicate that Libor Loans shall be deemed “unavailable”
for purposes of this Agreement. No Libor Interest Periods may expire after the end of the Maturity Date and, in such case, the
Loan will bear interest at the Base Rate during such period.

 

2.11         Setoff.
(a) Borrower agrees that Lender has all rights of setoff and banker’s liens provided by applicable law. The Borrower agrees
that, if at any time (i) any amount owing by it under this Agreement or any Financing Agreement is then due and payable to
the Lender or (ii) an Event of Default shall have occurred and be continuing, then the Lender or the holder of the Note issued
hereunder, in its sole discretion, may set off against and apply to the payment of any and all Liabilities, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter with the Lender or such holder.

 

    	 	- 20 -	 

     

    

 

(b)          Without
limitation of Section 2.11(a) hereof, the Borrower agrees that, upon and after the occurrence and during the continuance
of any Event of Default, the Lender is hereby authorized, at any time and from time to time, without prior notice to the Borrower,
(i) to set off against and to appropriate and apply to the payment of any and all Liabilities any and all amounts which the
Lender is obligated to pay over to the Borrower (whether matured or unmatured, and, in the case of deposits, whether general or
special, time or demand and however evidenced), and (ii) pending any such action, to the extent necessary, to deposit such
amounts with the Lender as Collateral to secure such Liabilities and to dishonor any and all checks and other items drawn against
any deposits so held as the Lender in its sole discretion may elect.

 

(c)          The
rights of the Lender under this Section 2.11 are in addition to all other rights and remedies which the Lender may otherwise
have in equity or at law.

 

2.12         Termination
of Commitment by the Lender. On the date on which the Commitment terminates pursuant to Section 10.2 hereof, the Loan
and other Liabilities shall become immediately due and payable, without presentment, demand or notice of any kind.

 

2.13         Commitment
Fee. On the Closing Date, the Borrower shall pay to the Lender a one-time commitment fee in the amount of One Hundred Seven
Thousand Two Hundred Fifty and 00/100 ($107,250.00), which shall be deemed fully earned as of the Closing Date.

 

2.14         Late
Charge. If any installment of principal or interest due hereunder shall become overdue for five (5) days after the date when
due, the Borrower shall pay to the Lender on demand a “late charge” of five cents ($.05) for each dollar so overdue
in order to defray part of the increased cost of collection occasioned by any such late payment, as liquidated damages and not
as a penalty.

 

3.            CHANGE
IN CIRCUMSTANCES.

 

3.1           Yield
Protection. If, after the date of this Agreement, a Change in Law,

 

(a)          subjects
the Lender to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding taxation of the overall
net income of the Lender), or changes the basis of taxation of payments to the Lender in respect of the Loan or other amounts due
it hereunder, or

 

(b)          imposes,
modifies, or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the Lender (other than reserves and assessments taken into
account in determining the interest rate applicable to Libor Loans), or

 

(c)          imposes
any other condition the result of which is to increase the cost to the Lender of making, funding or maintaining advances or reduces
any amount receivable by the Lender in connection with advances, or requires the Lender to make any payment calculated by reference
to the amount of advances held or interest received by it, by an amount deemed material by the Lender, or

 

(d)          affects
the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and the Lender
determines the amount of capital required is increased by or based upon the existence of this Agreement or its obligation to make
the Loan hereunder or of commitments of this type,

 

    	 	- 21 -	 

     

    

 

then, within three (3)
Business Days of demand by the Lender, the Borrower agrees to pay the Lender that portion of such increased expense incurred (including,
in the case of clause (d), any reduction in the rate of return on capital to an amount below that which it could have achieved
but for such law, rule, regulation, policy, guideline or directive and after taking into account the Lender’s policies as
to capital adequacy) or reduction in an amount received which the Lender determines is attributable to making, funding and maintaining
the Loan.

 

3.2           Availability
of Rate Options. If the Lender determines that maintenance of any of its Libor Loans would violate any applicable law, rule,
regulation or directive of any government or any division, agency, body or department thereof, whether or not having the force
of law, the Lender shall suspend the availability of the Libor Rate option and require any Libor Loans outstanding to be promptly
converted to a Base Rate Loan subject to the Borrower’s compliance with Section 3.4 hereof; or if the Lender determines
that (i) deposits of a type or maturity appropriate to match fund Libor Loans are not available, the Lender shall suspend the availability
of the Libor Rate after the date of any such determination, or (ii) the Libor Rate does not accurately reflect the cost of making
a Libor Loan, then, if for any reason whatsoever the provisions of Section 3.1 hereof are inapplicable, the Lender shall,
at its option, suspend the availability of the Libor Rate after the date of any such determination or permit (solely in the case
of clause (ii)) the Borrower to pay the Lender for any increased cost it may incur.

 

3.3           Taxes.
All payments by the Borrower under this Agreement shall be made free and clear of, and without deduction for, any present or future
income, excise, stamp or other taxes, fees, levies, duties, withholdings or other charges of any nature whatsoever, now or hereafter
imposed by any taxing authority, other than franchise taxes and taxes imposed on or measured by the Lender’s net income or
receipts (such non-excluded items being called “Taxes”). If any withholding or deduction from any payment to
be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower shall:

 

(a)          pay
directly to the relevant authority the full amount required to be so withheld or deducted;

 

(b)          promptly
forward to the Lender an official receipt or other documentation satisfactory to the Lender evidencing such payment to such authority;
and

 

(c)          pay
to the Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by the Lender will
equal the full amount the Lender would have received had no such withholding or deduction been required.

 

Moreover, if any Taxes
are directly asserted against the Lender with respect to any payment received by the Lender hereunder, the Lender may pay such
Taxes and the Borrower agrees to promptly pay such additional amounts (including, without limitation, any penalties, interest or
expenses) as is necessary in order that the net amount received by the Lender after the payment of such Taxes (including, without
limitation, any Taxes on such additional amount) shall equal the amount the Lender would have received had not such Taxes been
asserted. Notwithstanding the foregoing, if the Lender fails to timely pay any such Taxes after the Lender receives prior written
notice of such Taxes being due prior to the date such Taxes are due, then any penalty directly resulting from the failure to timely
pay such Taxes shall not be borne by the Borrower.

 

    	 	- 22 -	 

     

    

 

3.4           Funding
Indemnification. If any payment of a Libor Loan occurs on a date that is not the last day of the applicable Libor Interest
Period, whether because of acceleration, prepayment or otherwise, or a Libor Loan is not made on the date specified by the Borrower,
the Borrower shall indemnify the Lender for any loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or maintain the Libor Loan.

 

3.5           Lender
Statements. The Lender shall deliver a written statement to the Borrower as to the amount due, if any, under Sections 3.1,
3.3 or 3.4 hereof. Such written statement shall set forth in reasonable detail the calculations upon which the Lender
determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Unless otherwise
provided herein, the amount specified in the written statement shall be payable within five (5) days after receipt by the Borrower
of the written statement.

 

3.6           Basis
for Determining Interest Rate Inadequate or Unfair. If with respect to any Libor Interest Period: (a) Lender determines (which
determination shall be binding and conclusive on the Borrower) that by reason of circumstances affecting the interlender Libor
Base market adequate and reasonable means do not exist for ascertaining the applicable Libor Base Rate; or (b) Lender determines
that the Libor Base Rate will not adequately and fairly reflect the cost to Lender of maintaining or funding the Loan for such
Libor Interest Period, or that the making or funding of Libor Loans has become impracticable as a result of an event occurring
after the date of this Agreement which in the opinion of Lender adversely affects such Libor Loans, then, in either case, so long
as such circumstances shall continue: (i) Lender shall not be under any obligation to make, convert into or continue Libor Loans
and (ii) on the last day of the then current Libor Interest Period for each Libor Loan, each such Loan shall, unless then repaid
in full, automatically convert to a Base Rate Loan. Lender shall promptly give the Borrower written notice of any determination
made by it under this Section accompanied by a statement setting forth in reasonable detail the basis of such determination.

 

3.7           Illegality.
If any applicable law or regulation, or any interpretation thereof by any court or any governmental or other regulatory body charged
with the administration thereof, should make it unlawful for Lender or its lending office to make, maintain or fund any Libor Loan,
then the obligation of Lender to make, convert into or continue such Libor Loan shall, upon the effectiveness of such event, be
suspended for the duration of such unlawfulness, and on the last day of the current Libor Interest Period for such Libor Loan (or,
in any event, if Lender so requests, on such earlier date as may be required by the relevant law, regulation or interpretation),
the Libor Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.

 

    	 	- 23 -	 

     

    

  

4.            ATTORNEY-IN-FACT.

 

4.1           Appointment
of the Lender as the Borrower’s Attorney-in-Fact. The Borrower hereby irrevocably designates, makes, constitutes and
appoints the Lender (and all Persons designated by the Lender in writing to the Borrower) as the Borrower’s true and lawful
attorney-in-fact, and authorizes the Lender, in the Borrower’s or the Lender’s name to do all acts and things which
are necessary, in the Lender’s reasonable discretion, to fulfill the Borrower’s obligations under this Agreement. The
Borrower hereby ratifies and approves all acts under such power of attorney and neither Lender nor any other Person acting as Borrower’s
attorney hereunder will be liable for any acts or omissions or for any error of judgment or mistake of fact or law made in good
faith. The appointment of Lender (and any of the Lender’s officers, employees or agents designated by the Lender) as Borrower’s
attorney, and each and every one of Lender’s rights and powers, being coupled with an interest, are irrevocable until all
of the Liabilities have been fully repaid and this Agreement shall have expired or been terminated in accordance with the terms
hereunder.

 

5.            CONDITIONS
OF THE LOAN.

 

The Lender’s
obligation to make all or any part of the Loan hereunder is subject to the satisfaction of each of the following conditions precedent:

 

(a)          Fees
and Expenses. The Borrower shall have paid all fees owed to the Lender and reimbursed the Lender for all reasonable costs,
disbursements, fees and expenses due and payable hereunder on or before the Closing Date, including, without limitation, the Lender’s
counsel fees provided for in Section 11.2(a) hereof.

 

(b)          Documents.
The Lender shall have received all of the following, each duly executed and delivered and dated the Closing Date, or such earlier
date as shall be satisfactory to the Lender, each in form and substance reasonably satisfactory to the Lender in its sole determination:

 

(1)         Financing
Agreements. This Agreement, the Note, the Mortgage, the Assignment of Rents and Leases, the Collateral Assignment of Agreements,
the Environmental Indemnity Agreement, the Pledge Agreement and such other Financing Agreements as the Lender may reasonably require.

 

(2)         Resolutions;
Incumbency and Signatures. Copies of the resolutions or written consent of the manager of each Credit Party authorizing or
ratifying the execution, delivery and performance by such Credit Party of this Agreement, the Financing Agreements to which such
Credit Party is a party and any other document provided for herein or therein to be executed by such Credit Party, certified by
a Duly Authorized Person of such Credit Party and, in each case, to the extent applicable. A certificate of a Duly Authorized Person
certifying the names of the officers of the Borrower authorized to make a borrowing request on behalf of the Borrower and sign
this Agreement and the Financing Agreements to which the Borrower is a party, together with a sample of the true signature of each
such officer; the Lender may conclusively rely on each such certificate until formally advised by a like certificate of any changes
therein.

 

(3)         Consents.
Certified copies of all documents evidencing any necessary consents and governmental approvals, if any, with respect to this Agreement,
the Financing Agreements, and any other documents provided for herein or therein to be executed by Borrower.

 

    	 	- 24 -	 

     

    

 

(4)         Opinion
of Counsel. An opinion of Hanson Bridgett, LLP and Macdonald Resnevic, PLLC, the legal counsel to the Credit Parties, in form
and substance reasonably satisfactory to Lender.

 

(5)         Constitutive
Documents. A copy (certified by a Duly Authorized Person) of each Credit Party’s (i) Certificate of Formation, certified
by the Secretary of State of the State of Delaware as of a date acceptable to the Lender, together with a good standing certificate
from such governmental entity or department and, if and to the extent applicable, a good standing certificate (or the equivalent
thereof) from the Secretaries of State (or the equivalent thereof) of each other State in which any Credit Party is required to
be qualified to transact business and (ii) a true, correct and complete copy of the Limited Liability Company Agreement of the
Borrower and the Parent.

 

(6)         UCC
Financing Statements; Termination Statements; UCC Searches. UCC Financing Statements, as requested by the Lender, naming each
Credit Party as debtor and the Lender as secured party with respect to the Collateral, together with such UCC termination statements
necessary to release all Liens (other than Permitted Liens but, for the avoidance of doubt, including any Liens securing the Debt
to be Repaid) and other rights in favor of any Person in any of the Collateral except the Lender, and other documents as the Lender
deems necessary or appropriate, shall have been filed in all jurisdictions that the Lender deems necessary or advisable. UCC tax,
lien, pending suit and judgment searches for the Borrower (and, if and to the extent applicable, under any of its trade or assumed
names, if any), each dated a date reasonably near to the Closing Date in all jurisdictions reasonably deemed necessary by the Lender,
the results of which shall be satisfactory to the Lender in its sole and absolute determination.

 

(7)         Insurance
Certificates. Certificates from the Borrower’s insurance carriers evidencing that all insurance coverage required hereunder
and under the Mortgage and other Financing Agreements is in effect, which designate the Lender as “Lender’s Loss Payee”
under the personal property insurance, additional insured under the liability insurance and mortgagee, as applicable.

 

(8)         Real
Estate Lease. A true, correct and complete copy of the fully-executed Real Estate Lease, and all amendments, assignments,
modifications and other supplements in connection therewith, together with a Subordination, Non-Disturbance and Attornment Agreement
with respect to the Facility, in each case, in a form and substance acceptable to Lender, including, without limitation, evidence
that the Rent Expense associated with the Real Estate Lease on an annual basis is not less than One Million Three Hundred Thousand
and 00/100 Dollars ($1,300,000) in the aggregate

 

(9)         Debt
to be Repaid. All Debt to be Repaid has been (or concurrently with the initial borrowing of the Loan will be) paid in full,
and all agreements and instruments governing the Debt to be Repaid and all Liens securing such Debt to be Repaid have been (or
concurrently with the initial borrowing of the Loan will be) terminated.

 

    	 	- 25 -	 

     

    

 

(10)        Property
Condition Report. A Property Condition Report for the Real Property on which the Facility is located, the form, substance and
results of which shall be satisfactory to Lender in its sole and absolute determination, unless waived in writing by Lender.

 

(11)        Environmental
Assessment. Phase I environmental report of the Real Property on which the Facility is located prepared by an environmental
audit firm reasonably acceptable to the Lender, the results of which shall be satisfactory to the Lender in its sole and absolute
determination.

 

(12)        Title
Insurance. A title insurance policy in the form of ALTA Form Mortgagee Title Insurance Policy shall be issued by an insurer
(acceptable to the Lender) in favor of the Lender for the Real Property, together with copies of all documents of record concerning
the Real Property as identified on the commitment thereof. Each title insurance policy shall contain such endorsements as deemed
appropriate by the Lender.

 

(13)        Survey.
An ALTA plat of survey shall be prepared on the Real Property (with current ALTA/ACSM land survey standards and reasonably satisfactory
to the Lender), unless waived in writing by the Lender.

 

(14)        Appraisal.
An appraisal prepared by an independent appraiser of the Real Property, which appraisal shall satisfy the requirements of the Financial
Institutions Reform, Recovery and Enforcement Act, if applicable, and shall evidence compliance with the supervisory loan-to-value
limits set forth in the Federal Deposit Insurance Corporation Improvement Act of 1991 (including a loan-to-value ratio using an
income-approach basis not to exceed 75%). Such appraisal (and the results thereof) shall be satisfactory to the Lender in its sole
and reasonable determination.

 

(15)        Flood
Insurance. A flood insurance policy, if applicable, concerning the Real Property, reasonably satisfactory to the Lender, if
required by the Flood Disaster Protection Act of 1973.

 

(16)        Permits.
Certified copies of all licenses, permits and governmental approvals necessary for the use or operation of the Facility, together
with a certificate of occupancy with respect to the Facility issued in the name of the Operating Company or, as applicable as the
same relates to participation in the QIPP, the Hospital District.

 

(17)        Management
Agreement. True, correct and complete copies of the fully-executed Management Agreement in form and substance satisfactory
to the Lender in its sole discretion.

 

(18)        Summit
Note Subordination Agreement. The Summit Note Subordination Agreement in form and substance satisfactory to the Lender in its
sole discretion.

 

(19)        QIPP
Agreements. A true, correct and complete copy of each fully-executed QIPP Agreement in form and substance satisfactory to the
Lender in its sole discretion.

 

(20)        Other.
Such other documents, certificates and instruments as the Lender may reasonably request.

 

    	 	- 26 -	 

     

    

 

(c)          Field
Examination; Site Visit. The Lender shall have completed its site visit and field examinations of the Borrower’s books
and records, assets, and operations which examinations will be satisfactory to the Lender in its sole and absolute discretion.

 

(d)          No
Material Adverse Change. Since December 31, 2016, there shall be no material adverse change in the business, assets, liabilities,
properties, condition (financial or otherwise) or results of operations of the Borrower or Operating Company.

 

(e)          Representations
and Warranties. All representations or warranties of the Credit Parties contained herein or in any Financing Agreement shall
be true and correct as of the Closing Date.

 

(f)          Acknowledgement
of Operating Company. Evidence reasonably acceptable to the Lender that the Operating Company has acknowledged the obligations
of Borrower under Section 8.9 hereof and that the Borrower has notified the Operating Company that all amounts payable to the
Borrower under the Real Estate Lease shall be paid directly to the Lease Deposit Account and that the Operating Company has agreed
to comply with such arrangement.

 

(g)          Financial
Statements. The Lender shall have received financial statements of the Operating Company (showing results of the operation
of the Facility) for the fiscal year ended December 31, 2016 and such financial statements shall be in form and substance reasonably
acceptable to the Lender. The Lender shall have received (i) company prepared financial statements for the Operating Company and
Borrower for each of the fiscal years ended December 31, 2015 and December 31, 2016 and (ii) company prepared financial statements
of the operations of the Facility for the 12-month period ending December 31, 2017 and such financial statements, in each case,
shall be in form and substance reasonably acceptable to the Lender.

 

(h)          Commitment
Fee. The Borrower shall have paid to Lender (i) the commitment fee referenced in Section 2.13 hereof (ii) and such other fees
incurred by the Lender in connection with its due diligence process.

 

(i)          Capital
Structure. The capital and organizational structure of Summit, Parent, the Borrower and their Subsidiaries shall be satisfactory
to the Lender.

 

    	 	- 27 -	 

     

    

  

6.            COLLATERAL.

 

6.1           Security
Interest. As security for the prompt and complete payment and performance of all of the Liabilities when due or declared due
in accordance with the terms hereof, the Borrower hereby grants, pledges, conveys and transfers to the Lender (in addition to the
security interests, assignments and mortgages on the Real Property as contemplated by the Mortgage and the other Financing Agreements)
a continuing security interest in and to any and all assets and personal property of the Borrower, of any kind or description,
tangible or intangible, wheresoever located and whether now existing or hereafter arising or acquired, including the following
(all of which property, along with the products and proceeds therefrom, are individually and collectively referred to as the “Collateral”):
(a) all of Borrower’s accounts receivable, including, without limitation, Accounts and Health-Care-Insurance Receivables
(each as defined in the Code), (b) all of the Borrower’s General Intangibles, including, without limitation General Intangibles
related to accounts receivable and money; (c) all of Borrower’s Deposit Accounts and other deposit accounts (general or special)
with, and credits and other claims against, the Lender, or any other financial institution with which the Borrower maintains deposits;
(d) all of the Borrower’s contracts (including any QIPP Agreement in which the Borrower has rights), licenses, chattel paper,
instruments, notes, letters of credit, bills of lading, warehouse receipts, shipping documents, contracts, tax refunds, documents
and documents of title, and all of the Borrower’s Tangible Chattel Paper, Documents, Electronic Chattel Paper, Letter-of-Credit
Rights, letters of credit, Software, Supporting Obligations, Payment Intangibles, and Goods (each as defined in the Code); (e)
all of the Borrower’s Inventory and Equipment (each as defined in the Code) and motor vehicles and trucks; (f) all of the
Borrower’s monies, and any and all other property and interests in property of the Borrower, including, without limitation,
Investment Property, Instruments, Security Entitlements, Uncertificated Securities, Certificated Securities, Chattel Paper, and
Financial Assets (each as defined in the Code), now or hereafter coming into the actual possession, custody or control of the Lender
or any agent or Affiliate of the Lender in any way or for any purpose (whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise), and, independent of and in addition to the Lender’s rights of setoff, the balance of any account
or any amount that may be owing from time to time by the Lender to the Borrower; (g) all insurance proceeds of or relating to any
of the foregoing property and interests in property, and any key man life insurance policy covering the life of any officer or
employee of Borrower; (h) all proceeds and profits derived from the operation of the Borrower’s business; (i) all of the
other assets and personal property of the Borrower; (j) the Lease Deposit Accounts, the Cash Loan Guaranty Fund and, in each case,
the funds relating thereto; (k) all of the Borrower’s books and records, computer printouts, manuals and correspondence relating
to any of the foregoing and to such Borrower’s business; (k) all cash of the Borrower; and (l) all accessions, improvements
and additions to, substitutions for, and replacements, products, profits and proceeds of any of the foregoing.

 

6.2           Preservation
of Collateral and Perfection of Security Interests Therein. The Borrower agrees that it shall execute and deliver to the Lender,
concurrently with the execution of this Agreement, and at any time or times hereafter at the request of the Lender, all financing
statements (and the Borrower shall pay the cost of filing or recording the same in all public offices deemed necessary by the Lender)
or other instruments and documents as the Lender may reasonably request, in a form satisfactory to the Lender, to perfect and keep
perfected the Liens in the Collateral or to otherwise protect and preserve the Collateral and the Lender’s Liens therein.
If the Borrower fails to do so, the Lender is authorized to sign any such financing statements (or, if no signature is required
in the filing jurisdiction, file such financing statements without the Borrower’s signature) as the Borrower’s agent.
The Borrower further agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.

 

6.3           Loss
of Value of Collateral. The Borrower agrees to immediately notify the Lender of any material loss or depreciation of over $100,000
in the value of the Collateral or any portion thereof.

 

    	 	- 28 -	 

     

    

 

6.4           Right
to File Financing Statements. Notwithstanding anything to the contrary contained herein, the Lender may at any time and from
time to time file financing statements, continuation statements and amendments thereto that describe the Collateral in particular,
and which contain any other information required by the Code for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including whether the Borrower is an organization, the type of organization and any organization
identification number issued to the Borrower. The Borrower agrees to furnish any such information to the Lender promptly upon request.
Any such financing statements, continuation statements or amendments may be signed by the Lender on behalf of the Borrower and
may be filed at any time with or without signature and in any jurisdiction as reasonably determined by the Lender.

 

6.5           Third
Party Agreements. The Borrower shall at any time and from time to time take such steps as the Lender may reasonably require
for the Lender: (i) to obtain an acknowledgment, in form and substance reasonably satisfactory to the Lender, of any third party
having possession of any of the Collateral that the third party holds for the benefit of the Lender, (ii) to obtain “control”
(as defined in the Code) of any Deposit Accounts, with any agreements establishing control to be in form and substance reasonably
satisfactory to the Lender, and (iii) otherwise to ensure the continued perfection and priority of the Lender’s security
interest in any of the Collateral and of the preservation of its rights therein.

 

6.6           All
Advances One Obligation. Payment of all Liabilities shall be secured by the Collateral and pursuant to certain of the terms
of this Agreement and the Financing Agreements. All loans or advances made to Borrower under this Agreement shall constitute one
Loan, and all of Borrower’s Liabilities shall constitute one general obligation secured by Lender’s Lien on all of
the Collateral and by all other Liens heretofore, now, or at any time or times granted to Lender to secure the Liabilities. Borrower
agrees that all of the rights of Lender set forth in this Agreement shall apply to any amendment, restatement or modification of,
or supplement to, this Agreement, any supplements or exhibits hereto and the Financing Agreements, unless otherwise agreed in writing
by the Lender.

 

6.7           Commercial
Tort Claims. If the Borrower shall at any time hereafter acquire a Commercial Tort Claim (as defined in the Code), the Borrower
shall promptly notify the Lender of same in a writing signed by the Borrower (describing such claim in reasonable detail) and grant
to the Lender in such writing (at the sole cost and expense of the Borrower) a continuing, first-priority security interest therein
and in the proceeds thereof, with such writing to be in form and substance satisfactory to the Lender in its sole and absolute
determination.         

 

6.8           Cash
Loan Guaranty Fund. Prior to the funding of the Loan on the Closing Date, the Borrower agrees to establish and hereby grants
the Lender a security interest in a restricted account set up for the purpose of depositing the Cash Loan Guaranty Fund reserve
held by the Lender. The Cash Loan Guaranty Fund established with the Lender shall be invested in such a manner as shall be mutually
agreed upon among the Lender and the Borrower; and, in the event there shall be no agreement, then as shall be determined by the
Lender in its sole discretion. The Lender shall have sole access to the Cash Loan Guaranty Fund, provided, however, that the Lender
may use such funds solely to repay amounts owed under the Loan upon maturity of the Loan or while any Event of Default exists and
to apply such funds to other Liabilities as and when the same become due and payable. Any and all interest on the Cash Loan Guaranty
Fund shall be added to the Cash Loan Guaranty Fund and shall be property of the Borrower subject to the security interests granted
herein and, upon repayment in full of the Liabilities and the termination of this Agreement, such interest shall be paid to the
Borrower; provided, however, that at any time an Event of Default has occurred and continuing, the Borrower acknowledges and agrees
that such interest may be applied to the Liabilities by the Lender. The failure of Borrower to comply with the provisions of this
paragraph shall be considered an Event of Default and immediately entitle the Lender to any of the remedies provided in this Agreement.
Nothing in this Section shall mitigate, limit or otherwise affect any of the Borrower’s obligations under this Agreement.

 

    	 	- 29 -	 

     

    

 

7.            REPRESENTATIONS
AND WARRANTIES.

 

The Borrower represents
and warrants that as of the date of this Agreement, and continuing as long as any Liabilities remain outstanding, and (even if
there shall be no such Liabilities outstanding) as long as this Agreement remains in effect:

 

7.1           Existence.
The Borrower is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware.
The Borrower is duly qualified and in good standing as a foreign limited liability company authorized to do business in the State
of Texas and each jurisdiction where such qualification is required because of the nature of its activities or properties. The
Borrower has all requisite limited liability company power to carry on its business as now being conducted and as proposed to be
conducted.

 

7.2           Authority.
The execution and delivery by the Borrower of this Agreement and all of the other Financing Agreements to which Borrower is a party
and the performance of its obligations hereunder and thereunder: (i) are within its limited liability company powers; (ii) are
duly authorized by the manager of the Borrower and, if applicable, the member of the Borrower; and (iii) are not in contravention
of the terms of its limited liability company agreement, or of any indenture, agreement or undertaking to which it is a party or
by which it or any of its property is bound. The execution and delivery by the Borrower of this Agreement and all of the other
Financing Agreements to which it is a party and the performance of its obligations hereunder and thereunder: (i) do not require
any governmental consent, registration or approval; (ii) do not contravene any contractual or governmental restriction binding
upon it; and (iii) will not, except in favor of Lender, result in the imposition of any Lien upon any property of Borrower under
any existing indenture, mortgage, deed of trust, loan or credit agreement or other material agreement or instrument to which it
is a party or by which it or any of its property may be bound or affected.

 

7.3           Binding
Effect. This Agreement and all of the other Financing Agreements to which any Credit Party is a party are the legal, valid
and binding obligations of such Credit Party and are enforceable against such Credit Party in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor’s
rights and remedies generally.

 

    	 	- 30 -	 

     

    

  

7.4           Financial
Data.

 

(a)          All
income statements, balance sheets, cash flow statements, statements of operations, financial statements, and other financial data
which have been or shall hereafter be furnished to the Lender for the purposes of or in connection with this Agreement do and will
present fairly in all material respects in accordance with GAAP, consistently applied, the financial condition of the Credit Parties
and the Operating Company, as applicable, as of the dates thereof and the results of its operations for the period(s) covered thereby.

 

(b)          Since
December 31, 2016, there has been no Material Adverse Change with respect to any Credit Party or the Operating Company.

 

7.5           Collateral.
Except for the Permitted Liens, all of the Borrower’s assets and property (including, without limitation, the Collateral
and the Real Property) are and will continue to be owned by Borrower (except for items of inventory disposed of in the ordinary
course of business), have been or will be fully paid for, and are free and clear of all Liens. No financing statement or other
document similar in effect covering all or any part of the Collateral is on file in any recording or filing office, other than
those identifying the Lender as the secured creditor. The organizational number assigned by the State of Delaware upon Borrower’s
formation is 5200025.

 

7.6           Solvency.
Each Credit Party is solvent, is able to pay such Credit Party’s debts as they mature or become due, has capital sufficient
to carry on its business and all businesses in which it is about to engage, and now owns assets and property having a value both
at fair valuation and at present fair saleable value on a going concern basis (as determined in a manner and based upon assumptions
satisfactory to the Lender in its reasonable determination) greater than the amount required to pay all of its debts and liabilities,
including, without limitation, all of the Liabilities. No Credit Party will be rendered insolvent by the execution and delivery
of this Agreement or any Financing Agreement, or by completion of the transactions contemplated hereunder or thereunder.

 

7.7           Principal
Place of Business; State of Formation. The principal place of business and chief executive office of Borrower is located at
2 South Pointe Drive, Suite 100, Lake Forrest, California 92630. The books and records of the Borrower and all records of account
are located at the principal place of business and chief executive office of the Borrower. The Borrower’s state of formation
is the State of Delaware.

 

7.8           Other
Names. The Borrower has not used, and shall not hereafter use, any name (including, without limitation, any tradename, tradestyle,
assumed name, division name or any similar name) other than the name set forth in the introductory paragraph of this Agreement.

 

7.9           Tax
Liabilities. Each of each Credit Party and, to the Borrower’s knowledge, the Operating Company has filed all federal,
state and local tax reports and returns required by any law or regulation to be filed by it, except for extensions duly obtained
or except as permitted under Section 8.4, and has either duly paid all taxes, duties and charges indicated due on the basis
of such returns and reports, or made adequate provision for the payment thereof, and the assessment of any material amount of additional
taxes in excess of those paid and reported is not reasonably expected.

 

7.10         Loans.
Except as otherwise permitted by Section 9.2 hereof, Borrower is not obligated on any loans or other Indebtedness.

 

    	 	- 31 -	 

     

    

 

7.11         Margin
Securities. The use of the proceeds of the Loan and Borrower’s issuance of the Note will not directly or indirectly violate
or result in a violation of the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations U, T or X of the Board of Governors of the Federal Reserve System.
No Credit Party owns any margin securities and none of the Loan advanced hereunder will be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase
any margin securities or for any other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve System.

 

7.12         Subsidiaries.
The Borrower has no subsidiaries.

 

7.13         Litigation
and Proceedings. No judgments are outstanding against any Credit Party or, to the knowledge of Borrower, the Operating Company,
nor is there as of any such date pending or, to the Borrower’s knowledge, threatened, any litigation, suit, action, contested
claim, or federal, state or municipal governmental proceeding by or against any Credit Party or the Operating Company or any of
its property, in each case, involving an aggregate amount of One Hundred Thousand Dollars ($100,000) or more.

 

7.14         Other
Agreements. Neither any Credit Party, nor, to the Borrower’s knowledge, the Operating Company is in material default
under or in breach of any material agreement, contract, lease, or commitment to which it is a party or by which it is bound. The
Borrower does not know of any dispute regarding any agreement, contract, instrument, lease or commitment which could reasonably
be expected to have a Material Adverse Effect.

 

7.15         Compliance
with Laws and Regulations. The execution and delivery by Borrower of this Agreement and by each Credit Party of all of the
other Financing Agreements to which any Credit Party is a party and the performance of its obligations hereunder and thereunder
are not in contravention of any material law, rule or regulation, including, without limitation, Healthcare Laws. Each Credit Party
and, to the Borrower’s knowledge, the Operating Company and Hospital District, as applicable, has all licenses, authorizations,
approvals and permits necessary in connection with the operation of its business (including, without limitation, all certificates
needed for the Operating Company or the Hospital District, as applicable, to participate in the Medicare and Medicaid programs).
The Facility is operated as a skilled nursing facility and its licensed unit capacity is as set forth on Schedule 7.15.
The licenses, authorizations, permits and other approvals listed on Schedule 7.15 constitute all the licenses, authorizations,
permits and other approvals required by the Operating Company or the Hospital District, as applicable, to operate the Facility
at such licensed bed capacities. Each Credit Party and, to the Borrower’s knowledge, the Operating Company and Hospital District,
as applicable, has obtained all licenses, authorizations, approvals, licenses and permits necessary in connection with the operation
of its business, including, without limitation, licenses with respect to the Facility issued by the Texas Department of Aging and
Disability Services and designated as “Skilled Nursing Facility” and any additional designations required to operate
the Facility in the manner and for the purposes currently operated. All such licenses, authorizations, approvals and permits are
in full force and effect and each Credit Party shall keep such items in full force and effect during the term of this Agreement.
The Real Estate Lease shall at all times during the term of this Agreement require that the Operating Company or the Hospital District,
as applicable, keep such licenses, authorizations, approval and permits in full force and effect. Each Credit Party is in compliance
with all laws, orders, rules, regulations and ordinances of all federal, foreign, state and local governmental authorities applicable
to it and its business, operations, property, and assets, except to the extent any such non-compliance could not reasonably be
expected to result in a Material Adverse Effect. The Facility is not subject to any proceeding for revocation, suspension or issuance
of a probationary license or any certificate of need issued by any governmental authority and any Person succeeding to the functions
thereof, and there has not been instituted any Medicare or Medicaid termination action by such commission. Neither any Credit Party
nor, to the Borrower’s knowledge, the Operating Company has received any notice from any governmental authority that such
governmental authority has imposed or intends to impose any enforcement actions, fines or penalties for any failure or alleged
failure to comply with HIPAA.

 

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7.16         Intellectual
Property. No Credit Party owns or otherwise possess any registered patents, patent applications, copyrights, trademarks, trademark
applications, trade names, or service marks. To the Borrower’s knowledge, none of any Credit Party’s intellectual property
infringes on the rights of any other Person.

 

7.17         Environmental
Matters. Except as otherwise disclosed in the Environmental Reports (as defined in the Environmental Indemnity Agreement),
neither any Credit Party nor, to the knowledge of the Borrower, the Operating Company, has Managed Hazardous Substances on or off
its Property other than in compliance with Environmental Laws, except to the extent any such non-compliance could not reasonably
be expected to result in a Material Adverse Effect. Each Credit Party and, to the knowledge of Borrower, the Operating Company,
has complied in all material respects with Environmental Laws regarding transfer, construction on and operation of its business
at the Property, including, but not limited to, notifying authorities, observing restrictions on use, transferring, modifying or
obtaining permits, licenses, approvals and registrations, making required notices, certifications and submissions, complying with
financial liability requirements, Managing Hazardous Substances and Responding to the presence or Release of Hazardous Substances
connected with operation of its business or Property. Neither any Credit Party nor, to the knowledge of the Borrower, the Operating
Company, has any contingent liability with respect to the Management of any Hazardous Substance that could reasonably be expected
to result in a Material Adverse Effect. During the term of this Agreement, the Borrower shall not permit (and shall cause the Operating
Company not to permit) others to, Manage, whether on or off Borrower’s Property, Hazardous Substances. The Borrower shall
take prompt action in material compliance with Environmental Laws to Respond to the on-site or off-site Release of Hazardous Substances
connected with operation of its business or Property. Neither any Credit Party nor, to the knowledge of the Borrower, the Operating
Company, has received any Environmental Notice.

 

7.18         Disclosure.
None of the representations or warranties made by any Credit Party herein or in any Financing Agreement to which such Credit Party
is a party and no other written information provided by the Credit Parties or their respective representatives to the Lender contains
any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Borrower has disclosed to the Lender all facts of which the Borrower
has knowledge which at any time hereafter might result in a Material Adverse Effect.

 

    	 	- 33 -	 

     

    

 

7.19         Pension
Related Matters. If applicable, each employee pension plan (other than a multiemployer plan within the meaning of Section 3(37)
of ERISA and to which any Credit Party or any ERISA Affiliate has or had any obligation to contribute (a “Multiemployer
Plan”)) maintained by any Credit Party or any of their respective ERISA Affiliates to which Title IV of ERISA applies,
if any, and (a) which is maintained for employees of any Credit Party or any of their respective ERISA Affiliates or (b) to which
any Credit Party or any of their ERISA Affiliates made, or was required to make, contributions at any time within the preceding
five (5) years (a “Plan”), complies, and is administered in accordance, with its terms and all material applicable
requirements of ERISA and of the Internal Revenue Code of 1986, as amended, and any successor statute thereto (the “Tax
Code”), and with all material applicable rulings and regulations issued under the provisions of ERISA and the Tax Code
setting forth those requirements. No “Reportable Event” or “Prohibited Transaction” (as each is defined
in ERISA) or withdrawal from a Multiemployer Plan caused by any Credit Party has occurred and no funding deficiency described in
Section 302 of ERISA caused by any Credit Party exists with respect to any Plan or Multiemployer Plan which could have a Material
Adverse Effect. If and to the extent applicable, the Credit Parties and each ERISA Affiliate have satisfied all of their respective
funding standards applicable to such Plans and Multiemployer Plans under Section 302 of ERISA and Section 412 of the Tax Code and
the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA (“PBGC”)
has not instituted any proceedings, and there exists no event or condition caused by any Credit Party which would constitute grounds
for the institution of proceedings by PBGC, to terminate any Plan or Multiemployer Plan under Section 4042 of ERISA which could
have a Material Adverse Effect.

 

7.20         Perfected
Security Interests. The Lien in favor of the Lender provided pursuant to Section 6.1 hereof is a valid and, when properly
perfected by the timely filings, deliveries, notations and other actions contemplated by the Financing Agreements in the appropriate
jurisdictions, will constitute the first priority security interest in the Collateral (subject only to the Permitted Liens).

 

7.21         Real
Estate. As of the Closing Date, the Borrower owns or leases no Property other than the Real Property. The Borrower owns good
and marketable fee simple title to all of the Real Property. The Borrower has delivered true, correct and complete copies of the
fully-executed Real Estate Lease and all material instruments, agreements and documents entered into in connection therewith (including
all Exhibits and Schedules thereto) to the Lender on the Closing Date.

 

7.22         Ownership;
Consideration. Schedule 7.22 sets forth the correct legal name, jurisdiction of organization and, if applicable,
the organizational identification number assigned by the applicable jurisdiction of organization of the Credit Parties. The authorized
Capital Securities of each of the Credit Parties is as set forth on Schedule 7.22. All issued and outstanding Capital
Securities of each of the Credit Parties is duly authorized and validly issued, and if the Capital Securities of a corporate entity,
fully paid, nonassessable, and in each case is free and clear of all Liens other than those in favor of the Lender, and such Capital
Securities were issued in compliance with all applicable laws. The identity of the holders of the Capital Securities of each of
the Credit Parties and the percentage of their fully diluted ownership of the Capital Securities of each of the Credit Parties
as of the Closing Date is set forth on Schedule 7.22. As of the Closing Date there are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Credit
Party of any Capital Securities of any such entity.

 

    	 	- 34 -	 

     

    

 

7.23         Broker’s
Fees. No Credit Party has any obligation to any Person in respect of any finder’s, brokers or similar fee in connection
with the Loan or this Agreement.

 

7.24         Investment
Company Act. No Credit Party is an “investment company” or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.

 

7.25         Business
of Borrower. The sole business of the Borrower is to own the Real Property leased to the Operating Company and sub-leased to
the Hospital District while the Facility is subject to QIPP. The Borrower is not a party to any management agreement or similar
type of management contract, other than the Real Estate Lease.

 

7.26         Offenses
and Penalties Under the Medicare or Medicaid Program. Neither any Credit Party nor, to the Borrower’s knowledge, the
Operating Company and/or officers of such Credit Party or, to the Borrower’s knowledge, the Operating Company is currently
under investigation or prosecution for, nor has any Credit Party, or to the Borrower’s knowledge, the Operating Company or
any Affiliate or officer of such Person been convicted of: (a) any offense related to the delivery of an item or service under
the Medicare or Medicaid programs; (b) a criminal offense related to neglect or abuse of patients in connection with the delivery
of a health care item or service; (c) fraud, theft, embezzlement or other financial misconduct; (d) the obstruction of an investigation
of any crime referred to in subsections (a) through (c) of this Section; or (e) unlawful manufacture, distribution, prescription,
or dispensing of a controlled substance. Neither any Credit Party nor, to the Borrower’s knowledge, the Operating Company
and/or officers of such Credit Party or Operating Company have been required to pay any civil money penalty under applicable laws
regarding false, fraudulent or impermissible claims or payments to induce a reduction or limitation of health care services to
beneficiaries of any state or federal health care program, nor, is any such Credit Party, Operating Company or and/or officer of
such Person currently the subject of any investigation or proceeding that may result in such payment. Neither any Credit Party
nor the Operating Company and/or officers of such Credit Party or Operating Company have been excluded from participation in the
Medicare or Medicaid programs or any program funded under the “Block grants” to States for Social Services (Title XX)
Program.

 

7.27         Medicaid/Medicare.
Neither any Credit Party nor, to the Borrower’s knowledge, the Operating Company nor any officer or director of such Person
has engaged in any of the following: (a) knowingly and willfully making or causing to be made a false statement or representation
of a material fact in any application for any benefit or payment under Medicare or Medicaid; (b) knowingly and willfully making
or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or
payment under Medicare or Medicaid; (c) failing to disclose knowledge by a claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment under Medicare or Medicaid on its own behalf or on behalf of another, with
intent to secure such benefit or payment fraudulently; (d) knowingly and willfully soliciting or receiving any remuneration (including
any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay such remuneration:
(i) in return for referring any individual to a Person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part by Medicaid; or (ii) in return for purchasing, leasing or ordering or arranging
for or recommending the purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in
whole in part by Medicare or Medicaid.

 

    	 	- 35 -	 

     

    

 

7.28         Labor
Matters. There are no strikes or other labor disputes pending or, to the knowledge of Borrower, threatened against any Credit
Party. All payments due from any Credit Party on account of wages and employee and retiree health and welfare insurance and other
benefits have been paid or accrued as a liability on its books.

 

7.29         USA
Patriot Act; Absence of Foreign or Enemy Status. Neither any Credit Party nor any of its Affiliates is identified in any OFAC
List. Each Credit Party, and their respective Subsidiaries and Affiliates are in compliance with (a) the Trading with the
Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B
Chapter V, as amended) and any other enabling legislation or executive order relating thereto, (b) the Patriot Act and
(c) other federal or state laws relating to “know your customer” and anti-money laundering rules and regulations.
No part of the proceeds of any Loan will be used directly or indirectly for any payments to any government official or employee,
political party, official of a political party, candidate for political office, or anyone else acting in an official capacity,
in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended. Neither any Credit Party nor any Affiliate of such Credit Party is an “enemy” or
an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act (50 U.S.C. App. §§
1 et seq.), as amended. Neither any Credit Party nor any Affiliate of such Credit Party is in violation of, nor will the use of
the Loan violate, the Trading with the Enemy Act, as amended, or any executive orders, proclamations or regulations issued pursuant
thereto, including, without limitation, regulations administered by the Office of Foreign Asset Control of the Department of the
Treasury (31 C.F.R. Subtitle B, Chapter V).

 

8.             AFFIRMATIVE
COVENANTS.

 

The Borrower covenants and agrees that,
as long as any Liabilities remain outstanding, and (even if there shall be no such Liabilities outstanding) as long as this Agreement
remains in effect:

 

8.1           Reports,
Certificates and Other Information. The Borrower shall deliver or cause to be delivered to the Lender:

 

(a)          Monthly
Borrower and Operating Company Internally Prepared Financial Statements. On or before the thirtieth (30th) day after
the end of each month during the term of this Agreement (1) a copy of internally prepared financial statements of the Borrower
prepared in accordance with GAAP consisting of, at least, an income statement and a balance sheet for such month and for the period
from the beginning of such Fiscal Year to the close of such month and (2) a copy of internally prepared financial statements of
the Operating Company prepared in accordance with GAAP consisting of, at least, an income statement and a balance sheet as at the
close of such month and for the period from the beginning of such Fiscal Year to the close of such month.

 

    	 	- 36 -	 

     

    

 

(b)          Operating
Company Annual Financial Statements. On or before the one hundred twentieth (120th) day after (i) the Fiscal
Year ending December 31, 2017, financial statements of the operations of the Facility for such Fiscal Year, with a report of
agreed upon procedures delivered by independent certified public accountants selected reasonably acceptable by the Lender, together
with, at least, balance sheets and statements of income and cash flow for such period, prepared in conformity with GAAP and (ii)
each Fiscal Year ended thereafter, a copy of the annual audited financial statements for the Operating Company, prepared by independent
certified public accountants selected by the Borrower (and reasonably approved by the Lender), together with, at least, balance
sheets and statements of income and cash flow for such period, prepared in conformity with GAAP.

 

(c)          Reserved.

 

(d)          Monthly
Reports. On or before the thirtieth (30th) day after the end of each month, and without duplication of any reports
delivered pursuant to Section 8.1(a) above, copies of all financial statements for the Facility for the preceding calendar month
specific to the operations of Operating Company at the Facility as such financial statements are required under to be prepared
and delivered pursuant to the Real Estate Lease.1

 

(e)          Certificates.
Contemporaneously with the furnishing of each annual financial statement and within forty-five (45) calendar days of each Fiscal
Quarter commencing with the Fiscal Quarter ending June 30, 2018, a duly completed compliance certificate with appropriate insertions,
in form and substance reasonably satisfactory to the Lender (a “Compliance Certificate”), dated the date of
such annual financial statement or such Fiscal Quarter and signed on behalf of the Borrower by a Duly Authorized Person, which
Compliance Certificate shall state that no Default or Event of Default has occurred and is continuing, or, if there is any such
event, describes it and the steps, if any, being taken to cure it. In addition, each Compliance Certificate shall contain a computation
of, and show compliance with, the financial ratios and restrictions set forth in Section 9.12 hereof including, without
limitation, financial statements of the Facility necessary to determine compliance with Section 9.12(c) with respect thereto. The
computation and calculation of the financial ratios in each Compliance Certificate shall be in form and substance reasonably acceptable
to the Lender.

 

(f)          Real
Estate Taxes. As paid, evidence of timely payment of real estate taxes owed on the Real Property.

 

(g)          Tax
Returns. Promptly, and in any event no later than 10 days following the filing thereof, copies of all tax returns filed by
the Borrower.

 

 

1
NTD: To be retained to pick up any financial information delivered to Borrower under Section 5.3(a)(v).

 

    	 	- 37 -	 

     

    

 

(h)          Notice
of Default, Regulatory Matters, Litigation Matters or Adverse Change in Business. Promptly upon learning of the occurrence
of any of the following, written notice thereof which describes the same and the steps being taken by the Borrower with respect
thereto: (i) the occurrence of a Default or an Event of Default; (ii) except for actions described in clause (iv) below,
the institution or threatened institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental
proceeding in which any injunctive relief is sought or in which money damages in excess of One Hundred Thousand Dollars ($100,000)
in the aggregate are sought; (iii) the receipt of any written notice from any governmental agency concerning any material violation
or potential material violation of any regulations, rules or laws applicable to Borrower; (iv) the occurrence of any personal injury
or other action that is not covered by insurance (or if presumably covered by insurance, the applicable insurance company has not
confirmed coverage or liability for payment in writing) that could reasonably be expected to give rise to a tort claim against
the Borrower for an amount equal to or in excess of One Hundred Thousand Dollars ($100,000); or (v) any Material Adverse Change.

 

(i)          Insurance
Reports. (i) At any time after a Default and upon the request of the Lender, a certificate signed by a Duly Authorized
Person that summarizes the property, casualty, liability and malpractice insurance policies carried by the Borrower and that certifies
that the Lender is the named additional insured, lender’s loss payee and mortgagee, as applicable, with respect to all property
and casualty insurance policies (such certificate to be in form and substance satisfactory to the Lender), and (ii) written
notification of any material change in any such insurance by the Borrower within five (5) Business Days after receipt of any notice
(whether formal or informal) of such change by any of its insurers.

 

(j)          Interim
Reports. Promptly upon receipt thereof, copies of any management letters and interim and supplemental reports submitted to
any Credit Party by the independent accountants in connection with any interim audit of the books of Borrower and copies of each
management control letter provided to Borrower by independent accountants.

 

(k)          Affiliate
Transactions. Upon the Lender’s request from time to time, a reasonably detailed description of each of the transactions
between the Borrower and any of its Affiliates during the time period requested by the Lender, which shall include, without limitation,
the amount of money either paid or received, as applicable, by the Borrower in such transactions.

 

(l)          Annual
Budgets. As soon as available following the end of each Fiscal Year, but in any event not later than forty-five (45) days after
the end of each such Fiscal Year, an annual operating plan for the Facility for the following Fiscal Year, which (i) includes a
statement of all of the material assumptions on which such plan is based, (ii) includes monthly balance sheets, income statements
and statements of cash flows for the following year, (iii) integrates sales, gross profits, operating expenses, operating profit
and cash flow projections, and (iv) includes a description of estimated restructuring expenses to be incurred for the following
year, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of
cash flow projections, representing management’s good faith estimates of future financial performance based on historical
performance), and including plans for Capital Expenditures.

 

(m)          Lease
Reports. Promptly upon receipt, copies of any material reports or notifications required to be delivered by the Operating Company
to the Borrower pursuant to the terms of the Real Estate Lease, including, without limitation, annual financial statements of the
Operating Company, quarterly financial statements of the Operating Company and the other reports required under Section 5.3 of
the Real Estate Lease (and any other successor provisions).

 

    	 	- 38 -	 

     

    

 

(n)          Health
Care Reporting. Furnish to the Lender each of the following, to the extent applicable to the Operating Company or Facility:
(i) within three (3) Business Days of receipt by the Operating Company of Form 2567 from any Government Authority or any other
copy of any healthcare related licensure and annual or biannual certification survey report and any statement of deficiencies
and any survey (other than the annual or biannual survey) indicating a violation or deficiency with a scope and severity that
could be reasonably expected to adversely affect either the right to continue participation in Medicare, Medicaid or other reimbursement
programs for existing patients or the right to admit new Medicare patients, Medicaid patients or other reimbursement program patients
or result in the loss or suspension of the Operating Company’s licenses and permits to operate the Facility or the placement
of any Facility on the Special Focus Facility list of CMS, a copy of such certification survey report, statement of deficiency
or other survey, and within the time period required by the particular agency for submission, a copy of the plan of correction
with respect thereof if such plan of correction is required by such agency issuing the statement of deficiency or notice of violation,
and correct or cause to be corrected any such deficiency or violation within the time period required for cure by such agency;
(ii) to the extent not required in clause (i) above, within seven (7) Business Days
of receipt by any Operating Company of Form 2567 from any Government Authority or any other healthcare related licensure and annual
or biannual certification survey report and any statement of deficiencies and any survey (other than the annual or biannual survey)
indicating a violation or deficiency with a scope and severity above “G”, a copy of such certification survey
report, statement of deficiency or other survey, and within the time period required
by the particular agency for submission, a copy of the plan of correction with respect thereof if such plan of correction is required
by such agency issuing the statement of deficiency or notice of violation, and correct or cause to be corrected any such deficiency
or violation within the time period required for cure by such agency, subject to such agency’s normal appeal process, (1)
within five (5) Business Days of the receipt by the Borrower, any and all notices disclosing an adverse finding from any licensing,
certifying and/or reimbursement agencies that the Operating Company’s license, Medicare or Medicaid certification or entitlement
to payments pursuant to any program of such Operating Company is being downgraded to a substandard category, revoked, or suspended,
or that action is pending or being considered to downgrade to a substandard category, revoke, or suspend any rights pursuant to
the Borrower’s license, certification or program; and (iv) within ten (10) days of the date of the required filing of cost
reports of the Operating Company with Medicaid, Medicare or other applicable agency or pursuant to any program, or the date of
actual filing of such cost report of such Operating Company, whichever is earlier, a complete and accurate copy of the annual
Medicaid, Medicare and other cost reports for such Operating Company, which will be prepared by an independent certified public
accountant or by an experienced cost report preparer reasonably acceptable to Lender, and promptly furnish to Lender any amendments
filed with respect to such reports and all responses, audit reports or inquiries with respect to such reports.

 

(o)          Other
Information. Such other information, certificates, schedules, exhibits or documents (financial or otherwise) concerning the
Facility, the Credit Parties, the Operating Company and their respective operations, business, properties, condition or otherwise
as the Lender may reasonably request from time to time.

 

    	 	- 39 -	 

     

    

 

8.2           Inspection;
Audit Fees. Borrower will keep proper books of record and account in accordance with GAAP in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business and activities. The Lender, or any Person designated
by the Lender in writing from time to time, shall have the right: (a) from time to time hereafter (but no more than two (2) times
per calendar year prior to an Event of Default), to call and visit at the Borrower's place or places of business (or any other
place where the Collateral or any information relating thereto is kept or located) during ordinary business hours and, prior to
any Event of Default, upon reasonable advance notice (and after any Event of Default, at any time during normal business hours
without the requirement of any advance notice), (i) to inspect, audit, check and make copies of and extracts from the Borrower's
books, records, journals, orders, receipts and any correspondence and other data relating to its business or to any transactions
between the parties hereto, and (ii) to discuss the affairs, finances and business of the Credit Parties with any of the Duly Authorized
Persons, and (b) to make such verification concerning the Collateral as the Lender may consider reasonable under the circumstances.
The Borrower agrees to pay on demand all costs, expenses and reasonable fees incurred by Lender in connection with any inspections
or audits of the Borrower performed by the Lender under this Section. All such amounts incurred by the Lender hereunder shall bear
interest hereunder and shall be additional Liabilities of the Borrower to the Lender, secured by the Collateral, if not promptly
paid upon the request of the Lender.

 

8.3           Conduct
of Business. The Borrower shall maintain its limited liability company existence, shall maintain in full force and effect all
licenses, permits, authorizations, bonds, franchises, leases, patents, trademarks and other intellectual property, contracts and
other rights necessary to the conduct of its business, shall continue in, and limit its operations to, the same general line of
business as that currently conducted and shall comply with all applicable laws, orders, regulations and ordinances of all federal,
foreign, state and local governmental authorities, including, without limitation, Healthcare Laws, except to the extent any such
non-compliance could reasonably be expected to result in a Material Adverse Effect. The Borrower shall keep proper books of record
and account in which full and true entries will be made of all dealings or transactions of or in relation to the business and affairs
of the Borrower, in accordance with GAAP, consistently applied.

 

8.4           Claims
and Taxes. The Borrower agrees to indemnify and hold the Lender harmless from and against any and all claims, demands, liabilities,
losses, damages, penalties, costs and expenses (including, without limitation, reasonable attorneys’ fees) relating to or
in any way arising out of the possession, use, operation or control of the Borrower’s property and assets, including, without
limitation, the Collateral. The Borrower agrees to pay or cause to be paid all license fees, bonding premiums and related taxes
and charges and shall pay or cause to be paid all of the Borrower’s real and personal property taxes, including taxes with
respect to the Real Property, assessments and charges and all of the Borrower’s franchise, income, unemployment, use, excise,
old age benefit, withholding, sales and other taxes and other governmental charges assessed against the Borrower, or payable by
the Borrower, at such times and in such manner as to prevent any penalty from accruing or any Lien from attaching to its property,
provided that the Borrower shall have the right to contest in good faith, by an appropriate proceeding promptly initiated and diligently
conducted, the validity, amount or imposition of any such tax, assessment or charge, and upon such good faith contest to delay
or refuse payment thereof, if (a) the Borrower establishes adequate reserves to cover such contested taxes, assessments or charges,
and (b) such contest could not be expected to result in a Material Adverse Effect.

 

    	 	- 40 -	 

     

    

 

8.5           State
of Formation. The State of Delaware shall remain the Borrower’s State of formation, unless: (a) the Borrower provides
the Lender with at least thirty (30) days prior written notice of any proposed change, (b) no Event of Default then exists or will
exist immediately after such proposed change, and (c) the Borrower provides the Lender with, at Borrower’s sole cost and
expense, such financing statements, and if applicable, landlord waivers, bailee letters and processor letters, and such other agreements
and documents as the Lender shall reasonably request in connection therewith.

 

8.6           Liability
Insurance. The Borrower shall maintain or cause the Operating Company to maintain, at its expense, general liability insurance
and environmental liability insurance in such amounts and with such deductibles as are acceptable to the Lender in its reasonable
determination and shall deliver to the Lender the original (or a certified) copy of each policy of insurance and evidence of the
payment of all premiums therefor. In addition, the Borrower shall maintain, or cause the Operating Company to maintain, at its
expense, business interruption insurance in such amounts and with such deductibles as are acceptable to the Lender in its reasonable
determination and shall deliver to the Lender the original (or a certified) copy of each policy of insurance and evidence of the
payment of all premiums therefor. Such policies of insurance shall contain an endorsement showing the Lender as additional insured
thereunder and providing that the insurance company will give the Lender at least thirty (30) days prior written notice before
any such policy or policies of insurance shall be altered or canceled.

 

8.7           Property
Insurance. The Borrower shall, or shall cause the Operating Company, at its expense, to keep and maintain its assets insured
against loss or damage by fire, theft, explosion, spoilage, and all other hazards and risks ordinarily insured against by other
owners or users of such properties in similar businesses in an amount at least equal to the full insurable value of all such property.
All such policies of insurance shall be in form and substance reasonably satisfactory to the Lender. The Borrower shall deliver
to the Lender the original (or a certified) copy of each policy of insurance and evidence of payment of all premiums therefor.
Such policies of insurance shall contain an endorsement, in form and substance satisfactory to the Lender, showing the Lender as
“Lender’s Loss Payee” and all loss payable to the Lender, as its interests may appear, as provided in this Section
8.7. Such endorsement shall provide that such insurance company will give the Lender at least thirty (30) days prior written
notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of the Borrower
or any other Person shall affect the right of the Lender to recover under such policy or policies of insurance in case of loss
or damage. The Borrower hereby directs all insurers under such policies of insurance to pay all proceeds of insurance policies
directly to the Lender and the Lender shall absent an Event of Default permit the Borrower to use such proceeds to restore or rebuild
the damaged property as the Borrower shall determine in its reasonable and good faith determination. Upon the occurrence and during
the continuance of an Event of Default, the Borrower irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents designated by the Lender in writing to the Borrower) as the Borrower’s true and lawful attorney-in-fact
for the purpose of making, settling and adjusting claims under all such policies of insurance, endorsing the name of the Borrower
on any check, draft, instrument or other item of payment received by the Borrower or the Lender pursuant to any such policies of
insurance and for making all determinations and decisions with respect to such policies of insurance.

 

    	 	- 41 -	 

     

    

 

UNLESS THE BORROWER
PROVIDES THE LENDER WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT WITHIN FIVE BUSINESS DAYS FOLLOWING LENDER’S
WRITTEN REQUEST, THE LENDER MAY PURCHASE INSURANCE AT THE BORROWER’S EXPENSE TO PROTECT THE LENDER’S INTERESTS IN THE
COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE LENDER MAY
NOT PAY ANY CLAIMS THAT THE BORROWER MAKES OR ANY CLAIM THAT IS MADE AGAINST THE BORROWER IN CONNECTION WITH THE COLLATERAL. THE
BORROWER MAY LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE LENDER, BUT ONLY AFTER PROVIDING THE LENDER WITH EVIDENCE THAT THE
BORROWER HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE LENDER PURCHASES INSURANCE FOR THE COLLATERAL, THE BORROWER
WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE LENDER MAY IMPOSE IN CONNECTION
WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF
THE INSURANCE MAY BE ADDED TO THE OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE
THE BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.

 

8.8           Environmental.
The Borrower shall promptly notify and furnish Lender with a copy of any and all Environmental Notices which are received by it
or any Credit Party in connection with the Property. The Borrower shall or shall cause the Operating Company to take prompt and
appropriate action in response to any and all such Environmental Notices and shall promptly furnish Lender with a description of
the Borrower’s or such Credit Party’s Response thereto. The Borrower shall (a) obtain and maintain all permits required
under all applicable federal, state, and local Environmental Laws, except as to which the failure to obtain or maintain would not
have a Material Adverse Effect; and (b) keep and maintain the Property and each portion thereof in compliance with, and not cause
or permit the Property or any portion thereof to be in violation of, any Environmental Law, except as to which the failure to comply
with or the violation of which, would not have a Material Adverse Effect.

 

8.9           Banking
Relationship Generally; Rent Deposits. The Borrower shall at all times maintain all of its primary deposit and operating accounts
(other than payroll, tax and trust accounts) with the Lender and the Borrower shall cause all rent and other payments owed to it
by the Operating Company under the Real Estate Lease to be paid by the Operating Company directly into a designated lease deposit
account maintained with the Lender (the “Lease Deposit Account”). The Borrower shall use the Lender as the primary
cash management bank for all of its cash management activities (other than payroll, tax and trust accounts), including, without
limitation, the Lender acting as the principal depository and remittance agent for the Borrower.

 

    	 	- 42 -	 

     

    

 

8.10         Intellectual
Property. If after the Closing Date the Borrower shall own or otherwise possess any registered patents, copyrights, trademarks,
trade names, or service marks (or file an application to attempt to register any of the foregoing), the Borrower shall promptly
notify the Lender in writing of same and execute and deliver any documents or instruments (at the Borrower’s sole cost and
expense) reasonably required by Lender to perfect a security interest in and lien on any such federally registered intellectual
property in favor of the Lender and assist in the filing of such documents or instruments with the United States Patent and Trademark
Office and/or United States Copyright Office/Library of Congress or other applicable registrar.

 

8.11         Change
of Location; Etc. No Collateral may be moved to another location within the continental United States unless: (a) the Borrower
provides the Lender with at least thirty (30) days prior written notice, (b) no Event of Default then exists, and (c) the Borrower
provides the Lender with, at Borrower’s sole cost and expense, such financing statements, landlord waivers, bailee and processor
letters and other such agreements and documents as the Lender shall reasonably request. The Borrower shall or shall cause the Operating
Company to defend and protect the Collateral against and from all claims and demands of all Persons (other than the holders of
Permitted Liens) at any time claiming any interest therein adverse to the Lender. If the Borrower desires to change its principal
place of business and chief executive office, the Borrower shall notify the Lender thereof in writing no later than thirty (30)
days prior to such change and the Borrower shall provide the Lender with, at Borrower’s sole cost and expense, such financing
statements and other documents as the Lender shall reasonably request in connection with such change. If the Borrower shall decide
to change the location where its books and records are maintained, the Borrower shall notify the Lender thereof in writing no later
than thirty (30) days prior to such change.

 

8.12         Health
Care Related Matters. The Operating Company shall continue to be duly licensed by the State of Texas to operate the Facility
and shall otherwise maintain Medicare and Medicaid provider status. The Borrower shall cause the Operating Company to maintain
all licenses, permits, certificates of need, reimbursement contracts and programs, and any other agreements necessary for the use
and operation of the Facility or as may be necessary for participation of the Operating Company in Medicare and Medicaid and other
applicable reimbursement programs, to remain in full force and effect at all times. The Operating Company shall at all times maintain
in full force and effect a Medicare and Medicaid certification and a Medicare and Medicaid provider agreement. Each Credit Party
and the Operating Company shall at all times be in material compliance with all rules and regulations of the CMS and shall take
all necessary steps to protect personally identifiable health information for each patient substantially in accordance with the
CMS laws and regulations.

 

8.13         US
Patriot Act. Borrower covenants to Lender that if Borrower becomes aware that any Credit Party or their respective Affiliates
is identified on any Blocked Persons List (as identified in Section 7.29 hereof), Borrower shall immediately notify Lender
in writing of such information. Borrower further agrees that in the event that it or any Affiliate is at any time identified on
any Blocked Persons List, such event shall be an Event of Default, and shall entitle Lender to exercise any and all remedies provided
in any Financing Agreements or otherwise permitted by law. In addition, in response to any such notice Lender may immediately contact
the Office of Foreign Assets Control and any other government agency Lender deems appropriate in order to comply with its obligations
under any law, regulation, order or decree regulating or relating to terrorism and international money laundering.

 

    	 	- 43 -	 

     

    

 

8.14         Further
Assurances. The Borrower will, at its own cost and expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may from time to time be necessary or as the Lender may from time
to time reasonably request in order to carry out the intent and purposes of this Agreement and the other the Financing Agreements
and the transactions contemplated thereby, including all such actions to establish, create, preserve, protect and perfect a first-priority
Lien in favor of the Lender on the Collateral (including Collateral acquired after the date hereof), subject to Permitted Liens,
including, as set forth in Section 8.16 of this Agreement.

 

8.15         Single
Purpose Entity Provisions. The business and purposes of the Borrower is and will continue to be limited to the following:

 

(i)             to
acquire, own, hold, lease, operate, manage, maintain, develop and/or improve the Real Property;

 

(ii)           to
enter into and perform its obligations under the Financing Agreements;

 

(iii)          to
sell, transfer, service, convey, dispose of, pledge, assign, borrow money against, finance or otherwise deal with the Real Property
to the extent permitted hereunder and under the Financing Agreements;

 

(iv)          to
lease the Real Property to the Operating Company; and

 

(v)           to
engage in any lawful act or activity and to exercise any powers permitted to entities of its type pursuant to the laws of its state
of organization that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above mentioned
purposes.

 

The Borrower agrees
and covenants that it shall:

 

(i)            not
own any asset or property other than (A) a fee interest in the Real Property, and (B) incidental personal property necessary for
the ownership or operation of the Property;

 

(ii)           remain
solvent and pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets, to
the extent of its assets, as the same shall become due;

 

(iii)          do
or cause to be done all things necessary or desirable to observe organizational formalities of the Borrower and preserve its existence;
and

 

(iv)          to
the extent of cash flow available from operations, maintain adequate capital for the normal obligations reasonably foreseeable
in a business of its size and character and in light of its contemplated business operations.

 

9.             NEGATIVE
COVENANTS.

 

The Borrower covenants
and agrees that as long as any (other than contingent indemnification obligations) remain outstanding, and (even if there shall
be no such Liabilities outstanding) as long as this Agreement remains in effect (unless the Lender shall give its prior written
consent thereto):

 

    	 	- 44 -	 

     

    

  

9.1           Encumbrances.
The Borrower shall not create, incur, assume or suffer to exist any Lien of any nature whatsoever on any of its assets or property,
including, without limitation, the Collateral, other than the following (“Permitted Liens”): (a) Liens securing
the payment of taxes, either not yet due or the validity of which is being contested in good faith by appropriate proceedings,
and as to which the Borrower shall, if appropriate under GAAP, has set aside on its books and records adequate reserves, provided,
that such contest does not have a Material Adverse Effect; (b) deposits under workmen’s compensation, unemployment insurance,
social security and other similar laws; (c) Liens in favor of the Lender; (d) liens imposed by law, such as mechanics’, materialmen’s,
landlord’s, warehousemen’s, carriers’ and other similar liens, securing obligations incurred in the ordinary
course of business that are not past due for more than ten (10) Business Days or that are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established or that are not yet due and payable; and (e) purchase money
security interests upon or in any property acquired or held by the Borrower in the ordinary course of business to secure the purchase
price of such property so long as: (i) the aggregate indebtedness relating to such purchase money security interests and Capitalized
Lease Obligations does not at any time exceed Fifty Thousand Dollars ($50,000) in the aggregate at any time, (ii) each such lien
shall only attach to the property to be acquired; and (iii) the indebtedness incurred shall not exceed one hundred percent (100%)
of the purchase price of the item or items purchased.

 

9.2           Indebtedness.
Borrower shall not incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness,
except (a) the Liabilities, (b) the indebtedness not to at any time exceed Fifty Thousand Dollars ($50,000) relating to the purchase
money security interests and Capitalized Lease Obligations permitted pursuant to Section 9.1(e) hereof and (c) the Debt
to be Repaid (so long as such Indebtedness is repaid on the Closing Date with the proceeds of the initial Loans hereunder).

 

9.3           Consolidations,
Mergers or Acquisitions. Without the prior written consent of the Lender, the Borrower shall not be a party to any merger,
consolidation, or exchange of stock or other equity, or purchase or otherwise acquire all or substantially all of the assets or
stock of any class of, or any other evidence of an equity interest in, or any partnership, limited liability company, or joint
venture interest in, any other Person, or sell, transfer, convey or lease all or any substantial part of its assets or property,
or sell or assign, with or without recourse, any receivables. The Borrower shall not form or establish any subsidiary without the
Lender’s prior written consent.

 

9.4           Investments
or Loans. The Borrower shall not make, incur, assume or permit to exist any loans or advances, or any investments in or to
any other Person, except (a) investments in short-term direct obligations of the United States Government, (b) investments in negotiable
certificates of deposit issued by the Lender or by any other bank satisfactory to the Lender, payable to the order of the Borrower
or to bearer and (c) investments in commercial paper rated at least A-1 by Standard & Poor’s Corporation or P-1 by Moody’s
Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments.

 

    	 	- 45 -	 

     

    

 

9.5           Guarantees.
The Borrower shall not guarantee, endorse or otherwise in any way become or be responsible for obligations of any other Person,
whether by agreement to purchase the Indebtedness of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions, or by way of stock purchase, capital contribution,
advance or loan for the purpose of paying or discharging any Indebtedness or obligation of such other Person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of business.

 

9.6           Disposal
of Property. The Borrower shall not sell, assign, lease, transfer or otherwise dispose of any of its properties, assets and
rights to any Person except (i) sales of Inventory in the ordinary course of business, and (ii) sales of obsolete Equipment being
replaced in the ordinary course of business with other Equipment with a fair market value and orderly liquidation value equal to
or greater than the Equipment being replaced.

 

9.7           Use
of Proceeds. The Borrower shall not use the proceeds of the Loan and the Loan for any purpose other than (i) first, to repay
in full the Debt to be Repaid, and thereafter, (ii) to pay costs, fees, and expenses in connection with this Agreement, (iii) to
make the Closing Date Distribution and (iv) to the extent the Subsequent Draw is advanced pursuant to Section 2.1, to make the
Subsequent Draw Distribution.

 

9.8           Loans
to Officers; No Consulting and Management Fees. The Borrower shall not make any loans to its members, managers, officers, employees,
Affiliates, or to any other Person, and the Borrower shall not declare, make or pay any consulting, management fees, investment
banking fees, or similar fees or payments to its members, managers, officers, employees, agents, or Affiliates or any other Person,
whether for services rendered to the Borrower or otherwise.

 

9.9           Distributions
and Equity Redemptions. The Borrower shall not (i) declare, make or pay any dividend or other distribution (whether in cash,
property or rights or obligations) to or for the benefit of any officer, manager, member, Affiliate or any other Person or (ii)
purchase or redeem any of the membership interests or units of the Borrower or any options or warrants with respect thereto, or
set aside any funds for any such purpose; provided, however, that the Borrower may make (w) the Closing Date Distribution, (x)
to the extent the Subsequent Draw is made available pursuant to the terms hereof, the Subsequent Draw Distribution, (y) during
each Fiscal Quarter, distributions in cash to Parent in an amount estimated by the manager of the Borrower to equal the amount
necessary for the respective members of Parent to pay their actual state and United States federal income tax liabilities in respect
of income earned by the Borrower (the “Tax Liability Amount”); provided, however, that any such distributions
shall be net of any prior year loss carry-forward; provided, further that any distributions made to Parent as permitted under this
Section 9.9(y) during any Fiscal Year which exceed the actual Tax Liability Amount of the members of Parent as calculated at the
end of such Fiscal Year shall be contributed back to the Borrower by the Parent promptly, but in any event, within thirty (30)
days after the end of such Fiscal Year; and (z) distributions to Parent (and subsequent to Parent’s members) within forty-five
(45) days after the end of each Fiscal Quarter; provided that immediately before and after giving effect to any such distributions
(1) no Default or Event of Default has occurred and is continuing and (2) financial statements necessary to determine current compliance
with the financial covenants set forth in Section 9.12 of this Agreement have been delivered to Lender along with a true, correct
and complete copy of the Compliance Certificate required to be delivered for such Fiscal Quarter not less than ten (10) days prior
to any such distributions.

 

    	 	- 46 -	 

     

    

 

9.10         Payments
in Respect of Subordinated Debt. The Borrower shall not (i) make any payment in respect of any Indebtedness for borrowed money
that is subordinated to the Liabilities (including, without limitation, the Subordinated Debt, unless otherwise permitted expressly
under the terms of a subordination agreement in form and substance acceptable to the Lender) or (ii) permit Summit to accept any
payment in respect of the Summit Note unless and to the extent such payment is permitted under the terms of the Summit Note Subordination
Agreement.

 

9.11         Transactions
with Affiliates. Subject to the proviso contained in Sections 9.8 and 9.9 hereof, the Borrower shall not transfer
any cash or property to any Affiliate or enter into any transaction, including, without limitation, the purchase, lease, sale or
exchange of property or the rendering of any service to any Affiliate; provided, however, that the Borrower may enter
into transactions with Affiliates for fair value in the ordinary course of business pursuant to terms that are no less favorable
to the Borrower than the terms upon which such transfers or transactions would have been made had such transfers or transactions
been made to or with a Person that is not an Affiliate.

 

9.12         Financial
Ratios.

 

(a)          Minimum
EBITDAR. The Borrower shall not permit EBITDAR with respect to the Facility, measured on the last day of each Fiscal Quarter
for the trailing twelve (12) month period then ended, to be less than $1,750,000; provided, however, that for purposes of
(i) the Fiscal Quarter ending June 30, 2018, consolidated EBITDAR shall be tested on a trailing three month basis multiplied by
4, (ii) the Fiscal Quarter ending September 30, 2018, consolidated EBITDAR shall be tested on a trailing six month basis multiplied
by 2, (iii) the Fiscal Quarter ending December 31, 2018, consolidated EBITDAR shall be tested on a trailing nine month basis multiplied
by 1.33 and (iv) the Fiscal Quarter ending March 31, 2019 and each Fiscal Quarter thereafter, consolidated EBITDAR shall be tested
on a trailing twelve month basis.

 

(b)          Minimum
Fixed Charge Coverage Ratio. The Borrower shall not permit the Fixed Charge Coverage Ratio to be less than 1.05 to 1.00, measured
as of the last day of each Fiscal Quarter for the prior four fiscal quarters subject to adjustments to such measurement period
as set forth in the definition of Fixed Charge Coverage Ratio.

 

(c)          Acknowledgement.
The Borrower acknowledges and agrees that the calculation and computation of the foregoing financial ratios and covenants shall
be pursuant to and in accordance with Section 8.1 hereof and shall commence with the Fiscal Quarter ending June 30, 2018
and continue on each Fiscal Quarter ending thereafter.

 

9.13         Change
in Nature of Business. The Borrower shall not make any change in the nature of Borrower’s business carried on as of the
Closing Date. Without the prior written consent of the Lender, which may be granted or withheld in the Lender’ sole discretion,
the Borrower shall not permit any Person other than the Operating Company and the Management Company to operate or control the
Facility, whether by management agreement, joint venture agreement or otherwise.

 

    	 	- 47 -	 

     

    

 

9.14         Other
Agreements. The Borrower shall not enter into any agreement containing any provision which would be violated or breached by
the performance of its obligations hereunder or under any Financing Agreement to which Borrower is a party or which would violate
or breach any provision hereof or thereof, or that would or could reasonably be expected to adversely affect the Lender’s
interests or rights under this Agreement and the other Financing Agreements to which Borrower is a party or the likelihood that
the Liabilities will be paid in full when due, nor shall the Borrower’s limited liability company agreement be amended or
modified in any way that would violate or breach any provision hereof or of any Financing Agreement, or that would or could reasonably
be expected to adversely affect the Lender’s interests or rights under this Agreement and the other Financing Agreements
or the likelihood that the Liabilities will be paid in full when due; provided, prior to any amendment or modification of the Borrower’s
limited liability company agreement, the Borrower shall furnish a true, correct and complete copy of any such proposed amendment
or modification to the Lender.

 

9.15         Lock
Box Accounts. The Borrower shall not establish or open any lockbox or blocked account with any Person (other than the Lender)
after the Closing Date.

 

9.16         State
of Formation and Name. Except in accordance with Section 8.5 hereof, the Borrower shall not change its state of formation
from that of the State of Delaware or its name as identified in the Recitals hereto.

 

9.17         Environmental.
The Borrower shall not permit, or shall cause the Operating Company not to permit, any Property (including the Real Property) or
any portion thereof to be involved in the use, generation, manufacture, storage, disposal or transportation of Hazardous Substances
except in compliance with all Environmental Laws.

 

9.18         Real
Estate Lease and Management Agreement. The Borrower shall not amend, modify or supplement the Real Estate Lease or amend,
modify or supplement, or permit the Operating Company or Hospital District, as applicable, to amend, modify or supplement (i)
the Management Agreement or (ii) any QIPP Agreement, in each case in any manner that would or could be expected to adversely affect
the Lender’s interests under this Agreement or the other Financing Agreements, or the likelihood that the Liabilities will
be paid in full when due, without the Lender’s prior written consent. In any event, the Borrower shall provide the Lender
with fifteen (15) days’ written notice prior to entering into any non-adverse amendment, modification or supplement to the
Real Estate Lease, the Management Agreement or any QIPP Agreement allowed under this Section 9.18, which such notice shall indicate
a reasonably detailed description of such non-adverse amendment, modification or supplement.

 

9.19         Fiscal
Year. The Borrower shall not change its Fiscal Year.

 

9.20         Tax
Election. The Borrower shall not change its tax election with the Internal Revenue Service without the prior written consent
of the Lender.

 

    	 	- 48 -	 

     

    

 

9.21         Amendments
or Waivers. Without the prior written consent of the Lender, Borrower shall not permit (i) its organizational documents (e.g.,
charter, certificate or limited partnership agreement, or other similar organizational documents) or (ii) the Summit Note to be
amended or any provision thereof waived, the effect of which amendment or waiver could reasonably be expected to have a Material
Adverse Effect or otherwise be materially adverse to the to the rights and interests of the Lender.

 

10.         DEFAULT,
RIGHTS AND REMEDIES OF THE LENDER.

 

10.1         Event
of Default. Any one or more of the following shall constitute an “Event of Default” under this Agreement:

 

(a)          the
Borrower fails to pay (i) any principal or interest payable hereunder or under the Note on the date due, declared due or demanded
in accordance with the terms hereof, or (ii) any other cost, expense, fee or other amount payable to the Lender under this Agreement
or under any other Financing Agreement (including, without limitation, the Note) within three (3) calendar days after the date
when any such payment is due, declared due or demanded in accordance with the terms hereof;

 

(b)          the
Borrower fails or neglects to perform, keep or observe any of the covenants, conditions or agreements set forth in Sections
2.2, 8.1, 8.5, 8.6, 8.7, 8.9, 8.11, 8.12 or 8.l5 hereof, or any of the Sections of Article 9 hereof;

 

(c)          any
Credit Party fails or neglects to perform, keep or observe any of the covenants, conditions, promises or agreements contained in
this Agreement (other than those specified in Section 10.1(b) hereof) or in any Financing Agreement to which it is a party
and such failure or neglect shall continue for a period of twenty (20) calendar days;

 

(d)          any
representation or warranty heretofore, now or hereafter made by any Credit Party in this Agreement or any of the other Financing
Agreements is untrue, misleading or incorrect in any material respect, or any schedule, certificate, statement, report, financial
data, notice, or writing furnished at any time by any Credit Party to the Lender is untrue, misleading or incorrect in any material
respect, on the date as of which the facts set forth therein are stated or certified;

 

(e)          a
judgment, decree or order requiring payment in excess of One Hundred Thousand Dollars ($100,000) shall be rendered against any
Credit Party and such judgment or order shall remain unsatisfied or undischarged and in effect for thirty (30) consecutive days
without a stay of enforcement or execution, provided that this clause (e) shall not apply to any judgment for which such
Credit Party is fully insured and with respect to which the insurer has admitted liability;

 

(f)          a
notice of Lien, levy or assessment is filed or recorded with respect to any of the assets of any Credit Party (including, without
limitation, the Collateral), by the United States, or any department, agency or instrumentality thereof, or by any state, county,
municipality or other governmental agency or any taxes or debts owing at any time or times hereafter to any one or more of them
become a Lien, upon any of the assets of any Credit Party (including, without limitation, the Collateral), provided that this clause
(f) shall not apply to any Liens, levies, or assessments which a Credit Party is contesting in good faith (provided the Borrower
has complied with the provisions of clauses (a) and (b) of Section 8.4 hereof) or which relate to current
taxes not yet due and payable;

 

    	 	- 49 -	 

     

    

 

(g)          any
material portion of the Collateral or any portion of the Real Property is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors;

 

(h)          a
proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt or receivership law or statute
is filed against any Credit Party, and any such proceeding is not dismissed within forty-five (45) days of the date of its filing,
or a proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt or receivership law
or statute is filed by any Credit Party, or any Credit Party makes an assignment for the benefit of creditors, or any Credit Party
takes any action to authorize any of the foregoing;

 

(i)          any
Credit Party voluntarily or involuntarily dissolves or is dissolved, or its existence terminates or is terminated;

 

(j)          any
Credit Party becomes insolvent or fails generally to pay its debts as they become due;

 

(k)          any
Credit Party is enjoined, restrained, or in any way prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business affairs;

 

(l)          a
breach by any Credit Party shall occur under any material agreement, document or instrument (other than an agreement, document
or instrument evidencing the lending of money), whether heretofore, now or hereafter existing between the Borrower and any other
Person and the effect of such breach will or is could reasonably be expected to have or create a Material Adverse Effect;

 

(m)          any
Credit Party shall fail to make any payment due on any other obligation for borrowed money or shall be in breach of any agreement
evidencing the lending of money and the effect of such failure or breach would result in the acceleration of any obligation, liability
or indebtedness in excess of Fifty Thousand Dollars ($50,000); provided that the Credit Parties shall have fifteen (15) days to
contest in good faith such breach or purported breach as long as the Credit Parties have established an adequate reserve to cover
such amount and such contest is not reasonably likely to have or cause a Material Adverse Effect;

 

(n)          there
shall be instituted in any court criminal proceedings against any Credit Party, the Operating Company or their respective Affiliates,
or any Credit Party, the Operating Company or their respective Affiliates shall be indicted for any crime, in either case for which
forfeiture of a material amount of its property is a potential penalty, or any governmental enforcement action involving any criminal
penalties or exclusion from any federal or state health care program shall have been imposed against any such Persons;

 

    	 	- 50 -	 

     

    

 

(o)          a
Change of Control shall occur other than a Change of Control with respect to which the Lender has provided prior written consent,
such consent to be provided in the Lender’s sole discretion;

 

(p)          any
Lien securing the Liabilities shall, in whole or in part, cease to be a perfected first priority Lien (subject only to the Permitted
Liens); this Agreement, any of the Financing Agreements, shall (except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legally valid, binding and enforceable obligations of any Credit Party party thereto;
or any Credit Party shall directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability;

 

(q)          any
material breach of, noncompliance with or default under any Financing Agreement by any party thereto (other than by the Lender)
after expiration of any applicable notice and cure period;

 

(r)          institution
by the PBGC, a Credit Party or any ERISA Affiliate of steps to terminate any Plan or to organize, withdraw from or terminate a
Multiemployer Plan if as a result of such reorganization, withdrawal or termination, any Credit Party or any ERISA Affiliate could
be required to make a contribution to such Plan or Multiemployer Plan, or could incur a liability or obligation to such Plan or
Multiemployer Plan, in excess of One Hundred Thousand Dollars ($100,000), or (ii) a contribution failure occurs with respect to
any Plan sufficient to give rise to a lien under ERISA;

 

(s)          an
“event of default” or “default” shall occur under the Real Estate Lease, the Management Agreement or any
QIPP Agreement after the expiration of any applicable notice and cure period therein, if any, or the Real Estate Lease or the Management
Agreement shall terminate, or the Borrower shall cease to own the Real Property owned by the Borrower as of the Closing Date, or
a state or federal regulatory agency shall have revoked a Medicaid or Medicare qualification or any other license, permit or certificate
that is material to the operation of the Facility or any portion of the Real Property as currently conducted, regardless of whether
such license, permit, certificate or qualification was held by or originally issued for the benefit of the Borrower, a lessor or
any other Person, including the Operating Company;

 

(t)          except
as may be permitted under Section 9.13 hereof, the Management Agreement shall be terminated or assigned by the Management Company
or the Management Company (or its subsidiaries or affiliates) shall cease to actively manage the Facility;

 

(u)          a
Material Adverse Change shall occur;

 

(v)         (1)
there shall occur with respect to the Facility any Medicare or Medicaid survey deficiencies at Level I, J, K, L or worse (i) which
deficiencies are not cured within the amount of time permitted by the applicable reviewing agency; (ii) which result in the imposition
by any Government Authority or the applicable state survey agency of sanctions in the form of either a program termination, temporary
management, “Denial of Payment” (or similar denial) for new admission or otherwise (which continues for thirty (30)
days or more) and/or closure of the Facility and (iii) which sanctions could have a Material Adverse Effect as determined by Lender
in its reasonable discretion or (2) the Facility is otherwise placed on the “Special Focus Facility” list by CMS or
any other Government Authority; and/or

 

    	 	- 51 -	 

     

    

 

(w)          any
subordination provision in the Summit Note Subordination Agreement shall cease to be in full force and effect, or any Person (including
the holder of the Summit Note) shall contest in any manner the validity, binding nature or enforceability of any such provision.

 

10.2         Acceleration.
Upon the occurrence of any Event of Default described in Sections 10.1(h), (i), or (j), the Commitment (if they have not
theretofore terminated) shall automatically and immediately terminate and all of the Liabilities shall immediately and automatically,
without presentment, demand, protest or notice of any kind (all of which are hereby expressly waived), be immediately due and payable;
and upon the occurrence and during the continuance of any other Event of Default, the Lender may at its sole option declare the
Commitment (if they have not theretofore terminated) to be terminated and any or all of the Liabilities may, at the sole option
of the Lender, and without presentment, demand, protest or notice of any kind (all of which are hereby expressly waived), be declared,
and thereupon shall become, immediately due and payable, whereupon the Commitment shall immediately terminate.

 

10.3         Rights
and Remedies Generally. Upon the occurrence and during the continuance of any Event of Default, the Lender shall have, in addition
to any other rights and remedies contained in this Agreement and in any of the other Financing Agreements, all of the rights and
remedies of a secured party under the Code or other applicable laws, all of which rights and remedies shall be cumulative, and
non-exclusive, to the extent permitted by law, including, without limitation, the right of Lender to sell, assign, or lease any
or all of the Collateral or the Real Property. Upon notice to Borrower after an Event of Default and during the continuance thereof,
Borrower at its own expense shall assemble all or any part of the Collateral as determined by Lender and make it available to Lender
at any location designated by Lender. In such event, Borrower shall, at its sole cost and expense, store and keep any Collateral
so assembled at such location pending further action by Lender and provide such security guards and maintenance services as shall
be necessary to protect and preserve such Collateral. In addition to all such rights and remedies, the sale, lease or other disposition
of the Collateral, or any part thereof, by the Lender after an Event of Default and during the continuance thereof may be for cash,
credit or any combination thereof, and the Lender may purchase all or any part of the Collateral at public or, if permitted by
law, private sale, and in lieu of actual payment of such purchase price, may set-off the amount of such purchase price against
the Liabilities of the Borrower then owing. Any sales of such Collateral may be adjourned from time to time with or without notice.
The Lender may, in its sole discretion, cause the Collateral to remain on the Borrower’s premises, at the Borrower’s
expense, pending sale or other disposition of such Collateral. The Lender shall have the right after an Event of Default and during
the continuance thereof to conduct such sales on the Borrower’s premises, at the Borrower’s expense, or elsewhere,
on such occasion or occasions as the Lender may see fit.

 

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10.4         Entry
Upon Premises and Access to Information. Upon the occurrence and during the continuance of any Event of Default, the Lender
shall have the right to enter upon the premises of the Borrower where the Collateral is located without any obligation to pay rent
to the Borrower, or any other place or places where such Collateral is believed to be located and kept, and remove such Collateral
therefrom to the premises of the Lender or any agent of the Lender, for such time as the Lender may desire, in order to effectively
collect or liquidate such Collateral. Upon the occurrence and during the continuance of any Event of Default, the Lender shall
have the right to obtain access to the Borrower’s data processing equipment, computer hardware and software relating to the
Collateral and to use all of the foregoing and the information contained therein in any manner the Lender deems appropriate. Upon
the occurrence and during the continuance of any Event of Default, the Lender shall have the right to notify post office authorities
to change the address for delivery of the Borrower’s mail to an address designated by the Lender and to receive, open and
process all mail addressed to the Borrower to the extent such mail is in connection with accounts receivable collections provided
that such action does not violate any of the Operating Company’s residents’ rights to privacy under applicable law.

 

10.5         Sale
or Other Disposition of Collateral by the Lender. Any notice required to be given by the Lender of a sale, lease or other disposition
or other intended action by the Lender, with respect to any of the Collateral or the Real Property, which is deposited in the United
States mails, postage prepaid and duly addressed to the Borrower at the address specified in Section 11.12 hereof, at least
ten (10) calendar days prior to such proposed action shall constitute fair and reasonable notice to the Borrower of any such action.
The net proceeds realized by the Lender upon any such sale or other disposition, after deduction for the expense of retaking, holding,
preparing for sale, selling or the like and the attorneys’ and paralegal’ fees and legal expenses incurred by the Lender
in connection therewith, shall be applied as provided herein toward satisfaction of the Liabilities, including, without limitation,
such Liabilities described in Sections 8.2 and 11.2 hereof. The Lender shall account to the Borrower for any surplus
realized upon such sale or other disposition, and the Borrower shall remain liable for any deficiency. The commencement of any
action, legal or equitable, or the rendering of any judgment or decree for any deficiency shall not affect the Lender’s Liens
in the Collateral until the Liabilities are fully paid. The Borrower agrees that the Lender has no obligation to preserve rights
to the Collateral against any other Person. If and to the extent applicable, the Lender is hereby granted a license or other right
to use, without charge, the Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names,
tradestyles, trademarks, service marks and advertising matter or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale and selling any such Collateral or the Real Property, and the Borrower’s
rights and benefits under all licenses and franchise agreements, if any, shall inure to the Lender’s benefit until the Liabilities
of the Borrower are paid in full.

 

10.6         Waiver
of Demand. Demand, presentment, protest and notice of nonpayment are hereby waived by the Borrower. The Borrower also waives
the benefit of all valuation, appraisal and exemption laws.

 

10.7         Waiver
of Notice. TO THE FULLEST EXTENT PERMITTED BY LAW, UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, THE
BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE LENDER OF ITS RIGHTS TO REPOSSESS
THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.

 

    	 	- 53 -	 

     

    

  

11.          MISCELLANEOUS.

 

11.1         Waiver.
The Lender’s failure, at any time or times hereafter, to require strict performance by any Credit Party of any provision
of this Agreement or the Financing Agreements shall not waive, affect or diminish any right of the Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by the Lender of an Event of Default under this Agreement
or a default under any of the other Financing Agreements shall not suspend, waive or affect any other Event of Default under this
Agreement or any other default under any of the other Financing Agreements, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. None of the undertakings, agreements, warranties, covenants and representations
of the Credit Parties contained in this Agreement or any of the other Financing Agreements and no Event of Default under this Agreement
or default under any of the other Financing Agreements shall be deemed to have been suspended or waived by the Lender unless such
suspension or waiver is in writing signed by an officer of the Lender, and directed to the Borrower specifying such suspension
or waiver.

 

11.2         Costs
and Attorneys’ Fees.

 

(a)          The
Borrower agrees to pay on demand all of the costs and expenses of the Lender (including, without limitation, the reasonable fees
and expenses of the Lender’s counsel, and all UCC filing and lien search fees, and, if applicable, real estate appraisal
fees, survey fees, recording, field examination (with such field examination being subject to Section 8.2) and title insurance
costs, and any environmental report or analysis) in connection with the structuring, preparation, negotiation, execution, and delivery
of: (i) this Agreement, the Financing Agreements and all other instruments, agreements, certificates or documents provided for
herein or delivered or to be delivered hereunder, and (ii) any and all amendments, modifications, supplements and waivers executed
and delivered pursuant hereto or any Financing Agreement or in connection herewith or therewith. The Borrower further agrees that
the Lender, in its sole discretion, may deduct all such unpaid amounts from the aggregate proceeds of the Loan or debit such amounts
from the operating accounts of the Borrower maintained with the Lender.

 

(b)          The
costs and expenses that the Lender incurs in any manner or way with respect to the following shall be part of the Liabilities,
payable by the Borrower on demand if at any time after the date of this Agreement the Lender: (i) employs counsel in good faith
for advice or other representation (A) with respect to the amendment, modification or enforcement of this Agreement or the
Financing Agreements, or with respect to any Collateral securing the Liabilities hereunder, (B) to represent the Lender in
any work-out or any type of restructuring of the Liabilities, or any litigation, contest, dispute, suit or proceeding or to commence,
defend or intervene or to take any other action in or with respect to any litigation, contest, dispute, suit or proceeding (whether
instituted by the Lender, the Borrower or any other Person) in any way or respect relating to this Agreement, the Financing Agreements,
the Borrower’s affairs or any Collateral hereunder or (C) to enforce any of the rights of the Lender with respect to
the Borrower provided in this Agreement, under any of the Financing Agreements, or otherwise (whether at law or in equity); (ii)
takes any action to protect, preserve, store, ship, appraise, prepare for sale, collect, sell, liquidate or otherwise dispose of
any Collateral in accordance with the terms hereunder; and/or (iii) seeks to enforce or enforces any of the rights and remedies
of the Lender with respect to the Borrower or any guarantor of the Liabilities. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees include: reasonable fees, costs and expenses of attorneys, accountants and consultants;
court costs and expenses; court reporter fees, costs and expenses; long distance telephone charges; reasonable travel costs; and
courier and telecopier charges.

 

    	 	- 54 -	 

     

    

 

(c)          The
Borrower further agrees to pay, and to save the Lender harmless from all liability for, any documentary stamp tax, intangible tax,
or other stamp tax or taxes of any kind which may be payable in connection with or related to the execution or delivery of this
Agreement, the Financing Agreements, the borrowings hereunder, the issuance of the Note or of any other instruments, agreements,
certificates or documents provided for herein or delivered or to be delivered hereunder or in connection herewith, provided that
the Borrower shall not be liable for Lender’s income tax liabilities.

 

(d)          All
of the Borrower’s obligations provided for in this Section 11.2 shall be Liabilities secured by the Collateral and
the Real Property and shall survive repayment of the Loan or any termination of this Agreement or any Financing Agreements.

 

11.3         Expenditures
by the Lender. In the event the Borrower shall fail to pay taxes, insurance, audit fees and expenses, filing, recording and
search fees, assessments, fees, costs or expenses which the Borrower is, under any of the terms hereof or of any of the other Financing
Agreements, required to pay, or fails to keep the Collateral free from other Liens, except as permitted herein, the Lender may,
in its sole discretion, pay or make expenditures for any or all of such purposes, and the amounts so expended, together with interest
thereon at the Default Rate (from the date the obligation or liability of Borrower is charged or incurred until actually paid in
full to Lender) and shall be part of the Liabilities of the Borrower, payable on demand and secured by the Collateral.

 

11.4         Custody
and Preservation of Collateral. The Lender shall be deemed to have exercised reasonable care in the custody and preservation
of any of the Collateral in its possession if it takes such action for that purpose as the Borrower shall request in writing, but
failure by the Lender to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and
no failure by the Lender to preserve or protect any right with respect to such Collateral against prior parties, or to do any act
with respect to the preservation of such Collateral not so requested by a Borrower, shall of itself be deemed a failure to exercise
reasonable care in the custody or preservation of such Collateral.

 

11.5         Reliance
by the Lender. The Borrower acknowledges that the Lender, in entering into this Agreement and agreeing to make the Loan and
otherwise extend credit to the Borrower hereunder, has relied upon the accuracy of the covenants, agreements, representations and
warranties made herein by the Borrower and the information delivered by the Borrower to the Lender in connection herewith (including,
without limitation, all financial information and data).

 

11.6         Assignability;
Parties. This Agreement (including, without limitation, any and all of the Borrower’s rights, obligations and liabilities
hereunder) may not be assigned by the Borrower without the prior written consent of the Lender. Whenever in this Agreement there
is reference made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to
the successors and permitted assigns of the Borrower and the successors and assigns of the Lender.

 

    	 	- 55 -	 

     

    

 

11.7         Severability;
Construction. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement. The parties hereto have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement.

 

11.8         Application
of Payments. Notwithstanding any contrary provision contained in this Agreement or in any of the other Financing Agreements,
after the occurrence and during the continuance of an Event of Default the Borrower irrevocably waives the right to direct the
application of any and all payments at any time or times hereafter received by the Lender from the Borrower or with respect to
any of the Collateral, and the Borrower does hereby irrevocably agree that the Lender shall have the continuing exclusive right
to apply and reapply any and all payments received at any time or times hereafter, whether with respect to the Collateral or otherwise:
(i) first, to the payment and satisfaction of all sums paid and costs and expenses incurred by the Lender hereunder or otherwise
in connection herewith, including such monies paid or incurred in connection with protecting, preserving or realizing upon the
Collateral or enforcing any of the terms hereof, including reasonable attorneys’ fees and court costs, together with any
interest thereon (but without preference or priority of principal over interest or of interest over principal); (ii) second, to
the payment and satisfaction of the remaining Liabilities, whether or not then due (in whatever order the Lender elects), both
for interest and principal; and (iii) last, the balance, if any, after all of the Liabilities have been indefeasibly paid in full,
to the Borrower or as otherwise required by applicable law.

 

11.9         Marshalling;
Payments Set Aside. The Lender shall be under no obligation to marshall any assets in favor of the Borrower or any other Person
or against or in payment of any or all of the Liabilities. To the extent that the Borrower makes a payment or payments to the Lender
or the Lender enforces its Liens or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement
or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required
to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall automatically
be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

11.10       Sections
and Titles; UCC Termination Statements. The sections and titles contained in this Agreement shall be without substantive meaning
or content of any kind whatsoever and are not a part of the agreement between the parties hereto. At such time as all of the Liabilities
shall have been indefeasibly paid in full and this Agreement shall terminate in accordance with its terms, the Lender will, upon
Borrower’s written request and at the Borrower’s cost and expense, authorize the filing of all UCC termination statements
required by the Borrower to evidence the termination of the Liens in the Collateral in favor of the Lender and the Lender will
sign a customary payoff letter that evidences the termination of the grant of the security interest in its favor by the Borrower
as provided pursuant to Section 6.1 hereof.

 

    	 	- 56 -	 

     

    

 

11.11        Continuing
Effect; Inconsistency. This Agreement, the Lender’s Liens in the Collateral, and all of the other Financing Agreements
shall continue in full force and effect so long as any Liabilities shall be owed to the Lender, and (even if there shall be no
such Liabilities outstanding) so long as this Agreement has not been terminated as provided in Section 2.8 hereof. To the
extent any terms or provisions contained in any Financing Agreement are inconsistent or conflict with the terms and provisions
of this Agreement, the terms and provisions of this Agreement shall control and govern.

 

11.12        Notices.
Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered hereunder shall
be in writing, and shall be deemed to have been validly served, given or delivered upon the earlier of (a) personal delivery to
the address set forth below, (b) in the case of facsimile transmission, when transmitted and (c) in the case of mailed notice,
five (5) days after deposit in the United States mails, with proper postage for certified mail, return receipt requested, prepaid,
or in the case of notice by Federal Express or other reputable overnight courier service, one (1) Business Day after delivery to
such courier service; provided, however, that if any notice is tendered to an addressee and delivery thereof is refused by such
addressee, such notice shall be effective upon such tender unless expressly set forth in such notice. Notices to be provided pursuant
to this Agreement shall be as follows: (i) If to the Lender at: CIBC Bank USA, 120 S. LaSalle St., Chicago, Illinois 60603; Attention:
Adam D. Panos; Telephone No. (312) 564-1278; Facsimile No. (312) 564-6889; with a copy to: c/o Nixon Peabody LLP, 70 W. Madison,
Suite 3500, Chicago, Illinois, 60602; Attention: Daniel P. Strzalka, Esq.; Telephone No. (312) 977-4341; Facsimile No. (312) 977-4405;
(ii) If to any Borrower at: c/o Summit Healthcare REIT, Inc., a Maryland corporation, 2 South Pointe Drive, Suite 100, Lake Forrest,
CA 92630.  Telephone: (949) 535-1923, Facsimile: (949) 812-8173; with a copy to: Hanson Bridgett, LLP, 425 Market Street,
26th Floor, San Francisco, California, 94105, Attention: Jennifer Berland, Telephone No. (415) 995-5837; Facsimile No.
(415) 995-3409; or to such other address as each party designates to the other in the manner herein prescribed.

 

11.13        Equitable
Relief. The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be inadequate relief to the Lender; therefore, the Borrower
agrees that the Lender, if the Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.

 

11.14        Entire
Agreement. This Agreement, together with the Financing Agreements executed in connection herewith, constitutes the entire agreement
among the parties with respect to the subject matter hereof, and supersedes all prior written or oral understandings, discussions
and agreements with respect thereto (including, without limitation, any term sheet or commitment letter). This Agreement may be
amended or modified only by mutual agreement of the parties evidenced in writing and signed by the party to be charged therewith.
Time is of the essence hereof with respect to the Borrower’s obligations hereunder. The Recitals hereto are hereby incorporated
into this Agreement by this reference thereto.

 

    	 	- 57 -	 

     

    

 

11.15        Participations
and Assignments. The Lender shall have the right, without the consent of the Borrower, to sell participations in, or assignments
of, all or any portion of its rights and interest under this Agreement, the Liabilities and any of the Financing Agreements. The
Lender may furnish any information concerning the Borrower in the possession of the Lender from time to time to participants (including
prospective participants) provided that such Person agrees to comply with Section 11.21. In addition and without limiting
the foregoing, Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement
to secure obligations of Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section
shall not apply to any such pledge or assignment of a security interest.

 

11.16        Indemnity.
The Borrower agrees to defend, protect, indemnify and hold harmless the Lender and each and all of its officers, directors, employees,
attorneys, affiliates, and agents (“Indemnified Parties”) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel for the Indemnified Parties in connection with
any investigative, administrative or judicial proceeding, whether or not the Indemnified Parties shall be designated by a party
thereto, or otherwise), which may be imposed on, incurred by, or asserted against any Indemnified Party (whether direct, indirect
or consequential, and whether based on any federal or state laws or other statutory regulations, including, without limitation,
securities, environmental and commercial laws and regulations, under common law or at equitable cause, or on contract or otherwise)
in any manner relating to or arising out of this Agreement or the other Financing Agreements, or any act, event or transaction
related or attendant thereto, the making and the management of the Loan (including, without limitation, any liability under federal,
state or local environmental laws or regulations) or the use or intended use of the proceeds of the Loan hereunder; provided,
that the Borrower shall not have any obligation to any Indemnified Party hereunder with respect to matters caused by or resulting
from the willful misconduct or gross negligence of such Indemnified Party. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy,
the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all matters incurred by the Indemnified Parties. Any liability, obligation, loss, damage, penalty, cost or
expense incurred by the Indemnified Parties shall be paid to the Indemnified Parties on demand, together with interest thereon
at the Default Rate from the date incurred by the Indemnified Parties until paid by the Borrower, be added to the Liabilities,
and be secured by the Collateral and the Real Property. The provisions of and undertakings and indemnifications set out in this
Section 11.16 shall survive the satisfaction and payment of the Liabilities of the Borrower and the termination of this
Agreement.

 

11.17       Representations
and Warranties. Notwithstanding anything to the contrary contained herein, each representation or warranty contained in this
Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and the other Financing
Agreements and the making of the Loan and the repayment of the Liabilities hereunder.

 

    	 	- 58 -	 

     

    

 

11.18       Counterparts;
Faxes. This Agreement and any amendment or supplement hereto or any waiver granted in connection herewith may be executed in
any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute but one and the same Agreement. A signature hereto sent or delivered
by facsimile or other electronic transmission shall be as legally binding and enforceable as a signed original for all purposes.

 

11.19       Limitation
of Liability of Lender. It is hereby expressly agreed that:

 

(a)          Lender
may conclusively rely and shall be protected in acting or refraining from acting upon any document, instrument, certificate, instruction
or signature believed to be genuine and may assume and shall be protected in assuming that any Person purporting to give any notice
or instructions in connection with any transaction to which this Agreement relates has been duly authorized to do so. Lender shall
not be obligated to make any inquiry as to the authority, capacity, existence or identity of any Person purporting to have executed
any such document or instrument or have made any such signature or purporting to give any such notice or instructions;

 

(b)          Lender
shall not be liable for any acts, omissions, errors of judgment or mistakes of fact or law, including, without limitation, acts,
omissions, errors or mistakes with respect to the Collateral, except for those arising out of or in connection with Lender’s
gross negligence or willful misconduct. Without limiting the generality of the foregoing, except as required by applicable law,
Lender shall be under no obligation to take any steps necessary to preserve rights in the Collateral against any other parties,
but may do so at its option, and all expenses incurred in connection therewith shall be payable by Borrower; and

 

(c)          Lender
shall not be liable for any action taken in good faith and believed to be authorized or within the rights or powers conferred by
this Agreement and the other Financing Agreements.

 

11.20        Borrower
Authorizing Accounting Firm. Borrower shall authorize its accounting firm and/or service bureaus to provide Lender with such
information as is requested by Lender in accordance with this Agreement. Borrower authorizes Lender upon prior written notice to
the Borrower to, at any time while a Default or Event of Default exists or, if a Default or Event of Default does not exist, upon
prior written consent of the Borrower, contact directly any such accounting firm and/or service bureaus to obtain such information.

 

11.21        Confidentiality.
Lender shall hold all non-public information regarding the Borrower and obtained by Lender pursuant hereto confidential and shall
not disclose any such information, except that disclosure of such information may be made (i) to Lender’s agents, employees,
subsidiaries, Affiliates, attorneys, auditors, professional consultants, rating agencies, insurance industry associations and portfolio
management services, (ii) to prospective transferees or purchasers of any interest in the Loan or Liabilities, and to prospective
contractual counterparties (or the professional advisors thereto) in any Interest Rate Protection Agreement permitted hereby, provided
that any such Persons shall have agreed to be bound by the provisions of this Section 11.21, (iii) as required by law, subpoena,
judicial order or similar order and in connection with any litigation, investigation or proceeding, (iv) as may be required in
connection with the examination, audit or similar investigation of such Person and (v) to a Person that is a trustee, investment
advisor, collateral manager, servicer, noteholder or secured party in a Securitization (as hereinafter defined) in connection with
the administration, servicing and reporting on the assets serving as collateral for such Securitization. For the purposes of this
Section, “Securitization” shall mean a public or private offering by Lender or any of its Affiliates or their respective
successors and assigns, of securities which represent an interest in, or which are collateralized, in whole or in party, by the
Loan. Confidential information shall not include information that either: (i) is in the public domain, or becomes part of the public
domain after disclosure to such Person through no fault of such Person, or (ii) is disclosed to such Person by a Person other than
the Borrower or an Affiliate of Borrower (or Borrower’s accountants, attorneys or other advisors or agents), provided Lender
does not have actual knowledge that such Person is prohibited from disclosing such information. The obligations of Lender under
this Section 11.21 shall supersede and replace the obligations of Lender under any confidentiality agreement in respect
of this financing executed and delivered by Lender prior to the date hereof.

 

    	 	- 59 -	 

     

    

  

11.22      Customer
Identification - USA Patriot Act Notice; Compliance with Anti-Terrorism Orders.
The Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56,
signed into law October 26, 2001) (the “Patriot Act”), and the Lender’s policies and practices, the Lender
is required to obtain, verify and record certain information and documentation that identifies the Borrower, which information
includes the name and address of the Borrower and such other information that will allow the Lender to identify the Borrower in
accordance with the Patriot Act. In addition, Borrower shall (a) ensure that no Person who owns a controlling interest in or otherwise
controls Borrower is or shall be listed on the OFAC Lists, (b) not use or permit the use of the proceeds of the Loan to violate
any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply
with all applicable Bank Secrecy Act laws and regulations, as amended. Borrower shall not permit the transfer of any interest
in Borrower to any Person (or any beneficial owner of such entity) who is listed on the OFAC Lists. Borrower shall not knowingly
enter into a lease with any party who is listed on the OFAC Lists. Borrower shall immediately notify the Lender if Borrower has
knowledge that any other Credit Party, manager or any member or beneficial owner of a Credit Party is listed on the OFAC Lists
or (i) is indicted on or (ii) arraigned and held over on charges involving money laundering or predicate crimes to money laundering.
Borrower shall immediately notify the Lender if Borrower knows that any of their Affiliates is listed on the OFAC Lists or (A)
is convicted on, (B) pleads nolo contendere to, (C) is indicted on or (D) is arraigned and held over on charges involving
money laundering or predicate crimes to money laundering. Lender may immediately contact the Office of Foreign Assets Control
and any other government agency that the Lender deems appropriate in order to comply with its obligations under any law, regulation,
order or decree regulating or relating to terrorism and international money laundering.

 

11.23       SUBMISSION
TO JURISDICTION; WAIVER OF VENUE. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY:

 

(a)          SUBMITS
FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER FINANCING AGREEMENTS TO
WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION
OF THE COURTS OF THE STATE OF ILLINOIS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS AND APPELLATE
COURTS FROM ANY THEREOF;

 

    	 	- 60 -	 

     

    

 

(b)          CONSENTS
THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING (i) ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
AND

 

(c)          AGREES
THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER
ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT
PERMITTED BY LAW (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE BORROWER IN ANY SUIT, ACTION OR PROCEEDING,
AND (ii) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THE BORROWER. SOLELY TO THE EXTENT
PROVIDED BY APPLICABLE LAW, SHOULD THE BORROWER, AFTER BEING SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS
OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE DELIVERY OR MAILING THEREOF, THE BORROWER SHALL BE DEEMED
IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE COURT AGAINST THE BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. NOTHING HEREIN SHALL AFFECT THE LENDER’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR LIMIT THE LENDER’S RIGHT TO BRING PROCEEDINGS AGAINST THE BORROWER OR ITS PROPERTY IN ANY COURT OR ANY OTHER JURISDICTION.

 

11.24       GOVERNING
LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND ENFORCED AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

11.25       JURY
TRIAL. THE BORROWER AND THE LENDER HEREBY IRREVOCABLY AND KNOWINGLY WAIVE (TO THE FULLEST EXTENT PERMITTED BY LAW) ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS AGREEMENT,
THE FINANCING AGREEMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO, INCLUDING, WITHOUT LIMITATION, ANY
ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (B) ARISING FROM ANY DISPUTE OR CONTROVERSY
IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND THE FINANCING AGREEMENTS. THE LENDER AND THE BORROWER AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY.

 

[Signature Page Follows]

 

    	 	- 61 -	 

     

    

 

IN WITNESS WHEREOF, this Term Loan
and Security Agreement has been duly executed as of the day and year first above written.

 

	 	BORROWER:
	 	 
	 	CHP
    Friendswood snf LLC
	 	 
	 	By:  Summit Healthcare REIT, Inc., a Maryland corporation, its Manager
	 	 	 	 
	 	 	By:	/s/ Elizabeth Pagliarini
	 	 	Name: Elizabeth Pagliarini
	 	 	Title:  Chief Financial Officer
	 	 	 	 
	 	LENDER:
	 	 	 	 
	 	CIBC BANK USA
	 	 	 	 
	 	By:	/s/ Adam Panos
	 	Name: Adam Panos
	 	Title:  Managing Director

 

Term Loan and Security Agreement

 

     

     

    

 

Schedule 7.15

 

Licensed Unit Capacity;
Licenses

 

License No. 142584
issued to Friendswood TRS LLC – Friendship Haven Healthcare and Rehabilitation Center (Facility ID 004286) issued by the
Texas Department of Aging and Disability Services effective as of May 1, 2015 for the operation of a 150-bed Nursing Facility.

 

     

     

    

 

Schedule 7.22

 

Capitalization

  

	Entity	 	Jurisdiction	 	Organizational
 Identification
 Number	 	Holder of Capital

    Securities	 	Percentage of
 Outstanding
 Interests	 
	 	 	 	 	 	 	 	 	 	 
	CHP Friendswood SNF, LLC	 	Delaware	 	5200025	 	Cornerstone Healthcare Holdings 1, LLC	 	 	54	%
	 	 	 	 	 	 	 	 	 	 	 
	CHP Friendswood SNF, LLC	 	Delaware	 	5200025	 	Healthcare Real Estate Holdings, LLC	 	 	46	%
	 	 	 	 	 	 	 	 	 	 	 
	Cornerstone Healthcare Holdings 1, LLC	 	Delaware	 	5165903	 	Cornerstone Healthcare Partners LLC	 	 	100	%
	 	 	 	 	 	 	 	 	 	 	 
	Healthcare Real Estate Holdings, LLC	 	Delaware	 	5306027	 	Cornerstone Healthcare Holdings 1, LLC	 	 	88	%
	 	 	 	 	 	 	 	 	 	 	 
	Healthcare Real Estate Holdings, LLC	 	Delaware	 	5306027	 	Summit Healthcare Operating Partnership, L.P.	 	 	12	%

 

     

     

    

 

Schedule 9.1

 

Debt to Be Repaid

 

Indebtedness of the Borrower to Oxford Finance
LLC consisting of $6,860,696.40 of outstanding principal and $46,710.31 of accrued and unpaid interest, and certain other fees,
costs and expenses due and owing by the Borrower in connection therewith.Exhibit 10.1

 

EVOQUA WATER TECHNOLOGIES CORP.

2017 EQUITY INCENTIVE PLAN

NONSTATUTORY STOCK OPTION - NOTICE OF GRANT

 

Evoqua Water Technologies Corp. (the “Company”), a Delaware corporation, hereby grants to the Optionee set forth below (the “Optionee”) an option (the “Option”) to purchase the number of Shares of common stock of the Company (“Shares”) set forth below at the Option Price set forth below, pursuant to the terms and conditions of this Notice of Grant (the “Notice”), the Nonstatutory Stock Option Award Agreement attached hereto as Exhibit A (the “Award Agreement”), and the Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (the “Plan”).

 

	
Date of Grant:
    	
 
    	
    
    
	
 
    	
 
    	
 
    
	
Name of Optionee:
    	
 
    	
    
    
	
 
    	
 
    	
 
    
	
Number of Shares Subject to Option:
    	
 
    	
     Shares
    
	
 
    	
 
    	
 
    
	
Option Price
   (Price Per Share):
    	
 
    	
$    per Share
    
	
 
    	
 
    	
 
    
	
Expiration Date:
    	
 
    	
10 year anniversary of the Date of Grant.
    
	
 
    	
 
    	
 
    
	
Vesting:
    	
 
    	
The Option shall vest pursuant to the terms and   conditions set forth in Section 3 of the Award Agreement.
    
	
 
    	
 
    	
 
    
	
Vesting Start Date:
    	
 
    	
    
    

 

The Option shall be subject to the execution and return of this Notice by the Optionee to the Company within     days of the date hereof (including by utilizing an electronic signature and/or web-based approval and notice process or any other process as may be authorized by the Company). This Option is a non-qualified stock option and is not intended by the parties hereto to be, and shall not be treated as, an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. Capitalized terms used but not defined herein shall have the meaning attributed to such terms in the Award Agreement or, if not defined therein, in the Plan, unless the context requires otherwise. By executing this Notice, the Optionee acknowledges that his or her agreement to the covenants set forth in Section 7 of the Award Agreement is a material inducement to the Company in granting this Award to the Optionee.

 

This Notice may be executed by facsimile or electronic means (including, without limitation, PDF) and in one or more counterparts, each of which shall be considered an original instrument, but all of which together shall constitute one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to the other party hereto.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Notice of Grant as of the Date of Grant set forth above.

 

	
 
    	
EVOQUA   WATER TECHNOLOGIES CORP.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
OPTIONEE
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    

 

[SIGNATURE PAGE TO NOTICE OF GRANT FOR THE EVOQUA WATER TECHNOLOGIES CORP. 2017 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION]

 

 

Exhibit A

 

EVOQUA WATER TECHNOLOGIES CORP.

2017 EQUITY INCENTIVE PLAN

NON-STATUTORY STOCK OPTION

AWARD AGREEMENT

 

THIS NONSTATUTORY STOCK OPTION AWARD AGREEMENT (the “Award Agreement”) is entered into by and among Evoqua Water Technologies Corp. (the “Company”) and the individual set forth on the signature page to that certain Notice of Grant (the “Notice”) to which this Award Agreement is attached.  The terms and conditions of the Option granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, shall be as set forth in the Notice and this Award Agreement.  Capitalized terms used but not defined herein shall have the meaning attributed to such terms in the Notice or, if not defined therein, in the Plan, unless the context requires otherwise.

 

1.                                      No Right to Continued Employee Status or Consultant Service

 

Nothing contained in this Award Agreement shall confer upon the Optionee the right to the continuation of his or her Employee status, or, in the case of a Consultant or Director, to the continuation of his or her service arrangement, or in either case to interfere with the right of the Company or any of its Subsidiaries or other affiliates to Terminate the Optionee.

 

2.                                      Term of Option

 

As a general matter, the Option will expire on the Expiration Date set forth in the Notice and be deemed to have been forfeited by the Optionee. As provided below, the Optionee’s right to exercise the Option may expire prior to the Expiration Date if the Optionee Terminates, including in the event of the Optionee’s Disability or death. This Award Agreement shall remain in effect until the Option has fully vested and been exercised or any unexercised portion thereof has been forfeited by the Optionee as provided in this Award Agreement. No portion of this Option shall be exercisable after the Expiration Date, or such earlier date as may be applicable, except as provided herein.

 

3.                                      Vesting of Option

 

[Option 1: Subject to the remainder of this Section 3, the Option will vest as to twenty-five percent (25%) on each of the first four anniversaries of the Vesting Start Date, such that the Option shall become fully (100%) vested as of the fourth anniversary of the Vesting Start Date, subject to the Optionee not having Terminated as of the applicable vesting date.]

 

[Option 2: Subject to the remainder of this Section 3, the Option will vest as to thirty-three and one-third percent (33 1/3%) on each of the first three anniversaries of the Vesting Start Date, such that the Option shall become fully (100%) vested as of the third anniversary of the Vesting Start Date, subject to the Optionee not having Terminated as of the applicable vesting date.]

 

[Option 3: Subject to the remainder of this Section 3, the Option shall become fully (100%) vested upon the first anniversary of the Vesting Start Date, subject to the Optionee not having Terminated prior to such anniversary.]

 

 

[Option 4:  Subject to the remainder of this Section 3, the Option will vest as to          percent (   %) immediately upon the Vesting Start Date and thereafter as to                 percent (   %) on each of the first    anniversaries of the Vesting Start Date, such that the Option shall become fully (100%) vested as of the        anniversary of the Vesting Start Date, subject to the Optionee not having Terminated as of the applicable vesting date.]

 

If the Optionee Terminates for any reason, the portion of the Option that has not vested as of such date shall terminate upon such Termination and be deemed to have been forfeited by the Optionee without consideration.

 

4.                                      Exercise

 

Prior to the Expiration Date and at any time prior to the Optionee’s Termination, the Optionee may exercise all or a portion of the Option, to the extent vested, by giving notice in the form, to the person, and using the administrative method and the exercise procedures established by the Committee from time to time (including any procedures utilizing an electronic signature and/or web-based approval and notice process), specifying the number of Shares to be acquired. The Optionee’s right to exercise the vested portion of the Option following the date that of the Optionee’s Termination will depend on the reason for such Termination, as described in Sections 5 and 6 below.

 

The Optionee must pay to the Company at the time of exercise the amount of the Option Price for the number of Shares covered by the notice to exercise (“Aggregate Option Price”). The Aggregate Option Price for any Shares purchased pursuant to the exercise of an Option shall be paid in any or any combination of the following forms: (w) cash or its equivalent (e.g., a check);  (x) by making arrangements through a registered broker-dealer pursuant to cashless exercise procedures established by the Committee from time to time; (y) if permitted by the Committee in its sole discretion, the transfer, either actually or by attestation, to the Company of Shares that have been held by the Optionee for at least six (6) months (or such lesser period as may be permitted by the Committee) prior to the exercise of the Option, such transfer to be upon such terms and conditions as determined by the Committee; or (z) in the form of other property as determined by the Committee in its sole discretion. Any Shares transferred to the Company as payment of the Aggregate Option Price shall be valued at their Fair Market Value on the last business day preceding the date of exercise of such Option. In addition, at the discretion of the Committee in its sole discretion at the time of exercise, the Optionee may provide for the payment of the Aggregate Option Price through Share withholding as a result of which the number of Shares issued upon exercise of an Option would be reduced by a number of Shares having a Fair Market Value equal to the Aggregate Option Price. If requested by the Committee, the Optionee shall deliver this Award Agreement to the Company, which shall endorse thereon a notation of such exercise and return such Award Agreement to the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an Option and the number of Shares that may be purchased upon exercise shall be rounded down to the nearest number of whole Shares.

 

 

5.                                      Termination of Service

 

If the Optionee incurs a Termination for any reason, whether voluntarily or involuntarily, without Cause, other than as a result of the Optionee’s death or Disability, then the portion of this Option that has previously vested but has not been exercised shall remain exercisable until, and shall terminate upon, the first to occur of (a) the end of the day that is forty-five (45) days following the date of the Optionee’s Termination or (b) the Expiration Date. If the Optionee incurs a Termination for Cause, then this Option and all rights attached hereto shall be forfeited and terminate immediately upon the effective date of such Termination for Cause.

 

6.                                      Death or Disability of the Optionee

 

Upon the Optionee’s Termination by reason of death or Disability, the vested portion of the Option shall remain exercisable until, and shall terminate upon, the first to occur of (a) the end of the day that is one hundred and eighty (180) days after the date of the Optionee’s Termination for death or Disability, as applicable, or (b) the Expiration Date of the Option.  Until such termination of the Option, the vested portion of the Option may, to the extent that this Option has not previously been exercised by the Optionee, be exercised by the Optionee in the case of his or her Disability, or, in the case of death, by the Optionee’s personal representative or the person entitled to the Optionee’s rights under this Award Agreement.

 

7.                                      Prohibited Activities

 

(a)                                 No Sale or Transfer. Unless otherwise required by law, this Option shall not be (i) sold, transferred or otherwise disposed of, (ii) pledged or otherwise hypothecated or (iii) subject to attachment, execution or levy of any kind, other than by will or by the laws of descent or distribution; provided, however, that any transferred Option will be subject to all of the same terms and conditions as provided in the Plan and this Award Agreement and the Optionee’s estate or beneficiary appointed in accordance with the Plan will remain liable for any withholding tax that may be imposed by any federal, state or local tax authority.

 

(b)                                 Right to Terminate Option and Recovery. The Optionee understands and agrees that the Company has granted this Option to the Optionee to reward the Optionee for the Optionee’s future efforts and loyalty to the Company and its affiliates by giving the Optionee the opportunity to participate in the potential future appreciation of the Company.  Accordingly, if (a) the Optionee materially violates the Optionee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Optionee is a party, or (b) the Optionee materially breaches or violates the Optionee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Optionee is a party, or (c) the Optionee engages in any activity prohibited by this Section 7 of this Award Agreement, or (d) the Optionee materially breaches or violates any non-solicitation obligations under any Restrictive Agreement to which the Optionee is a party, or (e) the Optionee is convicted of a felony against the Company or any of its affiliates [or (f) the Optionee breaches or violates any non-competition obligations under any Restrictive Agreement to which the Optionee is a party](1), then, in addition to any other rights and remedies available to the 

 

(1)  Provision to be removed for California residents.

 

 

Company, the Company shall be entitled, at its option, exercisable by written notice, to terminate the Option (including the vested portion of the Option), or any unexercised portion thereof, which shall be of no further force and effect. [“Restrictive Agreement” shall mean any agreement between the Company or any Subsidiary and the Optionee (including any prior option agreement) that contains non-competition, non-solicitation, non-hire, non-disparagement, or confidentiality restrictions applicable to the Optionee.](2) [“Restrictive Agreement” shall mean any agreement between the Company or any Subsidiary and the Optionee (including any prior option agreement) that contains non-solicitation, non-hire, non-disparagement, or confidentiality restrictions applicable to the Optionee.](3)

 

(c)                                  Other Remedies. The Optionee specifically acknowledges and agrees that its remedies under this Section 7 shall not prevent the Company or any Subsidiary from seeking injunctive or other equitable relief in connection with the Optionee’s breach of any Restrictive Agreement.  In the event that the provisions of this Section 7 should ever be deemed to exceed the limitation provided by applicable law, then the Optionee and the Company agree that such provisions shall be reformed to set forth the maximum limitations permitted.

 

8.                                      No Rights as Stockholder

 

The Optionee shall have no rights as a stockholder with respect to the Shares covered by any exercise of this Option until the effective date of issuance of the Shares and the entry of the Optionee’s name as a shareholder of record on the books of the Company following exercise of this Option. Additionally, as a condition to the issuance of any Shares covered by any exercise of this Option, the Company reserves the right to require the Optionee to become party to the Company’s Second Amended and Restated Stockholders’ Agreement dated as of December 11, 2014 and the Company’s Second Amended and Restated Registration Rights Agreement dated as of October 16, 2017, in each case, as may be amended from time to time.

 

9.                                      Taxation Upon Exercise of Option; Tax Withholding; Parachute Tax Provisions

 

The Optionee understands that, upon exercise of this Option, the Optionee will recognize income, for Federal, state and local income tax purposes, as applicable, in an amount equal to the amount by which the Fair Market Value of the Shares, determined as of the date of exercise, exceeds the Option Price. The acceptance of the Shares by the Optionee shall constitute an agreement by the Optionee to report such income in accordance with then applicable law and to cooperate with Company and its subsidiaries in establishing the amount of such income and corresponding deduction to the Company and/or its subsidiaries for its income tax purposes.

 

The Optionee is responsible for all tax obligations that arise as a result of the exercise of this Option. The Company may withhold from any amount payable to the Optionee an amount sufficient to cover any Federal, state or local withholding taxes which may become required with respect to such exercise or take any other action it deems necessary to satisfy any income or other tax withholding requirements as a result of the exercise this Option. The Company shall have the right to require the payment of any such taxes and require that the Optionee, or the 

 

(2)  Provision to be removed for California residents.

(3)  Provision to be removed for non-California residents.

 

 

Optionee’s beneficiary, to furnish information deemed necessary by the Company to meet any tax reporting obligation as a condition to exercise or before the issuance of any Shares pursuant to this Option. The Optionee may pay his or her withholding tax obligation in connection with the exercise of the Option, by making (w) a cash payment to the Company, or (x) arrangements through a registered broker-dealer pursuant to cashless exercise procedures established by the Committee from time to time.  In addition, the Committee, in its sole discretion, may allow the Optionee, to pay his or her withholding tax obligation in connection with the exercise of the Option, by (y) having withheld a portion of the Shares then issuable to him or her upon exercise of the Option or (z) surrendering Shares that have been held by the Optionee for at least six (6) months (or such lesser period as may be permitted by the Committee) prior to the exercise of the Award, in each case having an aggregate Fair Market Value equal to the withholding taxes.

 

[In connection with the grant of this Option, the parties wish to memorialize their agreement regarding the treatment of any potential golden parachute payments as set forth in Exhibit A attached hereto.]

 

10.                               Securities Laws; Tolling of Exercise Period Expiration

 

(a)                                 Upon the acquisition of any Shares pursuant to the exercise of the Option, the Optionee will make such written representations, warranties, and agreements as the Committee may reasonably request in order to comply with securities laws or with this Award Agreement. Optionee hereby agrees not to offer, sell or otherwise attempt to dispose of any Shares issued to the Optionee upon exercise of the Option in any way which would: (x) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar filing under state law or the laws of any other county) or to amend or supplement any such filing or (y) violate or cause the Company to violate the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, or any other Federal, state or local law, or the laws of any other country. The Company reserves the right to place restrictions on any Shares the Optionee may receive as a result of the exercise of the Option.

 

(b)                                 Notwithstanding any provision contained in this Award Agreement or the Plan to the contrary,

 

(i)                                     if, following the Optionee’s Termination, all or a portion of the exercise period applicable to the Option occurs during a time when the Optionee cannot exercise the Option without violating (w) an applicable Federal, state or local law, (x) the rules related to a blackout period declared by the Company, (y) any agreed to lock-up arrangement, or (z) other similar circumstance, in each case, the exercise period applicable to the Option will be tolled for the number of days that such prohibitions or restrictions apply, such that the exercise period will be extended by the same number of days as were subject to the prohibitions or restrictions; provided, however, that the exercise period may not be extended due to such tolling past the Expiration Date of the Option as set forth above; and

 

(ii)                                  if the Expiration Date is set to occur during a time that the Optionee cannot exercise the Option without violating an applicable Federal, state or local law

 

 

(and the Option has not previously been exercised or otherwise terminated), the exercise period will be tolled until such time as the violation would no longer apply; provided, however, that the exercise period applicable to the Option in this event will be fifteen (15) days from the date such potential violation is longer applicable.

 

11.                               Modification, Extension and Renewal of Options

 

This Award Agreement may not be modified, amended, terminated and no provision hereof may be waived in whole or in part except by a written agreement signed by the Company and the Optionee and no modification shall, without the consent of the Optionee, alter to the Optionee’s material detriment or materially impair any rights of the Optionee under this Award Agreement except to the extent permitted under the Plan.

 

12.                               Notices

 

Unless otherwise provided herein, any notices or other communication given or made pursuant to the Notice, this Award Agreement or the Plan shall be in writing and shall be deemed to have been duly given (i) as of the date delivered, if personally delivered (including receipted courier service) or overnight delivery service, with confirmation of receipt; (ii) on the date the delivering party receives confirmation, if delivered by facsimile to the number indicated or by email to the address indicated or through an electronic administrative system designated by the Company; (iii) one (1) business day after being sent by reputable commercial overnight delivery service courier, with confirmation of receipt; or (iv) three (3) business days after being mailed by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below:

 

(a)                                 If to the Company at the address below:

 

Evoqua Water Technologies Corp.

210 Sixth Avenue

Pittsburgh, Pennsylvania

Phone:  (724) 772-0044

Attention:  General Counsel

 

(b)                                 If to the Optionee, at the most recent address, facsimile number or email contained in the Company’s records.

 

13.                               Award Agreement Subject to Plan and Applicable Law

 

This Option is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. Any provision of this Option inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Plan shall control in the event there shall be any conflict between the Plan, the Notice, and this Award Agreement, and it shall control as to any matters not contained in this Award Agreement. The Committee shall have authority to make constructions of this Award Agreement, and to correct any defect or supply any omission or reconcile any inconsistency in this Award Agreement, and to prescribe

 

 

rules and regulations relating to the administration of this Award and other Awards granted under the Plan.

 

This Option shall be governed by the laws of the State of Delaware, without regard to the conflicts of law principles thereof, and subject to the exclusive jurisdiction of the courts therein. The Optionee hereby consents to personal jurisdiction in any action brought in any court, federal or state, within the State of Delaware having subject matter jurisdiction in the matter.

 

14.                               Headings and Capitalized Terms

 

Unless otherwise provided herein, capitalized terms used herein that are defined in the Plan and not defined herein shall have the meanings set forth in the Plan. Headings are for convenience only and are not deemed to be part of this Award Agreement. Unless otherwise indicated, any reference to a Section herein is a reference to a Section of this Award Agreement.

 

15.                               Severability and Reformation

 

If any provision of this Award Agreement shall be determined by a court of law of competent jurisdiction to be unenforceable for any reason, such unenforceability shall not affect the enforceability of any of the remaining provisions hereof; and this Award Agreement, to the fullest extent lawful, shall be reformed and construed as if such unenforceable provision, or part thereof, had never been contained herein, and such provision or part thereof shall be reformed or construed so that it would be enforceable to the maximum extent legally possible.

 

16.                               Binding Effect

 

This Award Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.

 

17.                               Entire Agreement

 

This Award Agreement, together with the Plan, supersedes all prior written and oral agreements and understandings among the parties as to its subject matter and constitutes the entire agreement of the parties with respect to the subject matter hereof.  If there is any conflict between the Notice, this Award Agreement and the Plan, then the applicable terms of the Plan shall govern.

 

18.                               Waiver

 

Waiver by any party of any breach of this Award Agreement or failure to exercise any right hereunder shall not be deemed to be a waiver of any other breach or right whether or not of the same or a similar nature. The failure of any party to take action by reason of such breach or to exercise any such right shall not deprive the party of the right to take action at any time while or after such breach or condition giving rise to such rights continues.

 

 

Exhibit A

 

PARACHUTE TAX PROVISIONS

 

This Exhibit A sets forth the terms and provisions applicable to the Optionee pursuant to the provisions of Section 9 of the Award Agreement.  This Exhibit A shall be subject in all respects to the terms and conditions of the Award Agreement.

 

(a)                                 To the extent that the Optionee, would otherwise be eligible to receive a payment or benefit pursuant to the terms of this Award Agreement, any employment or other agreement with the Company or any Subsidiary or otherwise in connection with, or arising out of, the Optionee’s employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets (any such payment or benefit, a “Parachute Payment”), that a nationally recognized United States public accounting firm selected by the Company (the “Accountants”) determines, but for this sentence would be subject to excise tax imposed by Section 4999 of the Code (the “Excise Tax”), subject to clause (c) below, then the Company shall pay to the Optionee whichever of the following two alternative forms of payment would result in the Optionee’s receipt, on an after-tax basis, of the greater amount of the Parachute Payment notwithstanding that all or some portion of the Parachute Payment may be subject to the Excise Tax: (1) payment in full of the entire amount of the Parachute Payment (a “Full Payment”), or (2) payment of only a part of the Parachute Payment so that the Optionee receives the largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”).

 

(b)                                 If a reduction in the Parachute Payment is necessary pursuant to clause (a), then the reduction shall occur in the following order:  (1) cancellation of acceleration of vesting on any equity awards for which the exercise price exceeds the then fair market value of the underlying equity; (2) reduction of cash payments (with such reduction being applied to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments); and (3) cancellation of acceleration of vesting of equity awards not covered under (1) above; provided, however, that in the event that acceleration of vesting of equity awards is to be cancelled, acceleration of vesting of full value awards shall be cancelled before acceleration of options and stock appreciation rights and within each class such acceleration of vesting shall be cancelled in the reverse order of the date of grant of such equity awards, that is, later equity awards shall be canceled before earlier equity awards; and provided, further, that to the extent permitted by Code Section 409A and Sections 280G and 4999 of the Code, if a different reduction procedure would be permitted without violating Code Section 409A or losing the benefit of the reduction under Sections 280G and 4999 of the Code, the Optionee may designate a different order of reduction.

 

(c)                                  For purposes of determining whether any of the Parachute Payments (collectively the “Total Payments”) will be subject to the Excise Tax and the amount of such Excise Tax, (i) the Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Accountants, such Total Payments (in

 

 

whole or in part):  (1) do not constitute “parachute payments,” including giving effect to the recalculation of stock options in accordance with Treasury Regulation Section 1.280G-1, Q&A 33, (2) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the “base amount” or (3) are otherwise not subject to the Excise Tax, and (ii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.

 

(d)                                 All determinations hereunder shall be made by the Accountants, which determinations shall be final and binding upon the Company and the Optionee.

 

(e)                                  The federal tax returns filed by the Optionee (and any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a basis consistent with the determination of the Accountants with respect to the Excise Tax payable by the Optionee.  The Optionee shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his or her federal income tax return as filed with the Internal Revenue Service, and such other documents reasonably requested by the Company, evidencing such payment (provided that the Optionee may delete information unrelated to the Parachute Payment or Excise Tax and provided, further that the Company at all times shall treat such returns as confidential and use such return only for purpose contemplated by this paragraph).

 

(f)                                   In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, the Optionee shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect the Optionee but the Optionee shall control any other issues.  In the event that the issues are interrelated, the Optionee and the Company shall in good faith cooperate so as not to jeopardize resolution of either issue.  In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, the Optionee shall permit the representative of the Company to accompany the Optionee, and the Optionee and his representative shall cooperate with the Company and its representative.

 

(g)                                  The Company shall be responsible for all charges of the Accountants.

 

(h)                                 The Company and the Optionee shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this Exhibit A.

 

(i)                                     Nothing in this Exhibit A is intended to violate the Sarbanes-Oxley Act of 2002 and to the extent that any advance or repayment obligation hereunder would do so, such obligation shall be modified so as to make the advance a nonrefundable payment to the Optionee and the repayment obligation null and void.

 

(j)                                    Notwithstanding the foregoing, any payment or reimbursement made pursuant to this Exhibit A shall be paid to the Optionee promptly and in no event later than the end of the calendar year next following the calendar year in which the related tax is paid by the Optionee or

 

 

where no taxes are required to be remitted, the end of the Optionee’s calendar year following the Optionee’s calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation.

 

(k)                                 The provisions of this Exhibit A shall survive the termination of the Optionee’s employment with the Company for any reason and the termination of the Award Agreement.

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