Document:

exv10w3

Exhibit 10.3

SUB-ADVISORY AGREEMENT

     THIS SUB-ADVISORY AGREEMENT, dated as of May 19, 2008 (the “Sub-Advisory Agreement”), is
entered into between CIP Leveraged Fund Advisors, LLC, a California limited liability company
(“CLFA”) and CORNERSTONE LEVERAGED REALTY ADVISORS, LLC, a California limited liability company and
wholly-owned subsidiary of CLFA (the “Advisor”) and SERVANT HEALTHCARE INVESTMENTS, LLC, a Florida
limited liability company (the “Sub-Advisor”).

WITNESSETH

     WHEREAS, the Advisor has entered into that certain Advisory Agreement with the Company, a copy
of which is attached hereto and incorporated herein by this reference to Exhibit “A” (the
"Advisory Agreement”), whereby Advisor is performing certain functions for the benefit of the
Company;

     WHEREAS, Cornerstone Ventures, Inc. (“CVI”) has entered into that certain Alliance Agreement
dated as of the date hereof, by and between CVI and Servant Healthcare Investments, LLC (the
"Operator”), a copy of which is attached hereto and incorporated herein by this reference to
Exhibit “B” (the “Alliance Agreement”); and

     WHEREAS, the Advisor desires to avail itself of the knowledge, experience, sources of
information, advice and assistance available to Sub-Advisor to source, acquire, finance, asset
manage and dispose of real estate development and acquisitions in certain sectors in the United
States for the benefit of the Company and to have the Sub-Advisor undertake the duties and
responsibilities hereinafter set forth, all as provided herein; and

     WHEREAS, the Sub-Advisor is willing to undertake to render such services, on the terms and
conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:

     1. Definitions. As used in this Sub-Advisory Agreement, the following terms have the
definitions hereinafter indicated and any capitalized terms used in this Sub-Advisory Agreement
which are not otherwise defined shall have the meaning ascribed to them in the Advisory Agreement
and/or the Alliance Agreement:

     “Acquisition Expenses” means all expenses, excluding the fee payable to the Sub-Advisor
pursuant to Section 9(a), incurred by the Advisor, the Sub-Advisor, or any Affiliate of either in
connection with the Sub-Advisor’s sourcing, selection, evaluation and acquisition of, and or
development of any property or other potential investment in, Properties or other Permitted
Investments whether or not acquired or made, including but not limited to legal fees and expenses,
travel and communications expenses, costs of appraisals and surveys, nonrefundable option payments
on Properties or other Permitted Investments not acquired, accounting fees and expenses, computer
use-related expenses, architectural and engineering reports, environmental reports, title insurance
and escrow fees.

     “Acquisition Fees” means the fee payable to the Sub-Advisor pursuant to Section 9(a), plus any
and all fees and commissions, exclusive of Acquisition Expenses, paid by any Person to any other
Person (including any fees or commissions paid by or to any Affiliate of the Company or the
Advisor) in

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connection with the making or investing in any Property, Loans, or other Permitted Investments
or the purchase, development or construction of a Property by the Sub-Advisor.

     “Advisor” means (i) ClP LEVERAGED FUND ADVISORS, LLC, a Delaware limited liability company, or
(ii) any successor advisor for the benefit of the Company.

     “Advisory Agreement” means that certain Advisory Agreement by and between the Advisor and the
Company, a copy of which is attached hereto and incorporated herein by this reference to
Exhibit “A”.

     “Affiliate” or “Affiliated” means, as to any Person, (i) any Person directly or indirectly
controlling, controlled by, or under common control with such other Person; (ii) any Person,
directly or indirectly owning, controlling, or holding with the power to vote ten percent (10%) or
more of the outstanding voting securities of such other Person; (iii) any legal entity for which
such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person
ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other Person; and (v) any executive officer,
director, trustee, or general partner of such other Person. An entity shall not be deemed to
control or be under common control with an Advisor-sponsored program unless (i) the entity owns ten
percent (10%) or more of the voting equity interests of such program or (ii) a majority of the
board (or equivalent governing body) of such program is comprised of Affiliates of the entity.

     “Alliance Agreement” means that certain Alliance Agreement by and between Cornerstone
Ventures, Inc. and Servant Healthcare Investments, LLC, dated as of the date hereof a copy of which
is attached hereto and incorporated herein by this reference to Exhibit “B”.

     “Appraised Value” means value according to an appraisal made by an Independent Appraiser.

     “Assets” means any and all GAAP assets including but not limited to Property and other
Permitted Investments (including interests in Joint Ventures), tangible or intangible, owned or
held by, or for the account of, the Company whether directly or indirectly through another entity
or entities.

     “Asset Management Fee” has the meaning set forth in Section 8(b).

     “Average Invested Assets” means, for a specified period, the average of the aggregate GAAP
basis book carrying values of the assets of the Company invested, directly or indirectly, in
Properties, Loans and other Permitted Investments before reserves for depreciation or bad debts or
other similar non-cash reserves, computed by taking the average of such values at the end of each
month during such period (or if such specified period is a single month, then the average of such
values during such month).

     “Board of Directors” or “Board” means the individuals holding such office, as of any
particular time, under the Charter of the Company, whether they are the Directors named therein or
additional or successor Directors.

     “Bylaws” mean the bylaws of the Company, as the same may be amended from time to time.

     “Cash from Financings” means the net cash proceeds realized by the Company from the financing
of Properties or other Permitted Investments or from the refinancing of any Company indebtedness
(after deduction of all expenses incurred in connection therewith).

     “Cash from Sales” means the net cash proceeds realized by the Company from the sale, exchange
or other disposition of any of its Assets after deduction of all expenses incurred in connection
therewith. In

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the case of a transaction described in clause (i)(C) of the definition of Sale, Cash From
Sales means the proceeds of any such transaction actually distributed to the Company from the Joint
Venture. Cash from Sales shall not include Cash from Financings.

     “Cash from Sales and Financings” means Cash from Sales plus Cash from Financings.

     “Charter” means the charter of the Company, including the Articles of Incorporation and all
Articles of Amendment, Articles Supplementary and other modifications thereto as filed with the
State Department of Assessment and Taxation of the State of Maryland (the “SDAT”).

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor
statute thereto. Reference to any provision of the Code shall mean such provision as in effect from
time to time, as the same may be amended, mid any successor provision thereto, as interpreted by
any applicable regulations as in effect from time to time.

     “Common Stock” means shares of the Company’s common stock, $0.001 par value per share, the
terms and conditions of which are set forth in the Charter.

     “Common Stockholders” mean the registered holders of the Company’s Common Stock.

     “Company” means each of Cornerstone Growth & Income REIT, Inc. and Cornerstone Private Equity
Fund, Inc., each a corporation organized under the laws of the State of Maryland.

     “Competitive Real Estate Commission” means a real estate or brokerage commission paid for the
purchase or sale of a Property that is reasonable, customary and competitive in light of the size,
type and location of the Property.

     “Construction Fee” means a fee or other remuneration for acting as general contractor and/or
construction manager to construct, supervise or coordinate leasehold or other improvements or
projects, or to provide major repairs or rehabilitation on a Property.

     “Contract Sales Price” means the total consideration received by the Company for the sale of a
Property.

     “Development Fee” means a fee for the packaging of a Property, including negotiating and
approving plans, and undertaking to assist in obtaining zoning and necessary variances and
financing for such Property, either initially or at a later date.

     “Director” means an individual who is a member of the Board of Directors.

     “Disposition Fee” means the disposition fee as defined in Section 9(d) of this Sub-Advisory
Agreement.

     “Distributions” mean any distributions of money or other property by the Company to the
holders of the Common Stock, including distributions that may constitute a return of capital for
federal income tax purposes.

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

     “Independent Appraiser” means a Person with no material current or prior business or personal
relationship with the Advisor or the Directors, who is engaged to a substantial extent in the
business of

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rendering opinions regarding the value of assets of the type held by the Company, and who is a
qualified appraiser of real estate as determined by the Board. Membership in a nationally
recognized appraisal society such as the Appraisal Institute shall be conclusive evidence of such
qualification.

     “Internalization Event” means the purchase by the Company of the Advisor.

     “Invested Capital” means the amount calculated by multiplying the total number of shares of
Common Stock issued by the Company by the price paid for each such share of Common Stock, reduced
by an amount equal to the total number of shared of Common Stock repurchased from Common
Stockholders by the Company (pursuant to the Company’s plan for the repurchase of shares of Common
Stock) multiplied by the price initially paid for each such redeemed share of Common Stock when
initially purchased from the Company.

     “Joint Venture” or “Joint Ventures” means any joint venture, general partnership or limited
liability company or other Affiliate of the Company that owns, in whole or in part, on behalf of
the Company any Properties or other Permitted Investments.

     “Leasing Agent” means an entity that has been retained to perform and carry out leasing
activities for one or more of the Properties.

     “Loans” mean mortgage loans and other types of debt financing purchased by the Company.

     “Market Value” means the aggregate market value of all of the outstanding shares of Common
Stock, measured by taking the average closing price or average of bid and asked price, as the case
may be, during the consecutive 30-day period commencing 180 days following Listing.

     “NASAA” means the North American Securities Administrators Association, Inc.

     “NASAA Net Income” means, for any period, the total revenues applicable to such period, less
the total expenses applicable to such period excluding additions to reserves for depreciation, bad
debts or other similar non-cash reserves; provided, however, NASAA Net Income for purposes of
calculating total allowable Operating Expenses shall exclude the gain from the sale of the
Company’s Assets.

     “NASAA REIT Guidelines” means the Statement of Policy Regarding Real Estate Investment Trusts
published by the North American Securities Administrators Association in effect on the date hereof.

     “Offering” means an offering of Stock that is registered with the U.S. Securities and Exchange
Commission, excluding Stock offered under any employee benefit plan.

     “Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating
Expenses, (ii) all principal and interest payments on indebtedness and other sums paid to lenders,
(iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit,
accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such
expenses and tax incurred in connection with the issuance, distribution, transfer, registration and
Listing of Stock, (iv) taxes, (v) Acquisition Fees and Acquisition Expenses, (vi) real estate
commissions on the Sale of Assets, and other expenses connected with the acquisition, disposition,
and ownership of Assets (such as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair and improvement of property), and (vii) incentive fees paid in compliance with
the NASAA REIT Guidelines.

     “Operating Expenses” means all direct and indirect costs and expenses incurred by the Company,
as determined under GAAP, which in any way are related to the operation of the Company or to
Company

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business, including fees paid to the Advisor, but excluding (i) the expenses of raising
capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting,
brokerage, listing, registration, and other fees, printing and other such expenses and taxes
incurred in connection with the issuance, distribution, transfer, registration and Listing of
Stock, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization and bad debt reserves, (v) Acquisition Fees and Acquisition Expenses, (vi) real estate
commissions on the Sale of Assets, and other expenses connected with the acquisition disposition
and ownership of Assets (such as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair, and improvement of property) and (vii) any incentive fees which may be paid in
compliance with the NASAA REIT Guidelines.

     “Operating Partnership” means Cornerstone Growth & Income Operating Partnership, L.P., which
is the partnership through which the Company may own Properties and other Permitted Investments.

     “Operating Partnership Agreement” means the Limited Partnership Agreement of the Operating
Partnership, as amended from time to time.

     “Operating Revenue Cash Flows” means the Company’s cash flow from ownership and operation of
Properties, interests in properties owned by any Joint Venture or partnership in which the Company
is a co-venturer or partner, Permitted Investments, and short-term investments.

     “OP Unit” means a unit of limited partnership interest in the Operating Partnership.

     “Organization Expenses” mean any and all costs and expenses incurred by or on behalf of the
Advisor and/or Sub-Advisor in fulfilling their respective duties hereunder and in connection with
the formation and operation of the Advisor and/or Sub-Advisor including but not limited to the
costs and expenses of this Sub-Advisory Agreement and of organizing, converting, modifying,
merging, liquidating or dissolving any Sub-Advisor and/or Advisor entities.

     “Permitted Investments” means all investments that the Company may acquire pursuant to its
Charter, Bylaws and the investment objectives and policies adopted by the Board of Directors of the
Company from time to time, other than short-term investments acquired for purposes of cash
management.

     “Person” shall mean any natural person, partnership, corporation, association, trust, limited
liability company or other legal entity and also includes a group as that term is used for purposes
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

     “Property” or “Properties” means the real properties or real estate investments which are
transferred or conveyed to the Company either directly or through the Operating Partnership, Joint
Ventures, partnerships or other entities, which are in the Sectors (as hereinafter defined) which
are sourced through the Alliance Agreement.

     “Property Manager” means any entity that has been retained to perform and carry out at one or
more of the Properties property management services, excluding persons, entities or independent
contractors retained or hired to perform facility management or other services or tasks at a
particular Property, the costs for which are passed through to and ultimately paid by the tenant at
such Property.

     “REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

     “Sale” or “Sales” means (i) any transaction or series of transactions whereby: (A) the Company
or the Operating Partnership sells, grants, transfers, conveys or relinquishes its ownership of any
Property or other Permitted Investment or portion thereof, including the transfer (including by
lease) of any Property

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that is the subject of a ground lease, and including any event with respect to any Property or
other Permitted Investment that gives rise to a significant amount of insurance proceeds or
condemnation awards; (B) the Company or the Operating Partnership sells, grants, transfers, conveys
or relinquishes its ownership of all or substantially all of the interest of the Company or the
Operating Partnership in any Joint Venture in which it is a co-venturer or partner; (C) any Joint
Venture in which the Company or the Operating Partnership is a co-venturer or partner sells,
grants, transfers, conveys or relinquishes its ownership of any Property or other Permitted
Investment or portion thereof, including any event with respect to any Property or other Permitted
Investment that gives rise to insurance claims or condemnation awards; but (ii) not including any
transaction or series of transactions specified in clause (i) (A), (i) (B), or (i) (C) above in
which the proceeds of such transaction or series of transactions are reinvested in one or more
Properties or other Permitted Investments within 180 days thereafter.

     “Sector or Sectors” means the sectors or categories of Property that may be funded under the
Alliance and as more particularly set forth on Exhibit “C” attached hereto and incorporated
herein by this reference.

     “Stock” means shares of capital stock of the Company of any class or series.

     “Stockholders” mean the registered holders of the Company’s Stock.

     “Stockholders’ 6% Return” means, as of any date, an aggregate amount equal to a 6% cumulative,
non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis
based on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 6%
Return, “Invested Capital” shall be determined for each day during the period for which the
Stockholders’ 6% Return is being calculated and shall be calculated net of(1) Distributions of
Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative,
non-compounded, annual return in excess of 6%, as such amounts are computed on a daily basis based
on a three hundred sixty-five day year, (2) Distributions of Cash from Sales and Financings, except
to the extent such Distributions would be required to supplement Distributions of Operating Cash
Flow in order to achieve a cumulative, non-compounded, annual return of 6% as such amounts are
computed on a daily basis based on a three hundred sixty-five day year, and (3) consistent with the
second clause of the definition of Invested Capital, an amount equal to the total number of shares
of Common Stock repurchased from Common Stockholders by the Company (pursuant to the Company’s plan
for the repurchase of shares of Common Stock) multiplied by the price initially paid for each such
redeemed share of Common Stock when initially purchased from the Company.

     “Stockholders’ 8% Return” means, as of any date, an aggregate amount equal to a 8% cumulative,
non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis
based on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 8%
Return, “Invested Capital” shall be determined for each day during the period for which the
Stockholders’ 8% Return is being calculated and shall be calculated net of (1) Distributions of
Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative,
non-compounded, annual return in excess of 8%, as such amounts are computed on a daily basis based
on a three hundred sixty-five day year, (2) Distributions of Cash from Sales and Financings, except
to the extent such Distributions would be required to supplement Distributions of Operating Cash
Flow in order to achieve a cumulative, non-compounded, annual return of 8% as such amounts are
computed on a daily basis based on a three hundred sixty-five day year, and (3) consistent with the
second clause of the definition of Invested Capital, an amount equal to the total number of shares
of Common Stock repurchased from Common Stockholders by the Company (pursuant to the Company’s plan
for the repurchase of shares of Common Stock) multiplied by the price initially paid for each such
redeemed share of Common Stock when initially purchased from the Company.

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     “Stockholders’ 10% Return” means, as of any date, an aggregate amount equal to a 10%
cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a
daily basis based on a three hundred sixty-five day year). For purposes of calculating the
Stockholders’ 10% Return, “Invested Capital” shall be determined for each day during the period for
which the Stockholders’ 10% Return is being calculated and shall be calculated net of (I)
Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow
provide a cumulative, non-compounded, annual return in excess of 10%, as such amounts are computed
on a daily basis based on a three hundred sixty-five day year, (2) Distributions of Cash from Sales
and Financings, except to the extent such Distributions would be required to supplement
Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual
return of 10% as such amounts are computed on a daily basis based on a three hundred sixty-five day
year, and (3) consistent with the second clause of the definition of Invested Capital, an amount
equal to the total number of shares of Common Stock repurchased from Common Stockholders by the
Company (pursuant to the Company’s plan for the repurchase of shares of Common Stock) multiplied by
the price initially paid for each such redeemed share of Common Stock when initially purchased from
the Company.

     “Subordinated Performance Fee Due Upon Termination” has the meaning set forth in Section 9(g).

     “Subordinated Share of Cash Flows” has the meaning set forth in Section 9(e).

     “Tenants” mean the Persons or business entities that are leasing the Properties pursuant to
fully executed, written lease agreements (or singularly referenced as a “Tenant”).

     “Termination Date” means the date of termination of this Sub-Advisory Agreement.

     2. Appointment. The Advisor hereby appoints the Sub-Advisor to serve as its advisor
and asset manager on the terms and conditions set forth in this Sub-Advisory Agreement, and the
Sub-Advisor hereby accepts such appointment.

     3. Authority of the Advisor. Subject to the terms and conditions set forth in the
Advisory Agreement, the Advisor has the authority to review any investment opportunities or
transactions presented by the Sub-Advisor to the Advisor for investment and/or ownership by the
Company. Only the Company has the right to approve of any investment opportunities or transactions
presented for investment and/or ownership by the Company.

     4. Duties of the Advisor. The Company is responsible for providing one hundred percent
(100%) of the equity for acquisition, development and/or leasing projects presented to Advisor by
Sub-Advisor which the Company approves in its sole and absolute discretion. The Advisor shall be
responsible for reviewing and approving all Property acquisitions, development, leasing and
dispositions presented by the Sub-Advisor and further obtaining the Company approval (through the
approval of the Board of Directors) of any such Property acquisitions, development, leasing and
dispositions. The Advisor shall further be responsible for all negotiations with Company,
accounting, financial reporting, cash management, risk management and other necessary corporate
reporting services for the Company and/or entity(ies) that own the Properties, including but not
limited to reporting to national and state regulatory and governmental authorities and agencies.

     5. Authority of the Sub-Advisor. All rights and powers to manage and control the
day-to-day business and affairs of the Properties and/or to cause the Tenants to manage and control
the day-to-day business and affairs of the Properties shall be vested in the Sub-Advisor. The
Sub-Advisor shall have the power to delegate all or any part of its rights and powers to manage and
control the day-to-day business

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and affairs of the Properties and/or to cause the Tenants to manage and control the day-to-day
business and affairs of the Properties to such officers, employees, Affiliates, agents and
representatives of the Sub-Advisor as it may from time to time deem appropriate. Any authority
delegated by the Sub-Advisor to any other Person shall be subject to the limitations on the rights
and powers of the Sub-Advisor specifically set forth in this Sub-Advisory Agreement.
Notwithstanding the above, Advisor shall be primarily responsible for cash management.

     6. Duties of the Sub-Advisor. The Sub-Advisor undertakes to use its commercially
reasonable efforts to perform its obligations as set forth in this Sub-Advisory Agreement, subject
to the limitations set forth in this Sub-Advisory Agreement, including Sections 3 and 8, and
subject to the limitations set forth in the Advisory Agreement. The Sub-Advisor shall, either
directly or by engaging an Affiliate or a third party, or by causing a Property’s Tenant to do so,
perform the following duties:

     (a) Presenting to the Advisor potential Properties and investments opportunities to provide a
continuing and suitable investment program consistent with the investment objectives and policies
of the Company;

     (b) Identifying and underwriting Properties for acquisition, development and/or leasing to
present to the Advisor for approval;

     (c) Once such Properties are approved, structuring, pursuing, negotiating, contracting for,
performing due diligence on, obtaining debt financing for and acquiring and/or developing
Properties;

     (d) Managing the Properties on a day-to-day basis including negotiating with Tenants,
prospective Tenants and service providers;

     (e) Performing all accounting and reporting functions for the Properties (provided however the
Sub-Advisor shall not be responsible for REIT level accounting and reporting requirements but will
comply with the Advisor’s reporting requirements);

     (f) Once approved by the Advisor and the Company, disposing of the Properties;

     (g) Fulfilling any Advisor duties as set forth in the Alliance Agreement that the Advisor
reasonably delegates, with all necessary Company and Board of Directors’ approval and within the
overall scope of this Sub-Advisory Agreement, to the Sub-Advisor in connection with the Properties;

     (h) Performing all other services reasonably requested by the Advisor within the overall scope
of the Sub-Advisory Agreement.

     7. Bank Accounts. The Sub-Advisor as a part of its managing the Properties function
may establish and maintain one or more bank accounts in its own name for the account of the Company
and/or the Advisor or in the name of the Company and/or the Advisor and may collect and deposit
into any such account or accounts, and disburse from any such account or accounts, any money on
behalf of the Company and/or the Advisor, for such Properties, in accordance with the Advisor’s
cash management policies and procedures, provided that no funds shall be commingled with the funds
of the Sub-Advisor; and the Sub-Advisor shall from time to time render appropriate accountings of
such collections and payments to the Advisor.

     8. Records; Financial Statements; Sarbanes-Oxley Act Compliance. The Sub-Advisor, in
the conduct of its responsibilities pursuant to this Sub-Advisory Agreement, shall maintain
adequate and separate books and records for the Properties’ operations in accordance with GAAP,
which shall be

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supported by sufficient documentation to ascertain that such books and records are properly
and accurately recorded, using Yardi on the Advisor’s web-based application. Such books and records
shall be the property of the Company and shall be available for inspection by the Advisor or its
counsel, auditors, or other authorized agents at any time during normal business hours. Such books
and records shall include all information necessary to calculate and audit the fees or
reimbursements paid under this Sub-Advisory Agreement. The Sub-Advisor shall utilize procedures to
attempt to ensure such control over accounting and financial transactions as is reasonably required
to protect the Company’s assets from theft, error or fraudulent activity. All financial statements
that the Sub-Advisor delivers to the Advisor shall be prepared on an accrual basis in accordance
with GAAP. The Sub-Advisor shall liaise with the Advisor’s officers and independent auditors and
shall provide such officers and auditors with such reports and other information as the Advisor
shall request. Notwithstanding anything to the contrary contained in this Sub-Advisory Agreement,
the Advisor shall be responsible for accounting, financial reporting and other necessary corporate
reporting services for the Company and/or entity(ies) that own the Properties, including but not
limited to reporting to national and state regulatory and governmental authorities and agencies.
The Sub-Advisor will comply (and will cause its Affiliates to comply) with the rules, regulations
and provisions of The Sarbanes-Oxley Act of 2002, as amended and supplemented from time to time.

     9. Fees.

     (a) Acquisition Fees. As compensation for the investigation, selection and acquisition (by
purchase, investment or exchange) of Properties and other Permitted Investments, the Advisor shall
pay or shall cause the Company to pay Acquisition Fees to the Sub-Advisor for each such investment.
With respect to the acquisition of a Property to be wholly owned by the Company, the Acquisition
Fee payable to the Sub-Advisor shall equal sixty-two and five-tenths percent (62.5%) of the fee
actually received by Cornerstone Leveraged Realty Advisors, LLC (“CRA”), pursuant to the Advisory
Agreement. With respect to the acquisition of real property through any Joint Venture or
partnership in which the Company is a co-venturer or partner, the Acquisition Fee payable to the
Sub-Advisor shall equal sixty-two and five-tenths percent (62.5%) of the fee actually received by
CRA. Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the
Advisor or by the Company shall be subject to the limitations contained in the Company’s Charter.
The Sub-Advisor shall submit an invoice to the Advisor following the closing or closings of each
acquisition, accompanied by a computation of the Acquisition Fee.

     (b) Asset Management Fee. Subject to the overall limitations contained below in Section 10,
commencing on the date hereof, the Advisor shall pay or shall cause the Company to pay the
Sub-Advisor for the asset management services included in the services described in Section 6 a
monthly fee (the “Asset Management Fee”) in an amount equal to fifty percent (50%) of the fee
actually received by the Advisor with respect to the Properties.

     (c) Property Management, Leasing and Development Fees. If the Advisor and/or the Company
retain the Sub-Advisor or its Affiliates to manage, lease or develop any of its Properties, the
Advisor shall pay or shall cause the Company to pay the Sub-Advisor or its Affiliates a
market-based fee in accordance with a separately negotiated Property Management, Leasing and/or
Development Agreement to be approved by the Advisor, which such agreement may provide for fees
similar to what other management, leasing or development companies generally charge for the
management or leasing of similar properties, and which may include reimbursement for the costs and
expenses the Sub-Advisor or its Affiliates incurs in managing, leasing or developing the
Properties.

     (d) Disposition Fees. The Advisor shall pay to the Sub-Advisor or an Affiliate thereof at
closing a Disposition Fee in an amount equal to sixty-six and two thirds percent (66-2/3%) of the
fee actually received by the Advisor with respect to the Property.

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     (e) Subordinated Share of Cash Flows. Solely with respect to the Properties, the Subordinated
Share of Cash flows shall be payable to the Sub-Advisor in amount equal to sixty-six and two thirds
percent (66-2/3%) of the sum of the following multiplied by a fraction, the numerator of which is
the total amount of return on cost of the Properties for all Sectors having an average annual
return on cost greater than 7% and the denominator of which is the total amount of return on cost
of all of the real properties held by all Company sectors having an average annual return on cost
greater than 7%.

	 	(i)	 	5% of Operating Cash Flow and Cash from Sales and Financings remaining after
the Common Stockholders have received Distributions of Operating Cash Flow and of Cash
from Sales and Financings such that the owners of all outstanding shares of Common
Stock have received Distributions in an aggregate amount equal to the sum of (1) the
Stockholders’ 6% Return and (2) Invested Capital; plus
	 
	 	(ii)	 	5% of Operating Cash Flow and Cash from Sales and Financings remaining after
the Common Stockholders have received Distributions of Operating Cash Flow and of Cash
from Sales and Financings such that the owners of all outstanding shares of Common
Stock have received Distributions in an aggregate amount equal to the sum of (I) the
Stockholders’ 8% Return and (2) Invested Capital; plus
	 
	 	(iii)	 	5% of Operating Cash Flow and Cash from Sales and Financings remaining after
the Common Stockholders have received Distributions of Operating Cash Flow and of Cash
from Sales and Financings such that the owners of all outstanding shares of Common
Stock have received Distributions in an aggregate amount equal to the sum of (1) the
Stockholders’ 10% Return and (2) Invested Capital,

     When determining whether the above thresholds have been met:

	 	(A)	 	Any Stock dividend shall not be included as a Distribution;
	 
	 	(B)	 	Distributions paid on shares of Commons Stock redeemed by the
Company (and thus not included in the determination of Invested Capital), shall
not be included as Distribution, and
	 
	 	(C)	 	Operating Cash Flow and Cash from Sales and Financing shall not
be considered available for purposes of determining whether the thresholds in
subsections (ii) and (iii) have been met to the extent of payments out of
Operating Cash Flow and Cash from Sales and Financings are used to pay the
Subordinated Share of Cash Flows pursuant to subsections (i) and (ii),
respectively.

     (f) Internalization Fees. Upon the occurrence of any Internalization Event, the Advisor shall
pay or shall cause the Company to pay to the Sub-Advisor an amount equal to sixty-six and two
thirds percent (66-2/3%) of all compensation paid to Advisor and Sub-Advisor for the
Internalization Event multiplied by a fraction, the numerator of which is the total amount of
return on cost of the Properties for all Sectors having an average annual return on cost greater
than 7%, and the denominator of which is the sum of the total amount of return on cost of all of
the real properties held by all Company sectors having an average annual return on cost greater
than 7%, subject to the Internalization Event.

     (g) Subordinated Performance Fee Due Upon Termination. If (1) the Company terminates the
Advisory Agreement for any reason (including but not limited to a material breach of the Advisor);
(2) the Advisory Agreement is not renewed because the Company is unwilling to renew the Advisory
Agreement on substantially similar terms; (3) CVI terminates the Advisory Agreement because of a
material breach of

10

 

the Advisory Agreement by the Company; (4) the Advisor terminates this Sub-Advisory Agreement
for any reason other than a material breach hereof by the Sub-Advisor; or (5) the Sub-Advisor
terminates this Sub-Advisory Agreement because of a material breach hereof by the Advisor, then,
subject to the limitations in Section 16(a)(ii), the Advisor shall pay (to the extent the Company
pays the Advisor) or shall cause the Company to pay the Subordinated Performance Fee Due Upon
Termination, payable in the form of an interest bearing promissory note (the “Performance Fee
Note”), in principal amount equal to sixty-six and two thirds percent (66-2/3%) of the Subordinated
Performance Fee Due Upon Termination to the Advisor multiplied by a fraction, the numerator of
which is the average annual return on cost of the Properties per all Sectors, and the denominator
of which is the sum of the average annual returns on cost of all of the real properties held by the
Company, in the form it receives.

     (h) Additional Fees, Consideration or Compensation. Without limiting any of the foregoing in
this Section 9, the Sub-Advisor shall be entitled to receive, and the Advisor or the Company shall
pay or shall cause to be paid, sixty-six and two thirds percent (66-2/3%) of the swn of any
additional fees, consideration or compensation received by the Advisor, not previously identified
herein, with respect to the Properties, including but not limited to sales to third parties ofthe
Properties, the Advisor or the SubAdvisor, and calculated in a manner consistent with this Section
9.

     (i) Changes to Fee Structure. In the event of Listing, the Advisor and the SubAdvisor
negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

     10. Expenses.

     (a) Reimbursable Expeuses. In addition to the compensation paid to the Sub-Advisor pursuant
to Section 9 hereof, the Advisor shall pay directly or reimburse or shall cause the Company to pay
directly or reimburse the Sub-Advisor for all of the expenses paid or incurred by the Sub-Advisor
or its Affiliates on behalf of the Advisor and/or the Company in connection with the services
provided pursuant to this Sub-Advisory Agreement solely to the extent the incurrence of such
expenses by the Sub-Advisor were previously approved in writing by the Advisor, including, but not
limited to:

	 	(i)	 	Acquisition Fees and Acquisition Expenses incurred in connection with the
selection and acquisition of Properties and other Permitted Investments, excluding such
expenses incurred related to assets pursued or considered by but not ultimately
acquired by the Company unless such acquisition was previously approved by the
Company’s board;
	 
	 	(ii)	 	interest and other costs for borrowed money, including discounts, points and
other similar fees related solely to Properties;
	 
	 	(iii)	 	costs associated with insurance required in connection with the businesses of
the Properties,
	 
	 	(iv)	 	expenses of managing, improving, developing, operating and selling Properties;
and
	 
	 	(v)	 	all such fees incurred at the request, or on behalf of, the Advisor or any
committee of the Board of Directors.

     (b) Other Services. Should the Advisor and/or the Company request that the Sub-Advisor or any
director, officer or employee thereof render services for the Advisor and/or the Company other than
as set forth in Section 6, such services shall be separately compensated at such rates and in such
amounts as are mutually agreed to by the Advisor and the Sub-Advisor, subject to the limitations
contained in the Charter, and shall not be deemed to be services pursuant to the terms of this
Sub-Advisory Agreement.

11

 

     (c) Timing of and Additional Limitations on Reimbursements. Expenses incurred by the
Sub-Advisor on behalf of the Company and reimbursable pursuant to this Section 10 shall be
reimbursed no less frequently than monthly to the Sub-Advisor.

     11. Other Activities of the Sub-Advisor.

     (a) General. Nothing herein contained shall prevent the Sub-Advisor from engaging in other
activities, including, without limitation, the rendering of advice to other Persons (including
other REITs) and the management of other programs advised, sponsored or organized by the
Sub-Advisor or its Affiliates; nor shall this Sub-Advisor Agreement limit or restrict the right of
any manager, director, officer, employee, or equity holder of the Sub-Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other Person. The Sub-Advisor
shall report promptly to the Advisor the existence of any condition or circumstance, existing or
anticipated, of which it has knowledge, that creates or could create a conflict of interest between
the Sub-Advisor’s obligations set forth herein and its obligations to or its interest in any other
Person.

     (b) Policy with Respect to Allocation of Investment Opportunities. The Sub-Advisor shall be
required to use commercially reasonable efforts to present a continuing and suitable investment
program to Advisor that is consistent with the investment policies and objectives of the Company.

     12. Time Commitment. The Sub-Advisor shall, and shall cause its Affiliates and their
respective employees, officers and agents to, devote to the Advisor and the Company such time as
shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate
manner consistent with the terms of this Sub-Advisory Agreement. The Advisor acknowledges that the
Sub-Advisor and its Affiliates and their respective employees, officers and agents may also engage
in activities unrelated to the Company and may provide services to Persons other than the Company
or any of its Affiliates.

     13. Relationship of Advisor and Sub-Advisor. The Advisor and the Sub-Advisor are not
partners or joint venturers with each other, and nothing in this Sub-Advisory Agreement shall be
construed to make them such partners or joint venturers or impose any liability as such on either
of them.

     14. Non-Solicitation and Non-Competition. (a) By Company and/or Advisor. Until the
third (3,d) anniversary of the Termination Date of this Sub-Advisory Agreement, the Company, the
Advisor and/or any of their respective Affiliates shall not hire or solicit to perform services (as
an employee, consultant or otherwise) any employee of the Sub-Advisor or any employee of an
Affiliate of the Sub-Advisor without the prior written consent of the Sub-Advisor; provided,
however, that (i) general solicitations of employment published in a journal, newspaper or other
publication of general circulation or listed on any Internet job site and not specifically directed
towards such employees shall not be deemed to constitute solicitation for purposes of this
Sub-Advisory Agreement and (ii) any hiring of any employee of the Sub-Advisor or any employee of an
Affiliate of the Sub-Advisor will not be prohibited where such hiring is not the result of a
solicitation by the Company or by the Advisor.

     (b) By Sub-Advisor. Until the third (3,d) anniversary of the Termination Date of this
Sub-Advisory Agreement, the Sub-Advisor and/or any of its respective Affiliates shall not hire or
solicit to perform services (as an employee, consultant or otherwise) any employee of the Company,
an employee of the Advisor, or any employee of an Affiliate of the Company or of the Advisor;
provided, however, that (i) general solicitations of employment published in a journal, newspaper
or other publication of general circulation or listed on any Internet job site and not specifically
directed towards such employees shall not be deemed to constitute solicitation for purposes of this
Sub-Advisory Agreement and (ii) any hiring of any employee of the Company, any employee of the
Advisor, or any employee of an Affiliate of the Company

12

 

or of the Advisor will not be prohibited where such hiring is not the result of a solicitation
by the Sub-Advisor.

     15. Remedies. The parties hereby agree that in the event of a breach by either party
to one or more of the provisions, agreements, or covenants set forth herein, the non-breaching
party shall be entitled to any available remedies at law or in equity. The losing party hereby
agrees to indemnify and pay the other party for any and all reasonable costs, fees, expenses, and
attorney fees incurred by the party to obtain any relief pursuant to this provision.

     16. Representations and Warranties.

     (a) Of the Advisor. To induce the Sub-Advisor to enter into this Sub-Advisory Agreement, the
Advisor hereby represents and warrants that:

	 	(i)	 	The Advisor is a limited liability company, duly organized, validly existing
and in good standing under the laws of the State of California with all requisite
corporate power and authority and all material licenses, permits and authorizations
necessary to carry out the transactions contemplated by this Sub-Advisory Agreement.
	 
	 	(ii)	 	The Advisor’s execution, delivery and performance of this Sub-Advisory
Agreement have been duly authorized by its manager(s) and/or managing member(s). This
Sub-Advisory Agreement constitutes the valid and binding obligation of the Advisor,
enforceable against the Advisor in accordance with its terms. The Advisor’s execution
and delivery of this Sub-Advisory Agreement and its fulfillment of and compliance with
the respective terms hereof do not and will not (i) conflict with or result in a breach
of the terms, condition or provisions of, (ii) constitute a default under, (iii) result
in the creation of any lien, security interest, charge or encumbrance upon the assets
of the Advisor pursuant to, (iv) result in a violation of or (vi) require any
authorization, consent, approval, exception or other action by or notice to any court
or administrative or governmental body pursuant to, the Articles of Organization or
Operating Agreement or any law, statute, rule or regulation to which the Advisor is
subject, or any agreement, instrument, order, judgment or decree by which the Advisor
is bound, in any such case in a manner that would have a material adverse effect on the
ability of the Advisor to perform any of its obligations under this Sub-Advisory
Agreement.
	 
	 	(iii)	 	The Advisor has received copies of the Articles of Organization of the
Sub-Advisor and the Operating Agreement of the Sub-Advisor.

     (b) Of the Sub-Advisor. To induce the Advisor to enter into this Sub-Advisory Agreement, the
Sub-Advisor hereby represents and warrants that:

	 	(i)	 	The Sub-Advisor is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of Florida with all requisite
corporate power and authority and al material licenses, permits and authorizations
necessary to carry out the transactions contemplated by this Sub-Advisory Agreement.
	 
	 	(ii)	 	The Sub-Advisor’s execution, delivery and performance of this Sub-Advisory
Agreement have been duly authorized by its manager(s) and/or managing member(s). This
Sub-Advisory Agreement constitutes the valid and binding obligation of the Sub-Advisor,
enforceable against the Sub-Advisor in accordance with its terms. The Sub-Advisor’s
execution and delivery of this Sub-Advisory Agreement and its fulfillment of and
compliance with the respective terms hereof do not and will not (i) conflict with or
result in a breach of the terms, condition or

13

 

	 	 	 	provisions of, (ii) constitute a default under, (iii) result in the creation of any
lien, security interest, charge or encumbrance upon the assets of the Sub-Advisor
pursuant to, (iv) result in a violation of or (vi) require any authorization, consent,
approval, exception or other action by or notice to any court or administrative or
governmental body pursuant to, the Articles of Organization or Operating Agreement or
any law, statute, rule or regulation to which the Sub-Advisor is subject, or any
agreement, instrument, order, judgment or decree by which the Sub-Advisor is bound, in
any such case in a manner that would have a material adverse effect on the ability of
the Sub-Advisor to perform any of its obligations under this Sub-Advisory Agreement.
	 
	 	(iii)	 	The Sub-Advisor has received copies of the Articles of Organization of the
Advisor, the Operating Agreement of the Advisor, the Charter, the Bylaws, the
Registration Statement, and the Operating Partnership’s Limited Partnership Agreement
and is familiar with the terms thereof, including without limitation the investment
limitations included therein. The Sub-Advisor warrants that it will use reasonable care
to avoid any act or omission that would conflict with the terms of the Articles of
Organization of the Advisor, the Operating Agreement of the Advisor, the Charter, the
Bylaws, the Registration Statement, and the Operating Partnership’s Limited Partnership
Agreement in the absence of the express direction of the Advisor.

     17. Term. Subject to Section 18 hereof and unless otherwise mutually agreed upon by
the parties, this Sub-Advisory Agreement shall continue in force for so long as the Advisor is the
advisor of the Company.

     18. Termination.

     (a) Termination by the Advisor. This Sub-Advisory Agreement may be terminated immediately by
the Advisor in the event of (i) the bankruptcy of the Sub-Advisor or commencement of any bankruptcy
or similar insolvency proceedings of the Sub-Advisor, (ii) any material breach of this Sub-Advisory
by the Sub-Advisor not cured by the Sub-Advisor within thirty (30) days after written notice
thereof, (iii) the termination or non-renewal of the Advisor by the Company. This Sub-Advisory
Agreement may be terminated upon the occurrence and continuance of a Default (as defined in the
Alliance Agreement) under the Alliance Agreement; (iv) a change in Control of the Sub-Advisor; or
(v) at such point when two (2) of John Mark Ramsey, Kevin Maddron or Scott Larche is no longer
employed by, manage, control or otherwise is actively involved in the day-to-day operations of the
Sub-Advisor.

     (b) Termination by the Sub-Advisor. This Sub-Advisory Agreement may be terminated immediately
by the Sub-Advisor in the event of (i) the bankruptcy of the Company or of the Advisor or
commencement of any bankruptcy or similar insolvency proceedings of the Company or of the Advisor,
(ii) any material breach of this Sub-Advisory Agreement by the Advisor not cured by the Advisor
within thirty (30) days after written notice thereof, (iii) any action of the Company and/or the
Board which causes a change in the terms of this Sub-Advisory Agreement which is materially adverse
to the Sub-Advisor, including without limitation for example purposes only, a reduction in Fees
contemplated under Section 9.(j) herein, (iv) a change in Control of the Advisor, or (v) at such
point when Terry G. Roussel no longer is employed by, manages, controls or is otherwise actively
involved in the day to day operations of the Advisor, of CLFA, or of both. This Sub-Advisory
Agreement may be terminated upon the occurrence and continuance of a Default (as defined in the
Alliance Agreement) under the Alliance Agreement.

     The provisions of this Section and Sections I, 7, 9(g), 10(c), 13, 14, 19 through 30 survive
termination of this Sub-Advisory Agreement.

14

 

     19. Payments to and Duties of Sub-Advisor upon Termination.

     (a) After the Termination Date, the Sub-Advisor shall not be entitled to compensation for
further services hereunder except it shall be entitled to receive from the Company within thirty
(30) days after the effective date of such termination, only to the extent earned and paid to the
Advisor, but not yet paid to the Sub-Advisor, the following:

	 	(i)	 	all Acquisition Fees earned but not yet paid to Sub-Advisor, including
Acquisition Fees on investment opportunities which have closed and Acquisition Fees on
investment opportunities approved by the Company but not yet closed as of the
Termination Date which do close subsequent to the Termination Date (payable upon
closing of such investment opportunity);
	 
	 	(ii)	 	all Asset Management Fees earned but not yet paid to Sub-Advisor;
	 
	 	(iii)	 	all Disposition Fees earned but not yet paid to Sub-Advisor, including
Disposition Fees on investment opportunities which have closed and Disposition Fees on
investment opportunities under agreement to close but which have not yet closed as of
the Termination Date, which do close subsequent to the Termination Date (payable upon
closing of such investment opportunity);
	 
	 	(iv)	 	all unpaid reimbursable expenses and all earned but unpaid fees payable to the
Sub-Advisor prior to termination of this Sub-Advisory Agreement; and
	 
	 	(v)	 	the Subordinated Performance Fee Due Upon Termination (to the extent paid by
the Company or CVI).

     (b) The Sub-Advisor shall promptly upon termination:

	 	(i)	 	pay over to the Company all money collected and held for the account of the
Company pursuant to this Sub-Advisory Agreement, if any;
	 
	 	(ii)	 	deliver to the Advisor an accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the period
following the date of the last accounting furnished to the Advisor;
	 
	 	(iii)	 	deliver to the Advisor all assets, including Properties, and documents of the
Company then in the custody of the Sub-Advisor; and
	 
	 	(iv)	 	cooperate with the Advisor to provide an orderly transition of sub-advisory
functions.

     20. Assignment to an Affiliate. This Sub-Advisory Agreement may not be assigned by any
party without receipt of the other party’s prior written consent, which shall not be unreasonably
withheld.

     21. [Omitted.]

     22. [Omitted.]

     23. Notices. Any notice, report or other communication required or permitted to be
given hereunder shall be in writing unless some other method of giving such notice, report or other
communication is required by the Charter, the Bylaws, or accepted by the party to whom it is given,
and

15

 

shall be given by being delivered by hand or by overnight mail or other overnight delivery
service to the addresses set forth herein:

	 	 	 

	          To the Advisor:

	 	Cornerstone Leveraged Realty Advisors, LLC
	 

	 	1920 Main Street, Suite 400
	 

	 	Irvine, California 92614
	 

	 	Attention: Managing Member
	 
	 	 
	          To the Sub-Advisor:

	 	Servant Healthcare Investments, LLC
	 

	 	1000 Legion Place, Suite 1650
	 

	 	Orlando, FL 32801
	 

	 	Attention: John Mark Ramsey

Either party may at any time give notice in writing to the other party of a change in its address
for the purposes of this Section 22.

     24. Modification. This Sub-Advisory Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in writing signed by both
parties hereto, or their respective successors or assignees.

     25. Severability. The provisions of this Sub-Advisory Agreement are independent of and
severable from each other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.

     26. Construction. The provisions of this Sub-Advisory Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without regard to conflict of law
principles.

     27. Entire Agreement. This Sub-Advisory Agreement, subject to the Advisory Agreement,
contains the entire agreement and understanding among the parties hereto with respect to the
subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature whatsoever with
respect to the subject matter hereof. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof. This Sub-Advisory
Agreement may not be modified or amended other than by an agreement in writing.

     28. Indulgences, Not Waivers. Neither the failure nor any delay on the part of a party
to exercise any right, remedy, power or privilege under this Sub-Advisory Agreement shall operate
as a waiver thereof nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any
other occurrence. No waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.

     29. Gender. Words used herein regardless of the number and gender specifically used,
shall be deemed and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context requires.

16

 

     30. Titles/Caption Not to Affect Interpretation. The titles or captions of Sections
and Subsections contained in this Sub-Advisory Agreement are for convenience only, and they neither
form a part of this Sub-Advisory Agreement nor are they to be used in the construction or
interpretation hereof.

     31. Execution in Counterparts. This Sub-Advisory Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and the same instrument.
This Sub-Advisory Agreement shall become binding when the counterparts hereof, taken together, bear
the signatures of all of the parties reflected hereon as the signatories.

(signatures on following page)

17

 

     IN WITNESS WHEREOF, the parties hereto have executed this Sub-Advisory Agreement as of
the date and year first above written.

	 	 	 	 	 
	 	CIP LEVERAGED FUND ADVISORS, LLC

 	 
	 	By:  	 /s/ Terry G. Roussel
 	 
	 	 	Terry G. Roussel, President 	 
	 

	 	 	 	 	 
	 	SERVANT HEALTHCARE INVESTMENTS, LLC

 	 
	 	By:  	 /s/ John Mark Ramsey
 	 
	 	 	John Mark Ramsey, CEO 	 
	 	 	 	 
	 

18exv10w1

EXHIBIT 10.1

HAWKINS, INC.

EXECUTIVE SEVERANCE PLAN

(Effective August 2, 2011)

     Hawkins, Inc. has established this Hawkins, Inc. Executive Severance Plan (the “Plan”)
effective August 2, 2011 (the “Effective Date”).

     The purpose of this Plan is to provide certain executive employees of Hawkins with severance
benefits in the event that the executive’s employment is involuntarily terminated under
circumstances entitling the executive to such benefits.

     The Plan is intended to be an unfunded plan for a select group of management or highly
compensated employees that is intended to qualify for the exemptions provided in sections 201, 301
and 401 of ERISA, and for the alternative reporting method provided in DOL Reg. § 2520.104-23.

     The Plan shall continue until such time as it is amended or terminated.

ARTICLE 1

DEFINITIONS

     1.1 “Affiliate” means any entity with which Hawkins would be considered a single
employer under Code § 414(b) or 414(c).

     1.2 “Base Salary” means the Covered Executive’s annualized rate of base salary as paid
on each regularly scheduled payday for the Covered Executive’s regular work schedule as of his or
her Date of Termination; provided, however, that if such rate is reduced during the 90-day period
preceding the Covered Executive’s Date of Termination, the Covered Executive’s annualized rate of
base salary shall be based upon the highest rate in effect for the Covered Executive during such
90-day period.

     1.3 “Beneficial Owner” and “Beneficial Ownership” have the same meaning as in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor rule thereto).

     1.4 “Board” means the Board of Directors of Hawkins.

     1.5 “Cause” means:

	 	(a)	 	the Covered Executive’s willful and material failure or refusal during his or
her employment to carry out any reasonable directive of the Board;
	 
	 	(b)	 	any willful and material failure by the Covered Executive during his or her
employment to comply with any material policy, rule or code of conduct generally
applicable to employees of Hawkins or to management employees of Hawkins, which failure
is materially and demonstratively injurious to the financial condition or business
reputation of Hawkins;
	 
	 	(c)	 	the Covered Executive’s embezzlement or misappropriation of funds of Hawkins or
any other willful act or omission by the Covered Executive which is materially
injurious to the financial condition or business reputation of Hawkins; or
	 
	 	(d)	 	the Covered Executive’s conviction or confession of an act or acts constituting
a felony under the

 

	 	 	 	laws of the United States or any state thereof related to the business of Hawkins or
which is materially injurious to the financial condition or business reputation of
Hawkins.

     1.6 “Change in Control” means the occurrence of any of the following
events:

	 	(a)	 	the consummation of a Corporate Transaction unless, immediately following such
Corporate Transaction, all or substantially all of the persons who were the Beneficial
Owners of Voting Securities of Hawkins immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 50% of the combined voting power of
the then outstanding Voting Securities (or comparable equity interests) of the
surviving or acquiring entity (or its parent) resulting from such Corporate Transaction
in substantially the same proportions as their ownership of Voting Securities of
Hawkins immediately prior to such Corporate Transaction; or
	 
	 	(b)	 	any person or group, other than (i) one or more Subsidiaries, or (ii) any
employee benefit plan (or related trust) sponsored or maintained by Hawkins or any
Affiliate, becomes the Beneficial Owner of equity securities of Hawkins representing
more than 50% of the combined voting power of the then outstanding Voting Securities of
Hawkins, except that (A) any acquisition of equity securities of Hawkins directly from
Hawkins for the purpose of providing financing to Hawkins, any formation of a group
consisting solely of Beneficial Owners of Voting Securities of Hawkins as of the
Effective Date, or any repurchase or other acquisition by Hawkins of its equity
securities that causes any person to become the beneficial owner of more than 50% of
the combined voting power of the Voting Securities of Hawkins, will not be considered a
Change in Control unless and until, in either case, such person acquires Beneficial
Ownership of additional Voting Securities of Hawkins after the person initially became
the Beneficial Owner of more than 50% of the combined voting power of the Voting
Securities of Hawkins by one of the means described in this clause (A); and (B) a
Change in Control will occur if a person or group becomes the Beneficial Owner of more
than 50% of Voting Securities of Hawkins as the result of a Corporate Transaction only
if the Corporate Transaction is itself a Change in Control pursuant to subsection (a)
of this section; or
	 
	 	(c)	 	individuals who are Continuing Directors cease for any reason to constitute a
majority of the members of the Board.

     1.7 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

     1.8 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations
and guidance issued thereunder.

     1.9 “Committee” means the Compensation Committee of the Board or such other committee
of the Board (including, without limitation, the full Board) to which the Board has delegated power
to act under or pursuant to the provisions of the Plan.

     1.10 “Continuing Director” means an individual (a) who is, as of the Effective Date, a
director of Hawkins, or (b) who becomes a director of Hawkins after the Effective Date and whose
initial election, or nomination for election by Hawkins’ stockholders, was approved by at least a
majority of the then Continuing Directors, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board.

     1.11 “Corporate Transaction” means a dissolution or liquidation of Hawkins, a sale of
substantially all of the assets of Hawkins, a merger or consolidation of Hawkins with or into any
other corporation, regardless of whether Hawkins is the surviving corporation, or a statutory share
exchange involving capital stock of Hawkins.

     1.12 “Covered Executive” means any Employee who is specifically designated by the
Compensation Committee to participate in the Plan.

2

 

     1.13 “Date of Termination” means the effective date of a Termination of Employment.

     1.14 “Disability” means any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous period of not less
than six months, where such impairment causes the Covered Executive to be unable to perform the
duties of the Covered Executive’s position of employment or any substantially similar position of
employment.

     1.15 “Effective Date” means the effective date of this Plan, which is August 2, 2011.

     1.16 “Employee” means any common-law employee of Hawkins or an Affiliate (while it is
an Affiliate).

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

     1.18 “Good Reason” means any of the following conditions arising without the consent
of the Covered Executive:

	 	(a)	 	a material decrease in the Covered Executive’s base compensation;
	 
	 	(b)	 	a material diminution in the Covered Executive’s authority, duties, or
responsibilities;
	 
	 	(c)	 	relocation of Covered Executive’s principal office more than 50 miles from its
current location; or
	 
	 	(d)	 	any other action or inaction that constitutes a material breach by Hawkins of
any terms or conditions of any agreement between Hawkins and the Covered Executive,
which breach has not been caused by the Covered Executive.

     1.19 “Hawkins” means Hawkins, Inc., a Minnesota corporation, or any successor to all
or substantially all of its businesses by merger, consolidation, purchase of assets or otherwise.

     1.20 “Profit Sharing Plan” means the Hawkins, Inc. Profit Sharing Plan.

     1.21 “Release” means a written agreement and release of claims in a form furnished by
Hawkins. In such release, the Covered Executive will be asked to release Hawkins and its
directors, officer, employees and agents from any and all claims the Covered Executive may have
against them, including but not limited to any contract, tort, or wage and hour claims, and any
claims under Title VII, the ADEA, the ADA, ERISA, and other federal, state, local or foreign laws.
Under the Release, the Covered Executive must also agree not to solicit business similar to any
business offered by Hawkins from any Hawkins customer, not to advise any entity to cancel or limit
its business with Hawkins, not to recruit, solicit or encourage any employee to leave their
employment with Hawkins, not to disclose any of Hawkins’ trade secrets or confidential information,
and not to disparage Hawkins or its employees in any way. These obligations are in addition to any
other non-solicitation, noncompete, nondisclosure, or confidentiality agreements the Covered
Executive may have executed while employed by Hawkins. The Release shall not diminish or terminate
the Covered Executive’s rights under this Plan.

     1.22 “Salary Continuation Period” means the relevant period (which shall depend upon
the Covered Executive’s Tier on his or her Date of Termination and whether the Covered Executive’s
Termination of Employment is a Termination Due to a Change in Control) as described in Appendix
A for determining the Severance Benefits payable to a Covered Executive.

     1.23 “Separation Pay Plan Amount” means an amount payable pursuant to an arrangement
that constitutes a “separation pay plan due to involuntary separation from service” under Treas.
Reg. § 1.409A-1(b)(9)(iii) (or a successor rule thereto), and which, with respect to a Covered
Executive, shall be equal to two times the lesser of (a) the maximum amount that may be taken into
account under a qualified pension plan under Code § 401(a)(17) for the year in which the Effective
Date occurs; or (b) the Covered Executive’s annualized compensation

3

 

for the calendar year prior to the calendar year in which the Date of Termination occurs (adjusted
for any increase during that year that was expected to continue indefinitely if the Covered
Executive had not separated from service).

     1.24 “Severance Benefits” means the benefits payable under this Plan as described in
Article 3.

     1.25 “Target Annual Bonus” means the target annual bonus established under Hawkins’
annual incentive bonus program and approved by the Committee, as applicable, for the fiscal year in
which the Covered Executive’s Date of Termination occurs, or if such target annual bonus has not
been established for such fiscal year by the Employee’s Date of Termination, the target annual
bonus for the prior fiscal year.

     1.26 “Termination Due to Change in Control” means a Termination for Good Reason or a
Termination Without Cause that occurs during the 30-day period preceding or the two-year period
commencing upon the occurrence of a Change in Control.

     1.27 “Termination for Good Reason” means a Termination of Employment by the Covered
Executive for Good Reason; provided, however, that a Termination of Employment shall not be
considered to be a Termination for Good Reason unless the following conditions are satisfied:

	 	(a)	 	The Covered Executive has first given written notice to Hawkins of the
existence of a condition constituting “Good Reason” as described in Sec. 1.18 within 90
days of its first occurrence, and Hawkins has failed to remedy the condition within 30
days thereafter.
	 
	 	(b)	 	The Termination of Employment occurs not later than the expiration of the
two-year period following the initial existence of a condition constituting “Good
Reason” as described in Sec. 1.18.

     1.28 “Termination of Employment” means a termination of a Covered Executive’s
employment with Hawkins and its Affiliates, whether by action of the Covered Executive or by
Hawkins or an Affiliate, provided that such Termination of Employment also constitutes a
“separation from service” under Code § 409A and the regulations thereunder.

     1.29 “Termination Without Cause” means a Termination of Employment for any reason
other than Cause or the Covered Executive’s death or Disability.

     1.30 “Voting Securities” means, with respect to any company, the company’s outstanding
securities entitled to vote generally in the election of directors.

ARTICLE 2

ELIGIBILITY

     2.1 Eligibility. An Employee shall be entitled to participate in, and shall become a
Covered Executive under, the Plan upon his or her selection by the Committee for participation in
the Plan. Hawkins shall advise each Covered Executive who is selected for participation in the
Plan of his or her participation in the Plan.

     2.2 Tiers. Each Covered Executive shall be assigned a Tier by the Committee for
purposes of determining the Covered Executive’s entitlement to certain Severance Benefits under
this Plan. However, unless the Committee makes a different assignment, the Chief Executive Officer
is assigned to Tier 1 and the President of Hawkins is assigned to Tier 2. Notwithstanding the
foregoing, if the Covered Executive was assigned to a higher Tier during the 90-day period
immediately preceding the Covered Executive’s Date of Termination, the Covered Executive shall be
deemed to be assigned to such higher Tier for purposes of determining the Covered Executive’s
Severance Benefits under this Plan.

     2.3 Condition to Receiving Benefits. As a condition precedent to receiving Severance
Benefits under the Plan, a Covered Executive must complete, execute and return to Hawkins, not
later than 50 days following the

4

 

Covered Executive’s Date of Termination, a Release which has not been rescinded by the Covered
Executive prior to the expiration of all applicable rescission period(s). Such Release shall be
furnished to the Covered Executive within five days after the Covered Executive’s Date of
Termination.

ARTICLE 3

SEVERANCE BENEFITS

     3.1 Termination Without Cause Not In Connection with a Change In Control. In the
event of the Covered Executive’s Termination Without Cause which is not a Termination Due to Change
in Control, the Covered Executive shall be entitled to the Severance Benefits described in this
Sec. 3.1. For purposes of determining a Covered Executive’s Severance Benefits under this Sec.
3.1, the Salary Continuation Period for a Covered Executive shall be the relevant period described
in Appendix A.

	 	(a)	 	Base Salary. Hawkins shall pay the Covered Executive his or her Base
Salary for the Salary Continuation Period. Such Base Salary shall be paid in equal
installments over the Salary Continuation Period in accordance with Hawkins’ standard
payroll practices. Notwithstanding the foregoing, the following conditions and
limitations on the payment of Base Salary shall apply:

	 	(i)	 	It is intended that all or a portion of the amounts payable
during the six-month period following the Date of Termination will constitute
separation pay due to involuntary separation from service under Treas. Reg. §
1.409A-1(b)(9)(iii). Accordingly, the amounts in excess of the Separation Pay
Plan Amount that would otherwise have been payable during such six-month period
shall be accumulated and paid (without interest) to the Covered Executive in a
lump sum on the first day of the seventh month following the Date of
Termination (subject to satisfaction of the conditions described in Sec. 2.3 by
such date).
	 
	 	(ii)	 	Any installment payment(s) of Base Salary that otherwise would
have been paid during such six-month period to the Covered Executive pursuant
to this subsection, but solely for the fact that the conditions described in
Sec. 2.3 have not yet been satisfied, shall be accumulated and paid (without
interest) to the Covered Executive in a lump sum upon the first regularly
scheduled payroll date following the satisfaction of such conditions.

	 	(b)	 	Medical and Dental. Hawkins shall reimburse the Covered Executive for
the amount of the employer portion of his or her premium payments for COBRA
continuation coverage for medical and dental benefits for the Salary Continuation
Period, or, if shorter, the 18-month period following the Date of Termination, if the
Covered Executive qualifies for and elects that coverage for such period.
Notwithstanding the foregoing, however, Hawkins’ obligation to make any payment or
further payment pursuant to this subsection will cease on the date the Covered
Executive becomes covered by another group health plan that does not impose
pre-existing condition limitations on the Covered Executive’s coverage. Nothing in
this subsection shall be construed to extend the period for which COBRA continuation
coverage must be provided to the Covered Executive or the Covered Executive’s
dependents beyond that mandated by law. Such payments are intended to be medical
reimbursements exempt from Code § 409A pursuant to Treas. Reg. § 1.409A-1(b)(9)(v)(B).
	 
	 	(c)	 	Outplacement Costs. Hawkins shall engage and pay on behalf of the
Covered Executive, the reasonable costs of outplacement services for the twelve-month
period following the Date of Termination. The payments under this subsection are
intended to be exempt from Code § 409A pursuant to Treas. Reg. § 1.409A-1(b)(9)(v)(A).
Accordingly, the costs of such outplacement services shall not be incurred beyond the
last day of the second calendar year following the calendar year in which the Covered
Executive’s Date of Termination falls, and Hawkins’ payment shall be made before the
end of the third calendar year following the calendar year in which the Covered
Executive’s Date of Termination for the Salary Continuation Period.

5

 

     3.2 Termination Due to Change in Control. In the event of a Covered Executive’s
Termination for Good Reason or Termination Without Cause that is also a Termination Due to Change
in Control:

	 	(a)	 	The Covered Executive shall be entitled to the Severance Benefits described in
Sec. 3.1, except that:

	 	(i)	 	for purposes of determining the Covered Executive’s Severance
Benefits under this Sec. 3.2, the Salary Continuation Period shall be the
Salary Continuation Period for a Termination Due to Change in Control described
in Appendix A.
	 
	 	(ii)	 	the amounts payable during the six-month period described in
Sec. 3.1(a)(i) that constitute separation pay due to involuntary separation
from service under Treas. Reg. § 1.409A-1(b)(9)(iii) shall be paid as soon as
administratively practicable following the Date of Termination (subject to
satisfaction of the conditions described in Sec. 2.3 by such date).
	 
	 	(iii)	 	if the Change in Control constitutes a change in ownership of
a corporation under Treas. Reg. § 1.409A-3(i)(5)(v), a change in the effective
control of a corporation under Treas. Reg. § 1.409A-3(i)(5)(vi), or a change in
the ownership of a substantial portion of a corporation’s assets as defined in
Treas. Reg. § 1.409A-3(i)(5)(vii), the Base Salary installment payments that
would otherwise be payable for the remainder of the Salary Continuation Period
following the period described in Sec. 3.1(a)(i) shall instead be paid in a
lump sum on the first day of the seventh month following the Date of
Termination (subject to satisfaction of the conditions described in Sec. 2.3 by
such date).

	 	(b)	 	The Covered Executive shall be entitled to the following additional Severance Benefits:

	 	(i)	 	Bonus. The Covered Executive shall be entitled to
receive an amount equal to one-twelfth (1/12) of his or her Target Annual Bonus
multiplied by the number of months in Salary Continuation Period for a
Termination Due to a Change in Control described in Appendix A. Such
payment shall be made in a lump sum as soon as administratively practicable
after the expiration of all rescission period(s) described in Sec. 2.3, but in
any event not later than two and half months following the end of the year in
which the Date of Termination occurs. Such amount is intended to be a
short-term deferral pursuant to Treas. Reg. § 1.409A-1(b)(4).
	 
	 	(ii)	 	Profit Sharing Plan. The Covered Executive shall be
entitled to receive an amount intended to provide a benefit equal to the
additional benefit that the Executive would have received under the Profit
Sharing Plan if such Covered Executive (x) had remained employed by Hawkins for
the entire Salary Continuation Period and (y) had been entitled to Employer
Contributions (as defined in the Profit Sharing Plan) under the Profit Sharing
Plan for the Salary Continuation Period.
	 
	 	 	 	The amount of such payment shall equal the additional Discretionary Employer
Profit Sharing Contribution that the Covered Executive would have received
for the Salary Continuation period if his/her Compensation had continued at
the same rate as in effect immediately prior to his/her Termination of
Employment and the rate of the Discretionary Employer Profit Sharing
Contribution had been the same rate as in effect for the most recent Plan
Year ending prior to the Termination of Employment, plus if, on the Date of
Termination, the Profit Sharing Plan permits 401(k) Contributions, such
Employer Matching Contributions the Covered Executive would have received
for the Salary Continuation Period if he/she had made 401(k) Contributions
at least at the rate that would have entitled him/her to the maximum
Employer Matching Contributions

6

 

	 	 	 	permitted under the Plan.
	 
	 	 	 	Such payment shall be made in a lump sum as soon as administratively
practicable after the expiration of all rescission period(s) described in
Sec. 2.3, but in any event not later than two and half months following the
end of the year in which the Date of Termination occurs. Such amount is
intended to be a short-term deferral pursuant to Treas. Reg. §
1.409A-1(b)(4).

     3.3 Clawback. Any payment of a Severance Benefit hereunder shall be subject to, and
recoverable by, Hawkins under Hawkins’ clawback policy in effect from time to time; provided,
however, that for any attempted recovery from and after a Change in Control, such clawback policy
shall have been in effect prior to the Change in Control except as such policy has been modified to
conform to applicable law or regulation.

ARTICLE 4

PLAN ADMINISTRATION

     4.1 General. The Plan is administered by the Committee. The principal duty of the
Committee is to administer the Plan in a consistent and non-discriminatory manner in accordance
with its terms. The Committee shall have full power, as provided herein, to administer the Plan in
all of its details.

     4.2 Power and Authority. The Committee’s powers shall include, but shall not be
limited to, the following, in addition to all other powers provided by this Plan:

	 	(a)	 	to make, enforce, amend or rescind such rules and regulations relating to the
Plan, and to make any other determinations that it deems necessary or proper for the
efficient administration of the Plan;
	 
	 	(b)	 	to interpret the Plan and its terms, with the Committee’s interpretations
thereof to be final and conclusive on all persons claiming benefits under the Plan;
	 
	 	(c)	 	to correct any defect or supply any omission or reconcile any inconsistency in
the Plan in the manner and to the extent it deems necessary or advisable;
	 
	 	(d)	 	to decide all questions concerning the Plan and the eligibility of any person
to participate in, and to receive benefits provided under, the Plan;
	 
	 	(e)	 	to authorize the payment of benefits; and
	 
	 	(f)	 	to appoint such agents, counsel, accountants, consultants, and actuaries as may
be required to assist in administering the Plan.

Notwithstanding the foregoing, during the two-year period following a Change in Control, the
Committee shall not have the authority to exercise discretion with respect to any aspect of the
Committee’s powers and duties and any other aspect of the Plan’s administration, including the
benefits enumerated in Article 3, with the exception of making benefits changes beneficial, but not
less favorable, to the Covered Executive, and the review of benefit claims under Article 5.

     4.3 Payment. Hawkins shall make payments of Severance Benefits from its general
assets to Covered Executives in accordance with the terms of the Plan.

7

 

ARTICLE 5

CLAIMS PROCEDURE

     5.1 Claims. All claims for benefits shall be filed in writing with the Committee.
Each such claim must be filed by the Covered Executive, or his or her duly authorized
representative, within 90 days following the Covered Executive’s Termination of Employment.

     5.2 Determination of Claims. The Committee shall decide all claims for benefits under
the Plan within 30 days after receipt of the claim. Any denial by the Committee of a claim for
benefits shall be stated in writing and shall set forth, in a manner calculated to be understood by
the claimant, the specific reasons for denial, specific reference to pertinent Plan provisions on
which the denial is based, a description of any additional material or information necessary to
perfect the claim and an explanation of why such material or information is necessary, and the
procedure for the appeal of such denial and a statement of the claimant’s right to bring an action
under ERISA § 502(a) following an adverse benefit determination on appeal. In addition, the
Committee shall afford a reasonable opportunity to any claimant whose claim for benefits has been
denied a review of the decision denying the claim.

     5.3 Appeals. A claimant (or his or her duly authorized representative) may, upon
written request to the Committee within 30 days of receiving a denial of his claim for benefits,
(a) request a review of the denial, (b) review pertinent documents, and (c) submit issues and
comments in writing to the Committee. A decision by the Committee shall be made promptly and shall
not ordinarily be made later than 30 days after receipt of a request for review. The Committee’s
decision on review shall be in writing, shall include specific reasons for the decision, written in
a manner calculated to be understood by the claimant, as well as specific references to the
pertinent Plan provisions on which the decision is based, and shall contain a statement of the
claimant’s right to bring a civil action under ERISA § 502(a). If the decision on review is not
furnished within the applicable time described in this section, the claim shall be deemed denied on
review.

ARTICLE 6

MISCELLANEOUS

     6.1 Amendment and Termination. Notwithstanding the foregoing, the Plan may not be
amended in any manner that adversely affects any Covered Executive unless such Covered Executive
expressly consents to such amendment in writing. In the event of a Change in Control and for a
period of two years thereafter, the Plan may not be amended, suspended or discontinued in any
manner except to comply with applicable changes in the law, to prevent adverse tax consequences to
a Covered Executive, or to make benefits more favorable to a Covered Executive.

     6.2 Limitation of Covered Executive’s Rights. Nothing in this Plan shall be construed
as conferring upon the Covered Executive any right to continue in the employment of Company, nor
shall it interfere with the rights of Company to terminate the employment of the Covered Executive
and/or to take any personnel action affecting the Covered Executive without regard to the effect
which such action may have upon the Covered Executive as a recipient or prospective recipient of
benefits under this Plan. Any amounts payable hereunder shall not be deemed salary or other
compensation to the Covered Executive for the purposes of computing benefits to which the Covered
Executive may be entitled under any other arrangement established by Company for the benefit of its
employees.

     6.3 Application of Section 4999 to Severance Benefits.

	 	(a)	 	Excise Tax Adjustment to Severance Benefits. Notwithstanding any other
provisions of this Plan, in the event that any payment or benefit received or to be
received by a Covered Executive, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement (all such payments and benefits, including the
Severance Benefits, being hereinafter referred to as the “Total Payments”) would be
subject (in whole or part), to an excise tax under Code § 4999 (the

8

 

	 	 	 	“Excise Tax”), then, after taking into account any reduction in the Total Payments
provided by reason of Code § 280G in such other plan, arrangement or agreement, the
payments under this Plan that do not constitute deferred compensation within the
meaning of Code § 409A shall first be reduced, and all other payments that do
constitute deferred compensation within the meaning of Code § 409A shall thereafter
be reduced (beginning with those payments last to be paid), to the extent necessary
so that no portion of the Total Payments is subject to the Excise Tax, but only if
(i) the net amount of such Total Payments, as so reduced (and after subtracting the
net amount of federal, state and local income taxes on such reduced Total Payments
and after taking into account the phase out of itemized deductions and personal
exemptions attributable to such reduced Total Payments) is greater than or equal to
(ii) the net amount of such Total Payments without such reduction (but after
subtracting the net amount of federal, state and local income taxes on such Total
Payments and the amount of Excise Tax to which the Covered Executive would be
subject in respect of such unreduced Total Payments and after taking into account
the phase out of itemized deductions and personal exemptions attributable to such
unreduced Total Payments). In no event shall the Covered Executive have the
discretion to determine the order in which payments under this Plan shall be reduced
in accordance with the preceding sentence.
	 
	 	(b)	 	Excise Tax Determination. For purposes of determining whether and the
extent to which the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which
the Covered Executive shall have waived at such time and in such manner as not to
constitute a “payment” within the meaning of Code § 280G(b) of the Code shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account which,
in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Covered
Executive and selected by the accounting firm (the “Auditor”) which was, immediately
prior to the Change in Control, Hawkins’ independent auditor, does not constitute a
“parachute payment” within the meaning of Code § 280G(b)(2) (including by reason of
Code § 280G(b)(4)(A)) and, in calculating the Excise Tax, no portion of such Total
Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes
reasonable compensation for services actually rendered, within the meaning of Code §
280G(b)(4)(B), in excess of the Base Amount allocable to such reasonable compensation,
and (iii) the value of any non-cash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by the Auditor in accordance with the
principles of Code §§ 280G(d)(3) and (4). For purposes of this Sec. 6.3, (i) the
Covered Executive shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the applicable Total
Payment is to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Covered Executive’s residence in the calendar
year in which the applicable Total Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and local
taxes and (ii) except to the extent that the Covered Executive otherwise notifies
Hawkins, the Covered Executive shall be deemed to be subject to the loss of itemized
deductions and personal exemptions to the maximum extent provided by the Code for each
dollar of incremental income.
	 
	 	(c)	 	Payments Calculation Notice. At the time that payments are made under
this Plan, Hawkins shall provide the Covered Executive with a written statement setting
forth the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice Hawkins has
received from Tax Counsel, the Auditor or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to the statement). If the
Covered Executive objects to Hawkins’ calculations, Hawkins shall pay to the Covered
Executive such portion of the Severance Payments (up to 100% thereof) as the Covered
Executive determines is necessary to result in the proper application of subsection (a)
of this Sec. 6.3.

     6.4 Legal Fees and Expenses. Hawkins shall pay to the Covered Executive all legal fees
and expenses incurred by the Covered Executive in disputing in good faith any issue hereunder
relating to the termination of the Covered Executive’s employment, in seeking in good faith to
obtain or enforce any benefit or right provided by this

9

 

Plan, or in connection with any tax audit or proceeding to the extent attributable to the
application of Code § 4999 to any payment or benefit provided hereunder. Such payments shall be
made within ten business days after delivery of the Covered Executive’s written request for payment
accompanied with such evidence of fees and expenses incurred as Hawkins reasonably may require,
subject to the limits of Sec. 6.9. If Hawkins shall have reimbursed the Covered Executive for
legal fees and expenses and it is later determined that the Covered Executive was not acting in
good faith, all amounts paid on behalf of, or reimbursed to, the Covered Executive shall be
promptly refunded to Hawkins.

     6.5 Right of Offset. Hawkins reserves the right to withhold and set off from any
payments to a Covered Executive any amount owed to Hawkins or an Affiliate by the Covered
Executive, whether such obligation is matured or unmatured and however arising, at the time of (and
with priority over) any such distribution or payment to the extent that the retention or exercise
of such right does not have adverse tax consequences to the Covered Executive under Code § 409A
(for clarity, this offset right is against amounts then due and payable and is not intended to
accelerate payment of any amount). Hawkins further reserves the right to withhold and set off from
the Covered Executive’s accrued benefit under the Plan (even if a payment is not then due and
payable) any amount owed to Hawkins or an Affiliate by the Participant, as satisfaction of such
obligation of the Covered Executive, where such obligation is incurred in the ordinary course of
the service relationship between the Covered Executive and Hawkins or the Affiliate, the entire
amount of reduction in any of Hawkins’ or the Affiliate’s taxable years does not exceed five
thousand dollars ($5,000), and the reduction is made at the same time and in the same amount as the
obligation otherwise would have been due and collected from the Covered Executive.

     6.6 Nonalienation of Benefits. Except as expressly provided herein, the Covered
Executive shall not have the power or right to transfer, alienate or otherwise encumber his or her
interest under the Plan. Hawkins’ obligations under the Plan are not assignable or transferable
except to (a) any corporation or partnership which acquires all or substantially all of Hawkins’
assets, or (b) any corporation or partnership into which Hawkins may be merged or consolidated.
The provisions of this Plan shall inure solely to the benefit of the Covered Executive.

     6.7 Cooperation by Covered Executive. The Covered Executive shall cooperate with
Hawkins by furnishing any and all information reasonably requested by Company in order to
facilitate the payment of benefits hereunder.

     6.8 Withholding Taxes. Hawkins may make such provisions and take such action as it
deems necessary or appropriate for the withholding of any taxes which Hawkins is required by any
law or regulation of any governmental authority, whether Federal, state or local, to withhold in
connection with any benefits under the Plan, including, but not limited to, the withholding of
appropriate sums from any amount otherwise payable to the Covered Executive. The Covered
Executive, however, shall be responsible for the payment of all individual tax liabilities relating
to any such benefits.

     6.9 Compliance with Code § 409A. This Plan and the payments hereunder are intended to
be exempt from or to satisfy the requirements of Code § 409A(a)(2), (3) and (4), including the
exceptions for short-term deferrals, separation pay arrangements, reimbursements, and in-kind
distributions, and shall be interpreted and administered accordingly. Each payment under this Plan
is intended to be treated as one of a series of separate payments for purposes of Code § 409A and
Treas. Reg. § 1.409A-2(b)(2)(iii) (or any similar or successor provisions). To the extent that
payments under this Plan are subject to Code § 409A and the Covered Executive is a “specified
employee” (as defined in Code § 409A) as of the Date of Termination, distributions to the Covered
Executive may not be made before the date that is six months after the Date of Termination or, if
earlier, the date of the Covered Executive’s death. Payments to which the Covered Executive would
otherwise be entitled during the first six months following the date of termination will be
accumulated and paid on the first day of the seventh month following the Termination Date (or the
Covered Executive’s death, if earlier). To the extent that payments under this Plan are payments
under a “reimbursement plan” subject to Code § 409A, the right to reimbursement may not be
exchanged for cash or any other benefit, the amount of expenses eligible for reimbursement in one
calendar year shall not affect the expenses eligible for reimbursement in any other calendar year,
and the reimbursement of any eligible expense shall be made pursuant to Hawkins’ normal policies
and procedures for expense reimbursement, which shall be in any event no later than the last day of
the calendar year following the calendar year in which the expense was incurred.

10

 

     6.10 Unfunded Plan. The Plan shall not be funded, and no Covered Executive shall have
any right to, or interest in, any assets of Hawkins or its affiliates or subsidiaries.

     6.11 Severability. If any provision of this Plan is held unenforceable, the remainder
of the Plan shall continue in full force and effect without regard to such unenforceable provision
and shall be applied as though the unenforceable provision were not contained in the Plan.

     6.12 Governing Law. This Plan shall be construed in accordance with and governed by
the laws of the State of Minnesota, without reference to the principles of conflict of laws and to
the extent not superseded by the laws of the United States.

     6.13 Jurisdiction and Venue. Any action involving claims of a breach of this Plan
must be brought exclusively in the courts of the State of Minnesota and/or the United States
District Court, District of Minnesota.

     6.14 Headings. Headings are inserted in this Plan for convenience of reference only
and are to be ignored in the construction of the provisions of the Plan.

     6.15 Notice. Any notice or filing required or permitted to be given to Hawkins under
this Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified
mail, to the Human Resources Department, or to such other entity as Hawkins may designate from time
to time. Such notice shall be deemed given as to the date of delivery, or, if delivery is made by
mail, as of the date shown on the postmark on the receipt for registration or certification.

     6.16 Successors. This Plan shall be binding upon Hawkins and its successors and
assigns. Hawkins shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to assume and agree to perform all of Hawkins’ obligations hereunder in
the same manner and to the same extent that Hawkins would have been required to perform if no
succession had taken place.

fb.us.7124283.02

11

 

Appendix A

	 	 	 	 	 
	Tier	 	Salary Continuation Period
	 	 	Termination Without Cause (Not a Termination	 	 
	 	 	Due to Change In Control)	 	Termination Due to Change In Control
	Tier 1

	 	18 months
	 	24 months
	Tier 2

	 	18 months
	 	24 months
	Tier 3

	 	12 months
	 	18 months
	Tier 4

	 	12 months
	 	18 months

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00192-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00192-of-00352.parquet"}]]