Document:

Exhibit 10.1

 

	
        Healthcare 

        Facility Note

        Section 232

         
	
        U.S. Department of Housing 

        and Urban Development

        Office of Residential

        Care Facilities
	
        OMB Approval No. 2502-0605

        (exp. 06/30/2017)

 

Public reporting burden for this collection of information
is estimated to average 1 hour. This includes the time for collecting, reviewing, and reporting the data. The information is being
collected to obtain the supportive documentation which must be submitted to HUD for approval, and is necessary to ensure that viable
projects are developed and maintained. The Department will use this information to determine if properties meet HUD requirements
with respect to development, operation and/or asset management, as well as ensuring the continued marketability of the properties.
This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid
OMB control number.

 

Warning: Any person who knowingly presents a false, fictitious,
or fraudulent statement or claim in a matter within the jurisdiction of the U.S. Department of Housing and Urban Development is
subject to criminal penalties, civil liability, and administrative sanctions. 

 

HEALTHCARE FACILITY NOTE

(MULTISTATE)

 

FHA Project No.: 123-22094

FHA Project Name: Pennington

Gardens Assisted Living & Memory
Care

 

	US $10,643,800.00	as of September 1, 2018

 

FOR VALUE RECEIVED, the undersigned (“Borrower”)
jointly and severally (if more than one) promises to pay to the order of Capital One Multifamily Finance, LLC, a Delaware limited
liability company, the principal sum of Ten Million Six Hundred Forty-Three Thousand Eight Hundred and No/100ths Dollars (US $10,643,800)
(the “Loan”), with interest on the unpaid principal balance at the Interest Rate.

 

As used herein, “Interest Rate” means the
annual rate of Four and twenty-three hundredths per centum (4.23%).

 

1.          Defined
Terms. As used in this Note, (a) the term “Lender” means the holder of this Note, (b) the term “Indebtedness”
means the principal of, interest on, and all other amounts due at any time under this Note, the Borrower’s Security Instrument
or any of the other Loan Documents, including prepayment premiums, late charges, default interest, and advances under Section
13 of the Borrower’s Security Instrument to protect the security of the Borrower’s Security Instrument; (c) the term
“Borrower’s Security Instrument” has the meaning set forth in Section 4 of this Note; and (d) the term
“Program Obligations” means (1) all applicable statutes and any regulations issued by the U.S. Department of
Housing and Urban Development (“HUD”) pursuant thereto that apply to the Project, including all amendments
to such statutes and regulations, as they become effective, except that changes subject to notice and comment rulemaking shall
become effective only upon completion of the rulemaking process, and (2) all current requirements in HUD handbooks and guides,
notices, and mortgagee letters that apply to the Project, and all future updates, changes and amendments thereto, as they become
effective, except that changes subject to notice and comment rulemaking shall become effective only upon completion of the rulemaking
process, and provided that such future updates, changes and amendments shall be applicable to the Project only to the extent that
they interpret, clarify and implement terms in this Note rather than add or delete provisions from such document. Handbooks, guides,
notices, and mortgagee letters are available on HUD’s official website: http://www.hud.gov/offices/adm/hudclips/index.cfm
or a successor location to that site.

 

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The definition of any capitalized term or word used herein can
be found in this Note and, if not found in this Note, then found in the Healthcare Regulatory Agreement – Borrower between
Borrower and HUD (the “Borrower’s Regulatory Agreement”) and/or the Borrower’s Security Instrument.

 

2.          Address
for Payment. All payments due under this Note shall be payable in immediately available funds at Capital One Multifamily Finance,
LLC, 2 Bethesda Metro Center, 10th Floor, Bethesda, Maryland 20814, or such other place as may be designated by written notice
to Borrower from or on behalf of Lender.

 

3.          Payment
of Principal and Interest. Principal and interest shall be paid as follows:

 

(a)         Interest
only at the Interest Rate on the principal outstanding for the period beginning on the date of disbursement and ending on and including
the last day of the month in which such disbursement is made shall be payable on October 1, 2018. Thereafter, consecutive monthly
installments of principal and interest, each in the amount of Forty-Eight Thousand Six Hundred Seven and 62/100ths Dollars (US
$48,607.62) shall be payable on the first day of each month beginning on November 1, 2018, until the entire unpaid principal balance
evidenced by this Note is fully paid. Any remaining principal and interest shall be due and payable on October 1, 2053 or on any
earlier date on which the unpaid principal balance of this Note becomes due and payable, by acceleration or otherwise (the “Maturity
Date”).

 

(b)        Any
regularly scheduled monthly installment of principal and interest that is received by Lender before the date it is due shall be
deemed to have been received on the due date solely for the purpose of calculating interest due.

 

4.          Security.
The Indebtedness is secured by, among other things, that certain Healthcare Deed of Trust, Security Agreement, Assignment of
Rents and Fixture Filing (Arizona), dated as of the date of this Note (the “Borrower’s Security Instrument”),
and reference is made to the Borrower’s Security Instrument for other rights of Lender as to collateral for the Indebtedness.

 

5.          Application
of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness that is
less than all amounts due and payable at such time, Lender shall apply that payment to amounts then due and payable in the manner
and in the order set forth in Section 7(a)(3) of the Borrower’s Security Instrument. Neither Lender’s acceptance of
an amount that is less than all amounts then due and payable nor Lender’s application of such payment in the manner authorized
shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Notwithstanding
the application of any such amount to the Indebtedness, Borrower’s obligations under this Note shall remain unchanged.

 

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6.          Acceleration.
If a Monetary Event of Default occurs and is continuing, for a period of thirty (30) days, the entire unpaid principal balance,
any accrued interest and all other amounts payable to Lender under this Note and any of the other Loan Documents shall at once
become due and payable, at the option of Lender, without any prior notice to Borrower. If a Covenant Event of Default occurs and
the Indebtedness is accelerated as set forth in the Borrower’s Security Instrument, the entire unpaid principal balance,
any accrued interest, and all other amounts payable to Lender under this Note and any of the other Loan Documents shall at once
become due and payable. Lender may exercise this option to accelerate regardless of any prior forbearance. Upon Lender’s
exercise of any right of acceleration under this Note, Borrower shall pay to Lender, in addition to the entire unpaid principal
balance of this Note outstanding at the time of the acceleration, all accrued interest and all other sums due Lender under the
Loan Documents.

 

7.          Late
Charge. If any monthly amount payable under this Note or under the Borrower’s Security Instrument or any of the other
Loan Documents is not received by Lender within fifteen (15) days after the amount is due, Borrower shall pay to Lender, immediately
and without demand by Lender, a late charge equal to two percent (2%) of such monthly amount. Borrower acknowledges that its failure
to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, and that it is extremely
difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this
Section represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of
the additional expenses Lender will incur by reason of such late monthly payment.

 

8.          Exculpation;
Remedies.

 

(a)         Except
for personal liability expressly provided for in this Note or in the Borrower’s Security Instrument or in the Borrower’s
Regulatory Agreement, the execution of this Note shall impose no personal liability upon Borrower and those parties listed in Section
38 of the Borrower’s Regulatory Agreement for payment of the Indebtedness evidenced thereby and in the Event of Default,
the holder of this Note shall look solely to the Mortgaged Property in satisfaction of the Indebtedness and will not seek or obtain
any deficiency or personal judgment against Borrower and those parties listed in Section 38 of the Borrower’s Regulatory
Agreement except such judgment or decree as may be necessary to foreclose or bar its interest in the Mortgaged Property and all
other property mortgaged, pledged, conveyed or assigned to secure payment of the Indebtedness; provided, that nothing in this Section
8 and no action so taken shall operate to impair any obligation of Borrower under the Borrower’s Regulatory Agreement.

 

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(b)        Notwithstanding
Section 8(a) above, Borrower shall be liable to Lender for any loss or damage suffered by Lender as a result of (1) failure of
Borrower to apply all insurance proceeds and condemnation proceeds as required by Sections 19 and 20 of the Borrower’s Security
Instrument; (2) failure of Borrower to comply with Section 15 of the Borrower’s Security Instrument relating to the delivery
of books and records, statements, schedules and reports; (3) Borrower’s acquisition of any property or operation of any business
not permitted by Section 33 of the Borrower’s Security Instrument; (4) a transfer or the granting of a lien or encumbrance
that is an Event of Default under Sections 17 and 21 of the Borrower’s Security Instrument, other than a transfer consisting
solely of the involuntary removal or involuntary withdrawal of a general partner in a limited partnership or a manager in a limited
liability company; or (5) fraud or written material misrepresentation by Borrower or any officer, director, general partner,
member, manager or employee of Borrower in connection with the Loan Application for or creation of the Indebtedness or any request
for any action or consent by Lender. These damages shall be paid only from the available proceeds of an appropriate insurance policy
or from Surplus Cash or other escrow accounts.

 

(c)        Notwithstanding
Section 8(a) above, Borrower shall provide complete redress as set forth in Section 45(c) of the Borrower’s Security Instrument
and shall indemnify and hold harmless the Indemnitees as set forth in Section 48 of the Borrower’s Security Instrument.

 

9.         Voluntary
and Involuntary Prepayments.

 

(a)        This
Note contains a prepayment restriction and prepayment premium charge acceptable to HUD as to term, amount, and conditions, which
are set forth in the attached Rider 1. In the event of a default, pursuant to Program Obligations, HUD may override any
lockout or any prepayment premium, or combination thereof, in Rider 1 on the last day of any calendar month during any year in
which the prepayment premium is greater than one percent (1.00%) in order to facilitate a partial or full refinancing of the Mortgaged
Property and avoid a mortgage insurance claim.

 

(b)        Any
application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this
Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring
the payment to Lender by Borrower of a prepayment premium in the amount provided for in Section 9(a) or in Rider 1, as applicable.

 

(c)        Notwithstanding
the provisions of subsections (a) and (b) above, no prepayment premium shall be payable with respect to (1) any prepayment
made, other than as a result of acceleration, no more than 30 days before the Maturity Date, (2) any prepayment occurring
as a result of the application of any insurance proceeds or condemnation award under the Borrower’s Security Instrument,
or (3) any reduction in the original principal amount of the Loan, or any prepayment, resulting from any cost certification or
other report required by HUD pursuant to Program Obligations.

 

(d)        Any
permitted or required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date
of any subsequent monthly installments or change the amount of such installments, unless Lender agrees otherwise in writing.

 

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(e)        Borrower
acknowledges that the provisions of this Note relating to prepayment restrictions and prepayment premiums are a material part of
the consideration for the Loan, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as
a result of Borrower’s voluntary agreement to such provisions.

 

(f)         If
the Indebtedness is paid in full while insured under the provisions of the National Housing Act, as amended, Borrower shall pay
to Lender such adjusted mortgage insurance premium as may be required by Program Obligations.

 

(g)        All
payments to reduce the principal balance hereunder, other than regularly scheduled payments of principal, shall be made to Lender
in immediately available funds. Payments received after 4:00PM Eastern Time will be deemed to have been received on the next Business
Day.

 

10.        Costs
and Expenses. Borrower shall pay all expenses and costs, including reasonable fees and out-of-pocket expenses of attorneys
and expert witnesses and costs of investigation and litigation (including appellate litigation), incurred by Lender as a result
of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions
of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.

 

11.        Forbearance.
Any forbearance by Lender in exercising any right or remedy under this Note, the Borrower’s Security Instrument, or any of
the other Loan Documents, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other
right or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment,
or in an amount that is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment
when due of all other payments on account of the Indebtedness or to exercise any right or remedy for any failure to make prompt
payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as
to preclude the exercise of any other right or remedy available to Lender.

 

12.        Waivers.
Presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment
or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower.

 

13.        Loan
Charges. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge provided for in any of the Loan Documents, whether
considered separately or together with other charges provided for in any of the Loan Documents, violates that law, and Borrower
is entitled to the benefit of that law, then such interest or charge is hereby reduced to the extent necessary to eliminate such
violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce
the Indebtedness. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted
to be collected from Borrower has been violated, all of the Indebtedness that constitutes interest, as well as all other charges
made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the
stated term of this Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such
a manner that the rate of interest so computed is uniform throughout the stated term of this Note.

 

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14.       Commercial
Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business
or commercial enterprise, and not for personal, family or household purposes.

 

15.       Counting
of Days. Except where otherwise specifically provided, any reference in this Note to a period of “days”
means calendar days, not Business Days.

 

16.       Governing
Law; Consent to Jurisdiction and Venue.

 

(a)        This
Note and the Borrower’s Security Instrument, if it does not itself expressly identify the law that is to apply to it, shall
be governed by the laws of the jurisdiction in which the Land is located (the “Property Jurisdiction”), except
so long as the Loan is insured or held by HUD, federal law will apply to HUD’s rights and remedies where state or local laws
are preempted by federal law.

 

(b)        Borrower
agrees that any controversy arising under or in relation to this Note or the Borrower’s Security Instrument shall be litigated
exclusively in the Property Jurisdiction except as, so long as the Loan is insured or held by HUD and solely as to rights and remedies
of HUD, federal jurisdiction may be appropriate pursuant to any federal requirements. The state courts, and with respect to HUD’s
rights and remedies, federal courts and Governmental Authorities in the Property Jurisdiction, shall have exclusive jurisdiction
over all controversies which shall arise under or in relation to this Note, any security for the Indebtedness, or the Borrower’s
Security Instrument. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

 

17.       Rules
of Construction.  The captions and headings of the Sections of this Note are for convenience only and shall be disregarded
in construing this Note. Any reference in this Note to a “Section” shall, unless otherwise explicitly provided,
be construed as referring, respectively, to a Section of this Note. Use of the singular in this Note includes the plural and
use of the plural includes the singular. As used in this Note, the term “including” means “including,
but not limited to.”

 

18.       Notices.
 All notices, demands and other communications required or permitted to be given by Lender to Borrower or Borrower to Lender
pursuant to this Note shall be given in accordance with Section 31 of the Borrower’s Security Instrument.

 

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19.       Federal
Remedies. In addition to any rights and remedies set forth in the Borrower’s Regulatory Agreement, HUD has rights and
remedies under federal law so long as HUD is the insurer or holder of the Loan, including but not limited to the right to foreclose
pursuant to the Multifamily Mortgage Foreclosure Act of 1981, as amended, 12 U.S.C. § 3701, et seq., as amended, when
HUD is the holder of this Note.

 

20.       Termination
of HUD Rights and Remedies. At such time as HUD no longer insures or holds this Note, (a) all rights and responsibilities of
HUD shall conclude, all mortgage insurance and references to mortgage insurance premiums, all references to HUD, Ginnie Mae and
Program Obligations and related terms and provisions shall cease, and all rights and obligations of HUD shall terminate; (b) all
obligations and responsibilities of Borrower to HUD shall likewise terminate; and (c) all obligations and responsibilities of Lender
to HUD shall likewise terminate; provided, however, nothing contained in this Section 20 shall in any fashion discharge Borrower
from any obligations to HUD under the Borrower’s Regulatory Agreement or Program Obligations or Lender from any obligations
to HUD under Program Obligations, which occurred prior to termination of the Contract of Insurance. The provisions of this Section
20 shall be given effect automatically upon the termination of the Contract of Insurance or the transfer of this Note or the Borrower’s
Security Instrument by HUD to another party, provided that upon the request of Borrower, Lender or the party to whom this Note
or the Borrower’s Security Instrument has been transferred, at no cost to HUD, HUD shall execute such documents as may be
reasonably requested to confirm the provisions of this Section 20.

 

21.       WAIVER
OF TRIAL BY JURY. BORROWER AND LENDER EACH (a) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF
THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (b) WAIVES
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

 

See Rider 1 attached hereto and made a part hereof for prepayment
provisions.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]

 

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IN WITNESS WHEREOF, Borrower has signed and delivered
this Note or has caused this Note to be signed and delivered by its duly authorized representative as of the date first above written.

 

	 	SUMMIT CHANDLER, LLC
	 	a Delaware limited liability company
	 	 	 
	 	By:	Summit Healthcare REIT, Inc.,
	 	 	a Maryland corporation
	 	 	 	 
	 	 	By:	/s/ Elizabeth A. Pagliarini
	 	 	 	Elizabeth A. Pagliarini
	 	 	 	Chief Financial Officer and Treasurer

 

[Remainder of Page Intentionally Left
Blank]

 

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        State of Arizona Healthcare Facility Note
        [Multistate]

         

        SUMMIT CHANDLER, LLC

        to

         

        CAPITAL ONE MULTIFAMILY FINANCE, LLC

         

        FHA Project No.: 123-22094

         

        Insured under §232 pursuant to 223(f)
        of the National Housing Act, as amended, and regulations published thereunder in effect on July 17, 2018

         

        

By:                                                                       Date:                          , 20         

        [Title]

         

        A total sum of $____________ has been approved
        for insurance hereunder by HUD.

         

        

By:                                                                     Date: September___, 2018   

                               Jason P. Roth, Authorized Agent 

         

        FOR USE ONLY WITH
        LOANS TO BE INSURED PURSUANT TO § 223(a)(7): 

        For purposes of compliance with
        Section 223(a)(7)(A)(iv) of the National Housing Act, as amended, the Contract of Insurance regarding FHA Project No. [Old FHA
        Project Number] is transferred to FHA Project No. [New FHA Project Number], and said Contract of Insurance is hereby
        amended to reflect the terms, conditions and provisions of the National Housing Act, as amended, as evidenced by HUD’s endorsement
        for insurance of this Note dated __________________, ______, executed by ______________________________, (Borrower), and payable
        to _____________________________________, in the amount of $________________________________.

         

 

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RIDER 1 TO

HEALTHCARE FACILITY NOTE OF

SUMMIT CHANDLER, LLC

 

TO

 

CAPITAL ONE MULTIFAMILY FINANCE, LLC

 

IN THE ORIGINAL PRINCIPAL SUM OF $10,643,800.00

DATED AS OF SEPTEMBER 1, 2018

 

 

 

1.          This
Rider 1 to Healthcare Facility Note (this “Rider”) is attached to and made a part of the Healthcare Facility Note from
SUMMIT CHANDLER, LLC, an Arizona limited liability company (the “Borrower”),
to CAPITAL ONE MULTIFAMILY FINANCE, LLC, a Delaware limited liability company (the “Lender”) dated as of September
1, 2018 (the “Note”).

 

2.          Subject
to Section 9 of the Note, this Rider modifies the terms and conditions, if any, contained in the Note relating to prepayment premiums.
Borrower may not prepay any sum due under the Note prior to November 1, 2018. Commencing on November 1, 2018, Borrower may prepay,
in whole or in part, any sum due under the Note on the last day of any month, upon thirty (30) days advance written notice to Lender,
provided prepayment is accompanied by the applicable prepayment premium (expressed as a percentage of the principal amount so prepaid)
set forth below:

 

	Prepayment Period	 	Prepayment Premium	 
	 	 	 	 
	November 1, 2018 through October 31, 2019	 	 	10	%
	November 1, 2019 through October 31, 2020	 	 	9	%
	November 1, 2020 through October 31, 2021	 	 	8	%
	November 1, 2021 through October 31, 2022	 	 	7	%
	November 1, 2022 through October 31, 2023	 	 	6	%
	November 1, 2023 through October 31, 2024	 	 	5	%
	November 1, 2024 through October 31, 2025	 	 	4	%
	November 1, 2025 through October 31, 2026	 	 	3	%
	November 1, 2026 through October 31, 2027	 	 	2	%
	November 1, 2027 through October 31, 2028	 	 	1	%
	November 1, 2028 and therafter	 	 	None	 

 

[SIGNATURE APPEARS ON THE FOLLOWING PAGE]

 

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BORROWER SIGNATURE PAGE TO RIDER 1
TO HEALTHCARE FACILITY NOTE

 

	 	SUMMIT CHANDLER, LLC
	 	a Delaware limited liability company
	 	 	 
	 	By:	Summit Healthcare REIT, Inc.,
	 	 	a Maryland corporation
	 	 	 	 
	 	 	By: 	/s/ Elizabeth A. Pagliarini
	 	 	 	Elizabeth A. Pagliarini
	 	 	 	Chief Financial Officer and Treasurer

 

[END OF RIDER 1 TO HEALTHCARE FACILITY NOTE]

 

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	Healthcare Regulatory

        Agreement – Borrower

        Section 232

         
	U.S. Department of Housing 

        and Urban Development

        Office of Residential

        Care Facilities
	OMB Approval No. 2502-0605

        (exp. 06/30/2017)

 

Public reporting burden for this collection of information
is estimated to average 0.5 hours. This includes the time for collecting, reviewing, and reporting the data. The information is
being collected to obtain the supportive documentation which must be submitted to HUD for approval, and is necessary to ensure
that viable projects are developed and maintained. The Department will use this information to determine if properties meet HUD
requirements with respect to development, operation and/or asset management, as well as ensuring the continued marketability of
the properties. This agency may not collect this information, and you are not required to complete this form, unless it displays
a currently valid OMB control number. 

 

Warning: Any person who knowingly presents a false,
fictitious, or fraudulent statement or claim in a matter within the jurisdiction of the U.S. Department of Housing and Urban Development
is subject to criminal penalties, civil liability, and administrative sanctions. 

 

Recording requested by:

Nicole L. Hoffpauir, Esq.

Krooth & Altman LLP

1850 M Street NW, Suite 400

Washington, DC 20036

 

After recording return to:

United States Department
of Housing 

and
Urban Development

Phoenix Field Office

One North Central Avenue,
Suite 600

Phoenix, AZ 85004

Attn: Monica Garcia, Esq. 

 

Project Name: Pennington Gardens Assisted Living
& Memory Care

 

FHA Project No.: 123-22094

 

Project Location: Chandler, Maricopa County,
Arizona

 

Lender: Capital One Multifamily Finance, LLC

 

Original Principal Amount of Note: $10,643,800.00
Date of Note: as of September 1, 2018

 

Originally endorsed for insurance under Section 232 pursuant
to Section 223(f) 

 

Borrower:
Profit-Motivated  x 
Non-Profit   ̈

Is
Non-Profit Borrower permitted to take Distributions? Yes   ̈ 
No   ̈ 

(Failure to check the appropriate space(s) shall not affect
the enforceability or application of this Agreement.)

 

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This Healthcare Regulatory Agreement –
Borrower (this “Agreement”) is entered into as of this 1st day of September, 2018, between Summit
Chandler, LLC, a limited liability company organized and existing under the laws of Delaware, whose address is 2 South Pointe
Drive, Suite 100, Lake Forest, CA 92630, its successors, heirs, and assigns (jointly and severally) (“Borrower”)
and the U.S. Department of Housing and Urban Development, acting by and through the Secretary, his or her successors, assigns
or designates (“HUD”). Borrower is sometimes also referred to as “Owner” or “Mortgagor”
in the Loan Documents and Program Obligations. If Borrower is also Operator, references in this Agreement to Operator refer to
Borrower. To the extent that Borrower contracts with any other party to perform any functions included in this Agreement, Borrower
shall maintain ultimate responsibility for performance of all required functions included herein.

 

In consideration of, and in exchange for
an action by HUD, HUD and Borrower agree to the terms of this Agreement. The HUD action may be one of the following: HUD’s
endorsement for insurance of the Note, HUD’s consent to the transfer of any of the Mortgaged Property, HUD’s sale
and conveyance of any of the Mortgaged Property, or HUD’s consent to other actions related to Borrower, the Project, or
to the Mortgaged Property.

 

Borrower and HUD execute this Agreement
in order to comply with Program Obligations, with the requirements of the National Housing Act, as amended, and the regulations
adopted by HUD pursuant thereto. This Agreement shall continue during such period of time as HUD shall be the owner, holder, or
insurer of the Note. Upon satisfaction of the Note, as evidenced by the discharge or release of the Borrower’s Security
Instrument, this Agreement shall automatically terminate. However, Borrower shall be responsible for any violations of this Agreement
which occurred prior to termination.

 

Violation of this Agreement or Program
Obligations may subject Borrower and other signatories hereto to adverse actions.

 

Borrower and HUD covenant and agree as
follows:

 

I. DEFINITIONS.

 

1.            DEFINITIONS.
Any capitalized term or word used herein but not defined shall have the meaning given to such term in the Borrower’s
Security Instrument. The following terms, when used in this Agreement (including when used in the above recitals), shall have
the following meanings, whether capitalized or not and whether singular or plural, unless, in the context, an incongruity results:

 

“Affiliate” is defined
in 24 C.F.R. 200.215, or any successor regulation.

 

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“Approved
Use” means the use of the Project for the operation of the Healthcare Facility as an assisted living facility
with 90 beds, of which not less than 86 beds/77 units are in use and such other uses as may be
approved in writing from time to time by HUD based upon a request made by Borrower, or Operator, but excluding any uses that are
discontinued with the written approval of HUD.

 

“Borrower” shall mean the entity identified
as “Borrower” in the first paragraph of this Agreement, together with any successors, heirs, and assigns (jointly
and severally). “Borrower” shall include any person or entity taking title to the Mortgaged Property whether or not
such person or entity assumes the Note. “Borrower” is sometimes also referred to in the Loan Documents and Program
Obligations as the “Obligor,” the “Owner,” and/or the “Mortgagor.”

 

“Borrower-Operator Agreement” means any
agreement relating to the operation of the Healthcare Facility by and between Borrower and Operator, including any Operator Lease.

 

“Borrower’s Security Instrument” means
the Healthcare Deed of Trust, Security Agreement, Assignment of Rents, and Fixture Filing (Arizona), and shall be deemed to be
the mortgage as defined by Program Obligations.

 

“Distribution” means any disbursal, conveyance,
loan or transfer of cash, any asset of Borrower, or any other portion of the Mortgaged Property, other than in payment of Reasonable
Operating Expenses.

 

“Firm Commitment” means the commitment for
insurance of advances or commitment for insurance upon completion, dated July 17, 2018, issued to Lender by HUD under which the
debt evidenced by the Note is to be insured pursuant to a Section of the National Housing Act.

 

“Fixtures” has the meaning set forth in
the Borrower’s Security Instrument.

 

“Healthcare Facility” means that portion
of the Project operated on the Land as a Nursing Home, Intermediate Care Facility, Board and Care Home, Assisted Living Facility
and/or any other healthcare facility authorized to receive insured mortgage financing pursuant to Section 232 of the National
Housing Act, as amended, including any commercial space included in the facility.

 

“HUD” means the U.S. Department of Housing
and Urban Development acting by and through the Secretary in the capacity as insurer or holder of the Loan under the authority
of the National Housing Act, as amended, the Department of Housing and Urban Development Act, as amended, or any other federal
law or regulation pertaining to the Loan or the Project.

 

“Improvements” has the meaning set forth
in the Borrower’s Security Instrument.

 

“Indebtedness” means the principal of, interest
on, and all other amounts due at any time under the Note or the Loan Documents, including prepayment premiums, late charges, default
interest, and advances to protect the security as provided in the Loan Documents.

 

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“Land” has the meaning set forth in the
Borrower’s Security Instrument and is also legally described on Exhibit A, attached hereto and incorporated herein.

 

“Lender” means the entity identified as
“Lender” in the first paragraph of the Borrower’s Security Instrument, or any subsequent holder of the Note,
and whenever the term “Lender” is used herein, the same shall be deemed to include the “Obligee”, or the
“Trustee(s)” and the “Beneficiary” of the Borrower’s Security Instrument, and shall also be deemed
to be the “Mortgagee” as defined by Program Obligations.

 

“Loan Documents” has the meaning set forth
in the Borrower’s Security Instrument.

 

“Mortgaged Property” has the meaning set
forth in the Borrower’s Security Instrument.

 

“Non-Profit Borrower” means a Borrower that
is treated under the Firm Commitment as an entity organized for purposes other than profit or gain for itself or persons identified
therewith, pursuant to Section 501(c)(3) or other applicable provisions of the Internal Revenue Code. For transactions entered
into pursuant to Section 223(a)(7) of the National Housing Act, a Borrower who executed with HUD’s permission a “for-profit”
regulatory agreement in connection with the original loan being refinanced through this transaction shall not be considered a
“Non-Profit Borrower” for purposes of this Agreement and may designate itself as a “Profit-Motivated”
entity on page 1, provided, however, that any conditions in the Firm Commitment conflicting with the above statement shall control.

 

“Note” means the Note executed by Borrower,
described in the Borrower’s Security Instrument, including all schedules, riders, allonges and addenda, as such Note may
be amended from time to time.

 

“Notice” is defined in Section 45.

 

“Operator” means CSL – Chandler, LLC,
a limited liability company organized and existing under the laws of the Oregon, or any subsequent operator approved by HUD.

 

“Operator Lease” means a lease by Borrower
to Operator providing for the operation of the Healthcare Facility.

 

“Operator’s Regulatory Agreement”
means that certain Healthcare Regulatory Agreement - Operator relating to the Project and entered into by Operator for the benefit
of HUD.

 

“Personalty” has the meaning set forth in
the Borrower’s Security Instrument.

 

“Principal” is defined in 24 C.F.R. 200.215,
and any successor regulation, provided that for purposes of the Loan Documents, “Principal” shall also include the
managing member and any other member that has a twenty-five percent (25%) or more interest in a limited liability company.

 

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“Program Obligations” means (1) all applicable
statutes and any regulations issued by HUD pursuant thereto that apply to the Project, including all amendments to such statutes
and regulations, as they become effective, except that changes subject to notice and comment rulemaking shall become effective
only upon completion of the rulemaking process, and (2) all current requirements in HUD handbooks and guides, notices, and mortgagee
letters that apply to the Project, and all future updates, changes and amendments thereto, as they become effective, except that
changes subject to notice and comment rulemaking shall become effective only upon completion of the rulemaking process, and provided
that such future updates, changes and amendments shall be applicable to the Project only to the extent that they interpret, clarify
and implement terms in this Agreement rather than add or delete provisions from such document. Handbooks, guides, notices, and
mortgagee letters are available on HUD’s official website: http://www.hud.gov/offices/adm/hudclips/index.cfm or a
successor location to that site.

 

“Project” has the meaning set forth in the
Borrower’s Security Instrument.

 

“Property Jurisdiction” is any jurisdiction
in which the Land is located.

 

“Reasonable Operating Expenses” means expenses
that arise from the operation, maintenance and routine repair of the Project, including all payments and deposits required under
this Agreement and any of the Loan Documents, and comply with the requirements of 24 C.F.R. 232.1007, or successor regulation.

 

“Rent,” “Profits” and
“Income” shall include: all rent due pursuant to any Master Lease or Operator Lease; any payments due pursuant
to any Residential Agreement; any other lease payments, revenues, charges, fees and assistance payments arising from the operation
of the Project, including but not limited to, if and for so long as applicable, commercial leases, workers’ compensation,
social security, Medicare, Medicaid, and other third-party reimbursement payments, Accounts Receivable (as defined in the Borrower’s
Security Instrument) and all payments and income arising from the operation of the Healthcare Facility and/or the provision of
services to residents thereof.

 

“Reserve for Replacement” is defined in
Section 13.

 

“Residential Agreement” means a lease or
other resident agreement between the operator of the Healthcare Facility and a resident setting forth the terms of the resident’s
living arrangement and the provision of any related services.

 

“Residual Receipts” means certain funds
held by a Non-Profit Borrower which are restricted in their use by this Agreement and Program Obligations, and otherwise described
in Section 17.

 

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“Surplus Cash” is defined in Section 15.

 

“Taxes” means all taxes, assessments, vault
rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and
general or local improvements, that are levied, assessed or imposed by any public authority or quasi-public authority, and that,
if not paid, could become a lien on the Land or the Improvements.

 

“Waste” means a failure to keep the Project
in decent, safe and sanitary condition and in good repair. “Waste” also means the failure to meet certain financial
obligations regarding the payment of Taxes and the relinquishment of the possession of Rents. During any period in which HUD insures
the Loan or holds a security interest on the Mortgaged Property, Waste is committed when, without Lender’s and HUD’s
express written consent, Borrower:

 

		(1)	physically
                                         changes, or permits changes to, the Mortgaged Property, whether negligently or intentionally,
                                         in a manner that reduces its value;

 

		(2)	fails
                                         to maintain the Mortgaged Property in decent, safe, and sanitary condition and in good
                                         repair;

 

		(3)	fails
                                         to pay, or cause to be paid, before delinquency any Taxes that because of such failure,
                                         may subject the Project to a lien having priority over the Borrower’s Security
                                         Instrument;

 

		(4)	materially
                                         fails to comply with covenants in the Note, the Borrower’s Security Instrument,
                                         this Agreement, or any of the Loan Documents respecting physical care, maintenance, construction,
                                         abandonment, demolition, or insurance against casualty of the Mortgaged Property; or

 

		(5)	retains
                                         possession of Rents to which Lender or its assigns have the right of possession under
                                         the terms of the Loan Documents.

 

II. CONSTRUCTION; REPAIRS.

 

2.    
       CONSTRUCTION FUNDS. Borrower shall keep construction funds of the Project, if any,
separate and apart from operating funds of the Project, including without limitation any funds necessary to operate the
Healthcare Facility.

 

3.            UNPAID
OBLIGATIONS. Borrower certifies that upon final endorsement of the Note by HUD, Borrower shall have no unpaid obligations
in connection with the purchase of the Mortgaged Property, the construction of the Mortgaged Property, or with respect to the
Borrower’s Security Instrument except such unpaid obligations as have the written approval of HUD as to terms, form and
amount.

 

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4.            LENDER’S
CERTIFICATE. Borrower shall be bound by the terms of either the Lender’s Certificate, a copy of which has been provided
to Borrower, and/or the Request for Endorsement of Credit Instrument & Certificate of Lender, Borrower & General Contractor,
as applicable (a copy of which has been provided to Borrower), insofar as the applicable document establishes or reflects obligations
of Borrower, and Borrower agrees that the fees and expenses enumerated in the applicable document have been fully paid or payment
has been provided for as set forth in the applicable document and that all funds deposited with Lender shall be used for the purposes
set forth in the applicable document insofar as Borrower has rights and obligations in respect thereto.

 

5.            CONSTRUCTION
COMMENCEMENT/REPAIRS. Borrower shall not commence, and has not commenced, construction or substantial rehabilitation of the
Mortgaged Property prior to HUD endorsement of the Note except as permitted by Program Obligations or as otherwise permitted by
HUD, and provided that this Section 5 is not applicable if HUD has given prior written approval to an early commencement or early
start of construction, or if this Project is an Insurance Upon Completion loan or involves a loan refinancing.

 

6.            DRAWINGS
AND SPECIFICATIONS. The Project shall be constructed in accordance with the terms of the Construction Contract as approved
by HUD, if any, and with the “Drawings and Specifications,” as such term is referred to in such Construction Contract.

 

7.            REQUIRED
CONSTRUCTION PERMITS. Unless otherwise required in the Construction Contract and Building Loan Agreement, Borrower has obtained
all necessary certificates, permits, licenses, qualifications, authorizations, consents and approvals from all necessary Governmental
Authorities to own, construct or substantially rehabilitate, to carry out all of the transactions required by the Loan Documents
and to comply with all applicable federal statutes and regulations of HUD in effect on the date of the Firm Commitment, except
for those, if any, which customarily would be obtained at a later date, at an appropriate stage of construction or completion
thereof, and which the Borrower shall obtain in the future. The licenses and permits that are in effect as of the date hereof
are sufficient to allow any construction (or substantial rehabilitation, as applicable) of the Improvements to proceed to completion
in the ordinary course. As the construction (or substantial rehabilitation, as applicable) of the Project progresses, unless otherwise
required by the Construction Contract, Borrower shall procure and submit all necessary building and other permits required by
Governmental Authorities. The Project shall not be available for residency by any resident, nor shall the Healthcare Facility
commence operations, except to the extent approved by prior written consent of HUD and of all other legal authorities having jurisdiction
of the Project.

 

8.            PRE-COMPLETION
ACCOUNTING REQUIREMENTS. Borrower shall submit an accounting to HUD, as required by Program Obligations, for all receipts
and disbursements during the period starting with the date of first occupancy of the Mortgaged Property after endorsement of the
Note and ending, at the option of Borrower, any date after completion of the Project, as determined in accordance with Program
Obligations. Any income of the Project in excess of disbursements for HUD-approved construction and development costs and Reasonable
Operating Expenses, as such excess is determined by HUD, shall be treated as a recovery of construction cost, except as otherwise
allowed in Program Obligations.

  

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III. FINANCIAL MANAGEMENT.

 

9.            OUTSTANDING
OBLIGATIONS. Borrower shall have no obligations as of the date of this Agreement except those approved by HUD in writing and,
except for those approved obligations, the Land has been paid for in full (or if the Land is subject to a leasehold interest,
it must be subject to a HUD-approved lease), and is free from any liens or purchase money obligations, except as approved by HUD.
As of the date hereof, all contractual obligations relating to the Project have been fully disclosed to HUD.

 

10.          PAYMENTS.
Borrower shall make promptly all payments, including any deposits to required reserves, due under the Loan Documents, including
without limitation the Note and the Borrower’s Security Instrument.

 

11.          PROPERTY
AND OPERATION; ENCUMBRANCES.

 

(a)           Borrower
shall deposit all receipts of Borrower relating to the Project including all Rents, Advances, and equity or capital contributions
required under the Firm Commitment or otherwise advanced for the purpose and as part of the Mortgaged Property, in the name of
Borrower, for the benefit of the Project, in a federally insured depository or depositories and in accordance with Program Obligations,
provided that, in accordance with Program Obligations, an account held in an institution approved by the Government National Mortgage
Association may have a balance that exceeds the amount to which such deposit insurance is limited. Equity or capital contributions
shall not include certain syndication proceeds, such as proceeds from Low Income Housing Tax Credit transactions used to repay
bridge loans, all as more fully set forth in Program Obligations. Such funds shall be withdrawn only in accordance with the provisions
of this Agreement and Program Obligations. Any person or entity receiving Mortgaged Property or any other proceeds of the Project
other than for eligible purposes pursuant to this Agreement shall immediately deliver such Mortgaged Property or other proceeds
to Borrower for the benefit of the Project and failing so to do shall hold and be deemed to hold such Mortgaged Property in trust
for the benefit of the Project.

 

(b)           Borrower
shall not engage in any business or activity, including the operation of any other project or other healthcare facility, or other
ancillary businesses, or incur any liability or obligation not in connection with the Project. Borrower shall not acquire an Affiliate
or contract to enter into any affiliation with any party, except as approved by HUD.

 

(c)           Borrower
shall immediately satisfy or obtain a release of any mechanic’s lien, attachment, judgment lien, or any other lien that
attaches to the Mortgaged Property, except to the extent permitted by HUD.

 

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(d)           Penalties,
including but not limited to delinquent tax penalties, shall not be paid from the Mortgaged Property except to the extent such
payments are considered Distributions and are allowed pursuant to this Agreement.

 

(e)           Borrower
shall promptly notify HUD of the appointment of any receiver for the Project, the filing of a petition in bankruptcy or insolvency
or for reorganization, as well as the retention of any attorneys, consultants or other professionals in anticipation of such an
appointment or filing.

 

(f)           Borrower
shall cause the Project to be insured at all times in accordance with the Borrower’s Security Instrument and Program Obligations,
and Borrower shall notify HUD of all payments received, or claimed, from an insurer.

 

(g)           Borrower
shall notify HUD of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all
or any part of the Mortgaged Property, whether direct or indirect condemnation.

 

(h)           Borrower
shall notify HUD of any litigation proceeding filed against Borrower or Principals, Operator, the Healthcare Facility, or the
Project, or any litigation proceeding filed by Borrower, pursuant to Program Obligations.

 

(i)            If
the Healthcare Facility is an Assisted Living Facility, Borrower shall require that no more than one person shall occupy any residential
unit of the Healthcare Facility unless Operator receives prior written consent from all residents of such unit.

 

12.          FINANCIAL
ACCOUNTING. Borrower shall keep the books and accounts of the operation of the Mortgaged Property in accordance with Program
Obligations. Financial records of Borrower and the Project shall be complete, accurate and current at all times. Posting must
be made at least monthly to the ledger accounts, and year-end adjusting entries must be posted promptly in accordance with sound
accounting principles. All expenditures in connection with the Project must be fully documented so as to provide reasonable assurance
to all persons or entities that review such expenditures that such expenditures are permitted under Program Obligations. Undocumented
expenses shall not be considered Reasonable Operating Expenses.

 

13.          RESERVE
FOR REPLACEMENT.

 

(a)           Borrower
shall establish and maintain a Reserve for Replacement account for defraying certain costs for replacing major structural elements
and mechanical equipment of the Project or for any other purpose. The Reserve for Replacement shall be deposited with Lender or
in a safe and responsible depository designated by Lender in accordance with Program Obligations. Such funds shall at all times
remain under the control of Lender or Lender’s designee, whether in the form of a cash deposit or invested in obligations
of, or fully guaranteed as to principal by, the United States of America or in such other investments as may be allowed by HUD
and shall be held in accounts insured or guaranteed by a federal agency and in accordance with Program Obligations.

 

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(b)           Borrower
shall deposit at endorsement of the Note an initial amount of $77,000.00, if applicable, and Borrower shall deposit a monthly
amount of $3,850.00, concurrently with the beginning of payments towards amortization of the Note unless a different date or amount
is established by HUD. At least every ten years, starting February 14, 2028, and more frequently at HUD’s discretion, Borrower
shall submit to HUD a written analysis of its use of the Reserve for Replacement during the prior ten years and the projected
use of the Reserve for Replacement funds during the coming ten years in accordance with Program Obligations. The amount of the
monthly deposit may be increased or decreased from time to time at the written direction of HUD without a recorded amendment to
this Agreement. In connection therewith, every ten years starting February 14, 2028, the Lender shall obtain a physical and capital
needs assessment report for HUD to evaluate. The cost of such report may be paid from the Reserve for Replacements. HUD may, in
its sole discretion, require Borrower to maintain a minimum balance in the account, in an amount to be set by HUD.

 

(c)           Borrower
shall carry the balance in this account on the financial records as a restricted asset. The Reserve for Replacement shall be invested
in accordance with Program Obligations, and any interest earned on the investment shall be deposited in the Reserve for Replacement
for use by the Project in accordance with this Section 13.

 

(d)           Disbursements
from such account shall only be made after consent, in writing, of HUD, which may be given or withheld in HUD’s sole discretion.
In the event of a notification of default under the terms of the Borrower’s Security Instrument pursuant to which the Indebtedness
has been accelerated, a written notification by HUD to Borrower of a violation of this Agreement, or at such other times as determined
solely by HUD, HUD may direct the application of the balance in such account to the amount due on the Indebtedness as accelerated
or for such other purposes as may be determined solely by HUD.

 

(e)           Upon
Borrower’s full satisfaction of all of its obligations under the Loan Documents, any monies remaining in the Reserve for
Replacement account shall be released to Borrower or its designee.

 

(f)            Borrower
may, only with the advance written approval of HUD, borrow funds from the Reserve for Replacement for Reasonable Operating Expenses
as provided in Program Obligations. Such funds shall be repaid to the Reserve for Replacement by Borrower pursuant to the terms
approved by HUD prior to the making of such loan. To the extent HUD does not specify repayment requirements, Borrower shall repay
the Reserve for Replacement in full within thirty (30) days of the approved withdrawal. If Borrower fails to timely make any repayment
installment pursuant to the terms approved by HUD, upon notice from HUD, Borrower shall immediately repay the full amount of such
loan from non-Project funds.

 

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14.          RESERVED.

 

15.          SURPLUS
CASH.

 

(a)           Surplus
Cash shall be calculated semi-annually, at the end of the first six months of the Borrower’s annual fiscal year, and at
the end of the Borrower’s annual fiscal year.  Each Surplus Cash calculation shall be submitted to Lender and HUD with
the filing of Borrower’s Annual Financial Reports, unless otherwise required by HUD.

 

(b)           “Surplus
Cash” means any cash remaining after:

 

		(i)	the
                                         payment of (1) all sums due or currently required to be paid by Borrower under the Loan
                                         Documents, including any required deposits into reserves; and (2) all of Borrower’s
                                         obligations relating to the Project other than those required to be paid under the Loan
                                         Documents, unless funds for such payments have been set aside or deferment of payment
                                         has been approved by HUD; and

 

		(ii)	the
                                         segregation of all amounts required to be held in trust (e.g., tenant security deposits)
                                         and all amounts required to be held (segregated) in other restricted asset accounts of
                                         the Project (e.g., Reserve for Replacements) pursuant to this Agreement, the Loan Documents
                                         and Program Obligations.

 

16.          DISTRIBUTIONS.

 

(a)           Borrower
may make and take Distributions of Mortgaged Property, to the extent and as permitted by the law of the applicable jurisdiction,
pursuant to the restrictions below, including without limitation the reconciliation requirements set forth in Section 16(d); provided
however that, except as may be approved by HUD or permitted under Program Obligations, or as otherwise provided in this Agreement,
Distributions of Mortgaged Property are prohibited for Non-Profit Borrowers.

 

(b)           Distributions
shall not be made:

 

		(i)	from
                                         borrowed funds (unless the Borrower is Operator and such Distribution is permitted under
                                         the Operator’s Regulatory Agreement and Program Obligations) or prior to the completion
                                         of the construction or rehabilitation of the Project;

 

		(ii)	after
                                         HUD has given written notice to Borrower of a violation or default under this Agreement
                                         and/or after Lender has given written notice to Borrower of a violation or default under
                                         any of the Loan Documents, and until the terms of such notices of violation or default
                                         have been satisfied to the satisfaction of HUD and/or Lender, as applicable;

 

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		(iii)	when
                                         Borrower or the Project is under a forbearance agreement;

 

		(iv)	If:
                                         (A) necessary services for the operation of the Healthcare Facility are not being provided
                                         on a regular basis, which failure Borrower knows or should have known about in the exercise
                                         of due care; (B) written notices of necessary physical repairs or deficiencies involving
                                         exigent or significant health or safety risks to residents in connection with the Project
                                         (including but not limited to building code violations) by other Governmental Authorities
                                         and/or by HUD have been issued and remain unresolved to the satisfaction of the issuing
                                         Governmental Authority, (C) Borrower has been notified in writing by HUD, Lender or other
                                         Governmental Authority that necessary physical repairs and/or deficiencies exist in connection
                                         with the Project and Borrower has not corrected or cured, or caused to be corrected or
                                         cured, the identified items to HUD’s satisfaction, (D) there remain any outstanding
                                         loans from the Reserve for Replacement or Residual Receipts account, or any required
                                         deposits to such accounts have not been made when due, or (E) the Reserve for Replacement
                                         account or any other required reserve does not have the minimum balance required by HUD;
                                         and/or

 

		(v)	if
                                         the Borrower is also Operator, at any time that Operator is prohibited from distributing,
                                         advancing or otherwise using funds attributable to the Healthcare Facility (e.g., failure
                                         to timely file financial reports or when Healthcare Facility Working Capital is negative).

 

(c)           Any
Distribution of any funds, which the party receiving such funds is not entitled to retain hereunder, shall be returned to Borrower’s
Project-related accounts immediately.

 

(d)           Upon
each required calculation of Surplus Cash, Borrower must demonstrate positive Surplus Cash, or to the extent Surplus Cash is negative,
repay to Project-related accounts any Distributions taken during such calculation period. Such repayment must be made within thirty
(30) days of the conclusion of the reporting period, or such longer period approved by HUD.

 

(e)           If
a Non-Profit Borrower has been permitted to take Distributions, as indicated on the first page of this Agreement, and to the extent
the annual audited financial statement of such Non-Profit Borrower demonstrates Surplus Cash, such Non-Profit Borrower may make
Distributions of such Surplus Cash, upon the following conditions:

 

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		(i)	Distributions
                                         may only be made after the end of any annual or semi-annual fiscal period, and when the
                                         Borrower can demonstrate positive Surplus Cash pursuant to Section 15, at the end of
                                         the immediately prior annual or semi-annual fiscal period;

 

		(ii)	Operator
                                         is in good standing with the applicable licensing agency and has no open state compliance
                                         issues or special focus facility designation;

 

		(iii)	No
                                         unresolved audit findings in the annual audited financial statements exist relating to
                                         the Project;

 

		(iv)	Borrower
                                         and Operator are in compliance with the terms of this Agreement and the Operator’s
                                         Regulatory Agreement, respectively, with no notice of noncompliance or violation from
                                         HUD;

 

		(v)	No
                                         defaults exist under any of the Loan Documents and all payments required by any of the
                                         Loan Documents are current, with no notice of noncompliance or violation from HUD; and

 

		(vi)	The
                                         balance of the Residual Receipts account remains equal to no less than six months of
                                         the Borrower’s required debt service (including any mortgage insurance premium,
                                         escrow deposit, reserve deposits, or any other payments required by Borrower pursuant
                                         to the Loan Documents).

 

The Non-Profit Borrower making Distributions must evidence,
with appropriate documentation sufficient for audit and HUD monitoring purposes, compliance with each condition listed above at
the time such Distribution is made, and must retain such documentation in accordance with Program Obligations, for audit and HUD
monitoring purposes.

 

17.          RESIDUAL
RECEIPTS.

 

(a)           Any
Non-Profit Borrower shall establish and maintain a Residual Receipts account.  Unless and until otherwise approved in writing
by HUD, Residual Receipts and the Residual Receipts account shall be restricted as set forth in this Section 17. Within ninety
(90) days after the end of the annual or semi-annual fiscal period for which Surplus Cash is calculated, Borrower shall deposit
into the Residual Receipts account an amount equal to the excess, if any, of (i) Surplus Cash as of the end of such fiscal period
over (ii) the amount of any permitted Distributions therefrom.

 

(b)           Residual
Receipts shall be deposited with Lender or in a safe and responsible depository designated by Lender in accordance with Program
Obligations. Residual Receipts shall at all times remain under the control of Lender or Lender’s designee, whether in the
form of a cash deposit or invested in obligations of, or fully guaranteed as to principal by, the United States of America or
in such other investments as may be allowed by HUD and shall be held in accounts insured or guaranteed by a federal agency and
in accordance with Program Obligations.

 

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(c)           Borrower
shall carry the balance in such account on the financial records as a restricted asset. Residual Receipts shall be invested in
accordance with Program Obligations, and any interest earned on the investment shall be deposited in the Residual Receipts account
for use by the Project in accordance with this Section 17.

 

(d)           Disbursements
from such account shall only be made after consent, in writing, of HUD, which may be given or withheld in its sole discretion,
provided that, if the Non-Profit Borrower has been permitted to take Distributions as indicated on the first page of this Agreement,
then HUD shall apply the conditions enumerated in Section 16(e) in granting or withholding such consent. In the event of a notification
of default under the terms of the Borrower’s Security Instrument, pursuant to which the Indebtedness has been accelerated,
a written notification by HUD to Borrower of a violation of this Agreement or at such other times as determined solely by HUD,
HUD may direct the application of the balance in such account to the amount due on the Indebtedness as accelerated or for such
other purposes as may be determined solely by HUD.

 

(e)           Upon
Borrower’s full satisfaction of all its obligations under the Loan Documents, all funds remaining in the Residual Receipts
account shall be released to the Borrower.

 

(f)            Borrower
may, only with the advance written approval of HUD, borrow funds from Residual Receipts for Reasonable Operating Expenses as provided
in Program Obligations or for such other purposes as HUD may permit. Such funds shall be repaid to the Residual Receipts account
pursuant to the terms approved by HUD prior to the making of such loan. To the extent HUD does not specify repayment requirements,
Borrower shall repay the Residual Receipts account in full within thirty (30) days of the approved withdrawal. If Borrower fails
to timely make any repayment installment pursuant to the terms approved by HUD, upon notice from HUD, Borrower shall immediately
repay the full unrepaid amount of all such loan from non-Project funds.

 

18.          ADVANCES.

 

(a)           All
advances made by Borrower (or by a member, partner, shareholder of Borrower, or other individual or entity acting on behalf of
Borrower) for Reasonable Operating Expenses or otherwise for the benefit of the Project must be deposited into the Project’s
operating account, or otherwise as directed by HUD, as required by Program Obligations.

 

(b)           Interest
may accrue, and be paid, on such advances pursuant to terms approved by HUD in advance in writing.

 

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(c)           Repayments
of advances must be approved by HUD, or as otherwise provided in Program Obligations.

 

19.          PROJECT
RECORDS. Borrower shall:

 

(a)           Make
and keep books, records, and accounts, in such reasonable detail, so as to fully, accurately, and fairly reflect the activities
of Borrower.

 

(b)           Record
the Project’s assets, liabilities, revenues, expenses, receipts and disbursements in separate accounts from any other assets,
liabilities, revenues, expenses, receipts and disbursements of Borrower so as to permit the production of a Statement of Financial
Position, a Statement of Profit and Loss (Statement of Activities), and a Statement of Cash Flows for Borrower in which the activities
of Borrower are separately identifiable from the activities of the Operator, unless Borrower is also Operator.

 

(c)           Devise
and maintain a system of internal accounting controls sufficient to provide reasonable assurances that:

 

		(i)	Transactions are executed, and access to assets is permitted,
                                         only in accordance with Borrower’s authorization;

 

		(ii)	Transactions are accurately and timely recorded to permit the
                                         preparation of quarterly and annual financial reports in conformity with applicable Program
                                         Obligations;

 

		(iii)	Transactions are timely recorded in sufficient detail so as
                                         to permit an efficient audit of the Borrower’s books and records in accordance
                                         with Generally Accepted Auditing Standards (GAAS), Generally Accepted Government Auditing
                                         Standards (GAGAS), and other applicable Program Obligations; and

 

		(iv)	Transactions are timely recorded in sufficient detail so as
                                         to maintain accountability of the Borrower’s assets. The recorded accountability
                                         for assets shall be compared with the existing assets at reasonable intervals, but not
                                         less than annually, and appropriate action shall be taken with respect to any differences.

 

(d)           Make
the books, records and accounts of Borrower available for inspection by HUD or its authorized representatives, after reasonable
prior notice, during normal business hours, at the Project or other mutually agreeable location or, at HUD’s request, shall
provide legible copies of such documents to HUD or its authorized representatives within a reasonable time after HUD or its authorized
representative makes a request for such documents.

 

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(e)           Include
as a requirement in any operating or management contract that the books, records, and accounts of any agent of Borrower, as they
pertain to the operations of the Project, shall be kept in accordance with the requirements of this Section 19 and be available
for examination by HUD or its authorized representatives after reasonable prior notice during customary business hours at the
Project or other mutually agreeable location or, at HUD’s request, the Management Agent shall provide legible copies of
such documents to HUD or its authorized representatives within a reasonable time after HUD or its authorized representative makes
the request.

 

20.          ANNUAL
FINANCIAL REPORTS.

 

(a)           For
so long as any portion or portions of this Section 20 are not expressly waived or modified in writing by HUD, within ninety (90)
days, or such longer period established in writing by HUD, following the end of each fiscal year, Borrower shall furnish HUD and
Lender with a complete annual financial report of all of Borrower’s financial activities for the immediately preceding fiscal
year, or for such other period as approved by HUD in writing, prepared in accordance with Generally Accepted Accounting Principles
(GAAP). For purposes of this Section 20, where Borrower is also Operator, and without limiting the requirements for Operator’s
submission of financial reports to HUD under the Operator’s Regulatory Agreement, financial activities of Borrower and the
Project shall include all of the activities of both Borrower and Operator. To the extent any records or other information of the
Project is held by Operator, or any management agent or Affiliate, Borrower shall cause such entity to provide such information
to Borrower, Lender, and HUD, and every contract related to the Project with Operator, or any management agent or Affiliate, shall
include the provision that such information shall be provided on demand. All annual financial reports furnished to HUD required
herein shall be furnished in accordance with 24 C.F.R. 5.801 and other Program Obligations, and shall include a certification
in content and form prescribed by HUD and certified by Borrower.

 

(b)           In
addition, except as otherwise provided in this Section 20, annual financial reports shall be audited in accordance with Generally
Accepted Auditing Standards (GAAS) and Government Auditing Standards (GAS), and certified by a certified public accountant licensed
or certified by a regulatory authority of a state or other political subdivision of the United States, which authority makes such
certified public accountant subject to regulations, disciplinary measures, or codes of ethics prescribed by law. Such certified
public accountant must have no business relationship with Borrower other than for the provision of tax consulting and return preparation
and auditing services.

 

(c)           Any
Non-Profit Borrower shall submit audited annual financial reports, as applicable, pursuant to federal notice (e.g., Office of
Management and Budget Circular A-133). However, notwithstanding any additional time provided for Non-Profit Borrowers to submit
audited annual financial reports, such Borrowers shall still be required to submit unaudited annual financial reports pursuant
to Section 20(a), except that, for Borrowers that elect to submit their required audited annual financial reports early (i.e.
within the time specified in Section 20(a)), the requirement to submit unaudited annual financial reports shall be waived.

 

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(d)           If
Borrower fails to submit any annual financial report required by this Section 20 within ninety (90) days of the required due date,
HUD, at its sole election, and without relieving Borrower of its requirement to file such report, may thereafter examine, or cause
to be examined at Borrower’s expense, the books and records of Borrower and the Project for purposes of preparing a report
of the operations of the Project for HUD’s use.

 

(e)           Auditing
costs and tax return preparation costs may be charged as Reasonable Operating Expenses only to the extent they are required of
Borrower itself by state law, the Internal Revenue Service (“IRS”), the Securities and Exchange Commission,
or HUD. Neither IRS audit costs nor costs of tax return preparation for partners, members, shareholders, Principals or Affiliates
of Borrower are considered Reasonable Operating Expenses.

 

IV. PROJECT MANAGEMENT.

 

21.          PRESERVATION,
MANAGEMENT AND MAINTENANCE OF THE MORTGAGED PROPERTY. Borrower (a) shall not commit or permit Waste, (b) shall not abandon
the Mortgaged Property, (c) shall restore or repair promptly, or cause to be restored or repaired promptly, in a good and workmanlike
manner, any damaged part of the Project to the equivalent of its original condition, or such other condition as HUD may approve
in writing, whether or not litigation or insurance proceeds or condemnation awards are available to cover any costs of such restoration
or repair, and (d) shall keep, or cause to be kept, the Project in decent, safe, sanitary condition and good repair, including
the replacement of Personalty and Fixtures with items of equal or better function and quality. Obligations (a) through (d) of
this Section 21 are absolute and unconditional and are not limited by any conditions precedent and are not contingent on the availability
of financial assistance from HUD or on HUD’s performance of any administrative or contractual obligations. In the event
all or any of the Improvements shall be destroyed or damaged by fire, by an exercise of the power of eminent domain, by failure
of warranty, or other casualty, the money derived from any settlement, judgment, or insurance on any portion of the Project shall
be applied in accordance with the terms of Program Obligations and the Borrower’s Security Instrument or as otherwise may
be directed in writing by HUD.

 

22.          FLOOD
HAZARDS. Borrower shall maintain, or cause to be maintained, flood insurance as required by Program Obligations.

 

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23.          CONTRACTS
FOR GOODS AND SERVICES. Consistent with Program Obligations, to the extent that Borrower obtain, or cause to be obtained,
contracts for goods, materials, supplies, and services (“Goods and Services”), it shall do so at costs, amounts,
and terms that do not exceed reasonable and necessary levels and those customarily paid in the vicinity of the Land for Goods
and Services received. The purchase price of Goods and Services shall be based on quality, durability and scope of work. Reasonable
Operating Expenses do not include amounts paid for betterments as defined in the Property Jurisdiction or the Improvements unless
determined by HUD to be prudent and appropriate. If the Borrower is acquiring goods and services whose costs exceed five percent
(5.00%) of the Healthcare Facility’s gross annual revenue, Borrower shall solicit written cost estimates. Borrower shall
keep copies of all written cost estimates and contracts or other instruments relating to the Project, all or any of which may
be subject to inspection and examination by HUD at the Project or other mutually agreeable location.

 

24.          RESPONSIVENESS
TO INQUIRIES.  At the request of HUD, Borrower shall promptly furnish or cause to be furnished operating budgets and occupancy,
accounting and other reports (including credit reports) and give or cause to be given specific answers to questions relative to
income, assets, liabilities, contracts, operation, and conditions of the Project and the status of the Borrower’s Security
Instrument.

 

25.          PERMITS
AND APPROVALS.

 

(a)           Borrower
shall at all times cause Operator, or any lessee or management agent, as applicable, to maintain in full force and effect, all
appropriate certificates of need, bed authority, provider agreements, licenses, permits and approvals reasonably necessary to
operate the Healthcare Facility or to fund the operation of the Project for the Approved Use (collectively, the “Permits
and Approvals”). Without the prior written consent of HUD, none of the Permits and Approvals shall be conveyed, assigned,
encumbered, transferred or alienated from the Healthcare Facility or the Project (nor shall they be relinquished to any licensing
or certification authority). Borrower shall ensure that the Healthcare Facility and the Project are at all times operated in accordance
with the requirements of the Permits and Approvals.

 

(b)           The
security interest referred to in Section 27 below shall constitute, to the extent permitted by law, a first lien upon all of the
rights, titles and interests of Borrower, if any, in the Permits and Approvals. However, in the event of either a monetary or
other default under this Agreement, the Note, the Borrower’s Security Instrument, or any of the other Loan Documents, the
Borrower shall cooperate in any legal and lawful manner necessary or required to permit the continued operation of the Healthcare
Facility for the Approved Use. For the intents and purposes herein, Borrower hereby irrevocably nominates and appoints Lender
and HUD, their respective successors and assigns, each in its own capacity, as Borrower’s attorney-in-fact coupled with
an interest to do all things that any such attorney-in-fact deems to be necessary or appropriate in order to facilitate the continued
operation of the Healthcare Facility and the Project for the Approved Use, including but not limited to, the power and authority
to provide any and all information and data, pay such fees as may be required, and execute and sign in the name of Borrower, its
successors or assigns, any and all documents, as may be required by any Governmental Authority exercising jurisdiction over the
Project.

 

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(c)           Borrower
shall not alter, terminate or relinquish or suffer or permit the alteration, termination or relinquishment of any Permits and
Approvals without the prior written approval of HUD. In the event that any such alteration, termination or relinquishment is proposed,
upon learning of such proposed alteration, termination or relinquishment, Borrower shall advise HUD and Lender promptly. Borrower
shall insert the foregoing requirements into any Borrower-Operator Agreement for the Project.

 

(d)           Except
as otherwise provided below or in Program Obligations, Borrower shall electronically deliver within two (2) Business Days after
Borrower’s receipt thereof, to the assigned HUD personnel and Lender copies of any and all notices, reports, surveys and
other correspondence (regardless of form) received by Borrower from any Governmental Authority that includes any statement, finding
or assertion that (i) Borrower, Operator, the Project or any lessee or management agent of the Project is or may be
in violation of (or default under) any of the Permits and Approvals or any governmental requirements applicable thereto, (ii) any
of the Permits and Approvals are to be terminated, limited in any way, or not renewed, (iii) any civil money penalty relating
to the Project is being imposed with respect to the Healthcare Facility, or (iv) Borrower, Operator, the Project or any lessee
or management agent of the Project is subject to any governmental investigation or inquiry involving fraud. Borrower shall deliver
to the assigned HUD personnel and Lender, simultaneously with delivery thereof to any Governmental Authority, any and all responses
given by or on behalf of Borrower to any of the foregoing and shall provide to HUD and Lender, promptly upon request, such other
information regarding any of the foregoing as HUD or Lender may request. Unless otherwise requested by HUD, the reporting requirement
of this provision shall not encompass regulators’ communications relating solely to licensed nursing facility surveys where
the most severe citation level is at the “G” level
or its equivalent (pursuant to CMS State Operations Manual, Chapter 7, as may hereafter be edited or updated, or any successor
guidance) unless a citation at such level is either (i) unresolved from the two  most recent consecutive prior surveys, or
(ii) is a repeat violation having the same citation number.  Moreover, unless otherwise requested by HUD or Lender, the initial
communication from the Operator pursuant to this paragraph shall be a notice by email to the Lender describing the conduct cited,
the scope and duration of remedy(ies) imposed, and the timelines for corrective actions.  Then, unless otherwise requested
by HUD or Lender, the next communication from the Operator shall be notification that the citations have been cleared by the issuing
regulatory agency. The receipt by HUD and/or Lender of notices, reports, surveys, correspondence and other information shall not
in any way impose any obligation or liability on HUD, the Lender or their respective agents, representatives or designees to take
or refrain from taking any action, and HUD, Lender and their respective agents, representatives and designees shall have no liability
for any failure to act thereon or as a result thereof.

 

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26.          Operator;
Cooperation in Change of Operator.

 

(a)           Unless
Borrower is itself the licensed operator of the Healthcare Facility, Borrower has or shall enter into and maintain the Borrower-Operator
Agreement , in such form as approved by HUD. Any Operator (including Borrower) must be approved by HUD and shall execute a Healthcare
Regulatory Agreement – Operator (Form HUD-92466A-ORCF) upon such terms as are acceptable to HUD and an Operator Security
Agreement (Form HUD-92323-ORCF) and deposit account control agreements in form and substance satisfactory to HUD and Lender. If
Borrower is or becomes Operator, Borrower shall execute a Healthcare Regulatory Agreement – Operator (Form HUD-92466A-ORCF)
upon terms acceptable to HUD and an Operator Security Agreement (Form HUD-92323-ORCF) and deposit account control agreements in
form and substance satisfactory to HUD and Lender.

 

(b)           Borrower
shall require Operator to comply with the terms of the Operator’s Regulatory Agreement and shall set forth such requirements,
or cause such requirements to be set forth, in any Borrower-Operator Agreement.

 

(c)           In
the event that, consistent with the Operator’s Regulatory Agreement, HUD directs Borrower to terminate any Borrower-Operator
Agreement and procure a new Operator acceptable to HUD, Borrower shall expeditiously do so consistent with the continued operation
of the Healthcare Facility for the Approved Use, and in cooperation with and subject to the requirements of the necessary regulatory
and/or funding entities. Doing so shall in no way obviate the Borrower’s obligation to comply with all other terms of this
Agreement or affect any enforcement action by HUD.

 

(d)           In
the event that Borrower is itself the licensed operator of the Healthcare Facility and HUD determines that (i) any of the Permits
and Approvals have been or are at substantial and imminent risk of being terminated, suspended or otherwise restricted in such
a way that the Project could not be operated for the Approved Use, as evidenced by, without limitation, letters of warning or
imposition of penalties from applicable state and/or federal regulatory and/or funding agencies, or (ii) the financial viability
of the Healthcare Facility is at substantial and imminent risk, then, pursuant to Program Obligations and without prejudice to
any enforcement actions otherwise set forth in this Agreement, HUD may direct Borrower to retain the services of an operator acceptable
to HUD. Upon such direction from HUD, Borrower shall expeditiously do so.

 

(e)           Without
prior approval of HUD, the Operator Lease shall not, and may not be amended to, contain any provisions that cause such lease to
be characterized as other than an “operating lease” pursuant to Generally Accepted Accounting Principles and FASB
Standard 13 (or its successor), including without limitation provisions that convey an ownership interest in the Project to Operator,
or grant Operator a bargain purchase option during or after the lease term. Nothing herein shall be construed as prohibiting Borrower
from granting an Operator or Master Tenant, as applicable, an option to purchase the Project on arms-length negotiated terms,
provided that such terms do not cause the Operator Lease to be characterized as something other than an “operating lease”
for accounting purposes and provided such option provides that the exercising of same is subject to the prior satisfaction of
applicable Program Obligations, including those relating to the transfer of physical assets.

 

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27.          Personal
Property; Security Interests. Borrower shall suitably equip, or cause to be equipped, the Project for the Approved
Use. Except as otherwise approved in writing by HUD, Borrower shall grant to Lender and HUD a first lien security interest in
all personal property of Borrower related to the Project as additional security for the obligations of Borrower under the Note,
the Borrower’s Security Instrument and this Agreement. Such security interest shall be evidenced by such security agreements
as Lender and/or HUD may require and, in connection therewith, Borrower shall execute or cause to be executed and delivered such
deposit account control agreements as may be required by Lender and/or HUD. Borrower hereby authorizes each of Lender and HUD
to file such UCC financing statements, amendments, and continuation statements as either of them may deem to be necessary or appropriate
in connection with the foregoing security interests. Borrower shall not be permitted to grant any other liens on any of the Mortgaged
Property without the prior written approval of Lender and HUD.

 

28.          Professional
Liability Insurance. Borrower shall maintain, or cause Operator or any lessee or management agent to maintain, professional
liability insurance that complies with the applicable requirements of HUD. Annually, Borrower shall provide, or cause Operator
or any lessee or management agent to provide, to HUD and Lender, a certification of compliance with such professional liability
insurance requirements as evidenced by an Acord or certified copy of the insurance policy.

 

29.          PROPERTY
MANAGEMENT AGREEMENTS. If, in addition to or in lieu of any Borrower-Operator Agreement, Borrower enters into a property management
agreement or other document outlining procedures for managing the Healthcare Facility (“Management Agreement”), such
agreement or document must be approved by HUD and consistent with Program Obligations. Any management agent must be approved by
HUD and must execute and deliver a Management Agent Certification – Residential Care Facilities (form HUD-9839-ORCF, or
successor form) in such form as approved by HUD. Any Management Agreement shall contain the following provisions: (1) the Management
Agreement shall terminate without penalty upon failure to comply with the provisions of Management Certification to HUD, or for
other good cause, including without limitation for violations of the Borrower’s Regulatory Agreement, Operator’s Regulatory
Agreement, and/or Master Tenant’s Regulatory Agreement, if any, thirty days after HUD has mailed to Borrower, or Operator,
as applicable, a written notice of its desire to terminate the Management Agreement; (2) in the event that HUD determines that
any of the Permits and Approvals reasonably necessary to operate the Healthcare Facility is at substantial and imminent risk of
being terminated, suspended or otherwise restricted, if such termination, suspension or other restriction would have a materially
adverse effect on the Project, the Management Agreement shall terminate immediately without penalty upon HUD’s issuance
of a notice of termination to Borrower, or Operator, as applicable, and such management agent; and (3) the Management Agreement
may not be assigned without the prior written approval of HUD. Upon HUD’s request for termination, Borrower, or Operator,
as applicable, shall immediately arrange to terminate any such Management Agreement and shall make arrangements satisfactory to
HUD for the continuing proper management of the Healthcare Facility and the Project. Any material amendment to the management
agreement must be acceptable to HUD, in accordance with Program Obligations.

 

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30.          ACCEPTABILITY
OF MANAGEMENT OF THE MORTGAGED PROPERTY. Borrower shall provide management of the Mortgaged Property in a manner consistent
with Program Obligations and acceptable to HUD. Borrower shall take such actions as shall cause the Project to conform to Program
Obligations.

 

31.          TERMINATION
OF CONTRACTS. Except as otherwise permitted by HUD, any contract pertaining to the Project with a vendor having an identity
of interest with the Borrower and/or Operator, as determined by HUD pursuant to Program Obligations, shall provide: (1) in the
event of a default under this Agreement, or the Operator’s Regulatory Agreement, the contract shall be subject to termination
without penalty and without cause upon written request by HUD, within thirty (30) days notice of such termination; and (2) in
the event that HUD determines that any of the Permits and Approvals are at substantial and imminent risk of being terminated,
suspended or otherwise restricted so as to have a material adverse effect on the Project, the contract shall be subject to termination
immediately without penalty and without cause upon written request by HUD. Upon such request by HUD, Borrower shall immediately
arrange to terminate the contract, or cause Operator to terminate the contract, and Borrower shall also make arrangements, or
cause Operator to make arrangements, satisfactory to HUD for continuing acceptable services to the Project effective as of the
termination date of the contract.

 

32.          MANAGEMENT
AGENT. In the event that a management agent is or will be the holder of the Healthcare Facility license or is or will be the
payee under one or more third-party payor agreements with respect to the Healthcare Facility, such management agent will be treated
as an Operator in accordance with Program Obligations.

 

33.          COMMERCIAL
(NON-RESIDENTIAL) LEASES. No portion of the Project shall be leased for any commercial purpose or use without receiving HUD’s
prior written approval as to terms, form and amount, except for commercial leases for support or ancillary services which are
subordinate to the Borrower’s Security Instrument, have terms of not more than five (5) years and otherwise comply with
Program Obligations. Borrower shall deliver, or cause to be delivered, an executed copy of any commercial lease to HUD and Lender
within thirty (30) days after its effective date.

 

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V. ACTIONS REQUIRING
THE PRIOR WRITTEN APPROVAL OF HUD.

 

34.          Borrower
shall not without the prior written approval of HUD, including without limitation in accordance with Program Obligations:

 

(a)           Convey,
assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of the Mortgaged Property or any interest therein, or permit
the conveyance, assignment, or transfer of any interest or control in Borrower (if the effect of such conveyance, assignment or
transfer is the creation or elimination of a Principal) unless permitted by Program Obligations. Borrower need not obtain the
prior written approval of HUD for: (i) conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under
the Borrower’s Security Instrument; (ii) inclusion of the Mortgaged Property in a bankruptcy estate by operation of law
under the United States Bankruptcy Code; (iii) acquisition of an interest by inheritance or by court decree; or (iv) as otherwise
allowed by Program Obligations.

 

(b)           Enter
into any contract, agreement or arrangement to borrow funds or finance any purchase or incur any liability, direct or contingent,
other than in accordance with the Loan Documents and Program Obligations.

 

(c)           Pay
out any funds in violation of this Agreement, the Loan Documents, or Program Obligations.

 

(d)           In
accordance with 24 C.F.R. 232.1007 or any successor regulation, except for Distributions allowed pursuant to this Agreement, pay
any compensation, including wages or salaries, in excess of fair and reasonable compensation or incur any obligation to do so,
to any officer, director, stockholder, trustee, beneficiary, partner, member, or Principal of Borrower, or to any nominee thereof,
except that, at any time at which Borrower is the operator of the Healthcare Facility, Borrower may pay fair and reasonable compensation
to employees who are officers, directors, stockholders, trustees, beneficiaries, partners, members or Principals of Borrower.

 

(e)           Enter
into or change any contract, agreement or arrangement for supervisory or managerial services or leases for the operation of the
Healthcare Facility or any portion of the Project, except as permitted under Program Obligations.

 

(f)            Convey,
assign or transfer any right to receive Rents of the Mortgaged Property.

 

(g)           Remodel,
add to, subtract from, construct, reconstruct or demolish any part of the Project, except as required by HUD under Section 21(c)
and except that Borrower may, without approval of HUD, (i) dispose of or cause to be disposed of obsolete or deteriorated Fixtures
or Personalty if the same are replaced with like items of the same or greater quality or value (provided, that Borrower shall
have no obligation to replace any such Fixtures or Personalty that are not needed for operation of the Project) and (ii) make
minor alterations that do not adversely affect the Mortgaged Property.

 

(h)           Permit
the use of the Project, including any portion of the Healthcare Facility, for any other purpose except the Approved Use, or permit
commercial use greater than that originally approved by HUD.

 

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(i)            Amend
the organizational documents of Borrower in such a way that modifies the terms of the organizational documents required by HUD,
Lender, and/or Program Obligations, including, but not limited to: (i) any amendment that results in the creation or elimination
of a Principal or modifies the requirements regarding the filing of a HUD previous participation certification when required by
Program Obligations; (ii) any amendment that in any way affects the Loan Documents; (iii) any amendment that would change the
identity of the persons and/or entities authorized to bind Borrower previously approved by HUD or pre-approve a successor general
partner, manager or member to bind the partnership or company for any matters concerning the Project which require HUD’s
consent or approval; (iv) a change in any general partner, manager or managing member or pre-approved successor general partner,
manager or managing member of the partnership or company or any change in a guarantor of any obligation to HUD; and (v) any proposed
changes to the mandatory HUD language included in the organizational documents. Copies of all fully executed amendments to the
organizational documents must be provided to HUD within ten (10) days of the effective date of the amendment. If the amendments
to the organizational documents are recorded, copies of the recorded documents must be provided to HUD within ten (10) days of
receipt by Borrower.

 

(j)            Except
in cases funded by proceeds from professional liability insurance, institute litigation seeking the recovery of a sum in excess
of $100,000, nor settle or compromise any action for specific performance, damages, or other equitable relief, in excess of $100,000;
and in all cases dispose of or distribute the proceeds thereof.

 

(k)           Reimburse
any party from the Mortgaged Property for payment of expenses or costs of the Project except for Reasonable Operating Expenses
and except for payments by means of Distributions.

 

(l)            Receive
any fee or payment of any kind from Operator or any management agent or employee of the Project, or other provider of Goods or
Services of the Project in exchange for the right to provide such Goods or Services.

 

(m)          Except
as provided in Section 33, enter into, or agree to the assignment of, any commercial lease for all or part of the Mortgaged Property.

 

(n)           Enter
into any amendment of any contract or lease relating to the Project, except to the extent such contract or lease does not require
HUD’s approval, including without limitation any amendment that (i) reduces the rent or other payments due to Borrower,
(ii) materially increases the obligations of Borrower or the rights of the other parties to such contract or lease, (iii) materially
decreases the rights of Borrower or the obligations of the other parties to such contract or lease, or (iv) alters any provision
of such contract or lease required by HUD to be included therein.

 

VI. ENFORCEMENT.

 

35.          VIOLATION
OF AGREEMENT. The occurrence of any one or more of the following shall constitute a “Violation” under this
Agreement:

 

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(a)           Any
failure by Borrower to comply with any of the provisions of this Agreement;

 

(b)           Any
failure by Borrower to comply with any of the provisions of any other of the Loan Documents;

 

(c)           Any
fraud or material misrepresentation or material omission by Borrower, any of its officers, directors, trustees, general partners,
members, managers, employees, representatives or managing agent in connection with (1) any financial statement, rent roll or other
report or information provided to HUD during the term of this Agreement or (2) any request for HUD’s consent to any proposed
action, including a request for disbursement of funds from any restricted account for which HUD’s prior written approval
is required; or

 

(d)           The
commencement of a forfeiture action or proceeding, whether civil or criminal, which, in HUD’s reasonable judgment, could
result in a forfeiture of the Mortgaged Property or otherwise materially impair Lender’s and/or HUD’s interest in
the Mortgaged Property.

 

36.          NOTICE
OF VIOLATION AND EVENT OF DEFAULT.

 

(a)           At
any time during the existence of a Violation, HUD may give written notice of such Violation to Borrower (the “Violation
Notice”), addressed to the addresses stated in this Agreement, or such other addresses as may subsequently, upon appropriate
written Notice to HUD and Lender, be designated by Borrower as its legal business address. Borrower shall have thirty (30) days
to cure, or cause to be cured, any Violation described in the Violation Notice, provided that HUD shall extend such thirty (30)
day period by such time as HUD may reasonably determine is necessary to correct the Violation for so long as, HUD determines,
in its discretion, that: (i) Borrower is timely satisfying all payment obligations in the Loan Documents; (ii) none
of the Permits and Approvals is at substantial and imminent risk of being terminated; (iii) such violation cannot reasonably
be corrected during such thirty (30) day period, but can reasonably be corrected in a timely manner, and (iv) Borrower or
Operator commences to correct such Violation, or cause such correction to be commenced, during such thirty (30) day period and
thereafter diligently and continuously proceeds to correct, or cause correction of, such Violation. If, after delivery of such
Violation Notice and applicable cure period, the Violation is not corrected to the satisfaction of HUD, HUD may declare an Event
of Default under this Agreement without further Notice. Alternatively, if necessary in HUD’s determination to protect
the health and safety of the tenants or the financial or operational viability of the Healthcare Facility, HUD may declare an
Event of Default at any time during the existence of a Violation without providing prior written notice of the Violation.

 

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(b)           Notwithstanding
any other provisions of this Agreement, if HUD determines at any time that any of the Permits and Approvals are at substantial
and imminent risk of being terminated, suspended or otherwise restricted if such termination, suspension, or other restriction
would have a materially adverse effect on the Project, including without limitation, HUD’s determination that there is a
substantial risk that deficiencies identified by applicable state and/or federal regulatory and/or funding agencies cannot be
cured in such manner and within such time periods as would avoid the loss, suspension, or diminution of any of the Permits and
Approvals that would have a materially adverse effect on the Project, or if HUD determines at any time that, as a result of a
Violation, the value of the Mortgaged Property is at substantial and imminent risk of material adverse diminution, then HUD may
immediately (without thirty (30) days notice) declare an Event of Default of this Agreement and may immediately proceed to take
actions to pursue its remedies.

 

(c)           Upon
any declaration of an Event of Default, HUD may:

 

		(i)	If
                                         HUD holds the Note, declare the whole of the Indebtedness immediately due and payable
                                         and then proceed with the foreclosure of the Borrower’s Security Instrument or
                                         otherwise dispose of HUD’s interest in the Note and the Borrower’s Security
                                         Instrument pursuant to Program Obligations;
	 	 	 

		(ii)	If
                                         the Note is not held by HUD, notify the holder of the Note of such default and require
                                         the holder to declare a default under the Note and the Borrower’s Security Instrument,
                                         and the holder after receiving such Notice and demand, shall declare the whole of the
                                         Indebtedness due and payable and thereupon proceed with foreclosure of the Borrower’s
                                         Security Instrument and/or the exercise of other remedies available to Lender under the
                                         Loan Documents or at law or equity, or assign the Note and the Borrower’s Security
                                         Instrument to HUD as provided in Program Obligations. Upon assignment of the Note and
                                         the Borrower’s Security Instrument to HUD, HUD may then proceed with the foreclosure
                                         of the Borrower’s Security Instrument or otherwise dispose of HUD’s interest
                                         in the Note and the Borrower’s Security Instrument pursuant to Program Obligations;
	 	 	 

		(iii)	Collect
                                         all Rents and charges in connection with the Project or the operation of the Healthcare
                                         Facility, to the extent permitted by applicable law, and use such collections to pay
                                         obligations of Borrower under this Agreement and under the Note and the Loan Documents
                                         and the necessary expenses of preserving and operating the Project;
	 	 	 

		(iv)	Take
                                         possession of the Mortgaged Property, bring any action necessary to enforce any rights
                                         of Borrower growing out of the Mortgaged Property’s operation, and maintain the
                                         Mortgaged Property in decent, safe, sanitary condition and good repair;
	 	 	 

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		(v)	Apply
                                         to any court, state or federal, for specific performance of this Agreement, for an injunction
                                         against any Violations of this Agreement, for the appointment of a receiver to take over
                                         and operate the Project in accordance with the terms of this Agreement, or for such other
                                         relief as may be appropriate, as the injury to HUD arising from a default under any of
                                         the terms of this Agreement would be irreparable and the amount of damage would be difficult
                                         to ascertain; and,
	 	 	 

		(vi)	Collect
                                         reasonable attorney fees related to enforcing Borrower’s compliance with this Agreement.

 

(d)           Any
forbearance by HUD in exercising any right or remedy under this Agreement or otherwise afforded by applicable law shall not be
a waiver of or preclude the exercise of any right or remedy.

 

(e)           Intentionally
Omitted. 

 

37.          MEASURE
OF DAMAGES. The damage to HUD as a result of Borrower’s breach of duties and obligations under this Agreement shall
be, in the case of failure to maintain, or cause to be maintained, the Project as required by this Agreement, the cost of the
repairs required to return the Project to decent, safe and sanitary condition and good repair. This contractual provision shall
not abrogate or limit any other remedy or measure of damages available to HUD under any civil, criminal or common law.

 

38.          NONRECOURSE
DEBT. The following individuals or entities identified in the Firm Commitment: Summit Healthcare REIT, Inc. as identified
in the Firm Commitment does not assume personal liability for payments due under the Note and the Borrower’s Security Instrument,
or for the payments to the Reserve for Replacement, or for matters not under its control, provided that each said individual or
entity shall remain personally liable under this Agreement only with respect to the matters hereinafter stated; namely: (a) for
funds or property of the Project coming into its hands which, by the provisions of this Agreement, it is not entitled to retain;
(b) for authorizing the conveyance, assignment, transfer, pledge, encumbrance, or other disposition of the Mortgaged Property
or any interest therein in violation of this Agreement without the prior written approval of HUD; and (c) for its own acts and
deeds, or acts and deeds of others, which it has authorized in violation of the provisions of this Section. The obligations of
the individuals or entities listed in this Section shall survive any foreclosure proceeding, any foreclosure sale, any delivery
of any deed in lieu of foreclosure, any termination of this Agreement, and any release of record of the Borrower’s Security
Instrument. 

 

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	 	SUMMIT HEALTHCARE REIT, INC.
	 	a Maryland corporation
	 	 	 	 
	 	By:	/s/
    Elizabeth A. Pagliarini	 
	 	 	Elizabeth A. Pagliarini
	 	 	Chief Financial Officer and Treasurer

 

ACKNOWLEDGMENT

 

A notary public or other officer completing
this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and
not the truthfulness, accuracy, or validity of that document.

	 

        State of California
	

                           

                          )
	 
	County of _____________________	)	 

 

On September __, 2018, before me, ____________________________,
a Notary Public, personally appeared Elizabeth A. Pagliarini, who proved to me on the basis of satisfactory evidence to be the
person whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacities,
and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

 

I certify under PENALTY OF PERJURY under the laws of the State
of California that the foregoing paragraph is true and correct.

 

WITNESS my hand and official seal.

 

	Signature	 	 

 

[Remainder
of page intentionally left blank]

 

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VII. MISCELLANEOUS.

 

39.          COMPLIANCE
WITH LAWS.

 

(a)           Borrower
shall comply with all applicable: laws; ordinances; regulations; requirements of any Governmental Authority; lawful covenants
and agreements (including the Borrower’s Security Instrument) recorded against the Mortgaged Property; and Program Obligations;
including but not limited to those of the foregoing pertaining to: health and safety; construction of improvements on the Mortgaged
Property; fair housing; civil rights; zoning and land use; Leases; lead-based paint maintenance requirements of 24 C.F.R. Part
35 and maintenance and disposition of resident security deposits; and, with respect to all of the foregoing, all subsequent amendments,
revisions, promulgations or enactments. Borrower shall at all times maintain records sufficient to demonstrate compliance with
the provisions of this Section 39. Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit,
any illegal activities at the Mortgaged Property including those that could endanger residents or visitors, result in damage to
the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise impair the lien created by the Borrower’s
Security Instrument or Lender’s interest in the Mortgaged Property. To the best of Borrower’s knowledge, Borrower
represents and warrants to HUD that no portion of the Mortgaged Property has been or shall be purchased with the proceeds of any
illegal activity.

 

(b)           There
shall be full compliance with the provisions of (1) any State or local laws prohibiting discrimination in housing on the basis
of race, color, creed, or national origin; and (2) the regulations of HUD providing for non-discrimination and equal opportunity
in housing. It is understood and agreed that failure or refusal to comply with any such provisions shall be a proper basis for
HUD to take any corrective action it may deem necessary including, but not limited to, the rejection of applications for FHA mortgage
insurance and the refusal to enter into future contracts of any kind with which Borrower is identified; and further, if Borrower
is a corporation or any other type of business association or organization which may fail or refuse to comply with the aforementioned
provisions, HUD shall have a similar right of corrective action (1) with respect to any individuals who are officers, directors,
trustees, managers, partners, associates or principal stockholders of Borrower; and (2) with respect to any other type of business
association, or organization with which the officers, directors, trustee, managers, partners, associates or principal stockholders
of Borrower may be identified.

 

(c)           HUD
and Lender shall be entitled to invoke any remedies available by law or equity to redress any breach or to compel compliance by
Borrower with these requirements, including any remedies available hereunder.

 

40.          BINDING
EFFECT. This Agreement shall bind, and the benefits shall inure to, Borrower, its heirs, legal representative, executors,
administrators, successors in office or interest, and assigns, and to HUD and HUD’s successors, so long as the Contract
of Insurance continues in effect, and during such further time as HUD shall be Lender, holder, coinsurer, or reinsurer of the
Borrower’s Security Instrument, or obligated to reinsure the Note or the Borrower’s Security Instrument.

 

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41.          PARAMOUNT
RIGHTS AND OBLIGATIONS. Borrower warrants that it has not, and shall not, execute any other agreement with provisions contradictory
of, or in opposition to, the provisions hereof, and that, in any event, the requirements of this Agreement are paramount and controlling
as to the rights and obligations set forth and supersede any other requirements in conflict therewith.

 

42.          SEVERABILITY.
The invalidity of any clause, part, or provision of this Agreement shall not affect the validity of the remaining portions
hereof.

 

43.          RULES
OF CONSTRUCTION. The captions and headings of the sections of this Agreement are for convenience only and shall be disregarded
in construing this Agreement. Any reference in this Agreement to an “Exhibit” or a “Section”
shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Agreement
or to a Section of this Agreement. All Exhibits attached to or referred to in this Agreement are incorporated by reference into
this Agreement. Use of the singular in this Agreement includes the plural and use of the plural includes the singular. As used
in this Agreement, the term, “including” means “including, but not limited to.”

 

44.          PRESENT
ASSIGNMENT. To the extent permitted by applicable law, Borrower irrevocably and unconditionally assigns, pledges, mortgages
and transfers to HUD its rights to Rents, charges, fees, carrying charges, Project accounts, security deposits, and other revenues
and receipts of whatsoever sort that it may receive or be entitled to receive from the operation of the Mortgaged Property, subject
to the assignment of Rents and other provisions in the Borrower’s Security Instrument and, if Borrower is also Operator,
subject to the rights of any accounts receivable lender under accounts receivable financing that has been approved by HUD. Until
a default is declared under this Agreement, a revocable license is granted to Borrower to collect and retain such Rents, charges,
fees, carrying charges, Project accounts, security deposits, and other revenues and receipts, but upon an Event of Default under
this Agreement or under the Borrower’s Security Instrument, such revocable license is automatically terminated.

 

45.          NOTICE.

 

(a)          All
notices, demands and other communications (“Notice”) under or concerning this Agreement shall be in writing.
A courtesy copy of any Notice given by Borrower or HUD shall be sent simultaneously to Lender. Each Notice shall be addressed
to the intended recipients at their respective addresses set forth below, and shall be deemed given on the earliest to occur of
(i) the date when the Notice is received by the addressee; (ii) the first or second Business Day after the Notice is delivered
to a recognized overnight courier service, with arrangements made for payment of charges for next or second Business Day delivery,
respectively, or (iii) the third Business Day after the Notice is deposited in the United States mail with postage prepaid, certified
mail, return receipt requested. As used in this Section 45, the term “Business Day” means any day other than
a Saturday or a Sunday, a federal holiday or holiday in the state where the Project is located or other day on which the federal
government or the government of the state where the Project is located is not open for business. When not specifically designated
as a Business Day, the term “day” shall refer to a calendar day.

 

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(b)          Any
party to this Agreement and Lender may change the address to which Notices intended for it are to be directed by means of Notice
given to the other party in accordance with this Section 45. Each party agrees that it shall not refuse or reject delivery of
any Notice given in accordance with this Section 45, that it shall acknowledge, in writing, the receipt of any Notice upon request
by the other party and that any Notice rejected or refused by it shall be deemed for purposes of this Section 45 to have been
received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal
Service or the courier service.

 

	 	BORROWER:	Summit Chandler, LLC
	 	 	2 South Pointe Drive, Suite 100
	 	 	Lake Forest, CA 92630
	 	 	 
	 	HUD:	U.S. Department of Housing and Urban Development
	 	 	Office of Residential Care Facilities
	 	 	451 7th Street, SW
	 	 	Washington, D.C. 20410
	 	 	 
	 	LENDER:	Capital One Multifamily Finance, LLC
	 	 	2 Bethesda Metro Center, 10th Floor
	 	 	Bethesda, Maryland 20814

 

[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have set their
hands and seals on the date first herein above written.

 

Borrower hereby certifies that the statements and representations
contained in this instrument and all supporting documentation thereto are true, accurate, and complete and that each signatory
has read and understands the terms of this instrument. This instrument has been made, presented, and delivered for the purpose
of influencing an official action of HUD in insuring the Loan, and may be relied upon by HUD as a true statement of the facts
contained therein.

 

	 	BORROWER:
	 	 
	 	SUMMIT CHANDLER, LLC
	 	a Delaware limited liability company
	 	 
	 	By:	Summit Healthcare REIT, Inc.
	 	 	a Maryland corporation
	 	 	 	 
	 	 	By:	/s/
    Elizabeth A. Pagliarini
	 	 	 	Elizabeth A. Pagliarini
	 	 	 	Chief Financial Officer and Treasurer

 

ACKNOWLEDGMENT

 

A notary public or other officer completing
this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and
not the truthfulness, accuracy, or validity of that document.

	 

        State of California
	

                           

                          )
	 
	County of _____________________	)	 

 

On September __, 2018, before me, ____________________________,
a Notary Public, personally appeared Elizabeth A. Pagliarini, who proved to me on the basis of satisfactory evidence to be the
person whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacities,
and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

 

I certify under PENALTY OF PERJURY under the laws of the State
of California that the foregoing paragraph is true and correct.

 

WITNESS my hand and official seal.

 

	Signature	 	 

My commission expires:____________________

 

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	 	U.S. DEPARTMENT OF
    HOUSING 
	 	AND URBAN DEVELOPMENT,
    
	 	acting by and through
    the Secretary:
	 	 	 
	 	By: 	/s/
    Jason P. Roth
	 	 	Jason P. Roth
	 	 	Authorized Agent
	 	 	Office of Residential Care Facilities

 

ACKNOWLEDGEMENT

 

CITY OF WASHINGTON, DISTRICT OF COLUMBIA

 

On this         
day of ________, 2018, before me, a notary public in and for the jurisdiction aforesaid, personally appeared Jason P. Roth,
who acknowledged that she is the Authorized Agent of the Secretary of U.S. Department of Housing and Urban Development, acting
by and through the Federal Housing Commissioner, and Supervisory Account Executive in the Office of Residential Care Facilities,
U.S. Department of Housing and Urban Development, and that she, being authorized to do so by virtue of such office, executed the
foregoing instrument on behalf of the Federal Housing Commissioner, acting for the Secretary of the U.S. Department of Housing
and Urban Development. 

 

Witness my hand and official seal.

 

	 	 
	[SEAL]	Notary Public
	 	 
	 	 
	 	(Print Name)

 

My commission expires: __________________

 

NOTICE: THIS AGREEMENT MUST HAVE A LEGAL DESCRIPTION ATTACHED
AND BE EXECUTED WITH ALL FORMALITIES REQUIRED FOR RECORDING A DEED TO REAL ESTATE (i.e., NOTARY/ACKNOWLEDGEMENT, SEAL,
WITNESS OR OTHER APPROPRIATE FORMALITIES).

 

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EXHIBIT A

 

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF
CHANDLER, IN THE COUNTY OF MARICOPA, STATE OF ARIZONA, AND IS DESCRIBED AS FOLLOWS:

 

That portion of the Southeast quarter of the Southwest quarter
of Section 32, Township 1 South, Range 5 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona, described
as follows:

 

Beginning at the Southwest corner of the Southeast quarter
of the Southwest quarter of said Section 32;

 

Thence North 00 degrees 01 minutes 28 seconds West along the
West line of the Southeast quarter of the Southwest quarter of said Section 32, a distance of 453.00 feet; Thence North 89 degrees
47 minutes 21 seconds East, along a line parallel to the South line of the Southwest quarter of said Section 32, a distance of
32.00 feet to the True Point of Beginning; Thence continuing along said line bearing North 89 degrees 47 minutes 21 seconds East,
a distance of 283.00 feet; Thence South 00 degrees 01 minutes 28 seconds East, along a line parallel with the West line of the
Southeast quarter of the Southwest quarter of said Section 32, a distance of 382.00 feet to a point on a line parallel and 71.00
feet North of the South line of said Section 32; Thence South 89 degrees 47 minutes 21 seconds West along said parallel line,
a distance of 253.00 feet; Thence North 45 degrees 07 minutes 04 seconds West, a distance of 42.36 feet to a point on a line parallel
to and 32.00 feet East of the West line of the Southeast quarter of the Southwest quarter of said Section 32; Thence continuing
along said line bearing North 00 degrees 01 minutes 28 seconds West, a distance of 352.00 feet to the True Point of Beginning.

 

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RIDER 1 TO HEALTHCARE REGULATORY
AGREEMENT – BORROWER

 

The following language is
hereby incorporated by reference as Paragraph 46 of the Healthcare Regulatory Agreement – Borrower: 

 

		46.	WETLANDS RESTRICTION. While
                                         any mortgage insured by HUD is in effect, Borrower shall not develop any area of the
                                         Mortgaged Property that qualifies as a wetland by the U.S. Army Corp of Engineers 1989
                                         delineation procedures or the U.S. Fish and Wildlife Service “Classification of
                                         Wetlands and Deepwater Habitats of the United States” without first obtaining the
                                         consent of HUD and any applicable federal, state, or local permits. Please note this
                                         definition includes wetlands that are not defined as jurisdictional under Section 404
                                         of the Clean Water Act and is to be interpreted consistent with 24 CFR Part 55.

 

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