Summit Healthcare REIT 8-K Acquires Skilled Nursing Facility

Exhibit 10.2

FIRST AMENDMENT TO TERM

LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO TERM LOAN AND SECURITY AGREEMENT (this“Amendment”) dated as of October 31, 2014 is entered into by and among Summit Lamar, LLC, a Delaware limited liability company (“Lamar”), Summit Monte Vista, LLC, a Delaware limited liability company (“Monte Vista” and together with Lamar, the “Borrowers” and each a “Borrower”) and THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (the “Lender”) and is agreed to and acknowledged by Summit Myrtle Point, LLC, a Delaware limited liability company (“Myrtle”).

WHEREAS, the Lender and Borrowers are parties to that certain Term Loan and Security Agreement dated as of September 22, 2014 (the“Existing Loan Agreement”and as amended and modified by this Amendment, the“Amended Loan Agreement”);

WHEREAS, Myrtle is an Affiliate of the Borrowers and Myrtle and the Borrowers are engaged in related businesses to such an extent that the financial strength and flexibility of the Borrowers and Myrtle has a direct impact on the success of each other Person;

WHEREAS, Myrtle desires to purchase a thirty-five (35) bed skilled nursing facility known as Myrtle Point Care Center located at 637 Ash St, Myrtle Point, Oregon 97458 (the “Myrtle Facility”) operated by Care Centers Management, Inc., an Oregon corporation (the “Myrtle Operating Company”), pursuant to that certain Purchase and Sale Agreement dated as of August 1, 2014 by and between Kemry Properties LLC, an Oregon limited liability company (the “Myrtle Transaction Seller”) and Summit Healthcare REIT, Inc., a Maryland corporation (“Assignor”) as amended by that certain First Amendment to Purchase and Sale Agreement effective as of October 31, 2014, as such Purchase and Sale Agreement has been assigned by Assignor to Myrtle pursuant to an Assignment and Assumption of Purchase Agreements entered into with Myrtle dated as of October 27, 2014 (the “Myrtle Purchase Agreement”) and all agreements, certificates, schedules, exhibits and other documents executed and/or delivered in connection therewith, including, without limitation, the that certain Lease dated as of November 1, 2014between Myrtle and the Myrtle Operating Company regarding the Myrtle Facility, pursuant to which Myrtle leases the Real Property owned by Myrtle to the Myrtle Operating Company (the “Myrtle Real Estate Lease” and together with all such other agreements, certificates, schedules, exhibits and other documents and the Myrtle Purchase Agreement, the “Myrtle Transaction Documents”);

WHEREAS,Myrtle and the Borrowers desire that the Lender increase the Loan and make such increase available to Myrtle to allow Myrtle to pay a portion of the purchase price payable to the Myrtle Transaction Seller under the Myrtle Transaction Documents; and

WHEREAS,as a condition to the Lender’s agreement to increase the Loan and make such increase available to Myrtle, the Lender is requiring that Myrtle join the Amended Loan Agreement as a “Borrower” thereunder and, among other things, grant to Lender a security interest in and lien upon all of its tangible and intangible assets, including the Real Property owned by Myrtle and Myrtle’s interest in the Sinking Fund Account and the Lease Deposit Account, all as security for the “Liabilities” (as defined in the Amended Loan Agreement).

NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1

DEFINED TERMS

Capitalized terms not defined herein shall have the meaning ascribed to such terms in the Existing Loan Agreement.

SECTION 2

AMENDMENTS TO EXISTING LOAN AGREEMENT

2.1         Amendment to Definitions.

(a)          Additional Definitions. Section 1.1 of the Existing Loan Agreement is hereby amended by adding the following definitions in proper alphabetical order:

“Borrowers” shall mean, collectively, Lamar, Monte Vista and Myrtle. “Borrower” shall mean any of the Borrowers.

“Closing Date Advance Amount” shall mean an amount equal to $6,000,000, which amount represents the aggregate principal balance of the Loan outstanding as of the First Amendment Date, previously advanced by the Lender under this Agreement on the Closing Date.

“Closing Date Assignment of Representations and Warranties” shall mean that certain Assignment of Representations and Warranties executed by Lamar and Monte Vista in favor of Lender and acknowledged by the Closing Date Sellers dated as of the Closing Date.

“First Amendment” shall mean that certain First Amendment to Term Loan and Security Agreement dated as of the First Amendment Date by and among Lamar, Monte Vista and the Lender, and agreed to and acknowledged by Myrtle, together with the other joinders, agreements, certificates and other documents delivered in connection therewith.

“First Amendment Date” shall mean October 31, 2014, which is the effective date of the First Amendment.

“First Amendment Date Advance Amount” shall mean an amount equal to $3,075,000, which amount represents the aggregate principal balance of the Loan advanced on the First Amendment Date by the Lender under this Agreement.

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“Myrtle” means Summit Myrtle Point, LLC, a Delaware limited liability company.

“Myrtle Acquisition” means the transactions represented by the purchase of the assets of the Myrtle Sellerby Myrtle, pursuant to, and together with the other transactions described in, the MyrtlePurchase Documents.

“Myrtle Assignment of Representations and Warranties” shall mean that certain Assignment of Representations and Warranties executed by Myrtle in favor of the Lender and acknowledged by the Myrtle Seller dated as of the First Amendment Date.

“Myrtle Assignment of Rents and Leases” means that certain Assignment of Rents and Leases made by Myrtle, dated as of the First Amendment Date, as the same may be amended, supplemented or modified from time to time.

“Myrtle Deed of Trust” means that certain Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing made by Myrtle, dated as of the First Amendment Date, granting and conveying to the Lender a first mortgage Lien on that certain Real Property commonly identified as the Myrtle Point Care Center located at 637 Ash St, Myrtle Point, Oregon 97458, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Myrtle Earn-Out Payment” means and includes any payment made in respect of the “earn out payment” referenced in Section 6.2 of the Myrtle Real Estate Lease (or any successor provision) by any Borrower.

“Myrtle Facility” means the thirty-five (35) bed skilled nursing facility known as the Myrtle Point Care Center located at 637 Ash St, Myrtle Point, Oregon 97458 operated by the Myrtle Operating Company.

“Myrtle Purchase Agreement” shall mean that certain Purchase and Sale Agreement dated as of August 1, 2014 by and between the Myrtle Seller and Summit as amended by that certain First Amendment to Purchase and Sale Agreement effective as of October 31, 2014, as such Purchase and Sale Agreement has been assigned by Summit Healthcare REIT, Inc., a Maryland corporation, to Myrtle pursuant to an Assignment and Assumption of Purchase Agreements entered into with Myrtle dated as of October 27, 2014.

“Myrtle Purchase Documents” shall mean the Myrtle Purchase Agreement and all agreements, certificates, schedules, exhibits and other documents executed and/or delivered in connection therewith, including, without limitation, the Myrtle Real Estate Lease.

“Myrtle Operating Company” means Care Centers Management, Inc., an Oregon corporation.

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“Myrtle Real Estate Lease” means that certain Lease dated as of November 1, 2014 between Myrtle and the Myrtle Operating Company regarding the Myrtle Facility, pursuant to which Myrtle leases the Real Property owned by Myrtle to the Myrtle Operating Company.

“Myrtle Seller” shall mean Kemry Properties LLC, an Oregon limited liability company.

(b)          Amended Definitions. Each of the introductory paragraph and Section 1.1 of the Existing Loan Agreement, as applicable, is hereby amended by amending and restating the following definitions contained therein in their entirety:

“Assignment of Representations and Warranties” shall mean, collectively, the Closing Date Assignment of Representations and Warranties and the Myrtle Assignment of Representations and Warranties.

“Deeds of Trust” means collectively, the Lamar Deed of Trust, the Monte Vista Deed of Trust and the Myrtle Deed of Trust.

“Environmental Indemnity Agreement” means that certain Amended and Restated Environmental Indemnity Agreement dated as of the First Amendment Date made by the Borrowers in favor of the Lender, in form and substance acceptable to the Lender, as the same may be amended or modified from time to time.

“Facilities” means, collectively, the Lamar Facility, the Monte Vista Facility and the Myrtle Facility. “Facility” means any one of the Facilities.

“Fixed Charges” means, for any period of determination, the sum of, without duplication, (a) the aggregate amount of any and all advances and distributions made by any Borrower to any Person, including, without limitation, to any Affiliate of a Borrower during such period, (b) Interest Charges of the Borrowers for Indebtedness that is paid or becomes due during such period, (c) regularly scheduled principal payments made by the Borrowers for Indebtedness during such period, (d) unfinanced Capital Expenditures of the Borrowers made during such period, (e) payments made by the Borrowers in respect of federal, state and local taxes during such period, including taxes assessed in connection with Real Property and (e) any payments made by one or more of the Borrowers in respect of the Myrtle Earn-Out Payment during such period to the extent such payments are not funded with the proceeds of a capital contribution to Myrtle by Cornerstone made on or immediately prior to the date on which such payments are required to be paid.

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“Maximum Facility” means, (a) from the period commencing on the Closing Date and continuing until the First Amendment Date, an amount equal to the lesser of (i) Six Million and No/100 Dollars ($6,000,000.00), (ii) 75% of the loan-to-value ratio using an income approach of the Real Property as set forth on the most recent appraisal prepared and delivered to the Lender in accordance with the terms hereof or (iii) 80% of the purchase price required to be paid by Lamar and Monte Vista under the Closing Date Purchase Documents in connection with the Closing Date Acquisition; and (b) commencing on the First Amendment Date, an amount equal to the lesser of (i) Nine Million Seventy Five Thousand and No/100 Dollars ($9,075,000.00), (ii) 75% of the loan-to-value ratio using an income approach of the Real Property as set forth on the most recent appraisal prepared and delivered to Lender in accordance with the terms hereof or (iii) 80% of the purchase price required to be paid by the Borrowers under the Closing Date Purchase Documents in connection with the Closing Date Acquisition and the Myrtle Purchase Documents in connection with the Myrtle Acquisition.

“Operating Companies” means, collectively, the Lamar Operating Company, the Monte Vista Operating Company and the Myrtle Operating Company. “Operating Company” means any of the Operating Companies.

“Real Estate Leases” means, collectively, the Lamar Real Estate Lease, the Monte Vista Real Estate Lease and the Myrtle Real Estate Lease. “Real Estate Lease” means any of the Real Estate Leases.

“Subordinated Debt” means any and all Indebtedness owing by any Borrower to a third party that has been subordinated to the Liabilities in writing on terms and conditions satisfactory to the Lender in its sole and absolute determination, including, without limitation, amounts owing under the Myrtle Real Estate Lease in respect of the Myrtle Earn-Out Payment.

2.2          Amendment to Loan Facility.Section 2.1 of the Existing Loan Agreement is hereby amended by deleting the Section in its entirety and substituting the following therefor:

“2.1           Loan. On the terms and subject to the conditions set forth in this Agreement, and provided there does not then exist an Event of Default, the Lender shall, following the execution of this Agreement by the Borrowers and the Lender, extend in one (1) advance on the Closing Date and on (1) advance on the First Amendment Date, a term loan (the “Loan”) to the Borrowers in an aggregate principal amount equal to the lesser of (y) Nine Million Seventy Five Thousand and No/100 Dollars ($9,075,000.00)or (z) the Maximum Facility. The Borrowers acknowledge that the Closing Date Advance Amount has been advanced to the Borrowers on the Closing Date and, as of the First Amendment Date, remains outstanding as an obligation under this Agreement as amended on the First Amendment Date and that such amount shall, together with the First Amendment Date Advance Amount, continue to be owing on the terms set forth in this Agreement and be deemed for all purposes as a Liability hereunder and in the other Financing Agreements. The Borrowers agree to deposit with the Lender (for further deposit into the Sinking Fund Account), payments in respect of the Loan based on a twenty-five (25) year amortization schedule in consecutive monthly installments as follows:

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Closing Date through the First
Anniversary of the Closing Date:	$200,000 annually ($16,667/month)
First Anniversary of the Closing
Date through the Second Anniversary
of the Closing Date:	$210,000 annually ($17,500/month)
Second Anniversary of the Closing
Date through the Third Anniversary
of the Closing Date:	$220,000 annually ($18,333/month)

, together with interest accrued thereon, each payable on or before the fifth day of each calendar month, commencing on October 5, 2014, and otherwise in accordance withSection 2.5 hereof, with a final installment of the aggregate unpaid principal balance of the Loan, together with interest accrued thereon, payable on the Maturity Date. The Borrowers and the Lender agree and acknowledge that, as of the First Amendment Date $16,667.00 of principal has been deposited with the Lender (for further deposit into the Sinking Fund Account. Monthly interest payments on the Loan shall be computed using the interest rate then in effect and based on the outstanding principal balance of the Loan. Any amounts paid or applied to the principal balance of the Loan (whether by mandatory prepayment or otherwise) may not be reborrowed hereunder. The Lender's commitment hereunder to make the Loan is hereinafter called the “Commitment”. At the Maturity Date, the outstanding principal balance of the Loan shall be immediately due and payable, together with any remaining accrued interest thereon, to the Lender by the Borrowers. At the Maturity Date, the Borrowers hereby authorize and direct the Lender to apply all amounts deposited in the Sinking Fund Account to the outstanding amount of the Loan. The Loan shall be evidenced by a promissory note (hereinafter, as the same may be amended, modified or supplemented from time to time, and together with any renewals or extensions thereof or exchanges or substitutions therefor, called the “Note”), duly executed and delivered by the Borrowers, in form and substance reasonably satisfactory to the Lender, with appropriate insertions, dated the First Amendment Date, payable to the order of the Lender in the principal amount of Nine Million Seventy Five Thousand and No/100 Dollars ($9,075,000.00). THE PROVISIONS OF THE NOTE NOTWITHSTANDING, THE LOAN SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIEST TO OCCUR OF (X) THE MATURITY DATE; (Y) THE ACCELERATION OF THE LIABILITIES PURSUANT TOSECTION 10.2 HEREOF; AND (Z) THE TERMINATION OF THIS AGREEMENT (WHETHER BY PREPAYMENT OR OTHERWISE) IN ACCORDANCE WITH ITS TERMS.”

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2.3           Additional Representation. Section 7 of the Existing Loan Agreement is hereby amended by adding the following Section 7.33 in proper numerical order:

“7.33         Myrtle Acquisition.

(a)          The Myrtle Acquisition has been consummated contemporaneously with the execution and delivery of the First Amendment in accordance with the terms of the Myrtle Purchase Agreement, subject to such modifications, supplements and waivers as the Lender shall have approved.

(b)          No party to any Myrtle Purchase Documents has waived, without the consent of the Lender, any condition precedent to the obligations of any such party to close as set forth in the Myrtle Purchase Documents.

(c)          The aggregate consideration payable under the Myrtle Purchase Documents is equal to $4,150,000.

(d)          True and complete copies of all of the Myrtle Purchase Documents have been delivered to the Lender, together with a true and complete copy of each document to be delivered at the closing of the Myrtle Acquisition.

(e)          Except as set forth in the Myrtle Purchase Documents delivered to the Lender prior to the date hereof, there are no other agreements, oral or written, with respect to which any Credit Party thereof has any obligation or liability with respect to the Myrtle Acquisition.

(f)          No Credit Party nor, to the knowledge of any Borrower, any other Person party to the Myrtle Purchase Documents is in default in the performance or compliance with any provisions thereof.

(g)          The Myrtle Purchase Documents comply with, and the Myrtle Acquisition has been consummated in accordance with, all applicable laws, including, without limitation, all Healthcare Laws.

(h)          The Myrtle Purchase Documents are in full force and effect as of the date hereof and have not been terminated, rescinded or withdrawn.

(i)          All material requisite approvals by governmental authorities having jurisdiction over the Myrtle Seller, the Credit Parties and other Persons referenced therein with respect to the transactions contemplated by the Myrtle Purchase Documents have been obtained, and no such approvals impose any conditions to the consummation of the transactions contemplated by the Myrtle Purchase Documents or to the conduct by any Credit Party of its business thereafter which have not been satisfied within the time periods specified therein.

(j)          To the knowledge of the Borrowers, none of the Myrtle Seller’s representations or warranties in the Myrtle Purchase Documents contains any untrue statement of a material fact or omits any material fact necessary to make the statements therein made, in the context in which made, not misleading.”

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SECTION 3

REPRESENTATIONS AND WARRANTIES

Borrower hereby represents and warrants to Lender that:

3.1           Due Authorization, etc. The execution and delivery of this Amendment and the performance of Borrower’s obligations under the Amended Loan Agreement are duly authorized by all necessary limited partnership action, do not require any filing or registration with or approval or consent of any governmental agency or authority, do not and will not conflict with, result in any violation of or constitute any default under any provision of the certificate of formation or limited partnership agreement of Borrower or any material agreement or other document binding upon or applicable to it (or any of its properties) or any material law or governmental regulation or court decree or order applicable to it, and will not result in or require the creation or imposition of any Lien in any of its properties pursuant to the provisions of any agreement binding upon or applicable to it.

3.2           Validity. This Amendment has been duly executed and delivered by Borrower and, together with the Amended Loan Agreement, constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject, as to enforcement only, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of the rights of creditors generally.

3.3           Representations and Warranties. The representations and warranties contained in Section 7 of the Existing Loan Agreement are true and correct on the date of this Amendment, except to the extent that such representations and warranties (a) solely relate to an earlier date or (b) have been changed by circumstances permitted by the Amended Loan Agreement.

3.4           Absence of Defaults. No Event of Default or Default has occurred or is occurring as of the date hereof.

SECTION 4

CONDITIONS PRECEDENT

This Amendment shall become effective upon satisfaction of all of the following conditions precedent:

4.1           Receipt of Documents. Lender shall have received all of the following, each in form and substance satisfactory to Lender:

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(a)          Amendment. A counterpart original of this Amendment duly executed by Borrower.

(b)          Replacement Promissory Note. A replacement promissory note duly executed by the Borrowers and Myrtle in favor of the Lender dated as of the date hereof, substantially in the form ofExhibit A to this Amendment.

(c)          Joinder. A joinder agreement executed by Myrtle and acknowledged by the Borrowers dated as of the date hereof, substantially in the form ofExhibit B to this Amendment, pursuant to which Myrtle is joined to the Amended Credit Agreement as a “Borrower” and grants the security interests and liens contemplated thereby.

(d)          Deed of Trust. A Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing made by Myrtle in favor of Lender, dated as of the date hereof substantially in the form ofExhibit C.

(e)          Assignment of Rents and Leases. An Assignment of Rents and Leases made by Myrtle in favor of Lender, dated as of the date hereof substantially in the form ofExhibit D.

(f)          Environmental Indemnity Agreement. An Amended and Restated Environmental Indemnity Agreement made by the Borrowers and Myrtle in favor of the Lender, dated as of the date hereof substantially in the form ofExhibit E.

(g)          Assignment of Representations and Warranties. An Assignment of Representations and Warranties executed by Myrtle in favor of Lender and acknowledged by the Myrtle Transaction Seller, dated as of the date hereof substantially in the form ofExhibit F.

(h)          Subordination Agreement. A Subordination Agreement executed by the Myrtle Operating Company in favor of Lender and acknowledged and consented to by the Myrtle and the other Borrowers, dated as of the date hereof substantially in the form ofExhibit G.

(i)          Pledge Amendment. A Pledge Amendment executed by Cornerstone dated as of the date hereof, in the form attached as Schedule II to the Pledge Agreement pursuant to which the membership interests of Myrtle owned by Cornerstone are added as “Pledged Collateral” under the Pledge Agreement.

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(j)          Resolutions; Incumbency and Signatures. Copies of the resolutions or written consent of the manager ofthe Borrowers and Myrtle authorizing or ratifying the execution, delivery and performance by such Person of this Amendment and the other documents required to be delivered in connection herewith to which such Person is party, certified by a Duly Authorized Person of such Person.

(k)          Consents. Certified copies of all documents evidencing any necessary consents and governmental approvals, if any, with respect to the Myrtle Transaction Documents, this Amendment and any other documents provided for herein or therein to be executed by a Borrower or Myrtle.

(l)          Opinion of Counsel. An opinion of Hanson Bridgett, LLP and Kantor Taylor Nelson Evatt & Decina PC the legal counsel to Myrtle, in form and substance reasonably satisfactory to Lender.

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

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

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

(p)          Real Estate Leases. True, correct and complete copies of the fully-executed Myrtle Real Estate Lease, and all amendments, assignments, modifications and other supplements in connection therewith, together with a Subordination, Non-Disturbance and Attornment Agreements with respect to the Myrtle Facility, in each case, in a form and substance acceptable to Lender, including, without limitation, evidence that the Rent Expense associated with the Real Estate Leases on an annual basis is not less than Four Hundred Fifteen Thousand and 00/100 Dollars in the aggregate.

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

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

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

(t)          Survey. ALTA plats of survey shall be prepared on the Real Property on which the Myrtle Facility is located (certified to the (i) 2005 ALTA standards for existing surveys acceptable to Administrative Agent, together with affidavits of no change, and (ii) 2011 ALTA standards for new surveys (ordered to correct errors from prior existing surveys)), unless waived in writing by the Lender.

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

(v)         Flood Insurance. Flood insurance policies, if applicable, concerning the Real Property on which the Myrtle Facility is located, reasonably satisfactory to the Lender, if required by the Flood Disaster Protection Act of 1973.

(w)          Permits. Certified copies of all licenses, permits and governmental approvals necessary for the use or operation of the Myrtle Facility, together with a certificate of occupancy with respect to the Facilities issued in the name of the Myrtle Operating Company.

(x)          Myrtle Transaction Documents. True, correct and complete copies of the fully-executed Myrtle Transaction Documents and of the governmental approvals delivered in connection therewith.

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

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4.2           Commitment Fee. On the date hereof, the Borrowers and Myrtle shall pay to the Lender a one-time commitment fee in the aggregate amount of Thirty Thousand Seven Hundred Fifty and 00/100 Dollars ($30,750.00), which shall be deemed fully earned as of the date of this Amendment.

4.3           No Material Change. No material adverse change in any of any Borrower’s or Myrtle’s financial condition which, in Lender’s sole opinion, would impair the Borrowers’ and Myrtle’s ability to meet their respective obligations under the Amended Loan Agreement shall have occurred.

4.4           Other Conditions. No Event of Default or Default shall have occurred and be continuing.

SECTION 5

MISCELLANEOUS

5.1           Documents Remain in Effect. Except as amended and modified by this Amendment and the exhibits attached hereto, the Existing Loan Agreement and the other documents executed pursuant to the Existing Loan Agreement remain in full force and effect and each Borrower hereby ratifies, adopts and confirms its representations, warranties, agreements and covenants contained in, and obligations and liabilities under, the Existing Loan Agreement and the other documents executed pursuant to the Existing Loan Agreement.

5.2           Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment.

5.3           Expenses. The Borrowers and Myrtle, jointly and severally, agree to pay all costs and expenses of Lender (including reasonable fees, charges and disbursements of Lender’s attorneys) in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. In addition, Borrowers and Myrtle agree, jointly and severally, to pay, and save Lender harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Amendment, the borrowings under the Amended Loan Agreement, and the execution and delivery of any instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided in this Section 5.3 shall survive any termination of the Amended Loan Agreement.

5.4           Governing Law. This Amendment shall be a contract made under and governed by the internal laws of the State of Illinois. Wherever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable laws, but if any provision of this Amendment shall be prohibited by or invalid under such laws, such provisions shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

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5.5           Successors. This Amendment shall be binding upon Borrowers, Myrtle, the Lender and their respective successors and assigns, and shall inure to the benefit of Borrowers, Myrtle, the Lender and the successors and assigns of the Lender.

5.6          Advice of Counsel. Each Borrower and Myrtle acknowledges that it was advised by Lender to seek the advice of legal counsel in negotiating and reviewing this Amendment, and further acknowledges that it had the opportunity to obtain advice of legal counsel.

[signature page attached]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers or other representatives thereunto duly authorized and delivered at Chicago, Illinois as of the date first written above.

BORROWERS:
SUMMIT LAMAR, LLC,
By:  Summit Healthcare REIT, Inc., a Maryland corporation, its Manager
	By:	/s/ Kent Eikanas
	Name: Kent Eikanas
	Title: President
SUMMIT MONTE VISTA, LLC,
By:  Summit Healthcare REIT, Inc., a Maryland corporation, its Manager
	By:	/s/ Kent Eikanas
	Name: Kent Eikanas
	Title: President

LENDER:
THE PRIVATEBANK AND TRUST  COMPANY
By:	/s/ Adam Panos
	Name: Adam Panos
	Title: Managing Director

Acknowledged and Agreed to Myrtle:
SUMMIT MYRTLE, LLC,
By:  Summit Healthcare REIT, Inc., a Maryland corporation, its Manager
	By:	/s/ Kent Eikanas
	Name: Kent Eikanas
	Title: President

Exhibit A

Promissory Note

[see attached]

Exhibit B

Joinder

[see attached]

Exhibit C

Deed of Trust

[see attached]

Exhibit D

Assignment of Rents and Leases

[see attached]

Exhibit E

Environmental Indemnity Agreement

[see attached]

Exhibit F

Assignment of Representations and Warranties

[see attached]

Exhibit G

Subordination Agreement

[see attached]