Exhibit 10.135

20818034.8
10-30-15

MODIFICATION AGREEMENT

THIS MODIFICATION AGREEMENT (this “Agreement”) dated as of October 30, 2015 (the
“Agreement Date”), is entered into by and among APH&R PROPERTY HOLDINGS, LLC, a
Georgia limited liability company (“Borrower 1”), NORTHRIDGE HC&R PROPERTY
HOLDINGS, LLC, a Georgia limited liability company (“Borrower 2”) and WOODLAND
HILLS HC PROPERTY HOLDINGS, LLC, a Georgia limited liability company (“Borrower
3”) (collectively, the “Borrowers”), ADCARE HEALTH SYSTEMS, INC., a Georgia
corporation (“AdCare”) (the Borrowers and AdCare being sometimes referred to
herein collectively as the “Borrower/Guarantor Parties”), and THE PRIVATEBANK
AND TRUST COMPANY, an Illinois banking corporation (the “Lender”).
RECITALS

A.    The Borrower/Guarantor Parties and the Lender heretofore entered into the
following documents (the “Documents”):
(i)    Loan Agreement dated as of February 25, 2015 (the “Loan Agreement”), by
and among the Borrowers and the Lender.
(ii)    Promissory Note dated February 25, 2015 (the “Note”), from the Borrowers
to the Lender in the principal amount of $12,000,000.
(iii)    Mortgage, Security Agreement, Assignment of Rents and Leases and
Fixture Filing dated as of February 25, 2015 (“Mortgage 1”), by Borrower 1 to
and for the benefit of the Lender, recorded in the Official Records of Larry
Crane, Pulaski County Circuit/County Clerk, on March 4, 2015, as Document No.
2015012701.
(iv)    Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture
Filing dated as of February 25, 2015 (“Mortgage 2”), by Borrower 2 to and for
the benefit of the Lender, recorded in the Official Records of Larry Crane,
Pulaski County Circuit/County Clerk, on March 2, 2015, as Document No.
2015012392.
(v)    Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture
Filing dated as of February 25, 2015 (“Mortgage 3”), by Borrower 3 to and for
the benefit of the Lender, recorded in the Official Records of Larry Crane,
Pulaski County Circuit/County Clerk, on March 2, 2012, as Document No.
2015012316.
(vi)    Absolute Assignment of Rents and Leases dated as of February 25, 2015,
by Borrower 1 to and for the benefit of the Lender, recorded in the Official
Records of Larry Crane, Pulaski County Circuit/County Clerk, on March 4, 2015,
as Document No. 2015012702.

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(vii)    Absolute Assignment of Rents and Leases dated as of February 25, 2015,
by Borrower 2 to and for the benefit of the Lender, recorded in the Official
Records of Larry Crane, Pulaski County Circuit/County Clerk, on March 2, 2015,
as Document No. 2015012393.
(viii)    Absolute Assignment of Rents and Leases dated as of February 25, 2015,
by Borrower 3 to and for the benefit of the Lender, recorded in the Official
Records of Larry Crane, Pulaski County Circuit/County Clerk, on March 2, 2015,
as Document No. 2015012317.
(ix)    Environmental Indemnity Agreement dated as of February 25, 2015, by the
Borrowers and AdCare jointly and severally to and for the benefit of the Lender.
(x)    Guaranty of Payment and Performance dated as of February 25, 2015, by
AdCare to and for the benefit of the Lender.
B.    The Documents encumber the real estate described in Exhibit A attached
hereto and the personal property located thereon.
C.    The parties desire to make certain modifications and amendments to the
Documents, 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.
(a)    The foregoing Recitals are hereby incorporated into and made a part of
this Agreement.
(b)    The following capitalized terms shall have the following meanings in this
Agreement:
Little Rock Owner: Little Rock HC&R Property Holdings, LLC, a Georgia limited
liability company.
Little Rock Owner Loan Agreement: The Loan Agreement dated as of March 30, 2012,
by and among the Little Rock Owner, other borrowers and the Lender, as
heretofore and hereafter modified, amended, restated, increased, renewed and
extended.
Little Rock Owner Loan Documents: The Little Rock Owner Loan Agreement and the
other Loan Documents, as defined in said Loan Agreement, and

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all other documents at any time evidencing or securing any indebtedness
outstanding under any of the foregoing, and all as heretofore and hereafter
modified, amended, restated, increased, renewed and extended.
(c)    All capitalized terms used and not otherwise defined in this Agreement
shall have the meanings set forth in the Loan Agreement.
Section 2.    Limited Waivers of Financial Covenant Compliance.
(a)    The parties hereby acknowledge and agree that compliance with the
requirements of Section 7.17 (Minimum EBITDAR/Management Fee Adjusted for
Operators) of the Loan Agreement (the “Minimum EBITDAR Covenant”) was not
achieved for (i) the fiscal quarter ending March 31, 2015, and (ii) the fiscal
quarter ending June 30, 2015. In addition, the parties hereby acknowledge and
agree that in consideration of the additional cash collateral deposits described
in Section 3 of this Agreement, the Lender heretofore waived compliance with the
Minimum EBITDAR Covenant for the fiscal quarter ending March 31, 2015 (the
“3/31/15 Waiver”). The Lender hereby waives compliance with the Minimum EBITDAR
Covenant for the fiscal quarter ending June 30, 2015 (the “6/30/15 Waiver”). The
Lender does not waive compliance with the Minimum EBITDAR Covenant for any
fiscal quarter after the fiscal quarter ending June 30, 2015.
(b)    Neither the 3/31/15 Waiver nor the 6/30/15 Waiver shall, without
limitation, in any way operate as (i) an amendment or modification of the Loan
Agreement or any of the other Documents, (ii) a waiver of compliance with any
other provisions of the Loan Agreement or any of the other Documents, (iii) a
waiver of repayment by the Borrowers of any portion of the outstanding
liabilities under the Loan Agreement, or (iv) a waiver of, or consent with
respect to, any existing or future Default or Event of Default under the Loan
Agreement or any of the other Documents, or a waiver or abandonment of any right
or remedy available to the Lender with respect to any such Default or Event of
Default, all of which rights and remedies are reserved.
Section 3.    AdCare Pledge of Collateral Account; Changes in Collateral Account
Provisions.
(a)    The Collateral Account established and maintained pursuant to Section 3.4
of the Loan Agreement is Account No. 3294816 at the Lender, which was
established and is maintained in the name of AdCare, rather than in the name of
one or more Borrowers, as required by such Section 3.4. It is a condition of
this Agreement and the Loan that the Collateral Account shall continue to be
maintained in the name of AdCare. AdCare hereby pledges and assigns to the
Lender, and grants to the Lender a first lien on and a first priority security
interest in the Collateral Account, all cash and investments from time to time
on deposit in the Collateral Account, and all proceeds of all of the foregoing.
Pursuant to the Loan Agreement and the Benton Owner Loan Agreement, immediately
prior to the execution and delivery of this Agreement, the Cash Collateral
Account is held as additional security for (i) the payment and performance of
all of the obligations of Borrowers under the Loan Agreement and the other
Documents, and (ii) the payment and performance of all of the obligations of the
Benton Owners under the Benton Owner Loan Agreement and the other Benton Owner
Loan Documents.

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(b)    In consideration of the 3/31/15 Waiver and the Lender’s limited waiver of
non-compliance with certain financial covenants in the Benton Owner Loan
Agreement and the Little Rock Owner Loan Agreement for the fiscal quarter ended
March 31, 2015, the Borrowers and the Benton Owners deposited an additional
$1,400,000 into the Collateral Account, and the Little Rock Owner deposited an
additional $1,200,000 into the “Debt Service Reserve Account” established by the
Little Rock Owner Loan Agreement, which is Account No. 3175210 at the Lender.
The parties acknowledge and agree that as of the Agreement Date, the amount on
deposit in the Collateral Account is $3,400,483, and the amount on deposit in
the Debt Service Reserve Account is $2,142,934. In addition, in consideration of
the 3/31/15 Waiver, the Borrower/Guarantor Parties agreed to establish the
Excess Rent Account - ARK 3 provided for in Section 4 of this Agreement.
(c)    The parties to the Documents, the Benton Owner Loan Documents and the
Little Rock Owner Loan Documents have agreed that in consideration of the
6/30/15 Waiver and the Lender’s limited waiver of non-compliance with certain
financial covenants in the Benton Owner Loan Agreement and the Little Rock Owner
Loan Agreement for the fiscal quarter ended June 30, 2015, the Documents, the
Benton Owner Loan Documents and the Little Rock Owner Loan Documents shall be
modified and amended, pursuant to this Agreement, the Second Modification
Agreement dated as of even date with this Agreement by and among the Benton
Owners, AdCare, the Benton ADK Operators (as defined in the Benton Owner Loan
Agreement) and the Lender (the “Benton Second Modification”), and the Sixth
Modification Agreement dated as of even date with this Agreement by and among
the Little Rock Owner, AdCare, Little Rock HC&R Nursing, LLC, a Georgia limited
liability company, and the Lender (the “Little Rock Sixth Modification”) --
(i)    to provide that from and after October 30, 2015, the Debt Service Reserve
Account shall also be known as the “Additional Collateral Account”;
(ii)    to provide that both the Collateral Account and the Additional
Collateral Account shall be held as additional security for (A) the payment and
performance of all of the obligations of Borrowers under the Loan Agreement and
the other Documents, (B) the payment and performance of all of the obligations
of the Benton Owners under the Benton Owner Loan Agreement and the other Benton
Owner Loan Documents, and (C) the payment and performance of all of the
obligations of the Little Rock Owner under the Little Rock Owner Loan Agreement
and the other Little Rock Owner Loan Documents; and
(iii)    to revise the release provisions related to the Collateral Account and
the Additional Collateral Account.
It is a condition of this Agreement and the Loan that the Benton Second
Modification and the Little Rock Sixth Modification be executed and delivered to
the Lender simultaneously with the execution and delivery of this Agreement.
(d)    In order to provide for the modification and amendment of the Documents
as described in paragraph (c) of this Section and in connection with the
modification and amendment of the Documents as provided in Section 4 of this
Agreement --

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(i)    Effective as of the Agreement Date, the following defined terms are
hereby added to Section 1.1 of the Loan Agreement, in alphabetical order with
the existing defined terms therein:
Additional Collateral Account: The Debt Service Reserve Account established
pursuant to Section 3.7 of the Little Rock Owner Loan Agreement, which is
Account No. 3175210 at the Lender, which Debt Service Reserve Account is, from
and after October 30, 2015, also known as the Additional Collateral Account.
Benton Facility 3 Transition: The Facility 3 Transition (as defined in the
Benton Owner Loan Agreement).
Excess Rent Account - ARK 3: The account so designated that is provided for in
Section 3.7 of this Agreement.
Little Rock Operator: Highlands of Little Rock West Markham, LLC, a Delaware
limited liability company.
Little Rock Owner: Little Rock HC&R Property Holdings, LLC, a Georgia limited
liability company.
Little Rock Owner Loan Agreement: The Loan Agreement dated as of March 30, 2012,
by and among the Little Rock Owner, other borrowers and Lender, as heretofore
and hereafter modified, amended, restated, increased, renewed and extended.
Little Rock Owner Loan Documents: The Little Rock Owner Loan Agreement and the
other Loan Documents, as defined in said Loan Agreement, and all other documents
at any time evidencing or securing any indebtedness outstanding under any of the
foregoing, and all as heretofore and hereafter modified, amended, restated,
increased, renewed and extended.
(ii)    The defined term “Benton Operators” in Section 1.1 of the Loan Agreement
is hereby amended and restated in its entirety to read as follows effective as
of the Agreement Date, with existing the existing defined term “Benton
Operators” in Section 1.1 of the Loan Agreement to remain in effect for periods
prior to the Agreement Date:
Benton Operators: Highlands of Rogers Dixieland, LLC, a Delaware limited
liability company, and Valley River Nursing, LLC, a Georgia limited liability
company (or, after the Benton Facility 3 Transition, Highlands of Fort Smith,
LLC, a Delaware limited liability company).
(iii)    Section 3.4 of the Loan Agreement is hereby modified and amended in its
entirety to read as follows effective as of the Agreement Date, with existing
Section 3.4 of the Loan Agreement, to remain in effect for periods prior to the
Agreement Date:
3.4    Collateral Account; Additional Collateral Account.

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(a)    The following are conditions of this Agreement and the Loan: Borrowers
shall cause a collateral account to be established and maintained in the name of
one or more of Borrowers, or in the name of the Guarantor, held by Lender (the
“Collateral Account”), which shall be Account No. 3294816, a blocked, interest
bearing money market account at Lender. The amount of the Collateral Account
shall be $3,400,483, and Borrowers shall cause the sum of $3,400,483 to be on
deposit in the Collateral Account as of October 30, 2015. Earnings on
investments of amounts in the Collateral Account shall be added to the
Collateral Account. The Collateral Account shall be held as additional security
for (i) the payment and performance of all of the obligations of Borrowers under
this Agreement and the other Loan Documents, (ii) the payment and performance of
all of the obligations of the Benton Owners under the Benton Owner Loan
Agreement and the other Benton Owner Loan Documents, and (iii) the payment and
performance of all of the obligations of the Little Rock Owner under the Little
Rock Owner Loan Agreement and the other Little Rock Owner Loan Documents.
Borrowers hereby pledge and assign to Lender, and grant to Lender a first lien
on and a first priority security interest in the Collateral Account, all cash
and investments from time to time on deposit in the Collateral Account, and all
proceeds of all of the foregoing. In the event that the Collateral Account is at
any time in the name of the Guarantor, the Guarantor shall immediately pledge
and assign to Lender, and grant to Lender a first lien on and a first priority
security interest in the Collateral Account, all cash and investments from time
to time on deposit in the Collateral Account, and all proceeds of all of the
foregoing, pursuant to a security agreement in form and substance acceptable to
Lender.
(b)    From and after October 30, 2015, the Additional Collateral Account shall
also be held as additional security for (i) the payment and performance of all
of the obligations of Borrowers under this Agreement and the other Loan
Documents, (ii) the payment and performance of all of the obligations of the
Benton Owners under the Benton Owner Loan Agreement and the other Benton Owner
Loan Documents, and (iii) the payment and performance of all of the obligations
of the Little Rock Owner under the Little Rock Owner Loan Agreement and the
other Little Rock Owner Loan Documents.
(c)    All amounts on deposit in the Collateral Account and the Additional
Collateral Account shall be released by Lender to Borrowers, the Benton Owners
and the Little Rock Owner at such time, and only at such time, as all of the
principal of and interest on the Loan, the “Loan” (as defined in the Benton
Owner Loan Agreement) and the “Loan” (as defined in the Little Rock Owner Loan
Agreement) have been paid in full and all of the other obligations to Lender
under this Agreement and the other Loan Documents, the Benton Owner Loan
Agreement and the other Benton Owner Loan Documents and the Little Rock Owner
Loan Agreement and the other Little Rock Owner Loan Documents have been fully
paid and performed, subject to earlier release as provided in paragraphs (d),
(e) and (f) below.

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(d)    Notwithstanding the provisions of paragraph (c) of this Section,
$1,500,000 of the total, aggregate amount on deposit in the Collateral Account
and the Additional Collateral Account shall be released by Lender to Borrowers,
the Benton Owners and the Little Rock Owner upon the written request of
Borrowers to Lender if all of the following conditions are satisfied:
(i)    No Default or Event of Default has occurred and is continuing under this
Agreement or any of the other Loan Documents, the Benton Owner Loan Agreement or
any of the other Benton Owner Loan Documents, or the Little Rock Owner Loan
Agreement or any of the other Little Rock Owner Loan Documents.
(ii)    For any two consecutive fiscal quarters ending on or after June 30,
2015, the EBITDAR/Management Fee Adjusted for Operators is not less than
$495,000, as determined based on financial statements of Operators which have
been delivered to Lender as required by Section 7.4(a) of this Agreement, and
compliance certificates delivered to Lender in accordance with Section 7.4(a) of
this Agreement containing a correct computation of such EBITDAR/Management Fee
Adjusted for Operators.
(iii)    For any two consecutive fiscal quarters ending on or after June 30,
2015, the EBITDAR/Management Fee Adjusted for the Benton Operators is not less
than $265,000, as determined based on financial statements of the Benton
Operators which have been delivered to Lender as required by Section 7.4(a) of
the Benton Owner Loan Agreement, and compliance certificates delivered to Lender
in accordance with Section 7.4(a) of the Benton Owner Loan Agreement containing
a correct computation of such EBITDAR/Management Fee Adjusted for the Benton
Operators.
(iv)    For each of two consecutive fiscal quarters ending on or after June 30,
2015, the EBITDAR/Management Fee Adjusted for the Little Rock Operator shall be
not less than $450,000, determined based on financial statements of the Little
Rock Operator delivered to Lender in accordance with Section 7.4(a) of the
Little Rock Owner Loan Agreement, and compliance certificates delivered to
Lender in accordance with Section 7.4(a) of the Little Rock Owner Loan Agreement
containing a correct computation of such EBITDAR/Management Fee Adjusted for the
Little Rock Operator.
(e)    Notwithstanding the provisions of paragraph (c) of this Section,
$1,500,000 of the total, aggregate amount on deposit in the Collateral Account
and the Additional Collateral Account shall be released by Lender to Borrowers,
the Benton Owners and the Little Rock Owner upon the written request of
Borrowers to Lender if all of the following conditions are satisfied:

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(i)    No Default or Event of Default has occurred and is continuing under this
Agreement or any of the other Loan Documents, the Benton Owner Loan Agreement or
any of the other Benton Owner Loan Documents, or the Little Rock Owner Loan
Agreement or any of the other Little Rock Owner Loan Documents.
(ii)    For any two consecutive fiscal quarters ending after the fiscal quarters
for which the condition set forth in Section 3.4(d)(ii) above is satisfied, the
EBITDAR/Management Fee Adjusted for Operators is not less than $495,000, as
determined based on financial statements of Operators which have been delivered
to Lender as required by Section 7.4(a) of this Agreement, and compliance
certificates delivered to Lender in accordance with Section 7.4(a) of this
Agreement containing a correct computation of such EBITDAR/Management Fee
Adjusted for Operators.
(iii)    For any two consecutive fiscal quarters ending after the fiscal
quarters for which the condition set forth in Section 3.4(d)(iii) above is
satisfied, the EBITDAR/Management Fee Adjusted for the Benton Operators is not
less than $265,000, as determined based on financial statements of the Benton
Operators which have been delivered to Lender as required by Section 7.4(a) of
the Benton Owner Loan Agreement, and compliance certificates delivered to Lender
in accordance with Section 7.4(a) of the Benton Owner Loan Agreement containing
a correct computation of such EBITDAR/Management Fee Adjusted for the Benton
Operators.
(iv)    For any two consecutive fiscal quarters ending after the fiscal quarters
for which the condition set forth in Section 3.4(d)(iv) above is satisfied, the
EBITDAR/Management Fee Adjusted for the Little Rock Operator shall be not less
than $450,000, determined based on financial statements of the Little Rock
Operator delivered to Lender in accordance with Section 7.4(a) of the Little
Rock Owner Loan Agreement, and compliance certificates delivered to Lender in
accordance with Section 7.4(a) of the Little Rock Owner Loan Agreement
containing a correct computation of such EBITDAR/Management Fee Adjusted for the
Little Rock Operator.
(f)    Notwithstanding the provisions of paragraph (c) of this Section, the
entire remainder of the total, aggregate amount on deposit in the Collateral
Account and the Additional Collateral Account shall be released by Lender to
Borrowers, the Benton Owners and the Little Rock Owner upon the written request
of Borrowers to Lender if all of the following conditions are satisfied:
(i)    No Default or Event of Default has occurred and is continuing under this
Agreement or any of the other Loan Documents, the Benton Owner Loan Agreement or
any of the other Benton Owner Loan Documents, or the

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Little Rock Owner Loan Agreement or any of the other Little Rock Owner Loan
Documents.
(ii)    For any two consecutive fiscal quarters ending after the fiscal quarters
for which the condition set forth in Section 3.4(e)(ii) above is satisfied, the
EBITDAR/Management Fee Adjusted for Operators is not less than $495,000, as
determined based on financial statements of Operators which have been delivered
to Lender as required by Section 7.4(a) of this Agreement, and compliance
certificates delivered to Lender in accordance with Section 7.4(a) of this
Agreement containing a correct computation of such EBITDAR/Management Fee
Adjusted for Operators.
(iii)    For any two consecutive fiscal quarters ending after the fiscal
quarters for which the condition set forth in Section 3.4(e)(iii) above is
satisfied, the EBITDAR/Management Fee Adjusted for the Benton Operators is not
less than $265,000, as determined based on financial statements of the Benton
Operators which have been delivered to Lender as required by Section 7.4(a) of
the Benton Owner Loan Agreement, and compliance certificates delivered to Lender
in accordance with Section 7.4(a) of the Benton Owner Loan Agreement containing
a correct computation of such EBITDAR/Management Fee Adjusted for the Benton
Operators.
(iv)    For any two consecutive fiscal quarters ending after the fiscal quarters
for which the condition set forth in Section 3.4(e)(iv) above is satisfied, the
EBITDAR/Management Fee Adjusted for the Little Rock Operator shall be not less
than $450,000, determined based on financial statements of the Little Rock
Operator delivered to Lender in accordance with Section 7.4(a) of the Little
Rock Owner Loan Agreement, and compliance certificates delivered to Lender in
accordance with Section 7.4(a) of the Little Rock Owner Loan Agreement
containing a correct computation of such EBITDAR/Management Fee Adjusted for the
Little Rock Operator.
Section 4.    Excess Rent Account - ARK 3.
(a)    The following new Section 3.7 is hereby added to the Loan Agreement
effective as of the Agreement Date:
3.7    Excess Rent Account - ARK 3.
(a)    On or prior to October 30, 2015, Borrowers shall cause to be established
and shall maintain at all times thereafter a collateral account held by Lender
in the name of Borrower 2 (the “Excess Rent Account - ARK 3”), which shall be
Account No. 2414589, a blocked, interest bearing money market account at Lender.
Earnings on investments of amounts in the Excess Rent Account - ARK 3 shall be
added to the Excess Rent Account - ARK 3. The Excess Rent Account - ARK 3 shall
be held as additional security for the

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payment and performance of all of the obligations of Borrowers under the Loan
Agreement and the other Loan Documents, and Borrowers hereby pledge and assign
to Lender, and grant to Lender a first lien on and a first priority security
interest in the Excess Rent Account - ARK 3, all cash and investments from time
to time on deposit in the Excess Rent Account - ARK 3, and all proceeds of all
of the foregoing. For the avoidance of doubt, the Excess Rent Account - ARK 3
shall be held as additional security for the Loan only, as described above in
this paragraph, and not as additional security for the loans evidenced and
secured by the Benton Owner Loan Documents and the Little Rock Owner Loan
Documents.
(b)    Not later than November 10, 2015, Borrowers shall deposit into the Excess
Rent Account - ARK 3 an amount equal to the Excess Rent, if any, for the month
of September, 2015, as set forth in the covenant calculation certificate
required to be furnished to the Lender pursuant to Section 7.4(a)(vii) of this
Agreement. Within 10 days after the end of each calendar month commencing with
the month of October, 2015, Borrowers shall deposit into the Excess Rent Account
- ARK 3 an amount equal to the Excess Rent, if any, for such month, as set forth
in the covenant calculation certificate required to be furnished to the Lender
pursuant to Section 7.4(a)(viii) of this Agreement. For purposes of this
Agreement, the following terms shall have the following respective meanings:
“Debt Service” means, for any calendar month, principal and interest paid on the
Loan during such month.
“Excess Rent” means, for any calendar month, Income for such month minus
Expenses and Debt Service for such quarter.
“Expenses” means, for any calendar month, the operating expenses of the Projects
paid by Borrowers during such month, including but not limited to real estate
taxes, utilities, common area maintenance and insurance, but not including
depreciation, amortization, Debt Service, management fees, or any operating
expenses paid directly by ADK Operators or Aria Operators; all as determined on
a cash basis in accordance with customary real estate accounting practices
consistently applied.
“Income” means, for any calendar month, all income of Borrowers under the Leases
for such month, including rental payments by ADK Operators and payments by ADK
Operators as payment or reimbursement of operating expenses, but excluding
payments of security and other tenant deposits and prepaid rent; all as
determined on a cash basis in accordance with customary real estate accounting
practices consistently applied.
(c)    All amounts on deposit in the Excess Rent Account - ARK 3 shall be
released by Lender to Borrowers at such time, and only at such time, as all of
the principal of and interest on the Loan has been paid in full and all of the
other obligations to Lender under this Agreement and the other Loan Documents
have been fully paid and performed, subject to earlier release as provided in
paragraph (d) below.

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(d)    Notwithstanding the provisions of paragraph (c) of this Section, the
entire amount on deposit in the Excess Rent Account - ARK 3 shall be released by
Lender to Borrowers upon the written request of Borrowers to Lender if all of
the following conditions are satisfied:
(i)    No Default or Event of Default has occurred and is continuing under this
Agreement or any of the other Loan Documents.
(ii)    For any two consecutive fiscal quarters ending on or after June 30,
2015, the EBITDAR/Management Fee Adjusted for Operators is not less than
$495,000, as determined based on financial statements of Operators which have
been delivered to Lender as required by Section 7.4(a) of this Agreement, and
compliance certificates delivered to Lender in accordance with Section 7.4(a) of
this Agreement containing a correct computation of such EBITDAR/Management Fee
Adjusted for Operators.
Section 5.    Change in Furnishing Information Provisions. The following new
subparagraphs (vii) and (viii) are hereby added to Section 7.4(a) of the Loan
Agreement effective as of the Agreement Date:
(vii)    Without the necessity of any request by Lender, as soon as available
and in no event later than November 10, 2015, a duly completed covenant
compliance certificate dated the date of such certificate and certified as true
and correct by the appropriate officer of Borrowers, containing a computation of
Excess Rent for the month of September, 2015, as required by Section 3.7 of this
Agreement.
(viii)    Without the necessity of any request by Lender, as soon as available
and in no event later than 10 days after the end of each calendar month
commencing with the month of October, 2015, a duly completed covenant compliance
certificate dated the date of such certificate and certified as true and correct
by the appropriate officers of Borrowers, containing a computation of Excess
Rent for such month, as required by Section 3.7 of this Agreement.
Section 6.    Change in Distribution Provisions. Section 7.11(c) of the Loan
Agreement is hereby modified and amended in its entirety to read as follows
effective as of the Agreement Date, with the existing Section 7.11(c) of the
Loan Agreement to continue to be effective for periods prior to the date of this
Agreement:
(c)    Each Borrower shall not at any time make any Distribution which is in
violation of any of the following provisions:
(i)    On and after October 30, 2015, each Borrower shall not, directly or
indirectly, at any time make any Distribution until such time as the conditions
for the release of the entire remainder of the total, aggregate amount on
deposit in the Collateral Account and the Additional Collateral Account which
are provided for in Section 3.4(f) of this Agreement have been satisfied.

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(ii)    If any Default or Event of Default shall occur and be continuing under
this Agreement or any of the other Loan Documents, each Borrower shall not,
directly or indirectly, make any Distribution.
(iii)    Each Borrower shall not, directly or indirectly, at any time make any
Distribution that would cause its cash and cash equivalents remaining after such
Distribution to be less than an amount equal to the aggregate of (A) the total
amount of the security and other deposits received by such Borrower from tenants
of its Project, (B) the total amount of accrued but unpaid real estate taxes on
its Project, based on the last full year tax bill or bills received by such
Borrower, minus any amount held in a real estate tax escrow by Lender, and (C) a
reasonable working capital reserve.
Section 7.    Lender Consent to Further Amendment of Subleases; Amendment to
Loan Agreement Relating to Further Amendment of Subleases.
(a)    The Lender hereby consents to the further amendment of each of the
Subleases pursuant to the Second, Third and Fourth Amendments to Sublease
Agreement related to the Sublease of each of the Projects, such Amendments in
the case of each Project dated as of March 31, 2015, April 30, 2015 and October
6, 2015, respectively.
(b)    In order to induce the Lender to grant the consent described in paragraph
(a) of this Section, the Borrower and the Guarantors are entering into the
agreements with the Lender which are provided for in this Agreement.
(c)    The defined term “Subleases” in Section 1.1 of the Loan Agreement is
hereby modified and amended in its entirety to read as follows effective as of
the Agreement Date, with the existing defined term “Subleases” to continue to be
effective for periods prior to the Agreement Date:
Subleases: The Sublease Agreements by ADK Operator 1, ADK Operator 2 and ADK
Operator 3 to Aria Operator 1, Aria Operator 2 and Aria Operator 3,
respectively, each dated as of January 16, 2015, and each as amended by
Amendments dated as of February 27, 2015, March 31, 2015, April 30, 2015 and
October 6, 2015.
Section 8.    Condition to Agreements. It is a condition of this Agreement and
the Loan that within 30 days after the Agreement Date, the Borrowers shall
obtain and deliver to the Lender a date down endorsement to the Title Insurance
Policy for the Project encumbered by the Mortgage 1, a date down endorsement to
the Title Insurance Policy for the Project encumbered by the Mortgage 2, and a
date down endorsement to the Title Insurance Policy for the Project encumbered
by Mortgage 3, each dated on or after the date of the recording of the
Memorandum of this Agreement, each of which endorsements shall show no new
encumbrances other than those approved by the Lender and shall otherwise be in
form and content acceptable to the Lender. The failure of this condition to be
satisfied shall be an Event of Default under the Documents.

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Section 9.    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, 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)    Each 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 and each of the
Documents to which it is a party, 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 and each of the Documents to which it is
a party, 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 and the Documents in the capacity shown
in each signature block contained in this Agreement and the Documents 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 and each of the Documents have been duly authorized,
executed and delivered by such of the Borrower/Guarantor Parties as are parties
thereto, and this Agreement and each of the Documents constitutes 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 and
the Documents 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 no Default
or Event of Default has occurred and is continuing with respect to any of the
Documents.
(f)    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 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

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would adversely affect the transactions contemplated by this Agreement or any of
the Documents, 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 10.    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 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 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) 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 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 modified and
amended by this Agreement. Electronic records of executed documents maintained
by Lender shall be deemed to be originals thereof.
Section 11.    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 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 12.    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 13.    Successors. This Agreement shall inure to the benefit of and
shall be binding upon the parties and their respective successors, assigns and
legal representatives.

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Section 14.    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 15.    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 16.    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 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 17.    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 18.    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.

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Section 19.    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.

 
 
APH&R PROPERTY HOLDINGS, LLC
 
 
NORTHRIDGE HC&R PROPERTY HOLDINGS, LLC
 
 
WOODLAND HILLS HC PROPERTY HOLDINGS, LLC
 
 
 
 
 
 
 
 
 
 
 
 
By
/s/ William McBride, III
 
 
 
William McBride III, Manager of Each Borrower
 
 
 
 
 
 
 
 
 
 
 
 
ADCARE HEALTH SYSTEMS, INC.
 
 
 
 
 
 
 
 
 
 
 
 
By
/s/ William McBride, III
 
 
 
William McBride III, Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
THE PRIVATEBANK AND TRUST COMPANY
 
 
 
 
 
 
 
 
 
 
 
 
By
/s/ Amy K. Hallberg
 
 
 
Amy K. Hallberg, Managing Director

- AdCare Arkansas 3 2015 Owner Loan Modification Agreement -
- Signature Page -

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EXHIBIT A

LEGAL DESCRIPTION

PROJECT 1 - CUMBERLAND (OWNED BY BORROWER 1)

Real property in the City of Little Rock, County of Pulaski, State of Arkansas,
described as follows:

All of Block 19, Original City of Little Rock, Pulaski County, Arkansas, Less
and Except the West 50 feet of Lots 1, 2 and 3 of said Block 19, Original City
of Little Rock, Pulaski County, Arkansas.

Tax Parcel ID: 34L0200113600

PROJECT 2 - NORTHRIDGE (OWNED BY BORROWER 2)

Real property in the City of Little Rock, County of Pulaski, State of Arkansas,
described as follows:

Lot 1, Oak Manor Addition to the City of Little Rock, Pulaski County, Arkansas,
as shown on plat recorded in Book 1064, page 291, records of Pulaski County,
Arkansas.

Tax Parcel ID: 33N2620000100

PROJECT 3 - WOODLAND HILLS (OWNED BY BORROWER 3)

Real property in the City of Little Rock, County of Pulaski, State of Arkansas,
described as follows:

Tract C-1-R, Riley’s Replat of Tract C, Kellwood Subdivision, in the City of
Little Rock, Arkansas as shown on plat recorded as Plat No. B-068 and the S1/2
of a strip of land formerly platted as Riley Drive, that is abutting and
contiguous to Tract C-1-R, Riley’s Replat of Tract C, Kellwood, which was closed
by Ordinance No. 16,354, a certified copy filed for record February 11, 1993 and
recorded as Instrument No. 93-08724, records of Pulaski County, Arkansas, Less
and Except: Part of Tract C-1-R, Riley’s Replat of Tract C, Kellwood
Subdivision, in the City of Little Rock, Pulaski County, Arkansas, more
particularly described as follows: Commencing at a found iron pin for the
Southwest corner of said Tract C-1-R for the point of beginning; thence North 0
degrees17 minutes 06 seconds West, 303.41 feet to a set iron pin; thence North
88 degrees 55 minutes 59 seconds East, 656.12 feet to a set iron pin; thence
South 0 degrees 18 minutes 35 seconds East, 319.52 feet to found iron pin;
thence North 89 degrees 39 minutes 39 seconds West, 656.23 feet to the point of
beginning.

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Easement North Side:

Together with a non exclusive easement for ingress and egress over that portion
of Riley Drive which was closed by Ordinance No. 16,354, a certified copy filed
for record February 11, 1993 and recorded as Instrument No. 93-08724, records of
Pulaski County, Arkansas.

Easement East Side:

And together with a non exclusive easement for ingress and egress described as:
Commencing at the Southwest corner of Tract C-1-R; thence North 0 degrees 17
minutes 06 seconds West, 303.41 feet; thence North 88 degrees 55 minutes 59
seconds East, 656.12 feet; thence North 0 degrees 18 minutes 35 seconds West,
86.02 feet to the point of beginning of said road easement; thence North 0
degrees 18 minutes 35 seconds West, 135.0 feet; thence South 30 degrees 43
minutes 21 seconds East, 30.0 feet; thence South 7 degrees 37 minutes West,
110.18 feet to the point of beginning.

Tax Parcel ID: 44L0390100101

- A2 -