FOURTH AMENDMENT TO SUBLEASE AGREEMENT

THIS FOURTH AMENDMENT TO SUBLEASE AGREEMENT (this “Fourth Amendment”) is made as of the 6^th day of October, 2015 by and among WOODLAND HILLS HC PROPERTY HOLDINGS, LLC, a Georgia limited liability company (“Prime Landlord”), WOODLAND HILLS HC NURSING, LLC, a Georgia limited liability company (“Landlord”) and HIGHLANDS OF LITTLE ROCK RILEY, LLC, a Delaware limited liability company (“Tenant”).

A.     Prime Landlord, Landlord and Tenant entered into that Sublease Agreement dated as of January 16, 2015 as amended by that certain First Amendment to Sublease Agreement dated February 25, 2015, by that certain Second Amendment to Sublease Agreement dated as of March 31, 2015 and that certain Third Amendment to Sublease Agreement dated as of April 30, 2015 (as amended, the “Lease”). Landlord leases the Premises from Prime Landlord pursuant to the Prime Lease.

B.    Prime Landlord, Landlord and Tenant have agreed to further amend the Lease on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein, the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the parties, Prime Landlord, Landlord and Tenant, intending to be legally bound, hereby agree as follows:

1.Recitals Incorporated: Certain Defined Terms. The recitals set forth above are incorporated into this Fourth Amendment and shall be deemed to be terms and provisions hereof, the same as if fully set forth in this Section 1. Capitalized terms that are not otherwise defined in this Fourth Amendment shall have the same meanings ascribed to such terms in the Lease.

2.    Approval. This Amendment is subject to the approval of the lender holding a first priority mortgage on the Facility.

1.Term. The “Term” of this Lease commenced on May 1, 2015 (the “Commencement Date”) and shall continue until April 30, 2030. A “Lease Year” is the twelve (12) month period commencing on the Commencement Date and each anniversary thereof during each year of the Term. For purposes hereof, “Termination Date” shall mean the last day of the Term or the earlier date on which this Lease may be terminated as provided herein.

Tenant shall deposit with the Landlord and maintain during the Term the sum of Sixty Thousand and 00/100 Dollars ($60,000.00) as a security deposit (the “Security Deposit”) which Landlord shall hold as security for the full and faithful performance by Tenant of every material term, provision, obligation and covenant under this Lease and any Related Lease subject to the terms and conditions of this Lease.

Notwithstanding any provision of this Section 4 to the contrary, Tenant acknowledges that and agrees that Landlord may apply the Security Deposit to the Base Rent due hereunder on September 1, 2015. Tenant further agrees to deposit with Landlord on the earlier of (i) the closing of Tenant’s line of credit to be secured by accounts receivable of the Facility or (ii) December 31, 2015, additional money sufficient to restore the Security Deposit to the full amount required to be deposited with Landlord and Tenant’s failure to do so shall constitute an Event of Default without any further Notice.

(i) The failure of Highlands Arkansas Holdings, LLC to make any payment of principal or interest when due under that certain Second Replacement Promissory Note dated as of August 21, 2015 given in favor of AdCare Health Systems, Inc.

Tenant acknowledges and agrees that the following terms and conditions shall apply to Landlord’s self-insured tail liability with regard to professional or general liability incidents which occurred prior to the Commencement Date, for which Tenant is indemnified as set forth in Section 7.13 of the Transfer Agreement: (i) such liability shall not be funded or supported by a letter of credit or other collateral, (ii) such liability, since not actual insurance coverage, shall not name Tenant or its affiliates as additional insureds, (iii) Landlord will not provide excess coverage and (iv) claims under such liability will not be limited to $500,000.00 and will be managed by Sedgwick Claims Management Services (“Sedgwick”) (or such other claims management services as may be chosen by Landlord). If a claim is reported, Landlord shall advise Tenant of such claim and Sedgwick shall (i) collect information to defend the claim, (ii) select legal counsel (if needed), (iii) evaluate the potential liability and (iv) recommend to Landlord and its parent company, AdCare Health Systems, Inc. (“ADK”) a liability reserve amount. ADK will then recognize the potential liability on its balance sheet by creating a loss reserve and all settlements and/or judgments will be paid out of ADK’s general funds. ADK shall provide Tenant with evidence of such recognition of liability on its balance sheet. Any claims brought by Tenant or its affiliates relating to the operation of the Facility prior to the Commencement Date shall be brought in accordance with the Transfer Agreement.

j.     Schedule 1 to the Lease is hereby deleted in its entirety and Schedule 1 attached to the Fourth Amendment is substituted in lieu thereof.

3.    No Other Changes. Except as amended by the terms of this Fourth Amendment, the Lease shall remain in full force and effect and the parties hereto hereby affirm the same.

4.No Waiver. Neither the entering into of this Fourth Amendment nor any provision set forth herein shall be construed to be a waiver of any condition to performance under or breach of the terms of the Lease.

5.Counterparts. This Fourth Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. To facilitate execution and delivery of this Agreement, the parties may exchange counterparts of the executed signature pages by facsimile or other electronic transmission.

6.Entire Agreement. This Fourth Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements.

7.Authority. The parties signing below on behalf of Prime Landlord, Landlord and Tenant represent and warrant that they have the authority and power to bind their respective party.

IN WITNESS WHEREOF, the parties have duly caused this Fourth Amendment to Sublease Agreement to be executed as of the day and year first written above.