REGIONAL HEALTH PROPERTIES, INC (Form: 10-Q, Received: 05/21/2018 17:32:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-33135

Regional Health Properties, Inc.

(Exact name of registrant as specified in its charter)

Georgia		81-5166048
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification Number)

454 Satellite Boulevard NW, Suite 100, Suwanee, GA 30024

(Address of principal executive offices)

(678) 869-5116

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐		Smaller reporting company	☒
		(Do not check if a smaller reporting company)	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 17, 2018: 20,303,733 shares of common stock, no par value, were outstanding.

Regional Health Properties, Inc.

Form 10-Q

Table of Contents

		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	3
	Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017	4
	Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2018	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	41
Item 6.	Exhibits	41

Signatures		45

Part I. Financial Information

Item 1.

Financial Statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in 000’s)

(Unaudited)

	March 31, 2018			December 31, 2017

ASSETS
Current assets:
Cash	$	3,524		$	1,818
Restricted cash		833			960
Accounts receivable, net of allowance of $1,992 and $2,570		599			945
Prepaid expenses and other		521			304
Notes receivable		727			677
Total current assets		6,204			4,704
Restricted cash		2,640			2,581
Property and equipment, net		80,397			81,213
Intangible assets - bed licenses		2,471			2,471
Intangible assets - lease rights, net		1,945			2,187
Goodwill		2,105			2,105
Lease deposits		808			808
Straight-line rent receivable		6,383			6,400
Notes receivable		2,990			3,540
Other assets		55			542
Total assets	$	105,998		$	106,551
LIABILITIES AND EQUITY
Current liabilities:
Current portion of notes payable and other debt	$	17,714		$	6,621
Current portion of convertible debt, net		—			1,469
Accounts payable		3,996			4,386
Accrued expenses and other		4,523			7,022
Total current liabilities		26,233			19,498
Notes payable and other debt, net of current portion:
Senior debt, net		53,297			57,801
Bonds, net		6,586			6,567
Other debt, net		572			644
Other liabilities		3,899			4,133
Deferred tax liabilities		38			38
Total liabilities		90,625			88,681
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 19,697 and 19,697 issued and outstanding at March 31, 2018 and December 31, 2017, respectively		61,755			61,724
Preferred stock, no par value; 5,000 shares authorized; 2,812 and 2,812 shares issued and outstanding, redemption amount $70,288 and $70,288 at March 31, 2018 and December 31, 2017, respectively		62,423			62,423
Accumulated deficit		(108,805	)		(106,277	)
Total stockholders’ equity		15,373			17,870
Total liabilities and stockholders’ equity	$	105,998		$	106,551

See accompanying notes to unaudited consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in 000’s, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Revenues:
Rental revenues	$	5,705		$	5,775
Management fees		234			229
Other revenues		48			131
Total revenues		5,987			6,135
Expenses:
Facility rent expense		2,171			2,171
Cost of management fees		157			176
Depreciation and amortization		1,221			1,135
General and administrative expense		879			1,446
Provision for doubtful accounts		1,938			466
Other operating expenses		343			89
Total expenses		6,709			5,483
(Loss) income from operations		(722	)		652
Other expense:
Interest expense, net		1,275			1,032
Loss on extinguishment of debt		441			63
Other expense		9			95
Total other expense, net		1,725			1,190
Loss from continuing operations before income taxes		(2,447	)		(538	)
Income tax expense		26			1
Loss from continuing operations		(2,473	)		(539	)
Loss from discontinued operations, net of tax		(55	)		(413	)
Net loss		(2,528	)		(952	)
Preferred stock dividends - declared		—			(1,878	)
Preferred stock dividends - undeclared		(1,912	)		—
Net loss attributable to Regional Health Properties, Inc. common stockholders	$	(4,440	)	$	(2,830	)
Net loss per share of common stock attributable to Regional Health Properties, Inc.
Basic and diluted:
Continuing operations	$	(0.23	)	$	(0.12	)
Discontinued operations		0.00			(0.02	)
	$	(0.23	)	$	(0.14	)
Weighted average shares of common stock outstanding:
Basic and diluted		19,697			19,825

See accompanying notes to unaudited consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Amounts in 000’s)

(Unaudited)

	Shares of Common Stock		Shares of Preferred Stock		Common Stock and Additional Paid-in Capital		Preferred Stock		Accumulated Deficit			Total
Balances, December 31, 2017		19,697		2,812	$	61,724	$	62,423	$	(106,277	)	$	17,870
Stock-based compensation		—		—		31		—		—			31
Net loss		—		—		—		—		(2,528	)		(2,528	)
Balances, March 31, 2018		19,697		2,812	$	61,755	$	62,423	$	(108,805	)	$	15,373

See accompanying notes to unaudited consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in 000’s)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(2,528	)	$	(952	)
Loss from discontinued operations, net of tax		55			413
Loss from continuing operations		(2,473	)		(539	)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization		1,221			1,135
Stock-based compensation expense		31			234
Rent expense in excess of cash paid		113			158
Rent revenue in excess of cash received		(683	)		(768	)
Amortization of deferred financing costs, debt discounts and premiums		195			99
Loss on debt extinguishment		441			—
Bad debt expense		1,938			466
Changes in operating assets and liabilities:
Accounts receivable		(271	)		163
Prepaid expenses and other		(22	)		(201	)
Other assets		33			(294	)
Accounts payable, and accrued expenses and other		209			236
Other liabilities		—			60
Net cash provided by operating activities - continuing operations		732			749
Net cash used in operating activities - discontinued operations		(735	)		(1,051	)
Net cash used in operating activities		(3	)		(302	)
Cash flows from investing activities:
Purchase of property and equipment		(163	)		(329	)
Net cash used in investing activities - continuing operations		(163	)		(329	)
Net cash used in investing activities		(163	)		(329	)
Cash flows from financing activities:
Proceeds from debt issuance		2,397			—
Repayment on notes payable		(503	)		(1,974	)
Repayment of convertible debt		—			(6,700	)
Repurchase of common stock		—			(187	)
Dividends paid on preferred stock		—			(1,878	)
Net cash provided by (used in) financing activities - continuing operations		1,894			(10,739	)
Net cash used in financing activities - discontinued operations		(90	)		(140	)
Net cash provided by (used in) financing activities		1,804			(10,879	)
Net change in cash and restricted cash		1,638			(11,510	)
Cash and restricted cash, beginning		5,359			19,509
Cash and restricted cash, ending	$	6,997		$	7,999

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in 000’s)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Supplemental disclosure of cash flow information:
Interest paid	$	755		$	682
Supplemental disclosure of non-cash activities:
Non-cash payments of long-term debt	$	(8,744	)	$	—
Non-cash payments of convertible debt		(1,500	)		—
Non-cash payments of professional liability settlements from financing		(2,371	)		—
Non-cash debt issuance costs and prepayment penalties		(1,238	)		—
Non-cash payments of professional liability settlements from prior insurer		(2,850	)		—
Net payments through escrow	$	(16,703	)	$	—

Non-cash proceeds from financing	$	13,853		$	—
Non-cash proceeds from prior insurer for professional liability settlements		2,850			—
Net proceeds through escrow	$	16,703		$	—

Non-cash deferred financing	$	488		$	—
Surrender of security deposit	$	245		$	500
Non-cash proceeds from vendor-financed insurance	$	194		$	193
Non-cash proceeds from financing of South Carolina Medicaid audit repayment	$	—		$	385

See accompanying notes to unaudited consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

March 31, 2018

NOTE 1.

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

AdCare Health Systems, Inc. (“AdCare”) is the former parent of, and the predecessor issuer to, Regional Health Properties, Inc. (“Regional Health” and, together with its subsidiaries, the “Company”). On September 29, 2017, AdCare merged (the “Merger”) with and into Regional Health, a Georgia corporation and wholly owned subsidiary of AdCare formed for the purposes of the Merger, with Regional Health continuing as the surviving corporation in the Merger. The Company now has many of the characteristics of a real estate investment trust (“REIT”) and is focused on the ownership, acquisition and leasing of healthcare related properties. See Part II, Item 8, Notes to Consolidated Financial Statements , Note 1 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”) on April 16, 2018 (the “Annual Report”), for a description of the Merger.

The Company is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. The Company’s business primarily consists of leasing and subleasing healthcare facilities to third-party tenants, which operate the facilities. The operators of the Company’s facilities provide a range of healthcare services, including skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term and short-stay patients and residents.

As of March 31, 2018, the Company owned, leased, or managed for third parties 30 facilities , primarily in the Southeast United States. Of the 30 facilities, the Company: (i) leased 14 owned facilities and subleased 11 leased skilled nursing facilities to third-party tenants; (ii) leased two owned assisted living facilities to third-party tenants; and (iii) managed on behalf of third-party owners two skilled nursing facilities and one independent living facility (see Note 7 – Leases and Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 – Leases in the Annual Report for a more detailed description of the Company’s leases).

The Company leases its currently-owned healthcare properties, and subleases its currently-leased healthcare properties, on a triple-net basis, meaning that the lessee (i.e., the third-party operator of the property) is obligated under the lease or sublease, as applicable, for all costs of operating the property , including insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable. These leases are generally long-term in nature with renewal options and annual rent escalation clauses.

When used in this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise specifically stated or the context otherwise requires, the terms:

•

“Board” refers to the Board of Directors of AdCare with respect to the period prior to the Merger and to the Board of Directors of Regional Health with respect to the period after the Merger;

•

“common stock” refers to AdCare’s common stock with respect to the period prior to the Merger and to Regional Health’s common stock with respect to the period after the Merger; and

•

“Series A Preferred Stock” refers to AdCare’s 10.875% Series A Cumulative Redeemable Preferred Stock with respect to the period prior to the Merger and to Regional Health’s 10.875% Series A Cumulative Redeemable Preferred Stock with respect to the period after the Merger.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations for the periods presented have been included. Operating results for the three months ended March 31, 2018 and 2017 are not necessarily indicative of the results that may be expected for the fiscal year. The balance sheet at December 31, 2017 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

You should read the unaudited consolidated financial statements in this Quarterly Report together with the historical audited consolidated financial statements of the Company for the year ended December 31, 2017, included in the Annual Report. See

Part II, Item 8, Notes to Consolidated Financial Statements , Note 1 – Summary of Significant Accounting Policies included in the Company’s Annual Report, for a description of all significant accounting policies. During the three months ended March 31, 2018, there were no material changes to the Company’s policies, except as noted below in Recently Adopted Standards.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Allowances

Allowances. The Company assesses the collectability of its rent receivables, including straight-line rent receivables and working capital loans to tenants. The Company bases its assessment of the collectability of rent receivables and working capital loans to tenants on several factors, including payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, and current economic conditions. If the Company's evaluation of these factors indicates it is probable that the Company will be unable to receive the rent payments or payments on a working capital loan, the Company provides a reserve against the recognized straight-line rent receivable asset or working capital loan for the portion that we estimate may not be recovered. If the Company changes its assumptions or estimates regarding the collectability of future rent payments required by a lease or required from a working capital loan to a tenant, the Company may adjust its reserve to increase or reduce the rental revenue or interest revenue from working capital loans to tenants recognized in the period the Company makes such change in its assumptions or estimates.

As of March 31, 2018 and December 31, 2017, the Company allowed for approximately $2.0 million and $2.6 million, respectively, of gross patient care related receivables arising from its legacy operations. Allowances for patient care receivables are estimated based on an aged bucket method as well as additional analyses of remaining balances incorporating different payor types. Any changes in patient care receivable allowances are recognized as a component of discontinued operations. All uncollected patient care receivables were fully allowed at March 31, 2018 and December 31, 2017. Accounts receivable, net, totaled $0.6 million at March 31, 2018 and $0.9 million at December 31, 2017.

Pre-paid expenses and other

As of March 31, 2018 and December 31, 2017, the Company had $0.5 million and $0.3 million, respectively, in pre-paid expenses and other, primarily for directors’ and officers’ insurance and mortgage insurance premiums.

Self-Insurance

The Company has self-insured against professional and general liability claims since it discontinued its healthcare operations during 2014 and 2015 in connection with its transition from an owner and operator of healthcare properties to a healthcare property holding and leasing company (see Part II, Item 8, Notes to Consolidated Financial Statements , Note 15 – Commitments and Contingencies in the Annual Report for more information). The Company evaluates quarterly the adequacy of its self-insurance reserve based on a number of factors, including (i) the number of actions pending and the relief sought; (ii) analyses provided by defense counsel, medical experts or other information which comes to light during discovery; (iii) the legal fees and other expenses anticipated to be incurred in defending the actions; (iv) the status and likely success of any mediation or settlement discussions, including estimated settlement amounts and legal fees and other expenses anticipated to be incurred in such settlement, as applicable; and (v) the venues in which the actions have been filed or will be adjudicated. The Company believes that most of the professional and general liability actions are defensible and intends to defend them through final judgment unless settlement is more advantageous to the Company. Accordingly, the self-insurance reserve reflects the Company's estimate of settlement amounts for the pending actions, if applicable, and legal costs of settling or litigating the pending actions, as applicable. Because the self-insurance reserve is based on estimates, the amount of the self-insurance reserve may not be sufficient to cover the settlement amounts actually incurred in settling the pending actions, or the legal costs actually incurred in settling or litigating the pending actions. See Note 8 – Accrued Expenses and Other .

Reclassifications

Certain reclassifications have been made to the 2017 financial information to conform to the 2018 presentation with no effect on the Company's consolidated financial position or results of operations. These reclassifications did not affect total assets, total liabilities, or stockholders' equity. Reclassifications were made to the consolidated statements of operations for the three months ended March 31, 2017 to conform the presentation of management fee revenues and its related expense, previously reported as general and administrative expense. Reclassifications were made to the consolidated statements of cash flows for

the three months ended March 31, 2017 to include restri cted cash in cash and restricted cash at the beginning-of-period and end-of-period totals.

Recently Adopted Standards

On January 1, 2018 the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers , as codified in Accounting Standards Codification (“ ASC”) 606, which requires a company to recognize revenue when the company transfers control of promised goods and services to a customer. Revenue is recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. The new revenue standard does not apply to rental revenues, which are the Company’s primary source of revenue. A company is also required to disclose sufficient quantitative and qualitative information for financial statement users to understand the nature, amount, timing and uncertainty of revenue and associated cash flows arising from contracts with customers. The Financial Accounting Standards Board (“FASB”) has issued several amendments to the standards, which are intended to promote a more consistent interpretation and application of the principals outlined in the standard. The new revenue standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods.

The Company has one contract to manage (the “Management Contract”) two skilled nursing facilities and one independent living facility for a third-party, with payment for each month of service received in full on a monthly basis.

Companies are permitted to adopt the standard using a retrospective transition method (i.e., restate all prior periods presented) or a cumulative effect method (i.e., recognize the cumulative effect of initially applying the guidance at the date of initial application with no restatement of prior periods). However, both methods allow companies to elect certain practical expedients on transition that will help to simplify how a company restates its contracts. The Company adopted the standard using the cumulative effect method. As a result of the adoption of this guidance, for the three months ended March 31, 2017, the Company reclassified expenses related to the Management Contract from General and administrative expense to Cost of management fees on the consolidated statements of operations.

In August 2016, the FASB issued ASU 2016-1 5, Classification of Certain Cash Receipts and Cash Payments , guidance which clarifies the treatment of several cash flow categories. In addition, the guidance clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted the guidance for the three month period ending March 31, 2018 with an effective date of January 1, 2018. The adoption of ASU 2016-15 did not have a material effect on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18 , Restricted Cash , that requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash. Therefore, amounts generally described as restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted using a retrospective transition method to each period presented. The Company adopted the guidance with an effective date of January 1, 2018. Given this change, transfers between cash and restricted cash are no longer reported as cash flow activities on the statement of cash flows and hence reclassifications were made to the consolidated statements of cash flows for the three months ended March 31, 2017 to include restricted cash in cash and restricted cash at the beginning-of-period and end-of-period totals.

Recent Significant Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02 , Leases , which introduces a lessee model that brings most leases on the balance sheet and, among other changes, eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification. The FASB also issued an Exposure Draft on January 5, 2018 proposing to amend ASU 2016-02 , which would provide lessors with a practical expedient, by class of underlying assets, to not separate non-lease components from the related lease components and, instead, to account for those components as a single lease component, if certain criteria are met. ASU 2016-02 and the related Exposure Draft are not effective for the Company until January 1, 2019, with early adoption permitted. The Company is evaluating this guidance and the impact to the Company, as both lessor and lessee, on its consolidated financial condition, results of operations and cash flows.

See Part II, Item 8, Notes to Consolidated Financial Statements , Note 1 – Summary of Significant Accounting Policies included in the Annual Report, for a description of the other accounting pronouncements the Company is currently evaluating.

NOTE 2.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income or loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the respective period. Diluted earnings per share is similar to basic earnings per share except: (i) net income or loss is adjusted by the impact of the assumed conversion of convertible debt into shares of common stock; and (ii) the weighted-average number of shares of common stock outstanding includes potentially dilutive securities (such as options, warrants, non-vested common stock and additional shares of common stock issuable under convertible debt outstanding during the period) when such securities are not anti-dilutive. Potentially dilutive securities from options, warrants and unvested restricted shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options and warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities. Potentially dilutive securities from convertible debt are calculated based on the assumed issuance at the beginning of the period, as well as any adjustment to income that would result from their assumed issuance. For the three months ended March 31, 2018 and 2017, approximately 1.2 million and 2.8 million shares, respectively, of potentially dilutive securities were excluded from the diluted loss per share calculation because including them would have been anti-dilutive for such periods.

The following tables provide a reconciliation of net loss for continuing and discontinued operations and the number of shares of common stock used in the computation of both basic and diluted earnings per share:

	Three Months Ended March 31,
(Amounts in 000’s, except per share data)	2018			2017
Numerator:
Loss from continuing operations	$	(2,473	)	$	(539	)
Preferred stock dividends - declared		—			(1,878	)
Preferred stock dividends - undeclared ⁽¹⁾		(1,912	)		—
Basic and diluted loss from continuing operations		(4,385	)		(2,417	)
Loss from discontinued operations, net of tax		(55	)		(413	)
Net loss attributable to Regional Health Properties, Inc. common stockholders	$	(4,440	)	$	(2,830	)
Denominator:
Basic - weighted average shares		19,697			19,825
Diluted - adjusted weighted average shares ⁽²⁾		19,697			19,825
Basic and diluted loss per share:
Loss from continuing operations attributable to Regional Health	$	(0.23	)	$	(0.12	)
Loss from discontinued operations		0.00			(0.02	)
Loss attributable to Regional Health Properties, Inc. common stockholders	$	(0.23	)	$	(0.14	)

(1)	The Board suspended dividend payments with respect to the Series A Preferred Stock for the fourth quarter 2017 and first quarter 2018.

(2)	Securities outstanding that were excluded from the computation, because they would have been anti-dilutive were as follows:

	March 31,
(Share amounts in 000’s)	2018		2017
Stock options		181		333
Warrants - employee		582		1,450
Warrants - non employee		437		437
Shares issuable upon conversion of convertible debt		—		588
Total anti-dilutive securities		1,200		2,808

NOTE 3.

LIQUIDITY

The Company plans to undertake measures to grow its operations and to streamline its cost infrastructure by: (i) increasing future lease revenue through acquisitions and investments in existing properties; (ii) modifying the terms of existing leases; (iii) refinancing or repaying debt to reduce interest costs and mandatory principal repayments; and (iv) reducing general and administrative expenses.

Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing. At March 31, 2018, the Company had $3.5 million in unrestricted cash. During the three months ended March 31, 2018, the Company generated positive cash flow from continuing operations of $0.7 million and anticipates continued positive cash flow from operations in the future. The Board suspended dividend payments with respect to the Series A Preferred Stock for the fourth quarter 2017 and the first quarter 2018 dividend periods. The Board plans to revisit the dividend payment policy with respect to the Series A Preferred Stock in the second quarter of 2018. The Board believes that the dividend suspension will provide the Company with additional funds to meet its ongoing liquidity needs.

As of March 31, 2018, the Company had total current liabilities of $26.2 million and total current assets of $6.2 million, resulting in a working capital deficit of approximately $20.0 million. Included in current liabilities at March 31, 2018 is the $17.7 million current portion of its $78.2 million in indebtedness. The current portion of such indebtedness is comprised of: (i) $15.4 million of long term debt classified as current due to concerns regarding the Company’s ability to comply with the terms of a forbearance agreement detailed below in this note, which may cause acceleration of the maturity of such debt, (ii) $1.3 million mortgage indebtedness under the Company’s senior guaranteed debt; and (iii) other debt of approximately $1.0 million, which includes bond and other mortgage indebtedness. The Company anticipates net principal repayments of approximately $2.3 million (excluding the acceleration of the $15.4 million debt described above), during the next twelve-month period, which includes approximately $0.6 million of payments on other non-routine debt, $1.6 million of routine debt service amortization, and a $0.1 million payment of other debt. Management has obtained an additional extension of the maturity date of the Company’s credit facility with Housing & Healthcare Funding, LLC (the “Quail Creek Credit Facility”), that is secured by a first mortgage on the real property and improvements constituting the Nursing & Rehabilitation Center located in Oklahoma City, Oklahoma, to April 30, 2019. Management plans to refinance the Quail Creek Credit Facility within the next twelve months, although there is no assurance that the Company will be able to do so on terms that are favorable to the Company or at all.

On February 15, 2018, the Company entered into a debt refinancing (“Pinecone Credit Facility”) with Pinecone Realty Partners II, LLC (“Pinecone”), with an aggregate principal amount of $16.25 million, which refinanced existing mortgage debt in an aggregate amount of $8.7 million on three skilled nursing properties, and provided additional surplus cash flow of $6.3 million which is available to fund general corporate needs (see Note 9 – Notes Payable and Other Debt ). The surplus cash flow from the Pinecone Credit Facility was used to fund $2.4 million of self-insurance reserves for professional and general liability claims with respect to 25 professional and general liability actions, and to fund repayment of $1.5 million in convertible debt. The remaining $2.4 million in surplus cash proceeds from the Pinecone Credit Facility refinancing will be used for general corporate purposes.

Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the entity’s current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the entity to meet its obligations as they come due arising within one year of the date of the issuance of the Company’s consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern. The Company’s consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

On May 10, 2018, management was notified by Pinecone that the Company was in default on a number of administrative items as outlined in the Pinecone Credit Facility. Management also informed Pinecone that the Company had failed to meet one of its financial covenant obligations, the minimum fixed charge coverage ratio, as outlined in the loan agreement to the Pinecone Credit Facility for the period ended March 31, 2018.

execution of the Forbearance Agreement, to July 20, 2018, during which time, the Company must comply with all benchmarks as outlined in the Forbearance Agreement.

Management believes that the overall plan of correction as outlined in the Forbearance Agreement is achievable, however many of the benchmarks, as articulated in the Forbearance Agreement, fall outside of the control of management, and if the Company is unable to satisfy the requirements as outlined, then one of the remedies available to Pinecone is that the entire principal balance of the Pinecone Credit Facility, plus interest and fees, will become immediately due and payable, indicating that substantial doubt exists about whether or not the Company will be able to continue as a going concern within one year after the date that the consolidated financial statements are issued.

In applying the accounting guidance, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company’s obligations due over the next twelve months in addition to also considering the likelihood that the Company will comply with the requisites as outlined in the Forbearance Agreement and the implications thereof, as well as the Company’s recurring costs of operating its business.

The Company plans to continue to undertake measures to refinance certain loans and to streamline its cost infrastructure. But due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and the Company’s ability to satisfy its financial obligations that may arise over the applicable one-year period, the Company is unable to conclude that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these consolidated financial statements within the parameters set forth in the accounting guidance.

NOTE 4.

CASH AND RESTRICTED CASH

The following presents the Company's cash and restricted cash:

(Amounts in 000’s)	March 31, 2018		December 31, 2017
Cash	$	3,524	$	1,818

Restricted cash:
Cash collateral		87		63
Replacement reserves		242		260
Escrow deposits		504	637
Total current portion		833		960
Restricted cash for debt obligations		405		405
HUD and other replacement reserves		2,235		2,176
Total noncurrent portion		2,640		2,581
Total restricted cash		3,473		3,541

Total cash and restricted cash	$	6,997	$	5,359

Cash collateral —In securing mortgage financing from certain lending institutions, the Company and certain of its wholly-owned subsidiaries are required to deposit cash to be held as collateral in accordance with the terms of such loan agreements.

Replacement reserves —Cash reserves set aside for non-critical building repairs to be completed within the next 12 months, pursuant to loan agreements.

Escrow deposits —In connection with financing secured through the Company’s lenders, several wholly-owned subsidiaries of the Company are required to make monthly escrow deposits for taxes and insurance.

Restricted cash for othe r debt obligations —In compliance with certain financing and insurance agreements, the Company and certain wholly-owned subsidiaries of the Company are required to deposit cash held as collateral by the lender or in escrow with certain designated financial institutions.

HUD and other replacement reserves —The regulatory agreements entered into in connection with the financing secured through the U.S. Department of Housing and Urban Development (“HUD”) require monthly escrow deposits for replacement and improvement of the HUD project assets.

NOTE 5.

PROPERTY AND EQUIPMENT

The following table sets forth the Company’s property and equipment:

(Amounts in 000’s)	Estimated Useful Lives (Years)		March 31, 2018			December 31, 2017
Buildings and improvements	5-40		$	89,684		$	89,665
Equipment and computer related	2-10			10,893			10,893
Land		—		4,268			4,248
Construction in process		—		173			49
				105,018			104,855
Less: accumulated depreciation and amortization				(24,621	)		(23,642	)
Property and equipment, net			$	80,397		$	81,213

The following table summarizes total depreciation and amortization expense for the three months ended March 31, 2018 and 2017:

	Three Months Ended March 31,
(Amounts in 000’s)	2018		2017
Depreciation	$	808	$	797
Amortization		413		338
Total depreciation and amortization expense	$	1,221	$	1,135

NOTE 6.

INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following:

(Amounts in 000’s)	Bed licenses (included in property and equipment) ^(a)			Bed Licenses - Separable		Lease Rights			Total
Balances, December 31, 2017
Gross	$	22,811		$	2,471	$	7,181		$	32,463
Accumulated amortization		(4,166	)		—		(4,994	)		(9,160	)
Net carrying amount	$	18,645		$	2,471	$	2,187		$	23,303
Amortization expense		(171	)		—		(242	)		(413	)
Balances, March 31, 2018
Gross		22,811			2,471		7,181			32,463
Accumulated amortization		(4,337	)		—		(5,236	)		(9,573	)
Net carrying amount	$	18,474		$	2,471	$	1,945		$	22,890

(a)

Non-separable bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 5 – Property and Equipment ).

The following table summarizes amortization expense for the three months ended March 31, 2018 and 2017:

	Three Months Ended March 31,
(Amounts in 000’s)	2018		2017
Bed licenses	$	171	$	171
Lease rights		242		167
Total amortization expense	$	413	$	338

Expected amortization expense for all definite-lived intangibles for each of the years ended December 31 is as follows:

(Amounts in 000’s)	Bed Licenses		Lease Rights
2018 ^(a)	$	512	$	525
2019		683		667
2020		683		482
2021		683		203
2022		683		68
Thereafter		15,230		-
Total expected amortization expense	$	18,474	$	1,945

(a)	Estimated amortization expense for the year ending December 31, 2018, includes only amortization to be recorded after March 31, 2018.

The following table summarizes the carrying amount of goodwill:

(Amounts in 000’s)	March 31, 2018			December 31, 2017
Goodwill	$	2,945		$	2,945
Accumulated impairment losses		(840	)		(840	)
Net carrying amount	$	2,105		$	2,105

The Company does not amortize indefinite-lived intangibles, which consist of separable bed licenses and goodwill.

NOTE 7.

LEASES

Operating Leases

The Company leases a total of eleven skilled nursing facilities from unaffiliated owners under non-cancelable leases, all of which have rent escalation clauses and provisions requiring payment of real estate taxes, insurance and maintenance costs by the lessee. Each of the skilled nursing facilities that are leased by the Company are subleased to and operated by third-party tenants. The Company also leases certain office space located in Suwanee, Georgia and Atlanta, Georgia. The Atlanta office space is subleased to a third-party tenant.

As of March 31, 2018, the Company is in compliance with all operating lease financial covenants.

Future Minimum Lease Payments

Future minimum lease payments for each of the next five years ending December 31, are as follows:

	(Amounts in 000’s)
2018 ^(a)	$	6,262
2019		8,492
2020		8,671
2021		8,830
2022		9,026
Thereafter		37,430
Total	$	78,711

^(a)	Estimated minimum lease payments for the year ending December 31, 2018 include only payments to be paid after March 31, 2018.

Leased and Subleased Facilities to Third-Party Operators

The Company leases or subleases 27 facilities (16 owned by the Company and 11 leased to the Company) to third-party tenants on a triple net basis, meaning that the lessee (i.e., the third-party tenant of the property) is obligated under the lease or sublease, as applicable, for all costs of operating the property, including insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable.

Arkansas Leases and Facilities . Until February 3, 2016, the Company subleased nine facilities located in Arkansas (the “Arkansas Facilities”) to affiliates of Aria Health Group, LLC (“Aria”) pursuant to separate sublease agreements (the “Aria Subleases”). Effective February 3, 2016, the Company terminated each Aria Sublease due to the applicable Aria affiliate’s failure to pay rent pursuant to the terms of such sublease. From April 1, 2016 to October 6, 2016, the Company leased the Arkansas Facilities to Skyline Healthcare LLC (“Skyline”), pursuant to a Master Lease Agreement, dated February 5, 2016 (the “Skyline Lease”). The term of the Skyline Lease commenced on April 1, 2016. In connection with the Skyline Lease, the Company entered into an Option Agreement, dated February 5, 2016, with Joseph Schwartz, the manager of Skyline, pursuant to which Mr. Schwartz, or an entity designated by Mr. Schwartz (the “Purchaser”), had an exclusive and irrevocable option to purchase the Arkansas Facilities at a purchase price of $55.0 million, consisting of cash consideration in the amount of $52.0 million and a promissory note with a principal amount of $3.0 million and a maturity date of March 31, 2022 (the “Skyline Note”). The Company completed the sale of the Arkansas Facilities to the Purchaser on October 6, 2016 in accordance with the terms of the Option Agreement. The Skyline Note is guaranteed by Joseph Schwartz and Roselyn Schwartz (collectively, the “Guarantors”), pursuant to a Guaranty Agreement, dated September 30, 2016 (the “Guaranty”), executed by the Guarantors in favor of the Company (see Part II, Item 8, Notes to Consolidated Financial Statements Note 10 – Acquisitions and Dispositions included in the Annual Report).

In connection with the closing of the sale of the Arkansas Facilities, the Company entered into a Subordination and Standstill Agreement, dated September 26, 2016 (the “Subordination Agreement”), with CIBC (formerly the PrivateBank and Trust Company), as agent for the lenders specified therein (collectively, the “Lenders”). Pursuant to the Subordination Agreement, the Company agreed to subordinate its claims and rights to receive payment under the Skyline Note or any document which may evidence or secure the indebtedness evidenced by such note, other than the Guaranty (collectively, the “Subordinated Debt”), to the claims and rights of the Lenders to receive payment under certain revolving loans, with an initial aggregate principal amount of $6.0 million, and certain term loans, with an aggregate principal amount of $45.6 million (collectively, the “Loans”), each extended by certain of the Lenders to affiliates of Skyline (collectively, the “Skyline Borrowers”). Pursuant to the Subordination Agreement, the Company may not accept payment of the Subordinated Debt, or take any action to collect

such payment, if: (i) the Company has received notice from the Lenders that the Sky line Borrowers have failed to meet a specified financial covenant with respect to the Loans; or (ii) a default has occurred or is continuing with respect to the Loans. Pursuant to the Guaranty, the Guarantors have agreed to pay the outstanding principal am ount of the Skyline Note, together with all accrued and unpaid interest: (x) on the date on which the Skyline Borrowers or an affiliate thereof repays or refinances any of the Loans; (y) on the date on which the Skyline Borrowers or its affiliates sells an y of the Arkansas Facilities which the Skyline Borrowers or its affiliates purchased with proceeds from the Loans; or (z) upon written notice from the Company to the Guarantors any time on or after the two year anniversary of the Skyline Note. As of the da te of filing, the Company has not received written notice from the Lenders regarding conditions prohibiting repayment of the Skyline Note.

On April 24, 2018, Skyline entered into a management contract with a third-party to manage the Arkansas Facilities. The Company is negotiating an arrangement with such third-party, pursuant to which the Company would: (i) accept a cash payment from such third-party, within the next few months, in full satisfaction of the Skyline Note at a discount from the full amount outstanding thereunder, and (ii) agree to release the Guarantors from their obligations under the Guaranty. The Company estimates the recoverable amount of the Skyline Note to be in the range of $0.5 million to $2.5 million. Consequently, during the three months ended March 31, 2018, the Company recorded an allowance of $0.5 million on the Skyline Note. On March 31, 2018, the net balance of the Skyline Note was $2.5 million. In the course of on-going negotiations, as additional facts are known, additional losses on the Skyline Note may be incurred.

Beacon. On August 1, 2015, the Company entered into a lease inducement fee agreement with certain affiliates (collectively, the "Beacon Affiliates") of Beacon Health Management, LLC (“Beacon”), pursuant to which the Company paid a fee of $0.6 million as a lease inducement for certain Beacon Affiliates (collectively “Beacon Sublessee”) to enter into sublease agreements and to commence such subleases and transfer operations thereunder (the “Beacon Lease Inducement”). As of March 31, 2018 the balance of the Beacon Lease Inducement was approximately $0.5 million. On April 24, 2018, five Beacon affiliates (the “Ohio Beacon Affiliates”) informed the Company in writing that they would no longer be operating five (four owned and one leased by the Company) of the Company’s facilities located in Ohio (the “Ohio Beacon Facilities”) and that they would surrender operation of such facilities to the Company on June 30, 2018. Consequently, the Company is recognizing revenue on a cash basis with respect to the Ohio Beacon Facilities and has expensed approximately $0.7 million straight-line rent asset and recorded an allowance of $0.5 million against the Beacon Lease Inducement and $0.3 million allowance for other receivables (see Note 15- Subsequent Events) .

Peach Health. On June 18, 2016, the Company entered into a master sublease agreement (the “Peach Health Sublease”) with affiliates (collectively, “Peach Health Sublessee”) of Peach Health Group, LLC (“Peach Health”), providing that Peach Health Sublessee would take possession of and operate the three facilities located in Georgia (the “Peach Facilities”) as subtenant. The Peach Facilities are comprised of: (i) an 85-bed skilled nursing facility located in Tybee Island, Georgia (the “Oceanside Facility”); (ii) a 50-bed skilled nursing facility located in Tybee Island, Georgia (the “Savannah Beach Facility”); and (iii) a 131-bed skilled nursing facility located in Jeffersonville, Georgia (the “Jeffersonville Facility”). The Jeffersonville Facility and the Oceanside Facility were previously decertified by the U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services (“CMS”) in February and May 2016, respectively, for deficiencies related to the operations and maintenance of the facility while operated by the previous sublessee. The Jeffersonville Facility and the Oceanside Facility (the “Peach Recertified Facilities”) were recertified by CMS as of December 20, 2016 and February 7, 2017, respectively, which are the rent commencement dates for such facilities. The lease provided for a period of de minimis rent and base rent discounted by 50%.

On March 30, 2018 the Company and Peach Health Sublessee entered into an amendment to the Peach Health Sublease. The amendment provides for: (i) additional four and six month periods of base rent of $37,080 and $54,590, discounted by 50%, which rate continued through March 1, 2018, for the Oceanside Facility and the Jeffersonville Facility, respectively and (ii) beginning April 1, 2018 provides for additional rent payment amounts of $2,500 and $3,400 per month for the Oceanside Facility and the Jeffersonville Facility, respectively. The additional rent for each of the Peach Facilities will escalate at a rate of 3% each year on April 1 ^st of each remaining year of the term, and any extension thereof.

In connection with the Peach Health Sublease, the Company extended a line of credit to Peach Health Sublessee for up to $1.0 million for operations at the Peach Facilities (the “Peach Line”), with interest accruing on the unpaid balance under the Peach Line at a starting interest rate of 13.5%, which increases by 1% per annum. The entire principal amount due under the Peach Line, together with all accrued and unpaid interest thereunder, was due one year from the date of the first disbursement. The Peach Line was secured by a first priority security interest in Peach Health Sublessee’s assets and accounts receivable. On April 6, 2017, the Company modified certain terms of the Peach Line in connection with Peach Health Sublessee securing a $2.5 million revolving working capital loan from a third party lender (the “Peach Working Capital Facility”), subsequently capped at $1.75 million, which matures April 5, 2020. The Peach Working Capital Facility is secured by the eligible accounts receivable, and all the collections on the eligible accounts receivable are remitted to a lockbox controlled by the lender. The modifications of the Peach Line include (as so amended, the “Peach Note”): (i) reducing the loan balance to $0.8 million and restricting

further borrowings; (ii) extending the maturity of the loan to October 1, 2020 and adding a six month extension option by Peach Health Sublesse e, assuming certain conditions precedent are met at the time of the exercise of the option; (iii) increasing the interest rate from 13.5% per annum by 1% per annum; and (iv) establishing a four year amortization schedule. Payment of principal and interest under the Peach Note is governed by certain financial covenants limiting distributions under the Peach Working Capital Facility. Furthermore, the Company guaranteed Peach Health Sublessee’s borrowings under the Peach Working Capital Facility subject to cer tain burn-off provisions (i.e., the Company’s obligations under such guaranty cease after the later of 18 months or achievement of a certain financial ratio by Peach Health Sublessee). The Company is obligated to pay the outstanding balance on the Peach Wo rking Capital Facility (after application of all eligible accounts receivable collections by the lender) if Peach Health Sublessee fails to comply with the Peach Working Capital Facility obligations and covenants. Fair value of the liability using the expe cted present value approach is immaterial.

At March 31, 2018, there was approximately $1.0 million outstanding on the Peach Note.

Future minimum lease receivables from the Company’s facilities leased and subleased to third party tenants for each of the next five years ending December 31 are as follows:

	(Amounts in 000's) (a)
2018 ^(a)	$	15,248
2019		19,651
2020		20,112
2021		20,619
2022		21,140
Thereafter		103,721
Total	$	200,491

^(a)	Estimated minimum lease receivables for the year ending December 31, 2018, include only payments to be received after March 31, 2018.

For further details regarding the Company’s leased and subleased facilities to third-party operators, see Note 15 – Subsequent Events and Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 - Leases and Note 10 – Acquisitions and Dispositions included in the Annual Report.

NOTE 8.

ACCRUED EXPENSES AND OTHER

Accrued expenses and other consist of the following:

(Amounts in 000’s)	March 31, 2018		December 31, 2017
Accrued employee benefits and payroll-related	$	281	$	290
Real estate and other taxes		676		423
Self-insured reserve ⁽¹⁾		2,436		5,077
Accrued interest		333		260
Other accrued expenses		797		972
Total accrued expenses and other	$	4,523	$	7,022

(1)

The Company self-insures against professional and general liability claims and uses a third party administrator and outside counsel to manage and defend the claims. Additionally, for the period ended March 31, 2018 and the year ended December 31, 2017, $0.1 million and $0.2 million is accrued in “Other liabilities” in the Company’s consolidated balance sheets for amounts due in excess of twelve months, respectively (see Note 13 - Commitments and Contingencies) .

NOTE 9.

NOTES PAYABLE AND OTHER DEBT

See Part II, Item 8, Notes to Consolidated Financial Statements, Note 9 – Notes Payable and Other Debt included in the Annual Report for a detailed description of all the Company’s debt facilities.

Notes payable and other debt consists of the following:

(Amounts in 000’s)	March 31, 2018			December 31, 2017
Senior debt—guaranteed by HUD	$	33,479		$	33,685
Senior debt—guaranteed by USDA ^(a)		14,040			20,320
Senior debt—guaranteed by SBA ^(b)		683			2,210
Senior debt—bonds		7,055			7,055
Senior debt—other mortgage indebtedness		25,044			9,486
Other debt		1,098			1,050
Convertible debt		—			1,500
Subtotal		81,399			75,306
Deferred financing costs		(3,056	)		(2,027	)
Unamortized discount on bonds		(174	)		(177	)
Total debt		78,169			73,102
Less: current portion of debt		17,714			8,090
Notes payable and other debt, net of current portion	$	60,455		$	65,012

^(a)	U.S. Department of Agriculture (“USDA”)

^(b)	U.S. Small Business Administration (“SBA”)

The following is a detailed listing of the debt facilities that comprise each of the above categories:

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			March 31, 2018		December 31, 2017
Senior debt - guaranteed by HUD ^(b)
The Pavilion Care Center	Red Mortgage	12/01/2027	Fixed	4.16	%	$	1,302	$	1,329
Hearth and Care of Greenfield	Red Mortgage	08/01/2038	Fixed	4.20	%		2,111		2,127
Woodland Manor	Midland State Bank	10/01/2044	Fixed	3.75	%		5,305		5,334
Glenvue	Midland State Bank	10/01/2044	Fixed	3.75	%		8,235		8,283
Autumn Breeze	KeyBank	01/01/2045	Fixed	3.65	%		7,160		7,199
Georgetown	Midland State Bank	10/01/2046	Fixed	2.98	%		3,624		3,644
Sumter Valley	KeyBank	01/01/2047	Fixed	3.70	%		5,742		5,769
Total						$	33,479	$	33,685
Senior debt - guaranteed by USDA ^(c)
Attalla ^(e)	Metro City	09/30/2035	Prime + 1.50%	5.50	%	$	—	$	6,169
Coosa	Metro City	09/30/2035	Prime + 1.50%	5.50	%		5,517		5,562
Mountain Trace	Community B&T	01/24/2036	Prime + 1.75%	5.75	%		4,227		4,260
Southland	Bank of Atlanta	07/27/2036	Prime + 1.50%	6.00	%		4,296		4,329
Total						$	14,040	$	20,320
Senior debt - guaranteed by SBA ^(d)
College Park ^(e)	CDC	10/01/2031	Fixed	2.81	%	$	—	$	1,523
Southland	Bank of Atlanta	07/27/2036	Prime + 2.25%	5.75	%		683		687
Total						$	683	$	2,210

^(a)	Represents cash interest rates as of March 31, 2018 as adjusted for applicable interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which range from 0.08% to 0.53% per annum.

^(b)

For the seven skilled nursing facilities, the Company has term loans insured 100% by HUD with financial institutions. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud

or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain ev ents of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into each loan, the Company entered into a healthc are regulatory agreement and a promissory note, each containing customary terms and conditions.

^(c)

For the four skilled nursing facilities, the Company has term loans insured 70% to 80% by the USDA with financial institutions. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 3% to 4% through 2018, which declines 1% each year, capped at 1% for the remainder of the first 10 years of the term and 0% thereafter.

^(d)	For each of the two facilities, the Company has a term loan with a financial institution, which is insured 75% by the SBA.

^(e)	On February 15, 2018, the Company repaid these loans with proceeds from the Pinecone Credit Facility (described below, see “ Senior debt - other mortgage indebtedness” in this Note below) .

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			March 31, 2018		December 31, 2017
Senior debt - bonds
Eaglewood Bonds Series A	City of Springfield, Ohio	05/01/2042	Fixed	7.65	%	$	6,610	$	6,610
Eaglewood Bonds Series B	City of Springfield, Ohio	05/01/2021	Fixed	8.50	%		445		445
Total						$	7,055	$	7,055

^(a)	Represents cash interest rates as of March 31, 2018. The rates exclude amortization of deferred financing of approximately 0.26% per annum.

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate (a)			March 31, 2018		December 31, 2017
Senior debt - other mortgage indebtedness
Quail Creek ^(c)	Congressional Bank	04/30/2019	LIBOR + 4.75%	5.75	%	$	4,290	$	4,314
Northwest ^(d)	First Commercial	07/31/2020	Prime	5.00	%		—		1,122
Meadowood	Exchange Bank of Alabama	05/01/2022	Fixed	4.50	%		4,016		4,050
College Park	Pinecone ^(b)	08/15/2020	Fixed	12.50	%		2,573		—
Northwest	Pinecone ^(b)	08/15/2020	Fixed	12.50	%		2,059		—
Attalla	Pinecone ^(b)	08/15/2020	Fixed	12.50	%		8,499		—
Adcare Property Holdings	Pinecone ^(b)	08/15/2020	Fixed	12.50	%		3,607		—
Total						$	25,044	$	9,486

^(a)	Represents cash interest rates as of March 31, 2018 as adjusted for applicable interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which range from approximately 0.3% to 2.56% per annum and excludes the 3% finance fee described below.

^(b)	On February 15, 2018, the Company entered into the Pinecone Credit Facility with Pinecone. The amounts above include a combined 3% finance fee of approximately $0.5 million due upon maturity (for further information (see “ New Financing” below in this Note).

^(c)	On April 30, 2018, the Company extended the maturity date of the Quail Creek Credit Facility to April 30, 2019.

^(d)	On February 15, 2018, the Company repaid this loan with proceeds from the Pinecone Credit Facility described below, see New Financing below.

(Amounts in 000’s)
Lender	Maturity	Interest Rate			March 31, 2018		December 31, 2017
Other debt
First Insurance Funding	03/01/2019	Fixed	4.24	%	$	194	$	20
Key Bank	08/02/2019	Fixed	0.00	%		495		495
McBride Note ^(a)	09/30/2019	Fixed	4.00	%		227		264
Pharmacy Care of Arkansas	02/08/2018	Fixed	2.00	%		—		42
South Carolina Department of Health & Human Services ^(b)	02/24/2019	Fixed	5.75	%		182		229
Total					$	1,098	$	1,050

^(a)	The Company executed an unsecured promissory note in favor of William McBride III, the Company’s former Chairman and Chief Executive Officer, pursuant to a settlement agreement dated September 26, 2017, between Mr. McBride and the Company.

^(b)

On February 21, 2017, the South Carolina Department of Health and Human Services (“SCHHS”) issued fiscal year 2013 Medicaid audit reports for two facilities operated by the Company during 2013. In its fiscal year 2013 Medicaid audit reports, SCHHS determined that the Company owed an aggregate $0.4 million related to patient-care related payments made by SCHHS during 2013. Repayment of the $0.4 million began on March 24, 2017 in the form of a two-year note bearing interest of 5.75% per annum.

(Amounts in 000’s)
Facility	Maturity	Interest Rate			March 31, 2018		December 31, 2017
Convertible debt
Issued July 2012 ^(a)	04/30/2018	Fixed	14.00	%	$	—	$	1,500
Total					$	—	$	1,500

(a)	On February 15, 2018, the Company repaid the outstanding principal balance to Cantone Asset Management, LLC, together with accrued interest thereon with proceeds from the Pinecone Credit Facility (described above).

New Financing

On February 15, 2018 (the “Closing Date”), the Company entered into the Pinecone Credit Facility with Pinecone. The Company borrowed an aggregate principal amount of $16.25 million. The Pinecone Credit Facility refinanced existing mortgage debt in an aggregate amount of $8.7 million on three skilled nursing properties, as shown in the table below (the “Facilities”).

Facility	Prior Lender	Prior Balance		Refinanced Balance*
Attalla	Metro City	$	6,137	$	8,250
College Park	CDC		1,492		2,500
Northwest	First Commercial		1,115		2,000
	Sub Total	$	8,744	$	12,750
AdCare Property Holdings			—		3,500
	Total	$	8,744	$	16,250

*Excludes 3% finance fee due upon maturity

The maturity date of the Pinecone Credit Facility is August 15, 2020 and bears interest at a fixed rate equal to 10% per annum for the first three months after the Closing Date and at a fixed rate equal to 12.5% per annum thereafter, subject to adjustment upon an event of default and specified regulatory events. The Pinecone Credit Facility is secured by, among other things, first priority liens on the Facilities and all tangible and intangible assets of the borrowers owning the Facilities, including all rent payments received from the operators thereof. Beginning March 1, 2018, the first payment date, accrued and unpaid interest on the outstanding principal amount of the Pinecone Credit Facility is payable in consecutive monthly installments. The entire unpaid principal amount of the Pinecone Credit Facility is due on the maturity date, together with all accrued and unpaid interest and a finance fee equal to 3% of the original principal amount.

The Pinecone Credit Facility is subject to customary operating and financial covenants and regulatory conditions for each of the Facilities, which could result in additional mon thly interest charges during any non-compliance and cure period. The Pinecone Credit Facility is prepayable in full beginning on the date that is thirteen months after the Closing Date, subject to the payment of a specified finance fee and, with respect to any prepayment made between March 15, 2019 and September 15, 2019, a prepayment premium equal to 1% of the principal amount being repaid. A specified early termination fee is payable in the event any amount is prepaid (in whole or in part) or is accelerat ed on or before the first anniversary of the Closing Date.

The Pinecone Credit Facility and the related documentation provide for customary events of default. Upon the occurrence of certain events of default, Pinecone may declare the entire unpaid principal balance under the Pinecone Credit Facility, together with all accrued interest and other amounts payable, immediately due and payable.

On May 10, 2018, management was notified by Pinecone that the Company was in default on a number of administrative items as outlined in the Pinecone Credit Facility, consequently the fixed interest rate will be equal to 13.5% commencing May 18, 2018. For further information, see Note – 3 Liquidity and Note 15 – Subsequent Events.

Debt Covenant Compliance

As of March 31, 2018, the Company had approximately 23 credit related instruments outstanding that include various financial and administrative covenant requirements. Covenant requirements include, but are not limited to, fixed charge coverage ratios, debt service coverage ratios, minimum EBITDA or EBITDAR, and current ratios. Certain financial covenant requirements are based on consolidated financial measurements whereas others are based on measurements at the subsidiary level (i.e., facility, multiple facilities or a combination of subsidiaries). The subsidiary level requirements are as follows: (i) financial covenants measured against subsidiaries of the Company; and (ii) financial covenants measured against third-party operator performance. Some covenants are based on annual financial metric measurements whereas others are based on monthly and quarterly financial metric measurements. The Company routinely tracks and monitors its compliance with its covenant requirements.

The Company was not in compliance with various non-financial covenants and the combined fixed charge coverage ratio required under the Pinecone Credit Facility as of March 31, 2018. The Pinecone Credit Facility requires the Company maintain a combined fixed charge coverage ratio of 1.2, and the Company’s combined fixed charge coverage ratio was equal to 1.1 as of March 31, 2018. On May 18, 2018 the Company entered into the Forbearance Agreement, pursuant to which Pinecone granted a waiver with respect to such covenant violations. For further information see Note 3 – Liquidity and Note 15 – Subsequent Events.

Scheduled Maturities

The schedule below summarizes the scheduled gross maturities for the twelve months ended March 31 of the respective year:

For the twelve months ended March 31,	(Amounts in 000’s)
2019	$	2,330
2020		6,178
2021 ⁽¹⁾		18,425
2022		1,768
2023		5,135
Thereafter		47,563
Subtotal	$	81,399
Less: unamortized discounts		(174	)
Less: deferred financing costs, net		(3,056	)
Total notes and other debt	$	78,169

⁽¹⁾

The Pinecone Credit Facility matures on August 15, 2020.

NOTE 10.

DISCONTINUED OPERATIONS

For discontinued operations, cost of services, primarily accruals for professional and general liability claims and bad debt expense are classified in the activities below. For a historical listing and description of the Company’s discontinued entities, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 11 – Discontinued Operations included in the Annual Report.

The following table summarizes the activity of discontinued operations for the three months ended March 31, 2018 and 2017 :

	Three Months Ended March 31,
(Amounts in 000’s)	2018			2017
Cost of services	$	52		$	409
Interest expense, net		3			4
Net loss	$	(55	)	$	(413	)

NOTE 11.

COMMON AND PREFERRED STOCK

Common and Preferred Stock Repurchase Activity

In November 2016, the Board approved two share repurchase programs (collectively, the "November 2016 Repurchase Program"), pursuant to which management was authorized to repurchase up to 1.0 million shares of the common stock and 100,000 shares of the Series A Preferred Stock during a twelve-month period. Share repurchases under the November 2016 Repurchase Program could be made from time to time through open market transactions, block trades or privately negotiated transactions and were subject to market conditions, as well as corporate, regulatory and other considerations. The Company could suspend or continue the November 2016 Repurchase Program at any time and had no obligation to repurchase any amount of the common stock or the Series A Preferred Stock under such program. The November 2016 Repurchase Program was suspended in February 2017.

During the three months ended March 31, 2017, the Company repurchased 118,199 shares of the common stock pursuant to the November 2016 Repurchase Program for $0.2 million at an average price of $1.54 per share, exclusive of commissions and related fees, and made no repurchases during the three months ended March 31, 2018. During the three months ended March 31, 2018 and 2017, respectively, the Company made no repurchases of the Series A Preferred Stock.

Preferred Stock Offerings and Dividends

No dividends were declared or paid on the Series A Preferred Stock for the three months ended March 31, 2018. Dividends declared and paid on shares of the Series A Preferred Stock were $0.68 per share per quarter, or $1.9 million, for the three months ended March 31, 2017.

As of March 31, 2018, as a result of the suspension of the dividend payment on the Series A Preferred Stock for the fourth quarter 2017 and first quarter 2018, the Company has $3.8 million of undeclared preferred stock dividends in arrears, $1.9 million per quarter. Holders of the Series A Preferred Stock are entitled to receive, when and as declared by the Board out of funds of the Company legally available for the payment of distributions, cumulative preferential cash dividends at an annual rate equal to 10.875% of the $25.00 per share stated liquidation preference of the Series A Preferred Stock, which is equivalent to an annual rate of $2.72 per share. Dividends on the Series A Preferred Stock are payable quarterly in arrears, on March 31, June 30, September 30, and December 31, of each year, although the Board has suspended dividend payments for the fourth quarter 2017 and first quarter 2018 dividend periods. Under the terms of the Series A Preferred Stock, dividends on the Series A Preferred Stock shall continue to accrue and accumulate regardless of whether such dividends are declared by the Board. If the Company fails to pay cash dividends on the outstanding Series A Preferred Stock in full for any four consecutive or non-consecutive dividends periods, then (i) the annual dividend rate on the Series A Preferred Stock will be increased to 12.875%, commencing on the first day after the missed fourth quarterly payment and continuing until the second consecutive dividend payment date following such time as the Company has paid all accumulated and unpaid dividends on the Series A Preferred Stock in full in cash; and (ii) the holders of the Series A Preferred Stock will be entitled to vote, as a single class, for the election of two additional directors to serve on the Board.

As of March 31, 2018, the Company had 2,811,535 shares of the Series A Preferred Stock issued and outstanding.

Holders of the Series A Preferred Stock generally have no voting rights but have limited voting rights under certain circumstances. The Company may, at its option, redeem the Series A Preferred Stock, in whole or in part, by paying $25.00 per share, plus any accrued and unpaid dividends to the redemption date.

For historical information regarding the Series A Preferred Stock, the Company’s former “at-the-market” offering program and prior share repurchase programs, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 12 – Common and Preferred Stock included i n the Annual Report.

NOTE 12.

STOCK BASED COMPENSATION

For the three months ended March 31, 2018 and 2017 , the Company recognized stock-based compensation expense as follows:

	Three Months Ended March 31,
(Amounts in 000’s)	2018		2017
Employee compensation:
Restricted stock	$	3	$	118
Warrants		—		60
Total employee stock-based compensation expense	$	3	$	178
Non-employee compensation:
Board restricted stock	$	28	$	44
Board stock options		—		12
Total non-employee stock-based compensation expense	$	28	$	56
Total stock-based compensation expense	$	31	$	234

Stock Incentive Plan

The AdCare Health Systems, Inc. 2011 Stock Incentive Plan, as amended (the “2011 Stock Incentive Plan”), was assumed by Regional Health pursuant to the Merger. As a result of the Merger, all rights to acquire shares of AdCare common stock under any AdCare equity incentive compensation plan have been converted into rights to acquire Regional Health common stock pursuant to the terms of the equity incentive compensation plans and other related documents, if any. The 2011 Stock Incentive Plan expires March 28, 2021 and provides for a maximum of 2,027,393 shares of common stock to be issued. The 2011 Stock Incentive Plan permits the granting of incentive or nonqualified stock options and the granting of restricted stock. The plan is administered by the Compensation Committee of the Board (the “Compensation Committee”), pursuant to authority delegated to it by the Board. The Compensation Committee is responsible for determining the employees to whom awards will be made, the amounts of the awards, and the other terms and conditions of the awards. As of March 31, 2018, the number of securities remaining available for future issuance is 723,530.

In addition to the 2011 Stock Incentive Plan, the Company grants stock warrants to officers, directors, employees and certain consultants to the Company from time to time as determined by the Board and, when appropriate, the Compensation Committee.

For the three months ended March 31, 2018 and 2017 , there were no issuances of common stock options or warrants.

Common Stock Options

The following table summarizes the Company’s common stock option activity for the three months ended March 31, 2018:

	Number of Shares (000's)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000's)
Outstanding, December 31, 2017		181	$	3.98		6.4	$	—
Granted		—	$	—
Forfeited		—	$	—
Expired		—	$	—
Outstanding, March 31, 2018		181	$	3.98		6.1	$	—
Vested, March 31, 2018		181	$	3.98		6.1	$	—

The following table summarizes the common stock options outstanding and exercisable as of March 31, 2018:

	Stock Options Outstanding						Options Exercisable
Exercise Price	Number of Shares (000's)		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Vested, March 31, 2018		Weighted Average Exercise Price
$1.31 - $3.99		115		6.5	$	3.90		115	$	3.90
$4.00 - $4.30		66		5.5	$	4.12		66	$	4.12
Total		181		6.1	$	3.98		181	$	3.98

Common Stock Warrants

The following table summarizes the Company’s common stock warrant activity for the three months ended March 31, 2018:

	Number of Warrants (000's)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000's)
Outstanding, December 31, 2017		1,019	$	3.79		4.7	$	—
Granted		—	$	—
Forfeited		—	$	—
Expired		—	$	—
Outstanding, March 31, 2018		1,019	$	3.79		4.4	$	—
Vested, March 31, 2018		1,019	$	3.79		4.4	$	—

The following table summarizes the common stock warrants outstanding and exercisable as of March 31, 2018:

	Warrants Outstanding						Warrants Exercisable
Exercise Price	Number of Shares (000's)		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Vested at March 31, 2018		Weighted Average Exercise Price
$0 - $1.99		110		1.6	$	1.93		110	$	1.93
$2.00 - $2.99		110		1.6	$	2.57		110	$	2.57
$3.00 - $3.99		274		3.2	$	3.71		274	$	3.71
$4.00 - $4.99		502		6.3	$	4.42		502	$	4.42
$5.00 - $5.90		23		5.1	$	5.90		23	$	5.90
Total		1,019		4.4	$	3.79		1,019	$	3.79

Restricted Stock

The following table summarizes the Company’s restricted stock activity for the three months ended March 31, 2018:

	Number of Shares (000's)			Weighted Avg. Grant Date Fair Value
Unvested, December 31, 2017		152		$	1.83
Granted		—		$	—
Vested		(61	)	$	1.85
Forfeited		—		$	—
Unvested, March 31, 2018		91		$	1.81

For restricted stock unvested at March 31, 2018, $0.1 million in compensation expense will be recognized over the next 1.3 years.

NOTE 13.

COMMITMENTS AND CONTINGENCIES

Regulatory Matters

Laws and regulations governing federal Medicare and state Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from certain governmental programs. As of March 31, 2018, all of the Company’s facilities leased and subleased to third-party operators and managed for third-parties are certified by CMS and operational (see Note 7 - Leases ).

Legal Matters

The Company is party to various legal actions and administrative proceedings and is subject to various claims arising in the ordinary course of business, including claims that the services the Company provided during the time it operated skilled nursing facilities resulted in injury or death to the patients of the Company’s facilities and claims related to professional and general negligence, employment, staffing requirements and commercial matters. Although the Company intends to vigorously defend itself in these matters, there is no assurance that the outcomes of these matters will not have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company previously operated, and the Company’s tenants now operate, in an industry that is extremely regulated. As such, in the ordinary course of business, the Company’s tenants are continuously subject to state and federal regulatory scrutiny, supervision and control. Such regulatory scrutiny often includes inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine. In addition, we believe that there has been, and will continue to be, an increase in governmental investigations of long-term care providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Adverse determinations in legal proceedings or governmental investigations against or involving the Company, for the Company’s prior operations, or the Company’s tenants, whether currently asserted or arising in the future, could have a material adverse effect on the Company’s business, results of operations and financial condition.

Professional and General Liability Claims . As of March 31, 2018, the Company is a defendant in 34 professional and general liability actions commenced on behalf of former patients. These actions generally seek unspecified compensatory and punitive damages for former patients of the Company who were allegedly injured or died while patients of facilities operated by the Company due to professional negligence or understaffing. As of March 31, 2018, 22 of such actions were filed in the State of Arkansas by the same plaintiff attorney who represented the plaintiffs in a purported class action lawsuit against the Company previously disclosed as the Amy Cleveland Class Action (which settled in December 2015), and such 22 actions were subject to a settlement in principle as discussed below, subject to approval of the probate court. Of the original 25 actions subject to the settlement in principle, the probate court approved settlements with respect to three of such actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of such actions subsequent to March 31, 2018. Of the 12 actions not subject to settlement in principle, two of such pending actions are covered by insurance, except that any award of punitive damages would be excluded from such coverage.

On March 12, 2018, the Company entered into a separate mediation settlement agreement with respect to each of the original 25 actions (22 such actions remaining subject to settlement in principle, at March 31, 2018), filed in the State of Arkansas relating to the settlement in principle of such actions, subject to the satisfaction of certain specified conditions. Each mediation settlement agreement provides for payment by the Company of a specified settlement amount, which settlement amount with respect to each action was deposited into the mediator’s trust account. The aggregate settlement amount, for all such 25 actions before related insurance proceeds is $5.2 million. The settlement of each such action must be individually approved by the probate court, and the settlement of one action is not conditioned upon receipt of the probate court’s approval with respect the settlement of any other action. Upon the probate court approving, with respect to a particular action, the settlement and an executed settlement and release agreement, the settlement amount with respect to such action will be disbursed to the plaintiff’s counsel. Under the settlement and release agreement with respect to a particular action, the Company will be released from any and all claims arising out of the applicable plaintiff’s care while the plaintiff was a resident of one of the Company’s facilities.

In connection with a dispute between the Company and the Company’s former commercial liability insurance provider regarding, among other things, the Company’s insurance coverage with respect to the 25 actions filed in the State of Arkansas, the former insurer filed a complaint in May 2016 against the Company seeking, among other things, a determination that the former insurer had properly exhausted the limits of liability of certain of the Company’s insurance policies issued by the former insurer, and the Company subsequently filed a counterclaim against the former insurer regarding such matters (collectively, the “Coverage Litigation”). On March 12, 2018, the former insurer and the Company entered into a settlement agreement (the

“Coverage Settlement Agreement”), providing for, among other things, a settlement payment by the former insurer in the amount of approximately $2.8 million, (the “Insurance Settlement Amo unt”), the dismissal with prejudice of the Coverage Litigation, a customary release of claims by the former insurer and the Company, and agreement that that the former insurer has exhausted the policies’ respective limits of liability and has no further ob ligations under the policies. Pursuant to the Coverage Settlement Agreement: (i) on March 16, 2018, the former insurer deposited the Insurance Settlement Amount into the trust account of the mediator with respect to the 25 actions; and (ii) on March 20, 20 18, the former insurer and the Company caused the Coverage Litigation, including the counterclaim, to be dismissed with prejudice.

Assuming, and subject to, the approval by the probate court of the settlement of each of the original 25 actions filed in the State of Arkansas and related matters, and the satisfaction of the other conditions with respect thereto, the Company will pay, net of the Insurance Settlement Amount, an aggregate of approximately $2.4 million in settlement of such actions. The probate court approved settlements with respect to three of the 25 Arkansas actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of the 25 actions subsequent to March 31, 2018, and approximately $0.5 million and $3.3 million, respectively, was paid from the mediator’s trust account in such settlements. The Company gives no assurance that the probate court will approve the settlement of the remaining 7 Arkansas actions pending approval or that the other conditions to such settlements will be satisfied, or that such actions will be settled on the terms described herein or at all.

In the first quarter of 2018, the Company settled four professional and general liability actions (other than those subject to mediation settlement agreements as discussed above) for the total of $670,000. A majority of the settlements include payment terms greater than one year.

The Company established a self-insurance reserve for these professional and general liability claims, included within “Accrued expenses and other” in the Company’s consolidated balance sheets of $2.4 million and $5.1 million at March 31, 2018, and December 31, 2017, respectively. Additionally as of March 31, 2018, and December 31, 2017, $0.1 and $0.2 million respectively, was reserved for settlement amounts in “Other liabilities”, and $0.6 million and $0.5 million in “Accounts payable” in the Company’s consolidated balance sheets, respectively. For additional information regarding the Company’s self-insurance reserve, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 15 – Commitments and Contingencies included in the Annual Report.

Aria Bankruptcy Proceeding . On May 31, 2016, Highlands Arkansas Holdings, LLC, an affiliate of Aria (“HAH”) and nine affiliates of HAH (collectively with HAH, the “Debtors”), filed petitions in the United States Bankruptcy Court for the District of Delaware for relief under Chapter 7 of the United States Bankruptcy Code. Following venue transfer from the Delaware court, these cases are pending in the United States Bankruptcy Court for the Eastern District of Arkansas.

On July 17, 2015, the Company made a short-term loan to HAH, for working capital purposes, and, in connection therewith, HAH executed a promissory note (the “HAH Note”) in favor of the Company. Since July 17, 2015, the HAH Note has been amended from time to time and currently has an outstanding principal balance of $1.0 million that matured on December 31, 2015. On October 6, 2015, HAH and the Company entered into a security agreement, whereby HAH granted the Company a security interest in all accounts arising from the business of HAH and the Aria Sublessees, and all rights to payment from patients, residents, private insurers and others arising from the business of HAH and the Aria Sublessees (including any proceeds thereof), as security for payment of the HAH Note, as amended, and certain rent and security deposit obligations of the Aria Sublessees under Aria Subleases.

On April 21, 2017, the Company moved for relief from the automatic stay seeking release of its collateral, the Debtors’ accounts and their proceeds, the value of which the trustee has represented as a total of approximately $0.8 million. The Company’s motion was opposed by the Chapter 7 trustee and another creditor in May 2017. In its objection, the Chapter 7 trustee asserts that the Company is not entitled to any of the $0.8 million with respect to the HAH Note. Discovery with respect to the motion is ongoing and the matter is currently not on the calendar. In addition to opposing the Company’s claim to the $0.8 million, the Chapter 7 trustee has also indicated he was investigating avoidance claims against the Company with respect to funds the Company received from the Debtors prior to the bankruptcy filings. On March 28, 2018, such avoidance case was filed, requesting relief in an amount of $4.7 million, which the Company believes to be without merit and intends to vigorously defend against. For the year ended December 31, 2017 the Company has charged approximately $0.6 million to bad debt expense on the HAH Note. The Company believes it acted in good faith and as it is the only secured creditor believes that the remaining balance on the HAH Note is collectible. There is no guarantee that the bankruptcy court will approve repayment of the HAH Note to the Company or that the Company will prevail in the avoidance action that has been filed against it.

NOTE 14.

RELATED PARTY TRANSACTIONS

McBride Matters

During the three months ended March 31, 2018 the Company paid $36,600 to Mr. McBride, the Company’s former Chief Executive Officer and a former director, pursuant a Settlement Agreement and Mutual Release the Company entered into with Mr. McBride on September 26, 2017.

For additional information regarding the Company’s related party transactions, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 18 – Related Party Transactions included in the Annual Report.

NOTE 15.

SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through the date the consolidated financial statements were issued and filed with the SEC. The following is a summary of the material subsequent events.

Forbearance Agreement

On May 18, 2018, (“the Forbearance Date”), the Company entered into a Forbearance Agreement in association with the Pinecone Credit Facility, whereby the Company was notified of certain events of default under the loan agreements of the Pinecone Credit Facility. Such Forbearance Agreement outlines a plan of correction whereby the Company may regain compliance under its obligations pertaining to the loan documents of the Pinecone Credit Facility, through a forbearance period ending July 20, 2018. Some requirements outlined in the Forbearance Agreement include, among other items, the hiring of a special consultant to advise Management on operational improvements and to assist in coordinating overall company strategy. Pursuant to the Forbearance Agreement, the Company and Pinecone agreed to amend certain provisions of the Pinecone Credit Facility. Such amendments, among other things: (i) eliminate the Company’s obligation to complete the Lease Assignments; (ii) require the payment of a specified “break-up fee” upon certain events, including prepayment of the Pinecone Credit Facility or a change of control; (iii) increase the ongoing interest rate from 12.5% per annum to 13.5% effective May 18, 2018, and (iii) increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%, as of the Forbearance Date.

Notification of Potential Employer Shared Responsibility Payment

On April 2, 2018, the Company received notification from the Internal Revenue Service (“IRS”), on Letter 226-J, that the Company may be liable for an Employer Shared Responsibility Payment (“ESRP”) in the amount of $2.9 million for the year ended December 31, 2015. The ESRP is applicable to employers that had 50 or more full-time equivalent employees, did not offer minimum essential coverage (“MEC”) to at least 70% of full-time employees (and their dependents) or did offer MEC to at least 70% of full time-employees (and their dependents), which did not meet the affordable or minimum value criteria and had one or more employees who claimed the Employee Premium Tax Credit (“PTC”) pursuant to the Affordable Care Act (the “ACA”). The IRS determines which employers receive Letter 226-J and the amount of the proposed ESRP from information that the employers complete on their information returns (IRS Forms 1094-C and 1095-C ) and from the income tax returns of their employees. The letter indicated that none of the Company’s employees claimed the PTC. The Company engaged third party providers to assist the Company with complying with the provisions of the ACA for the year ended December 31, 2015 to ensure the Company offered plans that would not require ESRP. On April 10, 2018 the Company responded to the IRS with appropriate documentation to prove the Company has no ESRP liability, and on May 8, 2018 the Company received written confirmation from the IRS that is in agreement with the Company’s findings.

Extension of Quail Creek Credit Facility

On April 30, 2018, the Company extended the maturity date of the Quail Creek Credit Facility to April 30, 2019. There is no assurance that the Company will be able to refinance or further extend the maturity date of the Quail Creek Credit Facility on terms that are favorable to the Company or at all.

Notice of Facility Surrender by Tenants

On April 24, 2018, the Company received notice from five of its Ohio facility tenants, affiliated with Beacon, that they will be vacating the Company’s properties on June 30, 2018. The Company intends to enforce its rights under the applicable sublease agreements for such five facilities and pursue all remedies available to it under such sublease agreements and applicable law. Consequently the Company is recognizing revenue on a cash basis and has expensed approximately $0.7 million of straight-line rent asset and recorded an allowance of $0.5 million against the Beacon Lease Inducement and $0.3 million for other receivables. The Company is in negotiations with new tenant operators for such facilities.

The annualized cash rent for 2018 per the lease agreements for the Ohio Beacon Affiliates is shown below:

Initial Lease Term

Operating

Commencement

Expiration

2018 Cash

Facility Name

Beds/Units

Structure

Date

Annual Rent

Ohio

Covington Care

Leased

8/1/2015

4/30/2025

818

Eaglewood ALF

Owned

8/1/2015

7/31/2025

764

Eaglewood Care Center

Owned

8/1/2015

7/31/2025

764

H&C of Greenfield

Owned

8/1/2015

7/31/2025

382

The Pavilion Care Center

Owned

8/1/2015

7/31/2025

382

Total

373

3,110

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report and certain information incorporated herein by reference contain forward-looking statements and information within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, and management’s plans and objectives. In addition, certain statements included in this Quarterly Report, in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “seek,” “plan,” “project,” “continue,” “predict,” “will,” and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on the Company’s current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.

All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. The Company’s actual results may differ materially from those projected, stated or implied in these forward-looking statements as a result of many factors, including the Company’s critical accounting policies and risks and uncertainties related to, but not limited to, the operating results of the Company’s tenants, the overall industry environment and the Company’s financial condition. These and other risks and uncertainties are described in more detail in the Company’s most recent Annual Report, as well as other reports that the Company files with the SEC.

Forward-looking statements speak only as of the date they are made and should not be relied upon as representing the Company’s views as of any subsequent date. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that the Company makes in this Quarterly Report and other reports that the Company files with the SEC that discuss factors germane to the Company’s business.

Overview

Regional Health, through its subsidiaries (together, the “Company” or “we”), is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. Our business primarily consists of leasing and subleasing healthcare facilities to third-party tenants. As of March 31, 2018, the Company owned, leased, or managed for third parties 30 facilities primarily in the Southeast.

The operators of the Company’s facilities provide a range of health care and related services to patients and residents, including skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term and short-stay patients and residents.

The following table provides summary information regarding the number of facilities and related operational beds/units as of March 31, 2018:

	Owned				Leased				Managed for Third Parties				Total
	Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units
State
Alabama		3		410		—		—		—		—		3		410
Georgia		4		463		10		1,168		—		—		14		1,631
North Carolina		1		106		—		—		—		—		1		106
Ohio		4		279		1		94		3		332		8		705
Oklahoma		2		197		—		—		—		—		2		197
South Carolina		2		180		—		—		—		—		2		180
Total		16		1,635		11		1,262		3		332		30		3,229
Facility Type
Skilled Nursing		14		1,449		11		1,262		2		249		27		2,960
Assisted Living		2		186		—		—		—		—		2		186
Independent Living		—		—		—		—		1		83		1		83
Total		16		1,635		11		1,262		3		332		30		3,229

The following table provides summary information regarding the number of facilities and related operational beds/units by operator affiliation as of March 31, 2018:

Operator Affiliation	Number of Facilities ⁽¹⁾		Beds / Units
C.R. Management		8		936
Beacon Health Management ⁽²⁾		7		585
Wellington Health Services		4		641
Peach Health Group		3		252
Symmetry Healthcare		3		286
Southwest LTC		2		197
Subtotal		27		2,897
Regional Health Managed		3		332
Total		30		3,229

⁽¹⁾

Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 7 – Leases and Note 15 – Subsequent Events located in Part I, Item 1, of this Quarterly Report; Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 – Leases included in the Annual Report; and “ Portfolio of Healthcare Investments ” included in Part I, Item 1, Business included in the Annual Report.

⁽²⁾

On April 24, 2018, the Company received notice from the Ohio Beacon Affiliates, that they would no longer be operating five (four owned and one leased by the Company) of the Company’s facilities located in Ohio commencing July 1, 2018. Regional is currently in negotiations with suitably qualified replacement operators to take possession of the Ohio Beacon Facilities on July 1, 2018. There is no assurance that Regional will be able to execute new leases with respect to the Ohio Beacon Facilities on substantially equivalent terms to the Sublease Agreements or at all or that, if new leases are executed, the new tenants will be able to take possession of the Ohio Beacon Facilities on July 1, 2018.

Portfolio Occupancy Rates

The following table provides summary information regarding our portfolio facility-level occupancy rates for the periods shown:

For the Three Months Ended

Operating Metric ⁽¹⁾

June 30,

2017

September 30,

2017

December 31,

2017

March 31,

2018

Occupancy (%) ⁽²⁾

83.1

81.8

80.0

79.5

⁽¹⁾

Excludes the three Peach Facilities, which were operated by affiliates of New Beginnings Care LLC prior to their bankruptcy and are currently operated by affiliates of Peach Health and the Meadowood Facility acquired on May 1, 2017, for all periods presented. Occupancy (%) for the Savannah Beach Facility, the one facility among the Peach Facilities which was not decertified by CMS and which has 50 operational beds, for the three months ending June 30, 2017, September 30, 2017, December 31, 2017 and March 31, 2018 was 82.0%, 84.9%, 88.5% and 85.7%, respectively.

⁽²⁾

Occupancy percentages are based on operational beds. The number of operational beds is reported to us by our tenants and represents the number of available beds that can be occupied by patients. The number of operational beds is always less than or equal to the number of licensed beds with respect to any particular facility.

Lease Expiration

The following table provides summary information regarding our lease expirations for the years shown:

			Operational Beds					Annual Lease Revenue ⁽¹⁾
	Number of Facilities		Amount		Percent (%)			Amount ($) '000's		Percent (%)
2024		1		126		4.3	%		965		4.0	%
2025 ⁽²⁾		12		1,206		41.7	%		9,671		40.2	%
2026		—		—	—%				—	—%
2027		8		869		30.0	%		8,265		34.4	%
2028		—		—	—%				—	—%
Thereafter		6		696		24.0	%		5,129		21.4	%
Total		27		2,897		100.0	%		24,030		100.0	%

⁽¹⁾	Straight-line rent.

⁽²⁾

On April 24, 2018, the Company received notice from the Ohio Beacon Affiliates, that they would no longer be operating five (four owned and one leased by the Company) of the Company’s facilities located in Ohio commencing July 1, 2018. Straight-line annual lease revenue included in the table above relating to these five facilities is approximately $3.3 million. The Company intends to enforce its rights under the applicable sublease agreements for such Ohio Beacon Facilities and pursue all remedies available to it under such sublease agreements and applicable law. Regional is currently in negotiations with suitably qualified replacement operators to take possession of the Ohio Beacon Facilities on July 1, 2018. There is no assurance that Regional will be able to execute new leases with respect to the Ohio Beacon Facilities on substantially equivalent terms to the Sublease Agreements or at all or that, if new leases are executed, the new tenants will be able to take possession of the Ohio Beacon Facilities on July 1, 2018. Regional intends to enforce its rights under the Sublease Agreements and pursue all remedies available to it under the Sublease Agreements and applicable law.

Acquisitions

There were no acquisitions during the three months ended March 31, 2018. For historical information regarding the Company’s acquisitions, see Part II, Item 8, Notes to Consolidated Financial Statements , Note 10 – Acquisitions and dispositions included in the Annual Report.

Divestitures

There were no divestitures for the three months ended March 31, 2018. For historical information regarding the Company’s divestitures, see Part II, Item 8, Notes to Consolidated Financial Statements , Note 11 – Discontinued Operations included in the Annual Report.

Critical Accounting Policies

We prepare our financial statements in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulation S-X. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. On an ongoing basis we review our judgments and estimates, including, but not limited to, those related to doubtful accounts, income taxes, stock compensation, intangible assets and loss contingencies. We base our estimates on historical experience, business knowledge and on various other assumptions that we believe to be reasonable under the circumstances at the time. Actual results may vary from our estimates. These estimates are evaluated by management and revised as circumstances change.

For a discussion of our critical accounting policies and recent accounting pronouncements not yet adopted by the Company see Note 1 – Organization and Significant Accounting Policies to the Company's Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Results of Operations

The following table sets forth, for the periods indicated, unaudited statement of operations items and the amounts and percentages of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our consolidated financial statements and the notes thereto, which are included herein.

	Three Months Ended March 31,
(Amounts in 000’s)	2018			2017			Percent Change
Revenues:
Rental revenues	$	5,705		$	5,775			(1.2	)%
Management fees		234			229			2.2	%
Other revenues		48			131			(63.4	)%
Total revenues		5,987			6,135			(2.4	)%
Expenses:
Facility rent expense		2,171			2,171			—
Cost of management fees		157			176			(10.8	)%
Depreciation and amortization		1,221			1,135			7.6	%
General and administrative expenses		879			1,446			(39.2	)%
Provision for doubtful accounts		1,938			466		NM
Other operating expenses		343			89		NM
Total expenses		6,709			5,483			22.4	%
Loss (income) from operations		(722	)		652		NM
Other expense:
Interest expense, net		1,275			1,032			23.5	%
Loss on extinguishment of debt		441			63		NM
Other expense		9			95			(90.5	)%
Total other expense, net		1,725			1,190			45.0	%
Loss from continuing operations before income taxes		(2,447	)		(538	)		354.8	%
Income tax expense		26			1		NM
Loss from continuing operations		(2,473	)		(539	)		358.8	%
Loss from discontinued operations, net of tax		(55	)		(413	)		(86.7	)%
Net loss	$	(2,528	)	$	(952	)		165.5	%

Three Months Ended March 31, 2018 and 2017

Rental Revenues —Rental revenue decreased by approximately $0.1 million, or 1.2%, to $5.7 million for the three months ended March 31, 2018, compared with $5.8 million for the same period in 2017. The decrease reflects the reduced payment of rent we received from the Ohio Beacon Affiliates, who have notified us of their intention to vacate our facilities on June 30, 2018. The Company recognizes all rental revenues on a straight line rent accrual basis, except with respect to the Ohio Beacon Affiliates and the Oceanside Facility prior to recertification (which was recertified by CMS, in February 2017), for which rental revenue is recognized based on cash received.

Facility Rent Expense —Facility rent expense was $ 2.2 million for the three months ended March 31, 2018, and $2.2 million for the same period in 2017. For further information, see Part II, Item 8, Notes to Consolidated Financial Statements , Note 7 – Leases , included in the Annual Report and Note 7 – Lease s to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Depreciation and Amortization —Depreciation and amortization increased by $0.1 million, or 7.6%, to $1.2 million for the three months ended March 31, 2018, compared with $1.1 million for the same period in 2017. The increase is due to amortization of the lease intangible related to the assisted living and memory care community with 106 operational beds in Glencoe, Alabama that we purchased in May 2017, which will be fully amortized in May 2018.

General and Administrative —General and administrative costs decreased by $0.5 million, or 39.2%, to $0.9 million for the three months ended March 31, 2018, compared with $1.4 million for the same period in 2017. The net decrease is due to a continued reduction in overhead and specifically the following: (i) a decrease in salaries, wages and employee benefits expense of approximately $0.2 million and (ii) a decrease in legal, contract services, IT, insurance and other expenses of approximately $0.3 million.

Provision for doubtful accounts —Provision for doubtful accounts expense increased by approximately $1.4 million, to $1.9 million for the three months ended March 31, 2018, compared with $0.5 million for the same period in 2017. The increase is due to the Ohio Beacon Affiliates notifying the Company of their plan to cease operating our properties on June 30, 2018 and in addition the Company has also recorded an allowance of approximately $0.5 million on the $3.0 million Skyline Note.

Other operating expenses —Other operating expenses increased by $0.2 million, to $0.3 million for the three months ended March 31, 2018, compared with $0.1 million for the same period in 2017. The increase is due to an accrual for $0.3 million in property taxes associated with the Ohio Beacon Affiliates notifying the Company of their plan to cease operating our properties on June 30, 2018, offset by $0.1 million in lower professional and general legal expenses and workers’ compensation expenses.

Interest Expense, Net —Interest expense increased by approximately $0.3 million, or 23.5%, to $1.3 million for the three months ended March 31, 2018, compared with $1.0 million for the same period in 2017. The increase is mainly due the net increase of debt principal year over year of approximately $6.3 million and approximately $1.0 million in capitalized deferred financing. The $16.25 million Pinecone Credit Facility, increased debt by approximately $7.5 million from February 15, 2018, which was partially offset by the repayment of $6.7 million in convertible debt in the prior year and $1.5 million repayment of convertible debt during the current quarter. The increase in interest is approximately $0.1 million for amortization of deferred financing and approximately $0.1 million due to interest.

Loss from Debt Extinguishment —The loss from debt extinguishment increased by approximately $0.3 million, to $0.4 million for the three months ended March 31, 2018, compared with $0.1 million for the same period in 2017. The increase is due to pre-payment penalties of $0.2 million and $0.2 million in expensed deferred financing fees from the repayment of debt in connection with the Pinecone Credit Facility.

Loss from Discontinued Operations —The loss from discontinued operations decreased by $0.3 million, or 86.7%, to $0.1 million for the three months ended March 31, 2018, compared with $0.4 million for the same period in 2017. The decrease is primarily due to lower bad debt expense, professional and general legal expenses and collection activity expenses.

Other Expenses —Other expense decreased by $0.1 million, or 90.5%, to $0.0 million for the three months ended March 31, 2018, compared with $0.1 million for the same period in 2017. The prior period charge was related to expenses for the Merger.

Liquidity and Capital Resources

On February 15, 2018, the Company entered into a debt refinancing with Pinecone, with an aggregate principal amount of $16.25 million, that refinanced existing mortgage debt in an aggregate amount of $8.7 million on three skilled nursing properties, and provided additional surplus cash flow of $6.3 million. The surplus cash flow from the Pinecone Credit Facility was used to deposit $2.4 million of cash into escrow to fund self-insurance reserves for professional and general liability claims

with respect to 25 professional and general liability actions (included within current liabilities), and to fund repayment of $1.5 million in convertible debt.

If the Company is able comply with the terms of the Forbearance Agreement, and Pinecone does not exercise rights or remedies against the Company on account of any event of default, then given current funds on hand and expected future cash flow from operations, management believes that the Company will be able to meet its obligations as they become due in the ordinary course, of business for a period of at least the next 12 months. Management's belief assumes that the Company will continue to be successful in implementing its business strategy and achieving forecasted results and that there will be no further material adverse developments in the Company’s business, liquidity or capital requirements.

The Company expects to use cash from operations, restricted replacement reserves and borrowings to: (i) invest in the Company’s existing property portfolio, (ii) resolve our 12 outstanding legal actions, and (iii) refinance or repay debt to minimize the average weighted cost of capital.

For additional information regarding the Company’s liquidity, see Note 3 – Liquidity , to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Cash Flows

The following table presents selected data from our consolidated statement of cash flows for the periods presented:

	Three Months Ended March 31,
(Amounts in 000’s)	2018			2017
Net cash provided by operating activities - continuing operations	$	732		$	749
Net cash used in operating activities - discontinued operations		(735	)		(1,051	)
Net cash used in investing activities - continuing operations		(163	)		(329	)
Net cash provided by (used in) financing activities - continuing operations		1,894			(10,739	)
Net cash used in financing activities - discontinued operations		(90	)		(140	)
Net change in cash and restricted cash		1,638			(11,510	)
Cash and restricted cash at beginning of period		5,359			19,509
Cash and restricted cash at end of period	$	6,997		$	7,999

Three Months Ended March 31, 2018

Net cash provided by operating activities—continuing operations for the three months ended March 31, 2018 was approximately $0.7 million, consisting primarily of our income from operations less changes in working capital, and noncash charges (primarily bad debt expense, depreciation and amortization and rent revenue in excess of cash received).

Net cash used in operating activities—discontinued operations for the three months ended March 31, 2018 was approximately $0.7 million, excluding non-cash proceeds and payments. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims.

Net cash used investing activities—continuing operations for the three months ended March 31, 2018 was approximately $0.2 million. This is the result of capital expenditures on building improvements for three of the Company’s properties.

Net cash provided by financing activities—continuing operations was approximately $1.9 million for the three months ended March 31, 2018. Excluding non-cash proceeds and payments, this is primari ly the result of $2.4 million new financing from Pinecone offset by routine repayments of $0.5 million of other existing debt obligations.

Net cash used in financing activities—discontinued operations for the three months ended March 31, 2018 was approximately $0.1 million payments for Medicaid and vendor notes.

Three Months Ended March 31, 2017

Net cash provided by operating activities—continuing operations for the three months ended March 31, 2017 was approximately $0.7 million, consisting primarily of our loss from operations less changes in working capital, and noncash charges (primarily depreciation and amortization, share-based compensation, rent revenue in excess of cash received, amortization of debt discounts and related deferred financing costs and bad debt expense) all primarily the result of routine operating activity.

Net cash used in operating activities—discontinued operations was approximately $1.1 million. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims, in addition to settling legacy vendor liabilities.

Net cash used in investing activities—continuing operations for the three months ended March 31, 2017 was approximately $0.3 million. This is the result of capital expenditures of $0.3 million on building improvements for Peach Recertified Facilities to assist Peach Health Sublessee in connection with recertification efforts.

Net cash used in financing activities—continuing operations was approximately $10.7 million for the three months ended March 31, 2017. This is primarily the result of repayments of $6.7 million of convertible debt, $2.0 million of other existing debt obligations and $2.0 million payment of dividends with respect to the Series A Preferred Stock.

Net cash used in financing activities—discontinued operations was approximately $0.2 million payments for vendor notes.

Notes Payable and Other Debt

For information regarding the Company’s debt financings, see Note 9 – Notes Payable and Other Debt , to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report, and Part II, Item 8, Notes to Consolidated Financial Statements, Note 9 – Notes Payable and Other Debt included in the Annual Report.

Receivables

Our operations could be adversely affected if we experience significant delays in receipt of rental income from our tenants.

Accounts receivable, net totaled $0.6 million at March 31, 2018 and $0.9 million at December 31, 2017, with all uncollected patient care receivables fully allowed at March 31, 2018 and December 31, 2017.

Operating Leases

For information regarding the Company’s operating leases, see Note 7 – Leases , to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report, and Part II, Item 8, Notes to Consolidated Financial Statements, Note 7 – Leases included in the Annual Report.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Disclosure in response to Item 3. of Form 10-Q is not required to be provided by smaller reporting companies.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our interim Chief Executive Officer and interim Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the

desired control objectives , and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our interim Chief Executive Officer and interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report (the “Evaluation Date”). Based on such evaluation, our interim Chief Executive Officer and interim Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Oth er Information

Item 1.

Legal Proceedings.

The Company is a defendant in various legal actions and administrative proceedings arising in the ordinary course of business, including claims that the services the Company provided during the time it operated skilled nursing facilities resulted in injury or death to patients. Although the Company settles cases from time to time when settlement can be achieved on a reasonable basis, the Company vigorously defends any matter in which it believes the claims lack merit and the Company has a reasonable chance to prevail at trial or in arbitration. Litigation is inherently unpredictable and there is risk in the Company's strategy of aggressively defending these cases. There is no assurance that the outcomes of these matters will not have a material adverse effect on the Company’s financial condition. Although arising in the ordinary course of the Company's business, certain of these matters are described below under "Professional and General Liability Claims."

Except as set forth in this Item 1., Legal Proceedings, there have been no new material legal proceedings and no material developments in the legal proceedings reported in Part I, Item 3, Legal Proceedings, in the Annual Report. For additional information with respect to legal proceedings, also see Note 13 - Commitments and Contingencies to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Professional and General Liability Claims. As of March 31, 2018, the Company is a defendant in 34 professional and general liability actions commenced on behalf of former patients. These actions generally seek unspecified compensatory and punitive damages for former patients of the Company who were allegedly i njured or died while patients of facilities operated by the Company due to professional negligence or understaffing. Twenty-two of these actions were filed in the State of Arkansas by the same plaintiff attorney who represented the plaintiffs in a purporte d class action lawsuit against the Company previously disclosed as the Amy Cleveland Class Action ( which settled in December 2015) and such 22 actions are subject to a settlement in principle as discussed below. Of the 12 not subject to settlement in principle: (i) two of such actions are covered by insurance, except that any award of punitive damages would be excluded from such coverage; and (ii) three of such actions relate to events which occurred after the Company transitioned the operations of the facilities in question to a third-party operator and which are subject to such operators’ indemnification obligations in favor of the Company. These remaining 12 actions are in various stages of discovery, and the Company intends to vigorously defend such actions, where economically favorable to the Company.

On March 12, 2018, the Company entered into a separate mediation settlement agreement with respect to each of the original 25 actions (22 such actions remaining subject to settlement in principle, at Marc h 31, 2018), filed in the State of Arkansas, relating to the settlement in principle of each such action, subject to the satisfaction of certain specified conditions. Each mediation settlement agreement provides for payment by the Company of a specified settlement amount, which settlement amount with respect to each action has been deposited into the mediator’s trust account. The action must be individually approved by the probate court, and the settlement of one action is not conditioned upon receipt of the probate court’s approval with respect the settlement of any other action. Upon the probate court approving, with respect to a particular action, the settlement and an executed settlement and release agreement, the settlement amount with respect to such action will be disbursed to the plaintiff’s counsel. Under the settlement and release agreement with respect to a particular action, the Company will be released from any and all claims arising out of the applicable plaintiff’s care while the plaintiff wa s a resident of one of the Company’s facilities. Of the original 25 actions subject to the settlement in principle, the probate court approved settlements with respect to three of such actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of such subsequent to March 31, 2018.

In connection with the Coverage Litigation between the Company and the Company’s former commercial liability insurance provider regarding, among other things, the Company’s insurance coverage with respect to the 25 actions filed in the State of Arkansas, the former insurer and the Company entered into the Coverage Settlement Agreement on March 12, 2018, providing for, among other things, Insurance Settlement Amount by the former insurer in the amount of approximately $2.8 million, the dismissal with prejudice of the Coverage Litigation, a customary release of claims by the former insurer and the Company, and agreement that that the former insurer has exhausted the policies’ respective limits of liability and has no further obligations under the policies. Pursuant to the Coverage Settlement Agreement: (i) on March 16, 2018, the former insurer deposited the Insurance Settlement Amount into the trust account of the mediator with respect to the 25 actions; and (ii) on March 20, 2018, the former insurer and the Company caused the Coverage Litigation, including the counterclaim, to be dismissed with prejudice.

Assuming, and subject to, the approval by the probate court of the settlement of each of the origi nal 25 actions filed in the State of Arkansas and related matters, and the satisfaction of the other conditions with respect thereto, the Company will pay, net of the Insurance Settlement Amount, an aggregate of approximately $2.4 million in settlement of such actions. The probate court approved settlements with respect to three of the 25 Arkansas actions during the quarter ended March 31, 2018 and approved settlements with respect to 15 of the 25 Arkansas actions after March 31, 2018, and approximately $0. 5 million and $3.3 million, respectively , was paid from the mediator’s trust account in such settlements . The Company gives no assurance that the probate court will approve the settlement of the remaining 7 Arkansas actions pending approval or that the oth er conditions to such settlements will be satisfied, or that such actions will be settled on the terms described herein or at all.

In the first quarter of 2018, the Company settled four previously disclosed professional and general liability actions (othe r than those subject to mediation settlement agreements as discussed above) for the total of $670,000. A majority of the settlements include payment terms greater than one year.

The Company has self-insured against professional and general liability claims since it discontinued its healthcare operations. The Company established a self-insurance reserve for these professional and general liability claims, included within “Accrued expenses and other” in the Company’s consolidated balance sheets of $2.4 million and $5.1 million at March 31, 2018, and December 31, 2017, respectively. Additionally, as of March 31, 2018, and December 31, 2017, $0.1 and $0.2 million respectively, was reserved for settlement amounts in “Other liabilities”, and $0.6 and $0.5 million in “Accounts payable” in the Company’s consolidated balance sheets, respectively. For additional information regarding the Company’s self-insurance reserve, see Part II, Item 8, Notes to Consolidated Financial Statements, Note 15 – Commitments and Contingencies included in the Annual Report.

The Company believes that most of the professional and general liability actions are defensible and intends to defend them through final judgement unless settlement is more advantageous to the Company. Accordingly, the self-insurance reserve primarily reflects the Company’s estimate of settlement amounts for the pending actions, as appropriate and legal costs of settling or litigating the pending actions, as applicable.

Aria Avoidance Claims. On March 28, 2018, the C hapter 7 bankruptcy trustee in the Aria bankruptcy proceeding, together with an unsecured creditor, filed in the United States Bankruptcy Court for the Eastern District of Arkansas an avoidance claim, in the amount of $4.7 million, against the Company seeking to recover funds the Company received from the Debtors in the Aria bankruptcy proceeding (Highlands Arkansas Holdings, LLC, and nine of its affiliates, Highland of Stamps, LLC; Highlands of Rogers Dixieland, LLC; Highlands of North Little Rock John Ashley, LLC; Highlands of Mountain View SNF, LLC; Highlands of Mountain View RCF, LLC; Highlands of Little Rock West Markham, LLC; Highlands of Little Rock South Cumberland, LLC; Highlands of Little Rock Riley, LLC; and Highlands of Fort Smith, LLC) prior to the bankruptcy filings. The Company believes that this action is defensible and intends to defend through final judgement. There is no guarantee that the Company will prevail in the avoidance action that has been filed against it.

Item 1A.

Risk Factors.

We depend on affiliates of C.R Management and Beacon Health Management for a significant portion of our revenues and any inability or unwillingness by such entities to satisfy their obligations to us could have a material adverse effect on us.

Our 27 properties (excluding the three facilities that are managed by us) are operated by a total of 27 separate tenants, with each of our tenants being affiliated with one of six local or regionally-focused operators. We refer to our tenants who are affiliated with the same operator as a group of affiliated tenants. Each of our operators operate (through a group of affiliated tenants) between two and eight of our facilities, with our most significant operators, C.R Management and Beacon Health Management, each operating (through a group of affiliated tenants) eight and seven facilities, respectively, as of the date of filing of this Quarterly Report. We, therefore, depend, on tenants who are affiliated with C.R Management and Beacon Health Management for a significant portion of our revenues. Recently, the Company was notified by five of the tenants affiliated with Beacon Health Management affiliates, who each of whom are one month in arrears on rental payments after application of the applicable lease deposit, that they can no longer operate five of our facilities located in Ohio and will surrender the respective properties facilities on June 30, 2018. See Note 15 – Subsequent Events , to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Although we are currently in negotiations with suitably qualified replacement operators to take possession of the five Ohio facilities on July 1, 2018, there is no assurance that we will be able to execute new leases with respect to such facilities on substantially equivalent terms to the sublease agreements for such facilities which we entered into with the Ohio Beacon affiliates or at all or that, if new leases are executed, the new tenants will be able to take possession of such facilities on July 1, 2018. We intend to enforce our rights under the sublease agreements for such facilities which we entered into with the Ohio Beacon affiliates and pursue all remedies available to us under such sublease agreements and applicable law.

We cannot assure you that the tenants affiliated with C.R Management and Beacon will have sufficient assets, income and access to financing to enable them to make rental payments to us or to otherwise satisfy their obligations under the applic able leases and subleases, and any inability or unwillingness by such tenants to do so could have a material adverse effect on us.

We depend on Pinecone not to call the entire principal balance, plus interest and fees of the Pinecone Credit Facility in the event the Company is unable to comply with all benchmarks as outlined in the Forbearance Agreement.

On May 10, 2018, management was notified by one of the Company’s lenders, Pinecone that the Company was in default on a number of administrative items as outlined in the Pinecone Credit Facility. Management also informed Pinecone that the Company had failed to meet one of its financial covenant obligations, the minimum fixed charge coverage ratio, as outlined in the loan agreement to the Pinecone Credit Facility for the period ended March 31, 2018.

In order to alleviate such defaults, on May 18, 2018, the Company entered into a forbearance agreement with Pinecone (the “Forbearance Agreement”), in which, Pinecone provides a timeline and a number of remedies available to cure all default items and to regain compliance under the Pinecone Credit Facility. The forbearance period is from May 18, 2018, the date of the execution of the Forbearance Agreement, to July 20, 2018, during which time, the Company must comply with all benchmarks as outlined in the Forbearance Agreement. Management believes that the overall plan of correction as outlined in the Forbearance Agreement is achievable, however many of the benchmarks, as articulated in the Forbearance Agreement, fall outside of the control of management, and if the Company is unable to satisfy the requirements as outlined, then one of the remedies available to Pinecone is that the entire principal balance of the Pinecone Credit Facility, plus interest and fees, will become immediately due and payable, indicating that substantial doubt exists about whether or not the Company will be able to continue as a going concern within one year after the date that the financial statements are issued.

There can be no assurance that the Company will be able to cure all of the deficiencies as listed in the Forbearance Agreement or that the Company will be able to continue to comply with all of the various covenants as required by the loan agreement of the Pinecone Credit Facility. The Company’s ability to cure its non-compliance with the Pinecone Credit Facility depends, in part, on its ability to work with outside parties, which is not within the Company’s exclusive control. If Pinecone were to call the balance of the Pinecone Credit Facility for any reason, and the Company were unable to cure such deficiency, it could have a material adverse consequence on the Company’s ability to meet its obligations arising within one year of the date of issuance of these financial statements. The Company plans to continue to undertake measures to refinance certain loans and to streamline its cost infrastructure. But due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and the Company’s ability to satisfy its financial obligations that may arise over the applicable one-year period, the Company is unable to conclude that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these financial statements within the parameters set forth in the accounting guidance.

For a d etailed description of certain risk factors that could affect our business, operations and financial condition, see Part I, Item 1A., Risk Factors, included in the Annual Report. The risk factors described in the Annual Report and this Quarterly Report. The risk factors described in the Annual Report (“Risk Factors”) do not describe all risks applicable to our business, and we intend it only as a summary of certain material factors. The Risk Factors should be considered in connection with evaluating the forward-looking statements contained in this Quarterly Report because the Risk Factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of the common stock and Series A Preferred Stock could decline.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defau lts upon Senior Securities.

The Board suspended dividend payments with respect to the Series A Preferred Stock for the fourth quarter 2017 and the first quarter 2018 dividend periods, and no dividends were declared or paid with respect to the Series A Preferred Stock for such dividend periods. As a result of such suspension, the Company has $3.8 million of undeclared preferred stock dividends in arrears with respect to the Series A Preferred Stock as of the date of filing of this Quarterly Report. See Note 11– Common and Preferred Stock – “Preferred Stock Offerings and Dividends ” , to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

On May 18, 2018, the Company and Pinecone entered into the Forbearance Agreement, pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the Forbearance Agreement, to forbear from exercising certain rights a nd remedies with respect to specified events of default under the Pinecone Credit Facility. Such events of default include, among other things: (i) the failure of a certain wholly-owned subsidiary (the “New Guarantor”) of the Company to assign certain oper ating leases required to be assigned by such subsidiary to certain other subsidiaries of the Company (the “Lease Assignments”); (ii) failure to deliver certain reports, notices and certificates required under the Pinecone Credit Facility; (iii) failure to obtain Pinecone’s prior written consent with respect to a certain lease amendment; (iv) certain inaccuracies in the representations and warranties made by the Company under the Pinecone Credit Facility; (v) certain healthcare regulatory matters with respect to two of the Company’s facilities; (vi) failure to comply with certain post-closing obligations under the Pinecone Credit Facility; and (vii) certain defaults by tenants of the Company under the applicable lease or sublease with the Company, which defaults constitute events of default under the Pinecone Credit Facility.

Pursuant to the Forbearance Agreement, the Company and Pinecone agreed to amend certain provisions of the Pinecone Credit Facility. Such amendments, among other things: (i) eliminate the Company’s obligation to complete the Lease Assignments; (ii) require the payment of a specified “break-up fee” upon certain events, including prepayment of the Pinecone Credit Facility or a change of control; (iii) increase the ongoing interest rate from 12.5% per annum to 13.5% per annum; and (iv) increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%.

Pursuant to the Forbearance Agreement , the New Guarantor entered into a guaranty agreement for the benefit of Pinecone, pursuant to which the New Guarantor agreed to guarantee the obligations of the borrowers under the Pinecone Credit Facility. In connection therewith, the New Guarantor executed shall execute a pledge agreement in favor of Pinecone, pursuant to which the New Guarantor pledged the equity interests in the New Guarantor’s subsidiaries as security for the New Guarantor’s obligations under such guaranty.

The Forbearance Agreement outlines a plan of correction whereby the Company may regain compliance under the Pinecone Credit Facility during the Forbearance Period. Among other things, the Company is required to complete certain post-closing actions required under the Pinecone Credit Facility no later than June 4, 2018 and to hire a consultant, acceptable to Pinecone and the Company, to advise management on operational improvements and to assist in coordinating overall company strategy. The Company is also required to obtain Pinecone’s prior written consent prior to paying dividends on the Series A Preferred Stock and to increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%. For additional information regarding the Company’s liquidity, see Note 3 – Liquidity and Note 15 – Subsequent Events , to the Company’s Notes to Unaudited Consolidated Financial Statements located in Part I, Item 1, of this Quarterly Report.

Item 6.

Exhibits.

The agreements included as exhibits to this Quarterly Report are included to provide information regarding the terms of these agreements and are not intended to provide any other factual or disclosure information about the Company, its business or the other parties to these agreements. These agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•

may apply standards of materiality in a way that is different from what may be viewed as material to investors; and

•

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and should not be relied upon by investors.

EXHIBIT INDEX

Exhibit No.	Description	Method of Filing


3.1	Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective September 21, 2017	Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017

3.2	Certificate of Merger, effective September 29, 2017	Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017

3.3	Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017	Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017

4.1	Form of Common Stock Certificate of Regional Health Properties, Inc.	Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017

4.2	Description of Regional Health Properties, Inc. Capital Stock	Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K12B filed on October 10, 2017

4.3*	2005 Stock Option Plan of AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011

4.4*	AdCare Health Systems, Inc. 2011 Stock Incentive Plan	Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011

4.5*	Form of Non-Statutory Stock Option Agreement	Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011

4.6*	Form of Incentive Stock Option Agreement	Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011


4.7	Form of Warrant to Purchase Common Stock of the Company	Incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-3 (File No. 333-175541)

4.8	Warrant to Purchase 50,000 Shares of Common Stock, dated December 28, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd.	Incorporated by reference to Exhibit 4.21 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012

4.9	Form of Warrant, dated March 28, 2014, issued by AdCare Health Systems, Inc. to the placement agent and its affiliates in connection with the offering of 10% Subordinated Convertible Notes Due April 30, 2015	Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014

4.10	Form of Warrant granted to management to Purchase Shares of AdCare Health Systems, Inc. dated November 20, 2007	Incorporated by reference to Exhibit 10.23.2 of the Registrant’s Annual Report on Form 10-KSB as amended March 31, 2008

Exhibit No.	Description	Method of Filing

10.1	Guarantee Agreement Dated February 15, 2018 by Regional Health Properties, Inc., AdCare Property Holdings, LLC, and Hearth & Home of Ohio, Inc., to and for the benefit of Pinecone Reality Partners, II, LLC.	Incorporated by reference to Exhibit 10.424 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017

10.2	Loan Agreement Dated as of February 15, 2018 among CP Property Holdings, LLC, Northwest Property Holdings, LLC and Attalla Nursing ADK, LLC as Borrowers, Hearth & Home of Ohio, Inc.., as Guarantor, AdCare Property Holdings, LLC, as Guarantor and Borrower, Regional Health Properties, Inc., as Guarantor, and Pinecone Reality Partners s II, LLC as Lender	Incorporated by reference to Exhibit 10.425 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017


10.3	Promissory Note for $3.5 million dated February 15, 2018 by and among Pinecone Realty Partners Il, LLC, and AdCare Property Holdings, LLC.	Incorporated by reference to Exhibit 10.426 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017
10.4	Promissory Note for $8.25 million dated February 15, 2018 by and among Pinecone Realty Partners Il, LLC, and Attalla Nursing ADK LLC.	Incorporated by reference to Exhibit 10.427 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017
10.5	Promissory Note for $2.5 million dated February 15, 2018 by and among Pinecone Realty Partners Il, LLC, and CP Property Holdings, LLC.	Incorporated by reference to Exhibit 10.428 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017
10.6	Promissory Note for $2.0 million dated February 15, 2018 by and among Pinecone Realty Partners Il, LLC, and Northwest Property Holdings, LLC.	Incorporated by reference to Exhibit 10.429 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017
10.7	2nd Amendment to Master Lease dated March, 30 2018 by and among ADK Georgia, LLC, OS Tybee, LLC, SB Tybee, LLC, and JV Jeffersonville, LLC.	Incorporated by reference to Exhibit 10.430 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017
10.8	Settlement Agreement dated March 9th, 2018 by and between Prior Insurer and AdCare Health Systems, Inc.; Regional Health Properties, Inc.; AdCare Administrative Services, LLC; Woodland Hills HC Nursing, LLC; Woodland Hills HC Property Holdings, LLC; AdCare Operations, LLC; APH&R Nursing LLC d/b/a Cumberland Health and Rehabilitation Center; APH&R Property Holdings, LLC; Little Rock HC&R Nursing LLC d/b/a West Markham Sub Acute and Rehabilitation Center; Little Rock HC&R Property Holdings, LLC; Northridge HC&R Nursing, LLC d/b/a Northridge Healthcare and Rehabilitation; Northridge HC&R Property Holdings, LLC; Coosa Nursing ADK, LLC	Filed herewith
10.9	Third Amendment to Promissory Note dated April 30, 2018 by and between QC Property Holdings, LLC, a Georgia limited liability company and Congressional Bank.	Filed herewith
10.10	Forbearance Agreement dated May 18, 2018 among CP Property Holdings, LLC, Northwest Property Holdings, LLC and Attalla Nursing ADK, LLC as Borrowers, Hearth & Home of Ohio, Inc., as Guarantor, AdCare Property Holdings, LLC, as Guarantor and Borrower, Regional Health Properties, Inc., as Guarantor, and Pinecone Reality Partners II, LLC as Lender	Filed herewith
10.11	Guarantee Agreement dated May 18, 2018 by AdCare Operations, LLC, a Georgia limited liability company for the benefit of Pinecone Reality Partners, II, LLC	Filed herewith
10.12	Pledge Agreement dated May 18, 2018 by AdCare Operations, LLC, a Georgia limited liability company for the benefit of Pinecone Reality Partners, II, LLC	Filed herewith

Exhibit No.	Description	Method of Filing

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act	Filed herewith

31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act	Filed herewith

32.1	Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith

32.2	Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith

101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017; (ii) Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited); (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2018 (unaudited); (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited); and (v) the Notes to Consolidated Financial Statements (unaudited).	Filed herewith

*	Identifies a management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

		REGIONAL HEALTH PROPERTIES, INC.
		(Registrant)

Date:	May 21, 2018	/s/ Brent Morrison
		Brent Morrison
		Interim Chief Executive Officer and Director (Principal Executive Officer)

Date:	May 21, 2018	/s/ E. Clinton Cain
		E. Clinton Cain
		Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer (Principal Financial and Accounting Officer)

Exhibit 10.8

SETTLEMENT AGREEMENT

This Settlement Agreement and Release (the “Agreement”) is by and between xxxxxxxxx (“xxxxxxxxxa”), on the one hand, and AdCare Health Systems, Inc.; Regional Health Properties, Inc.; AdCare Administrative Services, LLC; Woodland Hills HC Nursing, LLC; Woodland Hills HC Property Holdings, LLC; AdCare Operations, LLC; APH&R Nursing LLC d/b/a Cumberland Health and Rehabilitation Center; APH&R Property Holdings, LLC; Little Rock HC&R Nursing LLC d/b/a West Markham Sub Acute and Rehabilitation Center; Little Rock HC&R Property Holdings, LLC; Northridge HC&R Nursing, LLC d/b/a Northridge Healthcare and Rehabilitation; Northridge HC&R Property Holdings, LLC; Coosa Nursing ADK, LLC; xxxxxxxxxxx and AdCare are collectively referred to herein as the “Parties” and each individually as a “Party.”

RECITALS

WHEREAS, xxxxxxx issued Long Term Care Commercial Liability Policy No. PLC-xxxxxx, effective February 1, 2014 through May 1, 2015 (the “Primary Policy”) and Long Term Care Umbrella Policy No. UMB-xxxxxxx, effective February 1, 2014 through May 1,2015 (the “Umbrella Policy,” and together with the Primary Policy, the “Policies”) to AdCare Health Systems, Inc.;

WHEREAS, xxxxxxx paid the Policies' combined total limits of liability of xxxxxxx in settlement of various underlying lawsuits brought against AdCare for which the Policies afforded coverage;

WHEREAS, on May 27,2016, xxxxxxxx filed a complaint against AdCare Health Systems, Inc.; AdCare Administrative Services, LLC; Woodland Hills HC Nursing, LLC; Woodland Hills HC Property Holdings, LLC; AdCare Operations, LLC; Coosa Nursing ADK, LLC; xxxxxxxxxxxxxx xxxxxxxx (the “AdCare Defendants”) in a lawsuit captioned xxxxxxxxxx. v. AdCare Health Systems, Inc., et al. , No. 4:16-cv-295-JLH (E.D. Ark.), seeking determinations that (1) xxxxxx properly exhausted the Policies' limits of liability in settling various underlying suits; (2) by virtue of such exhaustion, xxxxxxxxxxxa has no further obligations to defend or indemnify AdCare or any other Insured under the Policies; and (3) AdCare is obligated to reimburse Columbia for any amounts advanced by xxxxxxx for defense expenses after exhaustion of the Policies (the “Coverage Litigation”);

WHEREAS, on July 7, 2017, the AdCare Defendants filed an Answer and Counterclaim in the Coverage Litigation, asserting: (1) xxxxxxx wrongfully exhausted the Policies' limits of liability in order to avoid its obligation to pay defense costs and (2) because of the alleged wrongful exhaustion, xxxxxxx is not entitled to the relief it seeks in the Coverage Litigation, and (3) several causes of action, including but not limited to, breach of contract; breach of fiduciary duty; declaratory relief; and bad faith claims (the “Counterclaim”);

WHEREAS, AdCare has sought coverage under the Policies for the following lawsuits filed against one or more of the AdCare Defendants in the Circuit Court for Pulaski County, Arkansas (collectively, the “Underlying Lawsuits”):

• Alma Ross v. AdCare Health Systems, Inc., et al., No. 60CV-16-1907;

• Wilalice Adams v. AdCare Operations, et al., LLC, No. 60CV-16-2768;

• Jeffrey Childress v. AdCare Health Systems, Inc., et al., No. 60CV-16-3239;

• Alexis Clark v. AdCare Health Systems, Inc., et al., No. 60CV-16-3089;

• Robert Lee Currie v. AdCare Health Systems, Inc., et al., No. 60CV-16-3287;

• Gloria Hankins v. AdCare Health Systems, Inc., et al., No. 60CV-16-3394;

• Elmoryo Livingston v. AdCare Health Systems, Inc., et al., 60CV-16-3393;

• Gloria Patillo v. AdCare Health Systems, Inc., et al., No. 60CV-16-3460;

• Gregory Rice v. AdCare Health Systems, Inc., et al., No. 60CV-16-3508;

• Sandy Mitchell v. AdCare Health Systems, Inc., et al., No. 60CV-16-5572;

• Jacquelyn Jones v. AdCare Health Systems, Inc., et al., No. 60CV-16-5586;

• Elizabeth Holmes v. AdCare Health Systems, Inc., et al., No. 60CV-16-5577;

• Vickie Heithkamper v. AdCare Health Systems, Inc., et al., No. 60CV-16-5385;

• Albert Lee Funch es v. AdCare Health Systems, Inc., et al., No. 60CV-16-5288;

• Clinton Smith v. AdCare Health Systems, Inc., et al., No. 60CV-16-5296;

• Tommie Ready v. AdCare Health Systems, Inc., et al., No. 60CV-16-5604;

• John Clowney v. AdCare Health Systems, Inc., et al., No. 60CV-16-5653;

• William Dust v. AdCare Health Systems, Inc., et al., No. 60CV-16-6671;

• Cecelia Morse v. A d Care Health Systems, Inc., et al., No. 60C V -17-65;

• Chris Bradshaw v. AdCare Health Systems, Inc., et al., No. 60CV-17-15;

• Pamela Frazier v. AdCare Health Systems, Inc., et al., No. 60CV-16-7069;

• Cathy Talbert v. AdCare Health Systems, Inc., et al., No. 60CV-16-6428;

• Betty Key v. AdCare Health Systems, Inc., et al., No. 60CV-17-173;

• Judy Harris v. AdCare Health Systems, Inc., et al., No. 60CV-16-7066; and

• Vakeisa Johnson v. AdCare Health Systems, Inc., et al., No. 60CV-17-1660.

WHEREAS, AdCare has also sought coverage under the Policies for the lawsuit captioned Ward, Legal Guardian Conservator of Laphesia Smith v. Coosa Nursing ADK LLC d/b/a Coosa Valley Health Care , Case No. CV-2014-900321.00 (Ala. Cir. Ct.) (the “Smith Action”), which has since been dismissed with prejudice;

WHEREAS, xxxxxx agreed to advance a portion of the defense expenses incurred by AdCare in connection with certain of the Underlying Lawsuits and the Smith Action pursuant to a complete reservation of rights, including the right to recoup any defense expenses advanced for the Underlying Lawsuits;

WHEREAS, the Parties participated in two mediations of the Coverage Litigation before Ralph Levy, Esq. of JAMS, in Atlanta, Georgia on November 2, 2016, and May 4, 2017, after which the mediator made a mediator's proposal for xxxxxxxxxa to pay $2.85 million to resolve the Parties' disputes and the Coverage Litigation;

WHEREAS, AdCare has agreed to pay $5.2 million to resolve all of the Underlying Lawsuits in exchange for a complete release and dismissal of the Underlying Lawsuits with prejudice (the “Settlement”);

WHEREAS, the Parties now desire to resolve all claims and issues between them related to the Policies, the Underlying Lawsuits, the Smith Action, the Settlement, and the Coverage Litigation, including the Counterclaim;

NOW THEREFORE, in consideration of the mutual promises herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Recitals . The recitals above are incorporated herein and by this reference made a part of this Agreement.

2. Settlement Payment .

(a) Within seven days after the Effective Date, xxxxxx will pay the sum of two million eight hundred and fifty thousand dollars and zero cents ($2,850,000.00) by check made payable to “Law Office of Travis Berry Trust Account” to be delivered to Travis Berry & Associates PLLC, 901 Main Street, Arkadelphia, AR 71923.

(b) The “Effective Date” means the date on which the last of all of the following have occurred:

(i)

receipt by xxxxxxx of fully executed mediation agreements for each of the Underlying Lawsuits in a form acceptable to xxxxxxxxxa;

(ii)

receipt by xxxxxxx of a fully executed version of this Agreement; and

(iii)

receipt by xxxxxxxx of a W-9 for “Law Office of Travis Berry & Associates PLLC Trust Account.”

(c) If the Effective Date does not occur by May 1, 2018, this Agreement shall be considered null, void, and of no effect, and the Parties shall be returned to the status quo ante as of the date of this Agreement (except for this Paragraph 2(c) and 11, which shall survive).

3. Exhaustion . The Parties agree that xxxxxx has exhausted the Policies' respective limits of liability and has no further obligations under the Policies. AdCare shall not tender any other claim or matter to xxxxxxx, provide notice to xxxxxxx under the Policies of any claim or circumstances which may subsequently give rise to a claim, or seek coverage for any other claim or matter under the Policies. The Parties agree that, except as provided in this Agreement, the Policies shall not provide any coverage or respond in any manner to the Underlying Lawsuits, the Smith Action, or any other claim, matter, or allegation that has been made or may be made in the future against AdCare or any other party who is an Insured as defined by the Policies.

4. A d Care Releases . Except for the promises and obligations set forth in this Agreement, AdCare hereby releases and discharges xxxxxxxx and its respective past, present and future predecessors, successors, parents, subsidiaries, affiliates, assigns, representatives, directors, officers, employees, shareholders, partners, principals, agents, attorneys, spouses, insurers and reinsurers, and any person acting on its behalf, and the predecessors, successors and assigns of same

(“ xxxxxxx Related Parties”), from any and all past, present and future claims, demands, obligations, and/or causes of action of any kind, type or nature whatsoever, whether known or unknown, whether suspected or unsuspected, whether concealed or not concealed, whether fixed or contingent, whether asserted or unasserted, whether matured or unmatured, and whether direct or consequential arising out of, related to, based upon, by reason of, or in any way involving the Policies; any claim or lawsuit tendered under the Policies, including any and all claims based upon, arising out of, related to, by reason of, or in any way involving the Underlying Lawsuits or the Settlement; the Smith Action; or the Coverage Litigation, including the Counterclaim (collectively, the “AdCare Released Matters”), as well as any claim for misrepresentation, fraud, indemnity, contribution, breach of contract, breach of duty, negligence, “bad faith,” violation of statute or regulation, unfair or improper claims handling, or damages of any kind whatsoever arising out of or relating to the AdCare Released Matters or any right to recoup any amount paid by any Party toward the defense of the Underlying Lawsuits or the Smith Action.

5. xxxxx Releases . Except for the promises and obligations set forth in this Agreement, xxxxxx hereby releases and discharges AdCare and its respective past, present and future predecessors, successors, parents, subsidiaries, affiliates, assigns, representatives, directors, officers, employees, shareholders, partners, principals, agents, attorneys, spouses, insurers and reinsurers, and any person acting on its, his, or her behalf, and the predecessors, successors and assigns of same (the “AdCare Related Parties”), from any and all past, present and future claims, demands, obligations, and/or causes of action of any kind, type or nature whatsoever, whether known or unknown, whether suspected or unsuspected, whether concealed or not concealed, whether fixed or contingent, whether asserted or unasse1ied, whether matured or unmatured, and whether direct or consequential arising out of, related to, based upon, by reason of, or in any way involving the Policies; any claim or lawsuit tendered under the Policies, including any and all claims based upon, arising out of, related to, by reason of, or in any way involving the Underlying Lawsuits or the Settlement; the Smith Action; or the Coverage Litigation, including the Counterclaim (collectively, the “xxxxxx Released Matters”), as well as any claim for misrepresentation, fraud, indemnity, contribution, breach of contract, breach of duty, negligence, “bad faith,” violation of statute or regulation, unfair or improper claims handling, or damages of any kind whatsoever arising out of or relating to the Columbia Released Matters or any right to recoup any amount paid by any Party toward the defense of the Underlying Lawsuits or the Smith Action.

6. Dismissal of the Coverage Litigation . Within seven days after the Effective Date, xxxxxx and the AdCare Defendants will dismiss the Coverage Litigation, including the Counterclaim, with prejudice, with each Party to bear its own fees and costs.

7. Waiver of Unknown Claims . In exchange for this Agreement, it is the intention of the Parties in executing this Agreement that this instrument shall be effective as a full and final accord and satisfaction and a general release of each and every Released Matter except as specifically set forth by the terms of this Agreement. In furtherance of this intention, the Parties, for themselves and their respective Related Parties, expressly waive any and all rights that might be claimed by reason of fraudulent inducement and any and all rights under Section 1542 of the California Civil Code with respect to the AdCare Released Matters and the xxxxxxxx Released Matters, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

The Parties acknowledge and agree that this waiver is an essential and material term of this Agreement and without such waiver the Agreement would not have been entered into.

8. Denial of Liability/No Admission . This Agreement is entered into for the sole purpose of resolving and compromising disputed claims, and nothing contained in this Agreement is to be construed as an admission by any Party. By executing this Agreement, the Parties are not admitting the nature, amount, or cause of damages claimed, if any. Further, any and all liability for wrongful or improper conduct is hereby expressly denied by all Parties.

9. Representations and Warranties .

(a) Each Party represents and warrants that it, he, or she has neither sold, assigned, pledged nor otherwise transferred any interest in the claims, demands, actions, or causes of action that are the subject of this Agreement.

(b) Regional Health Properties, Inc. (“RHP”) represents that, if it (or any entity comprising RHP) becomes a debtor or debtor-in-possession in a bankruptcy proceeding, a bankruptcy court would not find this Agreement or any of the transactions contemplated hereby or consummated in accordance herewith to be an avoidable fraudulent transfer under Sections 548(a)(1)(B) or 544 of Title 11 of the United States Code (the “ Bankruptcy Code ”). RHP also represents that in the event RHP (or any entity comprising RHP) is not a debtor under the Bankruptcy Code, a federal or state court of competent jurisdiction would not find this Agreement or any of the transactions contemplated hereby or consummated in accordance herewith to be avoidable under the Georgia Uniform Voidable Transactions Act, O.C.G.A. sections 18-2-70, et seq.

(c) Each entity comprising RHP represents and warrants that, neither this Agreement nor the transactions contemplated hereby or consummated in accordance herewith, are made with any actual intent to hinder, delay or defraud any creditor of RHP, or are made with any intent to defraud or deceive any person.

(d) RHP represents and warrants that the consideration received under this Agreement constitutes reasonably equivalent value in exchange for (i) any rights or claims that RHP has or may

have under the Policies relating to the Underlying Lawsuits, and (ii) any other consideration exchanged by RHP hereunder.

(e) RHP represents and warrants that, as of the date of this Agreement, (i) RHP is not Insolvent, and (ii) the consummation of the transactions contemplated by this Agreement will not render RHP Insolvent. For the purposes of this Section 7(e) , “Insolvent” shall have the meaning provided in Section 101(32) of the Bankruptcy Code.

(f) RHP represents and warrants that, as of the date of this Agreement, (i) RHP is not engaged in any business or transaction, or about to engage in any business or transaction, for which its remaining property was unreasonably small capital; (ii) RHP does not intend to incur, and does not believe it will incur, debts beyond its ability to pay as they mature; and (iii) RHP has not entered into this Agreement, or the transactions contemplated hereby or consummated in accordance herewith, for the benefit of an Insider, under an employment contract and not in the ordinary course of RHP's business. For the purposes of this Section 7(f) , “Insider” shall have the meaning provided in Section 101(31) of the Bankruptcy Code.

(g) The List of Liabilities attached hereto as Exhibit A is true and correct as of November 30, 2017 and represents and accurate and comprehensive statement of liabilities of RHP as of such date, prepared in accordance with Generally Accepted Accounting Principles. This Section 7(g) is certified as true and correct by Brent Morrison , who is the duly appointed interim chief executive officer of Regional Health Properties, Inc.

(h) Each Party represents and warrants that the undersigned signature and execution of this Agreement is made and undertaken by an individual authorized to execute this Agreement.

(i) Each Party represents and warrants that this Agreement is made and executed by each Party of such Party's own free will and in accordance with such Party's own judgment and upon advice of counsel. No Party has been influenced, coerced, or induced to make this compromise and settlement by any improper action by any other Party or its counsel.

(j) Each Party represents and warrants that this Agreement was negotiated and drafted with input from all of the Parties and their counsel.

10. Integration . This Agreement supersedes all prior or contemporaneous agreements, understandings, representations, warranties, negotiations and discussions, whether oral or written, of the Parties or their agents and representatives, except as specifically set forth herein. Each Party acknowledges and agrees that it has not relied on any representations made by any other Party (or its agents or representatives) in deciding to enter into this Agreement, except as expressly provided by this Agreement. No supplements, modifications, waiver, or terminations of this Agreement shall be binding unless executed in writing by the Parties to be bound thereby. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision herein (whether or not similar), and no such waiver shall constitute a continuing waiver unless expressly provided.

11. Confidentiality . The Parties shall keep the facts and terms of this settlement strictly confidential and will not disclose such information to any third party except: (a) as necessary to seek the dismissal of the Coverage Litigation, including the Counterclaim; (b) as required by law or court order; (c) as necessary to enforce this Agreement; (d) as reasonably necessary to enforce any Party's

rights against any other person or entity; (e) as necessary and in confidence to their respective legal counsel, officers, directors, employees, auditors, regulators, insurers, reinsurers or financial and tax advisors; or (f) as specifically consented to by all other Parties in writing.

12. Interpretation . As the Parties acknowledge and agree that each has been given the opportunity independently to review this Agreement with legal counsel and agree to the particular language of the provisions, this Agreement shall not be interpreted by rules of construction providing for interpretation against the drafter.

13. Binding on Successors . All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their assigns and successors.

14. Execution in Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. This Agreement shall be effective and finally executed when identical counterparts, which when taken together bear the signature of all Parties, have been delivered to counsel or representatives for all the Parties, either by e-mail in .pdf, facsimile, overnight delivery service, or U.S. mail. Copies of all or part of this Agreement, including signatures thereto, which are transmitted by facsimile or by e-mail in .pdf shall be presumed valid.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the Parties duly executed this Agreement as follows:

Xxxxxxxx Company

By:	xxxxxxxxxxxx
Printed Name:	xxxxxxxxxxxx
Title:	AVD
Date:	February 13 ^th , 2018

AdCare Health Systems, inc.

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Regional Health Properties, inc.

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

AdCare Administrative Services, llc

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Woodland Hills HC Nursing, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Woodland Hills HC Property Holdings, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

AdCare Operations, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

AdCare Administrative Services, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

APH&R Nursing LLC d/b/a Cumberland Health and Rehabilitation Center

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

APH&R Property Holdings, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Little Rock HC&R Nursing LLC d/b/a West Markham Sub Acute and Rehabilitation Center

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Little Rock HC&R Property Holdings, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Northridge HC&R Nursing, LLC d/b/a Northridge Healthcare and Rehabilitation

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Northridge HC&R Nursing property Holdings, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

Coosa Nursing ADK, LLC

By:	/s/ Brent Morrison
Printed Name:	Brent Morrison
Title:	Interim CEO
Date:	March 9 ^th , 2018

EXHIBIT A

Exhibit 10.8

AdCare Balance Sheet Detail

For more information, visit www.regionalhealthproperties.com .

Exhibit 10.9

THIRD AMENDMENT TO PROMISSORY NOTE

THIS THIRD AMENDMENT TO PROMISSORY NOTE (this " Amendment ") is made as of April 30, 2018 (the " Amendment Date ") by and between QC Property Holdings, LLC , a Georgia limited liability company (“ Borrower ”), and Congressional Bank , a Maryland chartered commercial bank, and its successors and assigns (collectively, “ Lender ”), as successor in interest to Housing & Healthcare Funding, LLC , a Delaware limited liability company.

R E C I T A L S :

A. Pursuant to the terms and conditions of that certain Loan and Security Agreement dated as of September 27, 2013, as amended by that certain First Amendment to Loan and Security Agreement, Consent and Release dated December 31, 2015, as further amended by that certain Second Amendment to Loan and Security Agreement dated September 19, 2016, as further amended by that certain Third Amendment to Loan and Security Agreement dated May 12, 2017, as further amended by that certain Fourth Amendment to Loan and Security Agreement dated August 10, 2017, as further amended by that certain Fifth Amendment to Loan and Security Agreement dated December 29, 2017 and as further amended by that certain Sixth Amendment to Loan and Security Agreement dated March 2, 2018 (as may be further amended, restated or replaced from time to time, collectively, the “ Loan Agreement ”) between Borrower and Lender, Lender has extended to Borrower a loan in the original principal amount of Five Million and no/100 Dollars ($5,000,000.00) (the “ Loan ”). Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement.

B. The Loan is evidenced by that certain Promissory Note dated as of September 27, 2013, as amended by that certain First Amendment to Promissory Note dated September 19, 2016 and by that certain Second Amendment to Promissory Note dated March 2, 2018, made by Borrower payable to the order of Lender in the maximum principal amount of Five Million and no/100 Dollars ($5,000,000.00) (as may be further amended, restated and/or replaced from time to time, collectively, the " Note ").

C. The Loan is secured by a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated as of September 27, 2013 by Borrower to and for the benefit of Lender (as amended, restated and/or replaced from time to time, the " Mortgage ").

D. The Loan Agreement, the Note, the Mortgage, and any other document now or hereafter given to evidence or secure payment of the Note or delivered to induce Lender to disburse the proceeds of the Loan, as such documents may hereafter be amended, restated and/or replaced from time to time, are hereinafter collectively referred to as the " Loan Documents ".

E. Borrower and Lender desire to amend the Loan Documents to make certain modifications, as more fully provided for herein.

{1140/028/00277821.2}

Quail Creek

Third Amendment to Promissory Note

Signature Page

Exhibit 10.9

AGREEMENTS :

NOW, THEREFORE , in consideration of (i) the facts set forth hereinabove (which are hereby incorporated into and made a part of this Agreement) and (ii) for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Amendments to Note . The Note is hereby amended as follows:

(a) Section 1 is hereby amended by replacing the phrase “April 30, 2018” with “May 31, 2018,” provided, however that upon satisfaction of all Extension Conditions (as defined in the Loan Agreement), the phrase May 31, 2018 will automatically be replaced by April 30, 2019.

(b) Section 3.1 of the Note is hereby deleted in its entirety and replaced by the following:

(a) Consecutive monthly payments of principal and interest accrued on the outstanding principal balance of the Loan in the amount of Fifty Thousand and No/100 Dollars ($50,000.00) commencing on June 1, 2018, and on the first (1st) day of each month thereafter, through and including the month in which the Maturity Date occurs, shall be due and payable.

(b) The unpaid principal balance of this Note, if not sooner paid or declared to be due in accordance with the terms hereof, together with all accrued and unpaid interest thereon and any other amounts due and payable hereunder or under any other Loan Document, shall be due and payable in full on the Maturity Date.

2. The Note shall continue to bear interest on the unpaid principal amount thereof from time to time outstanding from the date of first disbursement until the Maturity Date, or until maturity due to acceleration or otherwise and, after maturity, until paid, at the rates per annum and upon the terms specified in the Loan Agreement.

3. The Borrower certifies and warrants that the Note, as amended hereby, constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.

4. This Amendment shall be attached to and made a part of the Note.

5. All other terms, provisions and conditions of the Note, as modified hereby, are hereby confirmed, ratified and approved. Upon the effectiveness of this Amendment, each reference in the Note to “this Note”, “hereunder”, “hereof”, “herein” or words of like import shall mean and be a reference to the Note, as modified by this Amendment.

[Signature Page Follows]

{1140/028/00277821.2}

Quail Creek

Third Amendment to Promissory Note

Signature Page

IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Promissory Note dated as of the day and year first above written.

LENDER :		BORROWER :

CONGRESSIONAL BANK,		QC PROPERTY HOLDINGS, LLC,
a Maryland chartered commercial bank		a Georgia limited liability company


By:	/s/ Amy Heller	By:
Name:	Amy Heller	Name:	E. Clinton Cain
Its:	Authorized Signatory	Its:	Manager

Quail Creek

Third Amendment to Promissory Note

Signature Page

IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Promissory Note dated as of the day and year first above written.

LENDER :		BORROWER :

CONGRESSIONAL BANK,		QC PROPERTY HOLDINGS, LLC,
a Maryland chartered commercial bank		a Georgia limited liability company


By:		By:	/s/ E. Clinton Cain
Name:	James H. Peterson	Name:	E. Clinton Cain
Its:	Authorized Signatory	Its:	Manager

Quail Creek

Third Amendment to Promissory Note

Signature Page

Exhibit 10.10

FORBEARANCE AGREEMENT

This FORBEARANCE AGREEMENT (as amended, restated, amended or restated, supplemented or otherwise modified from time to time, this “ Agreement ”) is entered into as of May 18, 2018 by and among CP PROPERTY HOLDINGS, LLC, a Georgia limited liability company, as borrower (the “ CP Borrower ”), NORTHWEST PROPERTY HOLDINGS, LLC, a Georgia limited liability company, as borrower (the “ Northwest Borrower ”), ATTALLA NURSING ADK, LLC, a Georgia limited liability company, as borrower (the “ Attalla Borrower ”), ADCARE PROPERTY HOLDINGS, LLC, a Georgia limited liability company, as borrower and guarantor (“ AdCare Holdco ”; the CP Borrower, the Northwest Borrower, the Attalla Borrower and AdCare Holdco are collectively referred to herein as “ Borrowers ” and each as a “ Borrower ”), HEARTH & HOME OF OHIO, INC., a Georgia corporation, as guarantor (the “ HHO Guarantor ”), REGIONAL HEALTH PROPERTIES, INC. a Georgia corporation, as guarantor (the “ RHP Guarantor ”; the HHO Guarantor, AdCare Holdco and the RHP Guarantor are collectively referred to herein as “ Guarantors ” and each as a “ Guarantor ”), and PINECONE REALTY PARTNERS II, LLC, a Delaware limited liability company, as lender (together with its successors and assigns, the “ Lender ”).

RECITALS

WHEREAS, the Credit Parties and the Lender are parties to that certain Loan Agreement, dated as of February 15, 2018 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”);

WHEREAS, as of the date hereof, certain Events of Default under the Loan Agreement have occurred and are continuing; and

WHEREAS, upon the request of the Credit Parties, the Lender, subject to the terms and conditions set forth herein, has agreed to forbear during the Forbearance Period (as defined below) from exercising certain of its default-related rights and remedies against the Credit Parties with respect to the Specified Defaults (as defined below).

NOW, THEREFORE, in consideration of the foregoing, the terms, covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Definitions . Unless otherwise defined herein, all capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Loan Agreement, as amended, supplemented or otherwise modified by this Agreement.

SECTION 2. Forbearance; Forbearance Default Rights and Remedies .

(a) Specified Defaults . For purposes of this Agreement, the term “ Specified Defaults ” shall mean the following, collectively, and the term “ Specified Default ” shall mean any of the following:

(i) the Events of Default under Section 11.1(c) of the Loan Agreement as a result of the Borrowers’ failure to comply with the following provisions of the Loan

Agreement: (A) Sections 8.17(a) and 8.29 of the Loan Agreement as a result of the entry into that certain Second Amendment to Master Sublease Agreement among ADK Georgia, LLC, OS Tybee, LLC, SB Tybee, LLC, and JV Jeffersonville, LLC without the prior written consent of the Lender (the “ Peach Amendment Default ”); (B) Section 10.2(n) of the Loan Agreement as a result of the Credit Parties’ failure to deliver copies of all reports and notices provided by the Operators to the RHP Parties under the Operating Leases (the “ Reporting Default ”); (C) Section 10.3(c) of the Loan Agreement as a result of the Borrowers’ failure to furnish to the Lender a certificate of an Authorized Officer for the fiscal year ended December 31, 2017 stating that no Default or Event of Default by the RHP Guarantor exists as of the filing date of its Form 10-K for the fiscal year ended December 31, 2017, or if any such Default or Event of Default does exist, specifying the nature and extent thereof and what action the RHP Guarantor proposes to take with respect thereto (the “ Certificate Default ”); (D) Sections 10.2(a) , 10.2(b) , 10.2(g) , 10.2(j) , 10.2(l) , and 10.2(m) of the Loan Agreement as a result of (collectively, the “ DPNA Notice Defaults ”) (i) Borrowers’ failure to give prompt notice of the denial of payment for new admissions in force at the Healthcare Facility owned by QC Property Holdings, LLC (“ Quail Creek ”) and the Healthcare Facility owned by Northwest Property Holdings, LLC (“ Northwest ”), and (ii) Borrowers’ failure to give notice of ongoing correspondence and notice of pending decertification of the Healthcare Facilities owned by Quail Creek and Northwest from participation in one or more Government Reimbursement Program s ; (E) Section 7.11(j) of the Loan Agreement as a result of Borrowers’ failure to provide copies of plans of correction filed with the applicable Governmental Authority and evidence of the filings thereof in connection with the Healthcare Facilities owned by Quail Creek and Northwest ; (F) Section 8.18 of the Loan Agreement as a result of Quail Creek entering into the Seventh Amendment to Loan and Security Agreement with Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC, and the Third Amendment to Promissory Note with Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC (the “ Debt Amendment Default ”); and (G ) Section 10.2(f) of the Loan Agreement as a result of the applicable Credit Parties’ failure to give notice of the Reporting Default, the Beacon Ohio Lease Defaults, the Post-Closing Obligations Defaults, the Operator Insurance Defaults, the Operator Estoppel Defaults, the CP SNDA Default, the Attalla SNDA Default, the Northwest SNDA Default, the Northwest DPNA Default, t he Quail Creek DPNA Default, the He althcare Authorizations Default, the Debt Amendment Default and the Symmetry Lease Defaults (each as defined herein).

(ii) the Event of Default under Section 11.1(d) of the Loan Agreement as a result of (A) the representation and warranties made by the Credit Parties pursuant to Sections 6.5 and 6.10 of the Loan Agreement having been false at the time made due to there being an event or circumstance having occurred or existing that with the passage of time or giving of notice would constitute a default under the following Operating Leases as a result of non-payment of rent thereunder by the lessees thereunder (collectively, the “ Beacon Ohio Lease Defaults ”): (1) Lease Agreement, dated August 1, 2015, by and between Eaglewood Village, LLC and EW ALF, LLC; (2) Lease Agreement, dated August 1, 2015, by and between RMC HUD Master Tenant, LLC and PV SNF, LLC; (3) Lease Agreement, dated August 1, 2015, by and between 2014 HUD Master Tenant, LLC and EW SNF, LLC; and (4) Lease Agreement, dated August 1, 2015, by and between AdCare Health Systems, Inc. and CC SNF, LLC, (B) the representations and warranties made by

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the Credit Parties pursuant to Sections 6.5 , 6.10 and 6.25 of the Loan Agreement having been fal se at the time made due to the limitation, suspension or revocation of a Healthcare Authorization by a Governmental Authority at Quail Creek (the “ Quail Creek R&W Default ”) and (C) the representations and warranties made by the Credit Parties pursuant to Section 6.19 of the Loan Agreement having been false at the time made due to inaccuracies in the organizational chart included in Schedule 6.19 to the Loan Agreement ;

(iii) the Events of Default under Section 11.1(i) of the Loan Agreement due to the denial of payment for new admissions in force at each of Quail Creek and Northwest (the “ Healthcare Authorizations Default ”);

(iv) the Events of Default under Section 11.1(s) of the Loan Agreement as a result of the Borrowers’ failure to deliver or satisfy the following post-closing obligations set forth on Schedule 5.3 to the Loan Agreement within the time periods set forth therein (collectively, the “ Post-Closing Obligations Defaults ”): (A) Item 5 related to Tenant Estoppels; (B) Item 6 related to SNDAs; (C) Item 7 related to insurance coverage; (D) Item 8 related to the resolution of the Actions (as defined therein); (E) Item 9 related to intercompany Indebtedness; (F) Item 10 related to the Lease Assignments; (G) Item 15 related to Provider Network Agreements; (H) Item 16 related to Managed Care Agreements; (I) Item 17 related to UCC terminations; and (J) Item 18 related to written opinions by Borrowers’ legal counsel; and

(v) the Events of Default under Section 11.1(w) of the Loan Agreement as a result of: (A) the Beacon Ohio Lease Defaults; (B) an “Event of Default” under Section 11(g) of that certain Lease Agreement, dated as of September 22, 2014 (as amended by that certain First Amendment to Lease Agreement, dated as of November 21, 2014, and that certain Second Amendment to Lease Agreement, dated as of September 14, 2015, the “ Attalla Lease ”), by and between Attalla Nursing ADK, LLC and C.R. of Attalla, LLC (the “ Attalla Tenant ”) due to the filing by the Attalla Tenant of a voluntary petition under federal bankruptcy law for debtor’s relief (the “ Attalla Bankruptcy Default ”); (C) an “Event of Default” under Sections 12(b) and 12(c) of that certain Sublease Agreement, dated as of May 1, 2015 (as amended by that certain First Amendment to Sublease Agreement, dated as of December 1, 2015, the “ Northwest Lease ”), by and between NW 61st Nursing, LLC and Southwest LTC-NW OKC, LLC as a result of the denial of payment for new admissions at Northwest (the “ Northwest DPNA Default ”); (D) an “Event of Default” under Sections 12(b) and 12(c) of that certain Sublease Agreement, dated as of May 1, 2015 (as amended by that certain First Amendment to Sublease Agreement, dated December 1, 2015, the “ Quail Creek Lease ”), by and between QC Nursing, LLC and Southwest LTC-Quail Creek, LLC as a result of the denial of payment for new admissions in force at Quail Creek (the “ Quail Creek DPNA Default ”); (E) the “Events of Default” under each of the Operating Leases listed in Exhibit A hereto due to the failure by the Operator thereunder to (i) satisfy the insurance requirements of such Operating Lease (collectively, the “ Operator Insurance Defaults ”) and (ii) deliver to the Credit Parties fully executed Estoppel Certificates as requested by Credit Parties (collectively, the “ Operator Estoppel Defaults ”), as applicable; (F) an “Event of Default” under Section 12(f) of that certain Sublease Agreement, dated as of February 18, 2015 (the “ CP Lease ”), by and between CP Nursing, LLC and C.R. of College Park, LLC (the “ CP Tenant ”) due to the

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CP Tenant’s failure to comply with the provisions of Section 15 of the CP Lease (the “ CP SNDA Default ”); (G) an “Event of Default” under Section 11(f) of the Attalla Lease as a result of the Attalla Tenant’s failure to comply with the provisions of Section 14 of the Attalla Lease (the “ Attalla SNDA Default ”); (H) an “Event of Default” under Section 12(f) of the Northwest Lease as a result of the Northwest Tenant’s failure to comply with the provisions of Section 15 of the Northwest Lease (the “ Northwest SNDA Default ”) ; and (I) an “ Event of Default” under each of the following Operating Leases as a result of non-payment of rent thereunder by the lessees thereunder (collectively, the “ Symmetry Lease Defaults ”): (1) Lease Agreement, dated as of February 27, 2015 (as amended by that certain First Amendment to Lease Agreement, dated as of March 20, 2015), by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC; and (2) Lease Agreement, dated as of February 27, 2015 (as amended by that certain First Amendment to Lease Agreement, dated as of March 20, 2015, and that certain Second Amendment to Lease Agreement, dated as of May 31, 2015), by and between Mountain Trace Nursing ADK, LLC and Blue Ridge on the Mountain, LLC .

Each Borrower and each other Credit Party hereby acknowledges and agrees that each of the Specified Defaults is continuing and in existence as of the date of this Agreement, notwithstanding any cure periods set forth in the Loan Agreement (it being understood and agreed that all applicable cure periods in the Loan Agreement have expired prior to the date hereof).

(b) Effective as of the Forbearance Effective Date (as hereinafter defined), the Lender hereby agrees, that during the Forbearance Period, except as otherwise provided herein, the Lender will forbear from the exercise of any and all default-related rights and remedies (including, without limitation, (x) the acceleration of the outstanding Loans or any obligations of the Credit Parties under the Loan Agreement or any other Loan Document and (y) charging interest at the Default Rate pursuant to Section 2.2(b)(i) of the Loan Agreement) against the Borrowers and the other Credit Parties under the Loan Agreement, the other Loan Documents and/or applicable law to the extent the availability of such remedies arises from the Specified Defaults. As used herein, the term “ Forbearance Period ” shall mean the period beginning on the Forbearance Effective Date and ending upon the occurrence of a Termination Event (as hereinafter defined). As used herein, “ Termination Event ” shall mean the earlier to occur of (i) July 20, 2018 at 11:59 p.m. New York time and (ii) the occurrence of any Forbearance Default (as hereinafter defined). As used herein, the term “ Forbearance Default ” shall mean the occurrence of any one or more of the following:

(i) the occurrence of any Default (other than any Specified Default or any Default under Section 10.3(b) of the Loan Agreement due to the failure by the RHP Guarantor to furnish to Lender a Form 10-Q for the fiscal quarter ended March 31, 2018 and the other information required by Section 10.3(b) of the Loan Agreement, in each case, by no later than May 30, 2018) or Event of Default (other than any Specified Default) under and as defined in the Loan Agreement;

(ii) the failure of any representation or warranty made by the Borrowers or any other Credit Party under or in connection with this Agreement, the AdCare Opco Guaranty, the AdCare Opco Pledge Agreement or any of the Post-Forbearance Effective Date

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Agreements (each, as defined herein) to be true and correct in any respect as of the date when made;

(iii) the failure by any Borrower or any of the other Credit Parties to perform or comply with any of its covenants or obligations contained in this Agreement (including, without limitation, any of the covenants or obligations contained in Section 5);

(iv) 5:00 p.m. (New York City time) on July 6, 2018, if the Credit Parties shall have failed, prior to such time, to enter into a support agreement with the Lender, pursuant to which the Lender agrees to support a transaction or series of transactions (such transaction or series of transactions, the “ Specified Transaction ”) that remedies the Specified Defaults through a refinancing of the Loans or otherwise, which support agreement shall be in form and substance and shall contain terms and conditions (including terms and conditions regarding the Specified Transaction) that are acceptable to the Lender; provided that the Specified Transaction shall be commenced no later than July 16, 2018;

(v) any Borrower or any other Credit Party enters into any agreement or understanding outside the ordinary course of business (including, without limitation, an agreement to pursue a financing transaction (debt or equity), offer to purchase, acquisition, merger, consolidation, business combination, joint venture, sale of substantially all assets or equity interests, dissolution, wind-up, liquidation, reorganization, or restructuring relating to any such Borrower or any other Credit Party) that is not acceptable to the Lender or publicly announces its intention to do any of the foregoing;

(vi) any third-party announces an intention to acquire (directly or indirectly) or makes an offer to acquire (directly or indirectly), or makes a public or private offer to acquire (directly or indirectly), beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) of more than 35% of the equity securities of RHP Guarantor that are entitled to vote for members of the board of directors or equivalent governing body of RHP Guarantor; or

(vii) any Borrower or any other Credit Party takes any action in any manner to repudiate or assert a defense to this Agreement, the Loan Agreement or any of the other Loan Documents or any liabilities or obligations (including any Obligations) under this Agreement, the Loan Agreement or any of the other Loan Documents or asserting any claim or cause of action or initiating any judicial, administrative or arbitration proceeding against the Lender related to the foregoing.

(c) Upon the occurrence of a Termination Event, the agreement of the Lender to forbear from exercising its default-related rights and remedies shall immediately and automatically terminate without the requirement of any demand, presentment, protest, or notice of any kind, all of which the Borrowers and each other Credit Party hereby waive. The Borrowers and each other Credit Party agree that the Lender may at any time after the occurrence of a Termination Event proceed to exercise any and all of its rights and remedies under any or all of the Loan Agreement, any other Loan Document and/or applicable law, including, without limitation, any and all rights and remedies that the Lender is, or may become entitled to, as a

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consequence of any Default or Event of Default that ha s occurred prior to, during or after the Forbearance Period (including the Specified Defaults), all of which rights and remedies are fully reser ved by the Lender .

SECTION 3. Conditions . This Agreement shall be effective on the first day (the “ Forbearance Effective Date ”) upon which each of the following conditions precedent shall have been satisfied:

(a) (i) the Lender shall have received a counterpart signature of the Credit Parties to this Agreement and (ii) the Credit Parties shall have received a counterpart signature of the Lender to this Agreement;

(b) AdCare Operations, LLC (“ AdCare Opco ”) shall have executed and delivered to the Lender (x) the Guaranty Agreement attached hereto as Exhibit B , pursuant to which AdCare Opco shall have guaranteed all Obligations and other amounts outstanding under the Loan Agreement from time to time (the “ AdCare Opco Guaranty ”) and (y) the Pledge Agreement attached hereto as Exhibit C , pursuant to which AdCare Opco shall have secured the AdCare Opco Guaranty by granting a security interest in the Pledged Collateral (as defined in Exhibit C ) (the “ AdCare Opco Pledge Agreement ”);

(c) the Credit Parties shall have delivered to the Lender such certificates of resolutions or other action, incumbency certificates and/or other certificates of Authorized Officers of each Credit Party as Lender may require evidencing the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with this Agreement, the AdCare Opco Guaranty and the AdCare Opco Pledge Agreement; and

(d)the Borrowers shall have paid to Lender a non-refundable payment as additional interest, payable in-kind by increasing the outstanding principal amount of Loans held by such Lender by an amount equal to 2.50% of the Loans outstanding on the date hereof (with such increase being applied to each outstanding Loan on a pro rata basis in accordance with the outstanding principal amount thereof prior to such payment), whereupon from and after such date such amounts shall be added to and constitute Obligations (the “ PIK Payment ”).

SECTION 4. Representations and Warranties . Each Credit Party represents and warrants to the Lender, on the Forbearance Effective Date, that the following statements are true and correct in all material respects on and as of such date:

(a) the execution, delivery and performance of this Agreement has been duly authorized by all requisite corporate or limited liability company action on the part of such Credit Party; this Agreement has been duly executed and delivered by such Credit Party; and this Agreement constitutes a valid and binding agreement of such Credit Party, enforceable against such Credit Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability;

(b) no approval, consent, exemption, authorization or other action by, or material notice to, or material filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower or any other Credit Party of this Agreement;

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(c) the execution, delivery and performance by each Borrower and the other Credit Part ies of this Agreement do not (i) contravene the terms of the Borrowers ’ or any other Credit Part y ’ s certificate or articles of incorporation, certificate of formation, limited liability company agreement or by-laws (or equivalent constitutional, organizational and/or formation documents), as applicable; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, (A) any indenture, mortgage, deed of trust, Loan Agreement or loan agreement, or any other material agreement, contract or instrument to which any Borrower or any other Credit Part y is a party or by which it or any of its properties or assets is bound or to which it may be subject or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which any Borrower or any other Credit Part y or the properties or assets of any Borrower or any other Credit Part y is subject; (iii) violate any applicable law; or (iv) result in a limitation on any governmental approvals applicable to the business, operations or properties of any Borrower or any other Credit Part y;

(d) all of the Obligations are secured by a legal, valid and enforceable first priority security interest in and Lien on the Collateral in favor of the Lender;

(e) there are no offsets, counterclaims or defenses to the liabilities or obligations (including any Obligations) under any of the Loan Documents, or to the rights, remedies or powers of the Lender in respect of any of the Obligations or any of the Loan Documents;

(f) the execution and delivery of this Agreement has not established any course of dealing between the parties hereto or created any obligation, commitment or agreement of the Lender with respect to any future modification, amendment, waiver, forbearance or restructuring with respect to the Obligations, the Collateral or any of the Loan Documents;

(g) except for the Specified Defaults, no Default or Event of Default has occurred or is continuing under this Agreement, the Loan Agreement or any other Loan Document; and

(h)after giving effect to the PIK Payment on the Forbearance Effective Date, (i) the outstanding Principal amount of the Loan to CP Borrower is $2,562,500, (ii) the outstanding Principal amount of the Loan to Northwest Borrower is $2,050,000, (iii) the outstanding Principal amount of the Loan to Atalla Borrower is $8,456,250 and (iv) the outstanding Principal amount of the Loan to AdCare Holdco is $3,587,500.

SECTION 5. Covenants; Loan Agreement Amendment .

(a) Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Loan Agreement is hereby amended by:

(i) Item 10 in Schedule 5.3 of the Loan Agreement is hereby amended and restated as follows:

“10. [Reserved]”.

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(ii) amending Schedule 1 of the Loan Agreement by adding the following to the end of Item 1 appearing therein:

“(e) All Indebtedness outstanding under (i) the Sixth Amendment to Loan and Security Agreement, dated as of March 2, 2018, between QC Property Holdings, LLC and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC and (ii) the Second Amendment to Promissory Note, dated as of March 2, 2018, by and between QC Property Holdings, LLC, and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC.

(f) All Indebtedness outstanding under (i) the Seventh Amendment to Loan and Security Agree ment, dated as of April 30, 2018, between QC Property Holdings, LLC and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC; and (ii) the Third Amendment to Promissory Note, dated as of April 30, 2018, by and between QC Property Holdings, LLC, and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC.”

(iii) amending and restating Section 8.18 of the Loan Agreement in its entirety as follows:

“Cancel or otherwise forgive, release, extend, amend or otherwise modify any claim or debt owed to it by any Person, except for reasonably equivalent consideration and in the ordinary course of its business.”

(iv) deleting the reference to “first anniversary of the Closing Date” in Section 2.10(e) of the Loan Agreement and inserting “date that is thirteen (13) months after the Closing Date” in lieu thereof;

(v) amending the second sentence of Section 2.10(f) of the Loan Agreement by deleting the period at the end of such sentence and inserting the following in lieu thereof:

“; provided, however that the Break-Up Fee shall be due and payable only to the extent that (x) any Loan is prepaid or repaid in full (other than to the extent such prepayment or repayment is financed with the proceeds of Indebtedness provided by Lender or any of its Affiliates or upon the consummation of a Change of Control) or is accelerated as a result of an Event of Default under Section 11.1(c) due to any RHP Party incurring Indebtedness in violation of Article VIII or (y) upon the occurrence of a Change of Control, including an acceleration as a result of an Event of Default pursuant to Section 11.1(l) due to such Change of Control.”

(vi) amending and restating Section 2.10(d) of the Loan Agreement in its entirety as follows:

“(d) Prepayment Premium/Break-Up Fee . Each Borrower shall pay the following amounts to the Lender: (i) upon any repayment or prepayment by any Borrower of any principal of its Loan, including in connection with an acceleration of such Loan (expressly including acceleration as a result of an Event of Default pursuant to Section 11.(f)), before the Scheduled Maturity Date, such Borrower shall pay to Lender on the date

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of such repayment or prepayment the Prepayment Premium applicable thereto pursuant to Section 2.5, except if a prepayment is the result of a Casualty or Condemnation; and (ii) upon (x) the prepayment or repayment of any Loan in full (other than any such prepayment or repayment that is financed with the proceeds of Indebtedness provided by Lender or any of its Affiliates or in connection with a Change of Control) or an acceleration as a result of an Event of Default under Section 11.1(c) due to any RHP Party incurring Indebtedne ss in violation of Article VIII or (y) the occurrence of a Change of Control, including an acceleration as a result of an Event of Default pursuant to Section 11.1(l) due to such Change of Control , in each case of clauses (x) and (y), an amount equal to the Break-Up Fee.”

(vii) deleting the reference to “(the “ Ongoing Rate ”)” in Section 2.2(a) of the Loan Agreement and inserting the following immediately after the reference to “three (3) months after the Closing Date” appearing therein:

“until the Business Day immediately preceding the Forbearance Effective Date (as defined in the Forbearance Agreement, dated as of May 11, 2018, by and between the Credit Parties and the Lender) and thirteen and one-half percent (13.5%) per annum from and after the Forbearance Effective Date (the “ Ongoing Rate ”)”

(viii) amending the definition of “Obligations” in Section 1.1 of the Loan Agreement by inserting the following immediately after the reference to “in respect of the Loans”:

“(including Default Rate interest, Late Payment Charges, Prepayment Premium, the Break-Up Fee, Finance Fees and Early Termination Fees)”

(ix) amending and restating the definition of “Guarantor or Guarantors” in Section 1.1 of the Loan Agreement in its entirety as follows:

“ Guarantor or Guarantors : the meaning set forth in the preamble to this Agreement, and shall also include AdCare Operations, LLC and each other Person, if any, who on or after the Closing Date guarantees the payment and performance of the Obligations, including as contemplated by the Forbearance Agreement or otherwise.”

(x) amending the definition of “Early Termination Fee” in Section 1.1 of the Loan Agreement by deleting the reference to “first anniversary of the Closing Date” appearing therein and inserting “date that is thirteen (13) months after the Closing Date” in lieu thereof;

(xi) amending Section 1.1 of the Loan Agreement by inserting the following definitions in alphabetical order therein:

Break-Up Fee : (a) in connection with a prepayment or repayment of all Loans in full (other than with the proceeds of Indebtedness provided by Lender or any of its Affiliates or upon consummation of a Change of Control), an amount equal to 1.0% of the Loans outstanding at such time; and (b) in connection with a Change of Control, an amount equal to the following (which amount shall not be less than zero): (i) 10% of the Principal

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outstanding as of the Closing Date multiplied by the price per share that is paid to holders of RHP Guarantor’s 10.875% Series A Cumulative Redeemable Preferred Stock (“ Series A Preferred Stock ”) upon the consummation of such Change of Control, minus (ii) 10% of the Principal outstanding as of the Closing Date multiplied by the lesser of (x) the last quoted price per share by NYSE American LLC of RHP Guarantor’s Series A Preferred Stock on the Forbearance Effective Date and (y) the volume weighted average price of RHP Guarantor’s Series A Preferred Stock as quoted by NYSE American LLC for the consecutive 90-day period after the Forbearance Effective Date.”

Forbearance Agreement : that certain Forbearance Agreement, dated as of May 18, 2018, by and among the Credit Parties and the Lender.

(xii) amending and restating the definition of “Change of Control” in Section 1.1 of the Loan Agreement in its entirety as follows:

“ Change of Control : the occurrence of any of the following: (A) with respect to each Credit Party, the result caused by the occurrence of any event or series of events which results in (i) a majority of the members of the board of directors or other equivalent governing body ceased to be composed of individuals (a) who were members of that board or equivalent governing body on the Closing Date, (b) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (a) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (c) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (a) and (b) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body, or (ii) the pledge, hypothecation, encumbrance or transfer of any interest in such Credit Party (directly or indirectly, beneficially, legally or otherwise) other than RHP Guarantor, unless approved in writing by Lender in its sole and absolute discretion or (B) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 35% of the equity securities of RHP Guarantor entitled to vote for members of the board of directors or equivalent governing body of RHP Guarantor.”

(xiii) amending and restating the definition of “Loan Documents” in Section 1.1 of the Loan Agreement in its entirety as follows:

“ Loan Documents : this Agreement, all Collateral Documents, the Notes, the Guaranty, the Pledge Agreement, the RHP Guarantor Note, the Tenant Estoppels, the SNDAs, the Forbearance Agreement and all other documents, agreements and instruments now or hereafter evidencing, securing or delivered to Lender or any Lender in connection with the Loans or the transactions contemplated by this Agreement and/or the Forbearance Agreement, as each of the foregoing may be (and each of the foregoing defined terms shall refer to such documents as they may be) amended, restated, replaced, severed, split, supplemented or otherwise modified from time to time.”

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(xiv) amending and restating the definition of “Collateral” in Section 1.1 of the Loan Agreement in its entirety as follows:

“ Collateral : the meaning set forth in Section 4.1(b) and also includes any assets of any RHP Party in which Liens are granted or purported to granted to Lender to secure all or part of the Obligations from time to time, including pursuant to agreements, instructions and/or documents contemplated by the Forbearance Agreement or otherwise.”

(xv) amending and restating the definition of “Collateral Documents” in Section 1.1 of the Loan Agreement in its entirety as follows:

“Collateral Documents : all Mortgages, agreements, instruments and documents now or hereafter executed and delivered in connection with this Agreement and/or the Forbearance Agreement pursuant to which Liens are granted or purported to be granted to Lender in Collateral securing all or part of the Obligations each in form and substance satisfactory to Lender, including the Guaranty, the Mortgages, the Pledge Agreement, the Tenant Estoppels, the SNDAs and all UCC financing statements.”

(xvi) amending Section 11.1(c) of the Loan Agreement by including the following proviso at the end thereof:

“ provided , further , that any Default under Section 10.3(b) due to the failure by the RHP Guarantor to furnish to Lender a Form 10-Q for the fiscal quarter ended March 31, 2018 and the other information required by Section 10.3(b) of the Loan Agreement, in each case, by no later than May 30, 2018 shall not constitute an Event of Default unless RHP Guarantor shall not have cured such Default by July 6, 2018;”.

(xvii) amending and restating Section 9.1 of the Loan Agreement in its entirety as follows:

“ Fixed Charge Coverage Ratio . Commencing with the Fiscal Quarter ending June, 2018, the RHP Guarantor shall not permit the Fixed Charge Coverage Ratio as of the last day of each Fiscal Quarter during which any Loan is outstanding (calculated for each Test Period ending on such date) to be less than 1.2 to 1.0.”

(xviii) amending Section 11.1(w) of the Loan Agreement by deleting the “.” at the end of such clause and inserting the following in lieu thereof:

“; provided that, solely during the Forbearance Period (as defined in the Forbearance Agreement), a default under any Operating Lease with any of the following Operators due to the failure of such Operator to pay any amount required to be paid by such Operator under such Operating Lease shall not constitute an Event of Default unless such default has not been cured within thirty (30) calendar days after the original date on which such amount required to be paid by such Operator under such Operating Lease became due (it being understood that (i) a waiver by the lessor thereunder shall not constitute a cure of such default, and (ii) the original date on which such amount was required to be paid shall exclude all cure periods, grace periods and other similar allowances, if any, provided for under

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such Operating Lease): C.R. of College Park, LLC; C.R. of Attalla, LLC; C.R. of Coosa Valley, LLC; CRM of Meadowood, LLC; C.R. of Glenvue, LLC; C.R. of Autumn Breeze, LLC; C.R. of LaGrange, LLC; C.R. of Thomasville, LLC; SL SNF, LLC; LC SNF, LLC; Blue Ridge on the Mountain, LLC; Blue Ridge of Sumter, LLC; and Blue Ridge in Georgetown, LLC.”

(b) Each Borrower and each other Credit Party hereby agrees that to the extent that the Loan Agreement and/or any other Loan Document prohibits, restricts or limits any action or omission by any Borrower or any other Credit Party, or imposes any condition, certification or notification requirement on any Borrower or any other Credit Party upon the occurrence and during the continuance of a Default or Event of Default (including, without limitation, any prohibition, restriction or condition imposed on the use of any “basket” in Article VIII of the Loan Agreement), then such prohibition, restriction, limitation, condition, certification or notification requirement is currently in effect.

(c) To the extent any provision of Article XI of the Loan Agreement provides for a cure period with respect to any Default prior to such Default constituting an Event of Default, each Borrower and each other Credit Party hereby acknowledges and agrees that, with respect to the Specified Defaults, any such cure period has expired and such Specified Defaults are Events of Default that have occurred and are continuing as of the date hereof.

(d) As soon as reasonably practicable following execution of this Agreement and in no event later than May 23, 2018, the Credit Parties shall engage a nationally recognized, leading consulting firm that is mutually acceptable to the Credit Parties and the Lender on terms that are mutually acceptable to the Credit Parties and the Lender, with any such acceptance by the Lender being evidenced in writing.

(e) As soon as reasonably practicable following the execution of this Agreement but in any event by not later than June 4, 2018, the Credit Parties shall have complied with the following post-closing items set forth on Schedule 5.3 to the Loan Agreement: (i) Item 5 related to Tenant Estoppels; (ii) Item 6 related to SNDAs; (iii) Item 7 related to insurance coverage; (iv) Item 8 related to the resolution of the Actions (as defined therein); (v) Item 9 related to intercompany Indebtedness; (vi) Item 15 related to Provider Network Agreements; (vii) Item 16 related to Managed Care Agreements; (viii) Item 17 related to UCC terminations; and (ix) Item 18 related to written opinions by Borrowers’ legal counsel.

(f) The Credit Parties shall give notice to the Lender not later than one (1) calendar day after (i) the entry of any agreement referred to in Section 2(b)(v) (it being understood that any such agreement that is not acceptable to the Lender shall result in a Termination Event) and/or (ii) any Credit Party receives, or otherwise has knowledge of, an offer of the type described in Section 2(b)(vi), regardless of whether such offer is made to any Credit Party or any holder of RHP Guarantor’s equity securities.

(g) RHP Guarantor shall not declare, effectuate or otherwise consummate any of the following on account of, or in respect of, its 10.875% Series A Cumulative Redeemable Preferred Stock without the prior written consent of Lender: (i) any stock split or reverse stock split or recapitalization, combination, subdivision, reorganization or other reclassification; (ii) any

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dividend or other distribution of cash, indebtedness or other securities or property; or (iii ) any other transaction that would customarily trigger anti-dilution protections in equity or equity-linked securities.

(h) Within seven (7) calendar days after the Forbearance Effective Date, the Credit Parties shall have:

(i) paid to the Lender $50,000 as a non-refundable payment in Dollars as additional interest; and

(ii) delivered to the Lender each of the following, which shall be in form and substance satisfactory to the Lender (the following clauses (A) through (M), collectively, the “ Post-Forbearance Effective Date Agreements ”):

(A) a guaranty agreement executed by HHO Guarantor pursuant to which HHO Guarantor shall guarantee the Loans made by Lender to CP Borrower, Northwest Borrower and AdCare Holdco (the “ New HHO Guaranty ”);

(B) a pledge agreement executed by HHO Guarantor pursuant to which HHO Guarantor shall pledge the Equity Interests in all of its Subsidiaries as collateral for its existing Guaranty and the New HHO Guaranty;

(C) a guaranty agreement executed by AdCare Holdco pursuant to which AdCare Holdco shall guarantee the Loans made by Lender to the Attalla Borrower (the “ New AdCare Holdco Guaranty ”);

(D) a pledge agreement executed by AdCare Holdco pursuant to which AdCare Holdco shall pledge (i) the Pledged Collateral as collateral for the New AdCare Holdco Guaranty and (ii) as collateral for its Loan, its existing Guaranty and the New AdCare Holdco Guaranty, its Subsidiaries’ Equity Interests that do not constitute Pledged Collateral as of the Forbearance Effective Date;

(E) one or more new guaranty agreements executed by AdCare Administrative Services, LLC, AdCare Consulting, LLC, AdCare Financial Management, LLC, AdCare Oklahoma Management, LLC, AdCare Acquisition, Inc., Hearth & Home of Vandalia, Inc., New Lincoln Ltd., AdCare Management Company, Inc. and AdCare Employee Leasing, LLC (collectively, the “ New Guarantors ”) pursuant to which the New Guarantors shall guarantee the Loans made by Lender to the Borrowers (the “ New Guarantor Guaranty ”);

(F) a security agreement executed by the New Guarantors pursuant to which the New Guarantors shall grant liens on substantially all of their assets to secure the New Guarantor Guaranty;

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(G) each of the HHO Guarantor and the New Guarantors shall have caused to be filed in the Office of the Secretary of S tate for the State of Georgia UCC-1 financing statement s naming HHO Guarantor and each of the New Guarantors as debtor s and the Lender as secured party;

(H) if requested by Lender, (x) AdCare Holdco will cause to be filed one or more UCC-1 financing statements naming AdCare Holdco as debtor and Lender as secured party and/or one or more UCC-3 amendments with respect to UCC-1 financing statements naming AdCare Holdco as debtor and Lender as secured party and (y) deliver to Lender any other executed documents, agreements, instruments, amendments or supplements relating to any Collateral Document or take such other action to the extent necessary or advisable to ensure the Obligations are and continue to be secured by perfected first-priority liens on the Collateral;

(I) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Authorized Officers of each Credit Party and/or New Guarantor as Lender may require evidencing the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with the other Post-Forbearance Effective Date Agreements;

(J) Organization Documents and certifications as Lender may require to evidence that each New Guarantor is duly organized or formed, and that each Credit Party is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification;

(K) an executed opinion from Georgia counsel and Ohio counsel to the Credit Parties, AdCare Opco and the New Guarantors that is addressed to the Lender;

(L) a certificate signed by an Authorized Officer of each Credit Party stating that no event or circumstance has occurred or exists that constitutes a Default or Event of Default (other than the Specified Defaults) and either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Credit Party and the validity against such Credit Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required; and

(M) an updated organizational chart, with an associated opinion by legal counsel attesting to the accuracy of aforementioned organizational chart.

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(i) Within one (1) Business Day of the Forbearance Effective Date, AdCare Opco shall have caused to be filed in the Office of the Secretary of State for the State of Georgia a UCC-1 financing statement naming AdCare Opco as debtor and the Lender as secured party that is in form and su bstance satisfactory to Lender.

SECTION 6. Ratification of Liability .

Each of the Borrowers and each other Credit Party hereby ratifies and reaffirms all of its payment and performance obligations and obligations to indemnify, contingently or otherwise, under this Agreement and each other Loan Document to which such party is a party, and each such party hereby ratifies and reaffirms its grant of Liens on, or security interests in, its properties pursuant to such Loan Documents to which it is a party as security for the Obligations, and confirms and agrees that such Liens and security interests hereafter secure all of the Obligations. This Agreement shall in no manner affect or impair the Obligations or the Liens securing the payment and performance thereof. Each of the Borrowers and each other Credit Party (a) acknowledges receipt of a copy of this Agreement and all other agreements, documents and instruments executed and/or delivered in connection herewith, (b) consents to the terms and conditions of the same, and (c) agrees and acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and confirmed.

SECTION 7. Release . Each of the Credit Parties (on behalf of itself and its Affiliates) for itself and for its successors in title and assignees and for its past, present and future employees, agents , representatives (other than legal representatives), officers, directors, shareholders, and trustees (each, a “ Releasing Party ” and collectively, the “ Releasing Parties ”), does hereby remise, release and discharge, and shall be deemed to have forever remised, released and discharged, the Lender, the Lender’s successors-in-title, legal representatives and assignees, past, present and future officers, directors, partners, general partners, limited partners, managing directors, members, affiliates, shareholders, trustees, agents, employees, consultants, principals, experts, advisors, attorneys and other professionals and all other persons and entities to whom the Lender or its successors-in-title, legal representatives and assignees, past, present and future officers, directors, affiliates, shareholders, trustees, agents, employees, consultants, experts, advisors, attorneys and other professionals would be liable if such persons or entities were found to be liable to any Releasing Party or any of them (collectively, hereinafter the “ Releasees ”), from any and all manner of action and actions, cause and causes of action, claims, charges, demands, counterclaims, crossclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, rights of setoff and recoupment, controversies, damages, judgments, expenses, executions, liens, claims of liens, claims of costs, penalties, attorneys’ fees, or any other compensation, recovery or relief on account of any liability, obligation, demand or cause of action of whatever nature, whether in law, equity or otherwise (including, without limitation, any claims relating to (i) the making or administration of the Loans, including, without limitation, any such claims and defenses based on fraud, mistake, duress, usury or misrepresentation, or any other claim based on so-called “lender liability” theories, (ii) any covenants, agreements, duties or obligations set forth in the Loan Documents, (iii) increased financing costs, interest or other carrying costs, (iv) penalties, (v) lost profits or loss of business opportunity, (vi) legal, accounting and other administrative or professional fees and expenses and incidental, consequential and punitive damages payable to third parties, (vii) damages to business reputation, or (viii) any claims arising under 11 U.S.C. §§ 541-550 or any claims for avoidance or recovery under any other federal, state

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or foreign law equivalent), whether known or unknown, fixed or contingent, joint and/or several, secured or unsecured, due or not due, primary or secondary, liquidated or unliquidated, contractual or tortious, direct, indirect, or derivative, asserted or unasserted, foreseen or unforeseen, suspected or unsuspected, now existing, heretofore existing or which may heretofore accrue against any of the Releasees, and which are, in each case, based on any act, fact, event or omission or other matter, cause or thing occurring at any time prior to or on the date hereof in any way, directly or indirectly arising out of, connected with or relating to the Loan Agreement or any other Loan Document and the transactions contemplated thereby, and all other agreements, certificates, instruments and other documents and statements (whether written or oral) related to any of the foregoing (each, a “ Claim ” and collectively, the “ Claims ”). Each of the Releasing Parties further stipulates and agrees with respect to all Claims, that it hereby waives, to the fullest extent permitted by applicable law, any and all provisions, rights, and benefits conferred by any applicable U.S. federal or state law, or any principle of common law, that would otherwise limit a release or discharge of any unknown Claims pursuant to this Section 7 . Each of the Credit Parties , on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by the Borrowers or any other Credit Part y pursuant to this Section 7 . If any Credit Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, the Borrowers and other Credit Part ies, each for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys ’ fees and costs incurred by any Releasee as a result of such violation. For the avoidance of doubt, this provisions of this Section 7 shall survive the occurrence of a Termination Event.

SECTION 8. Construction . This Agreement and all other agreements and documents executed and/or delivered in connection herewith have been prepared through the joint efforts of all of the parties hereto. Neither the provisions of this Agreement or any such other agreements and documents nor any alleged ambiguity herein or therein shall be interpreted or resolved against any party on the ground that such party or its counsel drafted this Agreement or such other agreements and documents, or based on any other rule of strict construction. Each of the parties hereto represents and declares that such party has carefully read this Agreement and all other agreements and documents executed in connection therewith and that such party knows the contents thereof and signs the same freely and voluntarily. The parties hereto acknowledge that they have been represented by legal counsel of their own choosing in negotiations for and preparation of this Agreement and all other agreements and documents executed in connection herewith and that each of them has read the same and had their contents fully explained by such counsel and is fully aware of their contents and legal effect.

SECTION 9. Execution of Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument.

SECTION 10. Continuing Effect of the Loan Agreement .

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(a) The Lender has not waived, is not by this Agreement waiving, and has no intention of waiving any of the Specified Defaults, any other Defaults or Events of Default or any of the liabilities or obligations (including any Obligations) under any of the Loan Documents, and the Lender has not agreed to forbear with respect to any rights or remedies concerning any Defaults or Events of Default (other than, during the Forbearance Period, the Specified Defaults solely to the extent expressly set forth herein), which may have occurred or are continuing as of the date hereof or which may occur after the date hereof, all of which rights are ratified and affirmed in all respects and shall continue in full force and effect. Subject to Section 2(b) above (solely with respect to the Specified Defaults and only during the Forbearance Period), the Lender reserves the right, in its discretion, to exercise any or all of their rights and remedies under the Loan Agreement and the other Loan Documents, at law or otherwise as a result of any Defaults or Events of Default which may be continuing on the date hereof or any Defaults or Events of Default that may occur after the date hereof, and the Lender has not waived any of such rights or remedies, and nothing in this Agreement, and no delay on the Lender ’ s part in exercising any such rights or remedies, should be construed as a waiver of any such rights or remedies.

(b) Nothing herein shall be deemed to entitle the Borrowers to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Loan Agreement in similar or different circumstances.

(c) This Agreement shall apply and be effective only with respect to the provisions of the Loan Agreement specifically referred to herein. After the effectiveness of this Agreement, any reference to the Loan Agreement shall mean the Loan Agreement as amended and modified hereby.

SECTION 11. Governing Law . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 12. Loan Document . This Agreement shall constitute a Loan Document. It shall be an immediate Event of Default under the Loan Agreement if any Borrower or any other Credit Party fails to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Agreement or if any representation or warranty made by any Borrower or any other Credit Party under or in connection with this Agreement shall be untrue, false or misleading in any respect when made.

SECTION 13. Assignments; No Third Party Beneficiaries . This Agreement shall be binding upon and inure to the benefit of the Borrowers, the other Credit Parties, the Lender and their respective successors and assigns; provided that neither the Borrowers nor any other Credit Party shall be entitled to delegate any of its duties hereunder and shall not assign any of its rights or remedies set forth in this Agreement without the prior written consent of the Lender, in its sole discretion. No person other than the parties hereto and the Lender shall have any rights hereunder or be entitled to rely on this Agreement and all third-party beneficiaries rights are hereby expressly disclaimed.

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SECTION 14. Amendment . No amendment, modification or waiver of the terms of this Agreement shall be effective except in a writing signed by the Credit Parties and the Lender.

SECTION 15. Arms-Length/Good Faith; Review and Construction of Documents . This Agreement has been negotiated at arms-length and in good faith by the parties hereto. The Credit Parties (a) have had the opportunity to consult with legal counsel of their own choice and have been afforded an opportunity to review this Agreement with their legal counsel, (b) have reviewed this Agreement and fully understand the effects thereof and all terms and provisions contained in this Agreement, and (c) have executed this Agreement of their own free will and volition. Furthermore, the Credit Parties acknowledge that (i) this Agreement shall be construed as if jointly drafted by the Credit Parties and the Lender, and (ii) the recitals contained in this Agreement shall be construed to be part of the operative terms and provisions of this Agreement.

SECTION 16. Submission to Jurisdiction; Waiver of Venue; Waiver of Trial by Jury; Headings; Severability; Preferences; Prior Agreements . The provisions of Sections 14.4, 14.6, 14.8, 14.9, 14.10 and 14.13 of the Loan Agreement are hereby incorporated into this amendment, mutatis mutandis .

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first written above.


BORROWERS:

CP PROPERTY HOLDINGS, LLC , a Georgia limited liability company


By:
	Name:
	Title:



NORTHWEST PROPERTY HOLDINGS, LLC , a Georgia limited liability company


By:
	Name:
	Title:



ATTALLA NURSING ADK, LLC , a Georgia limited liability company


By:
	Name:
	Title:



ADCARE PROPERTY HOLDINGS, LLC , a Georgia limited liability company


By:
	Name:
	Title:

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GUARANTORS:

REGIONAL HEALTH PROPERTIES, INC. , a Georgia corporation


By:
	Name:
	Title:



ADCARE PROPERTY HOLDINGS, LLC, a Georgia limited liability company


By:
	Name:
	Title:



HEARTH & HOME OF OHIO, INC., a Georgia limited liability company


By:
	Name:
	Title:

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LENDER :

PINECONE REALTY PARTNERS II, LLC, a Delaware limited liability company


By:
	Name:
	Title:

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Exhibit A

Operating Leases with Operator Insurance Defaults

Healthcare Facility Owner Lease Description

CP Property Holdings, LLC

Lease Agreement, dated February 18, 2015 by and between CP NURSING, LLC and C. R. OF COLLEGE PARK, LLC, as amended by the extension letter, dated February 16, 2017, by and between CP NURSING, LLC and C. R. OF COLLEGE PARK, LLC

Northwest Property

Holdings, LLC

Lease Agreement, dated May 1, 2015, by and between NW 61st NURSING, LLC and SOUTHWEST LTC-NW OKC, LLC, as amended by the First Amendment to Lease Agreement, dated December 1, 2015, by and between NW 61st NURSING, LLC and SOUTHWEST LTC-NW OKC, LLC

Attalla Nursing ADK, LLC

Lease Agreement, dated September 22, 2014, by and between ATTALLA NURSING ADK, LLC and C.R. OF ATTALLA, LLC, as amended by the First Amendment to Lease Agreement, dated November 21, 2014, by and between ATTALLA NURSING ADK, LLC and C.R. OF ATTALLA, LLC, as amended by the Second Amendment to Lease Agreement, dated September 14, 2015 by and between ATTALLA NURSING ADK, LLC and C.R. OF ATTALLA, LLC

Coosa Nursing ADK, LLC

Lease Agreement, dated September 22, 2014 by and between Coosa Nursing ADK, LLC, and C.R. of Coosa Valley, LLC, as amended by the First Amendment to Lease Agreement, dated November 21, 2014, by and between Coosa Nursing ADK, LLC, and C.R. of Coosa Valley, LLC, as amended by the Second Amendment to Lease Agreement, dated September 14, 2015, by and between Coosa Nursing ADK, LLC and C.R. of Coosa Valley, LLC

Meadowood Property

Holdings, LLC

Lease Agreement, dated March 22, 2017, by and between Meadowood Property Holdings, LLC and CRM of Meadowood, LLC

Erin Property Holdings, LLC

Lease Agreement, dated October 22, 2014, by and between ERIN NURSING, LLC and SL SNF, LLC

Mountain Trace

Nursing ADK, LLC

Lease Agreement dated February 22, 2015 by and between Mountain Trace Nursing ADK, LLC and Blue Ridge on the Mountain, LLC, as amended by the First Amendment to Lease Agreement, dated March 20, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain , LLC, as amended by the Second Amendment to

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Lease Agreement, dated May 31, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain, LLC

QC Property Holdings, LLC

Lease Agreement dated May 1, 2015, by and between QC NURSING, LLC and SOUTHWEST LTC-QUAIL CREEK, LLC, as amended by the First Amendment to Lease Agreement dated December 1, 2015, by and between QC NURSING, LLC and SOUTHWEST LTC-QUAIL CREEK, LLC

Eaglewood Property

Holdings, LLC

Lease Agreement dated August 1, 2015, by and between EAGLEWOOD VILLAGE, LLC and EW ALF, LLC

Glenvue H&R Property

Holdings, LLC

Lease Agreement dated July 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended by the First Amendment to Lease Agreement dated August 14, 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended by the Second Amendment to Lease Agreement dated October 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended and replaced by the Third Amendment to Lease Agreement dated July 27, 2016, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC

Mt. Kenn Property

Holdings, LLC

Lease Agreement dated October 1, 2015, by and between KB HUD MASTER TENANT 2014, LLC and C.R. OF AUTUMN BREEZE, LLC

Hearth & Care of

Greenfield, LLC

Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and HC SNF, LLC

The Pavilion Care

Center, LLC

Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and PV SNF, LLC

Woodland Manor Property

Holdings, LLC

Lease Agreement dated August 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and EW SNF, LLC

Sumter Valley Property

Holdings, LLC

Lease Agreement, dated February 27, 2015 by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter LLC, as amended by the First Lease Amendment to Lease Agreement, dated March 20, 2015, by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC

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Georgetown HC&R

Property Holdings, LLC

Lease Agreement, dated February 27, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown LLC, as amended by the First Amendment to Lease Agreement, dated March 20, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC, as amended by the Second Amendment to Lease Agreement, dated September 24, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC

Leased Healthcare Facility Lease Description

Powder Springs Nursing

Lease Agreement, dated January 31, 2015, by and between ADK GEORGIA, LLC and 3460 POWDER SPRINGS ROAD ASSOCIATES, L.P, as amended by the First Amendment to Lease Agreement, dated September 23, 2015, by and between ADK GEORGIA, LLC and 3460 POWDER SPRINGS ROAD ASSOCIATES, L.P

Tara at Thunderbolt

Lease Agreement, dated January 31, 2015, by and between ADK GEORGIA, LLC and 3223 FALLIGANT AVENUE ASSOCIATES, L.P, as amended by the First Amendment to Lease Agreement, dated September 23, 2015, by and between ADK GEORGIA, LLC and 3223 FALLIGANT AVENUE ASSOCIATES, L.P

Lumber City Nursing

Lease Agreement, dated October 22, 2014, by and between ADK GEORGIA, LLC and LC SNF, LLC, as amended by the First Amendment to Lease Agreement, dated September 10, 2015, by and between ADK GEORGIA, LLC and LC SNF, LLC

LaGrange Nursing

Lease Agreement, dated April 1, 2015, by and between ADK GEORGIA, LLC and C.R. OF LAGRANGE, LLC, as amended by the First Amendment to Lease Agreement, dated September 14, 2015, by and between ADK GEORGIA, LLC and C.R. OF LAGRANGE, LLC

Savannah Beach Nursing

Lease Agreement, dated June 18, 2016, by and between ADK GEORGIA, LLC and SB TYBEE, LLC

Oceanside Nursing

Lease Agreement, dated June 18, 2016, by and between ADK GEORGIA, LLC and OS TYBEE, LLC

Jeffersonville Nursing

Lease Agreement, dated June 18, 2016, by and between ADK GEORGIA, LLC and JV JEFFERSONVILLE, LLC

Thomasville Nursing

Lease Agreement, dated July 1, 2014, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC, as amended by the First Amendment to Lease Agreement, dated July 1, 2014, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC, as amended by the Second Amendment to Lease Agreement, dated February 9, 2015, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC, as amended by the Third Amendment to Lease

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Agreement, dated September 9, 2015, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC

Bonterra Nursing

Lease Agreement, dated July 20, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 2801 FELTON AVENUE, L.P., as amended by First Amendment to Lease Agreement, dated September 1, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 2801 FELTON AVENUE, L.P.

Parkview Manor Nursing

Lease Agreement, dated July 20, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 460 AUBURN AVENUE, L.P, as amended by the First Amendment to Lease Agreement, dated September 1, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 460 AUBURN AVENUE, L.P

Covington Care Center

Lease Agreement, dated August 1, 2015, by and between ADCARE HEALTH SYSTEMS, INC and CC SNF, LLC

Operating Leases with Operator Estoppel Defaults

Healthcare Facility Owner Lease Description

CP Property Holdings, LLC

Glenvue H&R Property

Holdings, LLC

Mt. Kenn Property

Holdings, LLC

Lease Agreement dated October 1, 2015, by and between KB HUD MASTER TENANT 2014, LLC and C.R. OF AUTUMN BREEZE, LLC

Hearth & Care of

Greenfield, LLC

Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and HC SNF, LLC

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The Pavilion Care

Center, LLC

Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and PV SNF, LLC

Woodland Manor Property

Holdings, LLC

Lease Agreement dated August 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and EW SNF, LLC

Sumter Valley Property

Holdings, LLC

Georgetown HC&R

Property Holdings, LLC

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Exhibit B

AdCare Opco Guaranty

[See attached]

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Exhibit C

AdCare Opco Pledge Agreement

[See attached]

-28-

Exhibit 10.11

GUARANTY AGREEMENT

This GUARANTY AGREEMENT (this “ Guaranty ”) is made as of May 18, 2018 by ADCARE OPERATIONS, LLC , a Georgia limited liability company, as guarantor (the “ New Guarantor ”), to and for the benefit of PINECONE REALTY PARTNERS, II, LLC , a Delaware limited liability company (together with its successors and assigns, “ Lender ”).

W I T N E S S E T H:

A. Pursuant to that certain Loan Agreement, dated as of February 15, 2018, by and among CP Property Holdings, LLC, a Georgia limited liability company, as borrower (the “ CP Borrower ”), Northwest Property Holdings, LLC, a Georgia limited liability company, as borrower (the “ Northwest Borrower ”), Attalla Nursing ADK, LLC, a Georgia limited liability company, as borrower (the “ Attalla Borrower ”), AdCare Property Holdings, LLC, a Georgia limited liability company, as borrower and guarantor (“ AdCare Holdco ”; the CP Borrower, the Northwest Borrower, the Attalla Borrower and AdCare Holdco are collectively referred to herein as “ Borrowers ” and each as a “ Borrower ”), Hearth & Home of Ohio, Inc., a Georgia corporation, as guarantor (the “ HHO Guarantor ”), Regional Health Properties, Inc., a Georgia corporation, as guarantor (the “ RHP Guarantor ”; the HHO Guarantor, AdCare Holdco and the RHP Guarantor are collectively referred to herein as the “ Existing Guarantors ” and each as an “ Existing Guarantor ”), and Lender (the “ Loan Agreement ”), Lender has made loans, advances and other extensions of credit to each Borrower. All capitalized terms used but not otherwise defined in this Guaranty shall have the meanings provided to such terms in the Loan Agreement.

B. A portion of the loans, advances and other extensions of credit under the Loan Agreement were used to settle or otherwise satisfy certain litigation claims against the New Guarantor, which litigation claims, if adversely determined, could have reasonably been expected to have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of RHP Guarantor and its Subsidiaries (collectively, the “ Existing RHP Parties ”), including New Guarantor, taken as a whole, by (i) causing one or more defaults under the definitive documentation governing the outstanding Indebtedness of one or more Existing RHP Parties, (ii) enabling the lenders of such Indebtedness to accelerate such Indebtedness and foreclose on the collateral therefor and (iii) causing RHP Guarantor and its Subsidiaries to attempt to restructure such Indebtedness by commencing an Insolvency Proceeding, which would have reasonably been expected to result in the termination or rejection of the Operating Leases.

C. In connection with the initial loans, advances and other extensions of credit, the Credit Parties agreed, pursuant to Section 5.3 of the Loan Agreement, to cause, within 90 days of the date of the Loan Agreement, each subsidiary of New Guarantor to transfer and assign to the appropriate subsidiary of AdCare Holdco the Operating Leases to which such subsidiary of New Guarantor is a party, all of which Operating Leases are material to the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole (the “ AdCare Opco Assignment ”).

D. T he Credit Parties have informed Lender that , as of the date hereof, several Events of Default have occurred and are continuing under the Loan Agreement . As a result of the foregoing, Lender is currently entitled to accelerate all Obligations and other amounts outstanding under the Loan Agreement, which acceleration would have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties , taken as a whole . The Credit Parties have requested Lender enter into that certain Forbearance Agreement, dated as of the date hereof, with the Borrowers and the Existing Guarantors , pursuant to which, among other things, Lender will agree to forbear from exercising certain rights with respect to the Specified Defaults (as defined in the Forbearance Agreement) .

E. The Credit Parties have informed Lender that the AdCare Opco Assignment will not be able to be completed within such 90-day period and an Event of Default that is not a Specified Default will occur as a result of such failure to comply with Section 5.3 of the Loan Agreement, which would result in a Termination Event under the Forbearance Agreement and enable Lender to accelerate all Obligations and other amounts outstanding under the Loan Agreement, which acceleration would have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole. As a result, the Credit Parties have requested Lender to agree to amend the Loan Agreement to eliminate the requirement to consummate the AdCare Opco Assignment.

F. As consideration for Lender’s agreement to forbear from exercising remedies with respect to the Specified Defaults and to eliminate the requirement in the Loan Agreement to consummate the AdCare Opco Assignment (each of which, if not agreed to by Lender, would reasonably be expected to have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties (including New Guarantor), taken as a whole, New Guarantor has agreed to, among other things, (i) enter into this Guaranty to provide security for the payment and performance of the full and prompt payment of each Loan to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents and (ii) secure its obligations under this Guaranty by granting a security interest in the Pledged Collateral under, and as defined in, that certain Pledge Agreement, dated as of the date hereof, by the New Guarantor in favor of Lender (the “ Pledge Agreement ”).

NOW, THEREFORE , for good and valuable consideration, the receipt of which is hereby acknowledged, and intending to be legally bound, the New Guarantor agrees as follows:

1. Guaranty. The New Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender (i) the full and prompt payment in cash of each Loan made to each Borrower pursuant to the Loan Agreement and all other sums owed by each such Borrower under the Loan Agreement and the other Loan Documents and (ii) the full and prompt performance by each Borrower of its other Obligations under the Loan Agreement and the other Loan Documents , in each case, whether now in existence or hereafter arising, and including any such Obligations incurred after the commencement of any proceeding under any Debtor Relief Law (including any interest accruing under any Loan Document after the filing of a petition with

respect to each such Borrower under any Debtor Relief Law , whether or not allowed or allowable as a claim in the related proceeding) , as and when the same shall become due and payable, whether at maturity, by acceleration or otherwise , or otherwise be required to be performed . This is a guaranty of payment and performance and not merely of collection.

2. Continuing Nature. This Guaranty shall be continuing and shall not be discharged, impaired or affected by (i) the power or authority or lack thereof of any Borrower or any other Credit Party to incur or contract for any Obligations or to execute, acknowledge or deliver any document, agreement or other instrument evidencing, securing or otherwise executed in connection with any Obligations; (ii) the regularity or irregularity, validity or invalidity, or enforceability or unenforceability of any Obligations; (iii) any defenses or counterclaims whatsoever that any Borrower or any other Credit Party may or might have to the payment or performance of any Obligations or to the assertion of a default under any document, agreement or other instrument evidencing, securing or otherwise executed in connection with any Obligations including, but not limited to, lack of consideration, statute of frauds, infancy, breach of warranty, lender liability, usury, fraud and statute of limitations; (iv) the existence or non‑existence of any Borrower or any other Credit Party as a legal entity; (v) the transfer by any Borrower or any other Credit Party of all or any part of the property securing any Obligations; (vi) any right of setoff, counterclaim or defense (other than the payment and performance of any Obligations in full) that the New Guarantor may or might have to its respective undertakings, liabilities and obligations under this Guaranty, each and every such defense being hereby waived by the New Guarantor; or (vii) the inability of Lender to claim any amount of interest, fees, costs, or charges from any Borrower or any other Credit Party pursuant to Section 506(b) of the Bankruptcy Code.

3. Guarantor’s Agreement to Pay. The New Guarantor further agrees, as the principal obligor and not as a guarantor or surety only, to pay to Lender, on demand, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by Lender in connection with the enforcement of this Guaranty against the New Guarantor .

4. Obligations Absolute. The obligations of the New Guarantor hereunder shall remain in full force and effect without regard to, and shall not be affected or impaired by, the following, any of which may be taken without the consent of, or notice to, the New Guarantor, nor shall any of the following give the New Guarantor any recourse or right of action against Lender:

(a) Any express or implied amendment, modification, renewal, addition, supplement, extension (including extensions beyond the original term) or acceleration of or to any of the Loan Documents;

(b) Any exercise or non-exercise by Lender of any right or privilege under this Guaranty or any of the Loan Documents;

(c) Any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to any Borrower or any other Credit Party or any other guarantor (which term shall include any other party at any time directly or contingently liable for any Borrower’s or any other Credit Party’s obligations under the Loan

Documents) or any affiliate of any Borrower or any other Credit Party or any action taken with respect to this Guaranty by any trustee or receiver, or by any court, in any such proceeding, whether or not the New Guarantor shall have had notice or knowledge of any of the foregoing;

(d) Any release or discharge of any Borrower or any other Credit Party from its liability under any of the Loan Documents or any release or discharge of any endorser or guarantor or of any other party at any time directly or contingently liable for the Obligations;

(e) Any subordination, compromise, release (by operation of law or otherwise), discharge, compound, collection, or liquidation of any Property or other collateral described in any of the Loan Documents or otherwise in any manner, or any substitution with respect thereto;

(f) Any assignment or other transfer of this Guaranty in whole or in part or of any of the Loan Documents;

(g) Any acceptance of partial performance of the Obligations;

(h) Any consent to the transfer of any Property or any portion thereof or any other collateral described in the Loan Documents or otherwise; and

(i) Any bid or purchase at any sale of any Property or any other collateral described in the Loan Documents or otherwise.

5. Waivers .

The New Guarantor unconditionally waives any defense to the enforcement of this Guaranty, including:

(a) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty;

(b) Any right to require Lender to proceed against any Borrower, any other Credit Party or any guarantor at any time or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy whatsoever at any time;

(c) The defense of any statute of limitations affecting the liability of the New Guarantor hereunder or the liability of any Borrower, any other Credit Party or any guarantor under the Loan Documents, or the enforcement hereof, to the extent permitted by law;

(d) Any defense arising by reason of any invalidity or unenforceability of (or any limitation of liability in) any of the Loan Documents or any disability of any Borrower, any other Credit Party or any guarantor or of any manner in which Lender has exercised its rights and remedies under the Loan Documents, or by any cessation from any cause whatsoever of the liability of any Borrower, any other Credit Party or any guarantor;

(e) Without limitation on clause (d) above, any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of

any Borrower or any other Credit Party or any principal of any Borrower or any other Credit Party or any defect in the formation of any Borrower or any other Credit Party or any principal of any Borrower or any other Credit Party ;

(f) Any defense based upon the application by any Borrower of the proceeds of the Loan for purposes other than the purposes represented by such Borrower to Lender or intended or understood by Lender or the New Guarantor;

(g) Any defense based upon an election of remedies by Lender, including any election to proceed by judicial or nonjudicial foreclosure of any security, whether real property or personal property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of remedies, including remedies relating to real property or personal property security, which destroys or otherwise impairs the subrogation rights of the New Guarantor or the rights of the New Guarantor to proceed against any Borrower, any other Credit Party or any guarantor for reimbursement, or a combination of the foregoing ;

(h) Any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other aspects more burdensome than that of a principal;

(i) Any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute;

(j) Any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code;

(k) Any duty of Lender to advise the New Guarantor of any information known to Lender regarding the financial condition of any Borrower or any other Credit Party and all other circumstances affecting any Borrower’s and any other Credit Party’s ability to perform its obligations to Lender, it being agreed that the New Guarantor assumes the responsibility for being and keeping informed regarding such condition or any such circumstances; and

(l) Any right of subrogation, reimbursement, exoneration, contribution or indemnity, or any right to enforce any remedy which Lender now has or may hereafter have against Borrower or any other Credit Party or any benefit of, or any right to participate in, any security now or hereafter held by Lender.

6. Subrogation .

The New Guarantor understands that the exercise by Lender of certain rights and remedies may affect or eliminate the New Guarantor’s right of subrogation against any Borrower or any other Credit Party or any guarantor and that the New Guarantor may therefore incur partially or totally nonreimbursable liability hereunder. Nevertheless, the New Guarantor hereby authorizes and empowers Lender, its successors, endorsees and assigns, to exercise in its or their sole discretion, any rights and remedies, or any combination thereof, which may then be available, it being the purpose and intent of the New Guarantor that the obligations hereunder shall be absolute, continuing, independent and unconditional under any and all circumstances. Notwithstanding any other provision of this Guaranty to the contrary,

until all Obligations have been repaid and the Mortgages have been released or reconveyed, the New Guarantor hereby waives and releases, to the fullest extent permitted by law, any claim or other rights which the New Guarantor may now have or hereafter acquire against any Borrower or any other Credit Party or any other guarantor of all or any of the obligations of the New Guarantor hereunder that arise from the existence or performance of the New Guarantor ’s obligations under this Guaranty or any of the other Loan Documents, including any right of subrogation, reimbursement, exoneration, contribution or indemnification, any right to participate in any claim or remedy of Lender against any Borrower or any other Credit Party or any collateral which Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including the right to take or receive from any Borrower or any other Credit Party , directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights.

7. Additional Waivers .

The New Guarantor shall not be released or discharged, either in whole or in part, by Lender’s failure or delay to (i) perfect or continue the perfection of any lien or security interest in any collateral which secures the obligations of any Borrower, the New Guarantor or any other Credit Party or any other guarantor, or (ii) protect the property covered by such lien or security interest.

8. Subordination .

Without limitation on the waivers and releases contained herein:

(a) The New Guarantor subordinates all present and future indebtedness owing by any Borrower or any other Credit Party to the New Guarantor to the obligations at any time owing by such Borrower or any other Credit Party to Lender under the Loan Documents. The New Guarantor assigns all such indebtedness to Lender as security for this Guaranty.

(b) The New Guarantor agrees to make no claim on such indebtedness until all obligations of any Borrower or any other Credit Party under the Loan Documents have been fully discharged.

(c) The New Guarantor further agrees not to assign all or any part of such indebtedness without the prior written consent of Lender, which consent may be granted or withheld by Lender in its sole and absolute discretion. If Lender so requests, (i) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Lender, (ii) all security for such indebtedness shall be duly assigned and delivered to Lender, (iii) such indebtedness shall be enforced, collected and held by the New Guarantor as trustee for Lender and shall be paid over to Lender on account of the Loans but without reducing or affecting in any manner the liability of the New Guarantor under the other provisions of this Guaranty, and (iv) the New Guarantor shall execute, file and record such documents and instruments and take such other action as Lender deems necessary or appropriate to perfect, preserve and enforce Lender’s rights in and to such indebtedness and any security therefor. If the New Guarantor fails to take any such action, Lender, as attorney in fact for the New Guarantor, is hereby authorized to do so in the name of the New Guarantor. The foregoing power of attorney is coupled with an interest and cannot be revoked .

9 . Proceedings on Default. Upon the failure of any Borrower or any other Credit Party to promptly and completely make any required payment and performance of its Obligations, Lender may, at its option: (a) proceed directly and at once without notice of such default, against the New Guarantor to collect and recover the full amount of the liability hereunder, or any portion thereof, without proceeding against such Borrower, such other Credit Party or any other person, or endorser, surety or guarantor, or foreclosing upon, selling, or otherwise disposing of, or enforcing, or collecting or applying any property, real or personal, Lender may then have as security for such Obligations, and without enforcing or proceeding under any other guaranty; or (b) sell the real and personal property Lender may then have as security for such Obligations under the power of sale contained in any mortgage deed, security agreement or similar instrument pursuant to which such property is held or to which such property is subject or sell such property through judicial foreclosure, as Lender may elect, notice of any such election being expressly waived by the New Guarantor, and proceed against the New Guarantor for an amount equal to the difference between the net proceeds of such sale to Lender and the amount of such Obligations then due and owing. Nothing herein shall prohibit Lender from exercising its rights against the New Guarantor, any other guarantor, endorser, or surety, the security, if any, for the Obligations, and any Borrower or other Credit Party simultaneously, jointly and/or severally.

10. Representations. The New Guarantor represents and warrants to Lender that: this Guaranty does not violate the provisions of any document, agreement or other instrument by which the New Guarantor is bound; no consent or authorization is required as a condition to the execution of this Guaranty; the New Guarantor is fully aware of the financial condition of each Borrower and each other Credit Party; the New Guarantor delivers this Guaranty based solely upon the New Guarantor’s own independent investigation and understanding of the transaction of which this Guaranty is a part and in no part upon any representation or statement of Lender with respect thereto; the New Guarantor is in a position to and hereby assumes full responsibility for obtaining any additional information concerning any Borrower’s and other Credit Party’s financial condition or business operations as the New Guarantor may deem material to its obligations hereunder and the New Guarantor is not relying upon, nor expecting Lender to furnish the New Guarantor with, any information in Lender’s possession concerning any Borrower’s and other Credit Party’s financial condition or business operations. The New Guarantor acknowledges and agrees that it hereby knowingly accepts the full range of risk encompassed within a contract of “continuing guaranty”, which risk includes, without limitation, the possibility that any Borrower or any other Credit Party will incur or contract for additional indebtedness for which the New Guarantor will be liable hereunder.

11. Independent, Separate and Secured Obligations. The obligations of the New Guarantor hereunder shall be absolute and unconditional and are independent of the obligations of any Borrower, any other Credit Party or of any other person, endorser, surety or guarantor ; and, in the event of any default hereunder, a separate action or actions may be brought and prosecuted against the New Guarantor whether or not the New Guarantor is the alter ego of a Borrower or any other Credit Party and whether or not a Borrower or any other Credit Party is joined therein or a separate action or actions are brought against such Borrower or other Credit Party. Lender’s rights hereunder shall not be exhausted until all of the Obligations have been

fully paid and performed. This Guaranty is secu red, an d shall be deemed to be secured, pursuant to the Pledge Agreement .

12. Bankruptcy.

(a) All of the Obligations shall, at the option of Lender, forthwith become due and payable if there shall be filed by or against the New Guarantor or any other Credit Party a petition in bankruptcy or for insolvency proceedings or for reorganization, dissolution or liquidation, or for appointment of a receiver or trustee, or if the New Guarantor or any other Credit Party makes an assignment for the benefit of creditors. This Guaranty shall remain in full force and effect, without abatement, until the Obligations have been paid or performed in full and all other obligations guaranteed hereunder have been performed to the satisfaction of Lender, it being expressly understood and agreed to by the New Guarantor that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligations is rescinded, invalidated, declared to be fraudulent or preferential, set aside or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the New Guarantor or any other Credit Party all as though such payment had not been made, to such Borrower or any other Credit Party or a trustee, receiver or any other party. The New Guarantor understands and agrees that in the event Lender is required to so return all or any portion of a payment received from any Borrower, the New Guarantor shall be required to pay Lender for such amount.

(b) So long as any of the obligations guaranteed hereunder shall be owing to Lender, the New Guarantor shall not, without the prior written consent of Lender, commence or join with any other party in commencing any bankruptcy, reorganization or insolvency proceedings of or against any Borrower or any other Credit Party . The New Guarantor understands and acknowledges that by virtue of this Guaranty, it has specifically assumed any and all risks of a bankruptcy or reorganization case or proceeding with respect to any Borrower or any other Credit Party. As an example and not in any way of limitation, a subsequent modification of the Obligations in any reorganization case concerning any Borrower or any other Credit Party shall not affect the obligation of the New Guarantor to pay and perform such Borrower’s Obligations in accordance with its original terms. In any bankruptcy or other proceeding in which the filing of claims is required by law, the New Guarantor shall file all claims which the New Guarantor may have against such Borrower or relating to any indebtedness of such Borrower to the New Guarantor and shall assign to Lender all rights of the New Guarantor thereunder. If the New Guarantor does not file any such claim, Lender, as attorney in fact for the New Guarantor, is hereby authorized to do so in the name of the New Guarantor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount payable on such claim and, to the full extent necessary for that purpose, the New Guarantor hereby assigns to Lender all of the New Guarantor’s rights to any such payments or distributions; provided , however , the New Guarantor’s obligations hereunder shall not be

satisfied except to the extent that Lender receives cash by reason of any such payment or distribution. If Lender receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty. Notwithstanding anything to the contrary herein, the liability of the New Guarantor hereunder shall be reinstated and revised, and the rights of Lender shall continue, with respect to any amount at any time paid by or on behalf of any Borrower or any other Credit Party on account of the Loan Documents which Lender shall restore or return by reason of the bankruptcy, insolvency or reorganization of such Borrower or any other Credit Party or for any other reasons, all as though such amount had not been paid.

13. Unenforceability of Obligations Against Borrower. If for any reason any Borrower has no legal existence or is under no legal obligation to discharge any of its Obligations, or if any of the Obligations have become irrecoverable from any Borrower by operation of law or for any other reason, this Guaranty shall nevertheless be binding on the New Guarantor to the same extent as if the New Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of any Borrower or for any other reason, all such amounts otherwise subject to acceleration under the terms of any document, agreement or other instrument evidencing, securing or otherwise executed in connection with any of the Obligations shall be immediately due and payable by the New Guarantor.

14. Payments. The New Guarantor covenants and agrees that any payments by the New Guarantor of the Obligations will be paid strictly in accordance with their respective terms regardless of any law, regulation or order now or hereinafter in effect in any jurisdiction affecting any of such terms of the rights of Lender with respect thereto. Without limiting the generality of the foregoing, the New Guarantor ’s obligations hereunder with respect to any Obligation shall not be discharged by a payment in a currency other than Dollars or at a place other than the place specified or designated by Lender for the payment of the Obligations.

15. Taxes. All payments hereunder shall be made without any counterclaim of setoff, free and clear of, and without reduction by reason of, any taxes, levies, imposts, charges and withholdings, restrictions or conditions of any nature (other than on the income of Lender) (“ Taxes ”), which are now or may hereafter be imposed, levied or assessed by any country, political subdivision or taxing authority, all of which will be for the account of and paid by the New Guarantor hereunder. If for any reason, any such reduction is made or any Taxes are paid by Lender, the New Guarantor will pay to Lender the additional amounts as may be necessary to ensure that it receives the same net amount that it would have received had no reduction been made of Taxes paid.

16. Further Assurances. The New Guarantor agrees that it will promptly provide to Lender information relating to the financial condition of the New Guarantor from time to time as Lender may reasonably request, including but not being limited to, the provision of financial statements and tax returns on an annual basis and all reports that its Subsidiaries are entitled to under their respective leases with Operators.

17. Successors and Assigns. This Guaranty shall be binding upon the New Guarantor and its heirs, executors, personal representatives, successors and assigns, and shall inure to the benefit of and be enforceable by Lender and its successors, transferees and assigns.

18 . Amendments and Waivers. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the New Guarantor therefrom shall be effective unless the same shall be in writing and signed by Lender . No failure on the part of Lender to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise of any other right.

19. Notices. All notices, consents, approvals and requests required or permitted under this Guaranty or any other Loan Document (a “ Notice ”) shall be given in writing and shall be effective for all purposes if either hand delivered with receipt acknowledged, or by a nationally recognized overnight delivery service (such as Federal Express), or by certified or registered United States mail, return receipt requested, postage prepaid, or, with respect to routine or administrative notices (but specifically excluding notices of Default, Events of Default or acceleration of the Obligations) by electronic mail, in each case addressed as follows (or to such other address or Person as a party shall designate from time to time by notice to the other party):

If to Lender:

Pinecone Realty Partners II, LLC

315 S. Beverly Drive, Suite 404

Beverly Hills, CA 90212

If to the New Guarantor:

454 Satellite Boulevard

Suite 100

Suwanee, GA 30024

A Notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; in the case of overnight delivery, upon the first attempted delivery on a Business Day; or, in the case of electronic mail, at the time of delivery.

20. Amendments and Modification s. The provisions of this Guaranty shall extend and be applicable to all renewals, amendments, extensions and modifications of the Obligations and the documents, agreements and other instruments evidencing, securing or otherwise executed in connection with the Obligations, and all references to the Obligations and such documents, agreements or instruments shall be deemed to include any renewal, extension, amendment or modification thereof.

21. Assignment. Lender may, upon written notice to the New Guarantor, assign or otherwise transfer any document, agreement or other instrument held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein to any other Person or entity, and such other person or entity shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all rights in respect thereof granted to Lender herein. The New Guarantor

acknowledges that it may not assign any of its rights or delegate any of its duties under this Guarant y .

22. Governing Law; Venue, etc.

(a) THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, THE NEW GUARANTOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS GUARANTY AND THE OTHER LOAN DOCUMENTS, AND THIS GUARANTY AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR THE NEW GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND THE NEW GUARANTOR WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE NEW GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.

(c) The New Guarantor expressly acknowledge and agree that the provisions of this Section 22 are reasonable and made for the express benefit of Lender.

23. Trial by Jury. THE NEW GUARANTOR AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE NEW GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION 23 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

24. No Oral Modifications or Waivers. This Guaranty shall not be modified nor any of its provisions waived except by a writing signed by the party against whom such modification or waiver is sought to be enforced.

25. Termination of Agreement. Upon the satisfaction in full in cash of all amounts owing under the Loan Agreement and all other Obligations, this Guaranty shall terminate without further action by Lender; provided , however , that this Guaranty shall remain in full force

and effect and continue to be effective should any petition be filed by or against the New Guarantor for liquidation or reorganization, should the New Guarantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of the New Guarantor ’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to A pplicable Laws, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. Upon termination of this Guarant y , Lender will execute and deliver to the New Guarantor any releases, termination statements or similar instruments of reconveyance as the New Guarantor may reasonably request. All such instruments and documents shall be prepared by the New Guarantor and filed or recorded by the New Guarantor , at the New Guarantor ’s sole expense, and Lender shall not have any duty, obligation or liability with respect thereto.

26. Severability. Any provision of this Guaranty or of any related instrument or document executed pursuant hereto which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Applicable Laws, the New Guarantor hereby waives any provision of law which renders any provision hereof or thereof prohibited or unenforceable in any respect; provided , however , that to the extent any provision of this Guaranty violates any contract in effect as of the date hereof to which the New Guarantor is a party or Applicable Law and such waiver is ineffective, such provision of this Guaranty shall be deemed automatically amended or modified to the extent necessary, and only to the extent necessary, to ensure this Guaranty does not violate such contract or Applicable Law.

27. Headings. The section headings in this Guaranty are included herein for convenience of reference only and shall not constitute a part of this Guaranty for any other purpose.

28. Counterparts. This Guaranty may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier, facsimile machine, portable document format (“ PDF ”) or other electronic means shall be as effective as delivery of a manually executed counterpart of this Guaranty. The effectiveness of any such documents and signatures shall, subject to Applicable Laws, have the same force and effect as manually signed originals and shall be binding on the New Guarantor and Lender. Lender may also require that any such documents and signatures be confirmed by a manually signed original thereof; provided , however , that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. No party may raise the use of a telecopier, facsimile machine, PDF or other electronic means, or the fact that any signature was transmitted through the use of a telecopier, facsimile machine, PDF or other electronic means, as a defense to the enforcement of this Guaranty.

29. Loan Document . This Guaranty shall constitute a Loan Document. It shall be an immediate Event of Default under the Loan Agreement if the New Guarantor or any other Credit Party fails to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Agreement or if any representation or warranty made by the New Guarantor or any other Credit Party under or in connection with this Agreement shall be untrue, false or misleading in any respect when made.

[remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, the New Guarantor has executed this Guaranty as of the date first set forth above.

ADCARE OPERATIONS, LLC , a Georgia limited liability company

By: ________________________________

Name: Brent Morrison

Title: Manager

[Signature Page to Guaranty Agreement]

Exhibit 10.12

Execution Version

PLEDGE AGREEMENT

This PLEDGE AGREEMENT (this “ Agreement ”) is dated as of May 18, 2018 by and between ADCARE OPERATIONS, LLC, a Georgia limited liability company (“ Pledgor ”), and PINECONE REALTY PARTNERS, II, LLC , a Delaware limited liability company (together with its successors and assigns, “ Lender” ).

A. Pursuant to that certain Loan Agreement, dated as of February 15, 2018 , by and among CP Property Holdings, LLC, a Georgia limited liability company, as borrower (the “ CP Borrower ”), Northwest Property Holdings, LLC, a Georgia limited liability company, as borrower (the “ Northwest Borrower ”), Attalla Nursing ADK, LLC, a Georgia limited liability company, as borrower (the “ Attalla Borrower ”), AdCare Property Holdings, LLC, a Georgia limited liability company, as borrower and guarantor (“ AdCare Holdco ”; the CP Borrower, the Northwest Borrower, the Attalla Borrower and AdCare Holdco are collectively referred to herein as “ Borrowers ” and each as a “ Borrower ”), Hearth & Home of Ohio, Inc., a Georgia corporation, as guarantor (the “ HHO Guarantor ”), Regional Health Properties, Inc., a Georgia corporation, as guarantor (the “ RHP Guarantor ”; the HHO Guarantor, AdCare Holdco and the RHP Guarantor are collectively referred to herein as the “ Existing Guarantors ” and each as an “ Existing Guarantor ”), and Lender (the “ Loan Agreement ”), Lender has made loans, advances and other extensions of credit to each Borrower.

B . A portion of the loans, advances and other extensions of credit under the Loan Agreement were used to settle or otherwise satisfy certain litigation claims against the Pledgor, which litigation claims, if adversely determined, could have reasonably been expected to have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of RHP Guarantor and its Subsidiaries (collectively, the “ Existing RHP Parties ”), including Pledgor, taken as a whole, by (i) causing one or more defaults under the definitive documentation governing the outstanding Indebtedness of one or more Existing RHP Parties, (ii) enabling the lenders of such Indebtedness to accelerate such Indebtedness and foreclose on the collateral therefor and (iii) causing RHP Guarantor and its Subsidiaries to attempt to restructure such Indebtedness by commencing an Insolvency Proceeding, which would have reasonably been expected to result in the termination or rejection of the Operating Leases.

C . In connection with the initial loans, advances and other extensions of credit, the Credit Parties agreed, pursuant to Section 5.3 of the Loan Agreement, to cause, within 90 days of the date of the Loan Agreement, each subsidiary of Pledgor to transfer and assign to the appropriate subsidiary of AdCare Holdco the Operating Leases to which such subsidiary of Pledgor is a party, all of which Operating Leases are material to the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole (the “ AdCare Opco Assignment ”).

otherwise) or prospects of the Existing RHP Parties, taken as a whole. The Credit Parties have requested Lender enter into that certain Forbearance Agreement, dated as of the date hereof, with the Borrowers and the Existing Guarantors, pursuant to which, among other things, Lender will agree to forbear from exercising certain rights with respect to the Specified Defaults (as defined in the Forbearance Agreement).

E . The Credit Parties have informed Lender that the AdCare Opco Assignment will not be able to be completed within such 90-day period and an Event of Default that is not a Specified Default will occur as a result of such failure to comply with Section 5.3 of the Loan Agreement, which would result in a Termination Event under, and as defined in, the Forbearance Agreement and enable Lender to accelerate all Obligations and other amounts outstanding under the Loan Agreement, which acceleration would have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole. As a result, the Credit Parties have requested Lender to agree to amend the Loan Agreement to eliminate the requirement to consummate the AdCare Opco Assignment.

F . As consider ation for Lender’s agreement to forbear from exercising remedies with respect to the Specified Defaults and to eliminate the requirement in the Loan Agreement to consummate the AdCare Opco Assignment (each of which, if not agreed to by Lender, would reasonably be expected to have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties (including Pledgor), taken as a whole, Pledgor has agreed to, among other things, guarantee (the “ Guaranty ”) the full and prompt payment of each Loan to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents pursuant to that certain Guaranty Agreement, dated as of the date hereof (the “ Guaranty Agreement ”) and to secure its obligations under the Guaranty by granting a security interest in the Pledged Collateral (as defined herein) in favor of Lender.

G. This Agreement is intended to provide security for the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement. All capitalized terms used but not otherwise defined in this Agreement shall have the meanings provided to such terms in the Loan Agreement and the Guaranty Agreement, as applicable.

NOW, THEREFORE , in consideration of the foregoing and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and to secure the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement , and the performance by Pledgor of all the terms, conditions, and provisions of this Agreement, Pledgor hereby agrees as follows:

article 1

PLEDGE AND ASSIGNMENT

1.1 Pledge and Assignment . As security for the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement, Pledgor hereby

pledges to , and grants to Lender a security interest in , all right, title and interest of Pledgor in all of the following (collectively, the “ Pledged Collateral ”):

a. the Equity Interests listed on Schedule I hereto, including all membership interests, limited liability company interests and other equity interests (the “ Pledged Interests ”) in the issuers listed on Schedule I or any issuers hereafter acquired by the Pledgor (the “ Issuers ”) and any certificates representing the Pledged Interests, and all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Interests and any and all voting rights or other rights relating to the management of the Issuers;

b. all additional interests of Pledgor in the Issuers from time to time acquired by Pledgor in any manner (which interests shall be deemed to be part of the Pledged Interests), and any certificates representing such additional interests, and all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests;

c. all other property hereafter issued to Pledgor in substitution for or in addition to any of the foregoing, all certificates, if any, and instruments representing or evidencing such property, and all dividends, distributions, cash, instruments and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; and

d. all products and proceeds of all of the foregoing.

1.2 Obligations Secured. This Agreement is made in favor of Lender to secure payment of the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement .

1.3 Delivery of Pledged Collateral. If applicable, from time to time all certificates and instruments evidencing any of the Pledged Collateral shall be delivered to and held by or on behalf of Lender pursuant hereto. All such certificates and instruments evidencing any of the Pledged Interests shall be accompanied by duly executed instruments of transfer or otherwise in form and substance satisfactory to Lender.

article 2

Representations and Warranties

2.1 Pledgor represents and warrants and, so long as this Agreement is in effect, shall be deemed continuously to represent and warrant that:

a. Pledgor now is the sole and absolute owner of all right, title and interest in the Pledged Collateral with full right and title to assign the same, and there is no outstanding assignment, transfer, mortgage or pledge thereof and there are no restrictions thereon which would impair the transfer of the Pledged Collateral ;

b. Pledgor has not executed and will not execute any assignment or security agreement or financing statement covering the Pledged Collateral other than to Lender ;

c. Schedule I is true, correct and complete in all respects as to the Pledged Interests owned by Pledgor;

d. the Pledged Interests listed on Schedule I hereto are the only Equity Interests of any Issuer;

e. as of the date hereof, there are no existing options, warrants, calls, or commitments of any character whatsoever relating to the Pledged Interests owned by Pledgor;

f. the pledge by Pledgor of the Pledged Collateral pursuant to this Agreement does not violate (i) the governing documents of Pledgor or any Issuer, or any indenture, mortgage or agreement to which Pledgor is a party or by which Pledgor’s properties or assets may be bound, (ii) any restriction on such transfer or encumbrance of such Pledged Collateral or (iii) any securities law or other Applicable Law;

g. (i) Each Issuer has expressly elected not to have its membership interests treated as securities under and governed by Article 8 of UCC, (ii) the Pledged Collateral is not currently evidenced by a limited liability company certificate and (iii) Pledgor shall not permit any Issuer to make any such election or cause any such Pledged Collateral to be evidenced by a limited liability company certificate without the prior written consent of Lender in its sole and absolute discretion; and

h. the address specified in Section 4.10 hereof for Pledgor is the principal place of business and chief executive office of Pledgor.

article 3

COVENANTS REGARDING PLEDGED COLLATERAL

3.1 Further Assurances; Possession of Pledged Collateral. Pledgor shall execute and deliver to Lender all assignments, endorsements, powers, hypothecations and other documents requested at any time and from time to time by Lender with respect to the Pledged Collateral and shall deliver to Lender any dividends thereon (upon demand by Lender after notice has been provided thereto, which notice shall be provided no later than five days after declaration of such dividend) or splits thereof in each case to effectuate the terms of this Agreement. Until the later of the payment in full of the Obligations or the termination of this Agreement, Lender shall hold possession of all instruments at any time representing or evidencing the Pledged Collateral.

3.2 Preservation of Pledged Collateral . Pledgor represents and warrants that it is the sole legal and beneficial owner of and has good and marketable title to the Pledged Interests (or, in the case of after-acquired Pledged Collateral, at the time Pledgor acquires rights in the Pledged Collateral, will be the sole legal and beneficial owner thereof) free and clear of any liens, other than Permitted Liens and liens in favor of Lender hereunder . Pledgor will, at its own cost and expense, promptly execute, acknowledge and deliver all such instruments and take all

such action as Lender from time to time may reasonably request in order to protect the lien granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to the Pledged Collateral, and will defend the title to the Pledged Collateral and the liens of Lender thereon against the claims of other Persons . Lender shall be under no duty to: (a) collect any of the Pledged Collateral or any moneys due or to become due thereunder; (b) give any notices with respect to the Pledged Collateral; (c) preserve or maintain any of the Pledged Collateral (except to the extent delivered to Lender ) ; or (d) preserve rights of Pledgor against prior parties to the Pledged Collateral .

3.3 Voting Rights . So long as no Event of Default shall have occurred and be continuing, Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to securities pledged hereunder or any part thereof; provided , however , that Pledgor shall not at any time, without Lender’s prior written consent, cast any vote or give or grant any consent, waiver or ratification or take any other action which could: (a) materially and adversely affect the value of the Pledged Collateral (or any portion thereof) or interfere with the practical realization to Lender of the rights afforded to Lender under this Agreement; (b) violate the terms of this Agreement or any of the Loan Documents; (c) impair the validity or priority of the security position or interests of Lender in any manner whatsoever; or (d) cause an Event of Default. Upon the occurrence and during the continuance of an Event of Default, and, following notice from Lender, all rights of Pledgor to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to this Section shall cease, and all such rights shall become vested in Lender, which shall thereupon have the sole right to exercise such voting and other consensual rights.

3.4 Lender’s Rights . Upon the occurrence of an Event of Default:

a. Lender may, at its option, and without notice to Pledgor or any other party, sell or otherwise dispose of any or all of the Pledged Collateral. The occurrence or non‑occurrence of an Event of Default hereunder shall in no manner impair the ability of Lender to demand payment of any portion of the Obligations which are payable on demand and/or payable pursuant to the Loan Documents. Lender shall have all of the rights and remedies of a secured party under the applicable UCC and under other Applicable Laws. In addition to all other rights available to it under Applicable Laws or otherwise, Lender, in conjunction with the assignment, pledge or transfer of any of the Obligations by Lender, shall have the right to assign therewith Lender’s rights in any of the Pledged Collateral, and any assignee, pledgee or transferee shall have the rights of Lender hereunder with respect to the Pledged Collateral so assigned, pledged or transferred.

b. Any written notice of the sale, disposition, or other intended action by Lender with respect to the Pledged Collateral which is required by Applicable Laws and is sent by certified mail, postage prepaid, to Pledgor at Pledgor’s address specified in Section 4.10 hereof at least ten (10) Business Days prior to such sale, disposition, or action shall constitute reasonable notice to Pledgor.

c. Pledgor recognizes that Lender may be unable to effect a public sale of all or part of the Pledged Collateral by reason of certain prohibitions contained in the Securities Act, and applicable state securities laws, but may be compelled to resort to one or more private sales

to a restricted group of purchasers who will be obligated to agree, among other things, to acquire all or a part of the Pledged Collateral for its own account, for t he Loan s and all other Obligations , and not with a view of the distribution or resale thereof. Pledgor acknowledges and agrees that any private sale so made may be at prices and on other terms less favorable to the seller than if such Pledged Collateral were sold at public sale and that Lender has no obligation to delay the sale of such Pledged Collateral for the period of time necessary to permit the registration of such Pledged Collateral for public sale under any securities laws. Pledgor agrees that a private sale or sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner. If any consent, approval or authorization of any federal, state, municipal or other governmental department, agency or authority should be necessary to effectuate any sale or other disposition of the Pledged Collateral, or any partial sale or other disposition of the Pledged Collateral, Pledgor will execute all applications and other instruments as may be reasonably required in connection with securing any such consent, approval or authorization and will otherwise use its best efforts to secure the same. In addition, if the Pledged Collateral is disposed of pursuant to Rule 144 of the Securities Act (“ Rule 144 ”), Pledgor agrees to complete and execute a “Form 144,” or comparable successor form, at Lender ’s request; and Pledgor agrees to provide any material adverse information in regard to the current and prospective operations of any entity whose membership interest or stock constitutes all or a portion of the Pledged Collateral of which Pledgor has knowledge and which has not been publicly disclosed, and Pledgor hereby acknowledges that Pledgor’s failure to provide such information may result in criminal and/or civil liability.

d. For so long as such Default or Event of Default continues and before the Pledged Collateral has been sold, Lender shall be entitled to remove any or all of the managers of each Issuer (the “ Managers ”) and appoint any representatives of Lender or any other person or entity, as Lender elects, to be the Manager(s) in order to fill the vacancy created by such removal and the members of the Issuers shall not have the right to remove the Managers so appointed by Lender or to elect a sole Manager or any new or additional Managers.

3.5. Limitations in Organizational Documents. Any limitations contained in the articles or organization, operating agreements or other organizational documents of the Issuers (“ Organizational Documents ”) inconsistent with the provisions of this Agreement shall be deemed waived until the Loans to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents, the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement have all been fully and finally paid and performed, including, without limitation any provision that requires approval of actions by a “Majority in Interest” and provisions requiring the approval of the Managers for certain actions. Notwithstanding anything contained in any Issuer’s Organizational Documents to the contrary, all restrictions on transfer and assignability of any member’s interests in such Issuer shall be inapplicable, and of no force and effect, as to any transfer of any interests in such Issuer to Lender (or any nominee affiliate, successor, assignee or transferee thereof) or other person in accordance with this Agreement.

3.6. HUD Loans. Notwithstanding anything contained in this Agreement to the contrary, if any provision contained in any Organizational Documents of Issuers with loans insured by the U.S. Department of Housing and Urban Development (“ HUD ”), or any provision in the loan documents for such HUD-insured loans, requires approval of HUD and/or the lender

whose loan is insured by HUD (the “ HUD Lender ”) in order for Lender to cause any of the Pledged Collateral to be transferred following an Event of Default, then (i) Lender shall notify HUD and the HUD L ender, as applicable , of its intention to cause such transfer and (ii) Lender shall not cause such transfer to be made without the consent of HUD or the HUD L ender, as applicable , unless Lender determines that such transfer would not cause a default or event of default under such loan documents.

article 4

ADDITIONAL PROVISIONS

4.1 Costs and Expenses. All costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses, incurred by or on behalf of Lender in connection with the taking, holding, preparing for sale or other disposition, selling, managing, collecting or otherwise disposing of the Pledged Collateral (collectively, the “ Liquidation Costs ”), together with interest thereon at a per annum rate of interest which is equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid and shall constitute and become a part of the Obligations secured hereby. Any proceeds of sale or other disposition of the Pledged Collateral will be applied by Lender to the payment of Liquidation Costs and the balance of such proceeds (if any) will be applied by Lender toward the payment of the Loans to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents, the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement (whether then due or not), at such time or times and in such order and manner of application as Lender may from time to time in its sole discretion determine.

4.2 No Duty to Act. Nothing contained in this Agreement or any of the other Loan Documents shall be construed as requiring Lender to take any particular enforcement or remedial action or combination of enforcement or remedial actions at any time.

4.3 Remedies Not Limited; Partial Exercise. All of Lender’s rights and remedies, whether provided under this Agreement, the other Loan Documents, at law, in equity, or otherwise shall be cumulative and none is exclusive. Such rights and remedies may be enforced alternatively, successively or concurrently, and Pledgor hereby agrees that Lender may enforce its rights separately hereunder with respect to individual items or classes of Pledged Collateral without waiving or prejudicing in any respect Lender’s rights hereunder with respect to any other items or classes of Pledged Collateral. Lender may exercise any other right or remedy which may be available to it under this Agreement, the Loan Agreement or Applicable Law, including, without limitation, the remedies set forth in Article 11 of the Loan Agreement, or may proceed by appropriate court action to enforce the terms hereof, to recover damages for the breach hereof, or to rescind this Agreement in whole or in part.

4.4 Mitigation of Damages. To the extent permitted by Applicable Laws, Pledgor hereby waives any notice or other mandatory requirements of Applicable Laws, now or hereafter in effect, which might require Lender to sell, lease or otherwise use any of the Pledged Collateral in mitigation of Lender’s damages; provided , however , that Pledgor does not waive any legal requirement that Lender act in a commercially reasonable manner.

4.5 No Waivers by Lender. No failure of Lender to exercise, or delay by Lender in the exercise of, any of its rights and remedies granted herein following the occurrence of a Default or an Event of Default shall constitute a waiver of any of Lender’s rights with respect to such Default or Event of Default or any subsequent Default or Event of Default (whether or not similar). Any failure or delay by Lender to require strict performance by Pledgor of any of the provisions, warranties, terms and conditions contained herein or in any other agreement, document or instrument, shall not affect Lender’s right to demand strict compliance and performance therewith.

4.6 Waiver of Notice and Hearing Regarding Probable Cause by Pledgor. Pledgor acknowledges being advised of a constitutional right, as to pre-judgment relief as may be sought by Lender through the process of a court, to notice and a court hearing to determine whether, upon an Event of Default, there is probable cause to sustain the validity of Lender’s claim and whether Lender is entitled to possession of the Pledged Collateral. Being so advised, Pledgor, in regard to such relief and to the fullest extent permitted by Applicable Laws, hereby voluntarily gives up, waives and surrenders any right to a notice and hearing to determine whether there is probable cause to sustain the validity of Lender’s claim. Any notices required pursuant to any state or local law shall be deemed reasonable if mailed by Lender to Pledgor at Pledgor’s address specified in Section 4.10 hereof at least ten (10) Business Days prior to disposition of the Pledged Collateral, and in reference to a private sale, need state only that Lender intends to negotiate such a sale.

4.7 Additional Waivers. In addition, and without limitation on any waivers contained in this Agreement or the other Loan Documents:

a.	Pledgor hereby unconditionally waives any defense to the enforcement of this Agreement based on the characterization of Pledgor as a guarantor and without limitation.

The Obligations of Pledgor hereunder shall remain in full force and effect without regard to, and shall not be affected or impaired by the following, any of which may be taken without the consent of, or notice to Pledgor, nor shall any of the following give Pledgor any recourse or right of action against Lender:

(1)

Any express or implied amendment, modification, renewal, addition, supplement, extension (including extensions beyond the original term) or acceleration of or to any of the Loan Documents;

(2)

Any exercise or non ‑exercise by Lender of any right or privilege under the Loan Documents;

(3)

Any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Pledgor, or any guarantor (which term shall include any other party at any time directly or contingently liable for any Credit Party’s Obligations under the Loan Documents) or any affiliate of Pledgor or any guarantor, or any action taken with respect to the Loan Documents by any trustee or receiver, or by

any court, in any such proceeding, whether or not Pledgor shall have had notice or knowledge of any of the foregoing;

(4)

Any release or discharge of any Credit Party or any guarantor from its liability under any of the Loan Documents or any release or discharge of any endorser or guarantor or of any other party at any time directly or contingently liable for the O bligations evidenced by the Loan Documents;

(5)

Any subordination, compromise, release (by operation of law or otherwise), discharge, compound, collection, or liquidation of any or all of the Pledged Collateral or any other collateral described in any of the Loan Documents or otherwise in any manner, or any substitution with respect thereto;

(6)

Any assignment or other transfer of any of the Loan Documents;

(7)

Any acceptance of partial performance of the Obligations;

(8)

Any transfer or consent to the transfer of any Healthcare Facility or any portion thereof or any collateral described in the Loan Documents or otherwise; and

(9)

Any bid or purchase at any sale of any collateral described in the Loan Documents or otherwise, or the release of the same by Lender.

c.	Pledgor unconditionally waives any defense to the enforcement of this Agreement, including:

(1)

All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Agreement or any Loan Document;

(2)

Any right to require Lender to proceed against any other Person (including without limitation, any Credit Party or any guarantor) at any time or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy whatsoever at any time;

(3)

The defense of any statute of limitations affecting the liability of Pledgor hereunder, the liability of any Credit Party or any guarantor under the Loan Documents, or the enforcement hereof, to the extent permitted by law;

(4)

Any defense arising by reason of any invalidity or unenforceability of (or any limitation of liability in) any of the Loan Documents or

any disability of any Credit Party , Pledgor or any guarantor or of any manner in which Lender has exercised its rights and remedies under the Loan Documents, or by any cessation from any cause whatsoev er of the liability of any Credit Party , Pledgor or any guarantor;

(5)

Without limitation on clause (4) above, any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of any Credit Party or any principal of any Credit Party or any defect in the formation thereof;

(6)

Any defense based upon the application by any Credit Party of the proceeds of the Loans or other Obligations for purposes other than the purposes represented by such Credit Party to Lender or intended or understood by Lender or Pledgor;

(7)

Any defense based upon an election of remedies by Lender, including any election to proceed by judicial or nonjudicial foreclosure of any security, whether real property or personal property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of remedies, including remedies relating to real property or personal property security, which destroys or otherwise impairs the subrogation rights of Pledgor or the rights of Pledgor to proceed against any other Credit Party for reimbursement, or both;

(8)

Any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other aspects more burdensome than that of a principal;

(9)

Any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute;

(10)

Any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code;

(11)

Any duty of Lender to advise Pledgor of any information known to Lender regarding the financial condition of any Credit Party, or any guarantor all other circumstances affecting any Credit Party or any guarantor’s ability to perform its O bligations to Lender, it being agreed that Pledgor assumes the responsibility for being and keeping informed regarding such condition or any such circumstances; and

(12)

Any right of subrogation, reimbursement, exoneration, contribution or indemnity, or any right to enforce any remedy

which Lender now has or may hereafter have against any other Person or any benefit of, or any right to participate in, any security now or hereafter held by Lender.

d. Bankruptcy Proceeding. So long as any of the Loans or Obligations shall be owing to Lender, Pledgor shall not, without the prior written consent of Lender, commence or join with any other party in commencing any bankruptcy, reorganization or insolvency proceedings of or against any other Credit Party. In any bankruptcy or other proceeding in which the filing of claims is required by law, Pledgor shall file all claims which Pledgor may have against any other Credit Party relating to any indebtedness of such Credit Party to Pledgor and shall assign to Lender all rights of Pledgor thereunder. If Pledgor does not file any such claim, Lender, as attorney‑in‑fact for Pledgor, is hereby authorized to do so in the name of Pledgor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount payable on such claim and, to the full extent necessary for that purpose, Pledgor hereby assigns to Lender all of Pledgor’s rights to any such payments or distributions; provided , however , Pledgor’s Obligations hereunder shall not be satisfied except to the extent that Lender receives cash by reason of any such payment or distribution. If Lender receives anything hereunder other than cash, the same shall be held as collateral for amounts due under the Guaranty Agreement. Notwithstanding anything to the contrary herein, the liability of Pledgor hereunder shall be reinstated and revised, and the rights of Lender shall continue, with respect to any amount at any time paid by or on behalf of Pledgor on account of the Promissory Note or the other Loan Documents which Lender shall restore or return by reason of the bankruptcy, insolvency or reorganization of Pledgor or for any other reasons, all as though such amount had not been paid.

e. Subrogation. Pledgor understands that the exercise by Lender of certain rights and remedies may affect or eliminate Pledgor’s right of subrogation against any Credit Party and that Pledgor may therefore incur partially or totally nonreimbursable liability hereunder. Nevertheless, Pledgor hereby authorizes and empowers Lender, its successors, endorsees and assigns, to exercise in its or their sole discretion, any rights and remedies, or any combination thereof, which may then be available, it being the purpose and intent of Pledgor that the Obligations hereunder shall be absolute, continuing, independent and unconditional under any and all circumstances. Notwithstanding any other provision of this Agreement or the Loan Documents to the contrary, until the Loans to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents, the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement have all been fully paid and performed, Pledgor hereby waives and releases any claim or other rights which Pledgor may now have or hereafter acquire against any other Credit Party or any guarantor of all or any of the Obligations of Pledgor hereunder that arise from the existence or performance of Pledgor’s Obligations under this Agreement or any of the other Loan Documents, including any right of subrogation, reimbursement, exoneration, contribution or indemnification, any right to participate in any claim or remedy of Lender against any Credit

Party , any guarantor or any collateral which Pledgor now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including, without limitation, the right to take or receive from any Credit Party , any guarantor, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights.

f. Additional Waivers . Pledgor shall not be released or discharged, either in whole or in part, by Lender’s failure or delay to (i) perfect or continue the perfection of any lien or security interest in any collateral which secures the Obligations of any Credit Party or any guarantor, or (ii) protect the property covered by such lien or security interest.

4.8 Lender’s Actions. Lender may take or release the Pledged Collateral or other security, may release any party primarily or secondarily liable for any Indebtedness to Lender, may grant extensions, renewals or indulgences with respect to such Indebtedness, and may apply any other security therefor held by it to the satisfaction of such Indebtedness, all without prejudice to any of its rights or Pledgor’s Obligations hereunder or under any of the other Loan Documents.

4.9 Liability for Loss. Lender shall not be liable for any loss to the Pledged Collateral in its possession, nor shall such loss diminish the debt due, except for loss caused by Lender’s willful misconduct or gross negligence.

4.10 Notices. All notices, consents, approvals and requests required or permitted under this Agreement or any other Loan Document (a “ Notice ”) shall be given in writing and shall be effective for all purposes if either hand delivered with receipt acknowledged, or by a nationally recognized overnight delivery service (such as Federal Express), or by certified or registered United States mail, return receipt requested, postage prepaid, or, with respect to routine or administrative notices (but specifically excluding notices of Default, Events of Default or acceleration of the Loans) by electronic mail, in each case addressed as follows (or to such other address or Person as a party shall designate from time to time by notice to the other party):

If to Lender:

Pinecone Realty Partners II, LLC

315 S. Beverly Drive, Suite 404

Beverly Hills, CA 90212

If to Pledgor:

454 Satellite Boulevard

Suite 100

Suwanee, GA 30024

4.11 Further Assurances. Pledgor will promptly and duly execute and deliver to Lender such further documents and assurances and take such further actions as Lender may from time to time reasonably request in order to carry out the intent and purpose of this Agreement and to establish and protect the rights and remedies created or intended to be created in favor of Lender hereunder.

4.12 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, Pledgor, Lender, and their respective successors and assigns.

4.13 Assignment. Pledgor acknowledges that it may not assign any of its rights or delegate any of its duties under this Agreement. Lender may assign all of its right, title and interest in and to this Agreement and the Pledged Collateral to any transferee of the Loans or other Obligations that is transferred in accordance with the terms of the Loan Agreement.

4.14 Governing Law; Venue, etc.

a. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, PLEDGOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

b. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK AND PLEDGOR WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.

c. Pledgor expressly acknowledges and agrees that the provisions of this Section 4.14 are reasonable and made for the express benefit of Lender.

4.15 Trial by Jury. PLEDGOR AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY PLEDGOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS

HEREBY AUTHORIZED TO FILE A COPY OF T HIS SECTION 4 .1 5 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

4.16 No Oral Modifications or Waivers. This Agreement shall not be modified nor any of its provisions waived except by a writing signed by the party against whom such modification or waiver is sought to be enforced.

4.17 Termination of Agreement; Release of Security Interest. Upon the satisfaction in full in cash of all amounts owing with respect to the Loans to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents, the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement, this Agreement shall terminate without further action by Lender; provided , however , that this Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Pledgor for liquidation or reorganization, should Pledgor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of Pledgor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to Applicable Laws, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Loans to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents, the Guaranty and payment and performance of all other Obligations of Pledgor under the Guaranty Agreement shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. Upon termination of this Agreement, Lender will return the Pledged Collateral, if applicable, to Pledgor upon request therefor and will execute and deliver to Pledgor any releases, termination statements or similar instruments of reconveyance as Pledgor may reasonably request. All such instruments and documents shall be prepared by Pledgor and filed or recorded by Pledgor, at Pledgor’s sole expense, and Lender shall not have any duty, obligation or liability with respect thereto.

4.18 Joint and Several Obligations . If this Agreement is now, or hereafter shall be, signed by more than one Person, it shall be the joint and several obligation of all such persons (including, without limitation, all makers, endorsers, guarantors and sureties, if any) and shall be binding on all such persons and their respective heirs, executors, administrators, legal representatives, successors and assigns.

4.19 Severability. Any provision of this Agreement or of any related instrument or document executed pursuant hereto which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Applicable Laws, Pledgor hereby waives any provision of law which renders any provision hereof or thereof prohibited or unenforceable in any respect; provided , however , that to the extent any provision of this Agreement violates any contract in effect as of the date hereof to which Pledgor is a party or Applicable Law and such

waiver is ineffective, such provision of this Agreement shall be deemed automatically amended or modified to the extent necessary, and only to the extent necessary, to ensure this Agreement does not violate such contract or Applicable Law .

4.20 Headings. The section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. The exhibits attached hereto, are hereby incorporated by reference as a part of the Agreement with the same force and effect as if set forth in the body hereof.

4.21 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by telecopier, facsimile machine, portable document format (“ PDF ”) or other electronic means shall be as effective as delivery of a manually executed counterpart of this Agreement. The effectiveness of any such documents and signatures shall, subject to Applicable Laws, have the same force and effect as manually signed originals and shall be binding on Pledgor and Lender. Lender may also require that any such documents and signatures be confirmed by a manually signed original thereof; provided , however , that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. No party may raise the use of a telecopier, facsimile machine, PDF or other electronic means, or the fact that any signature was transmitted through the use of a telecopier, facsimile machine, PDF or other electronic means, as a defense to the enforcement of this Agreement.

4.22 Loan Document . This Agreement shall constitute a Loan Document and a Collateral Document . It shall be an immediate Event of Default under the Loan Agreement if Pledgor or any other Credit Party fails to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Agreement or if any representation or warranty made by Pledgor or any other Credit Party under or in connection with this Agreement shall be untrue, false or misleading in any respect when made.

[remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF the undersigned Pledgor has executed and delivered this A greement under seal as of the day and year first written above.

PLEDGOR:

ADCARE OPERATIONS, LLC , a Georgia limited liability company

By: __________________________________

Name: Brent Morrison

Title: Manager

[Signature Page to Pledge Agreement]

SCHEDULE I

PLEDGED INTERESTS

Name of Issuer	Type of Organization	Jurisdiction of Organization	Class of Equity Interest	Percentage of Outstanding Equity Interests
NW 61st Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Little Rock HC&R Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Woodland Hills HC Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Northridge H&R Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Erin Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Homestead Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Park Heritage Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Valley River Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Mountain View Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Woodland Manor Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
CP Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
QC Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
ADK Georgia, LLC	Limited Liability Company	Georgia	Membership Interest	100%
APH&R Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%

Mountain Top ALF, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Eaglewood Village, LLC	Limited Liability Company	Georgia	Membership Interest	100%
2014 HUD Master Tenant, LLC	Limited Liability Company	Georgia	Membership Interest	100%
KB HUD Master Tenant, LLC	Limited Liability Company	Georgia	Membership Interest	100%
RMC HUD Master Tenant, LLC	Limited Liability Company	Georgia	Membership Interest	100%
ER Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Benton Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Rose Missouri Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Sumter N&R, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Mt. Kenn Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Glenvue H&R Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
Georgetown HC&R Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%
CSCC Nursing, LLC	Limited Liability Company	Georgia	Membership Interest	100%

Exhibit 31.1

CERTIFICATIONS

I, Brent Morrison, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Regional Health Properties, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 21, 2018

/s/ Brent Morrison

Interim Chief Executive Officer and Interim President

Exhibit 31.2

CERTIFICATIONS

I, E. Clinton Cain, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Regional Health Properties, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 21, 2018	By	By	/s/ E. Clinton Cain
			Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED

BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Regional Health Properties, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Brent Morrison, Interim Chief Executive Officer and Interim President of the Company, certify, pursuant to 18 U.S.C. § 1350, as added by § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

May 21, 2018

By:

/s/ Brent Morrison

Brent Morrison

Interim Chief Executive Officer and Interim President

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED

BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Regional Health Properties, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, E. Clinton Cain, Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 21, 2018

/s/ E. Clinton Cain

Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer