Document:

agen-ex104_180.htm

Exhibit 10.4

CONSULTING AGREEMENT

This Consulting Agreement (this “Agreement”), effective as of April 1, 2017 (the “Effective Date”) is made between Agenus Inc., a Delaware corporation, having an address at 149 Fifth Avenue, Suite 500, New York, NY 10010 (“Agenus”), and Dr. Robert Stein, an individual currently residing at 7 Peter Cooper Rd., Apt 10-B, New York, NY 10010 (the “Consultant”) (each a “Party” and collectively the “Parties”).

WHEREAS, Consultant and Agenus were previously parties to an Employment Agreement dated June 30, 2015 (the “Employment Agreement”), pursuant to which Consultant served as Agenus’ President of Research & Development;

WHEREAS, concurrent with the execution of this Agreement, Consultant and Agenus entered into a severance agreement that, amongst other things, terminated the Employment Agreement; and

WHEREAS, Agenus desires to retain the services of Consultant, and Consultant desires to perform certain services exclusively for Agenus, as set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Agenus and Consultant hereby agree as follows:

	
1.
	
Services.

1.1Description of Services. Subject to the terms and conditions of this Agreement, Agenus hereby exclusively retains Consultant as a Senior Advisor, Research & Development, to its CEO, Dr. Garo Armen, and/or his designees, to provide scientific guidance and advisory services to Agenus and/or its Affiliates, and such other services as may be requested from time to time (collectively, the “Services”).  Consultant shall make himself reasonably available to Agenus on full time basis to the extent requested by Agenus during the Term, including providing updates to the CEO at least bi-weekly, and participating in Agenus research personnel meetings upon request of the CEO or his designee.  Consultant shall perform the Services promptly and in compliance with the provisions of this Agreement and all applicable laws, rules and regulations, including if applicable, laws and regulations administered by the U.S. Food and Drug Administration (“FDA”) regarding the promotion and marketing of pharmaceutical products.  Consultant shall ensure that the Services are performed promptly and diligently.  

As used in this Agreement “Affiliate” means any corporation, firm, partnership or other entity, which controls, is controlled by or is under common control with a Party.  As used in this Agreement, “control” means direct or indirect ownership of fifty percent (50%) or more of the outstanding stock or other voting rights entitled to elect directors thereof or the ability to otherwise control the management of the corporation, firm, partnership or other entity.

1.2Non-Solicitation.  Consultant agrees that during the term of this Agreement and for a period of two (2) years thereafter, Consultant shall not, directly or indirectly, (i) solicit, divert, or take away, or attempt to divert or take away, the business or patronage of any actual or prospective clients, customers, or accounts of Agenus, or (ii) recruit, solicit, or hire any employee of Agenus, or induce or attempt to induce any employee of Agenus, to discontinue his or her relationship with Agenus.

1.3Third Party Obligations.  Consultant represents and warrants to Agenus that none of his or her current obligations conflict with this Agreement or the Services to be provided hereunder.  Consultant covenants not to enter into any such conflicting agreement or incur any such conflicting obligation without the prior written consent of Agenus.  Consultant further covenants that the performance of the Services will not breach any agreement or obligation with any third party, including without limitation any obligation to refrain from engaging in activities that may compete with such party.  

1.4Non-Competition.  During the Term and for a period of 12-months thereafter, Consultant shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, compete with Agenus or any of its Affiliates or undertake any planning for any business competitive with Agenus or any of its Affiliates. Specifically, but without limiting the foregoing, Consultant agrees not to engage in any manner in any activity that is directly or indirectly competitive with the business of Agenus or any of its Affiliates as conducted or under consideration at any time during the Term or during Consultant’s previous employment with Agenus. Restricted activity includes without limitation accepting employment or a consulting position with any Person (as defined below) who is, or at any time during the Term or during Consultant’s previous employment with Agenus has been, a competitor or a customer of Agenus or any of its Affiliates. For the purposes of this Section 1.4, the business of Agenus and its Affiliates shall include all Products (as defined below), and Consultant’s undertaking shall encompass all items, products and services that may be used in substitution for Products. The foregoing shall not prohibit Consultant’s passive ownership of two percent (2%) or less of the equity securities of any publicly traded company. Consultant agrees that, during the Term and for a period of 12-months thereafter, he will not undertake any outside activity, whether or not competitive with the business of Agenus or its Affiliates, that could reasonably give rise to a conflict of interest or otherwise interfere with his duties and obligations to Agenus or any of its Affiliates.  “Person” means an individual, a corporation, an association, a partnership, an estate, a trust and any other entity or organization, other than Agenus or any of its Affiliates.  “Products” mean all products planned, researched, developed, under development, tested, manufactured, sold, licensed, leased or otherwise distributed or put into use by Agenus or any of its Affiliates, together with all services provided or planned by Agenus or any of its Affiliates, during the Term or during Consultant’s previous employment with Agenus.

1.5No Disparagement; Moral Hazard Clause.  Consultant agrees that during the Term and thereafter, Consultant shall not disparage Agenus or any of its Affiliates, or their respective directors, officers, employees, consultants, or agents, or otherwise make any statement or take any actions that would be materially harmful to the business, interests or reputation of Agenus or any of its Affiliates, or their respective directors, officers, employees, consultants, or agents.  Consultant further agrees that that during the Term and thereafter, Consultant shall not engage in any behavior that could adversely impact the reputation of Agenus, including but not limited to committing, or being arrested for or charged with, any crime, or committing any acts of moral turpitude.

 

	
2.
	
Compensation.

2.1Compensation.  In exchange for the timely completion of Services during the Term, Agenus shall pay to Consultant a monthly retainer of $35,416.67 (the “Compensation”), and Consultant shall be entitled to continuation of vesting during the Term with respect to all equity incentive awards held by Consultant as of the Effective Date.  In the event of a Change of Control (as defined in the Employment Agreement) during the Term, all vesting of Consultant’s stock options will immediately be accelerated in full.  All payments for Compensation shall be made within 15 days following the end of each month Services are performed.  In addition to the Compensation provided for above, (i) so long as this Agreement remains in effective at all times on and through the one-year anniversary of the Effective Date (e.g., April 1, 2018), Consultant may be eligible to receive  up to an additional $170,000 in Agenus’ sole discretion as a bonus payment for Services performed; and (ii) so long as this Agreement remains in effective at all times on and through the 15-month anniversary of the Effective Date (e.g., July 1, 2018), Consultant may be eligible to receive up to an additional $42,500, in Agenus’ sole discretion as a bonus payment for Services performed.  All monies to be paid under this Agreement shall be paid to Consultant in U.S. Dollars.  Consultant acknowledges and agrees that payments made hereunder are for Services performed by Consultant.  No payments shall be passed through to third parties on behalf of Agenus without a valid invoice or other written documentation between the Parties evidencing such payment arrangement.

2.2Reimbursement of Expenses.  Agenus shall reimburse Consultant for reasonable travel and other out-of-pocket expenses incurred by Consultant in performance of the Services and in accordance with Agenus’s reimbursement policies, as they may be amended from time to time by Agenus, provided that (i) Consultant shall have submitted to Agenus written expense statements and other supporting documentation in a form that is reasonably satisfactory to Agenus, (ii) any individual expenses in excess of $500.00 must be pre-approved by Agenus in writing, and (iii) all expenses incurred under this Agreement in the aggregate shall not exceed $2,500.00 without Agenus’ prior written approval.  Agenus shall provide Consultant with a check for any amounts due under this Section 2.2 within forty-five (45) days after Agenus receives satisfactory documentation.

2.3Independent Contractor.  Consultant is an independent contractor of Agenus.  Consultant acknowledges and agrees that Agenus will not provide Consultant with any benefits.  Without in any way limiting the generality of the foregoing, Consultant acknowledges and agrees that he or she has no right to participate in any Agenus equity plan(s).  Consultant is also responsible for the payment and the withholding of all applicable taxes, levies and/or duties applicable to any compensation or reimbursements paid to Consultant hereunder in accordance with all applicable laws, rules and regulations.  In the event it is determined that Agenus has failed to make proper payment or withholding of income, payroll, or other taxes with respect to any compensation or reimbursements paid to Consultant hereunder and a federal or state tax authority determines that Agenus is liable for such nonpayment or underpayment or for any fines, penalties or interest connected with Consultant’s nonpayment or underpayment or the Parties’ characterization of such compensation or reimbursements, Consultant agrees to and shall, upon delivery of written notice from Agenus of a claim hereunder, indemnify and hold Agenus harmless from those amounts (including taxes, fines and/or penalties incurred in connection therewith) which Agenus pays.  

 

2.4No Additional Obligation/Fair Market Value.  Consultant acknowledges and agrees that the compensation payable hereunder represents Agenus’s full and complete obligation for any and all Services to be rendered by Consultant under this Agreement.  Consultant further represents to Agenus that the compensation paid hereunder represents fair market value for Consultant’s time and the Services hereunder and is consistent with fees paid to Consultant for similar time and services provided by Consultant to others.  Both Parties acknowledge that the compensation is not determined in a manner that takes into account the volume or value of any future business that might be generated between the Parties.  In addition, Consultant and Agenus acknowledge that nothing in this Agreement shall be construed to require Consultant to promote, purchase, prescribe, or otherwise recommend any Agenus products being marketed or under development.

	
3.
	
Term and Termination.

3.1Term.  This Agreement shall commence on the Effective Date and shall remain in effect for a period of 15 months, unless extended by mutual written agreement of the Parties, or earlier terminated in accordance with the provisions of this Article 3 (such 15-month period as it may be extended or terminated, the “Term”).

3.2Termination.  

(a)The Parties may mutually agree to terminate this Agreement at any time.  

(b)Agenus may terminate this Agreement immediately upon written notice to Consultant (or his legal representative) in the event (i) of the death or legal incapacity of Consultant; (ii) that Consultant is otherwise no longer able to perform the Services; or (iii) if Consultant breaches any provision of Sections 1.2, 1.3, 1.4, 1.5 or Articles 4, 5 or 6.

3.3Survival.  The following provisions shall survive the expiration or termination of this Agreement: Articles 4, 5 and 6; Sections 1.2, 1.4, 1.5, 7.4 through 7.10, and this Section 3.3.

	
4.
	
Confidential Information.

4.1Definition of Confidential Information.  Confidential Information shall mean any technical or business information furnished by or on behalf of Agenus to Consultant in connection with this Agreement or developed by Consultant in the course of performing the Services, regardless of whether such Confidential Information is in oral, electronic or written form.  Such Confidential Information may include, without limitation, trade secrets, know-how, inventions, technical data or specifications, testing methods, business or financial information, research and development activities, product and marketing plans, and customer and supplier information.

4.2Obligations.  Consultant shall

(a)maintain all Confidential Information in strict confidence; and

(b)use all Confidential Information solely for the purpose of providing the Services as  requested by Agenus; and

 

(c)reproduce the Confidential Information only to the extent necessary for providing the Services as requested by Agenus, with all such reproductions being considered Confidential Information;

(d)disclose the Confidential Information only as expressly permitted in order to perform the Services; and

(e)not disclose or publish any Confidential Information to any third party without the express prior written consent of Agenus, in each case in Agenus’s sole discretion.

4.3Exceptions.  The obligations of Consultant under Section 4.2 shall not apply to the extent that Consultant can demonstrate that certain information:

(a)was in the public domain prior to the time of its disclosure or development under this Agreement;

(b)entered the public domain after the time of its disclosure or development under this Agreement other than due to an act or omission by Consultant;

(c)was independently developed by Consultant prior to the time of its disclosure or development under this Agreement and without access to Confidential Information; or

(d)is or was disclosed to Consultant at any time prior to its disclosure or development under this Agreement, without restriction, by a third party having no fiduciary relationship with Agenus and having no obligation of confidentiality with respect to such Confidential Information.

4.4Required Disclosures.  In addition Consultant may disclose Confidential Information to the extent necessary to comply with applicable laws or regulations, or with a court or administrative order, provided that Consultant (i) gives Agenus prompt written notice of such requirement, (ii) takes all reasonable and lawful actions to obtain confidential treatment for such disclosure and, if possible, to minimize the extent of such disclosure, and (iii) discloses only the Confidential Information strictly required to comply with such legal obligation.

4.5Return of Confidential Information; Survival of Obligations.  Upon the termination of this Agreement, or earlier at the request of Agenus, Consultant shall return to Agenus all originals, copies, and summaries of documents, materials, and other tangible manifestations of Confidential Information in the possession or control of Consultant.  The obligations set forth in this Article 4 shall remain in effect for a period of five (5) years after termination of this Agreement, except that the obligations of Consultant to return Confidential Information shall survive until fulfilled.  Consultant acknowledges and agrees that the Confidential Information is of extreme value to Agenus, and any use or disclosure thereof other than as expressly allowed under this Agreement would cause irreparable harm to Agenus for which Agenus could obtain relief as contemplated in Section 7.9 of this Agreement, and that such unauthorized disclosure may represent Consultant’s violation of U.S. securities laws.

 

	
5.
	
Developments; Third Party IP; Avoidance of Claims.

5.1Proprietary Property.  Consultant acknowledges and agrees that all Confidential Information and Proprietary Property (as defined below) and any and all intellectual property rights therein is and shall remain the exclusive property of Agenus or the third party entrusting any Confidential Information to Agenus.  Consultant hereby assigns, conveys, and grants, and agrees to assign, convey, and grant to Agenus, all of his right, title, and interest in and to any and all Proprietary Property.  Consultant agrees to promptly disclose to Agenus any and all Proprietary Property.  Consultant further agrees to cooperate fully to allow Agenus to obtain patent or other proprietary protection for such Proprietary Property, all in the name of Agenus and at Agenus’s cost and expense, and shall execute and deliver all requested applications, assignments and other documents and take such other measures as Agenus shall reasonably request in order to perfect and enforce Agenus’s rights in the Proprietary Property (including transfer of possession to Agenus of all Proprietary Property embodied in tangible materials), and hereby appoints Agenus’s attorney to execute and deliver any such documents on his behalf in the event Consultant fails or refuses to do so.  As used in this Agreement, “Proprietary Property” shall mean any and all inventions, developments, data (including without limitation, written, printed, graphic, video and audio material, and information contained in any computer database or computer readable form), discoveries, improvements, ideas, concepts, computer programs, algorithms, protocols, systems and related documentation, and any other works of invention or authorship (whether or not patentable, copyrightable, or entitled to or eligible for other forms of legal protection) generated, conceived, discovered, written, invented, developed, or reduced to practice or tangible medium by or on behalf of Consultant (whether alone, jointly with others, or under Consultant’s direction) whether or not in the course of providing the Services, and any and all patent, patent applications, copyrights, trademarks, trade secrets or other intellectual property rights in any of the foregoing.  Consultant shall maintain adequate records (whether written, electronic, or otherwise) to document the Proprietary Property, including without limitation the conception and reduction to practice of all inventions, and shall make such records available to Agenus upon request.  Agenus shall have sole ownership of all such records.  

5.2Works.  In addition and without in any way limiting the foregoing, Consultant agrees that all right, title and interest in and to any works of authorship or copyrightable materials resulting from the performance of the Services and all copies thereof, in whatever media, (the “Works”) shall be in Agenus.  Consultant specifically agrees that, to the extent that any portion of the Works constitutes a work protectable under the copyright law of the United States (the “Copyright Law”), Agenus and Consultant agree that any such portion of the Works has been specifically ordered and commissioned by Agenus and shall be considered a “work made for hire” as such term is used and defined in the Copyright Law.  Accordingly, Agenus shall be considered the “author” of such portion of the Works and the sole and exclusive owner throughout the world of copyright therein.  In the event that any portion of the Works constitutes a work protectable under the Copyright Law but does not qualify as a “work made for hire” as such term is used and defined in the Copyright Law, Contractor hereby assigns and agrees to assign to Agenus all right, title and interest in and to copyright in the Works or in any such portion thereof and agrees to execute and deliver to Agenus, upon request, appropriate assignments of copyright and such other documents and instruments as Agenus may request.

 

5.3Third-Party Intellectual Property.  Consultant acknowledges that Agenus does not desire to acquire any trade secrets, know-how, confidential information, or other intellectual property that Consultant may have acquired from or developed for any third party (“Third-Party IP”).  Consultant agrees that in the course of providing the Services, Consultant shall not improperly use or disclose any Third-Party IP. 

5.4Avoidance of Claims by Third-Parties.  Unless covered by an appropriate agreement between any third party and Agenus, Consultant shall not engage in any activities or use any facilities, funds or equipment, in the course of providing Services, which could result in claims of ownership to any Proprietary Property by such third party. 

	
6.
	
U.S. Foreign Corrupt Practices Act Compliance.  

6.1FCPA.  Consultant understands that Agenus is an issuer of securities in the United States and is subject to the provisions of the U. S. Foreign Corrupt Practices Act, 15 U.S.C. §§ 78m, 78dd-1 through 78dd-3 (“FCPA”).  This law prohibits making, promising or offering to make corrupt payments to foreign officials, political parties or candidates, or making payments to other persons who will offer or make payments to any of the aforementioned parties in order to obtain business, retain business or gain an improper advantage.  Consultant represents and warrants to Agenus that Consultant is familiar with and understands the FCPA.  

6.2Representations.  Consultant represents and warrants to Agenus that throughout the period in which Consultant provides Services to Agenus, neither Consultant, nor any person performing Services on behalf of Consultant will engage in any activity that could cause a violation of any provision of the FCPA by Agenus.  Consultant represents and warrants that Consultant has not made, promised to make, or arranged for any third party to make any payments or gifts to foreign officials in connection with Consultant’s engagement by Agenus.  Further, Consultant represents and warrants to Agenus that Consultant has not violated any anti-corruption law and further that Consultant is not involved in, or the subject of, any investigation involving bribery, corruption or improper payments to foreign government officials, as defined in the FCPA.  Consultant agrees to update these representations and warranties on a periodic basis as required by Agenus in a format prescribed by Agenus.

6.3Notice of Violation.  Consultant agrees to notify Agenus immediately in writing if Consultant or any person who is performing Services hereunder on behalf of Consultant is suspected of violating any anti-corruption law or becomes involved in, or a subject of, an investigation or law enforcement inquiry into possible improper payments to foreign officials or possible violations of anti-corruption laws.   Consultant further agrees to provide such notification if Consultant or any person performing Services hereunder on behalf of Consultant becomes involved in any action, suit, claim, investigation or proceeding that is pending, or to the knowledge of Consultant threatened, relating to a potential violation of any anti-corruption laws, including the FCPA.

6.4Audits.  Consultant agrees to grant Agenus the right to audit Consultant’s books and records regarding the receipt and disposition of any payments made to Consultant by Agenus, and Consultant further agrees to cooperate with Agenus in connection with such audits.

 

6.5Material Provision.  It is agreed between Consultant and Agenus that this Article 6 is deemed by the Parties to be a material provision of this Agreement.

6.6Agenus Policy.  Consultant has received a copy of Agenus’s Policy on Improper Payments and Compliance with the FCPA (the “Policy”).  Consultant represents and warrants that Consultant has had the opportunity to review the Policy, understands the Policy, and will comply with it.

	
7.
	
Miscellaneous.

7.1Counterparts. This Agreement may be executed in counterparts, which, when taken together, shall constitute one agreement. If any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

7.2Assignment.  This Agreement may not be assigned by either Party without the prior written consent of the other Party, except that Agenus may assign this Agreement to an affiliate or in connection with the merger, consolidation, or sale of all or substantially all of its business or assets relating to this Agreement.  This Agreement shall inure to the benefit of and be binding upon the Parties and their respective lawful successors, assigns, heirs, and personal representatives.

7.3Insider Trading.  Consultant acknowledges that Consultant may receive material, non-public information about Agenus and its business in the course of providing the Services, that this information must be maintained in strict confidence, and that the U.S. securities laws restrict trading on the basis of such information or providing such information to third parties who may trade on such information.

7.4Publicity.  Consultant consents to use by Agenus of Consultant’s name and likeness in written materials or oral presentations to current or prospective customers, investors or others, provided that such materials or presentations accurately describe the nature of Consultant’s relationship with or contribution to Agenus.

7.5Notices.   Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed given (a) when delivered personally, (b) upon confirmation of delivery by email if sent during normal business hours, and otherwise on the next business day, (c) on the next business day after timely delivery to an overnight courier (postage prepaid), or (d) on the third business day after deposit in the United States mail (certified or registered mail return receipt requested, postage prepaid), to the addresses of the Parties set forth in the first paragraph of this Agreement, and in the case of correspondence to Agenus, with a copy to “Legal Department” at the same address.  Either Party may change its designated address by notice to the other Party in the manner provided in this Section 7.5.

7.6Entire Agreement; Amendment.  This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous oral and prior written agreements and understandings.  This Agreement may 

 

be modified, amended, or supplemented only by means of a written instrument signed by both Parties.  Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or fail to act in any other instance, whether or not similar.

7.7Governing Law.  This Agreement has been drafted in the English Language and the English language shall govern its interpretation.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York irrespective of any conflict of laws principles.

7.8Severability.  In the event that any provision of this Agreement shall, for any reason, be held to be invalid or unenforceable in any respect, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision had not been included herein.  If any provision hereof shall, for any reason, be held by a court to be excessively broad as to duration, geographical scope, activity, or subject matter, it shall be construed by limiting and reducing it to make it enforceable to the extent compatible with applicable law as then in effect.  To the extent this Agreement may be construed in accordance with the laws of any state that limits the assignability to Agenus of certain Proprietary Property, the provisions of this Agreement shall be modified to conform to such state limitation while most closely effectuating the original intention of the Parties (e.g., by providing for fully paid up license rights, or the like).

7.9Equitable Relief.  Consultant acknowledges that the restrictions contained in this Agreement are necessary for the protection of the business and goodwill of Agenus and are reasonable for such purpose.  Consultant agrees that any breach or threatened breach of his or her obligations under this Agreement will cause irreparable harm to Agenus.  Therefore, in addition to any other remedies that may be available to Agenus, Agenus may apply for and obtain immediate injunctive relief in any court of competent jurisdiction to restrain the breach or threatened breach of, or otherwise to specifically enforce, any obligations of Consultant under this Agreement.

7.10Massachusetts Information Security Regulations Compliance. Massachusetts Information Security Regulations, 201 Code of Mass. Regs. 17.00 et seq. (the “IS Regulations”) mandate procedures to safeguard the “Personal Information,” as defined in the IS Regulations, of Massachusetts residents. Because Consultant may have access to the Personal Information of Agenus’s employees, contractors, business associates, or customers who are Massachusetts residents (“Protected Information”), the IS Regulations require Consultant to certify compliance with the IS Regulations. Accordingly, Consultant agrees that, as long as Consultant has access to or maintains copies of Protected Information Consultant will: (a) comply with the IS Regulations with respect to the Protected Information, (b) promptly notify Agenus of any suspected or actual data breach involving Protected Information, and (c) cooperate with Agenus to investigate and remediate any suspected or actual data breach involving Protected Information.

7.11Whistleblower Notice.  Pursuant to 18 USC § 1833(b), an individual may not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret: (i) made in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; and/or 

 

(ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  Accordingly, the Parties to this Agreement have the right to disclose in confidence trade secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The Parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.

[The remainder of this page is intentionally left blank]

 

IN WITNESS WHEREOF, the Parties each have caused this Agreement to be executed by their duly respective authorized representative as of the Effective Date. 

 

	
AGENUS INC.
	
 
	
CONSULTANT

	
 
	
 
	
 

	
/s/ Garo H. Armen
	
 
	
/s/ Robert Stein

	
Name: Garo H. Armen, PhD
	
 
	
Name: Dr. Robert Stein

	
Title:  Chairman & CEO
	
 
	
Date: March 29, 2017

	
Date:  March 29, 2017Exhibit 10.1

 

MERGER CONSIDERATION ALLOCATION AGREEMENT

 

This Merger Consideration
Allocation Agreement (this “Agreement”) is made and entered into as of May 3, 2017 by and among Sentio Healthcare
Properties, Inc., a Maryland corporation (the “Company”), Sentio Healthcare Properties OP, L.P., a Delaware
limited partnership (the “Operating Partnership”), Sentinel RE Investment Holdings LP, a Delaware limited partnership
(the “Investor”), Sentio Investments, LLC, a Florida limited liability company (the “Advisor”),
and, solely with respect to Section 3, Section 5, Section 6, Section 7, and Section 10, KAREP
Master JV LLC, a Delaware limited liability company (“Parent”).

 

RECITALS

 

WHEREAS, the Company, the
Operating Partnership, Parent, KAREP Acquisitions Vehicle, LLC and Advisor, solely in its capacity as stockholders’ representative,
intend to enter into that certain Agreement and Plan of Merger to be dated as of the date hereof (the “Merger Agreement”),
pursuant to which the Company will be merged with and into Merger Sub (as defined in the Merger Agreement), with Merger Sub being
the surviving entity and each share of Company Common Stock (as defined in the Merger Agreement) and Company Preferred Stock (as
defined in the Merger Agreement) issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement)
will be converted into the right to receive the applicable Merger Consideration (as defined in the Merger Agreement) upon the terms
and conditions set forth in the Merger Agreement. Any capitalized term not otherwise defined herein shall have the meaning given
such term in the Merger Agreement.

 

WHEREAS, the Company and
the Advisor are party to that certain Advisory Agreement dated as of January 1, 2013 (as amended by that certain Transition to
Internal Management Agreement (as amended by those certain Amendments No. 1, No. 2, No. 3 and No. 4 to Transition to Internal Management
Agreement), collectively the “Advisory Agreement”), pursuant to which the Advisor would be entitled to certain
payments as a result of the transactions contemplated by the Merger Agreement and the termination of the Advisory Agreement.

 

WHEREAS, the Investor and
the Company are parties to that certain Second Amended and Restated Limited Partnership Agreement of the Operating Partnership
dated as of August 5, 2013 (as amended on December 22, 2014 and August 31, 2016, the “Partnership Agreement”).
Pursuant to the Merger Agreement it is contemplated that the OP Series B Preferred Units will be treated as provided herein, notwithstanding
anything contained in the Partnership Agreement or any other agreement to which the Investor is a party.

 

WHEREAS, in connection
with the determination of the Aggregate Merger Consideration and ultimately, the Common Merger Consideration, the parties hereto
desire to (a) confirm the amounts that the Investor will receive as consideration for all of its outstanding OP Series B Preferred
Units and agree upon how such units will be redeemed, (b) confirm the amounts that the Investor will receive as consideration for
all of its outstanding Company Preferred Stock, (c) confirm the amounts the Advisor will be entitled to receive in connection with
the consummation of the Merger (the “Promote Payment”) and the amount as a result of the termination of the
Advisory Agreement (the “Advisor Termination Payment” and together with the Promote Payment the “Advisory
Agreement Payment Amount”) and (d) confirm the allocation of the contingent value rights (each a “CVR”
and collectively, the “CVRs”) among the holders of Company Common Stock, Investor and the Advisor.

 

     

     

    

 

WHEREAS, in connection
with the transactions contemplated by the Merger Agreement, on or prior to the Calculation Date, the Company and Parent will agree
upon the Aggregate Cash Merger Consideration, which amount will be between $382,407,161 and $398,407,161 (the “Cash Consideration
Range”) per the terms of Section 2.1 of the Merger Agreement (subject to possible increases to the range per the terms
of the last proviso of Section 2.1(a) of the Merger Agreement).

 

WHEREAS, in connection
with the transactions contemplated by the Merger Agreement, the ultimate aggregate value of the CVRs will be between $0 and $8,760,000
(the “CVR Consideration”) per the terms of the Merger Agreement, the Indemnity Escrow Agreement and the Contingent
Value Rights Agreement (subject to possible increases to the range per the terms of Section 2.1(a) of the Merger Agreement).

 

NOW, THEREFORE, in consideration
of the mutual covenants and agreements contained in this Agreement and subject to the conditions herein contained, and intending
to be legally bound hereby, the parties hereto agree as follows:

 

AGREEMENT

 

1.          Allocation
of the Aggregate Cash Merger Consideration. Attached hereto as Exhibit A is a sample calculation of the Aggregate Cash
OP Series B Preferred Units Consideration, the aggregate Common Cash Merger Consideration payable with respect to all shares of
Company Common Stock entitled thereto, the Aggregate Preferred Merger Consideration payable with respect to all shares of Company
Preferred Stock entitled thereto, and the Promote Payment, each based on the Initial Estimated Closing Date for the calculation
of the Aggregate Cash Merger Consideration and the high and low end of the Cash Consideration Range. In addition, Exhibit A
sets forth the amount by which each of the foregoing changes on a monthly basis for later Estimated Closing Dates.

 

2.          Allocation
of the CVR Consideration. Attached hereto as Exhibit B is the calculation setting forth the percentage allocation among
the OP Series B Preferred Units, the Company Common Stock and the Advisor of the CVR Consideration. Holders of Company Common Stock
shall receive one CVR for each share of Company Common Stock, and the Investor and the Advisor shall receive the corresponding
numbers of CVRs that will give effect to the percentage allocation of CVRs among the OP Series B Preferred Units, the Company Common
Stock and the Advisor.

 

    	 	2	 

     

    

 

3.          Treatment
of OP Series B Preferred Units and Company Preferred Stock.

 

(a)          Redemption.
Notwithstanding anything contained in the Partnership Agreement or any other agreement to which the Investor is a party, conditioned
upon the occurrence of the Merger, the parties agree that the Operating Partnership shall, and Parent and Merger Sub shall cause
the Operating Partnership to, redeem all of the issued and outstanding OP Series B Preferred Units effective as of immediately
following the Effective Time for the Aggregate OP Series B Preferred Units Consideration as defined below in subsection (b). No
further notice of the redemption shall be required to be delivered by the Operating Partnership and the Investor waives any notice
requirements for a redemption of the OP Series B Preferred Units to which the Investor may otherwise be entitled. Furthermore,
the Investor agrees that notwithstanding any right the Investor may have in the Partnership Agreement or otherwise to convert the
OP Series B Preferred Units to Company Common Stock, the Investor agrees that it will not exercise such right for so long as this
Agreement remains in effect.

 

(b)          Aggregate
OP Series B Preferred Units Consideration. Notwithstanding anything contained in the Partnership Agreement or any other agreement
to which the Investor is a party, Parent, the Company, the Operating Partnership, the Advisor and the Investor hereby agree that
the “Aggregate Cash OP Series B Preferred Units Consideration” payable upon the redemption of the OP Series B Preferred
Units, subject to the final determination of the Aggregate Cash Merger Consideration pursuant to Section 2.1 of the Merger Agreement
(based on the Cash Consideration Range) is between $216,355,482 and $226,054,788 based on the Initial Estimated Closing Date (subject
to possible increases to the range per the terms of the last proviso of Section 2.1(a) of the Merger Agreement). Notwithstanding
anything contained in the Partnership Agreement or any other agreement to which the Investor is a party, Parent, the Company, the
Operating Partnership, the Advisor and the Investor hereby agree that upon determination of the Aggregate Cash Merger Consideration
pursuant to Section 2.1 of the Merger Agreement, the Aggregate Cash OP Series B Preferred Units Consideration shall be determined
based on the sample calculation set forth on Exhibit A using the final Estimated Closing Date as determined pursuant to
the Merger Agreement. In addition, upon the Effective Time, Parent, the Company, the Operating Partnership, the Advisor and the
Investor agree that the Investor shall be entitled to 57.78% of the aggregate number of CVRs to be issued. The aggregate number
of CVRs issued to the Investor in respect of the OP Series B Preferred Units together with the Aggregate Cash OP Series B Unit
Consideration is the “Aggregate OP Series B Unit Consideration.” Notwithstanding anything in the foregoing to the contrary,
distributions on the OP Series B Preferred Units shall continue to be made until the Closing Date, including payment thereof on
a daily basis for the period between the date of the last regularly paid quarterly distribution and the Closing Date, in accordance
with the Partnership Agreement and in accordance with Section 5.1(c) and the last paragraph of Section 5.1 of the Merger Agreement.

 

(c)          Company
Preferred Stock. The Investor is the only holder of Company Preferred Stock. Parent, the Company, the Operating Partnership,
the Advisor and the Investor hereby agree to the treatment of all of the issued and outstanding Company Preferred Stock in accordance
with Section 2.2(b) of the Merger Agreement. The Company shall continue to declare and pay dividends on the Company Preferred Stock
in accordance with the terms thereof, and the Company shall declare and pay immediately prior to the Effective Time a dividend
for the period from the most recent dividend payment date for the Company Preferred Stock to the date of the Closing Date in accordance
with Section 5.1(c) and the last paragraph of Section 5.1 of the Merger Agreement.

 

    	 	3	 

     

    

 

4.          Payments
to the Advisor. Notwithstanding anything contained in the Advisory Agreement, or any other agreement pursuant to which the
Company, the Operating Partnership, the Advisor and the Investor are parties, the Company, the Operating Partnership, the Advisor
and the Investor agree that the Promote Payment, subject to the final determination of the Aggregate Cash Merger Consideration
pursuant to Section 2.1 of the Merger Agreement (based on the Cash Consideration Range) is between
$4,697,186 and $5,483,061 based on the Initial Estimated Closing Date (subject to possible increases to the range per the
terms of the last proviso of Section 2.1(a) of the Merger Agreement). The Company, the Operating Partnership, the Advisor and the
Investor agree that upon final determination of the Aggregate Cash Merger Consideration in accordance with Section 2.1 of the Merger
Agreement, the amount of the Promote Payment shall be determined based on the sample calculation on Exhibit A using the
final Estimated Closing Date as determined pursuant to the Merger Agreement. Furthermore, the Company, the Operating Partnership,
the Advisor and the Investor agree that the Advisor is entitled to 4.22% of the aggregate number of CVRs to be issued. In addition,
the Company, the Operating Partnership, the Advisor and the Investor agree that upon the Effective Time and as a result of the
termination of the Advisory Agreement, the Advisor Termination Payment shall be fixed based on the Estimated Closing Date agreed
to by the parties pursuant to Section 2.1 of the Merger Agreement, which amount shall be determined in accordance with the sample
calculation set forth on Exhibit C. Notwithstanding the foregoing, prior to the termination of the Advisory Agreement, the
Advisor shall continue to be entitled to receive all amounts payable under the Advisory Agreement through the Effective Time.

 

5.          Funding
of the Aggregate OP Series B Preferred Units Consideration. Prior to the Effective Time, Parent shall deposit with the Paying
Agent cash in immediately available funds in an amount equal to the Aggregate Cash OP Series B Preferred Units Consideration in
accordance with Section 2.4 of the Merger Agreement. Such amount will be deemed to have been contributed by the Company to the
Operating Partnership, and used by the Operating Partnership to redeem the OP Series B Preferred Units in accordance with Section
3(a). Immediately after the Effective Time, Parent and Merger Sub shall cause (i) the Paying Agent to pay the Investor the
Aggregate Cash OP Series B Preferred Units Consideration to the account designated by the Investor and (ii) the Rights Agent to
deliver to the Investor the aggregate number of CVRs as set forth in Section 3(b).

 

6.          Termination
of Certain Related Party Agreements. The Company, the Operating Partnership and the Investor hereby agree that effective as
of the Effective Time each of the Securities Purchase Agreement, dated as of February 10, 2013, among the Company, the Operating
Partnership and the Investor, as amended and the Investor Rights Agreement, dated as of February 10, 2013, among the Investor,
the Company and the Operating Partnership, as amended (the “IRA”), shall each be terminated and shall have no
further force or effect, and no party thereto shall have any liability or obligation thereunder as of the Effective Time. The Company
and the Advisor hereby agree that effective as of the Effective Time the Advisory Agreement shall be terminated and shall have
no further force or effect, and no party thereto shall have any liability or obligation thereunder as of the Effective Time.

 

		7.	Representations and Warranties.

 

		(a)	The Company. The Company hereby represents and warrants
that:

 

    	 	4	 

     

    

 

		(i)	The Company is a corporation duly organized, validly existing
and in good standing under the Laws of Maryland and has the requisite corporate power and authority to conduct its business as
now being conducted.

 

		(ii)	The Company has all necessary corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

		(iii)	The execution, delivery and performance by the Company
of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly and validly authorized by
the Company Board and no other corporate action on the part of the Company is necessary to authorize the execution and delivery
by the Company of this Agreement, and the consummation by it of the transactions contemplated hereby.

 

		(iv)	This Agreement has been duly executed and delivered by
the Company and, assuming due and valid authorization, execution and delivery hereof by the other parties hereto, is a valid and
binding obligation of the Company enforceable against the Company in accordance with its terms, except that the enforcement hereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating
to creditors’ rights generally and (b) general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at Law) (collectively, the “Enforceability Exceptions”).

 

		(b)	The Operating Partnership. The Operating Partnership
hereby represents and warrants that:

 

		(i)	The Operating Partnership is a limited partnership duly
organized, validly existing and in good standing under the Laws of Delaware and has the requisite power and authority to conduct
its business as now being conducted.

 

		(ii)	The Operating Partnership has all necessary power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

		(iii)	The execution, delivery and performance by the Operating
Partnership of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly and validly
authorized and no other action on the part of the Operating Partnership is necessary to authorize the execution and delivery by
the Operating Partnership of this Agreement, and the consummation by it of the transactions contemplated hereby.

 

    	 	5	 

     

    

 

		(iv)	This Agreement has been duly executed and delivered by
the Operating Partnership and, assuming due and valid authorization, execution and delivery hereof by the other parties hereto,
is a valid and binding obligation of the Operating Partnership enforceable against the Operating Partnership in accordance with
its terms, except that the enforcement hereof may be limited by the Enforceability Exceptions.

 

		(v)	The Operating Partnership is not entering into this Agreement
with the intent to hinder, delay or defraud either present or future creditors. Immediately after giving effect to the redemption
of the OP Series B Preferred Units and the other transactions contemplated hereby and payment of all related fees and expenses,
the Operating Partnership will be Solvent. For purposes of this clause (v), the term “Solvent” with respect to the
Operating Partnership means that, as of any date of determination, (x) the amount of the fair saleable value of the assets
of the Operating Partnership and its Subsidiaries, taken as a whole, exceeds, as of such date, the sum of (i) the value of all
liabilities of the Operating Partnership and its Subsidiaries, taken as a whole, including contingent and other liabilities, as
of such date, as such quoted terms are generally determined in accordance with the applicable federal Laws governing determinations
of the solvency of debtors, and (ii) the amount that will be required to pay the probable liabilities of the Operating Partnership
and its Subsidiaries, taken as a whole on its existing debts (including contingent liabilities) as such debts become absolute
and matured; (y) the Operating Partnership will not have, as of such date, an unreasonably small amount of capital for the operation
of the business in which it is engaged or proposed to be engaged by Parent following such date; and (z) the Operating Partnership
will be able to pay its liabilities, including contingent and other liabilities, as they mature.

 

		(c)	The Investor. The Investor hereby represents and
warrants that:

 

		(i)	The Investor is a limited partnership duly organized, validly
existing and in good standing under the Laws of Delaware and has the requisite power and authority to conduct its business as
now being conducted.

 

		(ii)	The Investor has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

		(iii)	The execution, delivery and performance by the Investor
of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly and validly authorized and
no other action on the part of the Investor is necessary to authorize the execution and delivery by the Investor of this Agreement,
and the consummation by it of the transactions contemplated hereby.

 

    	 	6	 

     

    

 

		(iv)	This Agreement has been duly executed and delivered by
the Investor and, assuming due and valid authorization, execution and delivery hereof by the other parties hereto, is a valid
and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except that the enforcement
hereof may be limited by the Enforceability Exceptions.

 

		(d)	The Advisor. 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 Florida and has the requisite power and authority to conduct its business
as now being conducted.

 

		(ii)	The Advisor has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

		(iii)	The execution, delivery and performance by the Advisor
of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly and validly authorized and
no other action on the part of the Advisor is necessary to authorize the execution and delivery by the Advisor of this Agreement,
and the consummation by it of the transactions contemplated hereby.

 

		(iv)	This Agreement has been duly executed and delivered by
the Advisor and, assuming due and valid authorization, execution and delivery hereof by the other parties hereto, is a valid and
binding obligation of the Advisor enforceable against the Advisor in accordance with its terms, except that the enforcement hereof
may be limited by the Enforceability Exceptions.

 

		(e)	Parent. Parent hereby represents and warrants that:

 

		(i)	Parent is a limited liability company duly organized, validly
existing and in good standing under the Laws of Delaware and has the requisite power and authority to conduct its business as
now being conducted.

 

		(ii)	Parent has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

		(iii)	The execution, delivery and performance by Parent of this
Agreement, and the consummation by it of the transactions contemplated hereby, have been duly and validly authorized by the governing
body of Parent and no other action on the part of Parent is necessary to authorize the execution and delivery by Parent of this
Agreement, and the consummation by it of the transactions contemplated hereby.

 

		(iv)	This Agreement has been duly executed and delivered by
Parent and, assuming due and valid authorization, execution and delivery hereof by the other parties hereto, is a valid and binding
obligation of Parent enforceable against Parent in accordance with its terms, except that the enforcement hereof may be limited
by the Enforceability Exceptions.

 

    	 	7	 

     

    

 

8.          Covenants.

 

(a)          Transfer
of OP Series B Preferred Units. Absent the prior written consent of the other parties hereto, the Investor hereby agrees that,
from the date hereof until the termination of this Agreement, it shall not offer, sell, transfer, assign, tender in any tender
or exchange offer, pledge, encumber, loan, hypothecate or similarly dispose of (by merger, by testamentary disposition, by operation
of law or otherwise) (a “Transfer”) or convert any OP Series B Preferred Units, unless prior to the effectiveness
of any such Transfer, the transferee executes a joinder to this Agreement pursuant to which such transferee agrees in writing to
become a party to this Agreement and be subject to the terms hereof and otherwise become a party for all purposes of this Agreement
and notice of such Transfer is delivered to the other parties pursuant to Section 10(d).

 

(b)          Consent
to Merger Agreement. Pursuant to the Partnership Agreement and IRA, the Investor hereby consents to the transactions contemplated
by the Merger Agreement for all purposes thereunder and agrees to the treatment of the OP Series B Preferred Units as contemplated
herein and therein.

 

(c)          Further
Assurances. The parties agree to use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered,
any additional documents, instruments and assurances and to take, or cause to be taken, all actions that may be reasonably necessary
or appropriate to effectuate the provisions of this Agreement, including entering into any amendments to the Partnership Agreement
or the Advisory Agreement.

 

9.          Termination.
This Agreement shall terminate automatically without any further action of the parties upon the termination of the Merger Agreement.

 

10.         Miscellaneous
Provisions.

 

(a)          Amendment.
This Agreement may be amended, modified and supplemented by written agreement of all the parties hereto; provided, that Parent’s
consent shall only be required to the extent that the amendment relates to Section 3, Section 5, Section 6,
Section 7, or Section 10.

 

(b)          Counterparts.
This Agreement may be executed manually or by facsimile by the parties, in any number of counterparts, each of which shall be considered
one and the same agreement and shall become effective when a counterpart hereof shall have been signed by each of the parties and
delivered to the other parties hereto.

 

(c)          Severability.
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic
or legal substance of the Merger and the transactions contemplated hereby are not affected in any manner adverse to the applicable
party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner to the end that the Merger and the transactions contemplated hereby are fulfilled to the extent possible.

 

    	 	8	 

     

    

 

(d)          Notices.
All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally (notice deemed
given upon receipt), telecopied (notice deemed given upon confirmation of receipt) or sent by a nationally recognized overnight
courier service, such as Federal Express (notice deemed given upon receipt of proof of delivery), to the parties at the following
addresses (or at such other address for a party as shall be specified by like notice):

 

if to Parent, to:

 

c/o KAREP Acquisitions, LLC

1 Town Center Road, Suite 300

Boca Raton, FL 33486

Attention: David Selznick and Russell Reiter

Facsimile: (561) 300-6290

 

with a copy to:

Hogan Lovells US LLP

555 13th Street NW

Washington, DC 20004

Attention: Stuart Barr

Facsimile: (202) 637-5910

 

if to the Company or the Operating Partnership, to:

 

Sentio Healthcare Properties, Inc.

c/o Sentio Investments, LLC

189 S Orange Ave, Suite 1700

Orlando, FL. 32801

Attention: John Mark Ramsey

Facsimile: (407) 999-5210

 

with copies to:

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, California 90071-1560

Attention: Julian Kleindorfer

David Wheeler

Facsimile: (213) 891-8763

 

    	 	9	 

     

    

 

if to the Investor:

 

Sentinel RE Investment Holdings, L.P.

 c/o Kohlberg Kravis Roberts & Co. L.P.

 9 West 57th Street, Suite 4200

 New York, NY 10019

 Attention: Billy Butcher and General Counsel

 Facsimile: (212) 750-0003

 

With copies to:

 

Simpson Thacher & Bartlett LLP

 425 Lexington Avenue

 New York, New York 10017

 Attention: Gary I. Horowitz

 Facsimile: (212) 455-2502

 

if to the Advisor:

 

Sentio Investments, LLC

189 S Orange Ave, Suite 1700

Orlando, FL. 32801

Attention: John Mark Ramsey

Facsimile: (407) 999-5210

 

with copies to:

 

Foley & Lardner LLP

111 North Orange Avenue, Suite 1800

Orlando, FL 32801-2386

Attention: Matthew E. Jassak

Facsimile: mjassak@foley.com

 

		(e)	Governing Law; Jurisdiction

. 

		(i)	This Agreement, and all claims or causes of actions (whether
at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution
or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of Maryland without
giving effect to conflicts of laws principles (whether of the State of Maryland or any other jurisdiction that would cause the
application of the Laws of any jurisdiction other than the State of Maryland).

 

    	 	10	 

     

    

 

		(ii)	All Legal Proceedings and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any Maryland state or federal court. Each of the parties
hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of any Maryland state or federal court,
for the purpose of any Legal Proceeding arising out of or relating to this Agreement or any ancillary agreement related hereto
brought by any party, (b) agrees not to commence any such action or proceeding except in such courts, (c) agrees that
any claim in respect of any such action or proceeding may be heard and determined in any Maryland state or federal court, (d) waives,
to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any such action or proceeding, and (e) waives, to the fullest extent permitted by Law, the defense of an inconvenient
forum to the maintenance of such action or proceeding. Each of the parties agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided
by Law. Each party irrevocably consents to service of process in the manner provided for notices in Section 10(d). Nothing
in this Agreement will affect the right of any party to serve process in any other manner permitted by Law.

 

(f)          Waiver
of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION
HEREWITH OR THE MERGER AND OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10(f).

 

(g)          Assignment.
This Agreement shall not be assigned or delegated by any of the parties hereto (whether by operation of Law or otherwise) without
the prior written consent of the other parties hereto, except this Agreement shall be assignable without any consent to a permitted
transferee under Section 8(a). Any assignment in violation of this Section 10(g) shall be null and void. Subject
to the preceding sentence, but without relieving any party hereto of any obligation hereunder, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.

 

    	 	11	 

     

    

 

(h)          Specific
Performance. Parent agrees that, in the event that Parent does not perform the provisions of this Agreement in accordance with
its specified terms or otherwise breach such provisions, irreparable damage would occur, for which monetary damages, even if available,
may not be an adequate remedy. Parent agrees that if the Closing occurs, the Investor shall be entitled to an injunction, specific
performance or other equitable relief to cause the redemption of the OP Series B Preferred Units in accordance with Section
3. Such remedy shall not be deemed to be the exclusive remedy for breach of Agreement but shall be in addition to all other
remedies available at law or equity to the Investor. Parent agrees that it will not oppose the granting of an injunction, specific
performance and other equitable relief as provided herein on the basis that (x) the Investor has an adequate remedy at law or (y)
an award of specific performance is not an appropriate remedy for any reason at law or equity. The Investor, in seeking specific
performance, shall not be required to provide any bond or other security in connection with any such order or injunction

 

(i)          Entire
Agreement. This Agreement, together with the Merger Agreement, constitute the entire agreement among the Parties with respect
to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and oral, among
the Parties or any of them with respect to the subject matter hereof and thereof.

 

[SIGNATURE PAGE FOLLOWS]

 

    	 	12	 

     

    

 

IN WITNESS WHEREOF, the
Advisor, the Company, the Operating Partnership, the Investor, and Parent have caused this Agreement to be signed by their duly
authorized representatives as of the date first written above.

 

	 	SENTIO INVESTMENTS, LLC
	 	 	 
	 	By:	/s/  John Mark Ramsey
	 	 	Name: John Mark Ramsey
	 	 	Title: Manager
	 	 	 
	 	SENTIO HEALTHCARE PROPERTIES, INC.
	 	 	 
	 	By:	/s/  John Mark Ramsey
	 	 	Name:  John Mark Ramsey
	 	 	Title: Chief Executive Officer and President
	 	 	 
	 	SENTIO HEALTHCARE PROPERTIES OP, L.P.
	 	 	 
	 	By:	Sentio Healthcare Properties, Inc.,
	 	 	its general partner
	 	 	 
	 	By:	/s/   John Mark Ramsey
	 	 	Name:   John Mark Ramsey
	 	 	Title: Chief Executive Officer and President

 

[Signature Page to Merger Consideration Allocation Agreement]

 

     

     

    

 

	 	SENTINEL RE INVESTMENT HOLDINGS LP
	 	 	 
	 	By:	Sentinel RE Investment Holdings GP LLC,
	 	 	its general partner
	 	 	 
	 	By:	KKR REPA AIV-1 LP., managing member
	 	 	 
	 	By:	KKR Associates REPA L.P., its general 
	 	 	partner
	 	 	 
	 	By:	KKR REPA GP LLC, its general partner 
	 	 	 
	 	By:	/s/  David Sorkin
	 	 	Name: David Sorkin
	 	 	Title: Secretary

 

[Signature Page to Merger Consideration Allocation Agreement]

 

     

     

    

 

	 	KAREP MASTER JV, LLC
	 	 	 
	 	By:	/s/ S. David Selznick
	 	 	Name: S. David Selznick
	 	 	Title: Vice President

 

[Signature Page to Merger Consideration Allocation Agreement]

 

     

     

    

 

EXHIBIT A

 

	Aggregate Cash Merger Consideration Allocation ("ACMC")	Exhibit A

 

	 	 	 	 	 	 	ACMC Range	 
	 	 	 	 	Initial ACMC	 	Low	 	High	 
	Aggregate Cash Merger Consideration	 	(A)+(B)+(C)	 	$390,407,161	 	$382,407,161	 	$398,407,161	 
	Add back: Promote Payment	 	 	 	$5,090,124	 	4,697,186	 	5,483,061	 
	Aggregate Consideration	 	 	 	$395,497,285	 	$387,104,347	 	$403,890,222	 
	Distribution Catch Up to OP Common Units (a)	 	 	 	($12,573,815	)	(12,573,815	)	(12,573,815	)
	OP Series A Capital	 	 	 	($100,000	)	(100,000	)	(100,000	)
	Series A Accrued Distributions	 	 	 	$0	 	-	 	-	 
	Proceeds Available for Distribution Pro Rata	 	 	 	$382,823,470	 	$374,430,532	 	$391,216,407	 

 

Pro Rata Distributions: OP Common Units and OP Series B Preferred
Units

 

	 	 	Capital	 	Contribution	 	 	 	Relative
    Unit	 	 	 	 	 	 	 
	 	 	Contribution	 	per
    Unit	 	#
    Units	 	Percentages	 	 	 	 	 	 	 
	OP
    Common Units	 	$115,665,030	 	$10.00	 	11,566,503	*	42.22%	 	$161,618,335	 	$158,075,050	 	$165,161,619	 
	OP
    Series B Preferred Units	 	158,626,000	 	$10.02	 	15,830,938	 	57.78%	 	$221,205,135	 	216,355,482	 	226,054,788	 
	 	 	$274,291,030	 	 	 	27,397,441	 	100.00%	 	$382,823,470	 	$374,430,532	 	$391,216,407	 
	 	 	*
    includes 20,000 LP common units held by REIT	 	 	 	 	 	 	 

 

Common Cash Merger Consideration

 

	Proceeds Allocated Based on Pro Rata Units	 	 	 	 	 	$161,618,335	 	$158,075,050	 	$165,161,619	 
	Distribution Catch Up to OP Common Units	 	 	 	 	 	$12,573,815	 	12,573,815	 	12,573,815	 
	Less: Promote Payment	 	 	 	 	 	($5,090,124	)	(4,697,186	)	(5,483,061	)
	Common Cash Merger Consideration	 	Shares O/S	 	(A)	 	$169,102,026	 	$165,951,679	 	$172,252,373	 
	Common Cash Merger Consideration per Share	 	11,546,503	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$14.65	 	$14.37	 	$14.92	 
	 	 	Collar Per Share Impact	 	 	 	 	 	($0.27	)	$0.27	 
	Aggregate Cash OP Series B Preferred Unit Consideration (KKR)	 	 	 	 	 	 	 	 	 	 	 
	Proceeds Allocated Based on Pro Rata Units	 	 	 	 	 	$221,205,135	 	$216,355,482	 	$226,054,788	 
	Aggregate Cash OP Series B Preferred Unit Consideration	 	 	 	(B)	 	$221,205,135	 	$216,355,482	 	$226,054,788	 
	Preferred Merger Consideration (KKR)	 	 	 	 	 	 	 	 	 	 	 
	OP Series A Capital	 	 	 	 	 	$100,000	 	100,000	 	100,000	 
	Preferred Merger Consideration	 	 	 	(C)	 	$100,000	 	100,000	 	100,000	 

 

(a) Through Initial Estimated Closing Date (July 31,
2017). To be updated through revised Estimated Closing Date.

 

     

     

    

  

	Promote Payment	Exhibit A (Continued)

 

	I	 	Consideration to Legacy Common Shares	 	 	 	ACMC	 	Collar-Low	 	Collar-High	 
	 	 	Proceeds Allocated Based on Pro Rata Units	 	 	 	$161,618,335	 	$158,075,050	 	$165,161,619	 
	 	 	Distribution Catch Up to OP Common Units	 	 	 	12,573,815	 	12,573,815	 	12,573,815	 
	 	 	Sub-Total: Equity Value Available to Common Stock	 	 	 	$174,192,150	 	$170,648,865	 	$177,735,434	 
	 	 	Company Common Stock Shares Outstanding	 	 	 	11,546,503	 	11,546,503	 	11,546,503	 
	 	 	Equity Value Per Share Available to Company Common Stock	 	 	 	$15.0861	 	$14.78	 	$15.39	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Legacy Common Shares	 	 	 	12,804,644	 	12,804,644	 	12,804,644	 
	 	 	X  Equity Value Per Share Available to Company Common Stock	 	 	 	X $15.09	 	X $14.78	 	X $15.39	 
	 	 	 	 	A	 	$193,172,640	 	$189,243,268	 	$197,102,011	 
	 	 	Aggregate Distributions Paid to Company Common Stock (a)	 	B	 	45,643,359	 	45,643,359	 	45,643,359	 
	 	 	Total	 	A+B	 	$238,815,999	 	$234,886,627	 	$242,745,370	 
	 	 	 	 	 	 	 	 	 	 	 	 
	II	 	Threshold	 	 	 	 	 	 	 	 	 
	 	 	Company Common Stock Shares Outstanding	 	 	 	11,546,503	 	11,546,503	 	11,546,503	 
	 	 	X Invested Capital per Common Share	 	 	 	X $10.00	 	X $10.00	 	X $10.00	 
	 	 	 	 	C	 	$115,465,030	 	$115,465,030	 	$115,465,030	 
	 	 	Plus: KKR Capital Used in Redemption	 	D	 	8,726,000	 	8,726,000	 	8,726,000	 
	 	 	7% Stockholder Return (a)	 	 	 	63,723,734	 	63,723,734	 	63,723,734	 
	 	 	Total Threshold	 	C+D+E	 	$187,914,764	 	$187,914,764	 	$187,914,764	 
	 	 	 	 	 	 	 	 	 	 	 	 
	III	 	Promote Payment	 	 	 	 	 	 	 	 	 
	 	 	Difference Between I and II	 	 	 	$50,901,235	 	$46,971,863	 	$54,830,606	 
	 	 	Promote Payment %	 	 	 	X 10.0%	 	X 10.0%	 	X 10.0%	 
	 	 	Promote Payment	 	 	 	$5,090,124	 	$4,697,186	 	$5,483,061	 

 

(a) Through July 31, 2017.

 

     

     

    

  

	Aggregate Cash Merger Consideration Allocation ("ACMC"): Estimated Monthly Impact Post 7/31/17 (a)	Exhibit A (Cont)

 

	 	 	Pro Forma	Pro Forma	Change	 
	Aggregate Cash Merger Consideration	 	7/31/17 ACMC	8/31/17 ACMC	8/31 vs 7/31	 
	(A)+(B)	$390,407,161	$390,805,947	$398,786	 
	Add back: Promote Payment	 	5,090,124	5,104,397	14,273	 
	Aggregate Consideration	 	$395,497,285	$395,910,344	$413,059	 
	Distribution Catch Up to OP Common Units (b)	 	(12,573,815)	(12,795,093)	(221,278)	 
	OP Series A Capital	 	(100,000)	(100,000)	-	 
	Series A Accrued Distributions	 	-	-	-	 
	Proceeds Available for Distribution Pro Rata	 	$382,823,470	$383,015,251	$191,781	 

 

Pro Rata Distributions: OP Common Units and OP Series B Preferred
Units

 

	 	Capital
    Contribution	Contribution
    per Unit	#
    Units	Relative
    Unit Percentages	 	 	 	 
	OP
    Common Units	$115,665,030	$10.00	11,566,503  *	42.22%	$161,618,335	$161,699,300	$80,965	 
	OP
    Series B Preferred Units	158,626,000	$10.02	15,830,938	57.78%	221,205,135	221,315,951	110,816	 
	 	$274,291,030	 	 	27,397,441	100.00%	$382,823,470	$383,015,251	$191,781	 
	 	* includes 20,000 LP
    common units held by REIT	 	 

 

	Common Cash Merger Consideration	 	 	 	 	 
	Proceeds Allocated Based on Pro Rata Units	 	 	$161,618,335	$161,699,300	$80,965
	Distribution Catch Up to OP Common Units	 	 	12,573,815	12,795,093	221,278
	Less: Promote Payment	 	 	(5,090,124)	(5,104,397)	(14,273)
	Common Cash Merger Consideration	Shares O/S	(A)	$169,102,026	$169,389,996	$287,970
	Common Cash Merger Consideration per Share	11,546,503	 	 	 	 
	 	 	 	$14.65	$14.67	$0.02
	Aggregate Cash OP Series B Preferred Unit Consideration (KKR)	 	 	 	 	 
	Proceeds Allocated Based on Pro Rata Units	 	 	$221,205,135	$221,315,951	$110,816
	Aggregate Cash OP Series B Preferred Unit Consideration	 	(B)	$221,205,135	$221,315,951	$110,816
	Preferred Merger Consideration (KKR)	 	 	 	 	 
	OP Series A Capital	 	 	100,000	100,000	-
	Preferred Merger Consideration	 	(C)	100,000	100,000	-

  

 

(a)  Based
on net cash flow projection from Advisor (estimated at $92K per month) and average debt amortization for period Aug-Dec (actual
monthly amortization per month does not vary materially) 

(b)  Through
pro forma closing date of Aug 31, 2017. Actual amount dependent on agreed to revised Estimated Closing Date. 

 

     

     

    

 

	Aggregate Cash Merger Allocation as of 7/31/17 at Million Dollar Increments with Collar	Exhibit A (Continued)

 

	 	 	Collar Low	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	ACMC	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Collar High
	Aggregate Consideration	 	$387,104,347	 	$388,153,465	 	$389,202,582	 	$390,251,699	 	$391,300,816	 	$392,349,933	 	$393,399,050	 	$394,448,167	 	$395,497,285	 	$396,546,402	 	$397,595,519	 	$398,644,636	 	$399,693,753	 	$400,742,870	 	$401,791,987	 	$402,841,105	 	$403,890,222
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Promote Payment	 	(4,697,186)	 	($4,746,304)	 	($4,795,421)	 	($4,844,538)	 	($4,893,655)	 	($4,942,772)	 	($4,991,889)	 	($5,041,006)	 	($5,090,124)	 	($5,139,241)	 	($5,188,358)	 	($5,237,475)	 	($5,286,592)	 	($5,335,709)	 	($5,384,826)	 	($5,433,944)	 	($5,483,061)
	Aggregate Cash Merger Consideration	 	$382,407,161	 	$383,407,161	 	$384,407,161	 	$385,407,161	 	$386,407,161	 	$387,407,161	 	$388,407,161	 	$389,407,161	 	$390,407,161	 	$391,407,161	 	$392,407,161	 	$393,407,161	 	$394,407,161	 	$395,407,161	 	$396,407,161	 	$397,407,161	 	$398,407,161
	Aggregate Cash OP Series B Preferred Unit Consideration	 	$216,355,482	 	$216,961,689	 	$217,567,896	 	$218,174,102	 	$218,780,309	 	$219,386,515	 	$219,992,722	 	$220,598,928	 	$221,205,135	 	$221,811,342	 	$222,417,548	 	$223,023,755	 	$223,629,961	 	$224,236,168	 	$224,842,374	 	$225,448,581	 	$226,054,788
	Preferred Merger Consideration	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000	 	100,000
	Common Cash Merger Consideration	 	165,951,679	 	166,345,472	 	166,739,265	 	167,133,059	 	167,526,852	 	167,920,646	 	168,314,439	 	168,708,233	 	169,102,026	 	169,495,819	 	169,889,613	 	170,283,406	 	170,677,200	 	171,070,993	 	171,464,787	 	171,858,580	 	172,252,373
	 	 	$382,407,161	 	$383,407,161	 	$384,407,161	 	$385,407,161	 	$386,407,161	 	$387,407,161	 	$388,407,161	 	$389,407,161	 	$390,407,161	 	$391,407,161	 	$392,407,161	 	$393,407,161	 	$394,407,161	 	$395,407,161	 	$396,407,161	 	$397,407,161	 	$398,407,161
	Promote Payment	 	$4,697,186	 	$4,746,304	 	$4,795,421	 	$4,844,538	 	$4,893,655	 	$4,942,772	 	$4,991,889	 	$5,041,006	 	$5,090,124	 	$5,139,241	 	$5,188,358	 	$5,237,475	 	$5,286,592	 	$5,335,709	 	$5,384,826	 	$5,433,944	 	$5,483,061

 

 

     

     

    

  

	Contingent Value Right ("CVR") Allocation (i.e. Indemnity Escrow and Representative Fund)	Exhibit B

 

	 	At	At Cash Consideration Range	 
	Assumed Maximum Indemnity Escrow / Representative Fund Amount (a)	Initial ACMC	Low	High	 
	$8,760,000	$8,760,000	$8,760,000	 

 

	Company Common Stock Incremental Share of CVR	 	 	 	 
	Pro Rata Unit Allocation Applicable to OP Common Units	42.22%	42.22%	42.22%	 
	Adjustment for Advisor Promote Payment (1-10% Advisor Promote)	x 90.00%	x 90.00%	x 90.00%	 
	Incremental Company Common Stock CVR Allocation Percentage	38.00%	38.00%	38.00%	 
	Estimated Maximum CVR Dollars Allocable to Company Common Stock	$3,328,424	$3,328,424	$3,328,424	 
	Common Cash Merger Consideration	169,102,026	165,951,679	172,252,373	 
	Estimated Potential Total Proceeds to Common Shareholders	$172,430,450	$169,280,103	$175,580,797	 
	Potential Total Per Shr	$14.93	$14.66	$15.21	 
	OP Series B Preferred Units Incremental Share of CVR	 	 	 	 
	Incremental OP Series B Preferred Units CVR Allocation Percentage	57.78%	57.78%	57.78%	 
	Estimated Maximum CVR Dollars Allocable to OP Series B Preferred Units	$5,061,751	$5,061,751	$5,061,751	 
	Advisor Incremental Share of CVR / Representative Fund	 	 	 	 
	Incremental Company Common Stock CVR Allocation Percentage	42.22%	42.22%	42.22%	 
	x Advisor Promote (10%)	x 10.00%	x 10.00%	x 10.00%	 
	Incremental Advisor Share CVR Allocation	4.22%	4.22%	4.22%	 
	Estimated Maximum CVR Dollars Allocable to Advisor	$369,825	$369,825	$369,825	 

(a) Amounts remaining in Representative Fund and Indemnity
Escrow will be distributed via CVR. Illustrative example above assumes full Indemnity Fund return (before any possible adjustment
for the Company's Bryan interest) and use of Representative Fund limited to the $240,000 administrative fee.

 

CVR Issuance

 

	 	Common Shares	CVRs	Pro Rata	 CVR per Share
	Company Common Stock	11,546,503	11,546,503	38.00%	1.000
	OP Series B Preferred Units	15,830,938	17,559,516	57.78%	1.109
	Advisor	N/A	1,282,945	4.22%	 
	 	 	30,388,964	 	 

 

     

     

    

  

	Advisory Agreement Payment	Exhibit C

 

	 	ACMC	Collar-Low	Collar-High
	Promote Payment	$5,090,124	$4,697,186	$5,483,061
	Strategic Alternative Fee	3,000,000	3,000,000	3,000,000
	Total: Advisory Agreement Payment	$8,090,124	$7,697,186	$8,483,061

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00270-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00270-of-00352.parquet"}]]