Exhibit 10.35

THIRD MODIFICATION AGREEMENT

THIS THIRD MODIFICATION AGREEMENT dated as of September 30, 2013 (this
“Agreement”), is entered into by and among ADK THOMASVILLE OPERATOR, LLC
(“Borrower 1”), ADK LUMBER CITY OPERATOR, LLC (“Borrower 2”), ADK JEFFERSONVILLE
OPERATOR, LLC (“Borrower 3”), ADK LAGRANGE OPERATOR, LLC (“Borrower 4”), ADK
POWDER SPRINGS OPERATOR, LLC (“Borrower 5”), ADK OCEANSIDE OPERATOR, LLC
(“Borrower 6”), ADK THUNDERBOLT OPERATOR, LLC (“Borrower 7”), ADK SAVANNAH BEACH
OPERATOR, LLC (“Borrower 8”), ATTALLA NURSING ADK, LLC (“Borrower 9”), MOUNTAIN
TRACE NURSING ADK, LLC, an Ohio limited liability company (“Borrower 10”), MT.
KENN NURSING, LLC (“Borrower 11”), ERIN NURSING, LLC (“Borrower 12”), CP
NURSING, LLC (“Borrower 13”), BENTON NURSING, LLC (“Borrower 14”), VALLEY RIVER
NURSING, LLC (“Borrower 15”), PARK HERITAGE NURSING, LLC (“Borrower 16”),
HOMESTEAD NURSING, LLC (“Borrower 17”), WOODLAND MANOR NURSING, LLC (“Borrower
18”), MOUNTAIN VIEW NURSING, LLC (“Borrower 19”), LITTLE ROCK HC&R NURSING, LLC
(“Borrower 21”), GLENVUE H&R NURSING, LLC (“Borrower 24”) and COOSA NURSING ADK,
LLC (“Borrower 25”) each a Georgia limited liability company except as
hereinabove set forth (the “Existing Borrowers”), QC NURSING, LLC (“Borrower
26”) a Georgia limited liability company (the “New Borrower” and together with
the Existing Borrowers, the “Borrowers”), ADCARE HEALTH SYSTEMS, INC., an Ohio
corporation (the “Guarantor”) (the Borrowers and the Guarantor 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 the Lender heretofore entered into the
following documents (collectively, the “Documents”):
(i)    Loan and Security Agreement dated as of September 20, 2012 (the “Loan
Agreement”), by and among the Existing Borrowers, Northridge HC&R Nursing, LLC
(“Borrower 20”), Woodland Hills HC Nursing, LLC (“Borrower 22”), and APH&R
Nursing, LLC, each a Georgia limited liability company (“Borrower 23” and
together with Borrowers 20 and 22, the “Released Borrowers”; the Released
Borrowers together with the Existing Borrowers, the “Original Borrowers”), and
the Lender.
(ii)    Promissory Note dated September 20, 2012 (the “Note”), from the Original
Borrowers to the Lender in the principal amount of $10,600,000.
(iii)    Guaranty of Payment and Performance dated as of September 20, 2012, by
the Guarantor to and for the benefit of the Lender.

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B.    The Documents were previously modified and amended by the following
documents (the “Previous Modifications”): (i) the Modification Agreement dated
as of October 26, 2012, by and among the Original Borrowers, the Guarantor and
the Lender; and (ii) the Memorandum of Agreement dated January 25, 2013 (the
“Second Modification”), by and among the Released Borrowers and the Lender.
C.    The Released Borrowers were released from their respective obligations
under the Documents pursuant to the Second Modification.
D.    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
Modification, whether or not express reference is made to such previous
modifications and amendments.
Section 2.    Release of ADK Jeffersonville Operator, LLC, ADK Oceanside
Operator, LLC and ADK Savannah Beach Operator, LLC. ADK Jeffersonville Operator,
LLC (“Borrower 3”), ADK Oceanside Operator, LLC (“Borrower 6”) and ADK Savannah
Beach Operator, LLC (“Borrower 8”) have each requested that they be released
from their respective obligations under the Documents due to the fact that each
of them no longer operates a Facility. The Lender is agreeable to such request
and hereby releases Borrower 3, Borrower 6 and Borrower 8 as Borrowers under the
Loan Agreement, and releases the Collateral which is the property of Borrower 3,
Borrower 6 and Borrower 8 as security for the Loan.
Section 3.    Addition of New Borrower.
(a)    The New Borrower is hereby added as a Borrower under the Loan Agreement
and the Note, each as modified and amended by the Previous Modifications. The
New Borrower hereby joins in the Loan Agreement and the Note, each as modified
and amended by the Previous

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Modifications, and agrees to be jointly and severally bound and obligated under
the Loan Agreement and the Note with the other parties thereto, and hereby joins
in all of the representations, warranties, covenants and grants of security
interests by the Borrowers which are contained therein, and other provisions by
which the Borrowers are bound which are contained therein, all with the same
effect as if the New Borrower had executed the Loan Agreement and the Note as of
September 20, 2012. All references in the Documents to the Borrowers under the
Loan Agreement and the Note shall be deemed to include a reference to the New
Borrower. All of the Documents, as modified and amended by the Previous
Modifications, are hereby further modified and amended to incorporate the
foregoing provisions of this paragraph.
(b)    The following new defined terms are hereby added in alphabetical order in
Section 1.1 of the Loan Agreement:
Borrower 26: As defined in the Preamble hereto.
Borrower 26 Permitted Liens: Liens and security interests in its property
granted by Borrower 26 to HHC, provided that the HHC Consent and Subordination
has been entered into by the parties thereto and is in full force and effect.
HHC: Housing & Healthcare Funding, LLC, a Delaware limited liability company.
HHC Loan: The loan by HHC to QC Property Holdings, LLC (the “QC Owner”), the
owner of the Quail Creek Facility, as from time to time modified, amended,
increased, renewed and extended.
HHC Consent and Subordination: The Consent and Subordination dated as of
September 30, 2013, by and between Lender, HHC, Borrower 26, the QC Owner and
Guarantor.
Quail Creek Facility: Borrower 26’s Facility described in the definition of the
term Facility in this Agreement.
Quail Creek Project: The Project in which the Quail Creek Facility is located.
(c)    The definition of the term “Borrowers” in Section 1.1 of the Loan
Agreement, as modified and amended by the Previous Modifications, is hereby
further modified and amended in its entirety to read as follows effective as of
the date of this Agreement, with the existing definition of the term “Borrowers”
in Section 1.1 of the Loan Agreement, as modified and amended by the Previous
Modifications, to continue to be effective for periods prior to the date of this
Agreement:
Borrowers: Borrowers 1 through 26, except for Borrowers 3, 6, 8, 20, 22 and 23.
(d)    The definition of the term “Facility” in Section 1.1 of the Loan
Agreement, as modified and amended by the Previous Modifications, is hereby
further modified and amended in

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its entirety to read as follows effective as of the date of this Agreement, with
the existing definition of the term “Facility” in Section 1.1 of the Loan
Agreement, as modified and amended by the Previous Modifications, to continue to
be effective for periods prior to the date of this Agreement:
Facility: Each of the 20 Facilities which are operated by Borrowers in the
Projects, described as follows:
 
Facility
Borrower
Facility Name
Location
Beds
 
1
Borrower 1
Thomasville Nursing and Rehab Center
120 Skyline Drive, Thomasville, Thomas County, Georgia
52
 
2
Borrower 2
Lumber City Nursing and Rehabilitation Center
93 Highway 19, Lumber City, Telfair County, Georgia
86
 
3
Borrower 3
Released
 
 
 
4
Borrower 4
LaGrange Nursing and Rehab Center
2111 West Point Road, LaGrange, Troup County, Georgia
138
 
5
Borrower 5
Powder Springs Nursing and Rehab Center
3460 Powder Springs Road, Powder Springs, Cobb County, Georgia
208
 
6
Borrower 6
Released
 
85
 
7
Borrower 7
Tara at Thunderbolt Nursing and Rehabilitation Center
3223 Falligant Avenue, Thunderbolt, Chatham County, Georgia
134
 
8
Borrower 8
Released
 
50
 
9
Borrower 9
Attalla Health Care
915 Stewart Avenue SE, Attalla, Etowah County, Alabama
182
 
10
Borrower 10
Mountain Trace Nursing and Rehabilitation Center
417 Mountain Trace Road, Sylva, Jackson County, North Carolina
106
 
11
Borrower 11
Autumn Breeze Healthcare Center
1480 Sandtown Road, Marietta, Cobb County, Georgia
109
 
12
Borrower 12
Southland Healthcare and Rehab Center
606 Simmons Street, Dublin, Laurens County, Georgia
126
 
13
Borrower 13
College Park Healthcare Center
1765 Temple Avenue, College Park, Fulton County, Georgia
100

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14
Borrower 14
Bentonville Manor Nursing Home
224 South Main Street, Bentonville, Benton County, Arkansas
95
 
15
Borrower 15
River Valley Health and Rehabilitation Center
5301 Wheeler Ave, Fort Smith, Sebastian County, Arkansas
117
 
16
Borrower 16
Heritage Park Nursing Center
1513 South Dixieland Road, Rogers, Benton County, Arkansas
100
 
17
Borrower 17
Homestead Manor Nursing Home
826 North Street, Stamps, LaFayette County, Arkansas
94
 
18
Borrower 18
Eaglewood Care Center
2000 Villa Road, Springfield, Clark County, Ohio
113
 
19
Borrower 19
Stone County Nursing and Rehabilitation Center
706 Oak Grove Street, Mountain View, Stone County, Arkansas
97
 
20
Borrower 20
Released
 
 
 
21
Borrower 21
Little Rock Healthcare and Rehab, a/k/a West Markham Sub Acute & Rehab Center
5720 W. Markham, Little Rock, Pulaski County, Arkansas
157
 
22
Borrower 22
Released
 
 
 
23
Borrower 23
Released
 
 
 
24
Borrower 24
Glenvue Health and Rehabilitation
721 N. Veterans Boulevard, Glennville, Tatnall County, Georgia
160
 
25
Borrower 25
Coosa Valley Healthcare
513 Pineview Avenue,
Glencoe, Etowah County, Alabama 35905
124
 
26
Borrower 26
Quail Creek Nursing and Rehabilitation Center
13500 Brandon Place, Oklahoma City, Oklahoma County, Oklahoma
118

(e)    The definition of the term “Leases” in Section 1.1 of the Loan Agreement,
as modified and amended by the Previous Modifications, is hereby further
modified and amended in its entirety to read as follows effective as of the date
of this Agreement, with the existing definition of the term “Leases” in Section
1.1 of the Loan Agreement, as modified and amended by the Previous
Modifications, to continue to be effective for periods prior to the date of this
Agreement:
Leases: Leases by Owners to each of Borrower 11 through Borrower 26 (except for
Borrowers 20, 22, 23 and 25) of the respective Projects and subleases by
Sublessor to each of Borrower 1 through Borrower 8 (except for Borrowers 3, 6
and 8) of the respective Projects dated as follows:

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Facility
Borrower
Owner/Sublessor
Date of Lease/Sublease
 
1
Borrower 1
Owner, Master Lease Lessor - William Foster
Sublessor - ADK Georgia, LLC
Master Lease - August 1, 2010
Sublease - August 1, 2010
 
2
Borrower 2
Owner, Master Lease Lessor - William Foster
Sublessor - ADK Georgia, LLC
Master Lease - August 1, 2010
Sublease - August 1, 2010
 
3
Borrower 3
Released
 
 
4
Borrower 4
Owner, Master Lease Lessor - William Foster
Sublessor - ADK Georgia, LLC
Master Lease - August 1, 2010
Sublease - August 1, 2010
 
5
Borrower 5
Owner, Master Lease Lessor - William Foster
Sublessor - ADK Georgia, LLC
Master Lease - August 1, 2010
Sublease - August 1, 2010
 
6
Borrower 6
Released
 
 
7
Borrower 7
Owner, Master Lease Lessor - William Foster
Sublessor - ADK Georgia, LLC
Master Lease - August 1, 2010
Sublease - September 1, 2010
 
8
Borrower 8
Released
 
 
9
Borrower 9
Owner, Borrower 9
None
 
10
Borrower 10
Owner, Borrower 10
None
 
11
Borrower 11
Owner, Mt. Kenn Property Holdings, LLC
May 1, 2011
 
12
Borrower 12
Owner, Erin Property Holdings, LLC
May 1, 2011

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13
Borrower 13
Owner, CP Property Holdings, LLC
September 6, 2011

 
14
Borrower 14
Owner, Benton Property Holdings, LLC
August 31, 2011
 
15
Borrower 15
Owner, Valley River Property Holdings, LLC
August 31, 2011
 
16
Borrower 16
Owner, Park Heritage Property Holdings, LLC
August 31, 2011
 
17
Borrower 17
Owner, Homestead Property Holdings, LLC
August 31, 2011
 
18
Borrower 18
Owner, Woodland Manor Property Holdings, LLC
December 29, 2011
 
19
Borrower 19
Owner, Mount V Property Holdings, LLC
November 30, 2011
 
20
Borrower 20
Released
 
 
21
Borrower 21
Owner, Little Rock HC&R Property Holdings, LLC
April 1, 2012
 
22
Borrower 22
Released
 
 
23
Borrower 23
Released
 
 
24
Borrower 24
Owner, Glenvue H&R Property Holdings, LLC
June 19, 2012
 
25
Borrower 25
Owner, Borrower 25
None
 
26
Borrower 26
Owner, QC Property Holdings, LLC
June 25, 2012, amended July 1, 2012

(f)    Section 7.1(a) of the Loan Agreement is hereby modified and amended in
its entirety to read as follows effective as of the ate of this Agreement, with
the existing Section 7.1(a) of the Loan Agreement to continue to be effective
for periods prior to the date of this Agreement:
(a)    Except for a security interest granted to Lender and, in the case of
Borrower 26, Borrower 26 Permitted Liens, each Borrower agrees that all of the
personal property, fixtures, attachments, furnishings and equipment owned by it
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
such Borrower will be the absolute owner of said personal property, fixtures,
attachments and equipment. Borrowers, on request, shall furnish Lender with
satisfactory evidence of such ownership, and of the terms of purchase and
payment therefor.
(g)    Section 7.1 of the Loan Agreement is hereby modified and amended to add
the following as subparagraph (e) effective as of the date of this Agreement:

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(e)    Borrower 26 shall promptly furnish to Lender copies of all notices of
default and other material documents and communications sent or received by
Borrower 26 under or relating to the HHC Loan.
(h)    Section 7.10(a)(i) of the Loan Agreement is hereby modified and amended
in its entirety to read as follows effective as of the ate of this Agreement,
with the existing Section 7.10(a)(i) of the Loan Agreement to continue to be
effective for periods prior to the date of this Agreement:
(i)    Tangible assets, excepting only (A) sales or other dispositions of
property no longer useful in connection with the operation of a Facility,
provided that prior to the sale or other disposition thereof, such property has
been replaced by property of at least equal value and utility, and (B) in the
case of Borrower 26, Borrower 26 Permitted Liens;
(i)    Section 7.14 of the Loan Agreement is hereby modified and amended in its
entirety to read as follows effective as of the date of this Agreement, with the
existing Section 7.14 of the Loan Agreement to continue to be effective for
periods prior to the date of this Agreement:
7.14    Security Interest Matters. This Agreement is intended to be a security
agreement under the Code for the purpose of creating the security interests
provided for herein. Borrowers shall execute and deliver such additional
security agreements and other documents as Lender shall from time to time
request in order to create and perfect such security interests. With exception,
in the case of Borrower 26, of Borrower 26 Permitted Liens, Borrowers shall keep
all of the Collateral free and clear of all other liens, security interests and
encumbrances. Borrower 26 may grant liens and security interests in its property
to HHC provided that the HHC Consent and Subordination has been entered into by
the parties thereto and is in full force and effect.
(j)    Effective as of the date of this Agreement, the following new
subparagraphs (r) and (s) are added to Section 10.1 of the Loan Agreement:
(r)    The occurrence of any Default or Event of Default under the HHC Loan on
the Quail Creek Project; or
(s)    If there is any action taken by HHC to foreclose or otherwise enforce or
realize on its liens or security interests in any collateral of Borrower 26’s in
which the Lender has a lien or security interest.
(k)    The address for notices to the New Borrower shall be the address for
notices to Borrowers set forth in Section 12.10 of the Loan Agreement, and the
Loan Agreement, as modified and amended by the Previous Modifications, is hereby
modified and amended accordingly.
(l)    The New Borrower hereby represents and warrants to the Lender as follows:

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(i)    The nature of the New Borrower entity and the State in which it is
organized are as stated in the first paragraph of this Agreement. The
organizational number of the New Borrower in such State is as follows:
 
Borrower
Organizational Number
 
 
Borrower 26
12032778
 

(ii)    The address of the New Borrower’s chief executive office is the address
for notices to the New Borrower set forth in Section 12.10 of the Loan
Agreement.
(iii)    The New Borrower has no place of business other than the chief
executive office referred to in (ii) above and at its Facility.
(m)    Exhibit A to the Loan Agreement, as modified and amended by the Previous
Modifications, is hereby further modified and amended in its entirety to be as
attached to this Agreement effective as of the date of this Agreement, with the
existing Exhibit A to the Loan Agreement, as modified and amended by the
Previous Modifications, to continue to be effective for periods prior to the
date of this Agreement.
(n)    The address for notices to the New Borrower shall be the address for
notices to Borrowers set forth in Section 12.10 of the Loan Agreement, and the
Loan Agreement, as modified and amended by the Previous Modifications, is hereby
modified and amended accordingly.
Section 4.    Attachment to Note. The Lender may, and prior to any transfer by
it of the Note shall, attach a copy of this Agreement to the original Note and
place an endorsement on the original Note making reference to the fact that such
attachment has been made.
Section 5.    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 any of the Previous Modifications, if any. In
order to induce the Lender to enter into this Agreement, the Borrower/Guarantor
Parties hereby represent and warrant to the 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)    Each Borrower is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of which is stated in
the Preambles to this Agreement, and if such State is not the State in which its
Facility is located, such Borrower is duly registered or qualified to transact
business and in good standing in the State in which its Facility is located.
Each Borrower 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.

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(b)    The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio, 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)    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.
(d)    This Agreement, 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, the Documents and the
Previous Modifications constitute valid and legally binding obligations
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.
(e)    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.
(f)    There is no litigation or administrative proceeding pending or threatened
to restrain or enjoin the transactions contemplated by this Agreement, 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, 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.
(g)    The statements contained in the Recitals to this Agreement are true and
correct.
Section 6.    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 the 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

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and amended herein; (ii) acknowledge and agree that the 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) acknowledge and agree that
the 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 the 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 the
Lender shall be deemed to be originals thereof.
Section 7.    Certifications, Representations and Warranties. In order to induce
the Lender to enter into this Agreement, the Borrower/Guarantor Parties hereby
certify, represent and warrant to the Lender that all certifications,
representations and warranties contained in the Documents and the Previous
Modifications and in all certificates heretofore delivered to the 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 8.    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 9.    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 10.    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 11.    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.

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Section 12.    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.
(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 the 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 13.    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 the
Lender shall be deemed to be an original.
Section 14.    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.

[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.
 
ADK THOMASVILLE OPERATOR, LLC
 
ADK LUMBER CITY OPERATOR, LLC
 
ADK JEFFERSONVILLE OPERATOR, LLC
 
ADK LAGRANGE OPERATOR, LLC
 
ADK POWDER SPRINGS OPERATOR, LLC
 
ADK OCEANSIDE OPERATOR, LLC
 
ADK THUNDERBOLT OPERATOR, LLC
 
ADK SAVANNAH BEACH OPERATOR, LLC
 
ATTALLA NURSING ADK, LLC
 
MOUNTAIN TRACE NURSING ADK, LLC
 
MT. KENN NURSING, LLC
 
ERIN NURSING, LLC
 
CP NURSING, LLC
 
BENTON NURSING, LLC
 
VALLEY RIVER NURSING, LLC
 
PARK HERITAGE NURSING, LLC
 
HOMESTEAD NURSING, LLC
 
WOODLAND MANOR NURSING, LLC
 
MOUNTAIN VIEW NURSING, LLC
 
LITTLE ROCK HC&R NURSING, LLC
 
GLENVUE H&R NURSING, LLC
 
COOSA NURSING ADK, LLC
 
QC NURSING, LLC
 
 
 
 
 
By:
/s/ David Rubenstein
 
 
David Rubenstein, Manager of each Borrower
 
 
 
 
 
 
 
 
 
ADCARE HEALTH SYSTEMS, INC.
 
 
 
 
 
By:
/s/ Ronald W. Fleming
 
 
Ronald W. Fleming, Chief Financial Officer

AdCare Portfolio Operator Loan Third Modification Agreement
Signature Page 1

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THE PRIVATEBANK AND TRUST COMPANY
 
 
 
 
 
By:
/s/ Amy K. Hallberg
 
 
Amy K. Hallberg, Managing Director

AdCare Portfolio Operator Loan Third Modification Agreement
Signature Page 2

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Exhibit A

DIRECT AND INDIRECT OWNERSHIP OF BORROWERS

[See Attached Organization Chart]