Exhibit 10.85

FIFTH MODIFICATION AGREEMENT

THIS FIFTH MODIFICATION AGREEMENT dated as of May 1, 2015 (this “Agreement”), is
entered into by and among LITTLE ROCK HC&R PROPERTY HOLDINGS, LLC, a Georgia
limited liability company (the “Borrower”), ADCARE HEALTH SYSTEMS, INC., a
Georgia corporation (“AdCare”), LITTLE ROCK HC&R NURSING, LLC, a Georgia limited
liability company (the “Operator”) (AdCare and the Operator being sometimes
referred to herein collectively as the “Guarantors”) (the Borrower and the
Guarantors being sometimes referred to herein collectively as the
“Borrower/Guarantor Parties”), and THE PRIVATEBANK AND TRUST COMPANY, an
Illinois banking corporation (“Lender”).
RECITALS

A.    The Borrower/Guarantor Parties and Lender heretofore entered into the
following documents:
(i)    Loan Agreement dated as of March 30, 2012 (the “Loan Agreement”), by and
among the Borrower, Northridge HC&R Property Holdings, LLC, a Georgia limited
liability company (“Northridge”), Woodland Hills HC Property Holdings, LLC, a
Georgia limited liability company (“Woodland”) and the Lender. Northridge and
Woodland were released from their respective obligations under the Loan
Agreement and the other Documents pursuant to the “Second Modification” (as
defined below).
(ii)    Promissory Note A dated March 30, 2012 (the “Note”), from the Borrower
to the Lender in the principal amount of $13,664,956, which, along with Note B
and Note C described below, replaced the Promissory Note dated March 30, 2012
(the “Original Note”), from the Borrower, Northridge and Woodland to the Lender
in the principal amount of $21,800,000.
(iii)    Promissory Note B dated March 30, 2012 (“Note B”), from Northridge to
the Lender in the principal amount of $4,507,038, which, along with the Note and
Note C described below, replaced the Original Note, and which Note B was repaid
in full pursuant to the Second Modification.
(iv)    Promissory Note C dated March 30, 2012 (“Note C”), from Woodlands to the
Lender in the principal amount of $3,628,006, which, along with the Note and
Note B, replaced the Original Note, and which Note C was repaid in full pursuant
to the Second Modification.
(v)    Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture
Filing dated as of April 1, 2012 (the “Mortgage”), by the Borrower to and for
the benefit

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of the Lender, recorded in the Official Records of Larry Crane, Pulaski County
Circuit/County Clerk, on April 5, 2012, as Document No. 2012019925.
(vi)    Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture
Filing dated as of April 1, 2012 (“Mortgage 2”), by Northridge to and for the
benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski
County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019978, and
which Mortgage 2 was released pursuant to the Second Modification.
(vii)    Mortgage, Security Agreement, Assignment of Rents and Leases and
Fixture Filing dated as of April 1, 2012 (“Mortgage 3”), by Woodlands to and for
the benefit of the Lender, recorded in the Official Records of Larry Crane,
Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No.
2012019971, and which Mortgage 3 was released pursuant to the Second
Modification.
(viii)    Absolute Assignment of Rents and Leases dated as of April 1, 2012 (the
“Assignment of Rents”), by the Borrower to and for the benefit of the Lender,
recorded in the Official Records of Larry Crane, Pulaski County Circuit/County
Clerk, on April 5, 2012, as Document No. 2012019926.
(ix)    Absolute Assignment of Rents and Leases dated as of April 1, 2012
(“Assignment of Rents 2”), by Northridge to and for the benefit of the Lender,
recorded in the Official Records of Larry Crane, Pulaski County Circuit/County
Clerk, on April 5, 2012, as Document No. 2012019979, and which Assignment of
Rents 2 was released pursuant to the Second Modification.
(x)    Absolute Assignment of Rents and Leases dated as of April 1, 2012
(“Assignment of Rents 3”), by Woodlands to and for the benefit of the Lender,
recorded in the Official Records of Larry Crane, Pulaski County Circuit/County
Clerk, on April 5, 2012, as Document No. 2012019972, and which Assignment of
Rents 3 was released pursuant to the Second Modification.
(xi)    Environmental Indemnity Agreement dated as of March 30, 2012 (the
“Indemnity Agreement”), by the Borrower, AdCare, Northridge, Woodlands, the
Guarantors, Northridge HC&R Nursing, LLC, a Georgia limited liability company
(the “Northridge Operator”), and Woodland Hills HC Nursing, LLC, a Georgia
limited liability company (the “Woodland Operator”), to and for the benefit of
the Lender, with the Northridge, Woodland, the Northridge Operator and the
Woodland Operator being released from their respective obligations under the
Indemnity Agreement pursuant to the Second Modification.
(xii)    Guaranty of Payment and Performance dated as of March 30, 2012 (the
“Guaranty”), by the Guarantors, the Northridge Operator and the Woodlands
Operator to and for the benefit of the Lender, with the Northridge Operator and
the Woodland Operator being released from their respective obligations under the
Guaranty pursuant to the Second Modification.

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B.    The Loan Agreement, the Note, the Mortgage, the Assignment of Rents, the
Indemnity Agreement and the Guaranty are referred to herein as the “Documents”.
C.    The Documents were previously modified and amended by the following
documents (the “Previous Modifications”): (i) the Modification Agreement dated
as of June 15, 2012, but effective as of March 30, 2012, by and among the
Borrower/Guarantor Parties, the Lender and other parties, recorded in the
Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on June
22, 2012, as Document No. 2012038003, (ii) the Second Modification Agreement
dated as of December 28, 2012 (the “Second Modification”), by and among the
Borrower/Guarantor Parties and the Lender, a Memorandum of which Second
Modification Agreement was recorded in the Official Records of Larry Crane,
Pulaski County Circuit/County Clerk, on January 4, 2013, as Document No.
2013001265, (iii) the Third Modification Agreement dated as of June 26, 2013, by
and among the Borrower/Guarantor Parties and the Lender, and (iv) the Fourth
Modification Agreement dated as of November 8, 2013 (the “Fourth Modification”),
by and among the Borrower/Guarantor Parties and the Lender, a Memorandum of
which Fourth Modification Agreement was recorded in the Official Records of
Larry Crane, Pulaski County Circuit/County Clerk, on November 12, 2013, as
Document No. 2013081444.
D.    The Documents, as modified and amended by the Previous Modifications,
encumber the real estate described in Exhibit A attached hereto and the personal
property located thereon.
E.    The parties desire to make certain modifications and amendments to the
Documents, as modified and amended by the Previous Modifications, as more fully
provided for herein, all as modifications, amendments and continuations of, but
not as novations of, the Documents.
AGREEMENTS

In consideration of the premises and the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
Section 1.    Recitals Part of Agreement; Defined Terms; References to
Documents.
(a)    The foregoing Recitals are hereby incorporated into and made a part of
this Agreement.
(b)    All capitalized terms used and not otherwise defined in this Agreement
shall have the meanings set forth in the Loan Agreement.
(c)    Except as otherwise stated herein, all references in this Agreement to
any one or more of the Documents shall be deemed to include the previous
modifications and amendments to the Documents provided for in the Previous
Modifications, whether or not express reference is made to such previous
modifications and amendments.

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Section 2.    Lender Consent to Sublease to New Operator and Amendment of Lease
to Operator. The Lender hereby consents to the sublease of the Facility by the
Operator to Highlands of Little Rock West Markham, LLC, a Delaware limited
liability company (the “New Operator”), effective as of May 1, 2015, pursuant to
the Sublease Agreement dated as of January 16, 2015, by and among the Borrower,
the Operator and the New Operator, as amended by Amendments dated as of February
27, 2015, March 31, 2015, and April 30, 2015. The Lender also hereby consents to
the First Amendment to Facility Lease dated as of January 1, 2015, which is
referred to in Section 3(b) of this Agreement. In order to induce the Lender to
grant such consents, the Borrower and the Guarantors are entering into the
agreements with the Lender which are provided for in this Agreement.
Section 3.    Amendments to Loan Agreement Relating to Sublease and New
Operator.
(a)    For the avoidance of doubt, all references in the Loan Agreement, as
modified and amended by the Previous Modifications, to “Projects” shall be
deemed to be a reference to the Project owned by the Borrower.
(b)    From and after the date of this Agreement, all references in the Loan
Agreement and the other Documents, each as modified and amended by the Previous
Modifications, to the “Lease” of the Project shall be deemed to be a reference
to the Facility Lease dated as of April 1, 2012, by and between the Borrower, as
Landlord, and the Operator, as Tenant, as amended by Amendments dated as of
February 27, 2015, March 31, 2015, and April 30, 2015.
(c)    The following new defined terms are hereby added to Section 1.1 of the
Loan Agreement, as modified and amended by the Previous Modifications:
New Operator: Highlands of Little Rock West Markham, LLC, a Delaware limited
liability company.
New Operations Transfer Agreement: The Operations Transfer Agreement dated as of
January 16, 2015, by and among Operator, New Operator and Borrower.
Sublease: The Sublease Agreement dated as of January 16, 2015, by and among
Borrower, Operator and New Operator, as amended by Amendments dated as of
February 27, 2015, March 31, 2015, and April 30, 2015, by which Operator
subleased the Project to New Operator effective as of May 1, 2015.
(d)    Paragraphs (q), (v), (w), (z) and (aa) in Section 2.1 of the Loan
Agreement, as modified and amended by the Previous Modifications, are hereby
modified and amended in their entirety to read as follows effective as of May 1,
2015, with the existing paragraphs (q), (v), (w), (z) and (aa) in Section 2.1 of
the Loan Agreement, as modified and amended by the Previous Modifications, to
continue to be effective for periods prior to May 1, 2015:
(q)    Subject to the provisions of Section 7.9(b) of this Agreement, all
governmental permits and licenses required by applicable law in order for
Borrower

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to own and lease the Project to Operator, for Operator to sublease the Project
to New Operator, and for New Operator to operate the Facility, have been validly
issued and are in full force.
(v)    There are no leases or subleases for use or occupancy of the Project
other than the Lease and the Sublease, with the exception of agreements entered
into with residents and occupants in the ordinary course of business of
operating the Facility.
(w)    Each of the Lease and the Sublease is in full force and effect; no
Defaults or Events of Default on the part of Borrower or Operator, respectively,
have occurred and are continuing thereunder; the tenant and subtenant,
respectively, thereunder have no right of set-off against payment of rent due
thereunder; and enforcement of the Lease and the Sublease by Borrower and
Operator, respectively, or by Lender pursuant to an exercise of Lender’s rights
under the Assignment of Rents, would be subject to no defenses of any kind. All
of the conditions precedent for both the Landlord and the Tenant in the
Sublease, as amended, have either been satisfied or waived, and neither the
Landlord nor the Tenant under the Sublease has any remaining right to terminate
the Sublease, as amended, for failure of any condition precedent to be
satisfied. The New Operations Transfer Agreement is in full force and effect and
no Defaults or Events of Default on the part of Operator or New Operator have
occurred and are continuing thereunder.
(z)    Subject to the provisions of Section 7.9(b) of this Agreement, the
Facility has all necessary licenses, permits and certifications required by any
applicable governmental authority to operate and maintain a skilled nursing
facility therein with its current number of beds in service, and participates in
the Medicare and Medicaid programs. Subject to the provisions of Section 7.9(b)
of this Agreement, Operator and New Operator have complied with all applicable
requirements of the United States of America, the State of Arkansas and all
applicable local governments, and of its agencies and instrumentalities,
necessary to operate and maintain the Facility as such a facility. All utilities
necessary for use, operation and occupancy of the Project and the Facility are
available to the Project and the Facility. All requirements for unrestricted use
of the Project and the Facility as a skilled nursing facility under the rules
and regulations of the State of Arkansas Department of Human Services and of any
other department or agency of the State of Arkansas having jurisdiction over the
Project and the Facility have been fulfilled. All building, zoning, safety,
health, fire, water district, sewerage and environmental protection agency and
any other permits or licenses which are required by any governmental authority
for use, occupancy and operation of the Project and the Facility as a skilled
nursing facility have been obtained and are in full force and effect. Neither
Borrower, Operator, any Guarantor, New Operator, the Project or the Facility is
subject to any corporate integrity agreement, compliance agreement or other
agreement governing the operation of the Project or the Facility or the
operations of Borrower, Operator, any Guarantor or New Operator.

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(aa)    Each of Borrower, Operator and New Operator is in compliance in all
material respects with all laws, orders, regulations and ordinances of all
federal, foreign, state and local governmental authorities binding upon or
affecting the business, operation or assets of Borrower, Operator and New
Operator. Neither Borrower, Operator nor New Operator: (i) has had a civil
monetary penalty assessed against it under the Social Security Act (the “SSA”)
Section 1128(a), other than nominal amounts for violations which were not of a
material nature, (ii) has been excluded from participation under the Medicare
program or under a State health care program as defined in the SSA Section
1128(h) (“State Health Care Program”), or (iii) has been convicted (as that term
is defined in 42 C.F.R. Section 1001.2) of any of the following categories of
offenses as described in the SSA Section 1127(a) and (b)(l), (2), (3): (A)
criminal offenses relating to the delivery of an item or service under Medicare
or any State Health Care Program; (B) criminal offenses under federal or state
law relating to patient neglect or abuse in connection with the delivery of a
health care item or service; (C) criminal offenses under federal or state law
relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or
other financial misconduct in connection with the delivery of a health care item
or service or with respect to any act or omission in a program operated by or
financed in whole or in part by any federal, state or local government agency;
(D) federal or state laws relating to the interference with or obstruction of
any investigations into any criminal offense described in (A) through (C) above;
or (E) criminal offenses under federal or state law relating to the unlawful
manufacture, distribution, prescription or dispensing of a controlled substance.
Without limiting the generality of the foregoing, neither Borrower, Operator nor
New Operator is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any Medicare or
Medicaid Provider Agreement or other agreement or instrument to which Borrower,
Operator or New Operator is a party, which default has resulted in, or if not
remedied within any applicable grace period could result in, the revocation,
termination, cancellation or suspension of the Medicare or Medicaid
Certification of Borrower, Operator or New Operator.
(e)    Section 7.2 of the Loan Agreement, as modified and amended by the
Previous Modifications, is hereby modified and amended in its entirety to read
as follows effective as of May 1, 2015, with the existing Section 7.2 of the
Loan Agreement, as modified and amended by the Previous Modifications, to
continue to be effective for periods prior to May 1, 2015:
7.2    Fixtures and Personal Property. Except for security interests granted to
Lender, Borrower agrees that all of the personal property, fixtures,
attachments, furnishings and equipment delivered in connection with the
construction, equipping or operation of the Project will be kept free and clear
of all chattel mortgages, vendor’s liens, and all other liens, claims,
encumbrances and security interests whatsoever, and that Borrower will be the
absolute owners of said personal property, fixtures, attachments and equipment,
subject to the rights of Operator under the Lease and the rights of New Operator
under the Sublease.

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Borrower, on request, shall furnish Lender with satisfactory evidence of such
ownership, and of the terms of purchase and payment therefor.
(f)    Sections 7.7(a), 7.7(b) and 7.8 of the Loan Agreement, as modified and
amended by the Previous Modifications, are hereby modified and amended by
changing the references therein to “Operators” to be references to “Operator and
New Operator” effective as of May 1, 2015, with the existing Sections 7.7(a),
7.7(b) and 7.8 of the Loan Agreement, as modified and amended by the Previous
Modifications, to continue to be effective for periods prior to May 1, 2015.
(g)    Section 7.9 of the Loan Agreement, as modified and amended by the
Previous Modifications, is hereby modified and amended in its entirety to read
as follows effective as of May 1, 2015, with the existing Section 7.9 of the
Loan Agreement, as modified and amended by the Previous Modifications, to
continue to be effective for periods prior to May 1, 2015:
7.9    Licensure; Notices of Agency Actions. The following are conditions of
this Agreement and the Loan:
(a)    Subject to the provisions of paragraph (b) of this Section, New Operator
shall be fully qualified by all necessary permits, licenses, certifications,
accreditations and qualifications and shall be in compliance with all annual
filing requirements of all regulatory authorities.
(b)    The State of Arkansas license for the operation of Facility is held by
New Operator in its own name. The Medicare and Medicaid certifications for the
Facility are currently held by Operator. It is a condition of this Agreement and
the Loan that by July 1, 2015, New Operator shall have obtained Medicare and
Medicaid certifications for the Facility in its own name. Pending the receipt of
such Medicare and Medicaid certifications by New Operator, (i) Operator shall
retain the existing Medicare and Medicaid certifications for the Facility, and
(ii) New Operator shall operate the Facility under the Medicare and Medicaid
certifications of Operator under the New Operations Transfer Agreement. Upon the
issuance of the Medicare and Medicaid certifications for the Facility to New
Operator, the arrangements described above under the Operations Transfer
Agreement for the Facility shall terminate and New Operator shall thereafter
operate the Facility under its own Medicare and Medicaid certifications.
(c)    Borrower, Operator and New Operator shall within five days after receipt,
furnish to Lender copies of all adverse notices from any licensing, certifying,
regulatory, reimbursing or other agency which has jurisdiction over the Project
or the Facility or over any license, permit or approval under which the Project
or the Facility operates, and if Borrower, Operator or New Operator becomes
aware that any such notice is to be forthcoming before receipt thereof, it shall
promptly inform Lender thereof.

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(h)    Section 7.13 of the Loan Agreement, as modified and amended by the
Previous Modifications, is hereby modified and amended in its entirety to read
as follows effective as of May 1, 2015, with the existing Section 7.13 of the
Loan Agreement, as modified and amended by the Previous Modifications, to
continue to be effective for periods prior to May 1, 2015:
7.13    Leasing, Operation and Management of Projects.
(a)    The Project shall at all times be owned by Borrower, leased to Operator
under the Lease, and subleased by Operator to New Operator under the Sublease
(with the result that Borrower shall not operate the Facility). Borrower shall
not agree or consent to or suffer or permit any modification, amendment,
termination or assignment of, or sublease under, the Lease (other than the
Sublease), and shall not suffer or permit any Event of Default on the part of
Borrower to exist at any time under the Lease. It is a condition of this
Agreement and the Loan that Operator shall not agree or consent to or suffer or
permit any modification, amendment, termination or assignment of, or sublease
under, the Sublease, and shall not suffer or permit any Event of Default on the
part of Operator to exist at any time under the Sublease, including, without
limitation, any amendment changing in the rent payable under the Sublease. It is
a condition of this Agreement and the Loan that Borrower, Operator and New
Operator shall enter into an agreement in a form acceptable to Lender which
shall require (i) New Operator to pay all rental under the Sublease directly to
an account of Borrower at Lender, and (ii) Operator to pay any rent udner Lease
in addition to the amount of the rent payable under the Sublease directly to an
account of Borrower at Lender.
(b)    The Facility shall at all times be operated as skilled nursing facility
under the management of New Operator.
(i)    Paragraphs (g) and (n) in Section 10.1 of the Loan Agreement, as modified
and amended by the Previous Modifications, are hereby modified and amended in
their entirety to read as follows effective as of May 1, 2015, with the existing
paragraphs (g) and (n) in Section 10.1 of the Loan Agreement, as modified and
amended by the Previous Modifications, to continue to be effective for periods
prior to May 1, 2015:
(g)    The occurrence of a material adverse change in the financial condition of
Borrower, Operator, any Guarantor or New Operator;
(n)    The occurrence of an Event of Default (i) on the part of Borrower or
Operator under the Lease, (ii) on the part of Operator or New Operator under the
Sublease, or (iii) on the part of Operator or New Operator under the New
Operations Transfer Agreement;
Section 4.    Changes in Financial Reporting Requirements.
(a)    Subparagraphs (i), (iv) and (vii) in Section 7.4(a) of the Loan
Agreement, as modified and amended by the Previous Modifications, are hereby
modified and amended in their entirety to read as follows effective as of May 1,
2015, with the existing subparagraphs (i), (iv) and (vii) in

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Section 7.4(a) of the Loan Agreement, as modified and amended by the Previous
Modifications, to continue to be effective for periods prior to May 1, 2015:
(i)    Without necessity of any request by Lender, the following with respect to
Borrower:
(A)    As soon as available and in no event later than 45 days after the end of
each fiscal quarter commencing with the fiscal quarter ending March 31, 2015,
quarterly financial statements of Borrower showing the results of operations of
the Project and consisting of a balance sheet, statement of income and expense
and a statement of cash flows, prepared in accordance with GAAP, and certified
by an officer of Borrower.
(B)    As soon as available and in no event later than 120 days after the end of
each fiscal year commencing with the fiscal year ending December 31, 2014,
annual financial statements of Borrower showing the results of operations of the
Project and consisting of a balance sheet, statement of income and expense and a
statement of cash flows, prepared in accordance with GAAP, and certified by an
officer of Borrower, and accompanied by an audit report of a firm of independent
certified public accountants acceptable to Lender.
(iv)    Without necessity of any request by Lender, as soon as available and in
no event later than 120 days after the end of each fiscal year commencing with
the fiscal year ending December 31, 2014, annual financial statements of
Operator showing the results of operations of the Facility and consisting of a
balance sheet, statement of income and expense, statement of cash flows and
statement of payor mix, prepared in accordance with GAAP, certified by an
officer of Operator, and accompanied by an audit report of a firm of independent
certified public accountants acceptable to Lender.
(vii)    Without necessity of any request by Lender, with each financial
statement of Borrower, Operator, New Operator and AdCare required to be
furnished hereunder, a duly completed compliance certificate, dated the date of
such financial statements and certified as true and correct by appropriate
officers of Borrower, Operator, New Operator and AdCare, containing a
computation of each of the financial covenants set forth in Sections 7.14, 7.15,
7.16, 7.17 and 7.18 hereof which is required to be tested for or during the
period covered by such financial statement, and stating that Borrowers have not
become aware of any Default or Event of Default under this Agreement or any of
the other Loan Documents that has occurred and is continuing or, if there is any
such Default or Event of Default describing it and the steps, if any, being
taken to cure it.
(b)    The following new subparagraphs (viii) and (ix) are hereby added to
7.4(a) of the Loan Agreement, as modified and amended by the Previous
Modifications:

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(viii)    Without necessity of any request by Lender, as soon as available and
in no event later than 45 days after the end of each fiscal quarter commencing
with the fiscal quarter ending June 30, 2015, financial statements of New
Operator showing the results of operations of the Facility and consisting of a
balance sheet, statement of income and expense, statement of cash flows and
statement of payor mix, prepared in accordance with GAAP, and certified by an
officer of New Operator.
(ix)    Without necessity of any request by Lender, as soon as available and in
no event later than 120 days after the end of each fiscal year commencing with
the fiscal year ending December 31, 2015, annual financial statements of New
Operator showing the results of operations of the Facility and consisting of a
balance sheet, statement of income and expense, statement of cash flows and
statement of payor mix, prepared in accordance with GAAP, certified by an
officer of New Operator, and accompanied by an audit report of a firm of
independent certified public accountants acceptable to Lender.
Section 5.    Change of Borrower Debt Service Coverage Ratio to Borrower Fixed
Charge Coverage Ratio.
(a)    The present Section 7.14 of the Loan Agreement, as modified and amended
by the Previous Modifications, shall apply with respect to the fiscal years
ended December 31, 2012, 2013 and 2014, and shall not apply with respect to any
fiscal years ending after December 31, 2014.
(b)    Section 7.14 of the Loan Agreement, as modified and amended by the
Previous Modifications, is hereby modified and amended in its entirety to read
as follows effective for the fiscal quarter ending June 30, 2015, and each
subsequent fiscal quarter:
7.14    Minimum Fixed Charge Coverage Ratio of Borrower. It is a condition of
this Agreement and the Loan that as of the end of each fiscal quarter commencing
with the fiscal quarter ending June 30, 2015, that the ratio of --
(i)    the amount of EBITDA for Borrower for the 12-month period ending on the
last day of such quarter, to
(ii)    the sum of the amounts of the following for Borrower for the 12‑month
period ending on the last day of such quarter: (A) principal and interest
required to be paid on the Loan, plus (B) Distributions, other than any amounts
which were treated as an expense for accounting purposes,
shall be not less than 1.05 to 1.00.
Section 6.    Elimination of Minimum Fixed Charge Coverage Ratio of Operators
Covenant. From and after the date of this Agreement, the requirement contained
in Section 7.15 of the Loan Agreement, as modified and amended by the Previous
Modifications, shall no longer be in effect.

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Section 7.    Change in Definition of EBITDAR/Management Fee Adjusted. The
defined term “EBITDAR/Management Fee Adjusted” in Section 1.1 of the Loan
Agreement, as modified and amended by the Previous Modifications, is hereby
modified and amended in its entirety to read as follows:
EBITDAR/Management Fee Adjusted: With respect to any Operator or New Operator,
for any period, an amount equal to EBITDAR for such Operator or New Operator for
such period, except that notwithstanding the definition of the term Net Income
in this Section 1.1, the Net Income for such Operator or New Operator used in
calculating EBITDAR/Management Fee Adjusted for such Operator or New Operator
for any period, shall be computed by taking into account management fees equal
to the greater of such Operator’s or New Operator’s actual management fees for
such period or imputed management fees equal to 5% of such Operator’s or New
Operator’s gross income for such period as determined in accordance with GAAP.
Section 8.    Change in Minimum EBITDAR of Operator to Minimum EBITDAR of New
Operator. Section 7.16 of the Loan Agreement, as modified and amended by the
Previous Modifications, is hereby modified and amended in its entirety to read
as follows effective for the fiscal quarter ending June 30, 2015, and subsequent
fiscal quarters, with the existing Section 7.16 of the Loan Agreement, as
modified and amended by the Previous Modifications, to continue to be effective
for periods ended and ending prior to the fiscal quarter ending June 30, 2015:
7.16    Minimum EBITDAR of New Operator. It is a condition of this Agreement and
the Loan that for each fiscal quarter commencing with the fiscal quarter ending
June 30, 2015, the EBITDAR/Management Fee Adjusted for New Operator shall be not
less than 450,000.
Section 9.    Change in Debt Service Reserve Account Release Provisions.
Sections 3.7(b) and 3.7(c) of the Loan Agreement, which were added to the Loan
Agreement by the Fourth Modification, are hereby modified and amended in their
entirety to read as follows:
(b)    When both of the following conditions have been satisfied, the amount on
deposit in the Debt Service Reserve Account shall be reduced to $471,000, and
Borrower shall be entitled to withdraw from the Debt Service Reserve Account any
amount on deposit therein in excess of $471,000. The conditions referred to
above are as follows:
(i)    No Default or Event of Default under this Agreement or any of the other
Loan Documents has occurred and is continuing.
(ii)    For each of two consecutive fiscal quarters ending on or after June 30,
2015, EBITDAR/Management Fee Adjusted for New Operator shall be not less than
$450,000, determined based on financial statements of New Operator delivered to
Lender in accordance with Section 7.4 of this

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Agreement, and compliance certificates delivered to Lender in accordance with
Section 7.4 of this Agreement containing a correct computation of such
EBITDAR/Management Fee Adjusted for New Operator.
(c)    When both of the following conditions have been satisfied, the Debt
Service Reserve Account shall no longer be required, and Borrower shall be
entitled to withdraw from the Debt Service Reserve Account the entire remainder
of the funds on deposit therein. The conditions referred to above are as
follows:
(i)    No Default or Event of Default under this Agreement or any of the other
Loan Documents has occurred and is continuing.
(ii)    For each of two consecutive fiscal quarters ending after the fiscal
quarters for which the condition set forth in Section 3.7(b)(ii) above is
satisfied, EBITDAR/Management Fee Adjusted for New Operator shall be not less
than $450,000, determined based on financial statements of New Operator
delivered to Lender in accordance with Section 7.4 of this Agreement, and
compliance certificates delivered to Lender in accordance with Section 7.4 of
this Agreement containing a correct computation of such EBITDAR/Management Fee
Adjusted for New Operator.
Section 10.    Representations and Warranties. The term “Signing Entity” as used
in this Section means any entity (other than a Borrower/Guarantor Party itself)
that appears in the signature block of any Borrower/Guarantor Party in this
Agreement, any of the Documents or the Previous Modifications, if any. In order
to induce Lender to enter into this Agreement, the Borrower/Guarantor Parties
hereby represent and warrant to Lender as follows as of the date of this
Agreement and if different, as of the date of the execution and delivery of this
Agreement:
(a)    Borrower is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Georgia and duly registered
to transact business and in good standing in the state of Arkansas, has all
necessary power and authority to carry on its present business, and has full
right, power and authority to enter into this Agreement, each of the Documents
to which it is a party and the Previous Modifications, and to perform and
consummate the transactions contemplated hereby and thereby.
(b)    AdCare is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, has all necessary power and
authority to carry on its present business, and has full right, power and
authority to enter into this Agreement, each of the Documents to which it is a
party and the Previous Modifications, and to perform and consummate the
transactions contemplated hereby and thereby.
(c)    Operator is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Georgia and duly registered
to transact business and in good standing in the state of Arkansas. Operator has
full power and authority to carry on its present business, and has full right,
power and authority to enter into this Agreement and each of the

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Documents to which it is a party and to perform and consummate the transactions
contemplated hereby and thereby.
(d)    Each Signing Entity is duly organized, validly existing and in good
standing under the laws of the State in which it is organized, has all necessary
power and authority to carry on its present business, and has full right, power
and authority to execute this Agreement, the Documents and the Previous
Modifications in the capacity shown in each signature block contained in this
Agreement, the Documents and the Previous Modifications in which its name
appears, and such execution has been duly authorized by all necessary legal
action applicable to such Signing Entity.
(e)    This Agreement, each of the Documents and the Previous Modifications have
been duly authorized, executed and delivered by such of the Borrower/Guarantor
Parties as are parties thereto, and this Agreement, each of the Documents and
the Previous Modifications constitute a valid and legally binding obligation
enforceable against such of the Borrower/Guarantor Parties as are parties
thereto. The execution and delivery of this Agreement, the Documents and the
Previous Modifications and compliance with the provisions thereof under the
circumstances contemplated therein do not and will not conflict with or
constitute a breach or violation of or default under the organizational
documents of any Borrower/Guarantor Party or any Signing Entity, or any
agreement or other instrument to which any of the Borrower/Guarantor Parties or
any Signing Entity is a party, or by which any of them is bound, or to which any
of their respective properties are subject, or any existing law, administrative
regulation, court order or consent decree to which any of them is subject.
(f)    The Borrower/Guarantor Parties are in full compliance with all of the
terms and conditions of the Documents to which they are a party and the Previous
Modifications, and no Default or Event of Default has occurred and is continuing
with respect to any of the Documents or the Previous Modifications.
(g)    There is no litigation or administrative proceeding pending or threatened
to restrain or enjoin the transactions contemplated by this Agreement or any of
the Documents or the Previous Modifications, or questioning the validity
thereof, or in any way contesting the existence or powers of any of the
Borrower/Guarantor Parties or any Signing Entity, or in which an unfavorable
decision, ruling or finding would adversely affect the transactions contemplated
by this Agreement or any of the Documents or the Previous Modifications, or
would result in any material adverse change in the financial condition,
properties, business or operations of any of the Borrower/Guarantor Parties.
(h)    The statements contained in the Recitals to this Agreement are true and
correct.
Section 11.    Documents to Remain in Effect; Confirmation of Obligations;
References. The Documents shall remain in full force and effect as originally
executed and delivered by the parties, except as previously modified and amended
by the Previous Modifications and as expressly modified and amended herein. In
order to induce Lender to enter into this Agreement, the Borrower/Guarantor
Parties hereby (i) confirm and reaffirm all of their obligations under the
Documents, as previously modified and amended by the Previous Modifications and
as modified and amended herein; (ii) acknowledge and agree that Lender, by
entering into this Agreement, does not waive any existing or future default or
event of default under any of the Documents, or any rights or remedies under any
of the Documents, except as expressly provided herein; (iii)

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acknowledge and agree that Lender has not heretofore waived any default or event
of default under any of the Documents, or any rights or remedies under any of
the Documents; and (iv) acknowledge and agree that they do not have any defense,
setoff or counterclaim to the payment or performance of any of their obligations
under, or to the enforcement by Lender of, the Documents, as previously modified
and amended by the Previous Modifications and as modified and amended herein,
including, without limitation, any defense, setoff or counterclaim based on the
covenant of good faith and fair dealing. All references in the Documents to any
one or more of the Documents, or to the “Loan Documents,” shall be deemed to
refer to such Document, Documents or Loan Documents, as the case may be, as
previously modified and amended by the Previous Modifications and as modified
and amended by this Agreement. Electronic records of executed documents
maintained by Lender shall be deemed to be originals thereof.
Section 12.    Certifications, Representations and Warranties. In order to
induce Lender to enter into this Agreement, the Borrower/Guarantor Parties
hereby certify, represent and warrant to Lender that all certifications,
representations and warranties contained in the Documents and the Previous
Modifications and in all certificates heretofore delivered to Lender are true
and correct as of the date of this Agreement and if different, as of the date of
the execution and delivery of this Agreement, and all such certifications,
representations and warranties are hereby remade and made to speak as of the
date of this Agreement and if different, as of the date of the execution and
delivery of this Agreement.
Section 13.    Entire Agreement; No Reliance. This Agreement sets forth all of
the covenants, promises, agreements, conditions and understandings of the
parties relating to the subject matter of this Agreement, and there are no
covenants, promises, agreements, conditions or understandings, either oral or
written, between them relating to the subject matter of this Agreement other
than as are herein set forth. The Borrower/Guarantor Parties acknowledge that
they are executing this Agreement without relying on any statements,
representations or warranties, either oral or written, that are not expressly
set forth herein.
Section 14.    Successors. This Agreement shall inure to the benefit of and
shall be binding upon the parties and their respective successors, assigns and
legal representatives.
Section 15.    Severability. In the event any provision of this Agreement shall
be held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision hereof.
Section 16.    Amendments, Changes and Modifications. This Agreement may be
amended, changed, modified, altered or terminated only by a written instrument
executed by all of the parties hereto.
Section 17.    Construction.
(a)    The words “hereof,” “herein,” and “hereunder,” and other words of a
similar import refer to this Agreement as a whole and not to the individual
Sections in which such terms are used.

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(b)    References to Sections and other subdivisions of this Agreement are to
the designated Sections and other subdivisions of this Agreement as originally
executed.
(c)    The headings of this Agreement are for convenience only and shall not
define or limit the provisions hereof.
(d)    Where the context so requires, words used in singular shall include the
plural and vice versa, and words of one gender shall include all other genders.
(e)    The Borrower/Guarantor Parties and Lender, and their respective legal
counsel, have participated in the drafting of this Agreement, and accordingly
the general rule of construction to the effect that any ambiguities in a
contract are to be resolved against the party drafting the contract shall not be
employed in the construction and interpretation of this Agreement.
Section 18.    Counterparts; Electronic Signatures. This Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same document. Receipt of an executed signature page to this Agreement by
facsimile or other electronic transmission shall constitute effective delivery
thereof. An electronic record of this executed Agreement maintained by Lender
shall be deemed to be an original.
Section 19.    Governing Law. This Agreement is prepared and entered into with
the intention that the law of the State of Illinois shall govern its
construction and enforcement, except that insofar as this Agreement relates to a
Document which by its terms is governed by the law of the State of Arkansas,
this Agreement shall also be governed by the law of the State of Arkansas.
Section 20.    Waiver of Trial by Jury. THE PROVISIONS OF THE LOAN AGREEMENT AND
THE OTHER DOCUMENTS RELATING TO WAIVER OF TRIAL BY JURY SHALL APPLY TO THIS
AGREEMENT.

[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
 
 
LITTLE ROCK HC&R PROPERTY HOLDINGS,
 
 
LLC
 
 
 
 
 
 
 
By
/s/ William McBride III
 
 
 
William McBride III, Manager
 
 
 
 
 
 
 
 
 
 
 
 
ADCARE HEALTH SYSTEMS, INC.
 
 
 
 
 
 
 
By
/s/ William McBride III
 
 
 
William McBride III, Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
LITTLE ROCK HC&R NURSING, LLC
 
 
 
 
 
 
 
By
/s/ William McBride III
 
 
 
William McBride III, Manager
 
 
 
 
 
 
 
 
 
 
 
 
THE PRIVATEBANK AND TRUST COMPANY
 
 
 
 
 
 
 
By
/s/ Amy K. Hallberg
 
 
 
Amy K. Hallberg, Managing Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

- AdCare Little Rock Owner Loan Fifth Modification Agreement -
- Signature Page -

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EXHIBIT A

LEGAL DESCRIPTION

Commonly known as 5720 West Markham Street, Little Rock, Pulaski County,
Arkansas, improved with a skilled nursing facility containing 154 beds, and
known as Little Rock Healthcare and Rehab a/k/a West Markham Sub Acute and
Rehabilitation Center and legally described as follows:

Lot 13, Except the South 25 feet thereof; the West 10 feet of the South 30 feet
and the North 20 feet of Lot 9; the West 10 feet of Lots 10, 11 and the North
one half of Lot 12, and all of Lots 8, 14, 15, 16, 17 and 18, all in Block 2 of
Strong & Waters Addition to the City of Little Rock, Pulaski County, Arkansas.
Also a strip of ground formerly platted as an alley being 15 feet wide and lying
immediately East of and contiguous to the North one-half of Lots 13 and 14, 15,
16 and 17 and a 7.5 foot strip lying immediately East of and contiguous to Lot
18, all in Block 2, Strong & Waters Addition to the City of Little Rock, Pulaski
County, Arkansas, which was closed by Ordinance No. 10,127, a certified copy of
which is recorded in Book 600 at page 631 and Ordinance No, 11,645, a certified
copy of which is recorded in Book 933 page 557, records of Pulaski County,
Arkansas.

A-1