Exhibit 10.140

AGREEMENT REGARDING LEASE AND SUBLEASE

THIS AGREEMENT REGARDING LEASE AND SUBLEASE (this “Agreement”) is entered into
as of the 1st day of August, 2015, by COVINGTON REALTY, LLC, an Ohio limited
liability company (“Landlord”), ADCARE HEALTH SYSTEMS, INC., a Georgia
corporation (“Tenant”), and CC SNF LLC, a Florida corporation (“Subtenant”).

Recitals

A.    Landlord and Tenant are parties to a Lease Agreement dated August 26,
2002, as amended by a First Amendment to Lease Agreement dated July 14, 2003, a
Second Amendment to Lease Agreement dated April 1, 2008, a Third Amendment to
Lease Agreement dated May 1, 2011, and a Fourth Amendment to Lease Agreement
dated April 14, 2014 (the “Fourth Amendment”) (as so amended, the “Prime
Lease”), pursuant to which Landlord leased to Tenant the facility commonly known
as Covington Care Center, 75 Mote Drive, Covington, Ohio (the “Leased
Premises”), including related personal property, as more particularly described
in the Prime Lease.

B.    Tenant desires to sublease the Leased Premises to Subtenant, and Subtenant
desires to sublease the Leased Premises from Tenant, pursuant to a Sublease
Agreement dated August 1, 2015 (the “Sublease”).

C.    Pursuant to Section 16.01 of the Lease, Tenant may not sublease the Leased
Premises without the prior written consent of Landlord. Therefore, Tenant and
Subtenant have requested that Landlord consent to the Sublease.

D.    Landlord is willing to consent to the Sublease, on and subject to the
terms and conditions set forth in this Agreement.

Statement of Agreement

Landlord, Tenant and Subtenant hereby agree as follows:

1.    Express Assumption of Prime Lease by Tenant. The original tenant under the
Prime Lease was Adcare Health Systems, Inc., an Ohio corporation. However,
Adcare Health Systems, Inc. has been dissolved and no longer exists as an Ohio
corporation. Tenant, which is a Georgia corporation authorized to transact
business in Ohio, expressly and retroactively assumes the Prime Lease.
2.    Amendment of Prime Lease. The Prime Lease is amended as follows:
a.    Base Rent. Effective as of May 1, 2014, the annual base rent under the
Prime Lease was set at $600,000.00. Effective as of May 1, 2015 and each May 1
thereafter, the annual Base Rent under the Prime Lease shall be adjusted to 102%
of the annual base rent in effect immediately prior to such date.

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b.    Term. The term of the Prime Lease is extended through April 30, 2025.
Tenant has no option to extend the term of the Prime Lease beyond April 30,
2025.

3.    Non-Disturbance and Attornment. If the Prime Lease terminates prior to
April 30, 2025 other than by reason of fire or other casualty pursuant to
Section 4.07 of the Prime Lease or condemnation pursuant to Article 12 of the
Prime Lease, then, as of the date of such termination (the “Early Termination
Date”), the Sublease shall become a direct lease between Landlord, as landlord,
and Subtenant, as tenant, on the same terms and conditions as are provided for
in the Prime Lease (as if the Prime Lease had not terminated), provided that the
rent shall be as provided in the Sublease. If the Sublease becomes a direct
lease between Landlord and Subtenant as provided above, then (a) Tenant shall,
on the Early Termination Date, pay over to Landlord the security deposit made by
Subtenant pursuant to Section 3 of the Sublease, (b) Landlord shall not be
subject to the obligations of Tenant accruing under the Sublease prior to the
Early Termination Date, (c) Subtenant shall not have any claims or rights of
offset as against Landlord with respect to the obligations of Tenant accruing
under the Sublease prior to the Early Termination Date, and (d) Subtenant will
be responsible to Landlord for curing any defaults by Tenant existing under the
Prime Lease as of the Early Termination Date.

4.    Security Deposit. Subtenant is paying to Tenant a security deposit in
accordance with Section 3 of the Sublease. Until such time, if any, that the
Sublease becomes a direct lease between Landlord and Subtenant and Tenant pays
over to Landlord the security deposit as contemplated by Section 3 of this
Agreement, Landlord shall not have any obligations to Subtenant or otherwise
with respect to the security deposit.
5.    Replacement Reserve. On the date of this Agreement and on the first day of
each calendar month after the date of this Agreement until termination of the
Prime Lease, Tenant shall pay $3,000 to Landlord, in addition to any other
amounts owing by Tenant to Landlord under the Prime Lease, which Landlord shall
deposit in a federally insured account in the name of Landlord (such funds being
called the “Replacement Reserve Funds”). Any interest earned on the Replacement
Reserve Funds shall be added to and become a part of the Replacement Reserve
Funds. Landlord shall disburse the Replacement Reserve Funds to pay or reimburse
Subtenant for actual costs of capital improvements and capital replacements to
the Leased Premises (“Capital Costs”) as determined in accordance with generally
accepted accounting principles. From time to time as Subtenant incurs Capital
Costs, Subtenant may submit to Landlord a written request for disbursement of
Replacement Reserve Funds to pay or reimburse Subtenant for such Capital Costs,
which written request shall be supported by such backup documentation as
Landlord may reasonably request. Within 15 days after receipt of such a written
request and backup documentation, Landlord shall disburse Replacement Reserve
Funds to pay or reimburse Subtenant for the applicable Capital Costs. Any
balance of Replacement Reserve Funds remaining upon termination of the Prime
Lease shall be retained by Landlord without restriction.
6.    Costs. Tenant shall pay or reimburse Landlord for the reasonable
attorneys’ fees incurred by Landlord in connection with the Sublease and this
Agreement within 30 days after invoice by Landlord.

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7.    Consent by Landlord to Sublease. Landlord consents to the Sublease, on and
subject to the terms of this Agreement. Landlord’s consent is limited to the
Sublease, and does not apply to any assignment of the Prime Lease or the
Sublease or to any further sublease or all or any portion of the Leased
Premises. Subtenant shall not assign the Sublease or further sublease all or any
portion of the Leased Premises without the prior written consent of Landlord,
which consent may be given or withheld by Landlord as Landlord shall determine
in its sole discretion.
8.    Continuing Effect of Prime Lease. To the extent that the provisions of
this Agreement are inconsistent with the provisions of the Prime Lease, the
provisions of this Agreement shall control and the Prime Lease shall be deemed
to be amended hereby. Except as amended by this Agreement, the provisions of the
Prime Lease remain in full force and effect. Tenant remains primarily and fully
liable for all of its obligations under the Prime Lease.

9.    Sublease; Amendments. Tenant and Subtenant represent and warrant to
Landlord that a true, correct and complete copy of the Sublease is Exhibit A
hereto, and that the Sublease, as affected by this Agreement, constitutes the
entire agreement of Tenant and Subtenant with respect to the sublease of the
Leased Premises by Tenant to Subtenant. Tenant and Subtenant will not modify or
amend the Sublease, or agree to any early termination of the Sublease, without
the prior written consent of Landlord, which Landlord will not unreasonably
withhold.

10.    Priority of Prime Lease. The Prime Lease is superior to the Sublease in
all respects. Except to the extent, if any, that the Sublease becomes a direct
lease between Landlord and Subtenant as contemplated by Section 3 of this
Agreement, the Sublease imposes no obligations upon Landlord and Landlord shall
not be or be deemed a party to the Sublease.

11.    General Obligations of Subtenant to Landlord. Subtenant agrees, for the
benefit of Landlord, to comply with each and every covenant, agreement and
condition on the part of Tenant to be performed under the Prime Lease, other
than the payment of rent.

12.    Estoppel Statements. Tenant and Subtenant shall, from time to time, upon
not less than ten business days’ prior written request by Landlord, execute and
deliver to Landlord and/or other third parties designated by Landlord a
statement in writing addressed to such party as Landlord shall designate,
certifying that the Sublease is unmodified and in full force and effect and that
Subtenant has no defenses, offsets or counterclaims against its obligations to
pay the rent and to perform its other covenants under the Sublease (or, if there
have been any permitted modifications thereunder that the same is in full force
and effect as modified and stating the modifications and, if there are any
defenses, offsets, counterclaims or defaults, setting them forth in reasonable
detail), the dates to which rent has been paid, a statement that neither Tenant
nor Subtenant is in default under the Sublease (or if in default, the nature of
such default, in reasonable detail), and any additional factual information
reasonably requested by Landlord. Any such statement delivered pursuant to this
Section may be relied upon by any prospective purchaser or mortgagee of the
Leased Premises.

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13.    Notices. Each of Tenant and Subtenant shall, simultaneously with the
giving of any default notice to the other under the Sublease, give a copy of the
same to Landlord in accordance with the provisions of the Prime Lease.

14.    Insurance Certificates. Landlord (and its designees) shall be a named
insured under Subtenant’s insurance policies and shall receive certificates
evidencing such insurance upon execution hereof and thereafter upon five days’
written request, which insurance shall not be cancelable on less than 30 days’
prior written notice to Landlord. Subtenant shall comply with the insurance
requirements of the Prime Lease, including securing insurance in such amounts
and policies as is required for Tenant to secure under the Prime Lease; provided
that the terms of this Section shall not excuse Tenant from, or otherwise
affect, Tenant’s obligations under the Prime Lease regarding insurance.

15.    Release; Indemnification. Subtenant releases Landlord (and any and all
persons claiming by, through or under Landlord) from any liability for any loss
or damage of any kind or for any injury to or death of persons or damage to
property of Subtenant or any other person from any cause whatsoever (including,
without limitation, bursting pipes, water leaks and smoke) by reason of the use,
occupancy or enjoyment of the Leased Premises by Subtenant or any person therein
or holding under Subtenant, except to the extent any such liability is caused by
the negligence or willful misconduct of Landlord or its agents. Subtenant shall
indemnify and hold harmless Landlord harmless from and against any and all
liabilities, claims, costs and expenses arising from or in any way related to
the use or occupancy of the Leased Premises by or through Subtenant, except to
the extent caused by the negligence or willful misconduct of Landlord, or any
breach of the Sublease or this Agreement by Subtenant.

16.    Binding Effect. This Agreement shall be binding upon the parties and
their respective successors and assigns.

17.    Entire Agreement. This Agreement, together with the Prime Lease and the
Sublease, constitutes the entire agreement among the parties regarding the
subject matter hereof. This Agreement may not be modified or amended other than
by an instrument in writing signed by all parties.

18.    Captions. The captions to the Sections of this Agreement have been
inserted for convenience only and shall in no way modify or restrict any
provisions hereof or be used to construe any such provisions.

19.    Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.

20.    Multiple Counterparts. This Agreement may be signed in multiple
counterparts, which counterparts, when assembled with the signatures of all
parties, shall constitute one document.

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Executed as of the date first written above.

 
 
COVINGTON REALTY, LLC
 
 
 
 
 
 
By:
/s/ Fred D. Kanter
 
 
Name:
Fred D. Kanter
 
 
Title:
Manager
 
 
 
 
 
 
 
 
 
 
ADCARE HEALTH SYSTEMS, INC.
 
 
 
 
 
 
By:
/s/ William McBride
 
 
Name:
William McBride
 
 
Title:
Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
CC SNF LLC
 
 
 
 
 
 
By:
/s/ Bruce E. Wertheim
 
 
Name:
Bruce E. Wertheim
 
 
Title:
Manager
 
 
 
 

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EXHIBIT A

(copy of Sublease attached)